Questioning the travel industry status quo, one blog post at a time

More airline revenue happier customers

 

“The offer is the airline’s biggest asset.” ~Jim Davidson, CEO, Farelogix.

Traditionally, airlines create products at static price points in the PSS, and then distribute them through different channels via the PSS/GDS. A couple of years ago, IATA got airlines thinking differently when it introduced New Distribution Capability (NDC) and the concept of the ‘offer’. With NDC, when an airline receives a ‘request’ from a customer, it responds by dynamically creating and pricing a personalized ‘offer’ made up of flights and ancillary products. It then presents the ‘offer’ to the customer. Initially NDC framed the ‘request’ and ‘offer’ as coming via the travel agent or Travel Management Company (TMC) channel.

We now we think of the ‘request’ in broader terms. The ‘request’ can come through any channel or touchpoint. It can also be explicit (e.g. a request through the agent or an online search) or implicit (i.e. figured out from various data inputs). The airline then dynamically creates a personalized offer that meets the customer’s need and the commercial imperatives of the airline.

What information do airlines use to help them make the right offer? Check out the image below for some examples:

Data that controls the airline offer

Source: Jim Davidson, Farelogix Pre-Conference Workshop, Aviation Festival 2017.

Still wondering why the offer is important? It boils down to two things – more revenue for the airline and happier customers. The better the airline gets at predicting what a customer needs (and wants), the easier it will be to satisfy more of that need, and earn more money in the process. Another bonus is that the airline will be able to better manage its product inventory.

Dynamic Pricing

“Dynamic Pricing will require the ability to conceivably create and publish endless prices/offers in a frictionless manner tailored to a customer of one.” ~Henry H. Harteveldt, Atmosphere Research.

By applying the science of Dynamic Pricing to enabling technology the airline can price the offer on-the-fly. Here are a few ways to do this:

  • Modify ATPCO fares: Begin with the base price and apply a discount based on variables such as load factor.
  • Build from Market Price or Bid Price: Begin with the Market Price from the Revenue Management (RM) system and apply a mark-up based on factors like carrying cost, load factor, and channel.
  • Build Personalized Bundles: Begin with Market Price and add value to the fare with ancillaries that the customer will find compelling, like premium seat, priority boarding, and first bag free.
  • React to Market Changes: Adjust a base price depending on unusual search and/or booking data.
React to unusual flight search volumes

Source: Jim Davidson, Farelogix Pre-Conference Workshop, Aviation Festival 2017.

Single Source of Truth

In today’s hyper-connected world, customer relationships are key to establishing loyalty and trust. It’s important that an offer be consistent whether the customer is talking to an agent, on a meta-search site, visiting airline.com, or even asking Amazon Alexa.

To ensure this happens, the airline must create and control the offer, and become the ‘single source of truth’ – another concept at the heart of NDC. That way, the customer can trust that the fare they are offered is the best value for them, regardless of channel.

“Multiple searches can result in a $12 difference in the offer. Becoming the Single Source of Truth solves this problem.” ~Jim Davidson, CEO, Farelogix.

How Do We Get There?

Legacy technology and processes are the biggest obstacle to airline offer creation and control. This is because data is not integrated with the pricing engine; control of the offer is outsourced to the PSS or GDS; and there’s no dynamic pricing.

With modern technology for airline commerce, it’s now possible for the airline to move offer creation away from the PSS/GDS and gain control of all aspects of the offer, including scheduling, availability, pricing, and merchandising. With airlines in control, Revenue Managers will be empowered to create offers based on market and bid price, be able to expand product availability to stages further in the customer journey, and dynamically adjust the offer based on data inputs. In short, Revenue Management will become a hot-bed of innovation.

This is the route to happier customers and more revenue.

Want To Learn More About This Technology?

Farelogix Airline Commerce Gateway powers airline-controlled distribution, shopping, pricing, merchandising, and retailing across channels. Our technology is used by some of the world’s biggest airlines like American Airlines, Delta, Emirates, Lufthansa, United and many more. For more information, arrange a quick consultation with a member of our commercial team by emailing sales@farelogix.com.

I recently returned from GBTA in Boston after a long hiatus of attending this annual event. It was nice to be back and see some old friends and lots of new faces. I was honored by an invitation to speak on a couple of panels and did my very best to behave myself. There was a lot of talk about NDC and its impact on the world of corporate travel management and on travelers themselves. I didn’t sense the usual resistance to NDC for the first time in a long time, well actually forever.

Now maybe that “lack of NDC-resistance” was because a couple of weeks before GBTA, American Airlines hosted an NDC Summit in Dallas where they announced a new program to help the travel agency community “Start Somewhere” with American’s NDC API.  There was loads of talk about a carrot versus a stick and much excitement about a $2.00 per booking incentive for all travel agencies for all American marketed flights booked and ticketed using an American-approved NDC connection. American detailed several options for how TMCs can use an AA-approved NDC connection to qualify for the program. Options included: access via a direct AA NDC API link to a TMC, OTA, CBT; access via a Level 3 Certified aggregator (there are many!); access via the AA SPRK UI (powered by Farelogix); or access via the GDSs (yes, really!), once they are Level 3 Certified, of course.

It was simply a fantastic message for TMCs, aggregators, GDSs: access the AA NDC API through any channel, by any means, and get yourself $2.00 per booking. What’s not to like about that?  Frictionless choice!

Now, of course, many of the TMCs in the room with American that day openly stated that their preferred way to access the AA NDC API is via the GDSs. And that makes all the sense in the world…until one realizes the GDSs are just a bit delayed in being able to deliver this for AA (or any other airline for that matter).

When the GDSs at the meeting (Sabre, Travelport, and Amadeus) were asked when they would be ready with the AA NDC, the audience heard sincere comments about how complex NDC is, how difficult the integrations are, and that at minimum they needed to wait for the next NDC version (17.2) to come out, (it’s out), and so on. But wait, the GDSs are technology companies, at least that’s what they tell me. Why all the moaning?

What the audience did not hear was any dates from the GDSs, or timeframes of any sort for their respective NDC readiness. No “Q2 2018”, no “maybe will have something in 2019”.  Nothing. But, I am sure that will change given that agencies really want this new AA content and they want to access it through their GDSs.  Of course, the GDSs will make this a priority. Right? Sure, it all makes sense.

To be honest, I could see a bit of growing frustration on the faces of the TMCs.  They seemed to be sensing what was happening, and they were not happy. The thought bubbles went something like this: Here we have the largest airline in the world telling a room full of their most valued TMCs that the airline wants to give them access to all this new content; that the airline is more than happy to have them access their NDC API through the GDSs, and by the way, the TMC can get paid to do this. It’s a nice new incentive that will ultimately deliver new and better content and duty of care capabilities. Wow! When?  Oh right, not a single GDS would say when this will happen.

Well, no need to worry, no need to fret. I have come up with a plan that I borrowed from GBTA. Just like GBTA announced they are unveiling a couple of new indexes for the travel industry, Farelogix is announcing a new index for travel agencies concerned about when, GDSs and other technology players, will be ready with NDC API integrations. Drumroll please…

Announcing the “NIROTIC” Index for NDC Readiness!

Farelogix is pleased to announce the NDC Integration Readiness of TMC Implementation Capabilities Index a.k.a The NIROTIC Index. NIROTIC is the industry’s first index dedicated to measuring when travel agency technology providers will be ready to deliver NDC to their agency customers.

Our objective with the NIROTIC Index is to stimulate discussion, and provide needed visibility on “how we’re doing” as an industry as relates to NDC readiness.

Naturally, it will take a bit of time to get the NIROTIC Index perfected, as we will depend on verifiable public disclosures or real world demonstrable examples of technology provider NDC integration capability to publish profiles on various providers.

For this introductory piece, and since most of the TMCs at the AA NDC Summit prefer to “take their NDC through their GDS,” we will start with the GDS NIROTIC index and add others as we get them.

The NIROTIC Index follows technology aggregators that can deliver end-to-end airline NDC APIs to travel agencies regardless of NDC schema version utilized – from NDC Baseline (Open AXIS) to the most recent version to be published by IATA, Version 17.2

Here we go.  The first NIROTIC, this time with a focus on the GDSs.

The above is based on what we know from public disclosures, and we welcome feedback, additions or corrections. Simply email nirotic@farelogix.com with your input.

More NIROTIC profiles to follow! Oh, and if you want to see how Farelogix SPRK measures on the NIROTIC, click here.

It’s amazing how, over the years, so many people have said to me, “Jim, you really need to get some professional help.” I never really understood what they meant by that, but maybe someday I will.

This got me thinking about another situation where the need for quality professional help is evident. Just consider the plight of the world’s airlines as they struggle to make major and agonizing decisions regarding their PSS.

Should the airline change PSS providers? Renegotiate certain contract provisions? What can be changed, exactly, to ensure that airline innovation is not stifled moving forward?

Keep in mind, the PSS market is still dominated by just a few powerful players that impose contracts lasting 10 or more years. 10 years! During those long years together, the airline-PSS relationship can often be characterized by performance problems, rising search costs, and painfully slow delivery of new capabilities. Oh, and don’t forget the one-size-fits-all community model, which these days is a setup for disastrous results when you look at today’s requirement for airlines to create, control, and deliver their offers in real time.

So what can airline execs do today to protect their products, brand, and innovation over the next decade? Well, for starters, it might make sense to get some professional help before signing that new PSS contract. There are many areas that deserve a deep dive, but just to suggest a few:

PNR Data Control. Nowadays, airlines need to delve into the minutiae when it comes to PSS contract terms around who controls the data. That’s because it is key for the airline to have unimpeded access to PNR data to be able to market products, services, and ancillaries to the consumer throughout the travel journey. As an example, look at what Delta just did. Wow! Happy Customers and More Revenue! (Hmm, Delta has control over its PSS…there’s some food for thought.)

Access to Third Party Products/Services/Engines. Airlines seeking to control strategic elements of their offer – Availability, Schedules, Pricing, Merchandising – are striving to bring these capabilities under their control. As dynamic retail evolves, these critical elements will need to operate outside of the PSS, yet interoperate within it. Will that new PSS contract allow it? And at what cost? What might be heresy to some is the path to dynamic pricing and offer control for many others.

Dealing with Fail Cycles and Penalties. And, of course, there is the problem of how to deal with PSS product delivery and fail cycle management and penalties. Service level requirements are increasingly more critical as airline outages appear more common than ever; as is the ability to renegotiate financial terms as things like the cost of computing power continues to fall. Does that new contract give you the ability to renegotiate fees (up or down) every few years based on scorecard performance and product delivery?

Airlines use traditional RFP processes, driven by procurement for a new PSS selection. I admit I find this interesting when, in general, it’s a two-horse race. But RFP or not, what’s essential is that airlines get smarter before agreeing to contract terms that may at first glance sound innocent enough but in reality prevent any technological progress throughout the term of the agreement. An up-front price reduction that seems like a win for the airline on the date of signature is often-times a long-term losing proposition if key non-price contractual terms are not thoroughly negotiated.

Airlines making PSS decisions today are not just making a decision about the cost of services provided; they are also making future revenue generation, brand protection, customer engagement, and loyalty decisions for the next 10 years. They are also competing with airlines who are in fact getting smarter on these same topics today and ensuring their path to controlling their offer.

It’s probably not a bad idea to get some Professional Help.

It’s an understatement to say that we are living Moore’s law in terms of the pace of technological change. The adoption of smart, wearable technology, and voice-controlled systems — and the fact we can do nearly everything we need to do on our phones — was not part of our reality just a few years ago. To keep pace, retailers of all types are challenged to engage with their customers using the latest technologies and methods. Airlines are no exception, and the pressure has never been greater for airlines to up their game.

Airline executives realize that they must find ways to engage with travelers at any point in the trip process, and make it easy for travelers to shop or be presented with offers anywhere, and at the right time. “Show me you know me” is the name of the game, and if the airline doesn’t figure out how to be a “single source of truth”, they will lose the customer relationship. (And by the way, there is a long line of entities willing to take over that relationship if the airline doesn’t claim it – more on this later).

For many airlines, shifting to the world of dynamic retailing is exceptionally difficult. Why? Because it means they have to take control of their offer – something most airlines have never done. And yet with Moore’s law in play, there is a need to do it now or risk losing out for years to come.

Here’s some good news: recently there has been an increasing amount of practical discussion about airlines taking control. Airlines are responding by examining available options to take control of their offers, distribution channels, distribution costs, and brand. As an example, Farelogix hosted a “Control Your Offer” event in April that was attended by airline executives from around the world, spanning Revenue Management, IT, Ecommerce, and Distribution – http://farelogixoffersymposium2017.com/. This demonstrates that this next wave of change is big, and involves the full range of airline stakeholders.

There is growing recognition that effective airline control means not only “single source of truth” API’s (NDC), but also airlines taking control of their own merchandising, pricing, and inventory (availability). Yes, I said it. Airlines must have control over their own pricing and availability for all channels. When you think about it for a few minutes, it’s these ingredients that command the respect of distribution companies from any sector around the world. Yet for reasons steeped in history (“it’s always been this way”), or performance (response times), or cost (excessive scan fees, MIPS charges, and look-to-book fees), or simple convenience (easier for someone else to worry about it), many airlines freely give away control to third party distributors, GDSs, Metas, OTAs, PSSs, whereby these entities “re-manufacture” the airline’s pricing and inventory in ways that they (not the airline) see fit. For decades, airlines have essentially given away control over their brand and product. And this is precisely what has to change if airlines want to succeed in the world of dynamic retailing.

Here’s more good news: Believe it or not, airlines today can easily retain or regain control by simply in-sourcing and controlling pricing and inventory, and requiring any and all distribution partners come to the airline for this information. Now I say easy and simple, two words that seldom get tossed around our industry. But, a few things have changed that make airline control as defined above a reality.

First, there is real competition in airline pricing and availability providers. The GDS/PSS and ITA/Google are no longer the only games in town. Farelogix, for one, has made a significant investment in developing a highly scalable, performant, and cost effective airline pricing engine (FLX Shop & Price) and real-time availability engine (FLX Availability Calculator) capable of serving the “single source of truth” requirement for airline pricing and availability, and interoperability with our merchandising engine (FLX Merchandise). I’m sure others are also innovating in these areas as choices grow for airlines that are ready to take control.

Second, the cost of computing power has drastically reduced, and this enables airlines to up-end decades of legacy IT models. For example, the new Farelogix pricing and availability engines run on commodity hardware and can be easily managed, configured, and even hosted (cloud or physical) by any airline, accessible by any distribution partner, and with better response time than any cache or incumbent solution can offer. This eliminates the need to have expensive legacy PSS-based community pricing and availability systems, and makes the words “scan charges” or “look-to-book” sound about as relevant as “hey bring over your VCR and we can watch a movie”.

With technology no longer the barrier, the biggest challenge for airline executives now is to move quickly before someone else takes the opportunity away. We know that incumbent PSS/GDS providers will certainly do their best to contractually delay the inevitable shift to airline-controlled engines, and airlines need to address this. But it’s not just the PSS/GDS vying for airline control; I attended a recent CAPA conference in Dublin where Bobby Healy, CTO of Car Trawler, made an impassioned presentation about airlines losing control over their customers to the world’s most powerful search engine. He also has elaborated on this in writing, and I encourage you to have a read: https://www.tnooz.com/article/google-enemy-airline-distribution/.

The clock is ticking. If airlines don’t find a way to regain control over their offers, there is a line of entities ready to take it from them.

More than 90 people converged on Miami earlier this month for the Farelogix “Controlling Your Offer Symposium”. This was the industry’s first event dedicated to technology for airline-controlled offers, and it was a huge success. Attendees included senior executives from 23 airlines, representing IT, revenue management, pricing, e-commerce, merchandising, and NDC/distribution.

The event kicked off with our CEO, Jim Davidson, explaining that the offer is a virtual, electronic contract between an airline and its customers. An offer is unique, dynamically created in real time, and relevant. And since most airlines today do not control the offer, they cannot guarantee the price of an offer in search until later on in the process. The big takeaway for attendees was that it’s really hard to stand behind an offer if you don’t create it.

Henry Harteveldt, Principal at Atmosphere Research Group, spoke about activating the offer and its role in distribution and revenue management. He explained that airlines are “doing business in the era of Beyoncé, but are constrained by Beatles-era technology.” He discussed the factors enabling a new era of active retailing, and in particular focused on the importance of mobile as both a channel and catalyst for building better relationships between consumers and airlines.

Mike Wittman with the International Center for Air Transportation at MIT focused on the science behind the offer and dynamic pricing. He explained that dynamic pricing goes back to “who’s asking” – looking at everything from the point of origin and search pattern to frequent flyer number. He also examined the role of offers in driving revenue gains, increasing yield, reducing load factors, and more.

Scott Garner, President, Data & Analytics at ADARA enlightened attendees on the Traveler Value Score, a powerful new metric that accurately assesses the customer’s potential value as a traveler. Following an overview and then live demo of the next generation Farelogix pricing, merchandising, availability calculation, and schedule building engines, spokespersons from American Airlines, Air France-KLM, WestJet, Emirates, and United shared their stories of innovation after taking control of their offers.

For a quick glimpse into the Symposium, watch our recap video:

Thank you to everyone that took the time to attend our event.

We look forward to seeing you again soon!

Late last year, we announced the addition of FLX Shop & Price to our Airline Commerce Gateway. FLX Shop & Price is our purpose-built shopping, offer, and pricing engine to handle NDC-aligned shopping, offer-creation, faring, and pricing requirements.

Today we announced that WestJet is the first airline in full production with FLX Shop & Price. It provides the airline with substantial cost savings opportunities, significantly improved response times, flexibility, as well as the ability to dynamically modify ATPCO fares. The new shopping engine is in production for a number of travel agencies and technology providers that are shopping and booking WestJet content via WestJet Direct, the airline’s Level 2 NDC-certified API solution powered by Farelogix.

FLX Shop & Price is designed for airline-controlled NDC shopping and pricing. The engine provides full support for ATPCO-based fares as well as non-ATPCO fares managed directly by the airline, and is fully interoperable with other Farelogix “offer engines” for off-PSS merchandising, availability calculation, and schedule building. The engine can be hosted by the airline or, as is the case for WestJet, hosted by Farelogix.

The world of NDC requires airlines to have complete flexibility and scalability to accommodate dynamic search requests from OTAs, meta search providers, and agencies. FLX Shop & Price delivers on these requirements providing full control over offers, with the ability to accommodate large search volumes without impacting performance or incurring costly look to book fees.

By taking control of its offer using our next generation technology for shopping, WestJet is better positioned to compete for customers, react to competition, and improve revenue management through dynamic pricing strategies.

Early last week I had an Op-ed published in The Beat on the topic of “Full Content” (if you are a subscriber to The Beat, you can see my Op-ed here). I then read, with interest, James Filsinger’s response to my Op-ed. I sincerely appreciate anyone taking the time to enter the conversation. However, James made a few assertions that, as they say in the news business, can be unpacked here.

The first point he makes is that consumers go to online travel agencies and service providers to procure travel and that is certainly correct. However, he asserted that GDSs have access to all content. While the GDSs have a lot of content, and they want the world in which they operate to believe they have all content, this is simply not true and never has been true. In fact, the GDS “full content” provisions came about precisely because they did not have full content, namely the so-called “web fares”.  Similarly, low-cost carrier content has been a major issue for GDSs since the early 1990s.  And of course, ancillary content is the latest gap to hit the GDSs. Not to mention hotel and car rental content which have never been close to being fully available through the GDSs.

You may also recall this research study undertaken jointly by IATA, WTAAA, T2Impact and Atmosphere Research that surveyed travel agencies worldwide. The resulting report concluded, among other things, that “GDSs are no longer the comprehensive ‘department stores’ housing all airline content” and that on average, agencies book 26% of their air outside the GDS.

Over the years, in an attempt to close some of their content gap the GDSs have been forced to accept disparate content from suppliers via APIs, primarily from Low Cost Carriers (LCCs). The difference today is that NDC makes it possible for the GDSs, and any others, to aggregate disparate content in an easier and much more cost effective way than the one-off efforts of years past. I’m certainly not saying the GDSs want or like to do this, but as more and more airlines become the single source of truth for their content and delivery (via NDC APIs), the GDS that reinvents itself into a new world content aggregator (think plug and play NDC connections with new display and selling UIs instead of Green Screens) will clearly win the new GDS market share game.

Let’s move onto Filsinger’s assertion that the GDSs are like Amazon. Sure, in an ideal world, a lot of people would all like to think of the GDSs like Amazon. Similarly, in my ideal world, I’d like everyone to think of me as a 30-year-old, with washboard abs, and flowing locks of gold. Of course, the problem that I share with GDSs is when you meet either of us, you are sadly disappointed. As a big Amazon fan, I really appreciate their intuitive user interface, their one-click selling capability, their smart-learning product suggestion algorithms, and efficient and straight forward product descriptions. Do you see the similarities with the GDSs? Me neither!

And, I’m sorry, but Filsinger is wrong on this point too – a seat is not just a seat. The number one desire for corporate travelers is seats, seats, seats – location, pitch, legroom, comfort – all matter.  And, many of us road-ragged warriors are more than willing and eager to pay for better ones. Just look at the numbers coming in around premium seat sales – it’s simply astonishing.

Lastly, regarding his comment about my broad brushing the GDSs as “anti-competitive evildoers”: in fairness, I don’t believe I ever said evildoers. But anticompetitive? You bet! And this is not just my opinion. A jury in a Federal Court found the Sabre Full Content provisions to be anticompetitive AND harmful to airlines and consumers. This is Sherman Act antitrust stuff, so yes, my broad paint brush works quite well, thank you. The Beat did a great job of covering the trial, so I’d suggest checking out their archives. Or, if you’re interested in prior actions directed at American, Northwest and other airlines, you can read the transcripts of the 2012 American Airlines v. Sabre trial here.

Thanks again for the comments on my Op-ed, and for continuing the conversation.

Previously, I discussed that airlines must be the single source of truth. The question is how do you get there?

Existing airline technologies and processes are perhaps the biggest challenge. Legacy systems and ideas were not designed for this new world of hyper-connected customer relationships. Just think about it – data is not integrated with the pricing engine; control of the offer is outsourced to the PSS or GDS; and there’s no dynamic pricing. IATA’s New Distribution Capability (NDC) to the rescue!

The hyper-connected relationship demands personalization. But the reality is that your airline might have some great CRM data, or maybe even some good analytics and propensity scores – but how do you integrate these into the pricing engine that creates your offer when it’s sitting at your PSS and outside of your control?

What about Dynamic Pricing and the new science of Revenue Management? I know some of you who live and breathe this stuff are mumbling at me right now or thinking: “Gee, everything you’ve said sounds great, but it’s not reality! We live and breathe filed fares, 26 inventory buckets, and pricing engines that can’t possibly handle the billions of requests of the hyper-connected consumer! Get real!”

Yes, yes, I hear you and yes, that’s a challenge.

In some cases, the airline is still outsourcing these essential elements to a third party – if not the GDS, then the PSS. And if it’s outsourced, guess what? You’re on somebody else’s product roadmap, not your own. That’s a problem.

And how about the airline as the single source of truth? This is where NDC and all the work that has gone into it comes into play. NDC is a giant leap forward in solving that challenge.

So how does an airline get control? Game-changing, transformative innovation! For example, Farelogix provides technology that enables better revenue management – from filed fares to dynamic pricing. Our next generation offer engine optimizes all aspects of the offer including merchandising, pricing schedules, and availability. And of course, artificial intelligence and predictive analytics will soon be the new normal.

I think Henry Harteveldt of Atmosphere Research put it best: “Dynamic pricing will require the ability to conceivably create and publish endless prices/offers in a frictionless manner tailored to a customer of one.”

As long as you remember that you and your airline are the single source of truth for your hyper-connected travelers, we’ll get there together.

To succeed in today’s hyper-connected customer environment, you must be the single source of truth, dynamically determining and delivering your best offer, in real time, through any channel.

What does this mean?

It means that you – and only you – must create your offers. You can’t outsource it to anyone. You create offers based on your knowledge of your products and services, knowledge of your customer, and strategic use of big data and predictive analytics.

Then, you deliver that offer to all the channels and points of contact with your traveler so your customer knows that no matter how they interact with you, it’s still the same relationship. They can rest assured that you will be consistent. In other words, you are the single source of truth.

If you don’t step up to this challenge, you will fail. If you delegate the creation of your offer to a middleman, your consumer relationship will be faulty and – you will fail. This is the competitive terrain we’re in now. It’s the world of the hyper-connected consumer. Consumers today are hyper-connected because they want to connect to the source – and that’s you.

The New Science

 Dynamically creating and controlling the offer is the new science of Airline Revenue Management. In a study published last year, Atmosphere Research Group reported that airline executives see that the impact of Dynamic Pricing and Predictive Analytics will drive the biggest change in their distribution strategies. There’s a reason why scientists at leading universities around the world are being recruited by airlines to help redefine how they create their offers.

This is the way our industry – at last – is transforming into the world of retailing. Without question, this is the single most transformative time since the Internet was created. It’s not going to be easy and we all know why.

In my next post, I will address the challenge that airlines face in becoming the single source of truth.

 

In my last post, I told you how technology is changing your conversations with hyper-connected customers. I also promised to tell you what your biggest asset is.

You might think your biggest asset is your airplanes, or your people, or your newest business class seats. But no, the most vital asset that any of us in the airline industry have in our relationship with customers is “The Offer.” Without the right offer, nobody buys and nobody stays loyal. Without the right offer, you lose the relationship and the revenue.

The offer is what flows from you to your customer throughout this conversation and this relationship. The offer is truly your biggest and most important asset.

The concept of an offer is not new, of course. Offers have always existed. But in the past, an offer was a price on a product or service, and everybody who came to shop in your store – or even your website – generally saw the same prices or close to the same prices as your competitors.

Today, the offer is complex. In fact, its every bit as complex as the customer relationship you are in now. Every offer needs to be personalized and optimized – created specifically for a specific situation, person, product, and service. In other words, every offer is unique; just like people are unique in their own ways; just like every customer you have is unique. You could even say the offer has its own anatomy, or DNA. Every offer is unique and created dynamically in real time.

Think about it this way. Every single time you interact with your customer, a new strand of DNA – a new offer – is created. And what goes into the manufacturing of this offer? A lot!

We’re talking about Merchandising, Dynamic Pricing, and Predictive Analytics. We’re talking about loads and loads of data! There’s customer data – things like demographics, shopping and buying history, and loyalty. There’s data about your products and services. What’s the aircraft or the load factor on the flight, and how many premium seats are left? These might impact what you offer and for how much. There’s also data that comes from Predictive Analytics. What is this traveler’s propensity to buy this particular product?

All of this data is assembled and analyzed, and an impactful offer is dynamically calculated in real time. Hopefully, this unique offer delights the traveler and makes you some money in the process. This is the future of Revenue Management, and it’s the holy grail for the world’s leading airlines.

And guess what? Nobody except you – as the supplier with access to all of this data and intelligence – can ever create an offer this good or this impactful. You can’t outsource this to a third party or a GDS, or even a PSS – because they don’t have all the data! They are not in this specific, hyper-connected relationship. It’s you, and only you, creating your offer – your biggest asset. Think about it!

Of course, you can also request an invitation to attend our exclusive event dedicated to technology for airline-controlled offers in Miami, Florida, April 5-6, 2017. Visit farelogixoffersymposium2017.com/ for more information.