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

FLX-M Use Case Challenge

Airline Merchandising isn’t always about creating value by selling additional products and services. Very often, using merchandising to reward loyalty can be just as beneficial. Loyal and high-value customers often expect a certain level of service, and retaining these customers by providing certain perks can be extremely valuable. This brings us to today’s Use Case Challenge…

Today’s Challenge: Chauffeur Services

In this example, an airline wants to offer chauffeur drive services at departure and arrival for travelers in the first- and business-class cabins who have the highest level of frequent flier status. In this example, we’ll focus on the arrival portion of the offer. Let’s see how this looks in the offer designer…

Follow the JFK – * node to the 0.00 USD node. In this scenario, the service is offered at no charge for those travelers in first and business class, who also are members of the Tier 1 frequent flier program.

As a premium carrier, the airline wants to offer this white glove service to keep its most loyal customers happy. Happy customers ultimately result in more revenue. Happiness equals loyalty!

But let’s also not forget that sometimes travelers who don’t have that upper echelon of status may like to splurge and be treated like airline royalty. FLX Merchandise makes it easy to also give travelers the option to be treated like those Tier 1 travelers.

Notice the other two price points, 95.00 USD and 140.00 USD. Tier 2 travelers are offered the service for a $95 fee, while those travelers without status, but who may want to be treated to the white glove service, can purchase it for $140.

FLX Merchandise’s flexibility makes it easier for airlines of all types to offer services to travelers as either a loyalty reward or a purchasable service.

No matter what an airline’s merchandising strategy is, FLX Merchandise offers the flexibility and functionality to help the airline succeed in merchandising.

 

Merchandising Tip: Services like these require additional information to be provided by the passenger, such as address, phone contact, etc., so configuring the offer for the collection of data at the point of sale is key. FLX Merchandise allows configuration of the type of controls and instructions needed to fulfill the offered service.  In this case Address / Contact Info / Pick-Up Time are required.  Other cases may need to provide a drop-down or list in the POS application for user selection.  These configurable ‘Booking Instructions’ are passed to the POS application via the IATA NDC-compliant API.

USC-Chauffeur2

 

Got a merchandising idea for the FLX Merchandise Use Case Challenge? Send us an email with your idea!

 

FLX-M Use Case Challenge

Ancillary revenue has become key to airline success, with almost $50 billion in revenue projected in 2014. As luck would have it, we have an award-winning airline merchandising engine (FLX Merchandise) that is helping a number of airlines grow revenue and make customers happy. Among all the cool features of FLX Merchandise, without a doubt, the one that always tops the list among our airline users is flexibility. It’s always fun to demonstrate how new products and services can be introduced in a matter of minutes (not months!), without hard coding and without the overhead of administrating a static product catalog.

In fact, showcasing the flexibility is how we came up with the very first FLX Merchandise Use Case Challenge. There we were, leading a Merchandising Master Class in Singapore, and we thought, “Why not try a live on-the-spot challenge?” So about five minutes into the event, we invited about 100 merchandising managers to submit ideas and strategies for merchandising. What do you want to offer, to whom, and how? We were impressed by the creativity of the submissions—some of these people were really thinking outside the box!

Next, we selected a few of the entries and configured them, live, in our FLX Merchandise product. No hard coding. No developers. About an hour later, we came back and presented a handful of the submitted use cases functioning live in a test environment. Let me tell you, it was fun to hear–the oohs and aahs were priceless! We kept hearing that IT vendors had quoted these airlines months – even a year – for something similar and they could not believe that it was here,  working in a test environment just an hour later!

Ever since, the FLX Merchandise Use Case Challenge has been popular at all of our events, and we are forever getting more ideas submitted. So,  we had an idea: let’s put some of the best challenges in the blog for everyone to see, and invite even more participation!

So here it is, the first installment of the FLX Merchandise Use Case Challenge!

Today’s Challenge: Seats

Seats are our most common request, but for today’s savvy airlines the requirement is a lot more dynamic than simply charging a premium for select seating. Today we’re going to highlight two of our favorite seat challenges: 1) dynamic pricing based on row number and departure time, and 2) dynamic pricing based on load factor.

Here’s a screen shot from the FLX Merchandise Offer Designer:

UCC-Seats1

Let’s first look at the dynamic pricing by row number and departure time. Follow the node labeled “Pricing by Dep Time.” We designate rows that have premium seating, say rows 21-25. But now, notice the three price points ($15, $35, $25). Follow along the nodes and notice that those seat prices are designated by departure time, so flights departing between midnight & 6am and after 8pm charge $15 for premium seating, while flights departing between 10am & 5 pm carry a $25 charge. It’s dynamic supply and demand!

Below is screenshot of how the properties are determined.

UCC-Seats2

Now let’s look at dynamic pricing based on load factor. This is one of our favorites because it really can maximize revenue, while also giving airlines the opportunity to earn some revenue on a premium seat that would otherwise go unsold.

It doesn’t take an economist to tell you a $35 seat that doesn’t get sold isn’t worth $35 anymore. It’s worth $0. This is where FLX Merchandise’s dynamism really shines. FLX Merchandise can adjust the price of seats if departure day is getting closer and there are still many available premium seats. This is a great opportunity to really optimize your offer.

Maybe Jane Doe wouldn’t pay $35 for a premium seat, but it’s now the day before departure and the seat has dropped to $20. This may entice Jane to now purchase the seat. She gets value for it, and the airline makes $20 on a seat it would have given away to one of those clever people who book a seat at the back of the plane then ask the gate agent if there’s anything available closer to the front and end up in that premium seat for no charge. We’ve all seen it happen!

ROI: Let’s say you’re a Tier 2 airline and board 20 million passengers a year. Now let’s say you introduce (or enhance) your premium seating and assume, on average, you can get $25 for a premium seat. Let’s assume your take rate on premium seating is 5%. Let’s crunch some numbers here, and…

That comes out to about an extra $2 million a month. I don’t know any airline that wouldn’t mind an extra $2 million a month in revenue…

Merchandising FAQ: How much coding is required to change the price or the rules for an offer?

That’s an easy one – NONE! Any merchandising solution worth its salt will enable your business users to make changes in a matter of minutes. That’s what offer optimization is all about!

 

Got a merchandising idea for the FLX Merchandise Use Case Challenge? Send us an email with your idea!

 

FLX Ancillary AwardGuess what? Our friends at United Airlines nominated the FLX Merchandise product in the Airline Information 2014 Mega Event Awards for Innovation of the Year – and we won! This is news our entire company is thankful for as we head into the holiday season!

We were nominated in the Ancillary Revenue and Merchandising category based on United’s cross-channel use of our Farelogix FLX Merchandise product. United set the stage for us to win by highlighting how we’ve helped them achieve their lofty goal of increasing ancillary revenue by 11% per passenger in Q3 2014, and generating revenues of $3 billion in 2014 from ancillary sales of a variety of products and services, including Economy Plus seats, priority boarding, bags, and various subscriptions.

United hosts the FLX Merchandise product and has integrated it directly into their technology stack. This allows them to quickly and efficiently update product pricing, add new products and services, and continuously optimize their offers. FLX Merchandise also generates offers for United’s Economy Plus seats across channels including through the GDS, allowing travel management partners and travel agencies to seamlessly book extra legroom seats. Read the rest of this entry »

What? Seriously? Am I going to start bucking the conventional wisdom of an airline fare already? Slow down… we are all just fresh off IATA NDC-a-palooza in San Diego where everyone and their aunt was testifying to how ready they are for NDC.

So with the NDC Acceptance Position now a badge of honor (or of courage, for us early supporters), you bet I am taking on the concept of a “fare” because not only is the airline industry no longer just about “fares and schedules,” the very nature and concept of an “airline fare” is now in question.

Ok, I’ll be gentle and do my best to be brief because it may take a bit of time for this to sink in…at least it did for me, but when it did, boy, did the light bulb go off!

FLX-M Still

This new way of thinking is about creating truly dynamic bundles containing what we would traditionally know as a “fare” along with certain ancillaries, where the “fare” is treated as a “service item” within the actual bundle, similar to the ancillaries themselves.  Read the rest of this entry »

 

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In advance of Airline Information’s Mega Event 2014 in New Orleans, Farelogix will once again host a Pre-Conference Ancillary Revenue Workshop on Monday, November 17th. The workshop will feature presentations from IdeaWork’s Jay Sorenson and a representative from United Airlines in which they discuss the motivation and strategy behind implementing an ancillary revenue program.

We will also take the audience on a journey on how these technologies can be implemented. And back by popular demand, we will present our Use-Case Challenge! Our developers will be put to the test with on-the-spot use case scenarios from you, the audience, so be sure to bring your ancillary revenue ideas!

Space is limited so register now!

This week, I thought I’d toss out a question to all of you airline marketers:

Can you imagine a situation in which you invite one of your technology vendors to choose which color to paint your new fleet of planes? Or perhaps invite an outsider to decide how to structure and market your new loyalty program… or maybe even dictate what other companies you are allowed to partner with? Whoa OK, OK, I can hear you answering all the way from here – your answer is (correctly) a resounding no! Of course, your airline brand, your products, and your partners are core elements of your strategy and marketplace identity. Of course you would never turn over the control to a third party!  OK, I guess it was a silly question.

© buchachon

© buchachon

Well if that’s so silly, then maybe try to answer this: Why, in today’s world of merchandising and multi-channel customer engagement, do some airlines allow third parties to dictate what products the airline is allowed to sell and where, largely due to technology limitations and delays? Yes, this happens! “We just don’t know anyone who can help us sell seats the way we really want to so we just do what they can do and try to live with what they can do.” That is a real quote from an airline I met with just two weeks ago!  Or this, recently shared by a major international carrier: “NDC sounds promising because we do so much through the agency channel and we want to extend our merchandising there…but our PSS provider says realistically it will be years before it is possible, so I guess we’ll have to wait.” What? And you accept that answer? When in fact the decision of “should we offer it?” should never be dictated by what a particular technology provider can do. To accept that is to limit your potential right out of the gate!  It’s like your provider telling you to dream big…but only in black and white. Read the rest of this entry »

We recently announced the launch of NDC-Xpress, a technology solution that enables airlines to implement New Distribution Capability (NDC) with minimal risk and unprecedented speed to market. Building on the core technologies of the flagship FLX Airline Commerce Gateway, NDC-Xpress delivers airline-controlled merchandising, pricing, and API distribution in a SaaS model, with implementation delivered in less than six months using the latest NDC schemas (Version 1.1).

NDC-Xpress logoNDC-Xpress enables airlines to immediately begin generating new revenue streams from the sale of value-added services in the agency channel. In addition, significant cost savings may be realized through the delivery of content across multiple indirect channel outlets (i.e., GDSs and other third party aggregators) via a single, standardized XML API inclusive of a common and supported implementation structure.

“The focus of NDC-Xpress is speed to market for the long overdue delivery of airline ancillaries, merchandising, rich content, and value-added services in the agency channel,” said Jim Davidson, President and CEO at Farelogix. “With the final approval of IATA’s Resolution 787 (NDC) by the US Department of Transportation and the competitive push for airlines to offer dynamic and differentiated content across channels – beyond airline.com – the timing could not be better for Farelogix to deliver a solution that brings NDC to life, quickly and to the benefit of all parties.” Read the rest of this entry »

At Farelogix, we consider ourselves a disruptive force in airline distribution technology. We innovate. We push the envelope. We challenge ourselves. And because of all that, we produce some cutting-edge technology. Yet I still find myself in meetings with clients and at conferences asking, “How can this be?” Or, “How can an airline still be pigeon-holed like this?” Of course I’m not going to name names, but I think it is important for you to hear the stories and maybe, like me, you’ll be mad as hell and not willing to take it anymore!

© hxdyl - Fotolia.com

© hxdyl – Fotolia.com

For example, a couple of months back we were meeting with an airline to discuss merchandising. We love merchandising. We, along with the rest of the industry, now know for a fact that airline merchandising leads to better customer happiness and more revenue for the airlines. Plus, (shameless plug) we have awesome merchandising technology. So, needless to say, we were psyched for the meeting and it went really well. We showed them some really cool stuff around pricing seats, and even other cool stuff like dynamically pricing the seats and seat-location bundles, and since we already had a direct connect with this airline, we showed all this working in their system – no gimmicks or hocus pocus. Not exaggerating, it took us less than an hour to create these real examples, built right there in the conference room, and they were wowed.

During the demo we heard a pain-point from the airline. I don’t recall if it was because they were introducing new seat configurations or what, but basically they wanted to change the prices on some seats. It wasn’t even complicated stuff like dynamic seats based on city pair, length of flight, peak travel time, or anything like that. They told us their IT provider told them the request to change the price on a few seats would cost over half-a-million dollars and take up to six months. Six months! We had literally just shown them how they could do it in under an hour. Yet this is what airlines are still putting up with! It doesn’t have to be like this!

Imagine if I were selling a pair of shoes on eBay, and I wanted to change the price from $25 to $20. But instead of just being able to login to eBay and change the price, I had to write eBay, and they would write me back in a month or so to tell me they could change the price on the shoes I was selling but it’d take a month and cost $10,000. I know it sounds ridiculous, but this is the world so many airlines still live in. It’s absolute madness!

So, airlines, the next time your IT provider, or even your in-house IT folks, quote you some seemingly astronomical price or time frame for a merchandising-related implementation, tell them, “Hang on, I’ve got to Ask The Question!” Then call us. Chances are if we are not too busy, we could show your use case actually working in a real airline test system in a day or so.

Remember time is money, and the longer you wait the more money you are losing.

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As a precursor to Airline Information’s upcoming Mega Event Asia-Pacific 2014, we will be sponsoring a complimentary Ancillary Revenue Master Class on Tuesday, August 19, with a featured keynote from IdeaWorks’ Jay Sorensen. This event is a must see for anyone attending the Mega Event as it will shed some light on not only the “why” of airline merchandising, but also the “how,” while also demonstrating why delivering the right product at the right time and price to the right customer will put you on the path to more revenue and happy customers.

Farelogix will be providing some real life examples of merchandising in action, as well as putting our developers to the test with on-the-spot use case scenarios, so bring your ideas on how you’d like to generate ancillary revenue – maybe your use case will be selected!

Registration is still available, but space is limited so register now!

 

Now that DOT has cleared the storm clouds over NDC, airline conference rooms around the globe are being booked for meetings about NDC.  These meetings range from a simple, internal exploratory discussions on the NDC topic to serious “next steps” planning sessions on whether the airline will buy or build its own NDC API, while also prioritizing which GDSs and aggregators are ready to accept the airline’s NDC XML API when it’s ready.

© agsandrew - Fotolia.com

© agsandrew – Fotolia.com

Now before we get into whether to NDC or not NDC, I think a few clarifying facts and terms are in order. Along with the term “NDC,” one will quickly have to deal with terms and concepts like “NDC Solution Providers,” “Aggregators,” and “NDC Schema.”  So let’s start with some basic definitions.

NDC Solution Providers are generally technology companies, including those operating a PSS (Passenger Service System), that have both the capability and interest in building out airline NDC XML API connectors inclusive of comprehensive integration with the airline host and other systems, such as merchandising and pricing.  (In case you were wondering, Farelogix fits into this category). I like to call this group the Makers.

NDC-Capable Aggregators are generally distribution-related companies or travel technology companies that possess the capability to accept and integrate an airline’s NDC XML API with other airline content from one or more sources.  Obviously the GDS companies are the biggest of these aggregators, but there are a growing number of others making a name for themselves in this space.  I call these folks the Takers.

NDC Schema is the actual technical connectivity roadmap that is being standardized by IATA and airline/3rd party workgroups.  NDC Schema version 1.1 is anticipated to be finalized and published in Q4 of this year.

This version 1.1 schema will officially be the first technical “rules of engagement,” if you will, for those NDC Solution Providers and NDC-Capable Aggregators.  The Solution Providers (the Makers) will build out the airline connectivity, most likely starting with the NDC-shop, as this defines the offer/pricing creation at the airline level – the essence of NDC. The NDC Solution Providers will follow the NDC Schema so that the NDC-Capable Aggregators (the Takers) will have a reliable and consistent set of connectivity messages.  In other words, if an NDC-Capable Aggregator connects to two or more airline NDC XML APIs (even if for shop only) where those airline XML APIs were built by different NDC Solution Providers, they will send and receive consistent and expected data.  This makes the life for an NDC-Capable Aggregator a heck of a lot easier and enables them to scale and perform multiple airline connectivity for their customers in the most efficient manner.

Up Next… the real questions around “To NDC, or Not To NDC” because you know we just love to Ask the Question!