As registration is now open for FLX-Disrupt 2020, we thought we'd whet your appetite for the event by taking a look into the Future of Retailing. This was a key theme of FLX-Disrupt 2019, where speakers from Hopper, McKinsey & Company, and United Airlines recounted stories featuring the same three protagonists: NDC, personalization, and data. Their presentations left no doubt what's underpinning the opportunities ahead.
The Innovation Lynchpin - NDC
By forging a connection between airline systems/offer engines and retailing channels/ touchpoints, NDC enables airlines to make offers in response to customer requests, including in the indirect channel. As such, NDC is the bedrock of airline retailing innovation.
Of late, we’ve heard much about innovation behemoths, such as Amazon, being poised to ‘eat our lunch’ as a new distribution channel. As McKinsey’s Alex Cosmas rightly pointed out at FLX-Disrupt 2019, “Amazon has demonstrated the desire and ability to take other industry’s supply and channel it through its market place.” Alex described a conceivable future-state where Amazon buys airline inventory then sells and services the air products on its own platform.
Perhaps Amazon would reward the loyalty of Amazon Prime members with added benefits such as free Wi-Fi, baggage home-pickup/dropoff, and retail purchases delivered to the gate? Amazon might install its own airport check-in counters and, in the case of disruption, rebook customers using Amazon-owned inventory on other flights. By servicing customers end-to-end, Amazon would further commoditize air travel suppliers, much like mainline carriers have done with regionals.
At Farelogix, we’re not yet ready to predict Amazon’s land grab. However, we firmly believe that NDC does change the competitive landscape in a positive way for all. With NDC, consumers can shop for contextually relevant offers in any channel, and this is a great thing. Airlines can also compete on entirely new levels as retailing matures – another great thing.
We predict that the often-posed question “What percentage of your traffic is direct versus indirect?” will morph into “What’s your distribution portfolio?”. That is, what unique mix of distribution partners (direct channel distribution, third-party aggregators, GDS companies, and meta search engines) will you be using to reach your customers, optimize the offer, and compete?
In such a world, the threat stems not from retailers such as Amazon, but more from the failure of the airline to innovate and win business by taking control of their biggest asset – the offer. For this, airlines need NDC.
Customers are Everywhere – and Anywhere
Another great speaker at FLX-Disrupt 2019 was Jacob Guerra. Jacob shed light on how United Airlines is using NDC to reach customers where they are by innovating retailing across emerging channels. He began with some eye-opening facts.
Did you know…
- 2 in 5 adults use voice search once daily 1
- 50% of all searches will be voice searches by 2020 2
- 65 percent of people who own an Amazon Echo or Google Home can’t imagine going back to the days before they had a smart speaker 3
To explore the opportunity presented by digital assistants, Jacob detailed how United Airlines has experimented with voice and text-based interfaces, becoming the first US airline with apps and skills for Google Assistant, Fitbit Iconic, and Amazon Alexa 4.
The team at United has architected its retailing platform so it is easy to experiment with emerging channels and new technologies. The airline’s NDC API/Farelogix FLX Open Connect (in addition to the airline’s proprietary XML API) enables United Airlines systems to connect to any retailing touchpoint.
Emerging Channels and Dynamic Offers: Driving the Need for Personalization
Emerging channels such as mobile apps, voice-search, and chat share a common retailing challenge that will increasingly impact more traditional channels as airline-controlled offers mature.
On a website or agent desktop, it’s possible to present a significant volume of offers in response to a shopping request. However, Jacob drew attention to the limitations of presenting multiple offers to customers on emerging channels. Quite simply, no one using Amazon Alexa would be prepared to listen to a long list of offers before making a selection. Starting with traditional platforms, United Airlines uses multiple data inputs from travel history, trends, loyalty, and retail data to provide the travel recommendations which will be necessary for retailing success across emerging channels.
This approach will be equally crucial as airlines become better at creating dynamic offers, as it won’t just be real-estate but rather the human brain’s ability to make sense of a myriad options that will cause obstacles!
Hopper: AI-Driven User Experience
Mobile-OTA and growth giant, Hopper, has also been using NDC-enabled innovation and data-driven personalization to carve a niche in the market with astonishing success:
- 38M app users to date
- 100M trips have been organized on the platform
- $1B sold directly in the mobile app in the last three years, and will sell $1B in this year alone
- >100% growth year-on-year
- > monthly installs than AirBnB or Uber
The key to Hopper’s success is the strong relationship the company has with its app users and its user experience. As app users are identified customers, Hopper can collect rich data (both implicit and explicit) at an individual level, which is then used to segment customers into three market segments defined by price-sensitivity, flexibility, and desire for comfort. Behind the scenes, artificial intelligence (AI) algorithms apply price, flexibility, and comfort-related attributes to every flight and then weight these values according to the preferences of each market segment, thereby bringing the offer closer to the customer need.
“We need a technology pipe to pass information back and forth and share the segmentation information about the customer who is enquiring with the airline, so the airline can return the best offers,” said Dakota Smith, Chief Strategy Officer, Hopper. “We can take the first steps without that, e.g., branded fare class and paid seats. But for truly tailored offers we need NDC.”
“For NDC to be powerful, it can’t be just a pipe or a technology connection, you need the agency or third-party to display the offers and sell them. That is what Hopper is committed to doing,” he concluded.
FLX-Disrupt 2019 provided a unique platform from which inspiring innovators recounted stories of the industry’s greatest experiments, successes, and strategies. As these stories unfolded, delegates saw clearly how NDC, personalization, and data are playing a leading role in not only defining the future of airline retailing, but are also making a game-changing impact today.
If you want to immerse yourself in discovery and explore topics like these, why not attend FLX-Dirupt 2020? We're looking forward to welcoming you!
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