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

Posts Tagged ‘merchandising’

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.

Last month, Farelogix hosted its Merchandising Master Class as part of Airline Information’s (AI) Mega Event in Barcelona, Spain. Farelogix representatives brought together industry thought leaders, top airline performers, and technology solution providers to discuss merchandising with the standing-room-only crowd. These Master Class events, which have become a staple of AI’s Mega Event series, have been conducted all over the world – from Singapore to New Orleans.

Recognizing that designing and implementing an effective airline merchandising program requires innovation on many levels, the Barcelona workshop explored the entire end-to-end process with a focus on taking action – from strategy to execution. Real case studies and hands-on technology approaches were used to tackle the full spectrum of successful merchandising including: differentiating your product and brand; tips to create and optimize the best offer; and insights on New Distribution Capability (NDC) and related technologies that can help you get to market quickly with the highest flexibility, efficiency and revenue per passenger.

Jim Davidson, President of Farelogix, kicked off the event with his presentation: “Merchandising Call to Action: Are You Leaving $15 Per Passenger On The Table?” 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.

We recently had the opportunity, along with consulting firm L.E.K., to share our thoughts and insight on ancillary services and airline merchandising in a feature in IATA’s Airlines International magazine. Here’s a brief excerpt:

Ancillaries are not only a boon to airline economics but also an opportunity to enhance the customer experience and airline brand loyalty. Meeting the customer’s demand for greater choice, convenience, and value is the new competitive playing field. The key to meeting this demand is intelligent use of data—from customer demographics and trip purpose, to buying history, real-time trip conditions, and even revenue-managed inventory—to create the most relevant offer, and then deliver it no matter where the traveler happens to be shopping or browsing, even in-flight. Intelligent merchandising is, put simply, engaging with your customer, and acknowledging their specific needs.

You can read the article in its entirety, courtesy of Airlines International, here.

As you may remember from my last blog, I have been spending more time with my knitting, but quite frankly I have knitted enough sweaters for everyone on my 2014 Christmas list. And just wait ‘til you see the sweater vest I knitted for Mike Premo. It will go great with the bow tie.

So what now?

© Brian Jackson - Fotolia.com

© Brian Jackson – Fotolia.com

Well, I was thinking that since we have spent almost two years talking to, and working with, a number of airlines on their merchandising strategies and approaches, we thought it might be fun to categorize some of the more interesting findings on this very hot topic for airlines, consumers, travel agencies, corporations, and technology providers alike.

So that’s what we are going to do. We are going to write about some of the challenges, opportunities, and learnings around the topic of airline merchandising gleaned over the past two years.  It will be fun, a bit controversial, and, most of all, informative by providing a foundation for continuing productive dialogue, debate, and innovation surrounding this most important topic.

So what do we have teed up for the next few months?

    •  “Top 10 Reasons Not to Get Started with Airline Merchandising”

    •  “Oh, the Things We’ve Heard: Memorable Quotes and Quips from Airline, Agency, and Distribution Folks Around the World as They Discuss the Concept of Airline Merchandising”

    •  “Why the UX Never Sleeps, So Neither Can We: Our World Has Changed, But Have We?”

    •  “The Last Mile: Merchandising Through the Travel Agency Channel”

    •  “We Know Merchandising Creates Happy Customers More Revenue, But Cost Savings, Too?”

    •  “You Can Run, But You Cannot Hide: Mastering the Airline Silo Game”

That should keep me busy for a while. Although I’ve heard scrapbooking is making a come back…

We’re happy to premiere a new video with a very simple, age-old concept: More Revenue Happy Customer. The concept is nothing new, but when it comes to airline distribution, sometimes it’s a concept we’ve struggled finding the right balance for.

Without further ado… Enjoy!

 

View the video on YouTube.

I truly love this industry, especially the airline industry, and most especially the airline distribution subset. It is chocked full of opportunity, drama, tension, and lots of industry panels talking about how things need to change and get better.

So, the other evening I put on my fuzzy-toed bunny PJs, microwaved some popcorn, and curled up with my laptop to watch a rerun stream of a panel about airline distribution that was held just a day before in Beijing, China during the annual IATA conference.

http://www.iata.org/events/agm/2012/Pages/panel-airline-distribution.aspx

The panel included a full stage of industry execs from airlines, GDSs, and Google. Oh this is gonna be good….some notable heavyweights in the industry are poised to get it on! And get it on they did…in the form of a thought-provoking discussion focused largely on the 60 percent of airline distribution that goes through the travel agency channel. I thought I would attempt to characterize and share with you some major takeaways after 59 minutes. Here we go. Read the rest of this entry »

Debate is never in short supply in our industry, and a topic of choice these days is what some are calling “Ancillaries Vs. Merchandising.” So—surprise, surprise—I figured I’d weigh in on the subject. Maybe we should start with some basic definitions, and you know where I always turn for the most accurate 411…Wikipedia. Wiki says… an ancillary provides necessary support to the operation of an organization. Yuck, who wants to pay for that? It’s no wonder airline consumers don’t like “ancillaries” if all they are is support for the airline. Where is the consumer in all that?

© Flexmedia - Fotolia.com

Maybe the term “merchandising” shines a different light. Wiki says that merchandising is any practice which contributes to the sale of products to a retail consumer. Okay, that’s a bit better. At least there’s the notion of a consumer in that one.

Here’s what I think we should do. Let’s only use the term “ancillary” to mean the actual product or service an airline can offer that compliments the purchase of the airline seat. In fact, I think we should drop the term “ancillary” all together and just say “product” or “service.” Ancillary reminds me of the old airline term “change of gauge” (which basically means changing planes to a connecting flight). Why do we insist on continuing to use so many consumer-unfriendly terms? Are we trying to scare consumers off or just continue to confuse them with these archaic terms and processes?  Read the rest of this entry »

Articles about travel agents and ancillaries have been all over the web lately. First I read this one. Then I read this. And then this. I felt like I was reading the same article over and over and over. Then it hit me — Groundhog Day.

No, I’m not talking about the day when we pull Punxsutawney Phil from his burrow in Pennsylvania to see if he’ll see his shadow or not. I’m talking about the hilarious movie Groundhog Day (yes, the movie takes place on Punxsutawney Phil’s special day). In the movie Bill Murray keeps living the same day over and over… and over. And it seems to me that the conversation surrounding travel agents and ancillaries is stuck in a similar pattern. Read the rest of this entry »

Last week, I decided that I really needed a 3D television and, of course, all the trimmings to go with it to make it a total sensory experience – funny 3D glasses, a new 3D surround-sound system, and, of course, the smell-o-vision option. With the holidays closing in, I had my perfect cover – The Family Gift. They would love it. What would be better than the family sitting around the new 75-incher, basking in its warm glow while watching and smelling Harry Potter 12? Ah, I love the holidays.

Since I really despise actually going into a store, I decided to make my Family Gift selection online. As I began my search, I came across a number of aggregation sites that displayed price ranges for certain brands and models, but honestly, those sites weren’t of much help. I mean, telling me that the Mitsubishi TV is $4,140 – $6,000 isn’t terribly helpful. And those sites certainly didn’t take into account any personalization like my favorite places to shop online for electronics, and that I am a Costco member, and a Best Buy Rewards geek, and that I have a Fry’s credit card. But how could they? These aggregation sites know nothing about me. So naturally all they can serve up is a very generic display of something I may or may not want – the same display they provide to every other shopper looking for the same thing.

© Ali Ender Birer - Fotolia.com

Read the rest of this entry »