For the past five years, airlines have remained profitable by finding new ways to increase passenger capacity, unbundle fares and generate more ancillary revenue with baggage fees, á la carte services, and frequent flyer programs. However, there is still one thing customers are not happy about: the fee to change a flight, which can cost $200 on average.
This fee-based approach to ancillary revenue is well-worn and won’t solve the real problem, which is the failure to understand customers better. Airlines need technologies that transform air travel from a low-margin commodity to an ancillary gold mine by leveraging customer data and creating positive experiences.
Airlines have powerful systems for scheduling and pricing, but when it comes to distribution, airlines are lacking the booking engine power to get the right ancillary offers in front of the right customers at the right time. How can airlines expect to increase ancillary revenue when their booking engines are designed to only display schedules and prices, but lack the power of a true direct channel for sales, marketing and ecommerce? What incentive does a customer have to book directly with an airline, instead of with an online travel agency (OTA), who can book a flight and a hotel, rent a car and schedule an activity, all at once?
If airlines want to increase ancillary revenue and transform the customer experience, they must apply 'growth hack marketing' to embed ancillary merchandising strategies into their booking engines. Airlines will gather the data they need for marketing automation, ancillary up-selling and cross-selling. However, none of this is possible until airlines have the booking engine power to ‘customize the offer’ they present through sophisticated business rules, search parameters and travel inventory management.
Talk is cheap. Action is needed
When it comes to booking engines and ancillary revenue across the airline sector, everyone uses the right buzzwords – personalization, merchandising, segmentation and so on. But the problem we hear time and again is how hard it is to actually implement actions and solutions in line with those buzzwords. That’s why we created the Airline Merchandising Lab, which we'll be presenting at the Global Aviation Festival in London this week (September 6). The Lab will feature a set of demos and experiments to show exactly how ancillary merchandising works within a real-world booking engine.
We built the lab around six steps:
- Segmenting customers – how to analyze customer data to create actionable segments that will serve as a foundation for all future ancillary strategy.
- Building personas – how to enrich your segments and drill down deeper for more personalized and relevant strategies.
- Personalizing ancillary products & offers – how to create and deploy dynamic offers relevant to general personas and individual customers.
- Communicating effectively – how to use marketing automation to make sure your offers and messaging are precisely targeted to the right channel at the right time.
- Customizing the booking process – how to customize booking (and post-booking) flows based on the segments you built, and how to integrate your loyalty (or CRM) data.
- Measuring, analyzing, testing and optimizing – how to put business intelligence into action and use metrics to constantly improve – the key principle of growth hacking.
The Lab is a collaboration between Switchfly and Diggintravel: we’ve applied a growth hacking philosophy to ancillary merchandising, to help airlines move from buzzwords and ideas to best practices and real results that raise their bottom line.
For more background on the expert discussion during Aviation Festival in London and to receive a copy of the presentation, you can get in touch with me at email@example.com.