First published on 22nd July, 2016
Ai Editorial: United’s total ancillary revenue almost touched $6.2 billion in 2015. But as stakes get higher, airlines need to prepare better. Ai’s Ritesh Gupta assesses 5 areas.
Can an ancillary product be linked with loyalty? How to avoid the “clever” idea of opportunity cost pricing, say for a seat in the aircraft or lounge access? How can bundling and unbundling be linked with comfort and convenience?
Airlines are contemplating and probing issues around customer-centricity when it comes to ancillary revenue generation.
As IdeaWorksCompany and CarTrawler released 2015 Top 10 Ancillary Revenue Rankings, it was emphasised that ancillary benefits shouldn’t eclipse the core principles of customer experience that airlines have built their brands on. The opportunity is to deliver a personalised offering that complements their brand promise.
It’s getting bigger and bigger
In the era of data-driven merchandising and personalisation, stakes are much higher now.
According to IdeaWorksCompany’s latest ancillary revenue review of top-performing airlines, the top ten tally soared to nearly $26 billion in 2015.
· Top performer per passenger is Spirit. Even though the carrier’s systemwide total revenue per passenger was a very modest $119, the $52 earned from ancillary revenue represents a crucial 43.4% of Spirit’s total revenue per passenger. As per the revenue profile of Spirit, checked bags contributed 18%, online and call centre fee 14%, assigned seating 4%, sale of FFP points 3% and all other ancillary 4%.
The study asserts that a la carte methods have gained acceptance over the years, a trend exemplified by the fact that Spirit has risen from 5.5 million passengers in 2008 to nearly 18 million last year. For a carrier like Spirit, high passenger volumes and load factors enable them to sell more ancillary products and services, which in turn allow to reduce the base fare even further. In this category of ancillary revenue as a % of total revenue, Spirit was followed by Allegiant (37.6%) and Wizz Air (36.4%).
· Total ancillary revenue – United led this category with $6.2 billion, followed by American ($4.71 billion), Delta ($3.78 billion), Air France KLM ($2.16 billion) and Southwest ($2.11 billion). In all, there are 10 airlines over $1billion in the total ancillary revenue per year category. For their part, United has over the years grown their ancillary revenue per passenger by growing bag fees, developing their Economy Plus product, and stretching the revenue boundaries of the MileagePlus frequent flier program. Ancillary revenue per passenger in case of United has risen from $22 or so in 2008 to $44.16 in 2015.
Preparing for the future
Indeed ancillary revenue generation is an integral part of the business today, but airlines can’t afford to annoy the customer, and they also need to improve business processes.
1. Personalisation: The concept of ancillary products is common, but selling them in a personalised way is not. As Maria Cardenal, head of product development at Vueling Airlines asserted in a recent interview, selling ancillaries is about identifying a need in a particular moment. And doing it right. Because awkward personalisation can be worse than not personalising at all. Here is where big data comes into play. “So there is a need to use data effectively for personalization - collect enough data with enough quality, have the ability to draw the right inferences or customer intelligence, work out right tools to transform the data into personalised messages or experiences and must do it at the right time and in real time,” Cardenal pointed out. And while doing so, airlines need to counter the high cost of implementing personalization and assess customer acceptance level for personalisation.
2. Distribution: Airlines, OTAs and GDS companies are working on advanced merchandising capabilities including enhanced product information delivery via images, video etc. GDS companies have come up with graphically-rich workflow to support ancillary and branded fares sales. As IdeaWorksCompany’s president Jay Sorensen highlighted during our Ancillary Merchandising Conference in Barcelona in April, linking a la carte methods to GDS is the next revenue frontier. Quite often it is pointed out that ancillary or bundled products are not readily available when shopping through most travel agencies or corporate booking tools, but as Sabre recently told us, the team has made ancillary and branded fare content available through all points of sale that it develops.
3. Being flexible: In order to be flexible and astute with airline merchandising, there is a lot of scope for improvement as of today. If being flexible with the crafting of a new offering – say a new fare, a new ancillary product – can result in increased average order value or even augment the customer experience, then it would be a welcome change for any airline. But how much time does it take to do so? The technology is making rapid strides, and it is being highlighted that it shouldn’t take more than a day to 3 weeks (depending upon the fulfilment aspect of the new offering) to implement the same. Of course, testing is a vital component, but that shouldn’t restrain from trying out. The work that is done at the back-end to introduce a new offering should be done in a way that there is no amendment required in existing digital assets such as PC website.
4. Making it simple: Spirit asserts that the team allows customers to see all available options and their respective prices prior to purchasing a ticket, and this full transparency illustrates that total price, including options selected, is lower than other airlines on average. In fact, the airline ran a brand campaign in 2014 and 2015 to create awareness about how unbundled pricing model works.
Vueling’s Cardenal says the industry can look at improvement in easiness, convenience, relevance and self-sufficiency when it comes to selling ancillaries.
Also, airlines need to ensure page flow configuration on their sites results in control – the sort of products that one intends to sell, at what stage during the booking flow and also for the routes and a set of customers chosen. “Everything can’t be sold to the same set of customers the same way,” Justin Steele, Senior Director of Innovation, Switchfly.
5. Demonstrating value: One thing that I find annoying, from a traveller’s perspective, is the “clever” idea of opportunity cost pricing. Why should I pay an extra $10 for an economy class aisle seat just because the flight is not full today, knowing that a week ago a same seat on a fully booked flight did not demand any extra price? How can such opportunity cost pricing be justified?
Cardenal says the fundamental idea behind charging for a particular seat is not the opportunity cost, but the benefit of choosing where to sit and removing the uncertainty of where you will finally sit.
“Vueling passengers will have a seat assigned for free if they choose so or will be able to choose it themselves if either they pay for Optima fare or pay for Basic fare and then the seat they prefer. Either in an unbundled way or in a bundled way, there is value behind the possibility to choose. It’s the same simple principle for which you have different prices depending where you want to sit at the theatre or the Opera or a football match. You will have to pay extra if you want to sit in a privileged zone,” she said.
Gain an insight into latest trends at the upcoming Loyalty & Ancillary Revenue Conferences - 3rd Mega Event Asia-Pacific, scheduled to take place in Kuala Lumpur (23-24 August, 2016).
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First published on 21st July, 2016
Ai Editorial: Delivering “Amazon-like” travel experience is an apt benchmark. But as much as we can learn from the top-notch retail commerce platforms, we shouldn’t forget shopping for travel and say a retail item could be different, too, writes Ai’s Ritesh Gupta
What’s the benchmark for optimizing a traveller's shopping experience?
Quite often clues are taken from the retail sector, which I believe also tends to exert unnecessary pressure on executives from airlines.
Yes, there could be plenty to learn. So it could be running a personalised platform rather than a website that features customer profiles, depicting brand story in a forceful manner and delivering a distinctive experience, customized offers based on personal preferences etc.
But shopping for travel and say a retail item could be different, too. When I search for a book on Amazon, and “how to travel from Zurich to a village in Interlaken?” on a travel e-commerce platform, the requirement could be drastically different. While for a book, I might read 2-3 lines of reviews, price, availability etc. (yes, Amazon might be well anticipate what I intend to read), in case of a trip, I would look for different transportation options and then respective classes in each, things to do, weather, etc. As the number of variables increase, the display of content becomes a challenge, too. Definitely not an easy task for any airline, even though airlines might be knowing where I might travel next!
So any technology-related (or even distribution, loyalty, retailing-related etc.) decision isn’t easy as too much is happening around us. Airlines are contemplating several areas:
· How artificial intelligence (or AI) can pave way for meaningful interactions? Say - personal travel assistant and tips for trips
· Moving away from disconnected things to Internet of Things (IoT)
· Earnings points and miles when a loyal traveller isn’t travelling
· Effective cross-sell and up-sell at the right time and in the right channel
· Drifting away from websites to platforms as one embraces digital transformation
· Layering behavioral data on top of transactional information for real-time complete view of a traveller.
· Crafting luring offers based on contextual marketing, location etc.
· Optimizing user experience via emerging payment options
· Making the most of latest merchandising and retailing technology and overcoming limitations of legacy infrastructure
Plan, invest, learn and learn more
Airlines need to be meticulous about the way they go about planning for the future. Earlier this year JetBlue chose to set up JetBlue Technology Ventures, a wholly owned subsidiary. The plan is to invest in, incubate and partner with early stage start-ups. The advisory team includes CIO, and Executive Vice President – Commercial and Planning, along with other executives from the senior management. As much as a proper vision and an enterprise approach to aligning teams and identifying gaps are required, the organization needs to streamline testing of new concepts on an ongoing basis. Big organizations like Expedia, priceline etc. have proved it – iterations, testing etc. needs to go on and on. This week as I learnt about the introduction of a new artificial intelligence chatbot by Gurgaon, India-based travel search specialist ixigo, it emerged that it took 12 months for the team to come up with their AI chatbot. The offering would continue to evolve, learning from real interactions with users since the team uses artificial intelligence and deep-learning. So the point I was referring to about retail vs. travel – moving from A to B loaded with information that serves the purpose of the trip – travel companies are responding. ixigo is confident, starting with “80% accuracy”, something that has been built upon from over 30 million data points across destinations, points of interest, routes, things to do etc.
Challenge status quo
May be its time airlines looked beyond existing options for IT and distribution. “Airlines are still to a large extent looking for industry specific vendors and solutions, and – in many cases – still looking for a silver bullet to give them a 10- years leap forward. In my opinion, this is truly strange; when realizing that retailing has out-paced aviation, why don’t airlines look to major retailers for learning and to vendors/ systems in the retailing space, even without any airline special requirements?” questioned a source about the current approach. The source further added, “I don’t understand why we are looking for one standard – XML – why not allow any standard? Won’t we have the same problem as we have with EDIFACT today (although EDIFACT serves its purpose well in many environments), what will happen in years to come when we claim that XML is holding us back and we have a better messaging format? In that case use converters so if you want to speak XML and I want to speak JSON, why don’t we just translate?” As it turns out, Google currently supports structured itinerary definitions in email confirmations using two standards: an industry format Called Micro Formats, and their own custom format called JSON-LD.
Talking of selling, indeed if we were to see something new and different like e.g. airlines selling ancillaries on other airlines then I think NDC as a standard would become interesting and tangible. Matching content to offer is a major issue even today. Also, beyond a point don’t blame the so-called legacy structure, why should everything be sold in the same way. Sell as “well” as you can in the channels where you can sell and measure those sales. British Airways is introducing a host of servicing options and an additional payment option via NDC. Agents booking BA flights through NDC enabled systems are being equipped to pre-book additional luggage, advise the airline of catering requests for pre-order etc.
Airlines are not technology providers. They are service providers.
So in order to carve a niche, a strong collaboration is needed between strategy, marketing, operations, analytics and IT teams before any major initiative is taken. Your technology should integrate seamlessly across channels and touchpoints, while effectively scaling to meet your evolving needs. This is often easier said than done due to legacy systems and data silos. The digital transformation should not be linked to a certain department anymore.
As for keeping pace with the pace of personalisation and omni-channel retailing, airlines will have to implement a system that can link all the data that is being gathered together to enable intelligent offer management capabilities based on the identiﬁcation of customers and their preferences. And things are moving. For instance, a carrier in Europe is working on a customer-centric platform. They have chosen a supplier that provides a modern CRM platform framework that enables the integration of all relevant operational systems. Besides the PSS it’s possible to integrate an external identity and access management system as well as social media, real time arrival and departure information and many more. Based on all these sources of data it’s possible to develop applications that can use and combine such data to serve the customers in the best way.
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First published on 15th July, 2016
Ai Editorial: Proprietary APIs tend to create “one-off” implementations that make repeatability more complex and therefore more expensive, writes Ai’s Ritesh Gupta
Airlines are increasingly opting to control their own merchandising, e-commerce and API technologies.
The focus is on using platforms that enable airline control, faster speed to market, and flexibility – and drifting away from solutions that are hard coded or community-model based, or tied to a particular PSS or channel.
As carriers gear up for personalisation, yield-managed offers, it is clear that they need to sharpen their respective APIs (application programming interfaces). Amidst all the talk around a single, standardized set of XML messages that can feed all channels, how are airlines and GDS companies going about the same? It seems we haven’t yet settled for standardization i. e. relying on XML APIs or set of codes so that structured data can simplify processing and new application development.
Proprietary APIs – airlines need to be wary of them
NDC-XML is a messaging standard, and not a model or a system. Whether an airline is using XML or any other messaging standard, they will get feedback on their offer when someone purchases it. But proprietary APIs are not always scalable for widespread adoption.
I recently interacted with the Chinese platform Alitrip's team and it emerged that they have signed direct connect agreements with domestic carriers in China. But these aren’t NDC XML APIs.
“Proprietary APIs tend to create “one-off” implementations that make repeatability more complex and therefore more expensive,” said Jim Davidson, CEO, Farelogix.
He added, “Proprietary APIs are where we started, and generally it makes scaling more complex and expensive, hence the necessity for standardization. Even standardized APIs are subject to implementation interpretation which we are already seeing with the NDC APIs.”
So how complex it is to change APIs and switch over to NDC XML one?
“It is a process for anyone who has developed to a certain API, as they must reprogram to the new API. Certainly some change, and updating will always be required as new functions and services are added to the API. Standardization allows for developers to get familiar and comfortable with certain APIs, even when they change a bit from time to time. This all adds to greater adoption and utilization which is a good thing,” explained Davidson.
APIs and travel distribution
API’s are all over the place, and companies like Google have thousands. The concept of API utilization in travel distribution is about content delivery and the concept often referred to as the single point of truth. In terms of content delivery, an API generally has the capacity to deliver more interactive content than traditional (i.e., older) types of connectivity. Car, hotel, and even airline APIs have been around for years. “However, they tended to be a bit fragmented in their structure – meaning no two were really alike – so scaling was both challenging and expensive. For the concept of a single point of truth, an API can function as that one place anyone can go to for consistent and reliable (and accurate) content,” said Davidson.
NDC – still a long way to go
So when we compare the way carriers like American Airlines, British Airways, Qatar Airways etc. with say ones in China, it seems there is disparity in adoption of NDC-XML coding. Proactive airlines have shown that it is possible to deliver richer, more personalized offers across multiple channels, and also possible for aggregators to more cost-effectively scale their integration efforts. As Davidson shared with us earlier this year, this is a major accomplishment and bi-lateral win for the industry. We are seeing that play out in a number of forms – whether it is OTA’s such as Priceline consuming airline direct connects; GDS such as Sabre consuming American Airlines API etc. NDC-XML provides a strong first level of standardization where XML is used, and avoids many inefficiencies that different versions of XML can create. Based on this foundation, the industry will naturally and in practice further standardize how NDC-XML is applied in order to facilitate the widest adoption. This will involve a process of trial and error.
It is pointed out that GDSs have integrated airline content using proprietary airline API interfaces for several years. But GDS specialists are working their way, and even point out that IATA NDC standards are still new and emerging, and the airlines and airline IT providers are still assessing the role that NDC will play in the distribution of fares and content. “While some carriers are further down the path with their assessments and piloting solutions utilizing NDC standards for offer creation and order management, the majority of the almost 400 commercial airlines in the world are not. According to a recent IATA NDC survey, 86 carriers are planning to adopt the NDC standard in some capacity, while 93 are either undecided or not planning to adopt the NDC standard,” shared a source.
For their part, Sabre is closely engaged with IATA and ATPCO on the NDC initiative at both an executive level as well as a working group level.
“(Sabre) will be part of the group of industry constituents driving the evolution in this area,” Kathy Morgan, Director of Transportation Product Solutions, Sabre Travel Network told me in an interview.
In an interview with Ai earlier this year, Gianni Pisanello, Strategic Marketing Director, Airline Distribution, Amadeus did acknowledge the limitation of proprietary APIs and mentioned that NDC-XML will help increase scalability through a level of standardization. The industry will need to further standardize the data elements and the booking flows to benefit from full economies of scale. In order to deliver the economies of scale that everyone seeks and needs, the industry will need to continue to work closely together to find a balance between that flexibility and effective standardization as NDC-XML gets deployed.
Focus on centralized and standardized API
“When it comes to a distribution approach to an airline’s selling channels, the delivery methodology would be quite clear, i.e., a centralized and standardized API that would be consumed by all channels – web site, kiosk, GDSs, mobile, etc. The technology behind the API is generally related to the functions one wants to deliver through the API. In the airline world its things like flight search, flight price, PNR create, ticketing, etc. It’s nothing really magical, but rather just a highly efficient way to communicate with the outside world,” Davidson said.
Looking at the bigger picture, Farelogix recommends that airlines not only need to work out standardized set of XML messages that can feed all channels, but also need to plan web and mobile front-end that can dynamically add or alter any fare, bundle or ancillary, and facilitate all offer types and corresponding functionality for shopping, booking, fulfilment etc.
Ai is set to host Complimentary MasterClass with Farelogix - NDC in Action: Best Practices in Airline Merchandising & Digital Commerce in Kuala Lumpur (on 22nd August).
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First published on 11th July, 2016
Ai Editorial: Sabre is counting on its scale for innovation as the group continues to power apps, sites, reservation systems etc., writes Ai’s Ritesh Gupta
The way airlines sell is evolving, and this is ruffling the status quo.
Clearly airlines are re-looking at their IT infrastructure as well as association with intermediaries in order to gain desired control over what they sell. How viable is a direct connect agreement? What sort of investment would NDC require? Cutting down on GDS distribution cost or even doing away with it? These and many more issues are being dealt with.
Be it for consistency in selling across direct and indirect channels, or understanding a traveller’s intent, context, loyalty or even cost control, airlines are seeking change. Carriers are now focusing on a new messaging standard NDC, doing away with inflexible platforms that require a lot of development / programming to facilitate every change, looking at attaining cost-benefit balance while going for personalisation etc.
Sabre – banking on scale for innovation
Since airlines work with technology vendors and distribution specialists, a big question then is: how are B2B travel conglomerates responding to the evolving needs?
For one, Sabre is ready to bring on change with its software, data, mobile and distribution solutions. The group asserts that its scale enables the team to innovate across the entire travel lifecycle. Sabre processes more than 1.1 trillion system messages every year.
We interacted with Kathy Morgan, Director of Transportation Product Solutions, Sabre Travel Network about how the group is playing their part today:
· Collaborating for emerging distribution technology capabilities: A prime example of this is NDC connectivity to the Sabre GDS, as American Airlines worked on GDS integration to Sabre using the NDC-style API late last year. We are already seeing that usage of NDC -XML by airlines and GDSs will vary in its shape and form, resulting in a mix of EDIFACT and XML connectivity. “Evolution in technology standards is nothing new, nor is the use of XML technology standards in the air distribution business. But I would say that usage is on the rise,” said Morgan. Sabre has been utilizing a variety of technology standards, including a mix of XML and EDIFACT standards, for a long time. “And we’ve actually developed our platform to have the flexibility to manage the new ways that new technologies are allowing content to be sourced and distributed.” Morgan pointed out that going forward, the biggest challenge will be ensuring interoperability between the various industry standards during this evolution period – to ensure consistency in access to products and services across airlines and channels.
· Consistency in distribution: Morgan asserts that suppliers can count on improved consistency across channels – whether it’s branded fares and ancillaries or personalised offers and integration of rich, visual and descriptive content. “We can support it utilising a wide array of technology standards provided by entities such as ATPCO, IATA, and OpenTravel”. So for Sabre, the biggest development in indirect distribution that exemplifies how the GDS is enabling airlines to differentiate their offerings is the evolution of Sabre Red workspace travel agency platform, to include enhanced merchandising capabilities for suppliers.
“(The new flexible content sourcing platform) enables airlines to distribute their products in new and different ways, ensuring the indirect channel has access to the full breadth of content an airline wants to distribute and differentiate,” says Morgan. The offering features advanced merchandising capabilities including enhanced product information delivery via images, video etc. “It would enable airlines, hotels and other travel providers to leverage the Sabre travel marketplace for an omni-channel marketing strategy.” Morgan added that the graphically-rich workflow supports ancillary and branded fares sales (and enhanced hotel capabilities).
· Unique value: Sabre states there are several ways in which the group delivers unique value to airlines. “Through our APIs and Sabre-developed points of sale, we extend the reach of the airline to customers not easily accessible to them in their direct channel – such as managed corporate travellers and buyers outside of their home market,” says Morgan. “(Also, by using insights around the business processes and workflow of users in this channel) we can drive up sales of their premium products to increase revenues.” As distribution specialists, they state that GDS remains the most efficient, neutral and cost-effective distribution channel to reach travel agencies, not just for seats, but also effective retailing.
· Availability of ancillary or bundled products: It is pointed out that ancillary or bundled products are not readily available when shopping through most travel agencies or corporate booking tools – creating an unnecessary discrepancy and lost opportunity for both the airline. Morgan said the bundling and unbundling of products and services drives complexity in the air shopping and booking process. “At Sabre we’ve made ancillary and branded fare content available through all points of sale that we develop, from the Sabre Red Workspace agency booking platform to GetThere, our corporate online booking tool. Currently, 72 percent of bookable air content in Sabre offers an ancillary and/or branded fare, a significantly larger number than other GDSs. This more advanced level of merchandising capability is also built into our APIs, which are used by developers to build or update a customized booking applications for their websites or to use Sabre content within another application,” explained Morgan.
Morgan also mentioned that air ancillaries and branded fares are relatively early in their lifecycle and take time for adoption to grow. However, the industry is witnessing progress in this area. “Using March y-o-y comparisons as an example, growth of ancillary sales in the direct channel was 87.9 percent while growth in the indirect channel was almost twice that at 174.5 percent,” shared Morgan.
· Industry standards: Morgan said Sabre is a strong advocate for industry technology standards as the group believes they are the backbone of travel commerce and enable the broad and rapid deployment of products and services in the most efficient and cost effective manner. “We are also a major contributor to industry technology standards through participation and collaboration with industry bodies such as IATA, ATPCO, ARC and OpenTravel,” said Morgan. “Having said this, not all airlines choose to participate in and utilize the same standards. Sabre also needs to support standards for all suppliers of content – including hotel, car, rail and cruise content for example. While a base level of standardization is valuable, there is always going to need to be some level of customization.”
Morgan says NDC Certification is a formality – it is not required for Sabre to develop and deploy NDC-based solutions. “Sabre was the first GDS to launch American Airlines’ premium and paid seats capabilities (Preferred and Main Cabin Extra Seats) based on the NDC standard, making these ancillaries available to travel agents earlier this year,” emphasized Morgan.
“Additionally, from an airline IT perspective, our Dynamic Retailer solution will be available to all distribution channels via the NDC XML standard. This solution enables airlines to join customer data (such as trip history and tier status) with their fare and ancillary catalog to generate flight, branded fare, and ancillary bundles and discounts that are both relevant and personalized to the individual traveller,” added the executive.
Sabre is in the process of certifying both their GDS and IT solutions using NDC standards.
Hear from experts about the latest trends in air travel distribution at the upcoming 3rd Mega Event Asia-Pacific, to be held in Kuala Lumpur, Malaysia (23 Aug - 24 Aug 2016).
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First published on 29th June, 2016
Ai Editorial: Modern infrastructure is challenging and airlines struggle with systems that can support their retailing needs. LCCs are ready as long as they stick to their innate strengths, writes Ai’s Ritesh Gupta
Airlines’ approach towards retailing and their IT infrastructure has been under scrutiny for a while now.
In today’s era where digital transformation is paving for personalisation and enabling passengers to be in better control of their journey, it’s imperative to assess how full service carriers (FSCs) and low cost carriers (LCCs) are positioned to move on.
So how does the overall IT infrastructure at FSCs and LCCs for supporting core operations differs?
It doesn’t differ that much, says Ann Cederhall, an experienced business consultant.
LCCs (not all) are typically hosted on PSS with “less bells and whistles” (e.g. Navitaire, Radixx) just because they typically started out as website only distribution and with limited need for traditional distribution, said Cederhall. FSCs are typically hosted on the large PSS or own host with all the distribution complexity like interlining, code-shares, travel agency distribution etc. As it gets more complex, bigger is the need for a larger IT structure. “But remember that there are very few PSS to choose from as an airline customer and with the Amadeus acquisition of Navitaire it will be interesting to see what happens in this space in future, also interesting to watch are IBS and Travelsky,” said Cederhall.
Here we explore what’s required to make optimized IT and retail-oriented decisions:
· Being savvy with IT
It is pointed out that FSCs tend to struggle with changing their IT set up for distribution and personalisation.
Modern infrastructure is challenging and airlines struggle with either buying or building systems that can support their retailing needs. The biggest problem is that there really are not that many players to choose from so perhaps look how to leverage other technology? “(May be its time to question) if there is a need for a merchandising engine, wouldn’t just any powerful rules engines sitting in e-commerce suffice? Or maybe a combination of a shopping engine and ecommerce. To find best of breed is challenging and is time consuming. I actually see a need for more advisors in the industry helping airlines to assess in different areas what is best for them and how to move forward,” shared a source.
As for LCCs, they are driven by change and innovation which makes it a lot easier for them, it is in their DNA, asserted Cederhall.
She added, “But I have seen that it becomes challenging for LCCs when they decide to work with models used by FSCs, e.g. interlining, working with O&D based revenue management, travel agency traditional distribution. For example, if the airline is ticket-less can they stay ticket-less with agents? Yes some airlines are doing that but some use BSP ticketing for the GDS. And if you do this you have two models that you have to maintain in the airline.”
Cederhall points out that if airlines want to avoid being a commodity product they either need to demand that their PSS technology is customer focused or start using tech outside the PSS to do this kind of work.
In order to drive personalisation, it might be the case that airlines move toward a true super PNR environment/ strong relationship database. If it is not possible to drive change in the PSS enable systems on top. Should the super PNR environment drive personalisation and loyalty?
Considering that there is constant influx of new technologies that is changing the way businesses operate, how are LCCs reacting swiftly to the possibility of being customer-centric? Why the turnaround time of LCCs new IT projects is lesser? For instance, Ryanair has just launched myRyanair platform as part of its digital transformation program.
Reflecting on the same, Cederhall says again it is in LCCs’ DNA, cost effectiveness is key. And the LCCs have been the drivers of innovation and new revenue models.
“LCCs, in my experience, are usually much more open to new technology as they typically do not put all their eggs in one basket,” she said. Also when you work in an environment where you are told to constantly question how we can do it better and faster it comes natural to these airlines. But the trick is to stay like that. “Typically when these airlines are moving into what characterizes FSCs they sometimes struggle. They can also get caught in the PMO death spiral with more employees from consultancy companies than your own “formalizing the strategy” etc. Technology wise I fine Scoot particularly interesting as they are doing some interesting stuff different to traditional distribution. But you also see FSCs being innovative, Air New Zealand is one that I find interesting, also KLM embracing social media.”
· Being retail-oriented
Ryanair have talked about looking at selling other airlines on the platform and that is truly retail thinking, looking at flights and airlines like a commodity.
Of course, it’s a strategic decision.
But in general airlines are just taking baby steps when it comes to proper retail, just think of all the co-branding opportunities, of the personalisation opportunities. Retailing opportunities are endless, and we don’t see enough experimenting and testing. “Some airline websites out there are just so sad, I see endless opportunities with what you can do with the whole customer experience. But it does mean that the airline has to rethink its business in many areas and acquire new knowledge. Perhaps we are at the time when retailing will drive organizational change of the airlines?” pointed out a source.
Cederhall said that independent of the industry, there are a set of features needed by anybody who wants to be successful in (online) retailing. By recognizing these requirements and putting focus on adding the functionality needed to meet the additional needs, it should be possible to keep existing “core functions” from a PSS and online booking engine (IBE) and to enhance the customer experience without purchasing a complete, new e-commerce suite.
Cederhall cited few examples of core functional needs/ market demand that need to be considered:
I. Any online retailing site needs a content management system (CMS).
II. Core “shopping cart & check-out” functionality is something that everybody needs, the same for connectors to payment providers etc.
III. A more or less generic integration platform (or architecture allowing integration of any service) is a definitive must for any investment in retail/ ecommerce platform as of today. Airlines are generally already selling hotels and car rental – often through 3rd parties such as Expedia or Booking.com. Integration of any such 3rd party, be it Lonely Planet guidebooks or Über taxis, it must be possible to sell just about anything including T-shirts and model aircraft, either from internal inventory (e.g. T-shirts with colours and sizes kept in own inventory, such as SAP ERP system) or any external inventory.
IV. Analytics - customers are getting spoiled nowadays, and Amazon, Google et al have taught customers to expect a personal touch. Hence, the capability to drive personalisation is increasingly important and might well differentiate you from your harshest competitor. Even without analytics it is possible to do some basic level of personalisation.
V. Data. One of the core problems for many airlines is that they actually don’t have their data available. Surprisingly, still after a couple of years with a lot of hype around “Big Data”, airlines typically trust their PSS vendor to keep all their structured sales data (aka PNRs), which are also purged a couple of days after last itinerary segment is past date (even though solutions exist to build a data warehouse and also to keep some level of data in loyalty/ reward systems).
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First Published on 12th April, 2017
Ai Editorial: Can dynamic data, being generated on a continual basis, help in selling an air ancillary? Airlines need to delve deeper to handle such data, processing it on the fly, writes Ai’s Ritesh Gupta
Acting on data the moment it is generated isn’t really new, but airlines, as an industry, haven’t seemingly made significant headway in this context.
Let’s first summarize the terminology that is being used in handling dynamic data being generated on a continual basis, be it for human-generated comment, photo etc. or machine-generated data in real-time. Real-time stream processing is all about an incidence or a number of events recorded in a collection of fields, then there is steady flow of data, and eventually the capability to evaluate the same.
Stream processing entails ingesting a series of data, and incrementally bringing up-to-date reports and statistics with arriving data record.
Airlines need to be spot on with their ability to handle real-time data integration and streaming analytics. They need to add context to streaming data - the result could be capitalizing on an up-sell opportunity, for instance, when a shopper is on airline.com. or even handling critical functions like fraud prevention, crisis management etc. Are carriers capable of responding to critical events in time, in-context, be it for improving upon the journey through customer service or even monetizing via selling of an ancillary? Not really.
“Events” - that aren’t mundane
Seamlessness is what makes the journey easy and enjoyable. And when any organization can understand the intent – be it for a click made on a digital platform or conversation a passenger had via any touchpoint – then only airline would be able to respond, and in doing so, delivering aptly during that moment catapults the performance of the brand. But being data-driven doesn’t end here. More than predictable action (for instance, check-in or conversation at the airport counter), what is equally important is responding to an occurrence that can happen as per the discretion of the passenger, something that is tough to fathom.
Big data and analytics that come into play can be further explained in two components:
In an ideal world, all the customer-oriented systems that airlines operate need to be in sync. This would mean capturing all activities related to a passenger’s journey, right from the moment they made the booking till the point they give their feedback about how all of it went. The story that data can tell about a passenger shouldn’t be missed out on – one system might indicate that a family of three passengers booked their journey (so could capture information related to transaction etc.) plus there could be a repository of data about the same passenger that indicates what this passenger wrote about say on a social platform (a word of praise regarding the in-flight meal) etc.
· If everything is streamlined, here analytics could be about working out predictive analytical models to discover travelling preferences, new patterns of interest etc., based on chronological/ past data, which can feature data collected from event streams as well as other stored information. So looking beyond the purchase funnel, how about coming up with actionable data related to what a passenger enquired about on the day of travel? Can this enquiry be turned into an offer at the time when the same passenger shops for the next flight?
· A pertinent facet that can make or break the experience is about in-stream analytics i. e. acting on data as events are happening. For instance, last year, during one of my trips to Europe featuring a connecting flight (via SWISS and Lufthansa), there was a mistake on the part of SWISS when it came to allocation of the seat. Both the airlines acknowledged it via Twitter and ensured the matter would be prioritized at the boarding gate. And the staff at the gate had no clue even after exchanging of tweets with both the airlines spanning over two hours! Clearly airlines tend to miss out on data that is important. What’s the point in having resources meant to serve passengers or core product, air ancillary or non-air ancillary inventory – say a seat on an aircraft or in-flight meal – if that can’t be served or even sold when the passenger is willing to pay for it.
Preparing in an earnest manner
At a time when people, places and things are increasingly getting connected, airlines need to dig deep and focus on preparedness for event stream processing:
What would it take to connect, decode and comprehend streaming data? Enterprises won’t be able to live up to the expectations of travellers if they don’t act on streaming data from transactions, social feed, Internet of Things devices etc. As Amazon explains, data needs to be processed “sequentially and incrementally on a record-by-record basis or over sliding time windows, and used for a wide variety of analytics including correlations, aggregations, filtering, and sampling”. Also, organizations start with collecting system logs and elementary processing, and eventually perform advanced data analysis such as ones featuring machine learning algorithms.
What’s the benchmark for response time? Airlines need to address issues related to managing massive volume of data and yet responding at lightning speed. If a traveller is indicating that he is willing to pay for access to lounge while being at the airport, but isn’t able to find the way out, then can the airline help him out? What if the traveller fails to reach, and ends up changing his decision?
How to act on apt data? It is imperative that airlines ascertain in real time what data is of value, and filter out the irrelevant data. The value of streaming data needs to be optimized in conjunction with traditional batch data, by combining legacy systems with new streaming platforms. Batch processing can be done to work out arbitrary queries over diverse sets of data, and scrutiny of big data sets. Airlines can assess the efficacy of a hybrid model, working out a real-time layer and a batch layer.
Are airlines capitalizing on dynamic data? Gain an insight into intriguing issues at Ai’s 11th edition of Ancillary Merchandising Conference in Spain this year.
Date: 25 Apr 2017 - 27 Apr 2017; Location: Mallorca, Spain
For more info, click here
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First published on 22nd June, 2016
Ai Editorial on ground transportation: Ireland-based Kevin O’Shaughnessy, founder of Indigo.gt explains how the industry can improve the customer experience in this arena
Is reaching a destination, and then proceeding to a hotel or moving around in a city a smooth experience yet?
Before we delve deeper, there are many facets from which this aspect of a journey can be looked upon.
One could be sheer utility angle – just boarding a bus or taking a cab to reach my hotel. Of course, car hailing apps are there to avail, but what if going online isn’t possible. Yes, if you happen to be in an airport like New Delhi, just don’t assume you can go online that easily even if it’s free. Moving on one can also enjoy the peculiar ways one can travel – trams, bikes, train, vaporetto, gondolas, carts, cruise etc.
I will give you an example. I have been planning a trip to Switzerland. I chose Zurich, Lucerne, Lauterbrunnen, Montreux and Geneva as my places to visit. Yes, I could check options to reach hotel in each of the places via hotel website or via booking.com (post booking email/ in-app content link). But several of my questions remained unanswered unless I chose to research online. For instance, is there any option to take a cruise from Zurich to Lucerne? Not really, but one can enjoy cruise from Lake Zurich or Lake Lucerne. Directions and mode of transport can be checked via Google Maps, but there are times when I struggled with it. Google Maps came closest to sharing options – for instance, Hotel Astoria in Lucerne to Lauterbrunnen, one could find out the exact routing, time and stops for rail, car etc.
But I wasn’t completely satisfied with the experience. What if Gmail could analyze my emails – my dates of travel, air ticketing and hotel bookings – to send me a link for moving around! I would readily give access to any sort of permission Google might seek, and would rather present with me options.
Ireland-based Kevin O’Shaughnessy, founder of Indigo.gt, a search and reservation platform for airport-to-city transfers, says if every journey for business or leisure was considered a door-to-door journey from a planning as well as a booking perspective, rather than just directing users to the flight segment, we could show users a complete itinerary and allow them to book the entire thing in one step.
Kevin says overnight, this would change the dynamics of airline web bookings, online travel agencies and meta-search companies.
“This specifically means that instead of thinking of ground transport as an afterthought, it becomes a peer in a shared itinerary with flight content. The core technology to deliver this is here today: how long before the taxi app proposes to “take me home”, and streamline the flight booking as part of the process?”
Airlines are uniquely positioned in the market to profit from delivering a better user experience that comes from the transport utility, stated Kevin.
Opportunity for airlines
For the majority of air passengers, transport to/ from the airport — whether in car rental, chauffeur drive, metro or their own car — is a utility class of product: it is a functional part of the journey.
“If this is true, then the only real room for improvement are the external elements, such as the pickup experience. With the advances in ground transport technology and choice of providers, there is no reason airlines cannot take a lead in the passenger experience, turning a utility product into a positive experience. In doing so, airlines can also capitalize on the revenue opportunities, too,” said Kevin.
It needs to be highlighted that in the last 3 years, the data roaming charges in Europe have gone from extortionate to virtually free (part-driven by regulation), and many early adopters the world over have made the switch to tariffs which allow data on their handsets. Frequent travelers typically have the “roaming” switch set to “on” and there’s a good crossover between this behavior and use of taxi apps in a foreign destination. “The next major shift in transport innovation could well be driven by more widespread trends in passenger behavior when it comes to that roaming setting. If everybody could use data anywhere tomorrow, and since local taxi apps are commonplace, the biggest winners in the space — from a travel industry perspective — will be those apps. Airlines have therefore a very short runway indeed to capture — and profit from — this latent behavior common to the majority of their passengers,” explained Kevin.
As a traveller, Kevin says he attempts to optimize time and cost, but different passengers have different priorities. As for gaps, he points out:
- Not all the answers are in the online maps: not all the detail is there: not every mode of transport is shown, traffic information is patchy so timing will be off, cost is usually not there.
- There’s an onus on the passenger to “learn the destination”. I think airlines do go a certain distance to promote new routes and to give basic routing information to the city area.
- These different elements in the hands of passengers creates a type of “Travel Math” where they need to calculate the landing time, estimate the waiting time for their chosen transport, calculate the transit time. Then, they can finally propose a meeting at a certain time.
- At the airport, not all services are treated equally. The pick-up for different car services are relegated to car parks, different levels or more convenient exits. The same holds true for coaches: different commercial deals mean that some will be more convenient for passengers than others.
- Sometimes regulation or industry-wide tech adoption means that booking rail on mobile still means that passengers still need to pick up paper tickets, or that local transit tickets are only available to locals. This is slowly changing.
Here one must add that typically, airports profit well from ground transport companies: levies are applied to operating taxis and car services, rail is charged at a premium, bus stands are expensive and pick-up points for shuttles are all billed liberally. Since the revenue is already captured, at least to a certain extent, there’s less of an incentive to “go digital” and, only with a handful of exceptions, airport “ground transport” pages are limited to names of operating companies and basic destination information only. This is improving, very slowly, but airports are falling short of what they can do to improve the passenger journey.
Making it easy
Kevin says every market has its own habits.
“While taxi/ car services are popular across the US — this is not the case in large US metro areas or in Europe. In some markets, rail trips to/ from the airport are as high as 65%. Where high speed rail links exist, the typical take-up rate is about 35% of all passengers to/ from an airport,” said Kevin.
The problem, however, isn’t the product, according to him.
“Ultimately, ground transport — whether taxi or train — is a “local transport” product, which has been built for local residents over the last 50-100 years. This is perhaps why we must think of “transport” and “travel” as not being the same thing,” said Kevin. “Local transport, as a product, is not built for air passengers. Communicating options clearly and openly is key,” he says.
Referring to Europe, Kevin says rail and air behave differently in terms of information systems.
“We see plenty of innovation in train operating companies, but, to date, no credible source which brings all rail content together in a meaningful way for consumers,” he says.
When we “learn” a destination, we capture local knowledge in the right way for us. This is known as “embedded information” and the process of capturing and using this in online systems is difficult. To date, the travel industry hasn’t had a “common language” to apply to the intricate networks of and routes — whether to use them in a useful way for passengers or to monetize them somehow. “There’s no simple way of capturing the basics and communicating them simply. To date, only Google Maps has come close to this, maybe Rome2Rio, but both are missing the ability to transact,” says Kevin. “In some cases, this is hampered by local regulation or alliances. Only with some exceptions in the UK, rail is still mostly paper-ticket based. The trendy mobile apps you use still send you off to a machine to collect a paper ticket: basically reducing the mobile component to “search with a transaction” rather than issuing a fully-electronic ticket. In some cases, large rail operators in Europe intentionally restrict access to inventory, or lay on additional fees, in an effort to maintain consumer exclusivity.”
“Today, a door-to-door journey needs either time and effort on the part of the passenger to line up all the elements or, alternatively, some seriously smart technology, which we still haven’t seen yet,” Kevin.
He asserts that all ground transportation should be as easy to use as a taxi hailing app, and to achieve this, it means that all the inventory, pricing, commercials, payment technology, legal acceptance of terms and conditions by passengers needs to be visible and instantly available (meaning less than a second) for booking.
“This can be brokered through standards, but none has emerged yet. Business and Leisure travel could be transformed completely if the local transport component became an integral part of travel planning,” explained Kevin.
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First Published on 16th May, 2017
Ai Editorial: Airlines do acknowledge the potential of ancillary revenue generation but the existing “mindset” isn’t easy to change, writes Ai’s Ritesh Gupta
Airlines are reluctantly realizing that what they sell and how they sell has to change.
“The cinema makes more profit on the popcorn than the ticket, the profit for a petrol station comes from its shop selling a wide range of products. Like the petrol industry experienced, the distribution is also slowing down the innovation as that is where the profit sits in the chain,” says Paxport’s CEO Tony Barker. “Culturally the airline industry is very operationally-orientated, the focus is on cost and low risk. The first thought with any new innovation ideas are what if it goes wrong and then they think of all the systems that have to be changed, not possible, carry on as usual.”
Capitalizing on technology
Airlines have to plan and have a strategy to embrace the opportunities technology gives them in terms of actually lowering costs, creating revenue from different areas and how the passenger experience can be more seamless and predictive/ contextual that can also be driven by a spate of devices or by the passenger’s digital platforms/ social media accounts, chatbots or ecosystems like Google, Tencent etc.
This planning needs to done by experienced personnel, not Director of Operations or IT Director. Any commodity-orientated industry finds it difficult to accept, sweets and cigarettes for example can give more profit than petrol. Some people on the board need to come from retailing background to drive the change, otherwise it will not work, says Barker.
In an era where a digital transaction or marketing attribution is being scrutinized over micro-moments, a travel e-commerce purchase is a complex analysis, encompassing cross-device identification, cross-channel campaigns. Every carrier might not be doing it, but it is actually feasible. As an airline you first have to describe what you want to do in terms of the passenger experience, describe the improvements for the passenger and then forecast the anticipated increment in revenue generation and retention factor.
The key here is to crack the intent of passengers, aiding their decision-making at the right time that eventually results in a conversion or helps them in their journey. A couple of examples:
· Content via chatbots: A passenger opts to interact with an airline’s chatbot, can this passenger be shown the in-flight meal and allowed to be paid for the same? The chatbot should know the passenger is flying, consumers now expect this. Make it easy and attractive, 3 letter codes for a meal is not so mouth watering!
· If a passenger has to go into a website to order some extra services and reinput their booking number etc you are immediately at a conversion level 3-4 times lower than if an airline had actively offered the service to the passenger.
· Personalised video retargeting via Facebook: Say a user is looking at a friend’s holiday video on Facebook, can this user be shown a video related to the previously abandoned cart on airline.com?
Many services are now becoming valued as an experience, flying is not just a seat to transport a human from A to B. Passengers will pay more for an improved experience, it is likely that the cost of the ticket will soon be almost free, this is the price to “capture” a passenger and have the opportunity to sell them other services, this “data” is very valuable, you know what they are doing (business, holiday, visiting family) and you have their attention for a few hours, actually a retailers’ dream, imagine if you had to stay in IKEA for 3 hours! So if your prices are going down and you are not compensating this with other revenue it is not surprising the profit margin is being squeezed.
The arena of merchandising and digital commerce is evolving, so how are airlines responding to it?
Tech not a constraint, “mindset” is
“The industry (airlines) at large tends to be operationally, process and cost focused, and not so much on their customers (passengers) from a retailing perspective,” says Barker. Rather airlines need to exploit the data, content (not just the fare) and technology they do have available to make the travel more seamless, more predictive and come up with the right offer (at different opportune times), the battle between the reseller, airport or airline to control/ capture the traveller is on and at the moment the airline is not grabbing the same so well, indicated Barker. Airlines should help the indirect selling market sell more of their services not fight against them, for example.
As we dig deeper, it is clear that airlines at large aren’t savvy enough to embrace the requisite organizational change needed to become a retailing organisation. Some airlines are embracing the NDC to give them more control but there is still a long way to go. “It is very difficult to bring in change (in this industry), we have many years of legacy and those legacy systems are very well embedded ,” says Barker. BSP is celebrating its 31st year anniversary for example!
Airlines do acknowledge the potential of ancillary revenue generation but the existing “mindset” isn’t easy to change. Some airlines think loyalty cards and fare upgrades are the main ancillary services. Legacy technology is hard to deal with but if you expect to get a real retailing result using the same system it is like expecting a car with an old engine with a few tweaks to turn into a Formula One racing car.” Even if you have a Formula 1 car then make sure you have a good driver, not the one who drove the old car! You would not use a petrol pump engineer to design the shop?
In fact, a section of the industry asserts its time business processes that are still based on the paper-based workflows are done away with. If there is a full reliance on those legacy systems for back-office processes such as revenue accounting, revenue management, interline ticketing, and pricing, among many other functions, there will be limitations to the capabilities possible through digital transformation. With this weight on your shoulders, eventually the decision-making tends to drift toward – “we are different, e-commerce isn’t for us the way retailers do it, it is costly for us,”. Old tech isn’t ready, but making the most of SOA, microservices, API-led architecture etc. to extract data out of legacy systems, and embrace agility it is there. NDC, for example, is a worthy initiative, it is the key to the warehouse which can be offered to a wider market, then the next steps need to be taken.
Acting like a retailer
Barker recommends that there are several simple, smart merchandising techniques that can result in significantly stepping up the profit per passenger.
He cites the simple example of buying milk from a store where also the shopping trip ends up with a few other “spontaneous purchases” – placing the milk in a strategic place is no coincidence, as the shopper passes by he/she picks up other essentials or goodies. “One would not drive a few extra kilometres to buy those goodies” pointed out Barker. Airlines need to focus on design, content, frictionless checkout etc. to come across as a facilitator of travel essentials. There is no need to “heavy-lifting” like analytics for certain initiatives, may be cohort analysis or access to data related to a holiday is enough to sell ancillaries (opening up of PNR data). Similarly, airlines need to look at intricacies of capitalizing on the traffic or a booker, who can buy more items (during the booking flow, post purchase email or retargeting etc.). We know for example conversions went up by approx. 30% when we launched the post booking communication for some customers.”
Also, Barker categorically says technology isn’t a constraint (cabin crew today can be prepared to interact with passengers based on the purchase history and look beyond addressing one by mere name), airline’s content is being under-utilized for differentiation and data about a passenger can be plugged in (from CRM or a data management platform) to optimize merchandising opportunities. Some big, established traditional carriers are leading the change, some momentum is happening, but there is lot of hesitation from an organizational change perspective (a few skeptics in the camp & hurdles from the legacy providers),” he shared.
So how to overcome such hurdles pertaining to embracing change and optimizing merchandising?
Barker emphasised on a couple of points –
· Be clear about the position that the carrier has finalized, identify customer pain points within the framework of operations, and then act on it. If experience optimization can cover the entire journey of passengers, be it for simplifying check-in or enticing them to buy an upgrade, then the same can propel the overall merchandising strategy.
· A basic example if choice of seating is not creating approx. €5 per passenger there is more work to be done. Quite a few carriers will say “we do choice of seating”, when you ask them the revenue, conversions and what channels passenger can buy this service there is normally a silence!
· Keep an eye on data flow and predictive, robotic marketing – how recognition of data patterns can make the most of every interaction, touchpoint? Is there already a tendency among today’s generation to switch over to voice search rather than typing keywords? Who is controlling the data flow, and what role the likes of Google are going to play? For instance, as also explained during Ai’s Ancillary Merchandising Conference in Palma de Mallorca in April, use interactions, especially on mobile, to connect data. Did a passenger respond to a push notification urging them to sign up for a new frequent flyer program or redemption offer? Did they activate a mobile coupon for free lounge access?
· Bring in outside expertise at least to understand how well the airline is doing and what could the first steps to do to bring them nearer to a retailing experience.
But even as airlines strengthen their initiatives (even the extent of digital transformation), one shouldn’t ignore some of smart ways to garner incremental revenue even today. There is a lot of low hanging fruit.
Barker referred to the “pre-order” service in Scandinavia. “Airlines experience a €70 average order buying, very often with a 15% conversion. Customers can choose their duty-free in advance. Technology isn’t an issue rather the drive or willingness to do it is the biggest hurdle. Look for right KPIs and return on investment with whatever is being done. Airlines should look at the 15% conversion rate rather than worrying about .5% fulfillment error!
Technology can also really reduce waste, many airlines accept a 35+% food wastage, with preorder of food not only do you reduce waste but you can offer a more appetizing range of food which will increase the demand and revenue. Fewer passengers will buy food before they get on plane! When you know and see what is being demanded you can respond as well, it does not need to take 18 months to change explained Barker.
Such initiatives aren’t dwelling on personalisation on individual basis. Sophisticated analysis isn’t too far off, and in fact, by starting with the basic analytics (demographics, income etc. of passengers) and banking on the power of APIs or standard language going forward, airlines can make real progress with revenue from other sources which will significantly contribute to the financial performance. Some customers achieve above normal profits today and a lot of that revenue is through the ancillaries that are offered, they just do it better.
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First published, 7th June 2016
Ai Editorial: How are airlines gearing up for retailing? The industry is gradually making moves in a way that IT is being linked to business value. Ai’s Ritesh Gupta identifies 3 core data and IT-related issues
Being a part of an industry that is often labelled as a “laggard” when it comes to being customer-centric is no fun. Full service airlines are often singled out for their archaic IT infrastructure, and it’s time they find ways to get rid of sluggishness on their part.
“If you look at other industries you can see that airlines are far behind in terms of retailing their products,” pointed out a source, referring to proficiency of some retail players in pre-empting questions like “When will a specific customer next make a purchase?” or “How best can we communicate to them to make it happen?”
“Airlines simply don’t have that information available,” added the source. As things stand today, airlines’ offerings aren’t personalised and importantly, the booking flow isn’t aligned to the way customers think. Also, once a flight booking is confirmed, post that there is no cross-sell longevity. And carriers try to sell everything at once.
This is where organizations like Ryanair are counting on digital transformation, looking at data and IT in a novel way.
Here we explore what modern retail infrastructure should look like in the era of omni-channel retailing:
· Flexibility - Platforms need to become more flexible, think of being retail-oriented rather than being “airline website” oriented, as Dara Brady, Ryanair’s head of digital experience, asserted during Ai’s Ancillary Merchandising Conference in Barcelona (held in April this year).
Delving deeper into this, Paul Byrne, Senior Vice President of Development at OpenJaw Technologies, says, “It implies focusing on all the major retailing principles required for a true omni-channel retailing. Websites are just one part of the overall jigsaw. A rich customer experience requires rich, curated content, targeted / tailored products, adequate pricing models and a seamless experience across all channels.”
“Airlines require core platforms that are highly flexible. Airlines are still using very inflexible platforms. These are either based on shared community models or platforms that require a lot of development/ programming to facilitate every change,” says Byrne. He says to create and manage rich omni-channel customer experience, airlines require platforms that provides extensive business model control (rules-based) plus strong product and channel management capabilities. “These platforms must have a modular open architecture that fosters a partner eco-system for collaborations. Structured and well defined APIs form a key requirement for collaboration and innovations.”
· Dealing with existing IT set up – IT strategy and business strategy are being seen as inseparable, especially with digital transformation coming to the fore. IT is being linked to business value.
This inevitably makes one think – how can airlines gear up for transformation?
One can’t discount airlines’ existing infrastructure that is already in place. Re-developing these old systems would cost a lot of money. There are already specialists that offer modern PSS systems, some already fully NDC compliant as they say. “But if you are running one of the old legacy PSS systems it’s indeed the right way to make sure that you gain the desired customer-centricity by implementing the necessary systems around or on top of your current IT landscape. There are already cloud-based solutions available that provide you with an offer- and order management including detailed rules engines. In the back they’ll connect to your internal IT (e.g. legacy PSS system, CRM, pricing engine, etc.) to get input for the offers they generate. This is also the way how the IT landscape would look like in an NDC world,” shared PROLOGIS’ Matthias Hansen.
IT needs to showcase its proficiency and power change. The digitization trends are social, mobile, cloud, big data and the Internet of Things.
In a recent blog post, referring to hybrid infrastructure, Hewlett Packard Enterprise highlighted that big data can also be used to improve the existing infrastructure. The role of big data in itself is to pave way for simplicity irrespective of the situation. “… and hybrid infrastructure is nothing if not complex, particularly when it's built atop virtual servers, storage, and networking architectures, and then populated with numerous mobile, sync/sharing, and data productivity apps.” The same post did acknowledge that optimizing hybrid infrastructure is an intricate part of transforming legacy infrastructure into a modern, abstract data environment. Yet the entire ecosystem “must be funneled through an intuitive albeit comprehensive user interface that allows knowledge workers to define their own data and infrastructure requirements (within limits, of course).”
· Being data-driven - To keep up with the pace of personalization and omni-channel retailing airlines will have to implement a system that can link all the data that is being gathered together to enable intelligent offer management capabilities based on the identiﬁcation of customers and their preferences.
Airlines need to focus on how business functions create and use data in the context of day-to-day operations. For instance, how can e-commerce work on a use case for site traffic and conversion optimization? It could be about understanding my intent from the source I land up on an airline website or say I search on Google and then open an airline mobile app. “A lean experimentation approach would be beneficial initially. Firstly do enough homework to identify some of the low hanging fruits (short-term goals). Digital marketing and operation teams are key contributors at this stage. Identify and outline what you want to know from the data and to do what? Now identify the data sources needed to answer your queries and start aggregating / massaging the data sets,” said Byrne. “The point is that you might not initially require the Big Data storage and technologies. Try out small first and then hire a specialised vendor/ partner, when you are ready to go big. It’s a specialised area with high costs associated to it. A strong collaboration is needed between strategy, marketing, operations, analytics and IT teams for this to be successful.”
As for personalisation, there are still challenges that organization face when it comes to data: How to integrate different technologies involved in this industry’s value chain, so that they all work together for the same purpose. “It’s easy for one of the links (technologies) of the chain to fail. Although it is a challenge even for our direct channels, indirect channels are the biggest challenge for data collection, customer recognition and the effective use of the information,” shared Maria Cardenal, head of product development at Vueling Airlines, in a recent interview with us. She also referred to the high cost of implementing personalization, and customer acceptance i. e how much you can personalize before annoying customers.
Hear from experts about how to go about prioritising data and IT infrastructure for retailing at the upcoming 3rd Mega Event Asia-Pacific, scheduled to take place in Kuala Lumpur (23-24 August, 2016)
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