Ai Editorial: 5 Keys to Successful Airline Merchandising

Airlines’ retail infrastructure must enable one single view of the customer if they intend to assiduously address the retail opportunity across a traveller’s journey. An interview of Datalex by Ritesh Gupta, Airline Information Correspondent

How strong are retailing and ancillary merchandising capabilities of an airline?

This is one question that airline distribution, e-commerce and revenue management executives can’t evade today. Airlines have drifted away from rudimentary upsell practices and rather now dwell on passengers’ main objective when coming to an airline website; understanding their intent and offering what they require in the quickest time, with as seamless experience as possible. No doubt, airlines today are savvy enough to drive profitable revenue growth in this arena. And this means there is a way to meet the expectations of a shopper in the multi-channel, multi-device environment.

“In the eyes of the consumer, e-commerce and retail are now one.  Airlines need to address this reality as the new battleground for a sustainable and competitive business,” says Ornagh Hoban, VP - Strategy and Marketing at travel e-commerce software specialist Datalex.

As Hoban points out, there is no silver bullet and the airline as a business must engender a culture of innovation and experimentation to continuously test and learn in the pursuit of measurable value.

Here we explore what can impact merchandising initiatives:

• Aptly assess the efficacy of pricing and structuring of offers: There is no fixed formula to bundling and unbundling. Carriers bundle services, conditions and charges collectively, crafting a fare family under a branded fare name. Some carriers go for a brand strategy that feature fare attributes and offerings through branded fares, and there are others that work out a traditional fare structure and keep ancillaries separate from fares, with bundling a constituent of ancillary plan.

Hoban explains airlines are investing heavily to unify their retail infrastructure and exploring new revenue optimization models.  “For example, dynamic bundling and pricing within fare families have already driven hundreds of millions to the bottom line for some of our customers,” said Hoban.

It’s just not enough if airlines are solely focusing on keeping fare families simple. Rather such initiatives should complement the profile of the target audience, and enable the segment to easily evaluate the advantage of buying up to the bundle in comparison with buying the items separately.

• Go for “one single point of truth”: The team at Datalex refers to “one single point of truth”. It essentially means that airlines need to ensure that data is unified. “There should be one central hub for all pre-trip, during-trip and post-trip operations and a record of all offers and purchases at all touchpoints,” says Datalex CIO Malachi Faughnan.

Hoban adds, “Omni-channel engagement and a 360-view of customer remains out of reach for many airline retailers with competing and silo’d transactional and data technology platforms.  Big data is just data unless it can deliver one single point of truth, unless it’s synchronized, omni present and actionable.” She adds, “This will be the true retail challenge and will require a much larger price/ revenue optimisation framework. One which dynamically predicts customer choice, demand and value optimized for market conditions, channel, device/ media.”

• Focus on “smart selling”: The industry is witnessing interesting initiatives when it comes to selling. There are dynamic packages/ bundles that are driven by a passenger’s profile, buying pattern or past track record.

Datalex stresses that the time has come when organisations need to intuitively identify customer intent and tailor offer as per the persona of the shopper. The team recommends that airlines should be spot on when it comes to knowing the customer and optimising each interaction across various touchpoints, and focus on real time predictions of implicit interest and relevant content that customer values.  

• User experience: Passengers need to be clearly informed about current fare/ product and what other products and services are available and the cost.  Airlines require a deep understanding of the digital customer experience for even the most complex searches.

Also, according to specialists, airlines also need to consolidate information to create an online profile on the site, and create single customer view. Importantly, the need of the hour is to work out personalisation by channel, by use case. Airlines are successfully leveraging personalisation for tracking past shopping behavior in order to customize experience on the website. A single view of the customer is reflecting in the manner in which channels/ platforms including the web, email and mobile are being targeted. For instance, in case of email personalisation, a visitor who hasn’t completed a booking is being targeted after closed web session, and the focus is on streamlining path back into booking.

Other than direct channels, airlines also need to continuously strengthen their ties with indirect distribution partners. As Ailsa Brown, senior commercial director, Global Distribution Sales And Services, South Asia & Pacific, Travelport, mentioned recently (during Airline Information’s Loyalty, Ancillary & Co-Brand Conferences - Mega Event Asia-Pacific 2014 in Singapore),”...We need to understand ways to best use the intermediary channels, trying to take direct channel experience and apply into the indirect channel – we need to understand an agent’s workflow. Our goal is to connect how people want to sell with how they want to buy.” On the positive side, one is witnessing increasing acceptance of ATPCO OC and IATA EMD for ancillaries.  

• Performance counts: Revenue generation featuring “bags”, “seats” and other items are enabling airlines to improve upon on their financial performance.

For instance, Delta Air Lines, in its Q2 2014 Earnings Call, termed its merchandising initiatives as one of its commercial successes. The airline considers its seat merchandising as a growing revenue stream, increasing by $45 million over last year.  In order to achieve this, airlines also need to answer critical questions – if we are going to work out our revenue model around branded fares, then what sort of attributes are relevant to our passengers? Also, there is a need to avoid errors like losing out on up-sell volume if the families feature a substantial price difference.

Optimizing ancillary revenues and fare families demands coordinated changes to multiple interdependent systems. These include inventory systems, point of sale locations, revenue accounting etc. But airlines can’t slow down, as a lot is at stake today.   

As Hoban says, the merchandising framework should provide the tools that encapsulate the customer characteristics at all specific journey interactions, which infer preferences, intent, needs and which enable a real-time retail decision.

Datalex recently spoke at the Ancillary Merchandising Conference, a part of Airline Information’s Loyalty, Ancillary & Co-Brand Conferences-  Mega Event Worldwide held in New Orleans (18 – 19 November, 2014).