Ai Editorial: Can airlines target personalization with existing processes?

First Published on 11th April, 2017

Ai Editorial: In order to deliver a personalized experience and add to the joy of flying with all the differentiated offerings that each carrier has worked out, airlines need to optimize offer and order management, writes Ai’s Ritesh Gupta

 

Travel, as a product category, is exceptional in many ways, and the joy of flying is an integral part of it.

As much as flying is unique in terms of a product that is being consumed, airlines are being constantly challenged to overcome the commoditized way of displaying their offerings and also selling. And this criticism, to a large extent, is valid as a consumer really doesn’t care about differentiation between shopping experiences. Yes, buying a book on Amazon and its fulfilment is vastly different from finalizing an aisle seat, Chinese meal etc. on any travel e-commerce site. So airlines have to find answer – to deliver a personalised, contextual and seamless experience.

Role of NDC

So if we talk of retailing, can pre-set bundles really result in product differentiation? Not really, not in the long-term. Such offers can be replicated. Airlines have to look for the ability to personalise the bundles that are being offered, and to do the same dynamically.  It needs to be highlighted that technology not only needs to fall in place, but pricing and revenue management has a role to play as well. The blend of these components is what that going to make the difference. Also, in case of distribution, especially indirect channels, carriers can achieve process differentiation only when they are in control of how their supply is being distributed. Supply control is extremely important to deliver a consistent brand experience in a multi-channel environment. So the point is how to gain access to real-time data of passengers? Are airlines ready to reconcile data sources? How to access business intelligence anytime?

There is where standardization via an initiative like NDC comes into the picture.

The objective behind coming up with schemas is that there is a strategy in place, focused on overcoming commoditisation, protecting the brand and looking at velocity, agility and cost efficiency while running operations, then passengers can be communicated and serviced in real-time. And this is what NDC is trying to improve upon selling via indirect channels - product differentiation (main issue is rich content/ product description etc.), speed of time to market (any new product owned by an airline takes time to reach out to the indirect channel) and personalisation.

“The goal of offer personalization is the grand vision of the IATA New Distribution Capabilities (NDC) and One Order initiatives, which originated with the airlines themselves,” says Ryan Harris, Director - Americas, JR Technologies.

Processes in place today not enough

In order to truly reach this goal, an airline needs to be able to take all of the historical data that it has for an individual passenger and the passenger’s market segment, use that data to dynamically bundle and unbundle services and products to create a personalized offer for the passenger, be able to dynamically price that offer or offers specifically for that passenger, and present it through any sales channel that the passenger chooses, all within a respectable amount of time, which is a few seconds, not minutes, says Orlando, Florida-based Harris. 

With this vision, it becomes clear that the processes in place today will not support the goal, at least not through every channel.  In order to achieve this level of personalization, every piece that goes into creating that offer must reside fully within the airline’s control every step of the way. 

It also need to considered that most companies are taking the approach of building the digital world, along with the interfaces, passenger-facing systems, data collection, and data processing that come with it, on top of the legacy systems.  The reality is, there are just some things that the legacy systems cannot do because they were never designed to. 

As Harris also acknowledges, 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.

So what need to be done?

Harris explained and shared what all needs to fall in place:

·          Supporting dynamically-created messages: There is a need to build a communications structure that will support dynamically-created messages that contain inconsistent, always changing data.  This is being achieved through the standardization of the IATA NDC XML schemas, which also can use standard internet connectivity that is typically much faster and more available than the leased-line, point-to-point connections used today.  The flexibility and openness of these message structures means that an airline can reach outside its own sales infrastructure with the same capabilities that it can do internally, such as through its e-commerce site.

·          Dedicated offer management system: Behind the communication structure, it means an airline must be able to create offers and then change the accepted offers into orders.  In concept, this means having a dedicated offer management system that can take all the data points, run them through analysis and business rules, check availability and applicability, bundle the offer items, calculate the pricing, and deliver it along with branding and rich media to the passenger.  There are several systems in the market that can do this today for an airline’s direct sales channels, such as e-commerce, but in the NDC world, you need to be able to reach all sales channels, direct and indirect, to offer the same services to the passenger through their preferred sales channel.

·          Order management system: Moving from the offer, it needs to transition into an order management system for fulfilment and accounting.  This is somewhat analogous to the concept of tickets and EMDs in the legacy, but in the Order structure, there are not the restrictions that are present with these electronic documents.  For example, looking within the framework of the offer, and thus the order as well, there are not requirements for a RBD, fare basis, issuance code, service category, or even a rule.  Those can be populated, which is useful for the transition period where the legacy ticketing and reservations systems need to remain, but they are optional, providing the flexibility within the design of the standard to allow airlines to sell whatever they want to sell.  This means that revenue management can be truly dynamic by determining an offer price based on business goals, unrestricted by available RBDs or filed fares.  Merchandizing becomes a core role of the airline, not just an ancillary function.  Travel changes and refundability can now be offered as dynamically offered ancillary products and be applied to any journey at a variable price, instead of having to rely on the filled fare rules.

Benefitting from One Order

Where things really get interesting in the distribution ecosystem of tomorrow is with the implementation of One Order as an industry standard, says Harris.

“Several airlines have been free from the constraints of the ticketing system for years by implementing ticketless reservation systems, so they are fully aware of the possibilities that can open, especially with third-party services and products that become distributable through those systems,” he says. 

One Order is, at its roots, an industry standard for migrating to ticketless environments and expanding the possibilities of merchandizing for the entire industry. 

“One of the major drawbacks for those airlines that chose to use ticketless systems has always been interline and codeshare distribution with most carriers that do have the traditional ticket-based systems.  This was usually either overcome by the introduction of a third-party ticketing system to facilitate the interline sales and accounting, or was limited to be a unilateral partnership where one party could sell flights on the other, but not the other way around,” Harris says.

By building on the Offer and Order Management systems, using NDC as the distribution protocol, and creating the One Order standard, airlines will be in a true position to innovate themselves and will have a much larger pool of APIs and third-party content providers to offer their customers the right travel offer at the right time at the right price, regardless if the customer is coming to the airline.

Airlines need to take action in order to be control of various stages of the travellers’ journey, and then only one can get closer to delivering personalization. And this will only lend a strong dimension to the joy of flying.

 

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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