Executive Interview: JAL’s Akira Mitsumasu on “opportunity cost pricing”

First Published, 23rd March 2016

When carriers embrace unreasonable ways of charging a customer for an upgrade or a service, it just results in displeasure. This only upsets us and it should be avoided, recommends Japan Airlines’ Akira Mitsumasu.

 

Is unbundling going to make it hard for a family to sit together in a plane? Will I have to pay for early boarding request with my toddler?

Now if an airline is already charging for checked bags, overhead bin space etc., it is unlikely that the pre-boarding policy would allow a family to get into the aircraft first. Those who have paid for such services are likely to find space first for their bags, before anyone takes it including a family with kids.

Now this might be a common phenomenon in the U. S. but these issues tend to be seen in a completely different way in Asia, simply for the fact that many travellers could be new to flying.

So how to approach unbundling or offering ancillary offerings at large in Asia?

“There is no one size fits all solution, especially when we think of how diverse the APAC region is,” says Akira Mitsumasu, VP, Marketing & Strategy, Asia & Oceania Region, Japan Airlines.

It’s never easy to know if a given attribute (say, seat selection) is better to be included in a fare family or sold as an ancillary. Depending on your brand, market perception can be a big issue.

One important thing Mitsumasu recommends is to make sure that the proposed value and price are easy to understand.

“Search and purchase are important activities within a customer’s journey, and hence a proper understanding of the ancillary value proposition not only helps facilitate sales, but also helps create a better customer experience,” says Mitsumasu, who adds although some Asian carriers seem to have responded quicker than others to the retailing trend in aviation, the overall trend is, as in the West, is essentially driven by consumer needs and expectations. “In the APAC region, because of very diverse and different needs, finding or testing what is relevant is a very important process in determining what to invest in and co-produce with partners,” Mitsumasu told Ai Correspondent Ritesh Gupta in an interview. Excerpts:

Ai: If we were to talk of ancillary products and services, what has really delighted you and annoyed you going by your personal experience?

In my opinion, ancillary delights when they deliver value and annoys when they are just fees for something that is unbundled. It is somewhat like taking a regular product and deliberately breaking it to create artificially inferior versions. I do to certain extent agree that there are times when some elements of full service offerings could be taken out and sold separately. But when it goes too far, and this can easily be the case especially in markets where travellers expect a standard product to include a decent level of convenience without having to calculate the costs and decide whether to include or exclude certain elements of service.

Ai: So what annoys you?

To me, when I ask for a full English breakfast in a 5-star hotel, for example, the last thing I would want is the hassle of ticking item by item what I need and wondering how much that adds up to.

Another thing that I find annoying, from a traveller’s perspective, is the “clever” idea of opportunity cost pricing.  Why should I pay an extra $20 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?  Or why should airlines cram their customers together in tight narrow seats and then announce minutes before departure that they can move to comfortable seats at a price?

These ideas may appeal to carriers as ways to capture extra revenue, but they could also generate very negative travel experiences to the customer. Again, this is my opinion, and other travellers may feel quite differently. But this diverse attitude towards ancillaries is precisely why customer experience could easily go wrong.  

Ai: How close is the industry to offering consumers what they are seeking?

With big data analytics and better merchandising platforms, today’s technology has opened up many new ways to propose personalised air travel and related offerings through multi-channel and device environment. What is technically possible however is not necessarily always feasible, and I think the industry, which has just started to embrace this, will go through a period of trial and error, during which the more relevant offerings will be adopted and the less-so ones eliminated. Although airlines are getting better at personalizing offerings, this does not necessary mean that they are capable of customizing them. Building up an attractive repertoire of different offerings to different customers may not be technically possible nor financially viable either.  

Ai: When you hear about average revenue per passenger rising up in the markets like the U. S. or Europe, how do you assess the relevancy of the same in a market like Asia?

I think this depends on which part of Asia we are talking about. There are mature markets that behave in ways similar to that of the U.S. and Europe, but there are also new emerging markets that are quite different. Many people in Asia's emerging economies have just started to afford to travel, and many have travelled for their first time on LCCs - the experience of which could shape the perception and expectation these new travellers have towards an airline product. 

Ai: Can you share your observations where you think merchandising strategy requires a different approach say in regions like North Asia or Southeast Asia?

I think there are regional differences such as in terms of consumer needs and sophistication that consequently affect merchandising strategy.

In Japan, for example, consumers generally have relatively high demand for quality and would often expect full service. There are, however, also segments that are more willing to sacrifice quality for cheaper prices.

In some Southeast Asian countries, the norm is to buy "good enough" products and services, and consumers in such segments would want to save air travel expenses and spend instead on other areas. I would look at both regional differences, as well as intra-regional differences, such as the difference between a price sensitive versus a less price sensitive segment within a region.  

Ai: Any example which shows blindly following best practices can prove to be a disastrous move as far as air and non-air ancillaries are concerned?

Best practices work because they often define well two gaps. Firstly, the goods and services an airline offers that is not always needed and hence can be taken out as a separate value offering. And secondly, the goods and services that are required by its customers, but are not offered by the airline; in other words areas for new value fulfillment. It would be highly risky and potentially disastrous if an airline just blindly follows the ancillary offering of another airline without having first an understanding of its own value gaps and hence feasible opportunities.

Understanding the market is crucial, and starting with small steps to test what works and what doesn't would be a good approach. Identifying competence gaps, and finding partners that complement your capability is also important.

Ai: What would you term as the next biggest development in the arena of ancillary revenue generation?

As ancillaries move from air to non air travel related products, airlines will increasingly need to collaborate with other partners, and be flexible enough to un-bundle and re-bundle their resources. In light of this trend, I think the next biggest development would perhaps be extensive value co-production networks competing against one another.  

 

Note: The above remarks are Mitsumasu’s personal views and do not reflect that of Japan Airlines.

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Executive Interview: Jim Davidson, CEO, Farelogix

First Published, 11th March 2016

With developments such as the new standard NDC, airlines are able to deliver richer, more personalized offers across multiple channels. But still there is a need to curb the gap between direct and indirect channels when one considers the overall point of sale capabilities, asserts Jim Davidson, CEO, Farelogix

 

Airlines are increasingly getting proficient at defining their respective retail strategies, and working out a technology infrastructure that would pave way for merchandising capabilities consistent with their chosen policy.

A key decision that every airline has to make is to whether to acquire merchandising technology that they can control and even operate.

As it is turning out, airlines are open to running their own merchandising engines, embracing a flexible approach to creating, managing, and modifying offerings as per their discretion.

The sort of air and non-air products that are being offered - irrespective of the type of trip - too can be a key factor as the traveller may respond positively to a relevant offer shown by the airline. Now this mandates control over both merchandising initiative and technology so that there is a mechanism by which frequent product/ pricing testing can be enabled. Plus, a merchandising system needs to be linked to internal systems such as CRM, customer profiles and FFP database.

Also, carriers acknowledge that managing numerous merchandising processes/ systems across direct and indirect channels is not scalable. If each GDS needs a carrier to execute and support their distinctive procedure/ methodology (say a blend of   ATPCO filing and GDS direct filing), then the notion or expectation that airlines will manage their merchandising products and services featuring three-four different ways is a faulty hypothesis, something accepted by both the airlines and GDSs.

Level of control today

So in order to know more, Ai’s Ritesh Gupta asked Jim Davidson, CEO, Farelogix asked if he were to relate as a traveller, which areas of flying disappoint him till date - right from planning to travelling (for both as FFP member and even with an airline with which he doesn’t fly frequently)?  

“I do believe the travel shopping process is an area where there is scope for improvement,” stated Davidson.

He added, “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 – in terms of revenue, and the traveller – in terms of understanding all the products and services that might be available.”

According to him, in this time of online retailing, it is a reasonable expectation to be able to get the airline’s best offer from any touchpoint that an airline or travel agency offers. “Whether you are at airline.com’s mobile site, website, etc. that process should be seamless, and the requirement applies not only during the shop process but also in the case of a trip interruption.  Right now, this isn’t always the case, and this can cause customers (and potential customers) quite a bit of inconvenience.”

Looking at the same from airline business solution management perspective, Davidson said the more channels and touchpoint that can showcase an airline’s product and brand, the more the airline can grow revenue and loyalty. “The industry has taken some important steps to solve this problem – including adoption of new merchandising, and distribution technology and industry standards such as NDC, and new distribution approaches from major airlines such as Lufthansa, American, Air Canada, United and others,” he said. “The challenge now is to expedite adoption in the GDS and corporate booking tool channels which serve a large portion of the market worldwide. We are seeing this start now, it just needs to go faster before the gap gets too wide between direct and indirect.”

Taking charge

Airlines are trying to sharpen their distribution technology capabilities. For instance, there are tie-ups in place between airlines and technology providers to facilitate a connection directly to sales partners. This way there is a provision to look into each individual direct interface and offer support in planning and implementation.

Commenting on this trend, Davidson said all of this comes back to airlines taking control of the offer in order to offer more choices and differentiate their products.

“This is why we see airlines investing, now more than ever, in better, more reliable technology for airline-controlled merchandising, distribution and ecommerce, including direct connect as well as new platforms for merchandising and e-commerce that are adaptable, scalable, and more future-proof in the sense new solutions are PSS and channel agnostic,” he said.  There are specialists today that are offering airlines the opportunity to markedly enhance their .com spaces while also creating easier methods to reach and appropriately engage more customers.

No conflict as such with travel agents

With NDC-XML, and any other messaging protocol, airlines control the content they send to travel agencies. Travel agencies on their side optimize the information they display—be it airline information or hotel information—to maximize sales. Talking of control, are airlines going to be happy with this equation?  

Davidson doesn’t think there is a major conflict in this equation; in fact, it represents a more robust value chain and opportunity for all.

“The airlines are finally in a position to control and personalize their offer using NDC-aligned XML, and third party intermediaries are able to access this broader, richer content and package it for their customers, be it a corporate booking tool, OTA or travel management company.  Everyone stands to benefit from a more dynamic approach to travel retailing,” he said.

Moving together with standardization

Airlines are looking at single, standardized set of XML messages to feed their distribution partners.

The good news is that new technologies and standards (NDC) make it possible for airlines to deliver richer, more personalized offers across multiple channels, and make it possible for aggregators to more cost-effectively scale their integration efforts.

Davidson says 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 OTAs such as Priceline consuming airline direct connects; GDS such as Sabre consuming American Airlines API; or innovative business rewards program such as we see with Air Canada Rewards for Business, which also ties into its XML API,” shared Davidson.

“So the opportunity and real life examples are there. Where we’re falling short again goes back to the pace of adoption and innovation in the indirect channels, specifically when it comes to travel agency point of sale solutions and the GDS, where there are still major limitations in terms of point of sale capabilities,” he said. “What’s the point of putting rich, personalized content in a robust API if it will end up being sold using selling system that strips the offer down to a commoditized “everyone looks the same” display?” There is essentially no industry or business that can effectively compete this way. This is where the biggest innovation is needed, else the gap between direct and indirect channels will continue to widen in spite of NDC.

 

Ai is scheduled to conduct a “Complimentary MasterClass with Farelogix - Best Practices in Airline Merchandising & Digital Commerce” next month.

Date: 20th April

Location: Barcelona, Spain            

For more information, click here

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Executive Interview: Thomas Gregorson, MD Product Strategy & Development, ATPCO

Assessing how filing of fares is going to evolve in the NDC era

Ai Executive Interview:  ATPCO’s managing director - Product Strategy and Development, Thomas Gregorson

Airlines are trying to control what they sell and the way they sell. Ai’s Ritesh Gupta explores how ATPCO is set to play its part in the future

The way airlines intend to distribute their product, right from filing of fares to sharing their offerings with intermediaries, has been under scrutiny for a while now. Personalisation and doing away with commoditised way of disseminating information are areas that carriers are keenly looking at. 

In this context, a section of the industry has questioned the efficacy of ATPCO filing system.

For instance, an executive told me the concept of even a personalized price, let alone a set of products and services of which many are dynamically controlled inventory, was never conceived when the ATPCO filing system was set in place. The same executive also questioned the attempt to distribute dynamic airline ancillary products and services.  

Meeting dynamic pricing needs of the future

ATPCO’s managing director - Product Strategy and Development, Thomas Gregorson acknowledges that when ATPCO initiated its journey 50 years ago, personalisation was not really a need. 

“However, since this time as we continue to automate the fare distribution process in the industry ATPCO has enabled much of the personalisation that already exists and will continue to work with the industry to meet all of their needs in this regard,” says Gregorson.

To provide some context, ATPCO has for decades enabled the ability for airlines to distribute different content to different entities as well as to offer many different prices and products through the interaction of ATPCO data and prices with the inventory management controls. The organization also allows airlines to offers different prices, services and branded products to the passenger segments (Passenger Type Codes, Accounting Codes, Promotion (Ticket designator) Codes, and Frequent Flyer Tier Status). 

“We have recently introduced the ability to further segment the services that are offered to the level of an individual based on the airline proprietary Customer Index Score. Even with all of these capabilities we recognize that this may not be enough for the future,” admits Gregorson. 

A multidisciplinary industry working group has been set up that will look at the next level of dynamic pricing capabilities. This working group will include inventory management and pricing and distribution experts. The goal of this working group is to have the full industry implement globally all the capabilities that are already defined within the product as well to define what enhancements need to be created to support the dynamic pricing needs of the future.         

Gearing up for NDC

Gregorson says, “ATPCO continues to acquire new airlines that use our fare and rule collection and distribution services, the amount of data that goes through this service continues to grow and we have presented our and have received support from the airline industry that supports ATPCO being their infrastructure and  central conduit for all distribution (NDC and traditional)”.  

Some major steps towards this vision is ATPCO’s progress on acquiring airline ancillary content with over 130 airlines using ATPCO to distribute their optional services and us being the industry source for baggage fees.  

“We have launched an airline profile into production for NDC,” says Gregorson. 

ATPCO has completed its R&D and now is making progress with the building of a Message Hub that will serve as a cost efficient method for airlines and aggregators to connect to each other in a NDC world, while maintaining all the benefits of the current data distribution services.  

“In 2016 – we will finalize our technology transformation and build out our message hub and dynamic fare creation capabilities,” says Gregorson.

“We recognize that  the collection of content needs to expand from the current data push/upload or input via our user interface to also include more interactive APIs to airlines systems.  The Message hub will be our first method of collecting content from an airline offer management that we will then normalize so it can be easily consumed by all airlines and systems.”

Control and filing of fares    

ATPCO currently supports over three million parameters which dictate the control and use of traditional distributed content for the airlines.  

Gregorson says this level of control continues to grow and take new form with the creation of airline profile. 

“The methods of control will need to merge as airlines seek a simple and consistent method to control all content regardless how distributed.  With this we need to move to build an industry infrastructure that is connected to the message hub and has implemented airline profile in its distribution process,” he says.

Gregorson shared that the biggest changes in the fare distribution process with NDC will be the airlines owning or licensing airline controlled offer creation engines. 

“So instead of raw data being distributed to multiple systems, the process will change where the raw data will be sent to each airline offer engine and the airline offer engines will generate the offers,” he says. 

The biggest challenges with this transformation is the need to cost effectively support the Internet and consumer needs to shop for airline offers and services, and the need for airlines to obtain content creation engines to be integrated in their offer engines.   

ATPCO is focused on enabling a method for airlines to distribute raw data and created content to provide the most efficient method to support the industry shopping process, to continue to expand its distribution infrastructure of airline to GDS to be also used for all airline to airline distribution to support their offer engines. 

“Finally, we are building content creation engines that can be leveraged by all airlines,” he says.

Data distribution

Gregorson says the data distribution process that is there today will exist and be extended to include more volume and more frequency.  

“We have seen over the last 5 years our data base grow by 80% and we expect to see another doubling of the data base within the next year as airlines begin to adopt branded fares. We also see that there is need to have more frequent updates of some of the data,” he says.

“As such in the first half of 2016 we will have completed our technology transformation project which will include upgrading our systems to enable us to perform instant updates to the marketplace.   When and how this instant update process will be sued in the market is still being defined, but one item fully supported by the industry is the need to instantly remove or cancel a price in the marketplace.”

ATPCO believes the most cost efficient and effective way to maintain airline prices moving forward is through a blend of distribution of raw data, utilization of ATPCO content creation engines and creation of processes that enable airlines with the ability to define dynamically alter their pre-constructed prices. This method of maintaining prices, as Gregorson says, will leverage the airlines huge investments in their advance revenue management systems and ensure that their pricing is rational and optimally being implemented. 

“ATPCO has focused on reinforcing our infrastructure to provide the airline industry with the most flexible, robust, reliable, and cost effective fare distribution that works today as well as for the years to come,” stated Gregorson.

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Executive Interview: Aaron Carr, CEO and founder, Friendefi



Airlines are beginning to understand that gamification provides a set of tools that compliment their existing loyalty practices, says Aaron Carr, CEO and founder, Friendefi.

There really are many options for using gamification to create fun, interactive ways of obtaining educating customers, capturing customer data, driving transactions, and more.

Airlines are trying to incorporate gamification into routine features of a loyalty program. Be it for social activity, for instance, rewarding for completing valuable social sharing activities, or flying on specific routes, such initiatives need to fulfil a certain objective.

And rather than just focusing on the tactical aspect, airlines need to augment the overall experience via gamification, Carr told Ai Correspondent Ritesh Gupta.

Ai: How do you indulge in gamification yourself?

Carr: I do indulge in gamification from time-to-time…The practice isn’t that widespread yet - we’re working on changing that, but a recent airline example that I really enjoyed was Air Canada’s Earn Your Wings. This promotion encouraged Air Canada’s frequent flyers to ‘race’ and out-fly one-another over a two-month period. Although it mainly appealed to very frequent flyers, I thought it proved to be innovative from the standpoint of bringing competition and goal achievement (earning “Wings” and destination badges) to a very ‘business-centric’ customer group.

Ai: If you were to highlight areas that signify progress of gamification in the arena of loyalty, what would these be? What are the concrete benefits that gamification is offering to strengthen loyalty?

Carr: Most of the advancements around incorporating gamification into the program experience have largely been tactical – only used on a promotional basis.

But increasingly we’re seeing programs incorporate some aspects of gamification – such as recognition for achieving objectives through badging – as part of the core experience. While the benefits of tactical gamification can be very impressive, we believe that weaving these practices into the fabric of the program can yield even greater benefits.

Gamification – done well – creates activity and engagement loops where participants repeat a behavior, becoming better and better at it (think about levels within a video game). And, of course, encouraging repeat behaviour is a core objective of loyalty programs.

Ai: What is the most attractive part of social gamification for airlines today?

Carr:Gamification can be attractive to airlines for several reasons. But at the top of my list are two in particular: the ability to engage customers to learn about their frequent flyer offering and the ability to drive short (and potentially long)-term flight behaviour. 

Ai: Any campaign that you would like to highlight?

Carr:The American Airlines AAdvantage Passport Challenge, which we launched with AA last year stands out as a very strong case study – both for its scale and its results.

AA had three broad objectives:

(1) loyalty program education and partner awareness;

(2) social channel use and engagement; and

(3) drive short-term flight behaviour.

The promotion consisted of a digital “passport” and members could sign-in using their Facebook credentials and by entering their AAdvantage number. For each activity and game participants’ completed, they earned the accompanying passport stamp (like a badge) and AAdvantage miles. The games proved very popular and effective at improving participants’ awareness of partners. In fact, we saw a double-digit increase in mileage accumulation (spending) by members who played the partner games at those same partners. The social actions were also popular – participants dramatically increased their social channel engagement with AA as a result of the promotion and even helped the promotion achieve a greater reach by sharing with their social network friends. Finally, we saw an incredible lift in flight behaviour – mostly attributable to the personal goal we assigned to every participant. The goal was based on your actual historical flight behaviour and pro-rated to the 60-day duration of the promotion. A significant number of participants hit their goal resulting in a dramatic increase in pre / during flying on AA.

Ai: How should airlines approach social gamification?  

There isn’t one approach for how airlines can use gamification. A gamification initiative should always start from the airline’s business objectives and target audience.

When designing a gamification initiative you should also always ask the question: “What actions do I want my target audience to take?” Literally – think about what exact actions you want the target audience to perform and then consider the game mechanics that can be used to motivate those actions. And if your initiative includes purchases (e.g. Booking a flight), then consider how that information will be communicated from the airline’s reservation system or loyalty system to the gamification platform. Gamification works best when information flows in near real-time. I do something and see the result instantaneously or pretty quickly thereafter. So, in my book, the only do’s and don’ts have to do with designing your initiative based on a good assessment of your objectives, target audience, and desired actions / behaviors.

Ai: From your experience, who generally forms the core target audience for gamification? What are the strengths and limitations of gamification when it comes to targeting a specific audience?

Carr: Actually, I would flip this question on its head. Gamification is a broad tool-set and its appeal isn’t limited to a specific audience. Rather, the game mechanics and narrative should be determined based on the group a company wishes to influence. This should be judged based on behaviour characteristics. Using the Air Canada example, we know that most frequent flyers are traveling for business. Many business executives, by nature, are competitive and achievement-oriented. So a race to out-do others works. But this wouldn’t be the case for a less competitive subset of their customer base. Although these characteristics are not always known (as they’re not often measured by companies), they can often be inferred and tested. 

Ai: Considering the utility of mobile devices, how social gamification offers a bigger opportunity?

Carr: So much of the traveler journey remains untapped. Airplanes contain captive audiences for hours at a time. As an alternative to watching last month’s Hollywood films, imagine being able to play educational games about the airline, its products and services, its loyalty program and its loyalty program partners while earning miles. Or playing games that challenge you to create your dream travel itineraries so that the airline can understand your future potential travel intentions…Or creating in-airport challenges or global travel challenges.

There really are many options for using gamification to create fun, interactive ways of obtaining educating customers, capturing customer data, driving transactions, and more.

Ai: Can you share metrics associated with social gamification that help in meeting different campaign objectives?

Carr: In addition to the traditional metrics for any marketing campaign or program, gamification provides another layer of data capture and information. For example, when we ran the AAdvantage Passport Challenge, we not only measured how many people participated in the campaign, but how many completed each game and action. In addition to this, if the game involved trivia, we measured how many questions they answered correctly. In my view, this is a really compelling aspect of gamification, because we could tell AA not just how many customers played a specific game, but how many actually absorbed the marketing message promoted within that game. This is why, we believe, we saw such impressive increases in mileage earning at partners during the promotion. We didn’t offer bonus miles for shopping at those partners. Rather, we enticed customers to learn about those partners by playing games and trivia and only rewarded them for answering correctly. This had the effect of really increasing awareness and understanding.

Similarly, gamification can be a really effective tool for encouraging people to provide their purchase or travel intentions. Within the AAdvantage Passport Challenge, we had a couple of ‘create your own story’ or ‘dream getaway’ activities, where we asked customers to select their dream trip, hotel property, and activities at destination. From the customers’ standpoint, they were simply taking a minute to day dream about an ideal trip they would like to take. But, from our standpoint, they were providing valuable interest and intention data that could be used later to target highly relevant offers.

Ai: One factor that seems to be annoying a lot of customers these days is the availability of the lowest cost award tickets.  Is there any way gamification can help in making perception of FFPs better?

Carr: Having been responsible for flight rewards when I worked at Aeroplan, I understand the issue of seat availability very well. While many complaints about seat availability are valid, at Aeroplan we recognized that most program members didn’t understand how to maximize their chances of getting a seat using their miles.

For example, booking window, departure and destination airport, time of year, day of departure…etc, all impact the likelihood of getting a seat. Having seen the effectiveness of gamification as an educational approach, I would say that this could definitely be applied to educating program members about seat availability and the various options they have (e.g. departing on a Tuesday instead of a Saturday) for improving their chances of getting a seat.

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Executive Interview: Nik Laming, Cebu Pacific Air

Our chat with Nik Laming, General Manager – Loyalty Division at Philippines’ leading carrier Cebu Pacific Air, who spoke at the FFP Loyalty Conference, a part of 2nd Annual Mega Event Asia-Pacific (held in Singapore, 31st Aug 2015 – 2nd September 2015).

From a Traveller's Lens:

From A Traveller’s Lens

Airlines today are not only expected to recognize a loyal flyer, but achieve top-notch personalization, too.

If one has to deliver a consistent and yet tailored experience to members then it is imperative to clearly define processes and execute flawlessly, asserts Laming. Laming says there are many moving parts in the airline business and the loyalty program is a tool that helps to identify customers and customise offerings to their needs but only if the organisation can operationalize the good intentions.

For its part, Cebu Pacific launched its GetGo lifestyle rewards program for frequent fliers (over 1.4m) in March this year. It allows members to accumulate points on everyday spending (on groceries, utilities, gasoline, etc.) and redeem those points for a free flight. Laming spoke in detail about what needs to be done to ensure a loyal passenger gets his or her due in an interview with Ai Correspondent Ritesh Gupta.

Ai: If you were to assess loyalty as an air passenger, what makes you happy?  

As a loyalty member I am happy when the core benefits are done well – don’t give me non-air rewards and frilly extra’s to paper over the cracks of a fundamentally flawed program.  Make sure I can get redemption flights when I want them albeit at variable rates.  Tier qualification is poorly done sometimes – for example only business or first contributing to top status is too restrictive and just isn’t viable in this day and age.

Ai: What would you count on as the biggest development as well as the challenge in loyalty marketing today?

(It would be) The member revolution powered by smartphones and social media. People are more connected, more vocal and more demanding than ever before.  A small issue coupled with a canny member can result in wide spread social media unrest if not managed carefully.  And the speed of change and reduction in reaction times required to manage this new world are a big challenge.

Ai: The onus is on marketers to serve the customers in the best possible manner by being data-driven. What does it means to you, and how actually do you think one can excel in an omni-channel environment?

Getting the basics right is vital.  There is effectively an agreement between the program and a member whereby data is exchanged for rewards.  Using the data with respect and to improve customer experience is the key.  We currently operate across multiple channels including web, mobile, call center, Facebook, Twitter and Instagram – monitoring all the channels and having the tools in place to enable a single view of customer communication and respond is critical.

Identifying customers across proliferating social platforms, devices and channels is difficult and becoming more difficult every year. Having the right technology in place to knit together the different streams of data is a good start but there are often gaps. These gaps mean that customers do get frustrated as they are not addressed as one individual. It is an area of focus for every organization to solve in the near future.

Ai: Can you cite examples where you feel you have excelled in offering what customers expect from loyalty?

GetGo is a very new program so the best is yet to come.  However we have built in some best-in-class features to deliver above and beyond expectations from launch.  These include any seat redemption, points pooling, dynamic top up and an expanding range of earning opportunities.

Ai: Where do you think airline loyalty programs generally are going wrong – from both technology and operations perspective?  

There are inherent issues with airline loyalty programs with broken commercial models, complex technology and omnichannel customer service.  Most programs from legacy carriers suffer from a lack of award seat availability due to the underlying business model and conflict with revenue management. 

At Cebu Pacific, we did not originally anticipate the need to view Instagram as an inbound customer service channel.  But we had to adapt our process to accommodate it after we received a complaint as a comment under a photo we had posted. 

Ai: What role data analytics is playing in the arena of loyalty – for instance in improving upon merchandising redemption and the overall experience of flyers?

Data analytics underpins the ability to deliver a tailored experience and appropriate offers in the most efficient way.  Applied correctly the insights derived from analytics are the most powerful aspect of loyalty marketing.  Simple profiling and targeting remain very effective.

The ability to deliver real time and highly targeting messages has finally enabled marketers to answer the conundrum of right customer, right place, right time with the right offer. Predictive modeling adds another dimension to aid targeting and improve marketing efficiency. Differentiated service and offers are only made possible with data analysis. So the role of data analytics is simply huge.

Ai: What would you term as major priority today especially when airlines are not only expected to recognize a loyal flyer, but also achieve top-notch personalization?  

Process and operationalization do not tend to be viewed as a major priority for marketers.  However if you are going to deliver a consistent and yet tailored experience to members you have to be able to both clearly define processes and execute flawlessly. 

Delivering benefits such as priority boarding or baggage handling requires consistent process across wide networks. As campaigns become more complex and multi-dimensional the need to manage them efficiently relies on process. Points programs are essentially mini banks but managed by marketers. Without well defined processes to award and redeem points and secure data programs are frustrating for members best case and worse they are open to fraud and abuse.

Ai: What’s on your agenda for Cebu Pacific Air in the next year or so?

A major focus on the basics. Make the program attractive and efficient to attract members and keep the current ones engaged and excited.  We are adding new partners and ensuring we serve current ones well.  We have a roadmap of exciting developments in the coming 12 months but these need to be built on a solid foundation.

(The airline has a 55-strong fleet, and it carried 16.9m  passengers in 2014, 17.5% more than flown in 2013. Ancillary revenue grew 29% to P8.7 billion last year. It posted a core net income of P 3.3 billion, up 77% compared to the previous year, on the back of notable improvement in both revenues and operating expenses).

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Executive Interview: Aidan Brogan, CEO, Datalex

Real-time retail decision-making  - is tech ready for it?   

How challenging is to make use of multiple data sources to turn customer insights into real-time retail decision-making?

This isn’t a technology constraint anymore. Airlines today have options to manage all pre-trip, during-trip and post-trip operations, and manage a record of all offers and purchases at all touch points via a central hub.

As a specialist, Datalex recommends omni-channel fulfillment and trip management options while effectively managing the interaction across all channels and throughout the customer journey.

For a passenger, this means when an offer is presented it would likely match the profile/ the intent, the stage of the journey, and shouldn’t be just restricted to the airline website. For instance, you opt to check-in via airport kiosk, and what if you are given an option to upgrade or buy a seat at that point of time. Essentially, there is control of all product content in one place, including products syndicated from multiple sources.

“The effort is in combining all valuable data sources into one customer hub and ensuring that the commerce system can turn an insight into an offer,” says Aidan Brogan, CEO, Datalex.

There are some interesting developments that are emerging in the arena of personalisation. The emergence of branded fares with optional extras stands out. For instance, you may want to travel economy class but your desire of a premium meal experience can be fulfilled !

As an active participant in IATA’s NDC Working Group, Datalex has refined its offering to support the multi-channel capability to distribute products into every sales channel.

Brogan interacted with Ai’s Ritesh Gupta about personalisation, and how to set up required infrastructure for the same.

Ai: How are airlines looking at recognizing passengers, offer them relevant options and yet being in control of what they are selling?

A personal observation is that historically the airline industry was designed with the airline operation as the focus as opposed to the passenger or more importantly the customer as the focus. This is changing and changing rapidly, from what I am observing in the industry and from our customers, I would say that airlines are putting their customers at the centre of their business and changing their operations to give the customers control. 

Ai: So how challenging is to embrace change?

We do note that airlines require significant investment in re-platforming their digital commerce suites to enhance their ability to dynamically price, promote and reward customers across all channels and devices.    

Future proofing their retail systems is a business-led priority and the catalyst is the revenue opportunity and the acknowledgment that customers demand an increasingly sophisticated self-service ‘digital’ experience.   Our customers are also keenly focused on using multiple data sources to turn customer insights into real time retail decisions which optimize what is offered, when and at what price across the travel journey. Constraints remain to extend this capability to intermediary channels, but that’s not a technology constraint, rather an evolving business model to be tied down with airlines partners. IATA is leading this transformation with their NDC initiative which is gaining momentum across the airline world.

Ai: Can you share a personal example or any observation of any travel booking that depicts progress in personalization?

The emergence of branded fares with optional extras is one of the biggest changes taking place at the moment. The reality is that ‘one size does not fit all’, consumers want the ability to personalise and tailor their travel experience.

A great example is the ability on the Aer Lingus Trans-Atlantic flight to personalise your food and beverage by selecting from a range of personalised gourmet meals, I may want to travel economy class but I do want a premium meal experience. It’s just the beginning and airlines as retailers are still experimenting but they are doing so at great pace.

Ai: What do you find really time consuming when it comes to booking all requirements of your trip?

The inability to self-service in real time is a huge obstacle and particularly when I want to personalize my travel experience to meet my immediate needs, such as priority boarding or change to an earlier flight or sit at the front of the plane.

I love the JetBlue automated check-in – such a simple thing but one that makes my travel so much more convenient.    

Ai: What trends would you like to highlight in the manner in which airlines are meeting digital shopping needs of travellers?

The omni-channel capability is gaining momentum and is the future. This allows customers to engage with the airline across multiple digital devices with the airline having a single view of the customer. Customers want the choice to decide how they engage and in fact they want real time, immediate, relevant information on any device they decide to use.

The other trend is the ability to sell products and service via any channel going forward. For example, at Air China, our commerce platform enables channels such as WeChat (Chinese equivalent to WhatsApp);  Qunar  and Ctrip (the two biggest online travel agencies) and TMall marketplace (Chinese Amazon) to access tailored offers.  

Ai: Can you explain what can airlines in the Asia Pacific region learn from their counterparts in other markets when it comes to targeting new revenue opportunities offered by ancillary product selling?  

Datalex already has a significant footprint across Asia Pacific  and it is a core markets for the future growth of the business, particularly because it’s the fastest evolving digital marketplace for travel.   I believe airlines in the Asia Pacific will very soon lead the airline retail transformation however they do lag behind in terms of investment required to future proof their commerce platforms. 

There are some legacy system constraints but I believe they will accelerate investment and innovate at pace because their digital customers are already well ahead.

How should airlines in the Asia Pacific region go about selling an optimal mix of air and non-air products – any practical way of building up resources and infrastructure?

Put simply, it must be unified.  The pricing, offer and order management components for all products must be controlled through one unified commerce platform.  Only then, can the airline dynamically price and promote air and non-air products  in an optimal way.   Many airlines have opted for non-integrated pricing and merchandising solution providers which are difficult to integrate and have competing priorities.

The Global Mega Event, held on 04 & 05 November 2015 in San Diego, covered gearing up for personalisation and omni-channel strategy. Personalisation will also be a hot topic in may of our upcoming events listed at: www.AiConnects.us

Executive Interview: Marc Rosenberg, Strataconnex



Our chat with Marc Rosenberg, President, Strataconnex.

From a Traveller's Lens

How close are airlines to the point of creating a consistent, personalized, and value-added product for each passenger? And how are they looking at improvising on their distribution?

As for offering a relevant product via direct distribution, airlines are moving on from using a fairly simplistic algorithm, and are starting to adopt technology capable of taking input from customer management systems, usually in the form of a customer “score” that equates to a set of products to be offered. In order to know more about this and the current issues in distribution, Ai’s Ritesh Gupta spoke to Rosenberg. Excerpts:

Ai: As a traveller, what do you make of the experience of buying tickets for your flight?

It can be argued that the new technologies should simplify the process and to a certain extent it has. However, I must confess it is taking me longer than ever to sift through all the options available.  As each airline embarks on its own distribution strategy I can no longer assume any one source has all the options available. And they don’t, but when I finally drill down to my final choice the new technologies is allowing me to see all the detail I would ever want to know.

Ai: How a passenger is being made to feel that the airline is smart enough to offer what he or she actually needs?

The ability for an airline to display all its products and details on their own site, and soon with NDC adoption, on the sites of many travel retailers really allows for an airline to control the display of its content.   It was very frustrating to me when shopping a Trans-pacific premium economy seat that many online retailers did not even offer premium economy as a search option. Of course, I found it on each airline’s own  website. I cannot begin to imagine the lost sales from those of us who are self-bookers.  As for being smart I think we have a way to go before I would give the airlines a thumbs up.

Ai: How would compare the option of booking your airline ticket via airline website and via any OTA or a meta-search engine?  

Experience tells me you cannot go wrong with a direct look and see at most airline sites. However, and understandably, each carrier has bias toward its site to sell its own services. So if the airline is not flying non-stop to a particular city, you will not know that another carrier does.  The OTAs and meta-search engines on the other hand will give me more routing options so if I am not familiar with a city pair they are my first choice to start the search. The problem is on my recent Trans-pacific search many OTAs did not offer the premium economy option and in some instances did not have access to certain carrier’s content. 

So depending on your routing and knowledge of airline networks you have to look at several different sites before having the options you deem best for your needs.

Of course, a travel agent can provide most services and save you a lot of time and hassle, usually for a well deserved service fee.  Unfortunately for travel agents I am a bad potential client.  I am a control freak when it comes to my travel and I always want firsthand knowledge of options etc.   

Ai: So going by your experience would it be right to say that indirect channel is also in the infancy stage in terms of taking new airline content such as premium seating?

The technology even in the web cannot move quickly enough to adopt new airline products. Premium economy has been out for a couple of years it’s hard to believe some third party sellers cannot show it as an option in a search.

Ai: It is often said the distribution of airlines’ offering via indirect channels tends to revolve around price and schedule. How is this so called commoditization evolving?

With the NDC work at IATA I am hopeful the travel retailers will finally have access to the same richness of content that the airlines enjoy on their own carrier site.  The technology most travel agents use is limiting them to have the airlines content unless of course they go directly to an airline site.  I believe the commoditization will swing the other way, NDC being a significant factor in achieving that.

Ai: How do you see Lufthansa group’s decision to focus on individualized price options and ancillary services?

Each carrier has its own distribution strategy to meet its own needs. Lufthansa, like many airlines, is working toward embracing new technologies that should over time increase their earnings. How they go about it is a different discussion but I salute Lufthansa for having a vision and pursuing it. 

Ai: Lufthansa Group’s new commercial strategy includes a clear cost differentiation in the various booking channels. What do you make of this?  

It is very difficult for many stakeholders in our industry to accept the notion that differentiated costs are associated with different booking options and that any enterprise that is accountable for profit needs to pursue a strategy that maximizes profit and minimizes cost of acquisition.  

What we should not lose in all of this is that every booking channel option brings with it certain benefits that the other may not.  For example, the corporate managed channel needs a much more sophisticated booking channel that encompasses security, payment controls, managed reports etc.  That channel has no appetite for the booking channels I use as a self employed business traveller. Should I not have the option to reduce my costs to book travel?  And should the supplier (air, hotel, car etc.) not have the option of giving me that alternative? Where does it say I have to book and pay on the same terms as a large global corporate account. And why should I not be entitled to creative incentives to book one carrier over another? The managed corporate accounts enjoy all sorts of volume related airline and hotel and car discounts.  What I am really saying is that each target audience has different needs and each supplier should organize themselves to cater to those market segments they chose to want to do business with.

Ai: Many airlines offer on their websites ancillary services, branded packages and related content. However the distribution of this data to indirect channels is limited. What’s your viewpoint regarding this?  

This situation is not because most airlines are trying to deny the indirect channels from having the rich content. The technology of choice of most indirect channels is not capable at this time of providing that capability.  It is changing for the better, all be it slowly.  IATA’s NDC efforts will go a long way to solve for the current gap of the have and the haves not.

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Executive Interview: Jerome Seidita, Nok Airlines

Our chat with Jerome Seidita, mobile commerce director, Nok Airlines, outlines some of the issues facing airlines for mobile commerce, topics which were discussed and debated at the Airline & Travel Payments Summit (ATPS) Asia-Pacific (Bangkok, 26 - 27 Aug 2015) and will be covered at the 9th Airline & Travel Payments Summit (ATPS) Worldwide (Ft. Worth, 29-30 Oct 2-15)

From A Traveller’s Lens

Every country has its own inimitable challenges when it comes to accepting payment via mobile.

For instance, while some markets are showing signs of making steady progress with contactless ecosystem, there are others that are fairly new to this arena.

Yet airlines are adapting and trying to improve upon the payment experience.  For example, Thailand’s Nok Air has carved out a unique offline payment method when their customers book via its mobile channel.

So what is this initiative all about? What is Seidita’s take on 3D Secure, and dealing with regular changes in apps?

Ai’s Ritesh Gupta spoke to Seidita about mobile and payments in detail. Excerpts:

Ai: To what extent is your travel being simplified and how comfortable are you spending via apps?

In my opinion, mobile apps changed the world by simplifying complicated tasks in just few taps. Mobile behavior is different than desktop, users want reactivity, fast processes and simplicity. 

For me, amazing and efficient apps are the simplest one. Simplicity in the design, in the quantity of information, in the capacity or remembering past behaviors and information to make processes faster. 

The best example for me is the Uber application. It’s amazing how simple it became to order a private car. They know your location, your credit card number and your preferences, you just have to tell them where you want to go even though they probably knew it before you. 

When it comes to payment via apps, I feel very comfortable paying for goods and services from my mobile device. But it all depends on the application, if I have to spend more time giving the app my personal / payment information than selecting the product I want to buy, I prefer to use another channel such as web. 

Ai: Any anecdote that you would like to share while conceptualizing and designing apps and mobile website for Nok Airlines? What did you learn from that experience?

Nok Air is an innovative airline, we like very much exploring new technologies that would enhance our passengers journey. One of the latest initiatives was to make Nok Air one of the few first airlines to release an Apple Watch application on day one. 

When you start designing a new version of an app or mobile website you have to put yourself in the passenger shoes. Take everything that has been done on web and change it to be more simple, logic and fast on mobile. 

Few years back we started to work on “Low Fare Search”, a new way for passengers to look for the best fares available in an entire month instead of a single day. This functionality, still available today on our apps, was first implemented on our desktop website and we had to completely reinvent the user experience on our mobile channels. 

Desktop website did a great job by giving the user the cheapest flight of every day of the selected month but what if the user wanted to pay a little bit more but choose a flight that was leaving at night instead of the morning? Using a great user interface to cover complex API’s we have been able to create a flight result page that offered both the cheapest flights but also all other available flights accessible with one tap. 

What I learned from this project is that when designing apps for mobile devices you can get inspired from what have been created on other channels but you should never offer it exactly the same way. Passengers interact differently on their mobile, they have other expectations. 

Ai: What would you term as the toughest aspect of your role? Can you cite examples?

Mobile demand is growing very fast, technologies are changing every year but development is unfortunately not following at the same speed. 

Being innovative, offer a secure environment and implement airline requirement at the same time can be challenging for our developers who need to work on many projects, often never done before. 

To give a recent example, the Apple Watch app was released in April 2015 and less than 2 months later we learned that there was a complete new environment we could convert our application to. It’s a great improvement but it will require to change what we just finished to built in a very short time. 

Another tough aspect is that with Apple and Google in the market, offering amazing user experiences on mobile, people are expecting a lot more from developers than on desktop. If you want your mobile channels to work, you constantly need to plan for the next update and make sure your users are happy with it. Very challenging but we love it here.


Ai: Can you explain what should one look at while preparing for payment options via mobile?

Mobile payment was, as desktop at the beginning, difficult to trust but I believe people are now willing to spend on their mobile devices. We just need to make sure our offer is secure, trustable and offer the best user experience. 

At Nok Air we offer a very innovative offline payment method when you book on our mobile channels. You can book your flight and pay in the next 24 hours in 7-11 (supermarket) or any ATMs in Thailand. We also offer credit cards and almost finished to integrate Apple Pay. 

For credit cards, we found two solutions that any apps should be looking at, the first is to remember the last credit card number used and the another one is to copy all credit card information from the camera.

Ai: Shopper flow is often compromised at the payment stage by two key failures – a clunky look and feel, and multiple steps to complete the purchase. How to overcome such barriers?

For the clunky look and feel I believe we now have all the tools to create a great design, even when it comes to mobile payment. We just need more creative people. The only issue is when you get to the 3D secure page, as the only ones that can control this page are the banks and still a very few of them are thinking mobile for now. 

In my opinion, multiple steps are indeed a real key failure. Apple gave the best example by asking users their fingerprints today, nothing else. 

With a seamless payment as Apple, users don’t even feel they are spending their money and don’t need to seat and plan when they are booking. I believe Apple Pay is very promising.

Airlines are looking at selectively applying 3D Secure only to high-risk transactions, based on data customized to the airline. Can you explain how this is shaping in the industry?

Credit card fraud in Thailand is still high and at Nok Air we decided to apply 3D secure to every transaction. We are using a great tool to reduce fraud to the very minimum and it works great so far. If we had to take the same question out of Nok Air specific context I would say that this would be a great improvement as it would decrease number of steps and create a smoother booking experience. 

Can you cite few examples where airlines can face challenges with mobile payment?

The only challenge we had to face is the integration of direct debit transactions on mobile. The user has to connect to his bank online platform to accept the transaction but banks are still offering this functionality with non mobile friendly pages and it would deteriorate our user experience. We prefer to concentrate on channels that are ready and innovative. 

 LinkedIn: https://www.linkedin.com/in/jeromeseidita

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