First Published on 17th January, 2017
Ai Editorial: Travel companies aren’t new to tracking suspicious online behavior, but time has come to refine the ploy to make it more sophisticated as well as category-specific, writes Ai’s Ritesh Gupta
Certain level of sophistication, irrespective of the fact that whether the fraud prevention method is being used for the retail sector or an airline, is definitely needed. So, for instance, machine learning is able to detect certain patterns that can be termed fraudulent. There could be a couple of red flags in one session, say password change and change of shipping address, that can differentiate authentic shopping flow from an illegitimate one. The tracking of one’s navigational footprint can give ample indication whether a fraudulent transaction could happen.
Specialists point out that fraudsters need to be “out-smarted”, as tools and technology need to spot something that fraudsters wouldn’t think about!
Here are few areas that airlines can focus on to improve further, by acting on moves/ patterns that can be spotted on their digital assets. These initiatives not only combat fraud independently but also combine to make the whole effort even more fruitful:
· Do act on data that useful: Existing fraud solutions are designed to cater to mass markets where most airlines will only need to collect data based on a template that analyses very limited fields. This is not only insufficient, but also limits a merchant’s ability to create an optimal data strategy and reporting for their performance/ ROI. Unfortunately, not much useful data is returned to the merchant by default.
As each airline’s ecommerce website is unique, the data strategy deployed must be different and customised.
It is important to work with airlines and help them utilise all the data that is available on their website. Some custom data fields that may be collected include: flight details, loyalty miles claims (to detect abnormalities), or even a small, seemingly insignificant data field of whether the newsletter subscription box was checked or not.
· Tracking behavior for authentication: Behavioral analysis is one area that is becoming increasingly sophisticated. Swipes, taps, cursor movements etc. are being analyzed for navigation flow, time spent etc. to understand the behavior. Specialists are tracking mouse movements and clicks in context and meaning while becoming increasingly more accurate over time. User data is important to understand the user behaviour, for instance the words per minute (WPM) typed, how the cursor moves around the website, existing patterns of the card user, rather than simply focusing on the card blacklist or whitelist.
Visa, in one of its recent blog posts, emphasised that organizations today require a holistic approach—“one that begins by reducing the threat of fraud when the customer first establishes an account and continues all the way through the moment an online transaction is approved”. The company adds that a multi-layered fraud management approach is must. The goal of airlines should be – monitor each visitor, creating a unique device profile that accrues the device’s history over the Internet. This device information is associated with behavioral pattern exhibited by users. Further this is analyzed and compiled over a period of time, and then the real-time rule-based decision-making based on transactional data, in conjunction with device and behavioral data, for acceptance or rejection of a transaction.
It is also being suggested that behavioral biometrics, which spots patterns in human activities, needs to be looked upon for continuous authentication, and looked beyond the two-factor authentication (2FA) method. 2FA is a ploy used to make it tough for hackers to gain access to a user’s devices/ online accounts. So by just having a password one cannot clear the authentication check. Plan is to protect data from hackers who have stolen a password database or used phishing campaigns to gain users’ passwords. Speech pattern, ID card etc. is the second layer here. But it is being recommended that organizations now need to go for stringent processes that persistently evaluate and check the authenticity of users that are intricate to reproduce. The industry is making progress to precisely validate user identities via their inherent and subtle interactions online – behavior that cannot be imitated by a 3rd party.
So with more and more data analysed, it is harder for hackers to hide their tracks fully to pass off as genuine. By identifying user behaviour (between a genuine customer and a fraudster), fraud rates and chargeback rates will fall when fraudsters are effectively blocked by the fraud system.
· Protecting customers: As we highlighted in an article last week, every piece of customer data and information is under scrutiny. One can put a price tag on stolen account info – Uber, Facebook etc. and air miles. Yahoo, LinkedIn etc. have struggled of late in this arena. When the user account on one airline’s system is breached, hackers will use the exact credentials to take over the same user’s account on the other airlines’ systems as users seldom differentiate their login credentials. Travel e-commerce players should also move fast to be ahead of the curve and protect themselves against account takeovers. Here also there is a need to identify anomalies in real-time, and specialists are assessing behavioral data points to determine if it is the genuine account holder or an imposter.
Hackers/ fraudsters require automation, and rely on botnets to input user credentials. So how to detect a bot? Here Captcha, putting a limit on the volume of traffic that can visit a site during a given timeframe, fingerprinting etc. can help.
The variety and rising speed of fraud phenomena is forcing airlines to move swiftly. Be it for data or new technology, it time’s to look beyond the so-called mass-market or traditional solutions.
Are you bold enough to survive in the brave new world? Assess your preparedness at 11th Airline & Travel Payments Summit (ATPS).
Date: 03 May 2017 - 05 May 2017
Location: Berlin, Germany
For information, click here
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First Published on 5th January, 2017
Every market has its own payment mix, mandates, checkout and risk management considerations. When you think about the scale of global travel, monitoring these multinational regulations is a rigorous process.
Payouts are a complex process that entail one organization making mass payments to different recipients and bank accounts. With payouts, merchants have the opportunity to manage for cost reduction and efficiencies. A merchant can manage the process to be in their best interest versus with a consumer conversion that requires more flexibility.
As being witnessed with payment acceptance, travel companies are embracing an array of cross-border payment options for a local payout experience.
This is a welcome change as cross-border payments have progressed rather slowly over the years, mainly owing to the fact that one has to adhere to stipulated regulations. In the past, one had to deal with issues related to fees, long payout timelines and archaic banking networks. While initiating cross-border bank transfers, travel organizations encountered slow transactions and opaque funds flow. This was because funds had to go through multiple financial institutions to get to the ultimate end recipient. Each stop along this correspondent bank network also comes at high cost, as each financial institution charges a fee for handling the transaction. But now travel brands are increasingly trying to process payouts locally, bringing down the number of financial institutions involved, and ultimately reducing the cost of sending mass payouts.
“Instead of relying solely on standard global payment services like wire transfers, expect 2017 to boast new global payout methods allowing suppliers to simplify cross-currency transfers using local currency funding,” says Mike Carlo, Global Head of Travel Payments, Transpay.
Among other major trends for 2017, Carlo expects cost-management to gain prominence among travel companies planning to rationalize international funds transfers. He further added, “(Also) as the world becomes more interconnected through new technologies, manual invoicing practices will gradually decline across the industry. From the elimination of fax for hotel bookings, to refund payouts for distressed airline passengers, the travel industry is eagerly moving towards more scalable payout solutions to automate settlements.”
Ai’s Ritesh Gupta spoke to Carlo about cross-border transactions. Excerpts:
Ai: How do country-specific licensing requirements or developments such as Brexit and volatility in the Chinese market impact cross-border transactions? How such developments impact cross-border exchange for merchants, PSPs and consumers?
Mike Carlo: While it’s still too early for to know the full impact of Brexit, current market and currency volatilities, as well as potential government imposed sanctions, illustrate the need for merchants to pay close attention to the regulations associated with cross-border payouts.
Each country and financial institution has its own set of regulations, including anti-money laundering (AML) policies, which are frequently updated. When you think about the scale of global travel, monitoring these multinational regulations is a rigorous process and often requires outsourcing to companies with a dedicated staff, tasked with ensuring compliance.
Ai: Every market has its own payment mix, mandates, checkout and risk management considerations. What peculiar developments would you like to share as far as cross-border payments is concerned? Can you talk about this in the context of a market like China?
Mike Carlo: While not as expansive as payment acceptance, there are several complexities to supplier payouts, specifically in the area of cross-border transactions. For example, there are limitations to sending payments to individuals in markets like China, which has tight restrictions on the available pay-in options for the country; preferring instead to rely on its own currency.
From a B2B perspective, there are few truly global options, and merchants are traditionally left with costly electronic funds transfers like SWIFT and bank wires that take a long time to settle. Unlike payment acceptance, payouts are not about conversion but instead focus on cost management, so anyway to localize the payment experience and reduce cost, is critical to streamlining the process.
Ai: Funds sent internationally are subject to a number of regulatory and compliance standards. Can you explain what these standards are all about? In case countries lack requisite standards needed for movement of money, how can it impact business?
Mike Carlo: In the travel sector the main compliance standards focus around “knowing your customer” (KYC) and AML policies. Considering the number of global transactions occurring in travel, the industry wants to ensure it’s not aiding money laundering or supporting terrorism. For example, AML risks can arise when illicit fund transfers are masked as a hotel booking or a ground package purchases to small and unknown suppliers. To avoid this risk, financial institutions and companies like Transpay will check recipients against watch lists like OFAC OSC.
Ai: Talking of an area like airlines issuing refunds on cancelled flights or OTAs need a payout option for making commission payments, how can travel companies handle such routine transactions in an optimal manner?
Mike Carlo: The best practice would be to partner with an organization that manages, long-tail and to challenging markets. Merchants with significant presence in a few markets can oftentimes handle payouts in those markets themselves (opening a local bank account etc). However, the infrastructure and management required to process payouts makes it virtually impossible to scale this for every country.
Ai: Overall, how is the travel industry looking at real-time payouts in the B2B arena?
Mike Carlo: They are not but we’re looking to change that in 2017. If you look at the competitive nature of online selling, travel payments has focused on getting the largest amount of transactions in the door, and have spent the last 10 years fine-tuning the acceptance process. However, for every dollar in, there is a dollar out and very few companies have investigated to cost of sending payouts.
Ai: Can you talk about challenges that arise when applying e-wallets to global mass payouts?
Mike Carlo: The biggest challenge is eWallet acceptance and costs associated with it. Wallets are largely a consumer-based solution, so they are a viable solution for B2C transactions but not when applied to B2B payouts.
Ai: Can you explain how fraud risk on cross-border sales, which tends to be higher than domestic e-commerce transactions, has shaped up?
Mike Carlo: Fraud is much more of an acceptance challenge. Payouts are merchant pushed, so fraud is not part of the equation. The bigger issues in payouts center on AML and KYC risk.
Ai is set to conduct the 11th Airline & Travel Payments Summit (ATPS) this year.
Date: 3 May - 5 May 2017
Location: Berlin, Germany
For more info, click here
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First Published on 4th November, 2016
An omni-channel approach, with consistency across all channels, is the most efficient, most profitable distribution strategy for airlines. But airlines have to make diligent moves to attain such level of proficiency.
Data-driven merchandising and API-led distribution are laying strong foundation for a carrier’s retailing strategy, optimizing performance of both direct and indirect channels.
Not only are airlines re-looking at their whole IT infrastructure, but they are also beginning to recognize the significance of a business intelligence layer that can pave the way to regaining control of the offer being made via the indirect channel. Essentially this means airlines need to delve into search and booking data contained in XML message streams. By doing so, one can understand customer groupings in terms of customer type, degree of engagement, revenue contribution and the ancillary upselling-purchasing opportunities, says Jonathan Boffey, SVP for Business Development, Triometric.
Ai’s Ritesh Gupta spoke to Boffey about XML analytics. Boffey, who was in Toronto last week for Ai’s MegaEvent16, asserted that airlines can capitalise on shopping data from intermediaries, and reap benefits in several ways, be it for their IT operations, availability of inventory, pricing strategy or product relevance. Excerpts from the interview:
Analytics is paving way for effective retailing. Where do airlines need to improve in order to be in control?
Jonathan Boffey: Airlines, like any e-commerce brand, are earnestly trying to garner differentiated competitive advantage in today’s era of personalised retailing.
Customer insight is of paramount importance as it offers the ability to engage with context. A prospective traveller might search directly on airline.com, complete a transaction within Google’s domain, an OTA platform etc. The challenge is getting the right offer to the traveller at the right time and through the channel they prefer. Consistency and personalisation is key.
So it is vital for airlines to know who is looking for what, whether they are buying or not and if buying what they are buying. But if this is only restricted to a direct channel, then it isn’t an ideal scenario in the omni-channel shopping environment. So as much as airlines today can minutely scrutinize every piece of activity on their digital assets, they need to strengthen their analytics for indirect channels, too. Airlines have control and visibility when we talk of direct sales channels. But this control and visibility also needs to extend to indirect sales.
And with NDC, if a carrier isn’t analysing then it’s a missed opportunity, right?
Jonathan Boffey: Yes.
Without NDC, airlines have no visibility into search traffic and therefore into how they are performing nor can they sell the same range of value ancillaries at the same time as the seat sale. NDC is all about bringing control back to airlines in terms of offers they are able to make via this channel. Therefore, this channel’s performance should be able to be analysed and scrutinised with an analytical lens in the same way as the direct channel.
So what needs to be done to sharpen overall merchandising strategy?
Jonathan Boffey: Travel brands need to engage customers using decisions formulated from customer contact and transaction data.
Increasingly airlines are counting on XML to deliver content rich offers to OTAs, aggregators etc. What needs to be added to this new way of merchandising is a business intelligence layer. Essentially this means airlines need to delve into search and booking data featuring in XML message streams exchanged between airline systems and travel agencies. The key is to act on this in near real-time.
By sorting out XML search and reply data streams and measuring them against key performance indicators, valuable insight can be derived to help shape merchandising /offer decisions.
One of the biggest assets that airlines’ today possess is the offer they make. Analysing data flow can shape up the offers they intend to make, and this would in turn differentiate their proposition in the indirect environment.
We are equipped to capture the data, offer storage and processing capabilities, plus a web-based interface and reports and charts. All this can be scaled up, too. As a BI and performance monitoring platform, the Triometric Analyzer can be deployed as part of an organization’s data centre capabilities or via a preferred merchandising and distribution platform provider.
What does shopping data feature?
Jonathan Boffey: The data that is coming in via request from the indirect channel shares what is being demanded. Stored in XML format, it encapsulates the actual product search, the traveller or party, the date of travel and other attributes. And when an airline responds, it entails details of features, price, availability and ultimately booking confirmation. Now the analytics platform assesses each request-response pairing, applies NDC specific rules to pull out business relevant data as KPIs and stores them in a database. This way the gist of the transactions are captured and the search patterns are analysed. What effectively surfaces is trends by source - where requests are coming from tends to influence the nature of the enquiry such as destination, check-in date, itinerary, leisure/family etc. It becomes easy to generate reports showing for example conversion rates by agent and/or by destination by check-in date or indeed any phase in the plan-book-travel journey. Ultimately the data available for analysis and reporting is dependent upon the data content of the original XML – which fortunately is pretty good.
How can airlines build on their resources with such insights?
Jonathan Boffey: The key to unlocking the potential of today is identifying the quick wins across the business to ensure incremental and impactful changes, as well as keeping an open mind about what is possible in the future. Internal alignment is necessary, and organizations need to be nimble when it comes to leveraging insights derived from XML shopping data.
We believe airline business intelligence is all about breaking down those silos and barriers – and in key areas we believe XML analysis can play a critical part. Most have data practices across areas like revenue management, marketing, network planning and inventory management. However, it is often the case that these applications are not fully integrated into other parts of the business and are often poor at sharing data. For example, when it comes to things such as ancillary sales and customer data, this is often not in the hands of the revenue managers in time to help influence their pricing decisions.
Airlines should be in control of their business on various counts:
- The best performing routes
- Best customer groups and what do they look like/ their preferences
- Most relevant ancillary cross-sell or up-sell by customer group/ route
- What’s the booking curve?
- Identify customer groups and/or products fuelling growth, and ones on decline
Other than understanding what’s being requested and evaluating which customers are most valuable, airlines can plan several initiatives such as market specific promotion, and when to start or stop promotions; continuously refine flight schedules etc.
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First published on 4th October, 2016
How can airlines bring about change – being in control of their IT, offers they make, content they show, distribution etc.? Is the current landscape that features tightly integrated processes too rigid to crack easily? Ai’s Ritesh Gupta spoke to PASS Consulting’s Strauss about the same.
Airlines are keenly looking at emerging options, be it for their IT infrastructure or indirect distribution. Two aspects clearly stand out as of today – the pace of change and the quest of being in control. As witnessed, there are new arrangements that are emerging. For instance, Siemens, together with Lufthansa, started using a bespoke Direct Connect Solution for Lufthansa Group in August. The new arrangement uses Amadeus Altea and Amadeus- owned Cytric OBT, with GDS being bypassed.
Considering that Amadeus and Sabre are deeply entrenched in this space, what can one expect in the future?
In order to know more, Ai’s Ritesh Gupta interacted with Michael Strauss CEO PASS Consulting and Head of PASS Business Unit Travel. Excerpts:
Ai: Where do airlines, cumulatively as an industry, stand today in their quest of being in control of their inventory, distribution and sales?
Michael Strauss: Nowhere! With the exception of a few airlines, most of them are at the mercy of their PSS or CRS provider. With a couple of mergers (American Airlines or AA and US Airways or Continental and United Airlines) we have seen what an undertaking it is to change the inventory provider (or even merge them) – a multi-year project costing a fortune. So inventory management systems are definitely in the driver seat.
Airlines are smart if they at least put sales and distribution in other baskets – which most of them do with their own website or direct connects with large sales organizations (e.g. Priceline) or corporations (Siemens). But considering dependencies, we were able to witness how hard it is to change the landscape: AA in my eyes totally failed with their initiative a few years ago and only a few island solutions remain, and Lufthansa’s success remains to be seen - and it was only possible for them to get this far due to their domestic power. In sales sector business is underestimated – the TMCs maybe do not issue the majority of tickets, but bring in the most revenue. And this is a tightly integrated sector where things collapse if you try to change a screw. I believe TMCs have put too many eggs in GDS baskets and with the constellation that most inventory management systems are owned by GDSs this makes for a dangerous combination: GDSs control the whole value creation chain (image below) not just with their own sales organizations, but also with their influence on TMCs.
So all this friction makes sense to break some rules, but to use a hammer like Lufthansa did might not work for everybody.
Ai: Talking of direct connect strategy, how successful airlines are in their endeavour of being in control and also offering corporate travellers a service tailored to their individual needs?
Michael Strauss: It is lacking, there are so many tightly integrated processes that I’m not surprised. I still believe the strategy is not to change it all, but rather to make organizations think that they need to reinvent themselves. Technology may certainly help with providing individual needs, but even for us at PASS - we have all GDS integrations and a Lufthansa integration - it wouldn’t make sense to do the same for 480 airlines. So while technology can enable certain disruption to make people think it cannot change the whole landscape and all these players are in there for a reason – it is just that too many players are trying to prevent the status quo and block innovation. But as long as the majority of all the inventory is controlled by Amadeus Altea or SabreSonic there will only be change to a certain degree. It would have been interesting if Google used ITA’s res initiative to provide an alternative res system – but then you would put yourself into Google’s hands which isn’t much better. Different story when it was still ITA software.
Ai: 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 the airline. What do you make of the situation?
Michael Strauss: Personally I’m annoyed by this topic – and also considering it a ‘lost opportunity’ which I believe means lost revenue – there is not lost revenue. People are ready to pay an amount for their trip and if it is too much and there is no alternative they don’t go. What changed? Checked bags cost extra – in the past it was included. It was considered unbundling, but if it was unbundling, the ticket price should have dropped and since so many travellers started to pack lighter and don’t check bags the airlines should have actually lost revenue – but they didn’t. So checked bags is nothing else than a hidden price increase. And so is seat assignment, etc.
But this is just beside the fact. What I’m really annoyed at is that we are keeping ourselves so busy with technology and discussion on which channel gets what and so on, and no one looks at the user experience at all. The shopping and booking process is more complicated than it ever was. No matter where I book I always get a price which isn’t tailored for me - no system gets smarter with my preferences and search habits. I cannot really shop with my preferences. Don’t even bother showing me results on a middle seat, a connection at an airport which I don’t like, an angled business class seat, fares with outrageous rebooking fees, codeshare flights which don’t even allow me to book a seat, fares which do not satisfy my mileage expectation, etc. - all we can search today is basic price and/or schedule - and this is just made more complicated for the user as now he has to pay extra for a seat, for luggage, etc. on one airline which he doesn’t due to his status, policy or other things on another one – this is not even possible within the alliances. There is so much more we could do if we all just stopped the fighting and start innovating. As per my chatbot blog: I want a fair offer at a fair price for what I need including my preferences and this shouldn’t come in 20 steps, it should be right at your fingertips. (In his post on chatbot, Strauss refers to utility of a chatbot. One could possibly request for a change in a travel plan, and how right from knowing the PNR to details of the whole itinerary, chatbots could possibly help with not only mundane work but also proactive decision-making say intelligence related to destination you are going to).
Ai: Airlines need to work on a standardized API that would be consumed by all channels – web site, kiosk, GDSs, mobile, etc. Even as airlines are trying to be in control of distribution, even IATA points out that API XML connectivity of certain airlines is being done in a proprietary way. Where do airlines need to improve to ensure all stakeholders in the travel distribution chain benefit as well?
Michael Strauss: Indeed the problem is one standard. We have gone through this in the year 2000 when we were part of the Open Travel Alliance and were in the process of developing a Multi-GDS interface. The problem with standardization organizations is that there are numerous interests which end up in endless discussion without any result. In 2000, we had deadlines and needed to deliver. We couldn’t wait any longer until everybody was in agreement that why we just developed our own schema back then and left OTA aside. Later our schema somehow became the standard – at least for air. A decade later our schema was introduced by IATA as NDC. But now the same problem happens again: everybody wants to add his own preference and all of a sudden an air shopping message becomes so huge, that it cannot be easily handled anymore. Thus developer refrain from using it.
In order to become successful as an industry compromises are important – even if it means that not all of your preferences are reflected. You also need to be fast if a demand for a certain feature is there to get it standardized. On the other hand something which was developed need to remain stable and unchanged for a good while. We haven’t changed our schema in 5 years until recently when we introduced ancillary and our clients love us for that because they don’t have to change anything on their end all the time. Of course, we have still made progress and introduced new optional fields/ features but nothing that required change for our regular clients. In less time IATA introduced NDC and overhauled it completely several times. This makes it very complicated for people to trust that their investment is safe and has future if you constantly have to change and adapt.
Some airlines can’t wait or don’t want to wait and they move ahead. It is hard enough for them to get their internal folks behind an idea, so they just skip the idea of a combined industry approach. It is not the best, but it is the nature of standardization. Mobile GSM probably was one of the single most successful standards ever created by mankind, but it was very late adapted in the US. So there is not ideal solution here, bottom line is you need to work with what is out there and see if a compromise is possible. Once a standard or pseudo-standard has been established, you need to remain it constant for a significant amount of time (target 5 years). We are not in consumer electronics here, we are talking about big, heavy systems that need adjustments. Not to forget ever rising security demands which add another dimension of complexity.
Ai: In the context of recent developments such as Siemens and Volkswagen now deciding to book flights directly via LHG airlines’ platform, how the distribution status quo is being challenged?
Michael Strauss: It is not for everybody and it appears it wasn’t easy and took over a year to complete. It was politically strange that Amadeus Cytric bypasses Amadeus GDS to hook into Amadeus Altea. TMC involvement (created booking can be accessed by the TMC) turned out to be a huge challenge – so yes, there is some flexibility there, but in the long run I still believe at some point GDSs will catch up with more flexibility, new heads will revoke existing decisions and enter into new contracts and we will be back to the old environment just with a little more airline flexibility.
Ai: How are TMCs getting affected with the decision to look beyond GDS distribution?
Michael Strauss: TMCs definitely have their values and are much needed but with their dedication to GDS mainly due to the overwrites coming in from GDSs this is dangerous game that if airlines decide to bypass the chain as they are unable to change the rules with any of the player, TMCs might be degraded to value added services (Security, complicated bookings, remote areas, etc.) but much less the brick and mortar stuff which in the past have paid the bills. See next question about that TMCs need to reinvent themselves.
Ai: Going forward, how do you expect initiatives from airlines to change the world of corporate travel management?
Michael Strauss: I don’t see huge change, eventually all will stay the same – once the airlines are happy to have a little more influence to distribution and be able to position their product correctly. There will probably be some island direct connects but only in isolated areas - such as domestic Germany between huge players there. Even in Germany the prosperity of Germany is not built on Siemens, Lufthansa or Volkswagen, it is SME and no solution is anywhere near for SME. It is also interesting to note that LH only transports 4% passengers of compared to Deutsche Bahn. It is a good threat the airlines have against the oligopoly of the GDSs and for that reason they will keep this initiative alive, but in the end there will be arrangements.
Way more interesting to me is what TMCs will do, because they should really reinvent themselves and be more than just a call center using technology from everybody else. Otherwise I can see a shift that corporations will bring the technology and expertise inhouse and drastically reduce their agents. I see this happening with one of our financial clients. Don’t forget that soon there will be pretty smart AI agents.
Where is industry headed with developments such as NDC? Hear from senior industry executives at the upcoming 7th Mega Event Worldwide 2016, The Event for Loyalty, Ancillary & Merchandising & Co-Brands, to be held in Toronto, Canada. (25 -26 October, 2016).
Twitter hashtag: #MegaEvent16
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First published on 28th September, 2016
A coalition program of organisations with differing purchase cycles, margins and customer emotional attachment can be very powerful. Importantly, such model appeals to infrequent travellers as well, writes Ai’s Ritesh Gupta
Travel isn’t a frequent buy. So if loyalty is largely equated with how much one spends, then should the “frequency” factor limit the prowess of an airline brand to become a part of a consumer’s lifestyle?
As we have witnessed, be it for airlines or even an iconic brand like Starbucks, companies are rewarding best customers based on monetary value spend - meaning that customers who spend more – should be rewarded more than customers who spend less. Now in case of an airline, if one travel twice in a year vis-à-vis a traveller who travels probably 5 times a month, then shouldn’t both be targeted? The frequency of flying or even heftier spend shouldn’t be a deterrent in having a constant dialogue with the so-called infrequent traveller. Simply because we are living in the mobile era, where we have wallets, apps etc. So an airline brand needs to be a part of consumer’s digital lifestyle. A consumer could be spending on grocery or buying seat on an aircraft, but they are getting used to accumulating points for every penny.
So when we talk of engagement and a loyalty program that rewards you for everyday purchases, it boils down to how proficient are airlines at being part of their members’ daily activities say social interactions, tracking behavior with partners (retail, petrol, finance etc.)? We also see mobile shopping wallets being opened several times in a day. There is clearly an avenue for travel brands to refine their own digital assets or even be a part of 3rd party ecosystem, which could be a mix of content, information, media, shopping, travel, finance etc. The idea is to be a part of consumer’s lifestyle in a seamless manner.
Everyday purchases points earning opens up the utility of a loyalty program to the infrequent traveller, says Nik Laming, General Manager - Loyalty at Cebu Air Pacific Air.
“Expanding the potential and the velocity of earning means more travellers can participate and get a real benefit from a program. Most retail and financial card earn options are already spend based so are a natural fit with spend based airline points,” he says.
The power of coalition program
So how to break the shackles of travel not being a regular buy and rather becoming a consumer’s lifestyle?
A coalition program of organisations with differing purchase cycles, margins and customer emotional attachment can be very powerful, asserts Laming.
Laming explained by referring to peculiar behavior associated with different product categories/ sectors. “Supermarkets see customers often and have large spends but skinny margins. Mobile phone networks see handset transactions but rarely know the customer behind the number. Airlines have very high emotional attachment for people but a small share of spend and infrequent transactions,” said Laming, as he also spoke about insurance companies and credit credit companies in the same vein.“Bringing all these organisations together into a coalition program enables the different business to fill in the gaps.” According to him, the key lies in regular, positive communication with identified and profiled customers emotionally attached to the program, delivering attractive and relatively high value rewards. Every participant benefits as the focus is on solving each organisation’s marketing shortfalls.
“Airlines have the most compelling reward and as such tend to be a good leader for such programs,” highlighted Laming.
Lure of flying for free
Travel, as an infrequent category, has its share of lure, too, as there is aspirational value associated with flying.
“Flights are the most attractive and highly perceived value rewards,” he says.
“Programs that offer flight rewards pull harder. Seats are perishable and subject to distress giving opportunities to deliver the most desirable reward at marginal true cost,” says Laming.
The option to be rewarded from everyday purchases has opened up the realms of the FFP to the average or infrequent traveller.
“Having a network of partners funding the program helps the airline, as program owner, to offset costs and even generate revenues. This dynamic has enabled LCC’s to offer rewards as part of their proposition and has resulted in a new breed of loyalty program,” added Laming.
· Targeting the infrequent traveller: The reason a coalition model appeals to infrequent travellers is simple - share of wallet. A person will spend a small proportion of their disposable income on air travel in a year. Adding credit card, supermarket, department store, petrol and other retailers massively expands the share of disposable income going through the program. With higher total spend within the program ecosystem more points are earned and so even the most infrequent traveller can attain those reward flights.
· Selecting partners: Selecting and nurturing the right partnership is critical. Bank and financial card partners have always awarded miles for everyday purchases. The extension of the concept to supermarkets and other retailers is a natural one for those programs aiming to appeal to a broader audience. “But it is not for all as some programs are designed to retain and reward only frequent fliers. In this model there is less need for more partners as the vast majority of points will come from flying and natural partners to accelerate earn are the credit cards which are prevalent amongst this audience,” said Laming.
· Capitalizing on data: Another critical aspect of a coalition program is to ensure that airlines go through all aspects of data points of the customer journey. As much as airlines can capture the flying data, there are still going to be elements of daily purchases such as co-brand cards/ financial partners/ petrol partners/online retailers partners that loyalty specialists need to capture and able to capitalize on for monetization and superlative member experience.
Hear from senior industry executives at the upcoming 7th Mega Event Worldwide 2016, The Event for Loyalty, Ancillary & Merchandising & Co-Brands, to be held in Toronto, Canada. (25 -26 October, 2016).
Twitter hashtag: #MegaEvent16
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First published on September 2, 2016
Airlines aren’t analyzing their chargeback data sufficiently or efficiently. There is a need to make the most of multi-layer fraud management.
Clean fraud, friendly fraud, fast fraud, criminal fraud, merchant fraud…the list seems to be an endless one.
Airlines can’t ignore the malice of fraud, and so much so that chargeback management needs a continuous scrutiny. There is a need to analyse data and monitor chargeback sources to identify trends and triggers; recover losses whenever possible.
It is important for airlines to understand whether they are analysing their chargebacks enough.
“Chargebacks indicate a mistake has taken place somewhere—whether that is a fraud filter that didn’t detect criminal activity, a policy that is unnecessarily restrictive, or a consumer acted unethically,” says Chargebacks911’s COO, Monica Eaton-Cardone.
Monica says reviewing each chargeback that makes it through your defenses is hugely beneficial. These transaction disputes come with a wealth of information that can greatly enhance your future management efforts. “However, identifying that useful information is challenging. Sifting through all the available data to determine which is pertinent and actionable is time consuming. And, if merchants base their decisioning on insufficient or inaccurate data, they’ll do more harm than good.”
“Bottom line: Airlines aren’t analyzing their chargeback data sufficiently or efficiently. However, simply mandating more analysis isn’t the answer. Professional insight is needed to improve the efficacy and streamline resources,” she asserted.
And if this isn’t addressed properly, problems only compound. For instance, accounting for chargebacks is dreadful. If a chargeback has been filed, the damage to your accounting has already been done. Also, the process is a prolonged one. As Chargeback911 highlights, each chargeback comes with a fee. That means you’ll have to document not one, but two transactions in your accounting software!
Ai’s Ritesh Gupta recently interacted with Monica about related issues. Excerpts:
Ai: The commerce industry has seen dramatic changes in how payments are handled. Can you explain how the problem of chargebacks has evolved?
Monica Eaton-Cardone: The groundwork for chargebacks was first laid with the U.S’s Truth in Lending Act of 1968—long before the invention of the Internet. The federal government began to provide consumer protection against fraud liability. Chargebacks were a brick-and-mortar protection mechanism, and back then, there were only two sources of chargebacks—criminal fraud and merchant error. Cardholders were incentivized to use payment cards because they wouldn’t be liable if a criminal made purchases with a counterfeit card or the merchant accidentally processed a transaction twice. Merchants were rightfully held responsible for providing a safe and secure purchasing experience—until the Internet came along.
Seemingly overnight, the chargeback system became archaic, unable to handle modern payment processes. All of a sudden, there was a new and illegitimate way to use chargebacks. Consumers learned about the loopholes and identified ways to cheat the system.
Despite this new consumer behavior, merchants are—like they always have been—the bearer of all responsibility. What’s worse is more and more policies and technologies are sought out to protect the cardholder while less and less is being done to alleviate merchant’s friendly fraud liability.
Ai: What do you recommend when it comes to understanding what is causing chargebacks? How can you airlines become smarter and learn from their mistakes?
Monica Eaton-Cardone: It’s only possible to learn from our mistakes if we can identify mistakes for what they are. An inability to detect issues can limit the effectiveness of an in-house team. An outside perspective, however, is often more objective and filled with constructive criticism that will produce greater results. (Points in favour of in-house - can be cost-efficient since there isn’t an incremental cost per transaction, in-house teams come to recognize fraud and chargeback patterns and can adjust pre-emptively. For example, fraud associated with Black Friday is predictable; product knowledge etc.).
Airlines need to carefully analyze the effectiveness of their in-house teams and be open to the idea that outsourcing might have greater return on investment.
Fraud threats are constantly changing. As fraud detection technology evolves, criminals alter their tactics—what worked for them yesterday might not work today. When it comes to fraud and chargeback management, agility is one of the most valuable characteristics.
Unfortunately, most in-house teams are unable to be as dynamic as they’d like to be. In-house experts might know every nuance of their own business and even be aware of trends in their industry; however, a chargeback expert is aware of trends in all industries and how those tactics are affecting payment processing across the board.
Ai: Can you talk about the latest developments in the arena of fraud filter technology? How has it helped in dealing with issues and where does it tend to fall short?
Monica Eaton-Cardone: Fraud filter technology has made great strides in recent years. Machine learning, as opposed to static rule sets, helps decrease unauthorized transactions while also reducing the risk of false positives.
However, as Bill Gates once said, “automation applied to an efficient operation will magnify the efficiency…automation applied to an inefficient operation will magnify the inefficiency.”
Merchants are tempted to trust fraud filters implicitly and take their results at face value. While technology can help streamline efficiencies, they can’t fully replace human analysis. Manual reviews still play an integral part in effective fraud detection and chargeback prevention.
Ai: Chargebacks can also result from merchant fraud and criminal fraud. Going forward, how do airlines need to gear up for all sorts of fraud that can result in chargebacks?
Monica Eaton-Cardone: A phrase that is quite common throughout the industry right now is “multi-layer fraud management,” an idea that no single solution or strategy is sufficient to detect all fraud (rather this approach combines multiple complimentary solutions). Airlines can’t rely on just the basic tools, nor should they use every product on the market; neither strategy will effectively minimize risk exposure. For example, any merchant who uses Address Verification Service along with card security codes or 3D Secure is technically using multiple solutions to prevent fraud. (Other options include card security codes, geo-location, device authentication, proxy piercing, biometrics etc.)
Airlines need a carefully constructed fraud mitigation plan that incorporates complimentary tools for comprehensive protection. On the surface, this may seem like an elementary idea, implementation of the concept is quite complex. Airlines need to carefully consider a plan that will address their individual threats.
(Airlines also constantly need to understand what sort of fraud is taking place, especially with a number of new ways in which a transaction can be done. For instance, in case of clean fraud, a fraudster manages to impersonate genuine cardholders and tend to commit fraud without raising red flags!).
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First Published on 27th June, 2016-06-24
Ai Editorial: Sharing economy platforms can be global from their very outset so they need to create global identity verification processes, writes Ai’s Ritesh Gupta
What’s holding back online peer-to-peer transactions?
HooYu’s recent Trust in the Digital Age Survey found that 61% of people will refuse to or are unlikely to trust in somebody they don’t know until they are confident in that person’s identity.
Before we look specifically at the travel sector and related sharing economy platforms, it needs to be understood that the trust factor also depends upon the nature of the transaction.
According to HooYu’s survey, not all sharing activities require the same level of trust in the other participant’s identity.
The survey, which featured over 2,000 people in the UK and the US, indicated that sharing activity that required the most identity trust were renting personal items to other people (69% require proof of identity) or renting a room in somebody’s house (68% require proof of identity).
Trust and booking funnel
Talking of online peer-to-peer transactions such as buying something from an online marketplace or renting a holiday property, it needs to be noted that this segment has grown exponentially in the last five years. eBay, for example, has over 158 million active buyers and 800 million listings worldwide. To date, Airbnb has facilitated 10 million nights of accommodation. And BlaBlaCar motors 40 million passengers and drivers a year. “There has been huge growth but it has to date been delivered by the early adopters and trust and confidence issues are holding back mainstream expansion of the sharing economy,” said David Pope, marketing director at HooYu.
As a specialist in this arena, HooYu helps in building trust and security. As an ID checking service, it uses online and social media identity data, ID documents and facial biometric checks to prove that a person is who they say they are.
So how should operators that facilitate peer-to-peer transactions look at increasing the credibility of their platforms during the course of the booking?
Pope says the first step that sharing economy platforms need to take is to get rid of their caveat emptor approach to the identity of their users. Statements such as “We cannot and do not confirm each member’s identity” or “User verification on the Internet is difficult” are frequently buried in the T&Cs on sharing economy sites.
“As a traveller using peer-to-peer sites if I trust the platform I am likely to trust the person on the other end the transaction,” says Pope. “Our research found that four times as many people would be likely to use a sharing economy platform is they received an in depth identity confirmation report on the person they are transacting with. In other words, knowing the identity of the other party in the transaction is key to credibility of the platform.”
Fraud in online peer-to-peer transactions
It’s an inconvenient truth that fraudsters find ways to exploit any economic system, highlighted Pope. He referred to following:
· Some car sharing sites have had to shut down because they have not adequately checked the identities of customers using their car fleet and fraudsters using fake identities have disappeared with cars.
· In the ride sharing sector, fraudsters use ride sharing platforms to launder money. A fraudster creates two accounts, one using compromised identity and card details and another with a fake identity that they control. The then pay for a rideshare (that never actually took place) and via the rideshare platform move money from the compromised card to another financial instrument that they control.
· In the vacation rentals sector, stories abound of fake property owners. They post a property for rent and in their profile on the marketplace add text to say to email them if they don’t respond quickly via the platform’s own messaging system. The unwitting holiday maker who wants to bag that property at that low advertised price follows-up by email and at that point the fraudster has taken the holiday maker Out-Of-Bounds of the safety of the platform. Then they encourage the holiday maker to pay via bank transfer instead of the platform’s payment mechanism. Then the holiday maker has paid for a non-existent booking on that holiday rentals platform.
5 ways to increase trust and confidence in vacation rentals sites
Pope recommends five ways:
· Offer a well-lit marketplace by verifying your sharers, it will return dividends in terms of keeping fraud out and attracting new customers to register and transact.
· Don’t just use social sign-in as your verification mechanism. Social sign-in just identifies the customer, it doesn’t verify the customer. Platforms need to examine and cross reference the data that they are receiving. HooYu’s approach to identity uses multiple sources of identity to confirm and corroborate an identity.
· Lose the caveat emptor approach, it doesn’t engender trust & confidence
· Enable your customers to build confidence & trust in the people they wish to transact with. HooYu can be offered as a peer-to-peer identity confirmation system
· Go beyond identity. Identity is just one component of trust. If somebody is using their own identity, then you can more safely assume that they will evidence good behaviours. However, competence and intention are also parts of trust and confidence which must be built through mechanisms such as ratings and reviews.
Sharing economy platforms can be global from their very outset so they need to create global identity verification processes.
Checking identity databases such as voters’ rolls or credit reference agency data will only work in a handful of countries. Instead platforms need to look at universal identity attributes.
Also, a platform needs to understand its demographics’ attitudes to trust and confidence in the context of the peer-to-peer transaction that they are offering.
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First Published on 28th April 2016
Making innovation and digitalisation an integral part of any corporate’ DNA is a major exercise. Ai’s Ritesh Gupta interacts with Bornemann to know how Lufthansa is setting a prime example of being customer-centric.
A minor glitch or an unpleasant moment at the airport can spoil a business trip or a holiday with a family. Travellers intend to be in control, to gain easy access to information as they embark on a journey.
Let me share a couple of examples.
Last week I flew from Barcelona to New Delhi via Amsterdam. My flight was booked by my office in the U. S via Delta. So I was forwarded a confirmatory email from Delta. On the day of travel, I also received an email from KLM to check-in. Apparently, the first leg of my travel (Barcelona-Amsterdam) was operated by Transavia. I tried to check-in, but I couldn’t. Also, the KLM site didn’t facilitate my check-in for Amsterdam-New Delhi flight. The point here is if a traveller is clicking on given links, originating from the email, then the task needs to be completed.
Also, as I arrived at the Amsterdam Schiphol Airport, the screen didn’t show the gate for the next flight initially. I took few steps and asked the KLM staff available at a particular gate just where I was looking at the screen. She told me “F3”. This gave me ample time to relax, even as the screen didn’t flash the gate for another half-hour.
So there are many areas of flying, right from dreaming to planning to booking to physically travelling to sharing the journey, where airlines are looking at facilitating a personalised, simplified experience.
I say simplified as at times gaining access to mundane information isn’t easy. As for personalised, airlines are digging deeper to ascertain the profile, travelling pattern etc. of a traveller to drift away from generalised information.
Making it simple, personalised
Singapore-based Frank Bornemann, Head of Marketing, Loyalty Programs and Provider Management APAC, Lufthansa German Airlines explains how the group is focusing on doing the same.
“Passengers tend to be anxious…at times nervous (as we physically travel or even start our journey). So right piece of communication in a timely manner (considering the context, location) can help,” says Bornemann. Here a mobile app can be of immense help, but even then the lack of easy access to free Wi-Fi at certain airports can hinder the plan. In order to combat this, the Lufthansa group is banking on the beacon technology. This way Lufthansa can share details about boarding, departure time and gate number via smartphones. Also, to display information on the luggage carousel number for arriving passengers and expected waiting time. In fact, the group is going beyond routine flow and looking at refining the experience as it strives to drive digitalization with diligence.
Bornemann referred to the testing of services at the Munich airport when passengers are within a certain proximity of a location, for instance, an offer for entry into the Business Lounge for €25. Bornemann says this message would be delivered to a flyer present in the vicinity of a lounge. It would be sent if the passenger doesn’t have automatic lounge access through customer status or booking class.
Another utility-oriented feature is electronic baggage receipt on the app. So one doesn’t need to roam around for a screen or check among 10 or so carousel for luggage. The service results in knowing the baggage carousel. This service is currently available at several airports in Germany, and Milan, with plans to expand in the future.
Setting up right processes
The organization is currently in the process of rolling out a slew of digital initiatives, with focus on being precise with what to offer to customers, matching the need/ intent, the location etc.
It needs to be highlighted the Lufthansa group introduced seven fields of action or its “7 to 1 – Our Way Forward” strategic plan in 2014. Two of the initiatives are - innovation and digitalisation, and customer centricity and quality focus. The group is digitizing the entire air travel chain. A major initiative is the SMILE program, taking a closer look at processes and products more intensively from a customer perspective.
The industry is gearing up to stitch up data across channels and combine fragments to create a single identity of a traveller. Today there is talk of probabilistic and deterministic methods of identifying a digital user, but it’s a work in progress. Of course, airlines are assessing their own sources of data and systems to capitalize on the prowess of the company-owned digital assets. Lufthansa, for example, is evaluating how to make the most of its 80 databases available within the organization. “Many of our current database systems do not yet “talk to each other” because they were commissioned a long time ago, based on previously relevant needs,” shared Bornemann. Such first party data obviously can lay a strong foundation for personalisation, but it’s not as straightforward as it seems considering the fact that one has to respect the data protection laws, mentioned Bornemann. As per the German laws, there could be several different levels of permission that need to be approved by users before one can act on a certain set of data to send them other offers or promotions.
Bornemann indicated that the organization has aligned its operations over the years to gain a strong foothold in the arena of customer centricity. “Whilst the relevant data is available, we have been working in departmental silos for decades and as a result created systems and databases that are not yet talking to each other. We at LHG have created a central project team on a very high level addressing exactly these issues and making this our priority to underline our brand core “enriching travel experience”,” he said.
Being savvy with devices, tech and content
A lot is happening in the world of ad tech, analytics, ecommerce, mobile technology etc.
Bornemann finds all of this “very exciting”, and adds “through digitalization it is possible to address the needs of travellers better than ever”.
Today travel marketers are working out ways to make the most of available content and make it an integral part of an organization.
For instance, a European carrier is working on plans to set up a virtual content store to personalize information and offers via various in-house communication channels like apps, newsletters, app pop-ups, pre-check-in messages etc. And this will be delivered in the most relevant format. “It is of course very challenging to merge all data points, apply the right algorithms and have the right text and visual components come together to create a seamless flow of information to our customers,” shared an executive.
For its part, Lufthansa group is also making steady progress on similar projects, but the team isn’t in a position to comment yet.
Areas of improvement
It is not tough to analyze gaps where airlines tend to struggle when we think from the perspective of a traveller. So which areas of flying tend to disappoint in terms of loyalty – right from planning to travelling?
Bornemann the industry at large is falling short when it comes to “personalisation to individual needs”. He added, “Airlines have so much data available to address individual needs, but yet they usually blast offers to all customers in newsletters, apps, social media etc.”
It is still challenging for airlines to act on real-time operational data to improve upon their FFPs. “At the moment it is very challenging but in the future we are going to address exactly this point, which will help us to differentiate us from competitors and enrich our customers journey, which should result is loyalty beyond the classical FFPs,” acknowledged Bornemann.
Sometimes it is easy to get swayed with what technology or a new concept can do for the organization. Being customer-centric is fine, but it can also result in “information overkill,” cautioned Bornemann. “It is very easy to blast everything to everybody, but respect for our customers time is crucial to break through the communication clutter and build trust.”
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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.
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.”
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