Category: Airline Retailing

Customer centricity in aviation

Customer centricity in aviation

What does that mean to me?

I keep reflecting on the concept of customer centricity in the context of airline passengers. For a long time, I only saw it from the perspective of an airline loyalty programme, because having a particular status meant I got extra benefits to make my trip more comfortable (sometimes). Over the years, however, I have come to realise that this has little to do with the concept of customer centricity, but rather is used as a vehicle to bind a customer to one particular airline (or group of airlines). It is a one-way street that lures the customer in with the promise of benefits and privileges that are actually becoming less and less valuable as airlines reduce the level of service in order to reduce costs. Indeed, I can often get most of the common airline loyalty benefits with a branded credit card.

As an airline, when it comes to judging the loyalty of a customer, there are many factors that need to be considered beyond the simple mechanism of miles or segments flown. Am I really only judged as “important” to an airline if I flew a lot with them within a fixed timeframe? This is a potentially flawed assessment, particularly considering that, regardless of how much I paid for those flights, I might not actually have paid for them myself if I travel a lot for business. In this case, the “customer” may be the company paying for the travel, however “customer centricity” still focuses on the individual travelling. How should lifetime value be measured and assigned between the customer and the traveller when these are not identical? What about my changing needs and behaviours as a traveller, particularly as airlines evolve their product offerings? The airfare for a journey may be optimised to generate the highest possible revenue, but total spend is often not considered. Ancillary products such as more bags and seats typically have higher margins, however loyalty is often only rewarded on the fare paid or distance flown. The view of measuring loyalty over an arbitrary time period may not be the right way for all customer segments. If I only travel a lot every other year, is my total customer lifetime value not worth anything? By stripping benefits through the loss of a status level, airlines run the risk that customers may be less inclined to remain loyal to the airline, rather than recognising that loyalty spans more than a period of 12 months and providing incentives to keep wallet share even when customers are not flying.

My reasons for travelling are usually different for each journey – even if there are similarities. However, the service I receive (as a loyal customer) is almost always the same. While airlines cannot read my mind, does it always have to be the same service I receive when my needs are constantly changing? There may be clues in my travel patterns and behaviour that can be used to give direction when trying to become more customer centric. However, picking up on these subtle hints can be difficult and actioning them even more so. Maybe, as a result of my status, I get to take a second bag on a short business trip. While I may appreciate the extra luggage if I’m travelling long-haul for two weeks, I don’t need two heavy bags when traveling alone and using public transport upon arrival at my destination.

Recognising such situations is not difficult, but usually airlines do not take time to join the dots and figure out what I might really appreciate. The needs of every traveller are unique, and my needs are different almost every time I head off on a journey. However, there are patterns that are not necessarily common to me as an individual traveller, but rather to my demographic (“segment” or “cohort” if you prefer). Through tracking decisions and actions taken (or not taken), airlines can begin to make sense of a collection of seemingly random data points. If we then apply some machine learning to this and ask the right questions of this data, perhaps things become a little less hazy. When airlines begin to action some of these findings is when I will start feeling that the airline is focussing on my needs. Then I will finally start feeling the customer centricity, and can choose the additional services according to my needs. These needs may, or probably will, be specific to each journey. I may want to forgo the lounge because I prefer a short transit time to get to my destination faster. I may want to take two carry-on bags so I don’t have to go to check-in or risk the bag not arriving. I always want the option to upgrade my flight with miles or for cash if there is space on the flight – I always ask, so why do airlines not ask me, especially if there are premium cabin seats available and I have sufficient miles? Having to wait until I get to the gate only to be told there are not enough meals loaded is neither customer centricity nor good business sense. I am not unique with having these same behavioural patterns, but if we never look for patterns, we will never find them.

Travel is a journey rather than a flight between two points, and as a traveller, I make dozens of decisions along the way. I decide how I get to the airport, how I take my luggage, how comfortable and pampered (or not) I’d like or expect to be on board, where I stay when I get to my destination, how I get there. I make decisions about what I buy and what I don’t buy. And very importantly, I decide on whether I was satisfied with what I bought or whether my needs were not met. Did the airline ask me how I found the service on board or how the booking and check-in process was?

There is a vast ocean of data available on every single airline customer which can be collected from the time of shopping for flights and throughout the customer’s journey. Many customers will be happy to share even more data with airlines if it is used for their benefit and not just for maximising revenues for the airline. This is a call-to-action for airlines to rethink their customer-centricity processes, their availability of the related data, and for the airlines to collect and use the data to improve customer service and create personalised or tailored product offerings.

While I understand that airlines constantly have to balance customer centricity with operational and financial efficiency, a lot can be done with presumably manageable effort and investment. However, unless all organisations within the airline agree on what the airline’s goal and business model is, will there ever be agreement on what customer centricity means?

 

This post has been published in collaboration with Terrapinn.

(Mona Kristensen, 5. December 2022)

 

 

December 5, 2022 Boris PadovanAggregation, Airline Retailing, Airlines, Customer, Customer Service, Digital Transformation, forecast, forecasting, Homepage, NDC, NDC, ONE Order, OOMS, PSS, revenue, Segmentation, Uncategorized

The APAC distribution landscape is “progressing but conservative”

The APAC distribution landscape is “progressing but conservative”

Listen to the interview with our partner Daniel Friedli: The APAC distribution landscape is “progressing but conservative”

In anticipation of the upcoming Aviation Festival Asia, Daniel answered some questions relating to distribution, new distribution capability (NDC), ONE Order, and the transition to modern retailing in the region.

In this twenty-five-minute interview Daniel gave his perspective on the huge topic that is distribution in the Asia-Pacific region. Tackling this extensive subject, Daniel identified areas of variation across the region providing a useful overview of the transformation, uptake, and challenges. Additionally, Daniel highlighted catalysts and barriers to change in the region, shedding light on the current landscape and cautiously drawing comparisons against other areas of the globe.

An important takeaway from the discussion was that many of these changes are costly and have repercussions that must be considered before integrating new systems. With all the future facing conversations concerning implementing updated systems, the complexities and costs around successfully installing new technology and systems cannot be understated.

November 21, 2022 Boris PadovanAirline Retailing, Customer, Digital Transformation, Homepage, NDC, NDC, NDC Aggregation, NDC Aggregator, ONE Order, PSS, Uncategorized

Hey Airline Exec – Put your bum in my seat!

Hey Airline Exec – Put your bum in my seat!

Hey Airline Exec – Put your bum in my seat!

There is a lot of talk about customer experience, customer centricity, net promotor scores and the like amongst the airlines. Seemingly more now than ever before. But where and when does customer centricity come into play? And more crucially, why is it not working – or at least, not the way the customer feels it should?

What is Customer Experience?

To get us all on the same page, we should define what we mean by the term “customer experience”. Basically, we are talking about how an airline engages with customers in any form – through personal contacts at a counter or on board a flight, through digital means such as an airline website or mobile app, through visual means such as airport signage and onboard materials or through communication such as emails, phone calls, chats, and others.

A good customer experience instils trust, is easy and quick, provides clarity, and focuses on the customer’s need and should be (where possible and feasible), in the customer’s interest even if that clashes with the airline’s. Now, that doesn’t mean that a good customer experience results in an airline always giving in, but it does mean the airline finds a solution.

Also, what may be perceived as a great customer experience for me because it is all digital and self-service does not mean it is a good customer experience for my grandmother.

The Journey

Let’s start with the customer journey to get a better understanding of where and when the customer experience really comes into play. This is fairly simple: the experience encompasses everything from the first interaction with an airline until well after any trip I take. That was easy, wasn’t it? Well, perhaps we can break it down a bit more to get a little more insight.

First, let’s consider the inspiration phase where the airline is sending promotional mails, or a customer is hunting for prices and destinations on an airline website. In this phase, the airline should focus on an initial understanding of the customer – who is asking, and why? Sometimes the airline will know quite a bit about certain customers, in others they know very little. In such cases, creating a meaningful mail or putting the right products and destinations on the website can be done by applying segmentation and sampling logic.

During the shopping phase, very much like in the inspiration, the airline may or may not know the customer. However, the contents of the shopping request and the meta-information related to the request (e.g., what time and which weekday was it made, which channel etc.) can help in figuring out the intent of the customer and give some context. And in the cases a customer is known, previous behaviour and purchases (or the lack thereof) can help.

In the pre-travel phase, which are the days and hours leading up to the event and can be somewhat emotional, and stressful, for many who do not travel often, some guidance can help. While many airlines send emails, these are seldom helpful or focused on a specific customer or journey. But hey, it really isn’t that hard to get the context and content right. I don’t need the weather for 10 days if my return flight is two days later. Or instead of a generic, text-only email which is nearly two pages long, how about a mail which is simple to understand, focused on my journey and my travel class, and has links if I need to know more? Has anyone ever asked the customers what they want to know?

At the airport, the biggest challenges are often the signage, and the lack of control over many processes such as security and managing crowds. However, where an airline should be able to take influence is in their staff, or the representation through the ground handlers. The often-heard stories of customers who know more about flight delays than staff should be long gone and shows the lack of a communication strategy within the airline. Better pre-flight information via email or the app can help and simplifying the search for relevant information through enhanced chat and FAQs would serve customers well.

Each flight experience and airline is different. In flight, there are of course many aspects of customer experience we could talk about, from levels of service to staff friendliness and onboard facilities, however this would be enough to cover a blog post itself. Most airlines do a really good job and hats off to them.

Perhaps one of the biggest areas in which improvements can be made is when the need for changing travel plans arises, be that willingly or not. Or, when during a journey, unexpected things happen – because they inevitably do. How do we communicate and interact with the customer? How much information do we share? Can we be proactive in suggesting smart alternatives and solutions?

After the journey, a simple follow-up mail with a thank you would work wonders. I have rarely received one. And when things didn’t go to plan, how about an apology mail? I have never received one of those either. I don’t expect more – I don’t need miles or vouchers – at least not if the disruption wasn’t drastic. But not receiving a “thank you” or “we’re sorry” basically shows that for the airline, the journey is somewhat “fire and forget”. Does the airline even know or care how my journey went?

Well heck, why doesn’t it work?

I have a theory. and will turn this theory into a call to action. First and foremost, I wonder how many C-Level airline executives, VPs and directors actually travel, well, like travellers would travel. In my experience, none. They have staff tickets and people who book for them. They never follow the customer’s path. When missing a flight, they can easily no-show, knowing they can go-show on the next flight. Sure, they sometimes have to deal with being a “passenger available for disembarkation”, however they can also get insight into booking figures or call duty travel to rearrange flights, often with other airlines with no cost to the “customer” at all. Why don’t designated decision makers search, book, rebook and travel like the 99% of people sitting on their aircraft? Why don’t they use the apps to check-in or try to change their bookings like a consumer would? That could result in some eye-openers, I’m certain. Most likely it would also lead to a better understanding of the Net Promoter Score (NPS). Oh wait, you don’t measure that? Or you do, but don’t analyse the results and take action?

Surveys such as NPS are a great means to understanding satisfaction. However, it is not enough to conduct a survey. Two airlines we have worked with over the past years had task forces in place to evaluate NPS surveys and create action plans for improvement. These were very structured processes, with a dedicated team and empowerment to influence the different departments in the airline to constantly improve customer service. The issues, actions and improvements were presented twice a month at executive level, with buy-in from all departments within the airline. In both cases, NPS scores increased, and while the increases were only marginal in the first six months, they grew considerably faster once the improvement team and the processes were established and the first “quick wins” identified and implemented.

We suggest that airlines start doing two things if you do not already:

  • Make sure that decision makers can travel like customers a few times each year. Make them book online or via the app – or even with a travel agency. Travel like the masses – don’t call in for privileges, sit in the back, book non-flex tickets.
  • Measure and act and get help doing so if necessary.

Why are we asking you to do this? Well, as an industry, we have moved so far towards this vision of retailing and customer centricity. All the talk is about systems and technology, about retailing and customer data, about segmentation and creating personalised offers. That is all great, and we share the vision here at Travel in Motion. However, there is more to it than a vision of airline retailing with offers and orders, or other buzzwords like NDC, ONE Order, Dynamic Offers, Continuous Pricing and what have you. At the end of the day, the customer has to be happy.

 

This post has been published in collaboration with Terrapinn.

(Daniel Friedli, 3. November 2022)

November 3, 2022 Boris PadovanAggregation, Airline Retailing, Airlines, Customer, Customer Service, Digital Transformation, forecast, forecasting, Homepage, NDC, NDC, ONE Order, OOMS, PSS, revenue, Segmentation, Uncategorized

The Vendor’s View on the Transition to a World of Offers and Orders

The Vendor’s View on the Transition to a World of Offers and Orders

This whitepaper discusses the view of the vendor community on the transition to the world of offer and order. The paper does not aim to prove the value of dynamic offers – there are other publications which have already done that. It is intended more as a reminder of what the focus of dynamic offers is, and perhaps a small push to analyse the concepts and ideas a bit more. Rather, this paper serves to understand the readiness of the technology vendors which are supplying solutions to the airlines and the challenges that lay ahead. The white paper is available on our website and will also be made available through IATA.

DOWNLOAD THE PAPER NOW!

October 4, 2022 Boris PadovanAggregation, Airline Retailing, Airlines, Homepage, NDC, NDC Aggregation, NDC Aggregator, Uncategorized

The (Bleak?) Future of Departure Control Systems

The (Bleak?) Future of Departure Control Systems

When the Travel in Motion team was brainstorming about what the subject of our next blog and TiMCAST should be, I proposed the topic of the future of Departure Control Systems (DCS) in the context of order management. Our partner Daniel Friedli looked at me, smiled and said: “This will be our shortest ever blog, because there is no future for today’s systems of departure control”. As so often within the team, an interesting and energized discussion started, confirming that this an important topic. In the end, we agreed not to agree on the outcome related to the future of departure control systems, and here is why.

With the changes in the airline industry related to commercial business processes and the underlying technology systems, almost no areas remain untouched. That also goes for the DCS applications. These systems drive the “over the wing” passenger check in and boarding processes, and in addition very often the “under the wing” weight and balance of the aircraft. While the “under the wing” utilisation of DCS is mainly an airport operational process with (hopefully) no influence on the passenger experience, the “over the wing” components of DCS are key to the passenger experience and to many airline processes before, during and after the journey.

Background

Over the past years, progress has been made allowing airline commercial systems to transform towards retailing and customer focused solutions as opposed to the flight related transactional legacy systems the industry. The New Distribution Capability (NDC), ONE Order, dynamic offers, the future of interline, and Settlement with Orders can all lead to process simplification should the airlines chose to embrace them. From a technology perspective, the implementation of these systems and the related potential new solutions will, at least partly, replace substantial parts of the traditional airline Passenger Service Systems (PSS) into which DCS is often embedded, or which feeds a third-party DCS with the relevant passenger and trip-related data.

To date, in the traditional environments, the reservation and ticketing components of the PSS would feed the DCS, either directly through interactive data exchange (especially if the DCS was a component of the PSS) or through forms of offline data exchange via a method often in EDIFACT-based legacy formats and teletype. In essence, the DCS was designed to support the passenger process for checkin and boarding in a very rigid and legacy-driven way. This demonstrates the potential to modernise this process, especially as leveraging passenger touch points for ancillary sales, improved passenger experience and learning about passenger behaviour was not core to the processes supported by a DCS.

The challenge for “over the wing”

As mentioned, the “over the wing” part refers to the actual check-in of the customer and related baggage, government data exchange, seat assignments and the boarding process. Currently, this solution is often a part of a traditional PSS or a stand-alone system if the PSS does not include this or if, for example, operational or regulatory reasons mean the PSS DCS cannot be used. By its legacy system nature and its lack of focus on the passenger experience, business opportunities such as the upsell of ancillaries during these airport processes is very often a challenge. The challenge can be characterised by the overly complex process of selling services and collecting payments during checkin. In addition, there is the lack of a 360-degree view of the customer to provide individual and dynamic services. This also leads to an inconsistent customer experience, driven by different system environments, best manifested at numerous different touch points, such as check in desks, kiosks, and self-bag drops at the airport. To make matters worse, the same airline could use different vendors’ solutions at different airports, all with differing levels of capabilities.

The opportunity

With the advent of ONE Order, or the concept of the order in general, the value of legacy DCS – as an IT solution, not the business processes and practices it addresses – is put in question. And, while the need for such systems will remain for years to come, the industry will witness a transition to more interactive and retail-focused solutions which will rely on the interaction with the order as a single source of truth. The DCS of the future might basically be a user interface on any device which interacts with the order management solution to query which customer is about to travel, what the individual’s needs could be and dynamically propose ancillary services, trigger the exchange of data with governments and update information received. Further, the “check-in status” will be recorded in the order directly, as will information such as baggage tag numbers, seat assignments, advanced passenger information status and other relevant travel data. But the order will be the one and only master record as a single source of truth, allowing various transactions from different system to simultaneously update the order in real-time. Through this the customer will be individually identified at every single touch point during the check in, boarding process and upon arrival. By accessing the order, as well as the customer profile, individualised offers and tailored services can be created for the traveller. This can greatly enhance the customer experience as well as the airline’s servicing and sales opportunities, and greatly streamline airline processes, increase their revenue, and increase customer satisfaction.

Our conclusion

The need for a system that supports the passenger airport process will remain. Not only legal and regulatory requirements such as advanced passenger information demonstrate the need for such systems but also the inherent capability to “register” a customers readiness to travel. However, the facilitation of these processes will be integrated into the airline’s order system more and more, should the airline choose to enter this strategic path. In these cases, we will see a merge of the traditional DCS capabilities into Order Management Systems (OMS). Albeit for years to come, many airlines will remain on legacy PSS, and specific airport environments will dictate a legacy DCS as we know it today.

So, in essence there is no clear “yes or no” answer about the future of DCS – it is the famous “it depends”. While the need for “under the wing” operational support systems such as weight and balance systems will remain, the future of the “over the wing” depends on the path an airline takes: will its commercial operations be based on full offer and order, what are the requirements of the local airport environment and, last but not least, how big is the appetite to innovate and transform?

But there is at least one consistency: within the TiM Team we had another enticing discussion. And, even if we were not all completely aligned, we did agree that we, as avid industry observers, will closely follow the developments and continue assessing the need and feasibility of the DCS as it is today.

 

This post has been published in collaboration with Terrapinn.

(Boris Padovan, 4. October 2022)

October 3, 2022 Boris PadovanAggregation, Airline Retailing, Airlines, Digital Transformation, forecast, forecasting, Homepage, NDC, NDC, ONE Order, OOMS, Segmentation, Uncategorized

Tickets – can we live without them?

Tickets – can we live without them?

The commercial airline world has for decades revolved around one vital artefact – the ticket. As a traveller, the ticket has always served as something tangible to hold on to as an entitlement to travel (until this was replaced by the electronic ticket, at least!). However, as the world has become more digital, airline passengers have become accustomed to electronic tickets, and of course there are many “ticketless” airlines now, using receipts as confirmation of the entitlement to travel. Behind the scenes, however, many of these “ticketless” transactions are not really this at all, with tickets still being issued in the airline’s reservation system. Even with transactions using NDC messaging to facilitate the purchase, many airlines still choose to issue tickets, whether the traveller really needs one or not, because internal airline processes are often still heavily dependent on ticket numbers and the fare and fare construction information stored in the ticket, as well as the processes which transfer this ticket information to revenue accounting. At the same time, payment processes are evolving, with new alternative payment methods becoming increasingly in demand. Travellers’ expectations are also increasing – they expect to be able to change flights, add on optional services, and even rebook their entire travel plans with the same ease they can change their TV subscriptions. However, the complexity in the background that many airlines manage to hide from their customers gets in the way – an e-ticket is not in the status expected, or there is a mismatch between the ticket and the booking due to a schedule change, for example. Eliminating this complexity is an enormous undertaking, and currently many airlines are struggling to resolve this conundrum.

The shift towards orders may be helping airlines to think (and act) more like retailers. But this has not yet taken away any of the legacy complexity behind the scenes. There is a catch-22 situation for most airlines: tickets cannot be eliminated due to the many dependencies on them still in legacy systems, however the legacy dependencies cannot be eliminated while tickets are still so prevalent. But what are the drivers behind this complexity and the associated dependencies? Well, the ticket contains a few key items of information that are of extreme interest for many different entities within an airline. The fare basis code, for example, is used not only in accounting but in billing and settlement process, route profitability analysis and forecasting, revenue management and countless reporting processes. The flow of this information from the originating system (the PSS) into a plethora of downstream consumers is very difficult to disentangle. The transition from PNRs and tickets to orders would appear to give the ideal vehicle to redefine this flow of data, however the integration points between the various components tend to be very old, complex and are often unstructured or proprietary. Such a transformation is, therefore, costly, and laden with risks – things all airlines want to avoid.

Nevertheless, there is some hope in the form of NDC and, more importantly, ONE Order. The use of orders to augment (and eventually replace) the PNR and e-ticket brings a set of possibilities that airlines can use to address some of the transformation challenges mentioned earlier. The exact same information needed by the airline’s numerous reporting systems, accounting processes and forecasting tools is available in the order, however in a more structured and standardised format. The standards are also in place to facilitate the exchange of such information between users of the data – the ONE Order standards are simple, efficient and already implemented by most of the leading Order Management Systems (OMS) and accounting system providers. Along with NDC and ONE Order, a new IATA standard process known as “Settlement with Orders” (SwO) aims to address another common concern of airlines that has also maybe been holding back the transformation to orders. In indirect channels, where payment is often taken by the retailer (e.g. travel agency, corporate booking platform etc.), the ticket has been the sole basis for ensuring the flow of money from the retailer of the service to the supplier (the airline). As a result of this, tickets are still extremely widespread within indirect distribution, even where these may have been facilitated by NDC messaging. The same applies for interline distribution, where the use of NDC is not very common, or rather, almost non-existent.

While standard settlement processors such as BSP and ARC have adapted to support NDC, the SwO standard serves to provide “a framework for the settlement of orders between partners”. This differs from the previous approaches in that it introduces a new process and modernised set of messages, rather than trying to adapt an existing process to meet the needs of the future. As with NDC and ONE Order, the process does not mandate the use of tickets and EMDs as value documents and is expected to cover not only retailer-supplier settlement, but also interline and even intermodal cases. Will this bring any significant shift away from the dependency on tickets that many airlines still have? Well, as with NDC and ONE Order before, the SwO standard is not likely to solve all challenges and airline may have around settlement, reporting and accounting, data analytics and so on. Still, it does strive to ease another impasse in the existing legacy processes. First NDC gave an alternative approach to the creation of offers, providing the opportunity to get away from concepts such as booking designators, filed fares and other traditional fare and pricing concepts. Then, ONE Order took this a step further, allowing products to be managed more as Stock Keeping Units (SKUs) like in retail rather than airline inventory, independent of the need for tickets and EMDs. However, due to some of the key dependencies mentioned earlier, the majority of airlines have not been able to truly embrace these retailing concepts. And as with the earlier initiatives around “enhanced and simplified distribution”, SwO will not provide an overnight remedy to eliminate the legacy baggage most airlines still carry, it does provide a way forward for re-thinking the integration with downstream applications. Ironically, the interactions between airlines and those selling its products are some of the most disjointed. With SwO, along with NDC and ONE Order, these interactions can become richer conversations between partners. In turn, this may enable airlines truly to begin eliminating some of the legacy concepts that have been hanging around, slowing down the overall progress in the modernisation of airline distribution.

 

This post has been published in collaboration with Terrapinn.

(Nick Stott, 12. September 2022)

September 7, 2022 Boris PadovanAggregation, Airline Retailing, Airlines, Digital Transformation, forecast, forecasting, Homepage, NDC, NDC, ONE Order, OOMS, Segmentation, Uncategorized

Dipping your feet in customer segmentation

Dipping your feet in customer segmentation

There has been a lot of talk about customer segmentation and personalisation in the past few years. However, there is little evidence that airlines are actually applying any sophisticated level of either – personalisation or segmentation. We may receive marketing emails from airlines with very basic “Dear Mr. Friedli” salutations as an attempt at recognition, however the content of the mail is the same as the next and usually has nothing to do with my travel patterns or signalled intent. While some airlines are better than others in content marketing based on segmentation, most are far from the level which retailers are at. And the furthest extent of segmentation is typically in marketing mails.

During the offer creation process, the airlines’ lack of maturity is even more visible, be it on an airline’s website or app, or via new channels such as the API-driven NDC-channel. In the best case, there may be some differentiation based on the classification as a business traveller or a leisure customer. However, often I may be both, and here things fail.

The purchase process on the website, in most cases, is standardised in terms of process flow and content. Rarely do airlines apply a level of segmentation based on user data or ongoing input from the consumer. Even the promise of new distribution methods enabling “better personalisation and targeted offers” has rarely been fulfilled.

This article focuses on segmentation – or the lack thereof – during the offer creation process.

Why segmentation?

Traditionally, airlines would use very basic indicators to apply customer segmentation during the offer creation process. Segmentation was mainly limited to two segments: business and leisure travellers. This was controlled through characteristics such as weekend stays, duration and other, rather simplistic fare rules and parameters. Today, customers expect tailored content. As a matter of fact, 80% of customers expect a personalised brand experience according to research by Epslion.

The advantage of the basic, fare parameter-based segmentation method is that it will work through traditional channels such as legacy GDS distribution with ATPCO-based fare filing. The disadvantage? It is not a very fine-grained segmentation, nor does it reflect the changed travel behaviours, changed willingness to pay behaviour and changed airline fare products nor the new and enhanced airline and third-party ancillary products.

Applying fine-grained customer segmentation can increase airlines’ revenue, both by increasing conversion and by upselling products to the customer, thus getting just that little bit more of the customer’s wallet share. In consumer retail, estimates and past research show that revenues can be increased by up to 3% to 5% using segmentation and creating tailored offers. Additionally, it is safe to assume that applying smart segmentation can improve customer satisfaction by showing the customer more relevant content.

As distribution is shifting to more direct distribution for many airlines, and a shift towards NDC-based direct-connect distribution on the indirect side, there is growing value in segmentation as it can be applied to a larger customer segment.

What is holding the airlines back?

A combination of a lack of focus or strategy for segmentation, technology challenges, a lack of resources with the knowledge and experience and the inability to analyse customer behaviour, purchasing data and other data-related deficiencies seem to be the reason why airlines have not spent more time on this topic. It could be that airlines are just not convinced that better and more refined segmentation leads to additional revenue and customer experience. Let’s discuss these factors individually.

Strategy and focus

As segmentation has typically been the realm of the marketing and loyalty department, this is not an area which has been in the focus of the product and pricing teams in the past, except to the extent where it was required for basic segmentation. Furthermore, there is often a silo-challenge, whereby the eCommerce team is not in close communication with the revenue management and ancillary team, and the distribution team focusing on NDC and newer offer solutions such as an OMS are different yet again. However, the segmentation strategy for offer creation should, in our opinion, be anchored at the highest level with the overarching distribution strategy, and encompass all channels, segments and products.

Technology

There are a few angles of the technology aspect, and these differ considerably between airlines, depending on the organisation, the solutions in place and the organisation’s digital maturity. However, technology is available to enable an airline to do refined segmentation during offer creation. Optimally, an airline would have a central offer creation solution, or OMS. This would not only feed the airline’s own digital channels, but also the direct-connect channels such as NDC. Within or supporting the OMS, the airline would have a segmentation solution allowing it to determine, based upon each request, a customer segment and in many cases, the context or intent of the request and thus the customer.

Widely available are solutions for the website and mobile app today already and airlines are urged to grasp at the low-hanging fruit of segmentation in the digital channels, as these can be implemented relatively quickly and even managed by third parties, should an airline not have the resources. At the same time, these solutions are often quite advanced and allow for in-depth A/B testing of the success of your segmentation approach.

Resources and skills

Perhaps one of the greatest challenges is within an airline’s organisation. Many airlines continue to have the traditional organisational structure which has been prevalent for decades. Very few have adapted their organisations to align to modern retailers. These typically have a structure which is very much optimised and focused on sales (or channels), products, customer experience and finally, technology enablement. This type of setup could be well aligned to a commercial organisation within an airline.

The second challenge is having the skillsets which understand retail, digital and (new, digital) customer experience. Typically, these will need to come from outside the industry, meaning that they will lack any understanding of the fundamentals of the industry. However, an airline needs to ensure that the complexity of the business is understood, as there are elements of our industry which do not relate in the digital banking, insurance, or retail world. The airline industry is still governed by many standards and interaction protocols, we have regulatory bodies which allow us to interact with other airlines and, for example, governments. Thus, while the outside-in approach is a great way to bring new talent and knowledge, there is a need for bi-directional training within the organisations.

Should an airline be lacking the skills or resources, these can often be acquired as a service.

Product and offer optimisation capability

While we touched on the technology and skillset above, we now need to bring these together. Based on the segmentation strategy outlined previously, using the technology and the know-how we now have, it is time to execute the plan.

There are a number of tasks to be undertaken:

  • Define the actual segments or demand spaces, and create all required sub-segments based on, for example, geography, point of sale, demographics, and channels.
  • Define which ancillaries or fare products are relevant to which segments or demand spaces.
  • Define how pricing can be optimised to each segment’s willingness to pay, focusing on increasing conversion.
  • Creating bundles of products and services likely to be purchased by the segments.
  • Implementing the logic, business rules or algorithms within the offer engine or digital channels to analyse the request and the context or intent, select the right set of applicable products and create a number of tailored offers.
  • Implement A/B testing to measure the success and confirm any hypotheses made, especially in the initial phases, However, there is a need to continuously measure and test, as the optimisation is a never-ending process.

Data

For airlines, there is rarely a lack of data. It is available in abundance, however, perhaps not structured or easily accessible. Data is essential, however, to create an initial set of customer segments as well as an initial definition of tailored products and services per segment. Typically, this can be defined based on past purchase data.

Further, data from each request, as well as data from customer history or your customer data management (CDM) solution (e.g., the loyalty system) can be used to create the “on-the-fly” offer. There is a lot of valuable information in requests made through digital channels or the API channel which can be used. This includes obvious elements such as the cities travelled from and to, the number and types of passengers and the date of travel. However, other elements can be used as indicators as well, such as the amount of time a search is done before travel, the duration and days, the season in combination with the destination and many others.

Can an airline take baby steps to improve?

While the five groups of activities outlined above may seem a lot to deal with, this does not all have to be done at once. And, while there can be compelling events which offer the opportunity to consider the overall strategy and execution thereof as part of the process (such as when redefining your distribution strategy or implementing an OMS or upgrading your eCommerce platform), bits and pieces of all the above steps can already lead in the right direction.

An isolated micro-segmentation strategy can be a great first step, based on existing booking data and analytics from the website. Alternatively, implementing software on your website which helps with targeted offers and segmentation can be done in a matter of weeks, with initial results seen in a few months. This can be procured as a service, allowing the airline to focus on other topics at hand. Categorising the existing ancillaries and fare products to a basic and simple demand space structure, and creating some static bundles aligned to these can typically be implemented relatively quickly.

In any case, if you go big or small, take a giant leap or a baby step, it is strongly encouraged to seize the opportunity and not to wait with segmentation. As we work with airlines around the globe, this has become one of the key topics of interest and development, and will help airlines take one more step towards becoming retailers within the travel industry.

 

This post has been published in collaboration with Terrapinn.

(Daniel Friedli, 12. August 2022)

August 10, 2022 Boris PadovanAggregation, Airline Retailing, Airlines, Digital Transformation, forecast, forecasting, Homepage, NDC, NDC, ONE Order, OOMS, Segmentation, Uncategorized

Meet us at the PROS Outperform Virtual Conference from 16th till 18th November

Meet us at the PROS Outperform Virtual Conference from 16th till 18th November

Meet Travel in Motion at an upcoming industry event that is worthwhile attending: The PROS Outperfom Virtual Conference which will take place from 16th till 18th November. We will be present as sponsors and you can meet us by visiting our sponsor page. Our partner Daniel Friedli will also be on a panel to discuss the shifting airline distribution landscape with Boyan Manev of PROS and Keith Wallis of Air Canada (18th November, 11:00-11:40 Central Time, 18:00-18:40 CET).  This will be a perfect possibility to catch up, discuss and look forward to joint engagements.

 

November 11, 2021 Boris PadovanAggregation, Airline Retailing, Airlines, forecast, Homepage, NDC Aggregation, NDC Aggregator, ONE Order, OOMS, PSS, Uncategorized

Long Time No See – Meet us at one of these upcoming industry events!

Long Time No See – Meet us at one of these upcoming industry events!

After a long period of limited personal exchange we are looking forward to the upcoming industry events where Travel in Motion will be present, such as IATA’s Digital, Data and Retailing Symposium in Madrid from 26th till 28th October, PROS Outperfom Virtual Conference which will take place from 16th till 18th November and  the World Aviation Festival on 1st and 2nd December in London. Please reach out to us to personally reconvene. See you soon!

 

September 30, 2021 Boris PadovanAggregation, Airline Retailing, Airlines, Conference, forecast, forecasting, Homepage, NDC, PROS, Uncategorized

Travel in Motion’s Fifth Birthday

Travel in Motion’s Fifth Birthday

The summer is coming to an end in our northern hemisphere and the summer holiday period has confirmed that air travel is on the raise, again. Within Europe, Northern America and China there have been plenty of leisure flights, and although we have not reached pre-COVID numbers, the trend remains positive and promising.

A lot is dependent on potential virus mutations and vaccinations, but also on streamlining the numerous different rules, regulations and processes for air travel. Examples like the IATA Travel Pass Initiative have shown that technology, especially ongoing digitalization of processes, can contribute to the restart of global air travel.

Thus, digitalization has become one of the top priorities for our industry community, and we at Travel in Motion are engaged in helping our partners to reach the next level of digitalized distribution, disruption management and airport operations.

We have helped our partners now for over five years – yes, TiM celebrated its 5th birthday, and we have enjoyed every single day within TiM and within our community.

We are looking forward to continuing our work with you for many more years to come, and perhaps we can meet at one of the upcoming industry events where Travel in Motion will be present, such as IATA’s Digital, Data and Retailing Symposium in Madrid from 26th till 28th October, the PROS Outperfom Virtual Conference which will take place from 16th till 18th November or the World Aviation Festival on 1st and 2nd December in London. See you there!

 

September 29, 2021 Boris PadovanAggregation, Airline Retailing, Airlines, Birthday, Homepage, NDC, NDC, PROS, Uncategorized