Key Competitive Theme for the Future
Technology evolution over several decades has resulted in a distribution landscape that is increasingly fragmented and replete with new opportunity. Airlines can no longer rely on a static approach to inventory distribution or traditional revenue as a conduit to economic vitality – rather they must adopt a dynamic approach that leverages technology appropriately and supports a return to true one-to-one marketing (Peppers and Rogers, 1994) between airlines and their customers.
To do this effectively, airlines will need to devise a plan that is often evolutionary but also sometimes revolutionary in nature. Focusing on five key themes, airlines will positively transform the effectiveness of their distribution and revenue optimisation strategy to compete given the new reality of the info-consumer.
Mix it up!
In today’s multi-channel distribution environment, the majority of airlines offer content to their customers through a variety of channels. Given the nature of the info-consumer’s desire for immediate access to information through a variety of communication vehicles, there is compelling evidence that the multi-channel trend will continue to gain importance. Tomorrow’s distribution reality will be a greater emphasis on multi-channel mix. This will be more pronounced years from now when travel shoppers and buyers will receive tailored, dynamic and experiential content – increasing spontaneity in travel buying. Airlines will have to master use of emerging technologies and evaluate multiple ways to communicate with customers while also considering the true costs and benefits of each channel.
Moreover, they will do this whereas customers continue to gain in their ability to seek out travel information from a variety of sources. With numerous factors to evaluate, it is obvious that no one-distribution mix will meet the needs of all airlines. Guided by the anticipated results of each airline’s target customer strategy, the right channel mix will be influential in reaching the airline’s most profitable consumers without ignoring larger, less-profitable segments that keep the airline’s brand relevant in the marketplace and keep airplanes full. The concept of ‘trip type’ helps an airline segment booking types both by their number of occurrences and their contribution to an airline’s bottom line. When travelling, the info-consumer will not be defined by one label or type of travel. Instead, the info-consumer will travel at different times for different reasons – for the week, a business trip; for the weekend, a quick getaway. This channel jumping trend can already be seen today as highlighted by historical air travel purchase data outlined in Figure 1, based on a 2007 global distribution study by Sabre Holdings. These bookings come from different sources depending on the trip type. For example, in the scenario in Figure 1, about 70 per cent of bookings for cost-conscious leisure trips are made through a direct channel whereas about 90 per cent of managed corporate bookings are made using an indirect channel. The length of each bar is relevant to the size of the segment that purchases the type of trip.
Get intimate!
The ability for an airline to truly understand its customers – who they are, what they want and how to best reach them in a dynamic, interactive sense – will become increasingly important. Info-consumers have access to endless amounts of information in printed publications and through the media, but especially via the internet. This enhanced knowledge plays a crucial role in the decisions they make when planning a trip. Consumers might at times be overwhelmed with too much information, ironically leading them to recruit the help of a travel agent. This will likely be experiential in nature, using advanced technology to address tailored information with destination expertise. This provides another opportunity for airlines to get to know their customers and offer options for those requiring a little more help making decisions than those who view themselves as independent consumers.
In either case, info-consumers need to be viewed as unique individuals with specific needs, which help determine the decisions they make about the trips they purchase. Most importantly, the info-consumer wants to know that airlines understand their desires. This individuality drives the need to identify new and creative ways to reach travellers without compromising products, services or price.
Leveraging customer data
For an airline to simply know who its info consumers are – based on what is collected today through loyalty programmes – will be largely insufficient down line. Expanding the information collected and thus the intimacy of the relationship will result in creating innovative travel choices that will satisfy the customer’s desire for more tailored travel options. To do this successfully will require more indepth knowledge of what travellers want as they travel upstream and downstream in the price spectrum. In addition, a good understanding of the unique attributes of the travel experience desired will be required. As discussed earlier, the trap here is recognising that the same info-consumers may appear in various segment types and be inconsistent in the types of trips they select or in how they pay attention to brand. These consumers want to create personally branded options from start to finish for every trip, and they want to do it quickly.
One possible solution to this dilemma is through enhanced, automated search capabilities or data mining. Data mining may become the equivalent of today’s comprehensive contact lists enhanced with advanced customer relationship management tools that could facilitate more innovative marketing practices.
The increase in savvy info-consumers who want to travel ‘their way’ coupled with the emergence of new markets will compel travel suppliers to collect comprehensive customer data from all points of sale as well as employ analytical tools to interpret that information. Getting the right product to the right customer at the right time for the right price will not only be a preferred goal of marketers but a necessity for success. Mechanisms critical to understanding not only the customer value but the customer network value enables airlines of all sizes to market appropriately to the info-consumer. With this information, airlines will more effectively sell and cross sell to their targeted audience, offer consistent service, drive loyalty and leverage customer feedback in the development of new and desired products.