To get around a golf course, players need to use a set of different clubs – drivers for the long shot from the tee, then irons and woods, putters and (for the unlucky) sand-wedges. Imagine trying to play that entire round using only one of the clubs. You’d be out there all day, and you definitely would not win!
Airlines are generating some impressive revenue from merchandising. They are increasing passenger revenue thanks to packaging and itemisation. They are driving sales with better promotion, and they’re thinking about the context and the timing of their interactions with customers. Ancillaries are keeping the world airline industry solvent, and airlines are often developing great approaches to retailing on their digital channels. According to IATA, half of the world’s passengers now buy at least one ancillary.
So you might think things are going well. But the impression we sometimes get when we are running consulting engagements with airlines around the world is that the only channel they have thought about is the airline website.
It’s easy to see why – building things on an airline’s website is sometimes easier, and airlines control the channel. They can run analytics, build links to partners, and focus on the user interface that reflects their brand.
But will an airline’s customers go with them? For most airlines there’s a strong share of bookings coming through other channels – corporations, agencies, OLTAs, as well as your other direct channels: mobile, tablet, kiosks and call centres. And customers operate in omni-channels – a typical trip will cover around six different channels as passenger shop, book, wait to travel, and then go through the journey. Running a single channel merchandising approach means airlines miss out on a lot of chances to maximise their revenue and customer satisfaction.
If we think about business travellers, airline merchandising needs to be adapted to their special needs. Because they are typically booking under corporate rules about expenses, and because their travel needs to be approved, these travellers need to have a more structured approach. For example, they need their ancillaries to be available at booking time. In fact, most corporate travel managers prefer a bundled approach, with fare families.
One way to generate more ancillary sales from travel agencies is to experiment with commission. Amadeus introduced commissionable EMDs a while back, and it’s fascinating to watch the creativity of some of our airline customers as they experiment with commission levels. You might like to start off with a very generous commission to get the travel trade into the habit of booking your ancillaries. And of course the agencies can also add a service fee to ancillaries, so there are plenty of incentives there.
And what about the airline direct channels? A big area for revenue capture that we’ve identified is upselling at the call centre. When passengers change tickets they can be proposed a higher fare family to give them more flexibility in case the same thing happens again. Or call centre agents can be trained to propose a choice of families to the caller. Our statistics suggest that some airlines do well from insurance sales in call centres – which makes sense when you think that a human voice is selling it.
One thing our recent “Thinking like a retailer” report showed was the power of the tablet – these devices actually achieve a slightly better conversion rate than PCs! We’re also seeing dramatic increases in revenues for airlines that get the user experience right – improvements can bring 20% revenue increase.
Incredibly, in 2014 there are more connected mobile phones on our planet than there are people! That’s a vast opportunity for the airline industry, and airline CIOs expect ancillary revenues through mobiles to reach 10% in the next couple of years. Two thirds of passengers are willing to buy ancillaries on their mobile – now it’s up to the airlines to determine which services!
Of course, there are other channels to think about – kiosks can be a great place to sell ancillaries, for example lounge access or seat selection. The inflight entertainment or Wi-Fi can be a sales channel, and so can the cabin crew.
Merchandising offers huge potential to airlines, and our analyses have uncovered a lot of missed opportunities. Amadeus is there to enable airlines throughout the various channels to optimise the passenger experience and maximise the revenue. That way all the clubs in the bag are used!