Getting back to Business: As customers return to the skies, it’s time to refine retail strategies - World Aviation Festival Blog
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Getting back to Business: As customers return to the skies, it’s time to refine retail strategies

Getting back to Business: As customers return to the skies, it’s time to refine retail strategies

After suffering through the Covid-19 downturn, airlines will want to recover revenue from every opportunity, but this requires refining retail strategies that encourage customers to book and upgrade.

“As we emerge from the pandemic, our data insights tell us that ancillary revenue is taking on even more importance,” said Aileen McCormack, Chief Commercial Officer at CarTrawler. “More than ever before, customers will pay to travel in comfort and safety and will prioritize airlines based on how well they can meet their needs. Seat assignment is a critical part of an airline’s ancillary revenue strategy, but for maximum benefit, airlines must complement this with a memorable and seamless customer experience across the board.”

In their latest report on ancillary airline revenue, Car Trawler and IdeaWorks examine the growing trend towards charging passengers for seat selection, first introduced by LCCs, but now a relatively common practice with 80% of leading network airlines relying on a la carte fees from standard seat assignments. Some highlights from the 16-page report include:

  • More than half of leading airlines offer basic economy style fares, which require payment of a fee to check a bag and very often for pre-assigned seating.
  • Southwest Airlines is unique among leading airlines for not offering seat assignments, instead allowing passengers to choose seats as they board aircraft.
  • Alaska Airlines breaks from US network airline practice by offering a limited number of pre-assigned seats to its saver fare (basic economy) travelers.
  • Seat assignment revenue disclosures ranged from $6.63 per passenger on Spirit to $0.62 per passenger on Jin Air among LCCs.
  • Ryanair accommodates families by providing no-charge seat assignments for children when the adult pays a modest €4 to €6 fee; Singapore waives all standard seat fees for itineraries with children.

As the report also points out, it is not enough simply to tack on a fee for what might previously have been a free service and wait for the revenue to roll in. LCCs have, from the beginning, set customer expectations for bare-bones service of transport, with other passenger experience features incurring added charges, and they have designed their web-based retail platforms accordingly. Traditional carriers must carefully consider their presentation and sales flow so as not to discourage bookings. As the report’s authors state:

“Implementation seems to follow the logic of ‘if another airline is doing it, then we should too.’ This isn’t follow-the-leader, but rather the mere copy-and-pasting of an industry template onto your airline brand. This will produce results, but these will be sub-optimal. Instead, think of seat assignment as a new service which deserves investment and innovation.”

They suggest managing pricing to maximize revenue per flight while encouraging a buy-up at the point of booking rather than waiting for check-in. Airlines should also consider family-focused merchandising of seat assignments, encouraging parents to book their seats early with “meaningful child discounts.”

Presentation is essential, and the seat map provided during the online retail flow should make fees and their benefits easier to spot and value, encouraging selection at the point of booking.

Other suggestions include flipping the “free to fee” stigma around when promoting the service by offering benefits such as a guarantee of seat preference transfers in the event of an aircraft swap; or allowing customers to earn bonus frequent flyer points for their spend on fees. Elite frequent flyer customers could still have first access to the better seat options onboard, whether or not there are fees associated with booking them.

“It is possible to overwhelm consumers with details,” the authors warn. “Last year and prior to the pandemic, we received an email sent by a global network airline prior to departure. It was a timely message, and at first glance, seemed an impressive effort to promote an a la carte service. However, clicking the ‘Details’ link yielded a dense 1,200+ word page of text. There was no graphic showing the seat types offered along with content to summarize service benefits. Nope, just a ‘short story’ of terms and conditions. Good retailing provides the amount of detail desired by the consumer. If complexity causes confusion, then clarity reduces it.”

As important as designing an online retailing platform and digital sales flow that is intuitive and encourages customers to buy up to enhanced services, it is also critical to ensure continuity and availability of those digital platforms.

This past week, some airline websites were impacted by the second failure of the internet infrastructure, with an outage at global content delivery network Akamai Technologies affecting Virgin Australia, Southwest Airlines, and United Airlines. This outage follows a similar event impacting the web, with a failure of content delivery network Fastly, affected companies worldwide at the beginning of this month. While these events are outside of any airline’s control, they highlight the vulnerability of web-based retailing and the importance of having a solid response plan in place to address customer needs when websites are down.

The economics and reach of digital retailing are appealing, and the same is true for digital customer service through social media channels and web-based chat services. Still, airlines should have alternatives to the web available to customers with queries, especially during critical times. For example, SMS-based customer service and self-service options can help fill the gaps in internet reliability and address the unexpected seamlessly without requiring additional staff. Services like Clickatell and Netomi and chatbot services can also be complementary to web-based retail. In addition, message-based channels could be a helpful tool to encourage short-term or day-of-travel up-sells in services, last-minute fares discounts to boost load factors. They can also serve as an information tool and a sales tool for ancillaries during weather delays or other unexpected service issues.

These options work just as well for airports at boosting retail and managing disruptions. For example, AirChat offers airports a fresh way to connect with transient visitors and frequent flyers, keeping them informed of flight status and calling attention to special offers at concessionaires in a personalized way that encourages buy-in and fosters loyalty.

As we clear the cobwebs of recent black swan events and get back to business, it’s an excellent opportunity for airlines and airports alike to reexamine and refine their approach to retail, to gather every drop of revenue from the skies, even on rainy days.