Imagine if a grocer ran the following advertisement: “1 liter cartons of milk on sale, prices starting from $0.15*”, with the disclaimer reading “*Sale cartons hidden throughout our store. Customer responsible to find them. Cartons may or may not be available. Sale price can change at any time. Prices are not guaranteed until cartons are found and purchased.” Customers would revolt, and it’s hard to believe such a grocer would survive for long.
Interestingly enough, most global airlines have survived just fine while expecting customers to endure exactly this experience. As an exasperated friend once told me after receiving an email advertising Bermuda fares “starting from $88”: “all the airline is telling me is that someone else paid $88, just not me.”
This slightly ridiculous example above illustrates an important point: the ultimate revenue prize will only be achieved when airlines can more seamlessly connect their inventory with the customers who want to purchase it. “Seamless” as in understanding what customers care about, and proactively guiding them, with personalized, destination specific communications, to the inventory that is most relevant to them. “Seamless” as in ensuring that these communications contain real, bookable, fares, not teaser “lead fares.”
Technology is the great enabler here. Advances in inventory APIs and optimized querying techniques have made it possible to deliver personalized communications, containing real, bookable fares to relevant destinations, to an airline’s customers. Not only is there a revenue impact, there is also a cost impact as airlines streamline highly manual marketing functions.
What the size of the prize? If by leveraging advances in technology and communications, airlines are better able to connect customers and available inventory, the impact could be substantial. A 100 basis point improvement in load factor (1.5 extra seats filled on 150 seat aircraft), for the top 20 global carriers, represents roughly USD $4B in incremental revenue combined. And unlike the process of unbundling, which typically comes at a customer satisfaction cost, both airlines and customers “win” when airlines make it easier for their customers to purchase.
The most progressive airlines recognize that every one of their customers travels for a distinct reason. Revenue will truly be maximized when airlines understand traveler motivations, and more seamlessly link relevant inventory with customers. The NY Yankees fan living in London would receive an alert on his mobile letting him know that British Airways can fly him and his wife to New York next Friday to see the Yankees play the Red Sox (packaging up the tickets and the hotel). With one click, the customer could purchase via the app. A completely discretionary trip is now taken, filling seats that otherwise might have gone empty. The airline closes a vital information gap, providing specific, actionable, and relevant information to customers, driving incremental revenue.
The technology exists to achieve this, moving us beyond the annoying, unintelligent, and untargeted “pricing starting from $88” advertising. While global OTAs and meta search sites have already seized on these innovations, airlines clearly remain best positioned to capitalize on these advances in technology given their unmatched understanding of their own customers. The opportunity should not be wasted.