The Race Is On

Delivering A Differentiated Customer Experience In The Age Of Airline Retailing

Airlines around the world are searching for new ways to convert and upsell customers from the moment they begin shopping to post travel and everywhere in between. Airlines that have invested in the necessary technology and processes to support these conversion and upselling goals will outsell carriers that have not by more than 30 percent.

Arecent study published by IATA credits aviation as the industry that advanced e-commerce. Faced with decades of crippling and complex processes and systems, airlines welcomed the technology boom of the mid-1990s and began developing websites as a result of the growth of the Internet. These early websites became the first “virtual storefronts” for airlines and ultimately paved the way for airlines to have more direct access to their customers.

Having direct access to customers was significant 20 years ago, but it is even more critical today when considering that by 2017, digital travel sales will reach approximately US$166.4 billion in the United States. An article published by NASDAQ contends that Mexico, India, Spain, Italy and Norway are expected to have the highest shares of digital travel sales during the next five years, with Brazil, China, India, Mexico and Italy being the fastest growers.

This mega-trend has airlines taking notice. Airlines globally are re-evaluating their distribution and commerce strategies, looking for new opportunities to convert and upsell customers from their initial shopping experience through various touchpoints throughout their journey.

In addition, analysis from Google shows that the typical traveler uses 22 websites to research a trip, in multiple shopping sessions, before booking. This is evidence that traveler characteristics are continually evolving and consumers today are not only connected, but are savvy enough to comparison shop for travel products and services until they find an option they feel meets their needs.

Because of this, airlines can no longer simply merchandise their seat inventory or other high-margin ancillary products they would like to offer to their customer; they must become sophisticated retailers, ready and able to offer rich personalization of the right offer to the right customer at the right time.

These trends — an increase in the amount of travel purchased online, changes in online consumer behavior and a growing focus on the direct channel by airlines — have resulted in the emergence of airline retailing and an unprecedented need for well-developed retailing strategies that leverage customer data. While airlines have an early lead in executing in the direct channel, holistic strategies will also need to extend personalization capabilities into the indirect channels, where demand is also growing.

From Non-purchase To Purchase

For decades, airlines focused primarily on service fulfillment and transportation. However, many airlines have extended that focus to include ancillaries, as well as discounted and bundled services, across a customer’s entire journey. Often times, this can result in a shift from non-purchase to purchase because customers are offered something they value at particular stages of their trip.

Defining An Airline-Retailing Strategy

Airline retailing can be defined as a focus on personalization through data-driven customer insights with the convergence of e-commerce, merchandising and revenue optimization.

Together, these foundational pillars create a strong data tapestry from which airlines can focus on optimization of their product placement in their distribution channels, while ensuring that the offer is contextually relevant at each point in the customer journey.

Each pillar has a unique role to play in creating a robust approach to airline retailing:

  • Distinct merchandizing plan — A distinct merchandising plan that informs an overall airline-retailing strategy ensures airlines will be able to offer a wide variety of products and product bundles in a way that stimulates interest and entices customers to make a purchase.
  • Optimize distribution channels — After considering merchandising, airlines must optimize their distribution channels to be able to place the right ancillary products or product bundles in the right channel to increase airline profitability. Within the direct channel, airlines should have the flexibility to drive variability — or consistency — across the points of sale. Carriers should, however, consider their distribution strategies in both the direct (Web, mobile, call center and airport) and indirect (online and offline travel agencies, travel management companies) channels. While airline websites are still the dominant booking channel globally, the 2014 IATA Global Passenger survey found that a combined 41 percent still rely on indirect channels to purchase tickets.
  • Personalization — Once these pillars are jointly considered, actionable customer insights from across the traveler journey enables airlines to offer personalized à la carte ancillaries and product bundles at points where the consumer is most likely to purchase them. When airlines accomplish this, they move from just selling merchandise to truly becoming sophisticated retailers.

A recent special report published by The Economist Intelligence Unit and Sabre Airline Solutions® brings these concepts to life. The study compares the vastly different offers and products presented to Pablo Ramos, a fictional traveler, during one trip as a business traveler and another as a leisure traveler with his family. Through the illustrated example at, it is clear the airline can sense, respond and cater to Pablo’s unique needs during both of his trips.

Profiles Power Personalization

Robust customer profiles should bring together structured and unstructured data to build a comprehensive understanding of a customer’s behavior and preferences. When paired with customer journey insights, insights derived from the profile enable airlines to provide personalized offers to customers likely to convert.

Adapting Retailing To The Airline Business Model

Due to the proliferation of information available to customers via the Internet, there are substantial opportunities for airlines to influence the buyer at multiple steps in the retail lifecycle.

While airlines’ core competencies have traditionally been in service fulfillment and transportation, strategically extending their influence beyond these phases and across the entire customer journey can result in a shift from non-purchase to purchase because customers are offered something very meaningful at their particular stage in the journey.

It’s no secret that customer intimacy starts with influencing the retail lifecycle. Successful retailers such as CVS Caremark, which was ranked No. 2 by Forbes among the biggest retailers of 2014, have taken ownership of the customer experience from acquisition to optimization and have profited immensely from the ability to own the full retail experience. A recent report by Retail Info Systems News (RIS) credited the retailer’s ability to optimize digital communication as a key source of improvement in enhancing the customer experience.

Airlines today should lean in and discover what the CVS Caremark pharmacies of the world already know … long-term loyalty and profitability comes from gaining full control.

What can airlines do today to begin extending their reach through the traveler’s journey?


Airlines today should focus on widening the funnel through organic efforts such as search engine optimization (SEO) to lower the cost of customer acquisition. According to Ayima, a leading agency focusing on SEO, traditional network carriers dominate when it comes to link authority (derived from the number of backlinks), but online travel agencies (OTAs) consistently rank higher based on executing a cohesive SEO strategy.

“The major brands have huge authority in the eyes of the search engines but suffer from technical issues relating to aging websites, content management system platforms and multiple site migrations over time,” said Dave Burgess of Ayima. He continued to explain that devising long-term strategies that address these issues will “halt the power shift and return a brand to a market leader.”


At the 2014 IATA World Passenger Symposium, senior economists with IATA presented compelling research that proved a positive correlation between airlines that had a high percentage of revenue from ancillaries and airlines that benefitted from high operating profits as a percentage of revenue.

This research suggests that airlines should consider placing an increasing focus not only on selling their core air products, but also on upselling and cross-selling of air and non-air ancillary products to increase share of wallet per passenger.


Today, airlines have exclusive control of the passenger from check-in to departure, and it will become increasingly important for airlines to continue to explore new retailing opportunities at the airport. A study by PhoCusWright reports that the fastest area of growth for ancillary sales occurs at the airport and in-flight. Retailing strategies of the future should consider innovations such as digital signage in airports to provide customizable content through flexible channels for a range of purposes: location and wayfinding information, product and service status; news and weather content; advertising, branding and infotainment.

Measure And Optimize

Euromonitor believes that this year more than 80 percent of airlines will invest in business intelligence tools. So, while optimization has traditionally been left for the airline to work through from campaign or channel analytics, airlines will need to be empowered to know what ancillary products and services are generating revenue so they can continually optimize for the highest potential yields. Aggressive investment in not only campaign and channel analytics, but also user experience, traveler flow and funnel conversion will help airlines gain a greater understanding of their consumer’s behavior across the entire lifecycle.

Comparison Shopping

According to Google, the average traveler conducts research on 22 websites before finally booking a flight. Today’s savvy travelers spend time comparison shopping for travel products and services until they find a selection that meets their needs.

Customer Data Profile: Hub For Personalization

How can airlines successfully realize their retailing strategy? It begins with a 360-degree view of customer insights that combines structured and unstructured data from internal and external sources and triggers actionable insights across the customer journey. This “master data profile” will be the backbone and hub of successful retailing strategies by providing the ability to personalize offers and target customers.

Combining and structuring all customer data insights (preferences, behaviors, patterns, etc.) enables airlines to assign value scores for customers based on key attributes so airlines can better sell and service through targeted personalization.

“The challenge is making the data come alive so we get a better picture of the individual customer,” Jeff Foland, United Airlines senior vice president for marketing, strategy and technology recently told The Economist Intelligence Unit.

With roughly a terabyte of customer data floating around at any given time within a large carrier’s system, airlines that use this to create a seamless customer-data environment will make airline integration a problem of the past.

Consider the example of a fictional loyalty customer, Robert Jones. Robert’s master data profile with his airline contains important information about his history, including attributes such as the class he normally books, what markets he is likely to fly, if he is a member of an alliance, if he recently received service disruption and if he is likely to buy non-air ancillaries.

Robert is ready to book his next flight and returns to his preferred airline’s website to buy his ticket. Once he selects his origin and destination, a rules engine begins triggering specific personalized offers based on the airline’s particular preferences. After examining the information in Robert’s data profile, he is offered a free checked bag (based on his top-tier status with the airline), as well as a discounted on-board entertainment package (due to his propensity to purchase in-flight movies or Wi-Fi on previous flights). Robert is delighted by both the recognition of his affinity, as well as the discount, and he purchases the entertainment package.

This is a perfect example of the power of knowing a customer and presenting him with the best offer. When integrated with a retailing platform, airlines can retain their most loyal and high-value customers.

50 Percent Revenue Increase

In 1998, Harrah’s spent more than US$100 million to upgrade its loyalty program so it could collect as much information as possible on every customer transaction. As a result, in 1999, its revenue had increased by 50 percent year-over-year.

The Retailing Race Is On

To be successful and deliver on a customer-centric approach, airlines are demanding a solution that has the ability to leverage the master customer data profile and offer the right product to the right customer at the right time in the right channel.

Max Rayner, a partner at travel and technology firm Hudson Crossing, recently stressed that airlines need a “holistic systems view” of upgrades and all other upsell opportunities. The incremental revenue from selling more personalization relies on and is enabled by strategic investment in IT infrastructure, on both the operations and customer sides.

The gaming industry was one of the early adopters of making aggressive, strategic investments in IT and customer data management. Casinos such as Harrah’s (now Caesar’s Entertainment) have seen its investment pay off for more than a decade.

According to information published by The Economist Intelligence Unit, Harrah’s started to develop and refine the collection and analysis of customer information back in 1998 on a level not seen before in that industry.

By spending more than an estimated US$100 million in upgrading its loyalty program, Harrah’s began to collect information on every customer transaction possible. Data gathered included not just choices for bet-by-bet gambling, but all purchases made on premise at any Harrah’s across the country. Harrah’s leveraged this data to execute A/B testing of promotions on specific customer segments to determine what types of incentives and upgrades would encourage repeat visits.

The resulting return on investment was impressive. In 1999, Harrah’s revenue increased over the previous year by 50 percent, according to the Wall Street Journal.

The Connected Passenger

97 percent of travelers carry a smartphone, tablet or laptop, and one in five carry all three. This level of passenger connectivity gives airlines significant opportunities for data collection and analysis.

The example of Harrah’s illustrates the potential upside for airlines willing to invest in IT infrastructure and business-process updates to support an integrated airline-retailing strategy.

With more than 97 percent of airline passengers carrying a smartphone, tablet or laptop when they travel and one in five carrying all three, it is clear that the passenger of tomorrow will be more connected than ever before. This presents substantial opportunities for airlines to collect — and analyze — information about the digital-passenger experience.

Carriers that can harness this analysis, supplement it with information from past travel experiences and embrace an airline-retailing solution that targets the right customer through the right channel at the right time will ultimately create a highly differentiated product in a very generic marketplace.

Penny Gillespie, research director with Gartner, recently reported that by 2018, organizations that have fully invested in all types of online personalization will outsell companies that have not by more than 30 percent.

While this statistic is staggering, it should prompt airline executives around the world to ask themselves, “Is my airline positioned to win the airline-retailing race of the future?”