Customer-Centric Retailing Platform
An Industry Transformation In Airline Retailing
Customer centricity in the airline industry is becoming more fundamental every day, stretching from marketing and sales to now entering the operational domain. To more fully realize the advantages of a customer-centric retailing approach (improved customer experience, increased product sales and greatly improved product margins), market leaders are emerging with a retailing maturity model and early proof points that a migration to a customer-centric retailing approach opens a wealth of opportunities.
Best-of-breed airlines are in a state of transformation. While safety and operational excellence are always top priorities for airlines, the emergence of customer experience as a key competitive and brand differentiator is reshaping the industry.
It is not without precedence, of course. Amazon for retailing, Uber for ground transportation, FedEx for logistics, etc., have all become market leaders by building a customer experience based on personalization and really knowing their customers. And airlines have emerged.
However, the journey or transformation from merchandising to retailing is a multi-step process that leading airlines are currently charting. The journey shows the building blocks that airlines work through as they progress to airline retailing and to personalize and enhance the customer experience across the customer journey.
It represents a vital necessity in the process of moving forward in airline retailing. It sets up a mindset shift from revenue per seat to revenue per customer and will be a foundational element upon which airlines will build their business.
Customer data is the foundation but not the true value. Rather, customer data must be gleaned to produce true customer insights at the next level and then finally these customer insights are used in robust customer-centricity solutions, such as Sabre’s customer-centric retailing platform, to enhance the customer experience from not just a day of travel perspective but potentially over the life of the journey.
Customer-centric knowledge requires more and current customer data and insights, which entail a complex process of learning about and keeping up with the customer.
Logically, then, there’s a necessary tradeoff between complexity and value. Today, the industry is choosing value, and the logical basis of the customer-centric retailing platform is to better and more conveniently manage the complexity, involving much of the necessary integration and scaling for airlines.
Historical Progression Of Airline Retailing
It’s actually, in certain ways, somewhat amazing to contemplate that it was only a couple of decades ago that what was then regarded as a really new and innovative line of business in the airline industry sprang up around passenger sales and service, or PSS. Now, there’s an even more critical ongoing transformation into airline retailing.
At its core, PSS focused on three fundamental functions: airline-seat reservations (the basics of booking a seat for a passenger), seat inventory and departure control to verify fulfilment providing a payment or revenue recognition.
But the story goes back much further than that. In fact, it goes back to the very beginning of what the world knows as the commercial airline industry.
When airlines first started, their commercial needs were founded on the basic necessity to book a seat on a specified flight. Airlines’ primary operational focus was safety and cost constraints. Customer experience was a key factor (the golden age of flight, after all), but this was primarily an in-flight experience, there wasn’t a lot of pre- or post-flight communications.
A primary reason is because there were not many additional ancillaries or services and, realistically, this was a pre-Internet and pre-mobile timeframe so communication was limited. The process at that point was essentially a one-time transaction. Passengers didn’t routinely feel any necessity to check back in with the airline, and collection of any further customer data was almost entirely unheard of.
This is in stark contrast to today’s communications, which are divided between customer-driven and airline-driven communications via the Internet, but exponentially accelerated through mobile communications. These communications would also eventually allow an airline to understand where the customer is in the journey (pre-trip, day of travel, post-trip, etc.) and speak to the customer appropriately from both a retailing perspective (upgrades, special meals, etc.) and from an operations perspective (delayed flight, check-in availability, etc.) , thus entering into the age of personalization.
As airlines became more proficient with merchandising, there was a greater desire of some passengers to reserve a seat or receive a cabin upgrade, or perhaps to reserve and order a special meal. These were upgrades that would enhance a customer’s trip and for which the customer was willing to pay extra, but they were items that required only static inventory technology.
Then, eventually, carriers started offering bundles of items under “branded fares,” which grouped maybe a couple of offerings together under a branded price, providing a financial incentive to the offer.
Branded fares encompass packages such as a seat with Wi-Fi, or a seat with extra legroom. Again, however, it’s a static rather than a dynamic offering, with no opportunity for passengers to design their own bundles or otherwise customize the basic package.
Airlines could only develop better offers through personalization and, ideally, to be most effective, the offers would be based on specific knowledge of a customer’s previous trip, which, quite simply, means knowing the customer and eventually proactively predicting the customer’s wants and needs for a specific flight to a specific destination.
Today, the industry is rapidly approaching the ultimate goal of retailing nirvana -- personalized real-time dynamic bundling.
Given all the extensive and unique customer travel data they have, airlines are now beginning to operate from a much smarter perspective. They are adapting and adopting retailing concepts that have proven quite successful in other industries and other technology business verticals. The bar is set extremely high as customers are being conditioned to receive timely personalized offers from savvy retailers such as Starbucks, Amazon and Netflix.
Travelers, then, quite naturally expect personalized offers from many companies they buy from, and airlines, in turn, now understand that offering passengers a number of different customizable options among the various features of their flights can be an extremely successful and a highly appreciated practice.
Whatever option the customer desires can now be put together with other options in “à la carte” fashion to create a customized traveling experience. For instance, the customer can decide, “I want to sit in this particular aisle, and I want to purchase this meal. Also, I want Wi-Fi. And I’d like the airline to bundle in my cab fare.”
These are critical aspects of dynamic bundling, which can much better satisfy customers (who are willing to pay for options and a total package they create for themselves) and affords airlines the opportunity to realize much higher margins through this fundamental retailing method.
In recent years, it has become clear that the customer experience with dynamic bundling is emerging as a critical brand differentiator and the key to loyalty and increased revenue. The crucial necessity for airlines is to better know their customers – the expectation for travel is shifting in the mind of consumers that represents a tremendous opportunity for a sustainable level of brand differentiation.
The Evolution Of Customer Data
If an airline knows and understands its customer, based on customer behavior and browsing and buying patterns, it can strategically apply that knowledge to create a more personalized discussion with the customer, resulting in offers that the customer wants and is more likely to accept.
Then the airline has the knowledge and capability to pre-offer and up-sell packages, because it understands the customer’s wants and needs, as well as his or her personalization aspects.
With that insight, the airline can then create and continually develop and revise the individual’s master customer profile, a goal that is only possible through savvy application of the principles of Big Data and customer centricity.
That’s how the airline can put all these things together. That’s how the airline can properly determine what to offer the individual customer, and when. That’s the basis of providing a successful customer experience — getting customers what they want, when they want it, and fulfilled as they wish. This manifests itself in additional up-selling and cross-selling, thereby maximizing potential revenues and customer spend through appropriate retailing.
Devising such a system is an extremely complex undertaking, involving the most sophisticated techniques of Big Data, as well as immediate analysis and application, but it can be achieved quite efficiently and effectively through the right retailing partnership.
Master customer profiles must be constantly updated, based on transactions that have just taken place. This is another aspect of the complexity of the customer-centric retailing platform, which requires real-time or near-real-time responsiveness to fully deliver true 21st-century retailing capabilities.
The Bigger Picture
Carriers are in a highly transformative period in which they are migrating rapidly to airline retailing, which involves moving from a more operationally driven model to one of putting customer centricity in its rightful place as the key to marketing success.
The idea behind the customer-centric retailing platform is to help carriers successfully manage the complex data sets and integration of information, along with the numerous operational hurdles, such that airlines can quite properly focus on the customer, not on the technology platform.
Following is a look at a complete journey under the principles of customer-centric retailing, and full utilization of the extensive information available in a passenger’s unique master customer profile.
When the customer is planning the trip, the airline wants to get noticed. Doing so requires optimization of the airline’s placement in search-engine results, accurate airline product offerings when the customer goes meta-searching, and inspiring the customer with an emotive destination experience.
Then when the customer is actually shopping for flights, whether leisure travel or a business trip, personalized retailing focuses the customer’s attention on a specific airline’s offerings with branded fares, ancillary bundling and non-airline products.
Airline Retailing Maturity Model
In practice, airlines will add new functionality in defined groups over time with progressive customer insights fueling the growth. While each step adds new revenue and customer experience capabilities, it is the accumulation of groups that unleash the greatest value and generally drive industries toward a platform approach.
At the point at which the customer is booking travel, the carrier’s objective is to convert more lookers to bookers across all communications devices, once again focusing the customer’s attention on the airline’s offerings. Bookings via mobile devices, incidentally, are rapidly growing, and are estimated to jump possibly as much as another 33 percent in the very near future.
During the customer’s pre-trip phase (after booking the flight), the airline should utilize data from the master customer profile to make personalized sales and service offers, always in the proper journey context.
At check-in, the airline has a consistent up-sell and service opportunity regardless of the check-in channel used by the customer. Currently, mobile check-in is the fastest-growing check-in channel, anticipated to expand from around 10 percent of passengers today to about 20 percent within the next year.
In flight, the airline should continue to carefully identify individual customers, and sell to and serve those customers uniquely, with unique offers geared to their specific needs and wants. From about 25 percent now, within a couple of years, in-flight mobile-browsing capability is expected to grow to about 70 percent.
Considering the ongoing proliferation of social media, it should come as no surprise that happy passengers tend to share their experiences with their personal network, as well as their professional connections, thereby multiplying the potential of a good customer experience to positively influence others to use a specific airline (conversely, of course, bad experiences can also negatively influence an airline’s business).
Essentially, then, the positive potential of a happy customer to become a brand advocate and influence his or her peers to travel on a specific airline is significant, as statistics indicate that 60 percent of travelers share their experiences on social media.
The overall upshot is that it’s an essential endeavor for an airline to work diligently to create a personal connection with each of its customers, implementing a fully personalized travel journey through customer-centric retailing.
Naturally, one of the keys to realizing highly favorable results is establishment and proper utilization of an advanced customer-centric retailing platform.
A Plan For The Future
Partnering with Sabre Airline Solutions, carriers worldwide have improved their performance and augmented their economic viability.
The customer-centric retailing platform is a refined development that encompasses massive quantities of data from master customer profiles to create optimum offers for customers that are more likely to be accepted and appreciated.
In upcoming issues of Ascend, the customer-centric retailing platform will be further explained and analyzed, and several specific elements will be discussed in much greater detail: customer centricity, and its basis in the gathering, maintenance and augmentation of extensive data files; the fundamental concepts of highly effective retailing in technology verticals; and how to establish and continually expand customer loyalty.
It’s all part of the process of essentially reshaping a carrier’s outlook on data and the customer-experience impact, taking the industry from fundamental data to valuable insights to foundational structure to actually driving customer experience. This is why data-driven airline retailing is now emerging as a mission-critical aspect of building a highly differentiated and profitable airline.