Greater Certainty In
Revenue Analysis

Next-Generation Revenue Management Technology On The Horizon

Broader revenue analysis with the passenger at the center is the key to driving future airline profitability as well as customer satisfaction. This approach requires integrated systems and workflows that make sense of huge volumes of data in real time. At the center of such change will be next-generation revenue management.

The future of airline success involves an approach that encompasses improved retailing and customer centricity based on real-time information that will drive total revenue optimization.  Next-generation revenue management will not simply be a tool to help manage seat revenue. It will provide a much broader view of revenue at a customer level, presenting information in real time with much more efficient user interfaces integrated across sales and service tools (including inventory and dynamic retailing).

Ultimately, next-generation revenue management will provide the essential brainpower behind an airline-retailing strategy.

TRO Focal Points

Total Revenue Optimization requires a holistic, 360-degree approach to forecasting, analyzing and fully optimizing all revenue streams to maximize revenues and impact profitability.

As such, airlines will improve as retailers with greater savvy, furthering the principles of total revenue optimization while providing continually more insightful customer service. (View article "Total Revenue Optimization" from Ascend magazine 2014, issue No. 4)

Revenue-Management Influence

How can next-generation revenue management be such a prime mover among methodologies in improving airline economics and offering powerful opportunity to better serve customers?

The answer is actually a function of the nature of revenue management: It touches nearly every element that can realistically be considered part of a carrier’s business essence, from forecasting, optimizing, retailing, technology and distribution, customer centricity, real-time analytics, strategic partnerships and directed workflow, to budgeting and productivity, loyalty and marketing, and the overall traveling experience.

For airlines, it all culminates in total revenue optimization, helping make sense of a jumble of revenue streams and offering the opportunity to turn an exponentially exploding avalanche of real-time information into multiple further opportunities to enhance and expand a carrier’s capability to consistently please its customers.

Among many issues that have to be successfully dealt with are traditionally siloed business functions that simply must give way to greater transparency, visibility and teamwork across the enterprise, so the airline’s various departments will work better together to move the organization forward and upward in revenues and profitability.

The revenue-management function stands as a major influence (and often the primary actor) in myriad elements of the airline organization, and is thereby crucial in determining the airline’s overall results, and a key barometer of carrier performance.

Evolution Into A Revenue Necessity

At the onset of development of the revenue-management concept, it was relatively straightforward: Forecast demand for the airline’s flights. On that basis, optimize the price for each seat.

Price meant “base fare.” There were few, if any, nuances such as those introduced much more recently with carriers’ unbundling of product offerings to sell ancillaries.

Unbundling has placed airlines in an unfamiliar role, but a role to which they’ve warmed up and even started to create a degree of science around, which is the role of “retailer.” Complexity entered the equation with the retailing of checked luggage, seat selection, flight- and seat-selection upgrades, insurance, and even selling beyond the flight to hotels, rental cars and destination-focused entertainment.

Naturally, technology has been the key to progress (as it is now in intense distribution debates which are ongoing, and which would further expand airlines’ retailing mandate).

That mandate has further morphed into calls for advanced customization, leading quite logically to a push for ever greater customer centricity, which includes many interesting and technologically diverse elements and requirements.

Knowing Your Customers

A key aspect to becoming a smarter retailer is to understand customers, enabling an airline to bundle products and services together and make offers with optimal prices.

Understanding Customers

Being able to recognize, identify and empathize with various categories of customers has been a noble quest ever since airlines started pricing seats. However, the quest has acquired an extremely sharp edge because technology now enables assembly of a much more accurate and detailed customer profile in an airline’s database than ever before.

The capability to understand the customer, and on that basis to customize offers that match the customer’s wants and needs, is really an exciting area of customer centricity that carriers are now being able to hone in on to the point that knowledge of the customer’s characteristics is becoming even more of a vital necessity.

Combine that knowledge with real-time analytics and communication capabilities, and the retailing prowess of airlines will jump several more spaces forward. Fare classes are fading into the background, and fare rules as differentiators of customer classification are being superseded by much greater insight into each customer’s traveling, browsing and buying behaviors, taking customer centricity to new levels on the complexity scale.

Technology has to be able to handle the load of new information and new real-time necessity to help airline personnel better identify the needs of passengers, and to go further in determining individual pricing for passengers and system-wide adjustments in reaction not only to competitor pricing but to competitor scheduling and operating changes.

All this information is now available, but must be made more usable and palatable, with recommendations on prospective action that airline personnel can rely on in making good judgment calls in real-time spur-of-the-moment scenarios, when time is absolutely not standing still, nor are competitors’ tactics in trying to gain an edge in the marketplace.

Improving Analyst Performance

Workflow scripts are major elements of the new real-time analytical process for airlines seeking to most effectively apply the principles of next-generation revenue management.

It’s a matter of productivity, and the capability of revenue-management analysts to select the right levers to pull when there’s hardly any time to think, just to react.

For that reason, airlines will emphasize predictive alerting with “what-if” scenarios, enabling their analysts to be more productive and confident in their responses. Airlines will be able to concentrate more of their time on strategic issues of which markets to serve how often, rather than tactical decisions that can be automated.

Next-generation revenue management principles and practices will move airlines even further on the real-time scale of being able to react appropriately to competitors’ actions, plan better for any major development as the industry rockets forward, and assure that customers are served at the highest level of quality that meets their individual expectations.

Remove Silos, Promote Teamwork

Traditionally, airlines have operated in silos simply by the nature of the business. However, today, greater transparency, visibility and teamwork across the enterprise is essential to ensure all departments across the business are aligned and moving in the same forward direction

Vital Airline Partnerships

Among the critical industry components that will be further strengthened and enabled to accomplish greater achievements are partnerships of every type, size and model for mutual marketing and performance success.

From common codeshares to more extensive bilateral partnerships, all the way up to the major global airline alliances, the intensive technology upgrades of next-generation revenue management will enable greater visibility (within regulatory parameters) into the numbers underpinning each partner’s performance, and the capacity of the alliance members to more fully understand flight capacities and real-time bookings.

Such insights will be enabled through technology advances that are applicable to transparency of the inner workings of many industries, but that airlines are now moving further to take advantage of.

Another of the advanced capabilities that will be enhanced through next-generation revenue management technology upgrades is the area of dynamic pricing, which may in fact take customer centricity to new levels of refinement, as carriers will gain even more granular opportunity to make the right offer to the right customer, at exactly the right time and place on the customer’s agenda, such that the customer is most likely to accept the offer.

Again, it’s retailing in its most fundamental form, being able to make a highly relevant offer that fits the customer’s established behavior pattern, and is therefore a more likely retail sale.

Furthermore, when it comes to precepts of customer loyalty, the better an airline can understand how it needs to treat each individual customer, the better the chances that the carrier can retain that valued customer’s loyalty.

The Traveling Experience

This particular aspect of the next-generation revenue management concept, especially when combined and synergized with advanced operational integrity, goes even further, because there’s a certain quality of the traveling experience that every customer desires, expects and, in many cases, demands.

Real-time analytics enables multiple elements of next-generation revenue management to work, but none is more important than the service aspects of being able to understand what the customer wants and needs, and delivering on the airline’s brand promise of customer service not only to retain but to strengthen the customer’s loyalty.

Whether it’s a platinum customer who is offered only relevant items (such as a free drink at the airline’s most-favored-flyers’ club at the airport), or a customer whose luggage has not arrived and the airline makes the lightning-quick decision to offer personal help in accommodating the customer’s immediate needs, it will be enabled by the advanced theory and technology supporting next-generation revenue management.

Technology is only getting better and providing quicker, real-time results, and with it the modern capabilities of next-generation revenue management will be enhanced, for the improved performance of the airline and the gratification of customers whose needs are met with a flourish and a dash of understanding that can cement the customer’s loyalty for life.

Beyond a shadow of a doubt, next-generation revenue management is being nurtured and powered by the mega technological development of the future.

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