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Data-driven retail

From personalisation and data protection to virtual currencies and distribution channels, Ian Putzger rounds up the latest trends in airline retail

In March, GuestLogix – a provider of ancillary-focused merchandising, payment and business intelligence technology to airlines and the passenger travel industry – announced the acquisition of OpenJaw Technologies. This was a way of strengthening its capabilities to offer airline customers support for branded fares and dynamic ancillary bundles.


A rising number of airlines have embraced branded fares with alacrity. They have worked well for Brussels Airlines, is a relative newcomer to the game, having begun using branded fares last September on the back of a merchandise solution provided by Datalex. Within one month, the airline’s website revenues jumped by 35%. At WestJet, branded fares generated an additional CAD80 million in revenue in 2013.


Pricing is taking on additional parameters; a seat is no longer just a seat, even after extra legroom is included to notch up revenue, notes Michael Smith, managing partner at Airline Information. “Extra legroom seems more valuable on the first flight on a Monday morning,” he points out.


Most observers believe that this is merely the start of a new era of revenue generation for airlines. A white paper released in March by Sabre Industry Solutions (‘How data-driven personalisation will change the game for airlines’) stresses that brand differentiation and personalised sales and service are increasingly turning into strategic areas for carriers.


Once an airline has taken the basic steps to merchandise products and other ancillaries, the logical next move is to position itself to offer products and services tailored to different passenger segments. Essentially, this follows the approach set by the likes of Amazon, which shows users of its website potentially attractive products based on their history of choices and preferences, says Dave O’Flanagan, Chief Executive Officer and co-founder of Boxever, a provider of merchandising solutions for the travel industry.


The concept is drawing lively attention. “Most of the time, when we walk into a discussion it’s about personalisation,” remarks Jim Davidson, President and Chief Executive Officer of Farelogix, a technology provider for merchandising and distribution. “A couple of things are going to be interesting, like dynamic pricing. You create a price when a customer comes to the store; you try to create personalised packages.”


What airlines have done so far in terms of personalisation of services and charges is only a taste of things to come, he adds. “We have a long way to go. We are simply scratching the surface at this point. The majority of airlines are still in the initial stages.” This assessment is echoed by Smith: “I don’t think people have cracked even the basics,” he remarks.


This is not for lack of data on passengers. Sabre’s white paper argues that airlines are sitting on terabytes of data about passengers that can offer insights into shopping and buying behaviour, check-in and baggage history, inflight service preferences, airport movement, customer service interactions, and much more. Aggregation and analysis of this cornucopia of data offers airlines vast opportunities to create business value; possibly more than any other industry sector today.


However, airlines have been slow to make full use of the information at their fingertips. “Most airlines have all the data. It’s all there. They just struggle to put it together,” remarks O’Flanagan. “If you do a trip search for a man, woman and three kids to Malaga in the second week of May, you have given a lot of information.”


Working with a number of airlines, as well as travel agents, Boxever has access to a host of information on passengers, although typically it works only with an individual airline client’s data. “We can enrich that with information from social networks and from data aggregators,” says O’Flanagan.


Failure to tackle this area will cost airlines dearly, Sabre warns. “Airlines trying to run their businesses without a data-first focus could soon find themselves falling behind their competitors,” the company remarks.


One concern that may cause airlines to hesitate is privacy. “Privacy is always a big discussion point,” notes O’Flanagan. Boxever can help its clients come to grips with data protection legislation, but ultimately it is the responsibility of the airline.


According to the authors of Sabre’s white paper, customers are quite willing to give their data to airlines if it leads to an improved travel experience. Moreover, consumers are becoming used to customisation in other sectors, such as banking, retail and dining, and are going to expect this in air travel before long, they conclude.


One airline that is pushing ahead is Air New Zealand. Last November it signed an agreement with Boxever for the use of the latter’s customer intelligence and predictive marketing platform. This would generate real-time recommendations and one-to-one offers and messages across web, e-mail and mobile, as well as via a call centre.


The ability to cover multiple access channels is critical. According to Sabre, 97% of travellers carry a mobile device on their trip, with 81% of those devices being smartphones. Smith notes that one LCC in Brazil gets 10% of its bookings from tablets and other mobile devices, while Alibaba, the Chinese e-commerce platform, receives 54% of its orders from mobile devices.


Moreover, there is the possibility to capture ad hoc revenue opportunities. “You can sell to people in a taxi. For example, they may realise that they will get to the airport early and could potentially want a lounge,” he reflects.


At the same time, there is a strong desire to boost ancillary revenues through travel agents. Last September, Farelogix launched NDC (New Distribution Capability) Express, which the company describes as a “low-risk, accelerated solution [for airlines], delivering differentiated content to the indirect channel”.


“Ancillary revenue generation is the driver behind NDC,” confirms Davidson. “We have seen much heightened activity in what drives NDC – retail and ancillary revenues – both with LCCs and legacy carriers.” >>

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