Successful customization of ancillaries leads not only to increased revenue but also higher customer satisfaction and improved overall business performance, according to recent research completed by Forrester.
The survey, commissioned by Fusion, included 159 U.S. and U.K. decision-makers on the ancillary products front. Of these respondents, 60% considered ancillary revenue a priority of high or critical importance.
On the travel-side of ancillary, industry respondents were overall doing fairly well: 82% of those in the industry said that ancillary sales were meeting or exceeding the initial targets for the revenue stream.
The report also identified some travel-specific opportunities in areas such as:
Here are the four key steps, as identified by the research, for any travel brand seeking to maximize ancillary revenue via a customer-first mentality.
Be customer-obsessive
The key tenet of "know thy customer" is simple yet often overlooked.
It is absolutely critical to understand a customer, and her respective journey through the purchase funnel, in order to best deliver additional purchase options.
Without knowing who the customer is, it's hard to know what they are likely to buy. Without knowing what they are likely to buy, the product mix is likely to be mismatched.
This is a simple yet powerful reminder that it must all start with the customer. A brand that is customer-obsessive will be more successful as the savvy customer is no longer willing to stand patiently by an underwhelming brand.
There are also additional benefits for the company as well, given how a personalized experience increases overall consumer satisfaction.
The ability to swiftly deliver the correct product increases the likelihood of a positive perception related to a brand's sophistication, insight and intelligence regarding the customer experience - that's essential for any travel brand aspiring to true personalized hospitality.
As the report highlights, other core advantages to pursuing a comprehensive ancillary strategy:
Additional benefits include: margin improvement, competitive differentiation, enhanced new product development, and better relationships with customers.
Tailor products to customers’ impulsive needs
All ancillaries are not created equal - it's important to first understand the customer and then create ancillaries that appeal to specific, often impulsive, needs that occur during the purchase process.
This also might mean looking to outside sources in order to acquire the inventory that triggers an action in the customer.
Work well with others to optimize sales
This piece is really about trying to develop a deeper understanding of customers through partnerships and/or vendors - basically, looking at other means, in addition to user behavior, to learn about customers.
The number of companies that use true data-driven customer profiles is small, and this challenges the company's ability to best identify which partners might have inventory that the customer would like to purchase.
Also, working with an outside vendor on the fulfillment side frees up resources for the company to focus on its core competencies while still benefiting from additional revenue. Sales of ancillaries are important; equally important is the successful and satisfactory delivery of those services to the customer.
Stop putting ancillaries outside of the purchase path!
The best travel websites are the ones that can anticipate a customer's needs and not force them to navigate elsewhere to fulfill a need.
By understanding the customer's needs (see above), the brand can then deliver a comprehensive personalized experience that triggers impulsive purchases while also becoming more of a single merchant for multiple aspects of a trip.
For example, Carnival offers insurance right in the checkout process so the customer doesn't need to open a new tab and can immediately consider purchasing insurance.
This placement is effective because the consumer can immediately see the financial trade-off: "I am about to purchase a cruise for $x thousands, and insurance will make this less risky." It's quite likely that this sort of financial calculus fades after the primary behemoth of a transaction has been completed - and thus even more important for optimal placement of ancillary products.
Yet, 22% of the respondents said they didn't even test placement!
This is absolute insanity - ancillary placement should be A/B tested constantly in different product mixes and locations to improve conversion. Perhaps they perform better outside the purchase path...however, that's a doubtful proposition and should be tested for affirmative proof.
Remember: improved conversion doesn't just mean increased revenue - it's also providing a better experience, as the customer finds added value more often via ancillaries. A great place to be for any travel brand seeking better profitability and increased loyalty!
The report is much more extensive than covered here, and can either be viewed as a webinar or whitepaper.
NB: Customer loyalty image courtesy Shutterstock.