What happens when airlines, distributors and agencies come together to talk about merchandising?
In Dublin last week it was good conversation, some agreement, some disagreement, but not a lot of clarity on how to execute or fulfill merchandising of ancillary products across multiple sales channels.
Datalex hosted its annual conference for its customers and partners, with a focus on merchandising and travel retail.
In attendance were more than a dozen airlines, a few large distribution channels, travel agencies, and other players in the airline distribution supply chain.
The conference spanned two days, and included sessions on channel discrimination, commissionable ancillaries, social media and mobile, loyalty programs, standards, and the never-ending discussion about Google and ITA.
Several points came up over and over again, buoyed by equal parts passion and anxiety so I’ve distilled them down to the following:
1. Merchandising ancillary airline services is a proven business model
Similar to the CASMA conference in March, no one argued against merchandising. Checked bags, seat upgrades, lounge access and other services are being offered and sold to the tune of billions of dollars/euros worldwide by airlines, and while customers grumble about it on blogs/tweets/posts, they continue to purchase the services.
2. But airlines must do a better job at articulating the value proposition to customers
Lots of references were made to retailers – Amazon, Target, Tesco – as models for airlines considering how to market and present these services to their customers. After all, if billions are being made AND customers don’t understand the value proposition, imagine the turnover if customers did value these ancillary services.
This means airlines have to develop some sophistication in presenting offers so all options associated with a flight are available, bundled (as special offers) and fully unbundled. There’s nothing sacrosanct about the current booking path – disruption in the buying process can be useful. Test presentations of offers and if it doesn’t work, do something else and do it fast.
3. To do that, the airlines have to become marketers
Some airlines have done a great job with their frequent flyer programs (Air Canada and Delta were given as examples), and several speakers suggested that these programs could be the starting point for extended marketing efforts. Successful marketing depends on understanding the customer, and airlines have compiled extensive information about members in their frequent flyer programs. Why not use it?
4. What’s in it for me?
It’s one thing to present and sell ancillary services on brand.com; it’s another to distribute those services and products to other channels. Airlines are going to have to figure out how to give incentives to their distribution partners to sell these services, or decide that not all services or products are appropriate to be sold on every channel. It takes infrastructure to present, sell and report on sold services, and intermediaries don’t have money just lying around to build that infrastructure.
4. By the way, a multi-channel strategy is the ONLY strategy
As one speaker pointed out, the GDSs are not going away. American Airlines’ direct connect initiative is “noble” in the words of another speaker in their desire to better serve their customers’ needs, but a single-channel strategy will fail every time. Airlines must be prepared to identify multiple appropriate channels and utilize them.
Some of those channels will be direct-connect and some will be through the GDS, so build products that are flexible and can be adapted to various types of connectivity and sales channels.
5. So what could possibly get in the way of this merchandising nirvana?
Operations was cited over and over again as a sticking point, especially around the complexity of code-sharing and interlining. There are no operational standards around the reporting, fulfillment and revenue reconciliation of selling ancillary services and products of a partner airline, which puts the delivery of services sold at risk, undermining their value proposition and ultimately customer loyalty. It may be that this level of complexity doesn’t need to be addressed first, but it will have to be addressed at some point, especially if airlines are required to offer all services through all channels.
Which brings us to regulation, also cited as potential issue (although it’s difficult to understand if politicians in the US are just posturing). The prevailing (and predictable) sentiment in the room was that airlines and their partners should be able to offer relevant services in the appropriate channels and let markets, not governments, dictate what services and products are offered on what channel.
As an aside, I am so sick of hearing about Google and ITA, but it was a hot topic of discussion, so I’ll dive in. There was a pretty sharp disagreement between attendees about the level of threat presented by Google.
One on side were the airlines, who said no matter what information was presented where, they still controlled and sold the inventory. On the other side were those who said Google would undermine metasearch, the OTAs and perhaps the GDSs.
No one believed Google is interested in actually distributing inventory, but as with all things Google, who can tell?
Another industry conference, another discussion about merchandising, but the conversations at this event were focused not on the concept but on the execution, even if no one is exactly sure how to get it done.