5 ways the airline industry can make dynamic offers succeed

In July 2023, 23% of offers in the marketplace at any given time were generated dynamically. With an industry goal of 80%, there is still a way to go.

As we continue the journey, some global airlines have invested millions in new technology to deliver more than just dynamic prices. They are generating truly dynamic offers that include ancillaries and other product elements. On the other end of the spectrum are airlines of all sizes that have not yet tried to use dynamic offers of any kind. 

In 2024, our goal as an industry should be to agree on the standardized elements and data that all airlines need, and should have access to, in order to deliver dynamic offers to customers at scale. Data will help airlines deliver a dynamic offer that’s more targeted to customers' preferences and optimized for their businesses.  

Access to the right data

There are five types of data that will be required to move forward into the next generation of price calculation: foundational data, competitive insights, improved product performance insights, improved traveler insights and improved economic and environmental insights. 

Each of these facets of the offer calculation includes a huge amount of data. Delivering access to airlines requires more than a traditional rules-based process, and now is the time for the industry to move into a data-science based process. 

Airlines cannot just rely on its existing rules-based offer systems for enabling dynamic offers - they need to build out their own data science capabilities or engage with vendors who can work with these very large data sets. This requires more micro-segmented data with additional context to drive personalized, dynamic offers.

For example, segmenting historically could be a business traveler versus a leisure traveler, but micro-segmenting data can get more granular showcasing differences of a family traveling to a beach vacation versus a honeymooning couple. With airlines' own strategies and data science the industry can get the right offer to the right person at the right time. 

Prioritize dynamic prices and ancillaries

The leading-edge airlines are employing both dynamic price adjustment and adjusting the content within offers dynamically by bundling additional ancillary services with their offers. For those only utilizing dynamic pricing, a next good step would be to move towards more dynamic content.

After the base ticket price, ancillaries are a major decision factor for flight shoppers, with 22% saying Wi-Fi is the most influential factor when selecting a flight followed by free food and drink and leg room. 

Separate product from price

Airlines need access to product attributes to craft dynamic offers that better match what is important to each customer so they can create differentiated offers using more than just price. IATA paved the way by separating hard product attributes in their NDC standard, and the industry should embrace this concept.

Once airlines know more about the traveler’s context and desired attributes, they need a new mechanism to craft a more customized offer. This is where a “product catalog” comes in. The catalog contains all the individual items that can comprise an offer. They can package offers in a multitude of ways to create the best match for each traveler type. This catalog of products separated from prices has three separate but related use cases. 

First, is the airline’s own catalog in their offer system. Their offer system, armed with the catalog of product and service items, allows them to construct an offer in real time based on shopper context and the attributes each customer values most. They want total flexibility to define new products quickly at any time and to have total flexibility in what to include in an offer.

Second is the concept of a “supplier” catalog. This contains the information of the markets and products an airline intends to share with their alliance, marketing and interline partners. For example, if a retailer airline is answering a shopper request that will require travel on code share or interline partner airlines, they need data for the products and services offered by each potential partner to generate the best sub-offer.

Third is an airline profile, which allows airlines to publish to sellers and aggregators the markets they serve and the products they offer. As the sellers and aggregators field requests from shoppers they can use this information to provide offers that match the customers’ needs.

The airline profile may also contain the applicable merchandising content so the dynamic offers can be presented in a compelling way. One major opportunity is for airlines to provide visuals, for things like premium experiences and ancillaries. This helps airlines provide shoppers with something tangible that highlights the unique elements of the offer.

Maintain competitive and downstream insights

As the fare filing guys, we have complete access to what airlines are currently filing, and we’ve observed an interesting trend happening as airlines increase the volume of dynamic offers: They are actually also increasing their volume of filed fares.

Airlines using dynamic offers are experiencing two things. First, they are seeing the value of creating a lot of different offers in order to provide airline shoppers with the right offer. And second, airlines are realizing that they benefit from having that information available to them in their end-to-end, downstream processes, which is where filed fares come in. While dynamic offers help with the sales process, it’s important for airlines to have a record of that data for their own bookkeeping and analysis while network airlines need the data to flow for their interline partners.

The industry also benefits from understanding how their dynamic offers compare to what’s out there in the market. Having access to records of other filed fares provides insights that advertisers can use for competitive pricing and positioning. 

Work together

It’s exciting to see so many airlines start to experiment with dynamic offers, which give consumers more relevant choices and deliver higher revenue and give. Already, dynamic offers are throwing off massive amounts of data, and airlines are seeing that they will need infrastructure to manage that data, gain competitive transparency and have data downstream. This is where standards come in.

Managing dynamic offers with an eye toward data science that supports billions of offers generated from individual product attributes and variable prices requires collaboration across the industry and access to newer technology including data clean rooms and product catalogs.

As long as airlines prioritize standards and embrace these new technologies, they can tap into the potential of dynamic offers and get to 80%.