The pandemic has highlighted a significant pain point that still exists in the industry; the inability for airlines to react quickly to an ever-changing travel landscape and higher than ever digital expectations from travellers. Moreover, airlines need more flexibility in how they manage and promote ancillaries throughout the travel lifecycle to unlock additional ancillary revenue ‘beyond the seat’.
Datalex’s Ancillary Merchandiser Expert, Jeremiah McAuliffe shares his insights in this Q&A about how airlines can transform to be a true ‘reactive’ retailer and flex to get the most from ancillary revenue with real-time management of ancillaries.
Tell us more about what's going on with ancillaries now that we’re out of the pandemic?
Since 2020 the industry has seen two things clearly, the market demand for smarter, more connected, customer centric merchandising and the potential of ancillary revenue to help fill the gap of lost ticket revenue. Now that travel is back, airline's cannot afford to standstill with legacy ancillary processes and an out-of-date retail experience that falls short of customer expectations.
As flight bookings will take some time to return to pre-pandemic levels, driving a deeper wallet share is key and there is a huge opportunity for airlines to unlock revenue beyond the seat by monetising ancillaries across the travel lifecycle.
What challenges are airlines facing?
There is an industry-wide issue at play, which is the inability to react quickly to changing demand and customer needs in order to capture revenue. Airlines are held back by very slow processes that can take months trying to work out how to add a new ancillary stream or add new touchpoints.
Airlines need a much more flexible solution and fast time to market to manage and promote ancillaries for a more ‘digital’ traveller that wants choice and service options in real-time - agility and speed to market is paramount. Insights from a recent survey, conducted by Datalex, with over 100 airline executives worldwide reveals a distinct appetite by airlines for a balance of both automation in ancillary management and a degree of airline control - this will provide airlines with the ability to deliver true reactive retailing – real-time control of their merchandising strategy.
What are your top tips for airlines to amplify their merchandising successfully to drive new revenues and increase customer engagement?
- First - Think like a retailer; Airlines must think of themselves as a retailer who has a fleet of planes, not an airline attempting to sell extra products.
- Next – Choice; Connect & Engage customers with Timely & Relevant Offers. Airlines who can offer a the most relevant ancillary choices throughout the travel lifecycle and can intelligently sell them across all their touchpoints will be the ones who see revenue grow quickly.
- Monetise ‘Purchasing Mirco-Moments’ across the Travel Lifecycle; Airlines have to move away from the concept of just selling ancillary products, towards monetizing ‘purchasing micro-moments’ across the travel life cycle. That could be purchasing a pre-flight meal the night before. Adding extra cabin baggage. Adding car hire. Getting this timing right and product placement right - That’s the challenge.
- AI Powered Dynamic Pricing of Ancillaries; In our airline research, dynamic pricing of ancillaries came out the next big opportunity for ancillary revenue.
- My Final Tip – Invest in the right technology to power Reactive Retailing; Airlines need much greater flexibility and agility in how they manage ancillaries.
According to IATA and McKinsey, $40 billion dollars every year is being left on the table by failing to engage with customers through effective ancillary merchandising. What can airlines do today to capture some of this lost revenue?
Everything beyond the seat can be sold in theory, but the real opportunity lies with those airlines who can intelligently target and engage customers with personalized ancillaries bespoke to their unique journey. In addition to this, the traditional ancillaries of seats and bags can be squeezed further by offering types of these ancillaries.
In light of the last two years, flexibility as an ancillary is something travellers are willing to pay for so they can change travel plans easily as needed. In recently conducted Datalex research with 10,000 travellers worldwide, we asked travellers what ancillaries beyond the seat and bags are they willing to pay for to improve the travel experience – they identified areas such as flexibility and insurance.
It's all about timing of the right product, placement and pricing and the power to control that in real-time.
Source: Airline Retailing: The Value at Stake https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/airline-retailing-the-value-at-stake
Tell us about Datalex Merchandiser product and what makes it different?
- Real-Time Retail Control – powered by our Digital Configurator tool which empowers airlines with the ability to manage ancillaries directly and fast
- The power of reactive retailing – to test and launch new ancillaries at any touchpoint very quickly
- Choice – With an extensive Product Catalogue to offer more and relevant ancillaries to travellers
- Persona – our unique personalisation capability to make ancillaries more relevant to each individual
- Unlock revenues beyond seats and bags with more opportunities to Monetise ancillaries throughout lifecycle
- Plug and play product – gets airlines to market with powerful merchandising engine in 6 weeks
Datalex Merchandiser is serving a real need for airlines to boost their merchandising and ancillary revenue.
What’s your vision for the evolution of ancillaries into the future?
To connect travellers with relevant ancillaries that matches their need when they need it, that engages them pre, during and post journey and that extends to non-travel products as well as travel specific products. The airlines that will emerge on top will be those building better and more responsive travel retail experiences for customers and doing this quickly. Airline merchandising strategies around dynamic pricing, dynamic bundling of ancillaries and personalised customer experience will ensure the gap between high-end airline retailers and those who are not, becomes undeniable.
Download the Merchandiser Datasheet or Request a Meeting with our Merchandiser Experts here.
Datalex's purpose is to transform airline retail. To learn more about key digital trends and AI-powered dynamic pricing opportunities, download the Datalex Research Report: The Digital Airline and Customer 2022: https://content.datalex.com/the-digital-airline-and-customer-2022