The world of travel and aviation has been turned on its head by the effects of the COVID-19 pandemic.
In our last blog we mentioned how the industry is focusing on recovery and working closely with technology partners, to find out what their airline retail strategy could look like beyond the COVID battle. In this blog we'd like to dive deeper into the digital retail solutions that offer both flexibility and configurability for airlines, to differentiate their offerings and better answer the needs and wants of their customers.
The key component for every airline's recovery is their product offering. Creating the right offer at the right time for customers has never been more important and dynamic offers could play a crucial role in recovery and post-recovery strategies. Within airline retailing there are various definitions of dynamic offer. IATA Dynamic Offer, a project in the IATA Airline Industry Retailing (AIR) portfolio, supported by various airlines and strategic partners (including Datalex), have worked together to produce the following definition:
A “Dynamic Offer” can have varying levels of complexity. To be qualified as dynamic, the following criteria should be fulfilled:
- The offer is constructed by the airline.
- The offer presents some form of dynamic or real-time construction characteristics in response to a shopping request and its context.
Datalex defines the construction of a Dynamic Offer by comprising two main components:
|Product determination||Dynamic pricing|
|Determine which product, or in most cases which combination or bundle of products, to offer for a specific request.||Dynamically determine the price at which the product or the bundle of products should be offered for a specific request.|
There are numerous challenges when trying to implement a dynamic offer solution. For point-to-point carriers, which may have only one-way products with one leg, the optimal margin can also be included in the bid price. However, this does not work for a network carrier under origin and destination (OD) control. The reason is that bid prices live on the legs, and the same bid price is used for different ODs, i.e. the local OD and in the sum for all connecting ODs using that leg. The optimal margin is attributed to the customer currently requesting the offer and depends on how much the customer is willing to pay for the whole trip.
To help the industry address these complexities and provide a transformation roadmap, in 2019, IATA introduced The IATA Dynamic Offers Maturity Model Matrix. The IATA Maturity Matrix provides a framework for airlines and airline technology partners to track their maturity against the strategic destination of dynamic offers.
The current pricing processes within most airline businesses make it impossible to react instantaneously to market demands and desired pricing changes. Even if an airline can identify a necessary pricing change to capture the current willingness to pay, they still have the obstacle of getting this price to market in time to utilise the opportunity. Within the current COVID-19 situation airlines need a solution for making granular pricing changes in real time to obtain this lost opportunity.
As important as it is to enable a pricing change to be made, it is equally important that product determination is not restricting airline’s content suppliers to a single source. It is an absolute imperative that airline’s ensure their dynamic offer product has been architected in a content agnostic way where the number or type of content providers they source from is not restricted. Access to multiple content providers is the only way an airline can implement a dynamic product determination capability.
Finally, an airline needs to ensure they have the capability to offer their contextualised products on the right channel. What you see throughout the industry is the misuse of the word omni-channel. What most people mean when using this word is multi-channel. This is having the ability to offer products on multiple channels but not being able to transition mid-flow between channels. That would be true omni-channel.
Most airlines and technology partners who have already invested in the world of dynamic offer will ultimately aim for a transition to the uppermost right quadrant of the matrix, the most advanced and sophisticated stage of both dynamic product determination and dynamic price determination. However, depending on an airline’s unique business model, each of the quadrants in the Dynamic Offers Maturity Model Matrix may add value to their business.
Dynamic offers enables the opportunity to create contextual and relevant offers at a price that the requesting consumer is willing to pay. This will increase conversion rate, dramatically increase high-value revenue, drive customer satisfaction and customer loyalty whilst taking customer lifetime value into account. Dynamic offers can make a significant change for airlines in the short-term, as well as transform the airlines revenue models of the future.
How Datalex can help
Datalex is a true omni-channel provider, enabling our airline customers to distribute relevant offers across all channels. This means that our customers can differentiate to move beyond price, predict customer needs and tailor offers—the right offer, to the right customer, at the right time.
Datalex Dynamic enables a flexible digital retailing solution based on a non-restrictive architecture – that architecture being highly configurable and allowing airlines to react to current market events quickly and accurately, when and where there are business needs to do so. All our products are hosted on the Datalex Cloud delivered globally under a Software-as-a-Service (SaaS) model on AWS infrastructure. Housed in SOC3 certified data centres, to provide the security and availability our customers demand, globally, 24x7.
This article is originally published on World Aviation Festival Blog. As a golden sponsor of the World Aviation Festival Virtual 2020, Datalex has a few guest passes to offer. Please contact us if you are interested.
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