If you were at the 2017 Aviation Festival in London last October, you'll almost certainly have heard - or asked - the question: "Why can't airlines be more like Amazon or Netflix when it comes to customer personalization?"
As a company who specializes in helping airlines unlock the value which is hidden in their own data silos - and those of their re-seller partners - it's a question we get asked all the time.
The appeal for airline marketers is obvious. Amazon, for example, is a master of leveraging the sentiment 'people who liked this product, also liked this product'. They're also a role model for the power of testimonials and social referrals.
But is it realistic for an airline to aspire to Amazon's standards of consumer communications? And, more to the point, is it even a worthwhile goal?
Here's three reasons why airlines probably can't become 'the Amazon of the industry'. And, finally, there's insights into how the ConztanzONE agile database could fast-track on you the personalization goals which you can realistically achieve.
#1. Airline IT systems and data silos didn't evolve around personalization.
Amazon, Netflix and a plethora of online SaaS software as a service companies have shaped their entire offer around a customer-centric data platform.
But that isn't the case with the majority of airlines. They have evolved on and around a business model and legislative framework which is getting on for being a century old.
So their IT has evolved to answer silod, inward facing questions for differing parts of the business. For example marketing ('what is our occupancy for various routes?'), service (how do we manage missing baggage?'), accounts ('what is our EBITD?) and operations ('are we in compliance for pilot flying hours?).
Another reason why some airlines feel they are behind the curve when it comes implementing personalization initiatives is resources. For example, at Conztanz we help airlines to implement PSS systems and/or comply with EU PNR regulations... and we know that airlines need to prioritize their IT and human resources on those projects. Airline IT departments will often have a 'to do' list stretching years into the future.
Lastly, of course, is the fact that sophisticated personalization programs need real-time access to customer data which is dispersed around the business, or even hosted by third-parties in your channel.
Which brings us neatly to the second big challenge faced by airlines … ‘are your distribution channels to fragmented for personalization?’
Data is captured primarily to inform business decisions, not to enhance service, and systems have been built to enable that process. How many seats can we sell at what price? What is our likely occupancy rate in July? Do we make enough money selling excursions to justify the logistics of running them? What is our commercial response to the answers to these questions?
Why do airline brands have all the data but none of the delivery?
#2. Airline distribution channels are too fragmented and dispersed.
In a 2016 blog post (excerpt and link below), consultants PwC write about how the challenges of the distribution channel mean that airlines could have less rather than more connection with their customer.
And that's because a new breed of web-based, disruptive services are providing price-based services which allow consumers to find the cheapest and/or most convenient way to get from A to B. Often these new apps will package hotels and car rental and other options, which erodes the airline's ancillary opportunities.
It's a Catch 22 for airlines: they need to provide their airline timetable and price APIs to the distribution channel or risk losing sales ... but at the same time it's the reseller who has the customer relationship, or at least a major part of it.
At Conztanz we help airlines to implement IATA NDC as a way of controlling their brand experience through the distribution channel. This gives airlines some control over influencing the brand agnostic travelers who book their flights through comparison sites, but some aspects of the customer data are still going to reside with the reseller.
A big fear for the airlines we speak to is that they have to fight the challenge of simply becoming a commodity, with fewer opportunities to add value.
Of course, this fragmented distribution channel is not a problem for companies like Amazon and Netflix. They have a direct route to the customer and own all the customer data. Amazon has an affiliate channel, but that is simply a commission paid when consumers click on an affiliate link provided by blog owners and influence marketers.
In addition, Amazon and Netflix can base their insights on a wide range of customer purchases and insights. And volume of purchases is the third reason why airlines will have difficulty in replicating the personalized experience of Amazon customers. Read on ...
Airlines can benefit from this only if they undertake three major initiatives within a holistic strategy enabled by technology. They have to transform their travel distribution model in both direct and indirect channels. They must pursue closer partnerships with channel, content, and technology players. Finally, they should enhance internal capabilities (operating model, processes, skills, and technology) to capture the opportunities of the new distribution trends and so become centered on customers in their organizational setup.
#3. The average passenger flies with you less than 1.5 times a year.
KLM CEO Pieter Elbers says, during last Aviation Festival in London, the average customer flies with the airline between 1.1 and 1.5 times per year. And the typical airline shopping basket is between $100 and $1000, according to Tnooz.
That frequency-of-shopping and average-sale-value profile is entirely different to Amazon and means that the sales dynamic between Amazon and its customers is entirely different to the one experienced by airlines and their customers.
But wait. Just because airlines have fewer transactions and higher value than Amazon, that doesn't mean carriers need to have fewer customer data than online e-tailers.
Actually, Amazon would love to have all the customer insight opportunities and touchpoints that airlines have. Like Amazon, airlines know how their customer made a purchase. But airlines can then go on gather data about how the customer got to the airport, what they ate and shopped for at the airport, what seat class or price bracket they are in., any extras purchased on the plane, their destination, the price bracket of their hotel, whether they hired a car, etc.
Guess what? The airline even safely delivered their customer from A to B flying at 35,000 feet, which has got to count for more than Amazon delivering a matching duvet cover and pillowcase on time!
So, airlines have the opportunity to gather significant data about their customers. Which brings us to a final question ... 'Can airlines actually be better at marketing personalization than Amazon?'
Shopping for airline tickets is completely different from your typical experience on Amazon.
Not only is the average shopping basket significantly higher (an estimated range of $100-$1,000 for airlines, vs. only $50-$100 for Amazon), but the emotional investment in the purchase is dramatically higher as well.
This conditions the success of an upcoming vacation or crucial business trip – and is therefore a high-engagement process.
Closing the sale is far more difficult, and it explains why most airlines decide not to distract from the sensitive process of buying an air ticket with too many cross-selling offers.
Can airlines be better at marketing personalization than Amazon?
As Philippe der Arslanian wrote in his Tnooz article: "I have been an Amazon customer for 20 years (I bought my first book on amazon.com in Nov. 1997), and yet as far as Amazon is concerned, I fit in only two boxes. I am either an IT geek or an avid mountaineer. That’s it. Amazon has 20 years of purchasing data, and yet is only able to push me into these two buckets."
So how can airlines up their game?
At the core of the exercise, it's just a matter of airlines doing two things better:
1. Capture the right data.
2. Make the data available in real-time for 'on the fly' consumer personalization.
And Conztanz can help you make both those goals happen:
A. Conztanz consultants know how to structure NDC and other data-driven personalization initiatives.
B. The ConztanzONE agility platform leverages your current data, without affecting your present IT. How sweet is that?
Personalization for airlines. News sources.