Airlines need to transform themselves into hyper-relevant “Living Businesses”
Airlines have long relied on the loyalty of their frequent flyers to grow revenues and profits. And this year in the US it seems to be paying off. The first half of 2018 saw frequent flyer record profits for seven major US airlines.
But airlines can’t afford to rest on their loyalty laurels. According to the International Air Transport Association (IATA) 20% of flights worldwide, on average, are booked through OTAs — in the US it’s closer to 30% and 77% in China. That’s a massive loss of direct-booking revenue.
So do carriers need to enter into fare wars with OTAs to retain the eyeballs and wallets of travelers? Not if they take to heart the results of recent research by Accenture.
According to the study, today’s consumers are a fickle brandagnostic bunch who like to shop around. That’s no big surprise to anyone in the travel business. In their concerted efforts to manage challenging priorities (e.g. safety, regulations, profitability, operational efficiency, fuel costs, etc.) airlines don’t have it easy when it comes to satisfying travelers that have only one priority—themselves!
Something I found quite interesting in Accenture research and evident in our own industry at PressReader (digital publishing) was “why” people behave the way they do.
Accenture found that when people switch from one brand to another, 64% of the time it’s because they are looking for a more relevant experience, product, or service. When relevancy isn’t obvious, which happens in commoditized markets, consumers typically make buying decisions based on price. We see this all the time in the spread of free repetitive news content across the web — a major reason why so few people are willing to pay for digital news.
If relevancy truly is the main driver in consumer buying decisions, then airlines need to differentiate themselves from each other and the booking platforms. They need to become more agile, and continually adapt and cater their products, services, amenities, and experiences to the needs, wants, preferences, and even whims of the people they wish to serve — anywhere, anytime.
Airlines must fight to win the battle for hyper-relevancy — the heartbeat of what Accenture calls “Living Businesses.”
"Successful companies today realize that customer expectations are shaped by the most relevant, real-time, dynamic experiences they encounter across any and all industries. These companies have realized that to be relevant, they must build vitality into all they do. They know it’s not about customer loyalty any longer, it’s about company loyalty to customers."
— OMAR ABBOSH, Chief Strategy Officer, Accenture
Living Businesses design for relevance by using behavioral analytics to gain insights into individual customer desires and then delivering personalized products, services, and experiences that meet their expectations and needs. The key word here being “personalized.”
According to Econsultancy's 2017 Conversion Rate Optimization Report, 93% of businesses see conversion rates rise when they use personalization.
Marketing to a customer of one
Quick question, “Are you still using demographics to segment your audiences?” If so, then I hate to burst your bubble, but relying on demographic data in the 21st century is about as outdated as using floppy disks for backup.
Sure, it was all marketers had before the internet, but it can’t come close to delivering what is needed with today’s “ME Generations.” To become hyperrelevant Living Businesses, brands, including travel brands, need to start marketing to a customer of one.
Accenture Interactive’s global lead for personalization said it best in an interview with CMO.com,
“When you put them into a persona or a segment, you’re not treating them as individuals. You’re actually drowning out their voices in the masses.” Jeriad Zoghby
Unfortunately, most travel brands still struggle to get it right. According to Skift and Adobe’s 2018 Digital Transformation Report, only 36% of airline executives rate their personalization efforts as above average or excellent; 64% say they still have a ways to go.
So it’s not surprising that airlines are putting personalization at the top of their agendas in 2018.
This is all great, but where in the customer journey should this intense focus on personalization in relation to customer experience and relevancy happen? You probably guessed the answer — absolutely everywhere. But you have to start somewhere, so let’s start where airlines say they need it the most.
Relevancy in flight
Last year, PressReader partnered with the Airline Passenger Experience Association (APEX) to survey its members to gain insights into their plans for improving customer experience. 60% of airline executives said the most challenging part of the passenger experience is improving is the inflight component of their journey.
It’s an area that has huge potential since the cabin crew literally has a captive audience waiting to be amazed by all the airline has to offer. The problem is that for 80% of the passengers (those in non-premium cabins), there is very little that differentiates most airlines from their competition. Perhaps we should start calling it the commoditized class, rather than the economy class.
Even basic Wi-Fi connectivity, a highly demanded service, is either expensive, unreliable, or non-existent in most parts of the world.
According to Inmarsat’s
2018 connectivity survey, inflight Wi-Fi is not a niceto-have, but an essential criteria in today’s traveler’s choice of airline − right after the airline’s reputation, free checked baggage, and extra legroom.
The President of the Airline Passenger Experience Association (APEX) agrees.
“Connectivity has gone from an amenity to an expectation in North America. It's like having a lavatory onboard. You've got to have Wi-Fi, and if you don't, customers are going to revolt.”
Director of Aircraft interiors,
Inflight Entertainment and Connectivity, American Airlines
So perhaps upgrading to high-speed Wi-Fi might still be a differentiator within non-US travel brands over the next couple of years, but that window of opportunity is closing fast.
For those airlines already offering Wi-Fi onboard, what else are they doing to use it to create a more personal and relevant experience for their customers?
In 2018, Cathay Pacific Airways was one in only 10 airlines in the world awarded a 5-star certification by Skytrax. And although its business class cabins and service are worthy of note, it was the review of its economy class aboard it Airbus A350 aircraft that impressed me.
Not only did it offer ample legroom which is scarce these days, in addition to the standard tray table, Cathay’s A350 economy seats include a slide-out ledge for a tablet or smartphone, a power outlet and cup holder.
And in terms of Wi-Fi, while the airline still charges an hourly or full-flight fee, there is also an option for passengers to trade personal data with a Cathay partner for complimentary access − something most consumers are still willing to do when they see value in the transaction.
As a partner of Cathay Pacific since 2017 I can attest to the company’s focus on customer experience, not just with the premium flyers, but with economy passengers as well.
An excellent example of this is Cathay Pacific’s Artmap project. A million Marco Polo members receive, on their birthday, a digitized representation of their travels over the past year, turning their flights into a one-of-a-kind, high resolution work of contemporary art that the member can download, print, and frame.
It’s a highly personal and relevant gift passengers appreciate and remember.
Cathay has a new, much larger team focused on customer insights and understanding how people's views and needs are changing. Moving from traditional surveys to digital, the airline is gathering and analyzing a lot more data, a lot faster. Because the more Cathay knows about a passenger, the more it can respond to a person’s unique needs pre-, during-, and postflight.
Through the use of blockchain technology, Cathay’s Asia Miles team is moving closer to near-instant recognition of miles earned by members — responding quickly and directly to what matters to their loyal customers. It is also investing in technology, sponsoring hackathons to tap into the talents of young entrepreneurs and help them deliver on innovations that best serve travelers.
American Airlines’ iSolve app empowers its cabin crew with the authority to deliver onthe-spot compensation in the form of AA Advantage miles to appease a disgruntled passenger. This tangible and quick apology cannot only help defuse the potential spread of discontent while onboard, but it can potentially turn a dissenter into an advocate for the airline.
American also introduced a new shorthaul aircraft without seatback IFE systems supporting the BYOD (Bring Your Own Device) model instead -- a model passengers want, especially millennials. Rather than having to lean forward to view or read content, passengers can sit back, relax, and stream selected content free of charge on their own smartphones and tablets.
Not only is the airline saving millions in fuel costs with the removal of the heavy IFE systems, it’s giving passengers what they want -- an onboard entertainment experience that puts all passengers (not just those in premium class) in control of how and what watch/read/listen to − just like they do at home.
American Airlines also became the first domestic carrier this year to offer a Premium Economy product on its international and select flights to Hawaii, giving passengers more choice for their onboard experience.
Winner of the Best Airline in North America Skytrax award for the seventh time, Air Canada, is recognized as a sustainability leader in the industry and a top employer in the country. I’ve been a loyal member for well over a decade and reached the million mile status in 2015.
To say I’m a fan of the airline might be considered a bit of an understatement for those who know me. I’ve experienced the products, amenities, and services of many airlines in my extensive travels over the past 15 years, and while many are exceptional, my heart still belongs to AC.
In 2015, I was interviewed by the Air Canada for their enRoute magazine where I talked about the work we were doing at PressReader. Three years later, the airline rolled out PressReader to all of its Maple Leaf lounges, with plans to offer the product on board in the near future.
In an interview with Runway Girl Network, VP of products, Andrew Yiu shared the company’s plans to offer digital media onboard in 2019. It is a progressive move for the airline, but one that fits well with Air Canada’s commitment to sustainability and superior customer experience.
Recently we met with airport product design manager for Air Canada, Andrew Macfarlane, to talk about the airline’s future plans as they relate to a more personalized travel experience for its 48 million passengers.
“The company continually looks for opportunities to enhance and personalize the travel experience and build an ongoing relationship with customers, whether that be in person, by email, or through a social media channels.”
Relevancy is a big part of the customer experience equation at Air Canada. For example, the carrier uses behavioral analytics to customize email offers for destinations a customer recently showed interest in, as opposed to issuing irrelevant mass mailings many airlines resort to.
In an interview with Skift earlier this year, Mark Nasr, Air Canada’s vice president for loyalty and ecommerce, shared his thoughts on the importance of balancing analytic-driven experiences with a customer’s ability to customize their own.
“I think there’s a line between customizability and optimization. Today, I would argue a lot of travel suppliers have something akin to a kitchen-sink approach to distribution and retailing.
“Certainly a good deal of progress would be showing relevant products and services and getting it right, but that doesn’t foreclose the ability of allowing the customer to customize if maybe we got it wrong or maybe they’re curious and want to learn about new options that they haven’t experienced in the past.
“We certainly don’t close a door to allowing customization.”
The road to relevancy starts with trust and technology
As much as the threat of OTAs’ impact on airline revenues is significant, carriers still have a leg up on their digital competition when it comes to loyalty.
According to the Travel Loyalty Report 2018, despite over 90% of OTAs having a program in place, less than 10% of them have more than 50% of their users as members. In fact, 59% of OTAs report that less than a quarter of its customers are loyalty plan members.
Why so low? Is it a trust issue? We’ve certainly seen our share of that in the hospitality side of OTA travel.
“People today will use TripAdvisor to do basic research, but the reason why TripAdvisor is not doing well as an OTA is because no one trusts them. In the case of Priceline, Expedia, and Hotels. com, people don't feel vulnerable on a one- or two-star transaction, even on a three because their exposure's not great.
“But nobody's booking them for four- or five-star because it's too expensive and they don't trust them. So when they say this is five-star, six-star, seven-star, or eight-star, what's the criteria for giving that rating to a property? When the guest got there, it didn't turn out to be that way.
“I wish it wasn't so, but one of the reasons why Forbes Travel Guide, in the course of five years, has been able to go from a handful of countries to a hundred countries, and has become the most trusted name globally, is because everybody believes that we've been there, we've verified it, our standards are tough, the system has integrity, you can't game it, and you can't buy it.”
CEO of Forbes Travel Guide (2014 - 2018)
Personally, I appreciate the convenience of comparing multiple carriers on one page on Expedia or Orbitz. But once I hit the book button, I’m more interested in what the chosen airline will do for me from that point forward.
Perhaps an OTA’s influence over the postbooking travel experience isn’t enough for most travelers to join their program. But OTAs aren’t giving up on fickle flyers yet. In fact, they’re just getting started...
“We have to get more sophisticated in how we drive loyalty. At Expedia Group, we are learning more about customers and more about how to maximize their value both to us and to themselves. To be forthright, we have a lot of work to do. It comes down to knowing our customers and understanding what needs to be communicated to them at what time, to be valuable to them.”
Senior Director, Global Loyalty & Customer Retention Expedia
OTAs are still chasing the same Holy Grail as airlines — loyalty. And although airlines still seem to be miles ahead of OTAs in this space, there is no guarantee of that in the future. OTAs live in constant investment mode, particularly in technology and partnerships. And they’re actively working to inspire customers to buy more and not just during the pre-booking phase.
It’s time for airlines to put that same emphasis on the customer journey for every passenger, not just the 20%. Continuing down the path of catering to just the elites will result in OTAs eventually owning the wallets of the other 80% that don’t trust you to take care of them. They may occasionally fly with you, but they won’t buy from you.
Airlines need to become hyper-relevant Living Businesses — businesses that customers don’t switch from, by rather ones they switch to.
Airlines must embrace new ideas and related technologies to better anticipate and capitalize on opportunities to surprise and delight customers throughout the entire journey. They must consistently deliver personalized, relevant experiences (physical, emotional, and digital) based on individual needs, preferences, and context.
When researching this topic, I discovered that while efforts are being made to be more relevant by some, most airlines are still struggling to figure out how. But baby steps are being made, which is promising.
If you are with one of those airlines looking to capitalize on technology to become a hyper-relevant Living Business, I’d love to hear from you. Let’s talk!