Air­lines need to trans­form them­selves into hy­per-rel­e­vant “Liv­ing Busi­nesses”

The Insider - - CONTENTS -

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.”

Brian Richard­son

Pres­i­dent, APEX

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?

Cathay Pa­cific

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

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.

Air Canada

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.”

An­drew Mac­far­lane

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.”

Jerry Inz­er­illo

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.”

Ja­cob Miller

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!

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