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1188 days ago
 

Five reasons why the airline merchandising saga is maturing

Lots of ideas were floated at the annual Datalex User’s Conference in Dublin last week, as a roomful of consultants, airlines, distributors, and technology providers talked about airline merchandising perhaps coming-of-age.

Here’s a rundown of some of the more compelling ideas.

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1. It’s AND, not OR

Well, duh. Haven’t we seen this movie before? With all the posturing between the GDSs and the airlines, what’s being ignored is what the customer wants.

Sure, booking on Airline.com is the cheapest channel with the best opportunity for ancillary sales, and sure, a booking made via an intermediary has costs and limited opportunity for ancillary sales.

But guess what – in general customers do not care about those costs or opportunities.

So far, airlines that are present in the OTAs and GDSs haven’t made it worth every customer’s while to book direct. And there is an understandable reason: the lack of functionality is still seen as a supply issue rather than an intermediary issue.

Despite the number of years airlines have been selling products via the web, it’s still largely about access. Plus searching multiple airline sites for pricing and schedule comparison is a time-consuming headache. (Most) airlines must follow a multi-channel solution for now because it’s what the customer wants.

2. How direct is Direct-Connect?

Not so much. It is a clear misnomer. No supplier with a multi-channel distribution strategy wants to connect directly to every single trading partner without some sort of intermediary, which is the true meaning of direct connect.

Multiple direct connects are expensive to set up and expensive to maintain. GDSs and their competitors like Farelogix have direct connects between their applications and the airline but not from the airline to the end customer.

The industry needs to call a spade a spade here and stop misusing the term direct connect – it’s a deliberate obfuscation of the real issue at hand which is the airlines’ unhappiness with the GDS’ technology and financial models.

3. Airlines aren’t merchandisers, yet

Two presenters at the conference, from Dell and Geary Interactive, a marketing agency, talked about merchandising from non-travel perspectives.

Meant to be interactive, some questions like “how well do you know your best customers”, elicited dead silence in response. Given that it was a roomful of competitors, one could make the argument that no airline wanted to show its hand, but the general consensus at the cocktail reception that evening was that the silence indicated a lack of knowledge about customers and how to sell ancillary products and services to them.

Airline organizational charts contribute to the problem.  Commercial, loyalty and IT departments are often siloed, with little communication between them, and there still seems to be internal arguments as to which department actually owns the customer. It’s hard to get a complete picture of the customer with incomplete knowledge of that customer.

Part of this debate included a conversation on the difference between multiple channels and multiple touch points. Many questioned if it was just an issue of semantics, but one attendee said that if the industry can’t define the difference, we’ve all got some work to do.

The difference is actually pretty clear. The customer has interaction with the airline at different touch points – researching, booking, payment, check-in and on-board. Customers to access those touch points prior to on-board on whatever channel makes sense for the airline and for the customer.

To become effective merchandisers, airlines will need to know more about their customer and the dialogue of the interaction across these multiple channels and touch points.

Airlines, as Datalex using the term “personas” pointed out, need to interact with their customers more completely.  That lack of personalized customer information via today’s GDS-powered intermediaries is a sore point for the airlines (although in most cases the airlines’ web sites aren’t there yet either). It also represents the value that, say, a Google could (if they so chose) provide.

Shifting from the concept of effective merchandising to the reality is hard work and not a core strength of the airlines, and only focusing on the distribution side of this shift is an oversimplification of the issue.

4. The cost of change

It’s not sexy, but it’s a reality – the cost of change will have a significant impact on the merchandising of ancillary products and services. There are lots of travel agents out there who like their green screens, lots of software still depreciating, lots of existing long-term contracts, lots of employees who will need retraining, and lots of regulations that will need to be addressed in multiple jurisdictions.

But we are at a cusp – the cost of maintaining the current solution is also rising. Datalex CEO and conference host Cormac Whelan asked what is the cost of the green screen when airline customers want more than the green screen can provide?

All industries can and must evolve to meet changing market needs, but in an industry like air travel which has many, many moving parts and layers of regulation, glossing over the cost of change for suppliers, intermediaries, distributors and technology providers in the distribution debate is dishonest.

5. An industry problem needs an industry solution

Finally, as much as the airlines paint this as the problem of GDSs and vice versa, it’s not. This is a market problem – airlines want to offer more services to their customers, and customers want access to those services on different channels – B2C and B2B.

Those channels have a financial stake in offering value to their users, and technology providers have a stake in offering value to their customers – airlines and intermediaries.

This isn’t a problem the airlines can solve by themselves by dictating process, standards or requirements.  There is a need for a cooperative solution because the customer doesn’t always buy directly from the airline.  Somewhere along the line that thought seems to have been lost.

As one speaker admonished the audience: if Henry Ford had asked his customers what they wanted, they would have told him a faster horse. What the industry needs is not a faster something, but an altogether new something.

The only way forward is to recognize that all parties that have a stake also have a right to fully participate in the solution so that we as an industry can address the most important thing at hand – what the customer wants.

 
 
Valyn Perini

About the Writer :: Valyn Perini

Valyn Perini is a contributing Node to Tnooz and a travel industry lifer with experience in operations, sales and marketing, systems, consulting, and software development in the hospitality and travel industry.

Her was most recently the CEO of the OpenTravel Alliance, where she oversaw the operations of the organization, including developing and executing strategies to reach the goal of standardized electronic distribution of travel and traveler information.

Her travel career includes stints with InterContinental, Westin and Swissôtel, with PricewaterhouseCoopers as a travel technology consultant, and as the director of product strategy for Newmarket International.

Valyn speaks on industry topics at events around the world, and writes about travel when she can find the time.

Originally from Atlanta, Valyn now lives in Boston.

 

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  1. Chicke Fitzgerald

    Very articulate Valyn. As I was reading I found myself wondering who the author of this thoughtful piece was! I would love to quote you in the book that we are publishing this summer on Multi-Channel Distribution.

     
  2. Valyn Perini

    Jonathan and Scott,

    You both make great points. Jonathan, you are underscoring the point that airlines have not historically been retailers but have been bound by process. To provide the value to customers who buy these products, the airlines will have to become much more decentralized in how they manage on-board process (excepting safety and security, of course).

    Scott, thanks for the kind words. Right now, it seems that all innovation is locked up until court battles are won, lost or drawn. Even outside expertise can’t help until these legal initiatives are concluded.

     
  3. Scott Gillespie

    An insightful, even-handed analysis of a very important topic – well done, Valyn!

    But where do we go from here? What’s the prescription for treating the problem? In short, where is there real industry leadership?

    Does our industry need to import leaders from other industries, as JCPenney just did by hiring a senior exec from Apple? (Note that Delta hired a senior exec from Target…Exhibit A for this line of action.)

    Or do we rely on the talents within our industry and trust the Darwinian forces to work their evolutionary – not revolutionary – magic?

    Probably some of both…but aren’t we all getting tired of watching and waiting for the breakthroughs?

     
  4. IM Smith

    This doesn’t only apply to the sale of tickets. It applies to the sale of goods too. A traveller may want to do this.. change his ticket, change his seat, add another suitcase, buy some perfume for his wife, order a different meal, buy some airport transport (like a train ticket)…. how many places does he have to go to to be able to spend his money? There needs to be an all purpose shopping portal where the passenger can go and explore all his options and spend his money as he wants to do all this after the ticket purchase, but before travel.

     
  5. Travelport, Amadeus, Sabre, Abacus briefs - June 2011 | Tnooz

    [...] Five reasons why the airline merchandising saga is maturing [...]

     
  6. Jonathan Alford

    Excellent article, Valyn.

    Under point #3, can I add Operations to the airline org challenge?

    Quick anecdote – friend of mine flew back from Spring Break in Hawaii, fairly long flight full of families. Kids were excited because “Mega-Mind” was the in-flight movie. Meal service started, then stopped about 10 rows short because the plane ran out of food.

    After another hour, no movie yet – and the kids were getting antsy. Parents didn’t get any response from the flight crew. Finally they got their answer as to why the movie couldn’t start over 2 hours into the flight…

    Operating procedures stated that they could not start the movie until after meal service was completed. Since they ran out of food, meal service could not be completed.

    Point? A consumer-focused “Merchandising” shift from concept to reality, as you pointed out, is not a core strength, and the DNA required for that competency can take a long time to build, but also has to be done across the organization with full executive backing. Nordstrom, REI, Amazon, and Costco are a few good, but very distinct in their models, cases…

    great article…

     
 
 

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