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November 2018, Amsterdam

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Hyper-personalisation: all talk but little airline action, says McKinsey

A McKinsey report released to customers earlier this year and now in the public domain hits out at weak airline efforts to improve the customer experience

A stream of wake-up calls in McKinsey’s Travel & Logistics: Data Drives the Race for Customers report includes the dire fact that most major airlines struggle to provide customers with complete, easy to use digital services. Among the 25 major airlines it assessed,  ‘none excelled’.

Yet, given the importance of the technically driven changes transforming online travel, especially the move hyper-personalise, digital mastery seems a must! Already, McKinsey point out, 69% of customers are more loyal to a travel company that personalises their online and offline customer experiences.

Akira Mitsumasu, VP, Products & Services Planning, Japan Airlines (JAL), understands this and is working to get a single view of the customer and real-time data access, and is actively working with third parties so that it can deliver a hyper-personalised experience.

By hyper-personalised, we mean the ability to target intelligent, highly tailored offers and in real-time; in other words like Amazon. This is something that JAL understands too.

“We are also adopting a retailer's mind set, and are looking beyond being merely a point A to B mode of transport,” says Mitsamasu, who will be sharing more detailed insights into their journey towards hyper-personalisation in San Francisco at Analytics & AI in Travel (March 14-15, 2019).

But back to the McKinsey report. One of the world’s 'big three' strategy consultants, McKinsey has done a thorough job, pouring through data from 15 key countries and carrying out extensive interviews with experts on technology and in the airlines themselves. The report aims to gauge customer demand for digital interactions and services and the marketing response, and how companies are to ward off competition and create value.

Digital assistants are central to customer experience, offering comprehensive support throughout the trip and opening new revenue pools for airlines in the process

Looking at personalisation, it sees digital assistants as being “central to customer experience, offering comprehensive support throughout the trip and opening new revenue pools for airlines in the process.” Yet, while early versions already exist and some airlines are experimenting with text-based travel assistance, voice-based ones remain rare. Airlines, it states, “should not underestimate their importance”: already about 20% of all mobile searches online are conducted via voice.

“To launch digital assistant functions, all travel companies will need to structure their data pools and bridge their various data silos in ways that ensure assistance have sufficient data with which to work,” the report adds. Voice-enable assistants need substantial amounts of data as a typical web application presents the user with dozens of options in response to search requests, while a voice-enable assistant can offer only one of two.

Also, airlines would have to decide which touchpoints they would like to support. “In doing this they should consider their technical capabilities, customer needs and whether their own services are attractive enough for users to install dedicated apps, or whether they should partner with a third party,” it suggests.

Keeping the customer

The report takes a look at customer engagement. Simple to fix, but it found slow website page loads and too many clicks required - 30% of smart phone users will switch to another app if it fails to meet their needs immediately and 53% leave after three seconds).

Then, airlines ‘owned’ fewer than 20% of the 100 pre-booking digital touchpoints than the average customer chalks up across channels and devices researching a trip. As a result, full-service carriers rely heavily on paid referrals and search ads to drive traffic. “This means companies have to be smart in knowing which of the various search engines, review sites, blogs, and so on are relevant to their potential customers to focus advertising effectively,” the report states.

Low cost carriers fare best, with some 72% of traffic on their websites coming from direct requests or organic searches, against 60% for the full-service companies.

69% of customers are more loyal to a travel company that personalises their online and offline customer experiences

30% of smart phone users will switch to another app if it fails to meet their needs

20% of all mobile searches are conducted via voice

There is also a need to figure out how not to lose the customer on this long journey and to decide a cost-effective way of preventing this from happening. One way was, the report suggested, “to pre-populate search fields or payment data based on information retrieved from other channels”.

Securing data that customers want needs some industry-wide attention, it says, citing as an example three basic but very frequently requested features – legroom, the availability of inflight entertainment and Wifi.

“Few of the meta-searches we conducted offered such detail and only a small number of airlines did so,” it commented. Lack of data and shared standards were to blame, and the International Air Transport Association (IATA) has the latter on its list for change.

Data central to continuing the journey

Personalisation links with another technology-enabled trend - continuous customer engagement. Digital assistants, mobile devices, and data can be leveraged to capture a greater piece of customers’ “share of mind” not only before making a booking, but also during and after the trip, helping to counter the commoditisation of the industry. The flip side of continuous engagement, however, would be “higher customer expectations, especially for full-service carriers”. Customers would expect airlines to be “more aware of their needs and meet them, perhaps offering small delights throughout a trip.”

To tailor an offer exactly to a customer’s needs, airlines must be able to distinguish his or her intentions ahead of time…

All this requires that airlines will have to capture more customer data. Data on why a customer is making a trip will help gauge price sensitivities and needs, which will differ depending on whether it is for business or pleasure. As the report points out, “to tailor an offer exactly to a customer’s needs, airlines must be able to distinguish his or her intentions ahead of time – by knowing which channels are typically used at what times for which kind of trip.”

There is a lot of work to do, the report writers observe: “It will be no small task bringing all the relevant customer data about social media usage, loyalty programs, or flight capacities together. Many companies, not just airlines, will find it resides within different departments.”

The only comfort offered is that the technologies required should help the air travel companies to optimise their operations and lower costs!

Don’t miss an upcoming EyeforTravel Whitepaper with hyper-personalisation insights from Akira Mitsumasu, VP, Products & Services Planning, Japan Airlines Jeremy TerBush, SVP Analytics, Wyndham Destinations and Isaac Mavis, VP Data Science, Allegiant, who are also speaking in San Francisco at Analytics & AI in Travel (March 14-15, 2019).

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