Marketing to non-customers may violate the fundamental rules of marketing but EyeforTravel’s guest columnist, Tom Bacon, argues that may not be a bad thing.
‘Who is your target market?’ Your answer to that question is supposed to dictate your product, your promotion, your price, and your distribution strategy. We have all learned that such ‘focus’ is critical for any successful business. We are also told that marketing to non-customers violates fundamental rules of the marketing.
However, some highly successful marketers have pushed the envelope on this targeted, or should I say somewhat narrow, perspective. In fact, broadening your market can open up whole new opportunities for profitability without diluting your connection with your more narrowly defined primary ‘target’ market.
The Sabre success story
In travel, one of the most famous examples of this strategy was American Airlines’ development of the SABRE system for travel agencies. Sabre was the name for an automated system of airline industry schedules and fares. This allowed travel agents to quickly find the best flights and the best fares for their customers from right across the industry. As such United Airlines and Delta Airlines customers too, would benefit from American’s travel agent automation. American received tremendous marketing benefits from this initiative and eventually spun it off as a highly successful separate business. Their openness to ‘non-customers’ was worth over a billion dollars!
Selling travel to non-travellers
Another airline innovation was to team up with credit card companies and other businesses to sell frequent flyer ‘miles’. Non-travellers would earn free trips on American! In Dallas you could earn a free American Airlines’ trip by getting your roof replaced after a hailstorm! This marketing initiative recognised that:
1. Many non-travellers dream of travel that they would never be willing to pay for directly
2. Other businesses can benefit from – and are willing pay for – supporting such dreams to get more customers themselves.
Many large airlines today talk of how more frequent flyer miles are earned through non-travel activities than through travel itself. The revenue from the credit card companies and the other businesses that give away these miles, for example, has transformed AAdvantage into a large contributor to American’s profits – and has resulted in the successful spin-off of other such Frequent Flyer programmes by Air Canada and other airlines.
American’s regional affiliate, American Eagle, is a recent example of marketing to non-customers. Eagle operates mostly 50-seat regional jets – an aircraft which is now a declining part of the regional industry. While in bankruptcy, Eagle has focused its growth on ground handling, including handling other airlines’ flights and aircraft at airports across the country. Ground handling actually represents a competitive advantage for Eagle since its combination of low cost and relatively good quality of service is sought across the industry. Earlier this year, Eagle announced it was awarded a contract to handle United Express flights at nine locations.
BitBend is another recent example of marketing to non-customers – a travel site that offers something of value to non-travelers! This is a travel start-up that, like frequent flyer miles offered by non-travel companies, offers a dramatically lower price point for potential travellers (although, unlike frequent flyer miles, BitBend doesn’t give away travel for ‘free’). Many potential travellers resist non-refundable, non-changeable fares. Like the Dallas-based roofer who offers frequent flyer miles, BitBend allows such customers to ‘dream’ of travel without the commitment inherent in non-refundable, non-changeable fares. BitBend gives potential travellers the flexibility to lock in a fare – and availability – for less than $20 – much less than the $300-$500 required for a round-trip fare. And, as with the banked miles from a frequent flyer programme, the BitBend customer can contemplate the dream trip to Las Vegas or San Francisco – talk about it with friends and do research on sites and events (BitBend offers links to social media sites to facilitate travel discussions). So customers can enjoy the process of planning a real trip but without the huge financial commitment that this often requires. BitBend is launching its product in Chicago early next year.
Three tips to take away
What these strategies show is that travel companies can benefit from thinking more about ‘non-customers’. They should:
1. Think broadly. You can expand your business by building a product around ‘non-customers’. ‘Non-customers’ can include your competitors, your competitors’ customers, and potential customers who are excluded from your current market due to certain price or product attributes.
2. Consider selling an industry solution like Sabre or Eagle’s ground handling, more fully leveraging a competitive advantage. Making money on a service that appeals to a much larger slice of the whole market can be far more lucrative than limiting your thinking to your current smaller slice of the market.
3. Travel products, in particular, have a psychological benefit (dreaming, anticipating, planning, talking with friends) that are of value in themselves or which can be bundled with non-travel products. Both AAdvantage and BitBend capitalise on this special feature of travel.
This guest article was penned exclusively for EyeforTravel by Tom Bacon, former airline executive and industry consultant in revenue optimisation. Questions? Contact Tom at firstname.lastname@example.org.