Ancillary merchandising: time to get truly focused!
Tom Bacon attended the Smart Travel Data Summit in February where he found that a new approach to driving ancillary revenues in hotels could apply to airlines
At the EyeforTravel Smart Travel Data Summit in February, participants learned about a new tool for hoteliers to increase ancillary revenue. Using big data analytics to predict customer-specific purchase behaviour, hotels can help check-in agents address the most likely needs of their customers; they offer a larger room or a voucher for a drink based on calculated individual probabilities.
Here is an example:
One of the most important elements of this hierarchy is that it gives the front-line new focus. With the proliferation in ancillary options and associated fees, it can be overwhelming for both customers and employees. But by offering customers a more personalised set of options – ones that add value to that individual customer – the customer experience can dramatically improve, while the hotel also drives more revenue.
How it works is that the number of recommended amenities for each customer is limited to the highest probability options. Already, the one-on-one interaction between the check-in agent and the customer is often too long and there is little customer tolerance for it becoming longer still, especially with discussion of unwanted services. So, the agent is provided the most value-added options for possible discussion and sale.
Note that this is not actual personalisation. Instead of relying on actual individual purchase behaviour – which is often limited – the programme compares individual characteristics with other travellers and correlates purchase behaviour across the newly defined segment. The statistical approach is based on market segmentation; what characteristics define the highest probability ancillary purchasers?
This concept has possible implications for airlines too.
How would you use the above information as an airline? Would you modify the booking path, focusing more on the first few, higher probability, options rather than muddy Mr Bacon’s booking experience with low probability sell-ups? For me, for example, the travel insurance option is always just an annoyance – I never purchase travel insurance and having to explicitly reject it - every darn time - just complicates my booking. On the other hand, I appreciate some of the other ancillary options common in air travel booking.
Branded fares, of course, are an example of airlines trying to make the booking process easier for certain segments that value a bundle of amenities. These, however, are currently generic and not packages truly designed for individual passengers based on their ascribed market segment.
Besides making the booking process more relevant to individual travellers, airlines can leverage this information at othertouchpoints.
Lessons from Lufthansa
Lufthansa, in fact, has identified a special target customer for lounge use. The algorithm Lufthansa has developed includes customer specific information along with when the traveller checks in for his flight (if he has more than an hour, he is a more likely customer for the lounge) and busy-ness of the lounge itself (it doesn’t seek more customers if the lounge is full).
Lufthansa notifies passengers via a mobile message as they arrive at the airport for their flight. Similarly, electronic messaging could advise other passengers with messaging relevant to their particular segment: segments with other helpful information including, where deemed appropriate, on board amenities or services available at the destination?
Of course, the actual check-in process for a flight has become totally transactional, often with the passenger using a kiosk and having no contact with any airline employees. For airlines to exploit the personalised probabilities at the airport, the kiosk can be set up to highlight individualised, value-added amenities or, alternatively, it could direct the passenger to an employee for additional information. Could there be an airport employee designated for personalised travel experiences, responsible both for increased customer satisfaction and sell-up revenue? This seems totally counter-cultural (airlines adding customer-service employees) as for decades we’ve seen airlines seek technology to replace labour. Still, arguably, as airlines seek to be better travel merchandisers, there is a need for such one-on-one human interactions.
Tom Bacon has been in the airline business for 25 years and is now an industry consultant in revenue optimisation. He leads audit teams for airline commercial activities including RM, scheduling and fleet planning. Email Tom or visit his website