Why airlines must focus on post-booking power
After a customer has booked the airline has far more information and the possibilities for upsell are waiting to be grasped, writes Tom Bacon
Airline revenue management (RM) maximises fare-based revenue across broad networks. The systems allocate seats based on the highest expected revenue, taking into account demand forecasts by flight, origin-destination, and fare level. They use highly granular forecasts and are updated nightly.
With new features like checked bags, priority boarding, seat assignments, and so on, a new opportunity for revenue maximisation presents itself in the ‘post-booking’ phase. But after the traveller has booked his flight, what is the optimal way to engage with customers?
In some sense, post-booking merchandising is easier and can be much more effective than the booking process itself. At this point, there is a crucial opportunity for airlines to drive more revenue and increase customer satisfaction. The industry has invested heavily in ‘booking’; potentially, they should invest more heavily now in ‘post-booking’.
In some sense, post-booking merchandising is easier and can be much more effective than the booking process itself
Let’s just say, however, that revenue maximisation at the time of booking is not currently driven by the customer’s needs. The existing revenue management process is built around establishing one basic selling fare - at any point in time - that maximises revenue on each flight. Effectively, the airline is selecting which customers to accommodate by presenting the same selling fares to mostly anonymous customers; if the fare is too high for one customer, the airline is choosing not to serve that customer in favour of other customers that judges will pay more. This process doesn’t lend itself to customer engagement; presenting price alone to anonymous customers isn’t marketing.
The situation is totally different post-booking. Once the booking is made, airlines know much more about the traveller. Key attributes include number in party, ages of travellers, and length of stay, along with the selling fare and fare rules. Each of these can be used to identify attractive add-ons as well as the best way to communicate the benefits of any such upsells.
Based on the additional information about the customer, airlines can apply all of the tools of traditional marketing: product, price, place or time, promotion, positioning. Categorising customers in micro-segments based on their booking details allows airlines to identify the most appropriate ancillary products for each, along with the right time, the right price, and the best messaging.
Post-booking also lends itself to testing in ways that the initial booking does not.
- What segmentation works best?
- What messaging works best?
- What price elasticity exists for a given segment at a given time?
Tests can be much more focused; results are much more robust than tests conducted in a (pre) booking environment where anonymous travelers use multiple channels over a period of many weeks. Basically, the initial booking is the result of a huge purchase funnel – there may be over a hundred ‘looks’ to one booking. The post-booking funnel is much more concentrated and more manageable.
Post-booking is the new opportunity in travel. Airlines need to capitalise on this new revenue opportunity through increased personalisation and rigorous ongoing testing.
Tom Bacon has been in the business for 25 years. When he isn’t penning his regular column for EyeforTravel, he is an industry consultant in revenue optimisation, and leads audit teams for airline commercial activities including revenue management, scheduling and fleet planning. Want to find out more? Email Tom or visit his website