CLAIMAIR STRATEGY 2018
Claimair Strategy 2018 Your flight angels
Table of Contents
Your flight angels
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Global Startup Trend
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Airline Claims Market
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Legal Enforcement
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Airline
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Our Position
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Fundraising
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Strategy 2018
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---- Fuel the Pipeline
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---- Monetize
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---- Attract Investors and Acquire
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Your flight angels
Global Startup Trend It seems that the initial boom of mobile and web consumer apps is over as every major problem has been solved in essence. Every industry has its own well-established players, making it very difficult for newcomers to enter and disrupt the segment. The side effect is that VCs are reluctant to finance early-stage startups. They see a significant threat in competition and rather invest in Series A and later stages. Another effect is that industries consolidate. Big players have enough cash to buy small players. Acquirers enhance their dominant positions to grow faster and defend themselves against much bigger players like Google, Amazon, or Facebook.
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Your flight angels
Airline Claims Market The airline claims market is so big, disallowing dominant players like AirHelp and EUclaim to fully occupy it in a short period of time. The market still needs to be educated and transformed to fulfill needs of travelers.
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Your flight angels
Majority of travelers are still naware of their rights as air passengers. Those who know seek for the simplest solution. A price of the service (mostly based on a success fee) doesn’t play the key role when making the buying decision. As a result, only 15% of all existing claims are settled. A peculiarity of flight disruption segment is that it enables airline claim agencies claim compensation for historical flights up to 6 years back (3 years on average across the European countries), multiplying the potential of the market significantly.
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This creates the biggest argument for partnering up with online travel agencies, bringing volume for airline claims agencies and lucrative opportunity for online travel agencies with low setup costs. The market opportunity keeps all airline claims agencies (excluding ClaimAir) away from baggage compensation segment. This status is supported by greater difficulty of baggage claims processing. As a result, it still remains true that baggage segment is much less competitive than the flight one.
ClaimAir -- Strategy
Your flight angels
Legal Enforcement Legal enforcement also represents the biggest barrier for new companies within the industry. Companies need to gain credibility and secure regular volume of new cases to become attractive for lawyers. The volume also plays the key role allowing both sides to agree on mutually favorable conditions (success fee). Despite the nature of startups, essentially expressed by high speed and growth, lawyers and courts tend to work slow and in an old-fashioned way. This is another barrier for new companies entering the industry. Companies must maintain a sufficient financial reserve to ride out the period of processing of an initial batch of claims before companies generate the first significant revenue on a regular basis. Such period might take around 12 - 18 months, allowing a respective portion of claims to be completely processed judicially. Legal enforcement represents the vital point in the process as only around 25% of claims are settled without an activity of a registered lawyer. It still improves a success rate of an individual claimant (traveler) whose chance to succeed remains very low, just around 10%. Of those claims processed by lawyers, it’s estimated that 50% are settled out of a court, 30% are resolved after submitting writs of summons, and 20% by going through a lawsuit. It’s still too early to refine the estimations but it’s expected that just around 10% of judicial cases will be lost.
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Your flight angels
Airlines Airlines still hold their negative position towards paying compensation. Airlines keep underestimating the value of high-quality customer service, which is also supported by financial figures. It’s still cheaper for airlines to pay for legal costs rather than immediately settle eligible claims. This position of a majority of airlines can change in the future, once court costs outweigh the sum of required compensation. If it happens, airlines might be interested in platforms that automate management of claims.
Our Position In terms of volume, ClaimAir still acts like a small player. From a perspective of brand awareness, ClaimAir is considered among major players. Focus on baggage claims together with ClaimBag still secures the unique value of the company, making ClaimAir the only full-service airline claims agency. It also gives ClaimAir the advantage of global reach, because baggage claims utilize legal frameworks that are applicable also outside the European Union on a large scale. Unlike other airline claim agencies, ClaimAir positions its top-class product rather towards future flights. Travelers use the service not only to claim compensation for flown flights but also to get their upcoming flights covered. Thanks to advanced flight monitoring supported by relevant messaging, this approach should improve overall travel experience and increase travelers’ retention and lifetime value. The product in many aspects exceeds the competitive ones.
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Your flight angels
Fundraising Our inability to raise a seed round has caused the company must constantly focus on profitability. This approach slows down a growth rate and blocks the company to keep pace with its well-funded competitors. On the other hand, this approach makes ClaimAir well optimized and sustainable business. Considering the potential of the market, it is still possible to ramp up the volume of claims and gain significant market share, especially when talking about baggage segment. Being a vital company with visible growth will make ClaimAir an attractive target either for an investment or acquisition.
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Your flight angels
Strategy 2018 01 Fuel the Pipeline
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Your flight angels
The ultimate goal is to minimize costs of acquisition and secure a stable growth of new cases. To achieve this, multiple acquisition channels must be established. Google Adwords is a primary acquisition channel that generates around 60% of new cases. It’s currently the only channel with the ability to affect the volume immediately. A huge disadvantage of this channel is its vulnerability. If well-funded competitors apply a strategy of overbidding to eliminate the competition despite a negative ROI, it can pose a significant threat to the overall performance of the company. To minimize such risk, PPC campaigns must be created and regularly managed also on other ad networks. It’s also beneficial to prioritize baggage-related campaigns. Not only we can target countries outside the European Union, but such campaigns have lower acquisition costs because of the missing direct competition.
TACTIC: Create PPC campaigns on Bing, Sklik, Facebook, and Twitter. Prioritize baggage segment. Organic traffic represents a secondary channel bringing around 30% of new cases. Once duly established by regular content marketing activities, the organic channel has a long-term effect without a need of deep maintenance. This makes the organic channel very lucrative from a perspective of future costs. In order to initiate and boost this channel, it’s necessary to devote a lot of effort and costs in advance. The results can be visible in 6 months at the earliest.
TACTIC: Persistently perform content marketing activities on company’s blog and social media.
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Your flight angels
The essence of the product is to preemptively help travelers deal with flight disruption or baggage mishandlings. In summer, we launched a referral program where people can get â‚Ź10 for every referred eligible claim. This tactic brings a potential of virality with low acquisition costs in comparison with other channels.
TACTIC: Improve product sharing capabilities and motivate people to make referrals. Partnering up with travel-related businesses (online travel agencies, flight booking platforms, corporations, insurance companies, fintech, etc.) is a way to scale the volume. Business development will become a crucial activity once the volume exceeds 1,000 cases per month. Until that point, the volume can be secured just by B2C channels. It must be taken into account that in order to conclude a partnership, it might take several months and unlike B2C marketing, the outcome is always uncertain. Based on our experience, it’s really difficult to convince companies to prioritize our discussions. They must realize the value of our service and that they can use it as a competitive advantage. The product is ready and flexible enough to satisfy needs of companies from various segments.
TACTIC: Intense direct sales. Make the implementation simple.
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Your flight angels
02 Monetize
It’s clear that revenue directly correlates with our success rate. Without legal partners, we successfully resolve only around 25% of existing cases. Therefore, our future completely relies on our legal partners which is why we’ve given this agenda the highest priority.
TACTIC: Create a position of Chief Legal Officer that will maintain relations with legal partners.
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Your flight angels
Judicial enforcement might take up to 12 months. An average processing time together with success rate will be calculated with a higher volume of court cases, in June 2018 at the earliest.
TACTIC: Continuously fill the pipeline with new cases and improve estimations (success rate, processing time, revenue, costs, etc.) There are law firms all around the world that focus purely on airline claims. Such firms have extensive experience and are willing to share it with us. They understand the market, sometimes cooperate also with our competitors, and work on the success fee basis. Moreover, they accept a condition of paying court costs themselves, while ClaimAir would reimburse such costs together with respective legal fees required by airlines only in case of losing a lawsuit. As a result, cooperation with these law firms doesn’t burden our immediate cash flow. Such law firms account for 50% of our legal network. Most of these partnerships were established thanks to referrals coming from existing legal partners.
TACTIC: Partner up only with law firms that focus on airline claims. Get referrals to new law firms from our existing network. Lawyers need to be motivated in order to prioritize our tasks, which actually didn’t happen in the first half of 2017, causing worse financial performance of the company. The key factor for successful cooperation is securing the regular monthly volume of assigned cases and keeping the processing simple.
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Your flight angels
It’s also crucial to monitor KPIs of each law firm and regularly follow up with them. This is possible thanks to our platform that acts as claims management system and lawyers actively use it. It makes sense to establish a partnership only once the amount of eligible cases exceeds 10 with a focus on continuous delivery of new cases. Otherwise, law firms don’t prioritize our tasks.
TACTIC: Select a few specific countries as our target markets and focus on them to deliver reasonable volume. Perform monitoring of KPIs of each law firm and evaluate the performance weekly. It might be beneficial to motivate law firms to speed up their activities by creating a competitive space among law firms. We'd allow invited law firms to access and process available cases, while cases would be assigned on a first come first served basis.
TACTIC: Create a marketplace of eligible claims and make the platform available to all interested law firms. Start just with a single country and validate basic assumptions. The biggest obstacle when filing a lawsuit is a validity of an electronically signed power of attorney, which is a mandatory document allowing ClaimAir to act on travelers’ behalf. Especially in Spain and Italy, courts require notarized powers of attorney. Not only it brings unreasonable burden to travelers, but it also represents extra costs averaging to €80 per document. This obviously causes travelers often give up on possible judicial enforcement.
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ClaimAir -- Strategy
Your flight angels
We’re testing a solution of assigning claims of travelers directly to ClaimAir, right at the beginning of the complete process. This would remove the barrier.
TACTIC: Validate the test of assigning claims directly to ClaimAir.
03 Attract Investors & Acquirers
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ClaimAir -- Strategy
Your flight angels
In 2017, we received a lot of feedback both from angel and VC investors as a result of our fundraising activities. There was a similar pattern across all responses, expressing investors’ concerns on why not to invest in ClaimAir.
Competition Even though I agree that the industry has become competitive in a last few years, I strongly disagree with investors claiming that it’s easy to copy our business and enter the market. Not only you have to find smart team members, develop an automated platform, put all operational processes in place, establish well-performing acquisition channels, but you must be also successful with enforcement of rights of air passengers (network of legal partners). That’s why companies need sufficient funding to cover initial setup costs. From a brand equity perspective, ClaimAir is considered among top industry players. ClaimAir has overcome the initial setup phase and therefore is ready for scaling. In combination with our unique values, not only we might keep pace with major competitors but we can still dominate the market in specific segments (e.g. baggage, extra expenses compensation). The other thing is the available market opportunity. According to the industry statistics, there are around 160,000 travelers entitled to compensation daily. Based on our estimations, AirHelp, which is the leading industry player, processes around 10,000 cases per month. This in combination with the fact that claims can be enforced up to 6 years back means that the available global market is still huge, currently not worth more precise estimations.
TACTIC: At one moment, focus just on a few less occupied markets and continuously expand the reach. Prioritize baggage segment to leverage and strengthen our uniqueness.
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Your flight angels
Revenue Growth In the past year, there wasn’t any significant growth of new cases. However, I don’t consider this metric a primary anymore. The primary metric has become revenue. Revenue can grow by increasing either the success rate (by improving legal enforcement) or the volume of new cases. By focusing only on the latter option, there is a significant risk of having to manage a huge amount of cases with uncertain outcome. This could undesirably skyrocket our operational costs. The growth of revenue is crucial for attracting new investors.
TACTIC: Improve success rate first. Slightly increase the volume of new cases, either via B2C or B2B channels.
Profitability Profitability is vital but not necessary. Being profitable demonstrates sustainability of our business model and convinces investors to invest money purely for the sake of faster growth to leverage the market potential. Over the period of last 12 months, we’ve collected more than 1,000 of cases totaling to more than €700k in requested compensation. It’s only a matter of time until we cash at least 70% of this sum judicially. Together with decent growth of new cases, this should make the ongoing profitability happen.
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ClaimAir -- Strategy
Your flight angels
TACTIC: Optimize the judicial process. Establish partnership with a law firm that would cover litigation activities in several countries at one time. Focus on countries with more favorable law environment. Our priority is to be big. To make this happen, we need a big investment of around €500k. It’s been proven that the process of fundraising can’t be effectively controlled. Therefore, if a seed round doesn’t take place until July 2018, the highest priority will become the profitability. This would make ClaimAir a small business generating profit and paying existing investors annual dividends.
TACTIC: Raise €500k until September 2018. Decrease cost of acquisition and optimize case processing.
Exit The most probable exit event might be an acquisition of ClaimAir either by competitors (AirHelp) or business partners (Kiwi, Trip.Market). It’s possible to make the acquisition happen in upcoming 12 months.
TACTIC: Initiate conversation with possible acquirers.
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YOUR FLIGHT ANGELS
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