THE RETAIL STORE AT 35,000 FEET
ANCILLARY REVENUES: COMING IN FOR AN EARLY LANDING From the first attempts at unbundling the standard airfare by low cost airlines more than a decade ago to the full-fledged, wholesale adoption of incremental fees and commission-based ancillaries of today, ancillary revenues have assumed a central position in most airlines’ business models – not just in the cabin as a 35,000 ft. retail store, but at multiple touch points in the traveler experience, beginning before the gate and not concluding until the traveler has reached his or her hotel. But as with most evolutions and transformation - in all industries, not just aviation - they have been spurred by significant advances in technology and a rise in consumer expectations for service. When it comes to Asia-Pacific travelers those expectations are rising to almost “demand it” levels. A recent survey (August 2011) by Boeing and the Global Business Travel Association, confirms this point. The study found that Asians are already the most tech-savvy fliers, with 48% of survey respondents using Facebook or Twitter in travel planning versus 10% for US travelers. Many, the survey found, valued access to in-flight Wi-Fi and AC power adaptors, presumably for their portable mobile devices, than even the in-fight entertainment offerings. To be sure, without technological innovation, ancillary revenue programs would still be in their infancy, and they certainly wouldn’t be the lucrative lifeblood we are seeing bolstering balance sheets today, nor would they be as effective in introducing the Asia-Pacific traveling set to the airline retail experience.
TRAVELERS BECOME CONSUMERS BECOME LONG-TERM BUYERS To succeed, airlines must rethink their traditional relationship with travelers, doing their homework to better understand and learn Asia-Pacific traveler needs, wants, and desires. In the retail environment, everytime a consumer is treated well and provided exceptional service they are more apt to return. Airlines must master the art of selling more than just tickets. The relationship must shift from airlines and passengers to marketers and consumers. Passengers, who are encouraged to become consumers, ultimately become long-term buyers and a consistent source of non-ticketed revenue. Repositioning themselves as retailers with a travel-relevant offering, airlines can elevate their relationship with customers, and raise their profile as an airline of choice, especially in a region still new to “outside” airlines. Delivering a customer experience that is personalized, reliable and focused on the specific offers for the traveler will increase traveler loyalty, which will translate into sustained ancillary revenue from additional products and services in a recurring fashion. Ultimately, the question airlines must resolve is not “to sell or not to sell” but rather “what to sell and how to sell it.” It’s a question that can be answered through the business intelligence analytics gained through point of sale and onboard technology, giving airlines an at-a-glance view of trends in cash, credit and other forms of payment, as well as from the item’s purchased side, a “what’s hot” and “what’s not” snapshot. Armed with that level of real-time instant customer-traveler knowledge leaves airlines efficient and nimble enough to quickly modify their ancillary strategy. Airline travelers may be a captive audience, (whether they’re at the gate or in the cabin) but nothing will compel them to buy unless a product or service is presented to them properly. Real value for both the consumer and the airline can only occur when the airline focuses on the full customer relationship, and on turning travelers into consumers. Only at this point can an airline hope to meet its customers’ unarticulated needs and begin to build consumer - not traveler - loyalty. The Asia-Pacific region continues to amaze the world with its economic prowess and educational and middle class gains. But as an almost Wild West era of unbridled growth yields to maturity, you can bet that for airlines, the coming year of unmatched opportunity and their own brand of expansion, will not come again. Failure to embrace this new and exciting region now might leave an airline that pursues such a foolhardy approach cut off from nearly half the planet’s traveling population. It doesn’t take rocket science to conclude that is a poor approach and not smart business.
p.10
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