The Retailer Mindset
Finding new revenue streams while also creating brand differentiation is critical to airlines. Merchandising presents a powerful opportunity for both. Therefore, airlines must act more like traditional retailers if they want to have effective merchandising strategies.
In the retail industry, some of the most successful companies focus on having a solution to their customers’ problems and delivering the right products at the right price at the right time. What sets retailers apart is their ability to:
- Truly know their customers
- Optimize their inventory and pricing levers,
- Develop a blended-channel strategy,
- Deliver a consistent brand experience,
- Have consistent, near-real time data to create one source of the truth.
Knowing your customers is key to understanding what drives their decision to make a purchase — this goes beyond their basic demographics, but also includes things such as knowing:
- Where they shop,
- What kinds of products appeal to them in general,
- What their hobbies are or even what they read.
Knowing Your Customers
For airlines to understand what drives their customers’ buying decisions, they must know and understand their customers beyond basic demographics. They need to identify how and where they shop, what types of products and services they find appealing, some of their hobbies and even what they read. Only then can they offer the right products at the right times in the right format to the right customers.
For some retailers, their target customer fits into one niche, while many other retailers are able to focus on a broad spectrum of customer segments. For airlines, it often runs the spectrum, making segmentation and targeting instrumental to success. Segmentation and customer profiling can help an airline understand which customers are likely to buy specific ancillaries so the airline can offer them the right products at the right time. When thinking about a family traveling versus a business-class traveler, different products will appeal to each. Even within those segments, there may be sub-segments. Bottom line is that an airline’s merchandising strategy is going to have to address the needs of various segments.
What Customers Want
Today’s airline customers conduct extensive research when planning a trip using a number of devices such as smartphones and tablets. They want immediate information from anywhere, using any device, at any time. Therefore, airlines should enable customers to shop the way they want, including ancillary products and services, throughout their entire trip.
Some of the most successful retailers have excelled in using revenue management to profile their customers and understand how likely they are to spend money at each touchpoint. Retailers using these principles create offers by looking at the total value the customer places on the experience. For an airline, this means looking at the value of an entire trip, not just the airfare.
Retailers also take into account channel preferences for customers and implement a blended-channel approach. Customers today have better technology in their hands. They are more informed and interconnected than ever before. They do extensive research and share with others online and want the ability to shop from any device, anywhere, at any time. Giving customers the options to shop the way they want, including offering ancillaries through the life of their journey, is key to a strong retailing strategy.
Successful retailers use these tools to deliver a consistent brand experience. For airlines, in a single trip, one instance of poor service commingled with dozens of seamless service points can taint the entire journey and most likely a customer’s perception of an airline’s brand. Therefore, how an airline recovers from this kind of incident and provides timely options to resolve it could be an important point of differentiation.
Meeting customer demands in a world of multiple channels requires a single unified transaction platform that can take and fulfill orders as well as manage revenue. Retailers need to have a system where they have one inventory, one order and one report. Data needs to be captured — even across organizational silos — and needs to be channel-agnostic so it can be leveraged into actionable reporting. Best-in-class systems, with the flexibility to adjust to changing market conditions, are necessary to have one view of the truth.
So, who is really doing the right things to create a seamless and differentiated experience in the retail industry? A couple of strong examples include:
- Amazon excels at using customer profile data to target customers with relevant product suggestions, even employing the “Amazon Betterizer” to get customers without much data in their profile to tell them what products they like to build that profile. Amazon carries those relevant suggestions into the shopping cart, suggesting complementary products at check-out based on what other customers have purchased with the products in the cart.
- Disney lives up to its brand promise of delivering magic, carrying it through every touchpoint in the customer journey. Revenue management plays a significant role as Disney mines data to really predict customer behavior and ensure it is ready to offer relevant products and services and extract maximum revenue from each customer.
Thinking and acting like a retailer can enable airlines to drive loyalty, differentiate their brands, and deliver on revenue and customer satisfaction goals.
For additional information about an effective end-to-end merchandising strategy for airlines, read the special section of the previous issue of Ascend.