The airline industry has a problem. Travelers have a negative perception of airlines due to an extremely complex and constantly changing fare structure, hidden fees, and confusing ticket restrictions.
While some of these issues are beyond the airline’s control, there are steps they can take to make the customer experience more positive, and highlight the value of the experience they can provide the modern day traveler.
The solution? Dynamic Bundling – the process by which airlines can present packaged and relevant ancillary products to consumers. Unfortunately for consumers, airlines often present their ancillary products or packages in a confusing manner, with varying price points, unclear benefits, and conspicuous restrictions. This leads to a perceived lack of transparency, as well as lost revenue when consumers choose to opt out of these products.
However, there is an opportunity for airlines to simplify the customer experience. Airlines have an enormous amount of data at their disposal based on a customer’s travel purchase history and their real-time travel context (where they are going, when they are flying, who is traveling with them, etc.). By applying advanced analytics to this data, airlines can bundle offers that are relevant to the customer and streamline the purchase experience.
Dynamic Bundling benefits both airlines and customers because it genuinely enhances the customer experience, yet drives organic revenue growth for airlines. Below are three areas where dynamic bundling can provide favorable results.
- Generate Customer Lifetime Value. Airlines can create loyal, repeat customers by targeting their consumers’ individual needs. A well-travelled businessperson will continually book with an airline that not only offers a competitive seat price, but also looks at his/her travel history and tailors an offer with the products they’re most likely to buy (e.g. Wi-Fi and a seat upgrade). Not only does this create a more reliable organic revenue stream, it engenders greater brand loyalty because the airline understands each customer’s unique needs and caters to them.
- Reverse Negative Perception. By tailoring offers based on trip context and historical purchases, airlines can begin to turn around a customer’s negative perception. When people fly, they don’t just want to get to their destination, they want to get the best travel experience and value for their time and money. For example, ancillaries such as Wi-Fi and priority seating can be valuable selling points, especially when they are presented as convenient, packaged deals.
- Produce Relevant and Targeted Offers. This is an essential aspect of Dynamic Bundling. Presenting irrelevant product offerings squanders a revenue generating opportunity and depletes precious brand equity. Airlines must leverage predictive analytics and segmentation based on a customer’s purchase history, demographic information, and current travel plans. This means that a minor should not be offered a complimentary alcoholic beverage as a perk, or a business traveler on a same-day round trip itinerary might be offered discounted Wi-Fi instead of a free checked bag. By presenting relevant product offerings as bundled deals, this will increase the likelihood of purchase and generate a positive customer service experience.
Offering customers the right bundle of ancillary products, at the right time, at the right discount can generate incremental revenue uplift of 2 to 5 percent. As consumers become accustomed to individually tailored offers, the appeal of the one-size-fits-all offers of today, and the “selfish” airlines offering them, will diminish even faster.