While companies in the automotive-rental industry receive a substantial portion of their profits from ancillary revenue, there is an opportunity for even greater uplift from dynamic bundling and optimal pricing. But before these companies, or any others, can implement the necessary sophisticated analytics, they must ensure their organization is aligned with the change to fully capture the benefits.
This is easier said than done. Such pervasive and fundamental changes must be taken seriously, otherwise there will be a lack of user adoption resulting in fractional analytical benefits. Ancillary bundling strategies can change workflows, responsibilities, and expectations, and organizations must proactively plan and adjust to the coming change.
A comprehensive view of the solution requires aligning with an updated customer experience, employees’ goals and compensation, and company structure and support mechanisms. By doing this, organizations can effectively implement dynamic pricing & bundling solution for their ancillary product offerings.
- Align with updated customer experience. In 2014, 75 percent of Hertz’s ancillary sales were done by agents at the rental counter. However, this methodology is outdated and insufficient. In the age of the Internet, the vast majority of bookings are done online. Car rental companies should offer customers proactive bundles upon the initial booking using historical and segmented data, and online / phone representatives need to be able to offer bundles and discounts as well. In addition, car rental companies should also create a centralized sales and support team to support the analytics driving the web sales. This team should have access to previously offered bundles, and should be given flexibility to add / remove products when speaking to customers. If executed properly, ancillary offers will be made further upstream in the customer journey, reducing reliance on the agents at the counter. The agents can focus on further differentiating the brand by moving from a primary sales focus to delivering an exception customer experience.
- Align with employees’ goals and compensation. As an organization shifts its ancillary strategy further upstream, employees’ duties & compensation will also change. At the rental counter, organizations will need to make-up for lost ancillary sales bonuses. One way organizations could do this is by measuring a customer satisfaction index (CSI) score that is specifically related to ancillaries in order to incentivize employees to ensure top-notch service. Additionally, counter agents’ sales bonuses could focus more on last-minute bundle conversion efforts as opposed to metrics that depend on them as the primary sales source. Although this will require a larger investment from employees, the payoff from the sophisticated, predictive analytics used online will more than offset any cost organizations encounter.
- Align with company structure and support mechanisms. Companies must also ensure there is a certain amount of flexibility from the top down concerning structure and technology. Once employees have been trained to know when and how much to adjust offers depending on the context, they should have the flexibility and authority to execute the decision. For example, reservation desk employees could offer minimal discounts to encourage customers to make last-minute purchases, and adding additional products could get more discounts. In addition, reworking contracts with large clients to enable ancillary purchases, even at negotiated discounts is essential to drive organic revenue growth in this profitable segment. Furthermore, investigating ancillary offers / reservation packages with OTAs & third parties will drive additional ancillary demand.
People will not embrace change and fresh capabilities when they don’t align with their own goals and processes. A strategic and comprehensive transformation will actually ease the change and enable the organization to capture uplift from the analytics.