Airline Travel Will Never Be the Same
Bruno Trimouille 27000256KU firstname.lastname@example.org |
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Gasoline price hikes, low-cost competition, higher taxes and security fees continue to squeeze airlines. At the same time, many emerged from the red in 2010. Reduced capacity and increased airfares are two obvious reasons, but (and I know this may be hard to believe from a consumer’s pov) better decision making had a part to play, too. Particularly as it relates to yield management, something that airlines have worked on for decades. One could describe yield management as the art and science of having your fellow passenger pay a different price than you in order to maximize an airline’s revenue.
24 hours before my flight on a relatively new airline for me. I go online and log in to try to get a decent seat. The system recognizes my “non-frequent flyer” status. However, having booked through my company travel system – which often sends full frequent flyer details regardless of the airline – this airline’s system sends me a sweet offer: $80 for coast-to-coast upgrade. Unfortunately, I wasn’t paying enough attention and clicked on the “next” button, which I regretted when I saw that the middle seat in the back of the plane was my best option (a hazard of booking too close to departure date). I closed the web browser, logged in again. Not a chance. The offer was gone and I was stuck with my middle seat. Shoulda, woulda, coulda.
Travel day. Check in at airport. Feeling confident or lucky, I give it another try at the automated check-in kiosk. But as soon as I swipe my credit card, the system recognizes me and smart decisioning kicks in, again. The kiosk is now offering an upgrade for $300. $300!? Of course, because there are only 2 seats left. But I also know that there are 100s of other reasons, such as time of the day/week, number of high-roller frequent flyers on the flight, etc., because decision management technologies allow for this. Impressive, but too steep for me.
The next screen asks whether I need to check any luggage and, at the same time, promotes a combo offer: $30 for one checked bag and a window seat. Not bad, but I didn’t have any luggage. Next screen, promotes a $15 option for aisle or a $10 option for window, plus an additional $5 option on both for priority boarding (a plus when you have carry-on) and bulk-head seating (a plus when you need to deplane quickly). Wow. Call this high-tension nickel and diming, early bird gets the best seats, or smart decisioning for improved revenue management? It depends on your point of view. On my end, I opted for the aisle seat plus bulk-head offers, well worth it for a coast-to-coast flight.
Stay tuned for what happened on my return trip and how greater instrumentation, intelligence and connection can make a difference in your own travel experience.
About 3 years ago, I heard that one of our airline customers developed an interesting system for upgrades and seat assignments. To date, most airlines have been focused on yield management to price their seats at booking time. However, this customer applied the same yield management concept to ancillary/value-add services which was a breakthrough.
For business, this story is definitely compelling. High ROI, read it for yourself. Another customer recently told me that they couldn’t wait to deploy a similar system -- that adding 4 to 5 more parameters for more granular decision making beyond flight route could actually yield $2M/month of added revenues.
For IT, the story is quite interesting as well. Watch this customer panel.
My top takeaway: Focus on business users – decisioning cannot be an IT tool. Consultant James Taylor provides an expanded takeaway list. And improve customer experience. Please.