Consistent profitability and the continuing development of digital technologies are now allowing airlines to catch up to the e-commerce and digital merchandizing standards already achieved by leading retailers such as Amazon, according to Amadeus. And airlines and passengers alike are set to benefit from the vastly improved merchandizing capabilities that airlines are beginning to be able to deploy, says the transportation IT solutions company.
Interviewed by RGN at the recent Amadeus Airline Summit in Dublin, John Dabkowski, VP digital & merchandising, airlines for Amadeus, says that, “frankly”, airlines have lagged behind leading e-commerce retailers – but that this is now changing, for two reasons. One is that consistent profitability is giving them the financial resources to boost their e-commerce capabilities. The second is that digital-transformation technology “has moved on to enable it”.
Specifically, says Dabkowski, airlines now have the ability to store huge amounts of data; and “clean it” by turning disparate sets of data and file types into homogeneous, unified data sets which they can then analyze “really fast” to find transformative trends. Carriers can then “analyze who we think our customers are” and segment customers into a number of groups, each group having specific characteristics, needs and preferences. They can do this by integrating the information each passenger provides when booking with other databases they can access; and this allows carriers to develop a “persona” of characteristics for any particular customer and place the customer in a specific customer segment.
Two airlines which gave presentations at the Amadeus Airline Executive Summit (and showed the results of their analyses) provide good examples of how this process is developing, says Dabkowski. Qantas and airBaltic have recently undertaken initiatives to research and identify exactly how many specific customer segments they have. Separately, both carriers came up with similar numbers of customer segments – airBaltic identified 10 and Qantas identified eight. Verification by Amadeus of airBaltic’s analysis – at the airline’s request – closely confirmed the characteristics of eight of the segments airBaltic had identified.
“This is a good illustration that the technology is reliable and they can do it even when customers don’t identify themselves” by providing specific personal information – such as their loyalty program ID numbers – from which an airline can recognize a given individual, says Dabkowski. “That changes everything – do it in real-time and it is a huge enabler for merchandizing. That’s the digital transformation part at the front end.”
That’s good for the airlines, but how does it benefit passengers? The benefits, according to Dabkowski, lie in airlines “shaping the offer” specifically for each customer segment, so that customers in any particular segment are offered a static or dynamic package of services and products which may be particularly helpful or attractive to them.
(A static package is a standard package offered up front, such as a certain fare type, according to Dabkowski. A dynamic package is one which an airline creates “on the fly” during the booking process, depending on its identification of a passenger’s customer segmentation when booking a given flight, because any customer can fit into a different segment at different times – say, when booking business-commuting travel and when booking family-vacation travel.)
For instance, if an airline identifies via a passenger’s booking information and other data that the passenger is a business traveler flying to a business destination and may require ground transport, the airline can offer the customer during the booking a service package which includes a rental. In another scenario, an airline may be able to recognize a group of four people all booked together as a family with two children traveling on a vacation, and offer during the booking a package that includes checked baggage as part of the overall price. Or, via, dynamic packaging, the offer to these customers might include, say, an offer of a unified flight-plus-hotel vacation price.)
This offer-shaping capability even can apply to passengers who dislike being offered packages up front, when all they want to do is book a ticket. “The cut-off of the package is part of the segmentation,” says Dabkowski. “Do people in this category like to buy [travel] as a package up front, or do it on an LCC basis, with only the [air] travel up front?” If the latter is the case, airlines’ new digital-analysis capabilities allow them to decide “you don’t offer [such customers] a package.”
Here, says Dabkowski, communication between the airline and the customer is key, because it is vital for the airline to make sure each customer who purchases a basic LCC-type fare knows exactly what he or she is buying – no frills, with every additional service such as selecting a seat and checking a bag involving an additional fee.
In any event, “We can identify what is the right offer to a particular person, at the right place at the right time, in real-time – like the best retailers do,” says Dabkowski. “That gets us through the inspirational part, booking, which is good for the [airline’s] brand. Then you start applying the technology to support the predictive part.”
Here, he predicts, artificial intelligence technologies are going to become very important. “In two years’ time,” rather than booking and interacting with airlines purely online, customers will go “back to phones”, according to Dabkowski – but instead of dealing with human agents in call centers, travelers will very largely be interacting with extremely fast-learning and capable chatbots.
“That’s the next big thing,” says Dabkowski. “It is going to dramatically change the customer experience through the travel process. Dramatically. It will be 95 percent of what we do.”
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