The airline industry is setting travel records, flying more than 4.3 billion passengers in 2018. All of this jet-setting has boosted passenger revenues industry-wide to more than $560 billion in 2018 – another record – and according to the International Air Transport Association’s (IATA’s) fact sheet, industry analysts forecast revenues will continue to increase in 2019.
With statistics like that you’d think the airline industry is doing great! But not so fast … the challenges faced by the industry are equally as great, and they’re driving carriers to completely rethink how to service passengers and generate revenue.
Net profit per passenger is decreasing
The amount of the average fare per passenger per mile (the passenger yield) essentially reflects what passengers are willing to pay. On an industry-wide level the percentage of revenue from passenger yield continues to be negative, affecting profits and contributing to a lower percentage of net profits coming from operating margins.
But how can that be if the volume of passengers is up? One of the reasons is because operating costs across the board are also up. This downward force on net profits is motivating airlines to rethink their standard approach to loyalty programs to focus more on the individual customer’s experience. It’s also focusing attention on marketing more ancillary services.
Think of ancillary services as “everything but the seat.” Upgrades, bag check, WiFi, premium seats, gourmet meals, “even more space” offers – you’ve probably seen fee-based offers for any and all of these if you’ve flown recently. These generate revenue that is additional to the cost of the ticket. But so far, this approach has only worked up to a point (as evidenced by the negative passenger yields that I mention earlier). It doesn’t mean that the standard programs to up-sell a variety of ancillary services are wrong – similar to the rethinking of loyalty programs, it suggests a better approach is needed.
How personalization can help airlines maximize loyalty, improve the passenger experience, and increase revenue
Have you ever booked a seat online for a flight and then had to click through screen after screen of up-sell offers? Or been stuck at an airport gate trying to get information on when or if your delayed flight will depart? What about getting vacation package offers from an airline to visit …. the town where you currently live?
What all three of the scenarios above lack is personalization. Airlines that are succeeding in building customer loyalty and value are using the wealth of their passenger data plus big data and real-time decisioning technologies to engage with each customer on a personalized, one-to-one level. There are three main ways they are doing this:
- Personalizing every passenger experience
By knowing each customer’s travel needs and preferences, airlines are able to provide contextual offers, messages, and recommendations designed to deliver an individualized experience. For example, recommending specific in-flight entertainment or knowing whether or not a traveler typically checks a bag or orders a special meal can become part of a one-to-one engagement that is focused on creating long-term, loyal customer relationships that drive revenue growth and profitability.
- Turning service disruptions into opportunities to increase customer satisfaction
More and more, airlines are proactively offering information to help solve customers’ problems and minimize the impact of travel disruptions. And it’s more than just updated flight information. It’s connecting customer and logistical data with machine learning insights to help employees take pre-emptive actions that are right for each passenger. Imagine during a severe weather delay having the ability to send a customer a coupon for dinner at a restaurant at the gate where they are patiently waiting – even for specific dietary needs like vegetarian or Kosher. That’s the type of personalization that helps builds loyalty.
- Using personalized offers to boost revenue and delight customers
Non-personalized offers or one-size-fits-all campaigns typically have a less than 1% response rate because their messages don’t connect with customers in meaningful ways. By using data and intelligent decisioning to trigger and present the right offer at the right time in the right place – when the customer is actively listening and ready to buy – airlines can identify high-propensity customers and engage with them in a contextually relevant way across various points of interaction. Examples might be suggesting vacation packages based on purchase history and other customer data or presenting targeted offers right down to seat-specific screens. It’s a shift from a revenue-per-seat to revenue-per-customer mindset. The focus is essentially on selling, serving, and retaining customers and driving year-over-year miles based on the unique needs of person and their needs and actions in the moment.
Start with existing data and build value through relevant actions
When the three types of personalization described above are used together in a multi-prong approach to customer engagement, it creates opportunities for airlines to better differentiate their brand from their competitors. But even shifting toward just one of those personalization approaches can yield benefits and can be done in phases.
The transformation to a more customer-centric brand does not mean having to completely replace enterprise systems already in place. By applying AI-based, real-time decisioning to the data an airline already has, it can immediately start identifying high-propensity customers and recommending messaging that is relevant and contextual to the customer plus supports enterprise goals.
Leading carriers are already seeing results from a personalized approach
Airlines like British Airways, Transavia, and Air France/KLM have each adopted at least one of the approaches above and are already getting positive returns.
Transavia is creating memorable experiences for every customer. To do that, they use a unified interaction platform that analyzes customer data to recognize passenger needs before, during, and after their flight. Their Pega CRM™-based system helps Transavia connect with customers very early in the journey. It uses data and context to recommend to their employees relevant services and sales to help improve each customer’s journey – providing a memorable experience for the passenger and competitive advantage to Transavia.
Air France KLM created their “I-Care” Customer Intimacy strategy to focus on providing excellent care and seamless experiences for their more than 1 million passengers. Both airlines strive to provide a smooth journey on every trip. That includes viewing disruptions like weather or equipment issues as critical moments to turn disrupted passengers into happy customers. They achieve this by empowering their employees with a complete profile of each customer and the ability to provide proactive, on-the-spot service based on a passenger’s history, preferences, and context of the current interaction. This connected and personalized approach has allowed Air France KLM to standardize processes across their enterprise, increase agent productivity, and provide consistent performance.
British Airways is using proactive, one-to-one engagement to individualize the passenger experience and build loyalty. That’s a big task for an airline with more than 400 million customer interactions per year. To do this, British Airways centralized personalization by adopting a single customer view, omni-channel approach, central decisioning platform, and new metrics that focus on the uplift created through personalization. They also shifted their mindset, adjusting their organizational approach so that the outcome for the customer is valued as equally as outcomes for the enterprise. The result is a better understanding of their customer base, more conversational engagement, and more seamless service end-to-end.
As airline travel continues to increase, so will customer expectations. To thrive, brands will need to evolve to meet passenger needs.
Airlines are shifting from being carriers that get people from point A to point B to brands that are carving out reputations for providing individualized experiences. The ones that are winning loyalty and market share treat each passenger like a person, building relationships and value through tailored offers and outreach, customized for the context of each unique travel moment. And this person-centric approach to customer service will continue to evolve as technology evolves.
Is your airline prepared for the one-to-one customer journey?
- See how Pega helps enterprises increase customer lifetime value.
- Watch this video to learn how the Pega Customer Decision Hub™ learns and adapts to generate the most relevant customer offers.
- Read why analyst Forrester named Pega the leader in real-time interaction.
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