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Dynamic Pricing vs Personalized Pricing in the Airline Industry

Dynamic Pricing vs Personalized Pricing in the Airline Industry

You must have noticed how frequently the prices of the airlines keep on changing. Sometimes the change in the prices is quite predictable but there are also many times when it seems to happen without much of a reason. So, why does such a thing actually happen and what is the industry´s pricing strategy?  

Personalized pricing vs dynamic pricing – what is the difference? 

One of the major differences between dynamic and personalized pricing is that personalized pricing allows pricing based on a business context and the individual that is shopping. Dynamic pricing is not a new concept and it is determined by the general demand-supply theory of economics. This means when the demand is high and the supply is low, then the airlines can increase the pricing of the tickets. Today, almost all airlines use the concept of dynamic pricing, although based on a predefined, static set of fare levels. This should not be confused with the capability to dynamically adjusted prices in real-time at shopping, something that very few airlines are capable of. On the other hand, personalized pricing has evolved as a fresh concept that offers adjusted pricing based on individual customers. Thus, many airlines are coming up with the concept of personalized pricing as well.

Dynamic pricing

Dynamic pricing is the model that is determined by economic factors such as demand, inventory, and various other conditions of the market.

Features of Dynamic Pricing:

  • Dynamic pricing depends upon the changes that happen in the market
  • Dynamic pricing can lead to sudden fluctuations in the ticket prices of the airlines
  • It typically is based on the old concept of predefined, static fare levels associated to a set of RBDs
  • Modern, Dynamic Pricing allows for pricing adjustments at time of shopping, factoring in business contexts

Benefits of Dynamic Pricing:

  • Ability to create base load by stimulating and capturing price sensitive demand
  • The prices increase during the peak seasons which in turn increases the profit
  • In tandem with real-time adjustments provides significant revenue uplift
  • Real-time adjustments help eliminate step functions in price ladder

Personalized pricing 

While dynamic pricing is common in airlines on the basis of predefined, static fare levels, associated to a particular RBD, real-time adjustments as well as personalized pricing are still exceptions but are slowly gaining popularity.

Features of Personalized Pricing:

  • The pricing depends upon on value as viewed from the customer's perspective and not the airline's
  • The value will differ from customer to customer and will even vary based on the context of the customer's travel

Benefits of Personalized Pricing:

  • Personalized pricing focuses on pricing based on value to the customer
  • It enables higher propensity to buy
  • Customer satisfaction is increased by offering the right product at the right price
  • It drives higher revenues to the airline 

What airline pricing strategies do airlines use?  

Personalized pricing for flights 

You must have noticed personalized pricing in different industries such as food, apparel, etc. where the brands pamper you based on your preferences and your loyalty to the brands. Many airlines have come up with the same concept where some extra benefits are provided to loyal customers. Of course, the pricing of the flight ticket does fluctuate depending upon the seasons and demand. But today, with the use of Big Data Analytics, airline companies invest their resources in researching and knowing more about their customers. Understanding the different preferences and behavior of specific customers allow them to not only offer the right kind of product but also at the right price to the right customers at the right time. This no doubt happens to increase the profitability of the company.

Dynamic pricing for flights

While personalized pricing is slowly making its place in airline pricing, dynamic pricing without any real-time adjustments is still very prevalent. Airlines increase their flight tickets when there is a sudden increase in the demand for tickets, for example - during a festive season by closing lower RBDs. Similarly, they will drop fares by opening lower RDBs when demand decreases.

Airlines are gradually looking at technology that helps them to enhance dynamic pricing by making real-time adjustments, ultimately leading to full personalized pricing.

Achieve real-time personalized pricing with IBS Software

With competition steadily increasing in the industry, airlines require a proper system that can help them in achieving real-time personalized pricing. IBS is a trusted name helping travel companies operate in a digital world by delivering next-generation products to accelerate growth, drive efficiency, and create differentiated customer experiences.

Cargo Management: iCargo is the industry's best air cargo management and collaboration platform, co-designed with the world's major cargo airlines and ground handlers. iCargo's modern cloud platform underlies flexible solutions that scale with corporate needs and fully integrate end-to-end freight operations. Cutting-edge digital technologies, along with customer-centric sales capabilities, help speed innovation, go-to-market strategies and enhance industry collaboration. Intelligent revenue management and optimization features, backed by dynamic pricing, robust demand and capacity forecasting models, and fast reconciliation, help IBS' iCargo increase profitability for all stakeholders.

Passenger Services: iFly RES is an omni-channel platform that enables better traveler experiences through airline reservations, commerce, and end-to-end passenger processing. Its inherent departure control, offer, and order management features allow for modern commerce across customer touchpoints while streamlining passenger operations. iFly RES' dynamic pricing and AI-driven personalization engines are fully integrated from crucial airline and airport processes to point-of-sale, maximizing revenues through targeted upsell and cross-sell. The platform's extensive API set allows for contemporary distribution partnerships that increase business profitability and consumer value while minimizing legacy message expenses. Airlines benefit from iFly RES' self-service tools and AI-driven process automation, which give them matchless agility, flexibility, and operational cost savings.

Operations & Crew Management: iFlight helps leading airlines of all sizes and business models achieve operational excellence worldwide. iFlight is a comprehensive, data-driven platform for end-to-end airline operations and crew management that offers unrivalled predictability and reaction to operational difficulties. A single-screen can plan, optimize, manage, monitor, and automate an airline's complete operating spectrum with iFlight. The platform's dynamic situational awareness gives users real-time information about flight operations, crew planning, management, roster optimization, airport operations, fleet maintenance and repair, and proactive disruption management. AI ML capabilities and intelligent optimizers help iFlight increase operational reliability, efficiency, and robustness regularly.

Loyalty Management: By cultivating deeper member involvement, diversifying value delivery through partner ecosystems, and bundling individualized offers, airline loyalty programs are critical to improving airline revenues. iLoyal avoids costly and time-consuming system customizations and maintenance by relying on a cloud-native and highly adaptable platform. iLoyal allows airlines to develop and swiftly deploy new products, services, and B2B and B2C program designs thanks to its SaaS approach. iLoyal provides airlines with a 360-degree consumer view using sophisticated data and analytics to customize relevant offers to its members. iLoyal's secure platform accelerates program growth and revenues for the world's biggest airlines by enabling real-time transactions, from search to redemption to fraud detection. 

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