The journey to delivering customer value with modern retailing based on offers and orders
This is the first blog in a three-part series. Part two will investigate the creation of personalised and relevant offers for your customers and part three will address how order management can improve retailing effectiveness.
Historically, airlines viewed themselves as sellers of seats, which led to a commercial model primarily focused on the base product and its associated pricing. The accepted frame of reference was: "I have seats to sell - how do I sell as many as possible through as many distribution channels as possible, and how do I maximise my revenue in so doing?"
This "seat-centric" approach led to price-driven competition, effectively commoditising an airline's offering and making brands indistinguishable from their competitors. Revenue growth opportunities are limited in a commodity-driven environment, which airlines have been trying to address for several years. Given the pandemic´s impact on liquidity, revenues, cashflow, debt, and margins, airlines need new revenue streams while the industry´s limitations are bursting at the seams.
Beyond the airline industry, retailers across the globe have developed sophisticated retailing techniques to better serve their customers. These retailers don't see themselves as "product-centric" suppliers, but rather as facilitators to fulfilling customer needs. Adopting a "customer-centric" approach is pivotal to becoming a modern retailer. Both online and offline, successful retailers guide shoppers through their stores in a way that encourages them to add products and services to their shopping carts.
A fundamental mindset shift is needed for airlines to "think beyond the seat" and truly behave like retailers by transitioning from product to customer-centric innovation. In the airline retailing model, the new frame of reference is: "I have this set of customers - how do I fulfil as many of their end-to-end needs to capture maximum share of wallet, while also maximising the lifetime value of each customer?"
Technology and modern consumer experiences are key drivers of evolving customer expectations. During the pandemic, online shopping has boomed and now, more than ever before, customers expect seamless and frictionless user experiences. Consumers are constantly comparing shopping experiences to the best they've had with other online service providers. Accenture has defined the term "Liquid Expectations" to describe the perceived gap that consumers feel when they encounter inconsistencies in a digital experience delivered by one service provider and not by another, regardless of the industry. The bar is set high for travel with customers expecting modern retailing experiences across both the leisure and business journeys.
The bumpy road to airline retailing nirvana
Retailing aims to put the customer at the heart of the business and to become more 'customer-centric'. According to Gartner, customer-centricity is defined as "…the ability of people in an organization to understand customers' situations, perceptions, and expectations. Customer-centricity demands that the customer is the focal point of all decisions related to delivering products, services, and experiences to create customer satisfaction, loyalty, and advocacy". Travellers want to be recognised so they can enjoy personalised, contextualised, and seamless experiences that meet their needs at every stage of their journey.
Yet, airlines still struggle to become true retailers due to the limitations imposed by a complex and legacy technology infrastructure that is no longer fit for purpose. Packaging relevant offers across channels, in real-time, that include air and non-air services to fulfil customer needs across the journey is still an uphill battle. In today's environment, challenges continue to exist identifying end users and their needs, launching new products in a timely manner, pricing dynamically in real-time, tracking consumption status of products, servicing offers, introducing local payment methods, managing interline partners and interline ancillary products, etc. To better serve customer needs as a true retailer, all of these challenges must be addressed.
Attaining airline retailing nirvana requires a profound shift from today´s legacy and process-centric infrastructure to a modern, omnichannel, and customer-centric one. Trying to fit pegs into square holes is no longer enough to keep up with the retailing experiences consumers enjoy in other industries. Embarking on this transformation requires airlines to think across every stage of the customer journey from shopping to booking, payment, delivery, and financial back-office processes. Working backwards from the customer experience and simplifying processes that have been designed to accommodate legacy technology and its constraints is essential.
While the transition will be gradual, the good news is that industry initiatives are already underway to address these challenges. NDC, Dynamic Offers, ONE Order, Future Interlining, Settlement with Orders are just some of the IATA programmes paving the road to the vision of enhanced retailing. IBS Software is actively engaged in all these programmes, and more. The culmination of the journey is an omnichannel airline retailing platform that is a single source of truth for all customer data and interactions. Built from the ground up on the modern offer and order management concepts, not a retrofit to legacy technology, processes, and mindsets…
Paul Byrne joined IBS Software in May 2021 as Vice President, iFly RETAIL, focusing on bringing to market the company's latest omnichannel airline retailing platform. Paul has over 25 years of experience in technical, product management, and business development roles. He has been actively involved with IATA in the NDC, ONE Order, and Dynamic Offers working groups. He was a non-executive Board Member on the Open Travel Alliance.