Phy-gital Roundtable: Breakfast Roundup from Germany and Netherlands

02 May '15 | Debjyoti Paul

German Shoppers: Meet Them in the Fast Lane to Phy-gital

15 January '15 | Ralf Reich

Shoppers Will Share Personal Information (But They Don’t Want to be “Friends”)

15 January '15 | Anil Venkat

Modernize or Perish: Property and Casualty Insurers and IT Solutions

14 January '15 | Manesh Rajendran

Benelux Reaches the Phy-gital Tipping Point: Omnichannel Readiness is Crucial

13 January '15 | Anil Gandharve

The New Omnichannel Dynamic: Finding Core Principles Across Industries

13 January '15 | Debjyoti Paul

Technology does not disrupt business – CIO day 2014 Roundup

02 December '14 | Anshuman Singh

Apple Pay – The Best Is Yet To Come

02 December '14 | Indy Sawhney

Digital transformation is a business transformation enabled by technology

01 December '14 | Amit Varma

3 Stages of FATCA Testing and Quality Assurance

06 October '14 | Raman Suprajarama

3 Reasons why Apple Pay could dominate the payments space

18 September '14 | Gaurav Johri

Beacon of Hope: Serving Growth and Customer Satisfaction

05 August '14 | Debjyoti Paul

The Dos and Don’ts of Emerging Technologies Like iBeacon

30 July '14 | Debjyoti Paul

What You Sold Us On – eCommerce Award Finalist Selections

17 July '14 | Anshuman Singh

3 Steps to Getting Started with Microsoft Azure Cloud Services

04 June '14 | Koushik Ramani

8 Steps to Building a Successful Self Service Portal

03 June '14 | Giridhar LV

Innovation outsourced – a myth or a mirage or a truth staring at us?

13 January '14 | Ramesh Hosahalli

What does a mobile user want?

03 January '14 | Gopikrishna Aravindan

Increase Airline Revenue Through Advanced Demographic Analytics

Posted on: 27 May '15

To maximize competitiveness in a low-margin industry, airlines offer an array of products to their customers that extend far beyond basic air travel. Products offered can include flight-related services (checked bags, preferred seating, etc.), itinerary-linked products (hotel, rental car, dining, etc.), and general retail products with which the airline has a cross-sell agreement. The ancillary revenue derived from the sale of these products can be significant, and, for some airlines, accounts for a majority of company profit. Although airlines still provide passenger and cargo transportation as they have for nearly a century, they are rapidly evolving into more generalized retailers of diverse products and services.

Effectively selling the broad range of ancillary products requires up-to-the-minute insight and intelligence into inventory availability and customer preferences; however, both information requirements stand well outside the capabilities of traditional airline IT and analytics. Historically, airlines sold seats on flights (we are ignoring cargo for this discussion), and operated in a “demand pull” environment in which precise knowledge of individual customer preferences was not a critical factor. Further, all of the airline’s inventory (i.e. seats on flights) was available for sale in the carrier’s PSS or GDS. For these ancillary products, the situation is quite different.

In positioning a “supply push” ancillary offering, the information requirements differ dramatically. At the simpler end of the scale, the option to check a bag or purchase a meal onboard can be offered to anyone with a ticket for the flight, and the airline would know exactly how much of the product is available for sale. At the more complex end, however, the situation is much different. An offer for a hotel, a restaurant, or a sporting event must be specifically targeted to a unique segment of the customer universe, potentially to a “segment of one”, as the acceptance rates for each of these offers would vary greatly based upon individual customer preferences. Airlines have not focused on such micro-targeting in the past.

To increase revenue earned from higher-value individualized ancillary offerings, airlines must be selective in the products that they offer to the customer, as well as in all other related decisions regarding the offer’s timing, price, etc. Such decisions can be based upon the analysis of data specific to the customer, including flight and destination details, past travel history, preferences, purchasing habits, etc. However, airlines maintain only a small amount of the required data in their internal systems. To fully characterize the individual customer, additional data must be identified and analyzed.

In short, the airline’s task is to collect all available data on a customer’s preferences, needs, buying habits, and other related factors, and position a product offering to that customer so as to maximize the likelihood that the offer will be accepted and the product purchased. Retailers have pioneered the methods of understanding customer behavior at the finest level of detail, and airlines can utilize many of the same practices.

In addition to the airline’s own historical data on passenger behavior, other data sources can be accessed and evaluated. These sources include credit card data, GDS, social media, etc. A vast amount of data is potentially available for many of the airline’s customers through publicly available as well as purchased data sources. The various data sources have diverse characteristics in terms of size, information, structure, completeness, value, etc. Analytical tools have been refined to the point where “big data” techniques can overcome many of the obstacles posed by the diversity in the data characteristics and yield valuable analytical results.

The information from these sources can then be used to build a purchasing profile for an individual customer, and then to evaluate that profile for signals and indications as to which product offerings are most likely to be accepted.