How Can Identity Drive Profits for Airlines?
From Overbooking to Personalized Marketing, Knowing Your Customers Creates a Better Journey
The Airline Revenue Balancing Act
After seven straight years of smooth sailing and consistent expansion, the U.S. travel industry is facing its first level of uncertainty in a while. For the airlines, these uncertainties affect both the business and leisure travel sectors, putting added pressure on the marketing organizations to ensure they are reaching the right audience with the right message as competition increases for passengers.
Indicators are pointing to an 8th consecutive year of growth for the travel market in 2017, but at a slower pace (domestic forecast of 2% for the first half of year). This likely can be attributed to a variety of factors including global economic conditions, rising fuel prices, and public policy statements. The first half of the year is being driven more by leisure travelers than business travelers, but that could change if proposed corporate tax cuts are passed into legislation.1
To maximize revenue from tickets sales, managing distribution costs across channels, as well as accurately accounting for seasonality, competition, and market-by-market fluctuations, go a long way toward ensuring profitability.
The Case for Overbooking
Overbooking flights has been an essential industry practice for decades, allowing carriers to maximize their seating capacity when fliers cancel, miss, or change their flights. The practice of overbooking is a bit of a science. Every seat costs money, so it’s obviously better to take off with a full airplane, and the closer the carrier can get to having every seat filled, the better. The trick is knowing just how much to overbook a given flight. If you sell too few, you could lose out on revenue. Sell too many and, well, you’re going to have some irate passengers.
“It’s all about trying to maximize the revenue they bring in, and part of that is making sure there’s a butt in every seat,” said Brett Snyder, who runs the air travel assistance business Cranky Concierge.
Overbooking is good for everybody, in a sense. “When you have fewer butts in seats, the fares need to be higher to cover all the costs that involved.”3
Airline marketers have a vested interest in knowing everything they can about their customers and their behaviors. It’s not simply about learning what happens when they’re on the plane, it’s also important to know when they’re working, on their phone, or even watching TV. All of the triggers that consumers release along their purchase path needs to be collected, analyzed, and hopefully activated in a compelling and personalized way. Because when airlines get it wrong, it not only costs the airline empty seats (which can quickly result in millions of dollars of lost revenue), it can trigger a PR nightmare.
But to truly make this forecasting model work, each airline has to truly know each customer. When they do, the modeling works like a charm. When they don’t because the data is wrong, it can result in turbulence.
Personalization Requires an Identity Management Solution
Obviously, it’s important to know the basics about all your customers (i.e., where they are flying, when they’re flying, what’s their loyalty number). But there are some other data points that might not be as obvious. Airlines have to make predictions for the future that are based on what has happened in the past. For marketers, it’s just as important to know how many fights a customer has missed, if they use your mobile app, the likelihood of them purchasing an alcoholic beverage in-flight. These are all factored into a unique and personalized experience the customer might not even know is being delivered. And that’s the point. As marketers, you want to be helpful but not harmful, present but transparent, and you want to provide subtle suggestions to your customers that are just that — subtle.
For existing customers, this is an easier task. As a member in a frequent-flier program, customers willingly provide tons of information, with the trade-off that it will help make their travel experience more enjoyable (not to mention potentially upgradeable). The Average Customer Value (ACV) of a loyalist is usually set lower than a new flier. This is because you can already accurately predict and deliver the optimal customer experience based on their past history, so the cost of acquiring that loyalist is lower than someone you don’t know.
Putting the Data Pieces Together
There are a lot of channels that are great ways to collect consumer data. From airline mile credit cards, mobile apps, and airport lounges that monitor what travelers eat and drink, you can learn a lot about customer preferences and how best to market to them. But when you look at the entire customer journey, it can be hard to follow. Online Travel Agents (OTAs) like Expedia and Travelocity, Global Distribution Centers (GDCs) for business travelers, and even traditional travel agents, which is surprisingly on a steady 3-year rise (especially for millennials, believe it or not)4 give travelers more options than ever before when purchasing a flight.
Accurately collecting data from these disconnected sources is not only difficult, it’s often impossible. Much of the data is incomplete, old, and sometimes just plain wrong. Not being able to tie a recent purchase to Paris to a 15-year airline loyalist can be a little frustrating for marketers, as well as the analysts responsible for measuring attribution, budget, and marketing performance.
The Solution is Trusted Identity
The good news is that there is a way to manage and enrich the identity of your customers (both frequent fliers and first-time fliers) that provides accurate, current, and enriched customer intelligence throughout your organization – from marketer to analyst.
Every interaction is a chance to increase your customers’ Lifetime Value (LTV) with personalized and relevant communication. It also is an opportunity to build efficiencies and reduce acquisition costs, as well as marketing costs, by delivering targeted messaging to your most important channels.
Neustar helps you create a Connected CRM, ensuring the records are current, clean, and accurate. With additional customer intelligence such as demographic, psychographic, geographic, and behavioral attributes, you can enrich existing records to create more personal, relevant, and connected customer experiences. With cleaner and more robust records that are connected through a single identifier, our OneID system. This persistent ID follows a consumer across all touchpoints and provides transparency and consistency in measurement and engagements across all your marketing initiatives. The Neustar OneID system also appends missing identity information like name, address, phone, and email for a complete picture of your customer.
This means you can confidently identify, and then market to, the right customer with the right message across any channel. It helps you know who’s on the other end of the interaction no matter the channel — particularly phone and mobile. Mobile booking is growing, and fliers almost always travel with their device, so accurately identifying your customers across multiple devices ensures you can stay in touch with them before, during, and after their itinerary.
But with this increase in multiple device ownership, it’s become more difficult to know for sure if a site visitor is a loyal frequent flier or a potential new customer. Neustar's Consumer Identity Management Solution helps identify unknown site visitors and understand the reach of your digital investment. It also helps maintain clean, accurate information in your CRM, providing an “always-on” solution that collects, correlates, corroborates and connects fractional identifiers in real-time to create a 3D view of each customer. Your organization’s data analysts will be your new best friends because their CPA and CPC algorithms will be more accurate when actual unique visitors and identity are known, as will the Revenue Optimization system.