The rise of digital channels over the past decade or more has created a wealth of marketing and revenue opportunities for airlines. Their customers have also benefited from near-instant access to a vast choice of flights and ancillaries. The result, however, has turned out to be something of a mixed bag.
In streamlining the digital environment it is all too easy to strip out the human touch from interactions between people and businesses. Yet passengers can still be overwhelmed by the amount of time needed to identify products and services relevant to their needs, while the dominant transparency of price comparison ensures it is increasingly difficult for airlines to differentiate themselves.
Personalisation strategies offer airlines the opportunity to combat that commoditisation and synthesise peer-to-peer relationships with their customers that reward both parties. And the indications are that the potential business benefits can be considerable.
Personalisation requires airline business models and cultures to adapt and evolve. At the moment though, the expectations of the average customer, informed by the likes of Spotify or Netflix, continue to evolve ahead of what airlines have delivered. To be fair, the airline industry's articulation of personalisation and its ambitions for evolution are self-evident, but the emergent question is how does the digital world mimic the subtle interactions of a real-world relationship in a way that empowers, rather than alienates, the customer?
Personalisation will be "the battleground for the future" according to Dermot O’Connor, vice-president of product and engineering at Boxever, the customer intelligence cloud service. He explains that the past decade has seen basic interactions, like putting a name into an email, develop into context-aware exchanges, talking to customers in relation to their past behaviour. Now personalisation is moving into the predictive world.
"You know the person, you are taking the context of what potentially they have done before, you are using predictive capability to make a recommendation of what they might like," says O'Connor. "Where we are going with personalisation is a relationship. It's about applying that across the whole customer lifecycle, the whole customer experience."
The defining concept that underpins personalisation is relevance. Karin Dodson, head of product marketing, customer experience and loyalty solutions, airlines at Amadeus, states: "Personalisation is about being relevant to the traveller, no matter what point of the journey they are in. It is the ability for airlines to better serve their customers based on customer preferences and travel context."
She adds: "Airlines need to remember that humans use technology as an interface to someone else. If fully automated systems get it wrong – then it's not relevant, and therefore not effective. Genuine personalisation is focused on using the minimum set of information needed to provide the relevant service: it’s that simple."
Research among consumers in the USA, UK, Germany and France, issued in May 2018 by Periscope By McKinsey, reveals that many businesses are falling short when it comes to providing effectively targeted messages and offers that will deliver an emotive response. It reports that consumers are mostly positive to receiving personalised messages. However, most recommendations in those messages fail to hit the mark. Just 21% of consumers in the USA and 11% or less in Germany, the UK and France find recommendations to be very relevant.
Furthermore, when consumers were asked how often the personalised messages they receive were truly personal, relevant and intriguing, those people reporting that messages only sometimes captured these characteristics represented the majority of responses, at around 40% across the markets.
So how do airlines compare with other sectors in terms of their ability to personalise? Daniel Bensley, industry lead, travel, at personalisation platform Qubit, observes that airlines lag behind other industries in the digital and mobile world.
"Airlines tend to be a slightly older type of business and they are transforming to be more digital. If you compare them to some of the new disrupters, take a business like AirBnB, they have grown up with digital in their DNA, they did not exist before the internet, whereas airlines did."
However, Bensley points out that the opportunity for airlines to leverage personalisation is somewhat greater, thanks to their "wealth of customer data" and the time that they actually spend with the consumer. "Not just the booking, but the consumer/passenger sat on the flight, all the interactions in the airport, are opportunities to engage that customer that other travel businesses don’t have," he says.
Robin Hopper, senior vice-president product and marketing at airline commerce platform Guestlogix, adds that airlines do not realise the advantage they have over on-the-ground retailers by not having to address the "cold start" of knowing nothing about their customers when they walk through the door.
Yet terrestrial retailers' in-store customer experience can be excellent, despite having little to go on, so how much is personalisation down to establishing human rapport and empathy at the point of delivery, rather than anything technology can deliver?
On-the-ground retailers "know they get tremendous lift by giving a personalised experience, so it's front and centre to all of their staff to treat a person like a guest", according to Hopper. "When they start to apply technology to extend that human touch, they still come to it from that point of view of trying to treat people like a guest."
Airlines know who their passengers are, where they will be throughout the day of travel and which journey stages are likely to increase anxiety. Hopper says these are all factors that can break inertia and get airlines into the personalisation game pretty rapidly. "You don't have to boil the ocean to personalise and consumers have proven over and over again that they are willing to share their personal information, providing you make life better for them."
When it comes to scaling up personalisation capabilities, Bensley begins by looking for ways to improve conversion for large subsets of the digital audience – ironing out any friction in the booking funnel, for example. Next comes segmenting the customer base and trying to differentiate the types of experiences they have – it is this stage that is currently engaging many in the airline sector.
Typically, this is where airlines will reach an "impact barrier", according to Bensley, as developing and putting into production local content to suit each segment puts a strain on the internal resources of the business and the technology, which is when you may have to turn to outside specialists for support.
While personalising interactions with customers at search, flight booking and ancillary sales have been the initial focus for many airlines, some are now starting to explore opportunities where digital interactions meet the real world; in other words, in flight.
For Jonathan Gilbert, director, digital content and innovation at Spafax, in-flight entertainment offers a chance "to build a single view of the customer and their preferences so that we can provide a more relevant and enriching flight, as well as to achieve greater business understanding of customer behaviour in flight and in the moments leading up to their flight".
In March 2018, Swiss International Air Lines became the latest member of the Lufthansa Group to roll out Profile, the personalised entertainment platform from Spafax. Behind the scenes Spafax has invested in conversational interfaces and artificial intelligence to better understand the content it serves, the intent and behaviour patterns of its viewers and allow passengers to interact with the airline however they wish.
Personalisation is a mindset of digital transformation, according to Gilbert. "I think that transformation is really about finding new ways to disrupt the business and market sector that you work in – and that such disruption is easiest achieved through a big vision, but starting with a small implementation that you can test, iterate and pivot."
Singapore Airlines, in partnership with Panasonic Avionics, introduced myKrisWorld, a personalised IFE experience in November 2017. Andrew Mohr, head of innovation at Panasonic, emphasises that personalisation of IFE should be implemented within the context of the airline's total offering, "so that processes are ideally done once, consistently, and are intelligent".
He adds: "Many companies are vying to own as much of the passenger journey as possible. Those that deliver the most value with the least friction and duplicated effort have the best chance."
At a macro level, a connection can be drawn between the quality of a company's customer experience and its stock performance. Research from Forrester, issued in February 2018, found that the top 20% of brands in Forrester's Customer Experience Index had higher stock price growth and higher total returns than a similar portfolio of companies drawn from the bottom 20%.
The benefits of personalisation come into sharper focus when you look into the granular detail of revenue performance. Boxever’s Dermot O’Connor says some of its more transactional and revenue-focused customers have netted up to €80 million ($93 million) in incremental revenue over six months using one-to-one personalisation and achieved 65% higher engagement rates on communications.
"We have seen an increase in ancillary revenue up to €1 million in one week of cross-sells and up-sells, 30% engagement increases on dynamic product recommendations, return on investment of nearly 100% in just four weeks. So huge performance validation on the transactional side, the conversion side, the engagement side," he says.
Make no mistake, successful personalisation will require business model and cultural change. Ostensibly these changes will be driven by strategy. However, just embarking on a personalisation journey and learning more about your customers is likely to cause subtle changes with the business.
For Qubit’s Bensley, the culture of the business should be driven by its customers and their expectations are being shaped by personalised and curated services like Spotify and Instagram. "We spend so much time through these platforms, that this expectation is being carried through to interactions with other businesses, airlines, retailers, and if the business is not meeting that expectation, the customer will find another business that is."
Bensley observes that having digital representation at the highest corporate level, for example chief customer officer, also helps power a customer-focused culture. Further, the data insights on customers that personalisation initiatives accrue will drive change and eliminate opinion-based decision-making from the business.
"It is often the highest-paid person’s opinion that drives a lot of the business strategy, but when there is a data-driven process, customers are telling you what they expect from your flight and your experience, or customers are being quite clear about what they would like and what they'd want from you in the future. That has to drive the culture of change and improvement," he says.
This business realignment will impact at every level because, as Mohr notes, new digital services are only as effective as the human logistics, planning and fulfilment that accompanies them. "Personalisation can encompass cabin services, crew, marketing, IT and mobile teams. Traditionally, many of these groups have not needed to engage deeply with each other to offer effective personalisation services. That would need to change," he says.
European low-cost carrier AirBaltic's personalisation strategy has involved re-examining what and how it sells. It has begun, quite simply, by personalising at a route level – promoting ancillaries that resonate most with passengers flying to specific destinations. However, behind the scenes, more seismic shifts are under way.
Initiatives have included customer journey workshops with teams diving into the data to get a better understanding of their customers' needs and behaviour. AirBaltic has analysed customer data from the past five years to identify behavioural segments and it is now building a database around these segments to reach a view of total customer value and understand people’s propensity to buy.
At a cultural level, AirBaltic is in the process of putting the customer at the centre of what it does. Jouni Oksanen, senior vice-president e-commerce, sales and marketing, has broken down the walls between departments like marketing, e-commerce and revenue so they work together on a regular basis. He has also taken key players from his team to visit and learn from agile-working, customer-centric companies outside the aviation sector.
Workshops this summer will enable Oksanen’s team to have "a self-discovery of [what] the future organisation looks like". Oksanen explains: "It’s not going to be any more marketing, e-commerce, revenue management, etc – we are turning a vertical organisation horizontal so that it is aligned with the customer journey."
In the travel sector, all players, not just airlines, are jostling to own the customer. Customer data is a core business asset and the critical enabler of personalisation strategies. But will the true differentiators end up being those who are willing to share a little data in order to deliver more relevant services to their customers?
Justin Steele, vice-president of product at travel e-commerce specialist Switchfly, believes that the ultimate goal for personalisation is to create a travel retailing platform, a curated experience that combines what is currently possible – flights, times and dates, with the amenities and luxuries passengers desire, plus the products and services that they will need at their destination.
He observes: "It's really how can you create a customer experience that creates that brand loyalty. And it starts with the travel suppliers taking control of their own customer data and sharing maybe some of these parameters with others."
His view resonates with Mohr, who says companies must carefully weigh up the value they can deliver from their data. "Today, 'going alone' can result in a significant under-leverage of that data and the business intelligence opportunities that it yields. From our perspective, as a company making similar decisions, it really depends on the value that can be created using the data oneself, versus the enhanced value that can come from integrating different data sets and perspectives. There is no one answer for all companies."
Data protection and privacy has been in the spotlight, with the EU’s General Data Protection Regulation coming into force in May 2018. However, Steele reflects the general feeling among personalisation experts that GDPR's underlying principles and rules are best practice for airlines. "We need to adapt to transparency and offer value for that data in a very open manner."
Perhaps the biggest shift in mindset that personalisation will require is a willingness to form strategic partnerships with technology companies and other travel suppliers in order to be more relevant and more competitive.
"It's great when you own that data and you can personalise it for your specific products, but when you start thinking about complementary products, both on the technology side as well as the inventory side, and added value you can get by not trying to own all the different pieces of integration, I think that is going to create opportunity," says Steele.
At the moment, the onus is to bring customer knowledge to bear on the business requirement, but this risks burning out the customer if it fails to emulate a respectful peer-to-peer relationship.
The next major step will be to use customer knowledge in a more subtle and considerate way to evolve the quality of the relationship. The winners will be those who acknowledge that customers are happiest when they are made to feel like a decision-maker in the partnership. For that, they will need digital tools to listen and respond appropriately. This is where the power of artificial intelligence can be harnessed to deliver vastly more subtle relationships in which the airline is the partner of the customer.
Source: Cirium Dashboard