Description
Despite huge growth in the number of travellers carried, airlines are struggling to turn demand into profits. With high fuel and labour costs as well as intense competition and diminishing yields, industry profit margins remain weak at 1 to 2%.
Airline merchandising
amadeus.com
Thinking
like a
retailer
Contents
Foreword 3
Methodology 4
Thinking like a retailer: Airline merchandising 5
The importance of the customer journey 7
The importance of the merchandising techniques 8
The importance of channel 14
Using personalisation to drive sales 15
High priority merchandising techniques 16
High priority mobile opportunities 17
The last word: Brand and merchandising to lead to pro?tability 18
Thinking like a retailer: Airline merchandising 3
Foreword
The introduction of new merchandising techniques is fuelling a
revolution in how travel is purchased.
Simply put, merchandising is about providing the right product and service to the traveller, delivered
through the right channel, and at the right time, in a way that is visually appealing and easy to
understand.
Merchandising matters to airlines because it is a vital tool to improve traveller satisfaction and secure
competitive di?erentiation. However, it also matters because it represents a signi?cant opportunity to
drive up revenues and yield.
At Amadeus, we are committed to understanding how airlines can deploy e?ective approaches to
merchandising. We welcome this report by Frost & Sullivan as it provides a comprehensive overview
of the opportunity for the industry, as well as strategic insights into the components of a successful
merchandising strategy.
This study allows every part of the travel industry to better understand the impact of di?erent
merchandising techniques. It is this understanding of what works, and what doesn’t, that is crucial
for our airline partners, and for us, as we prioritise investments to better support merchandising
capabilities.
This study also goes one step further. It outlines the key elements that must underpin a successful
merchandising strategy, whether that is better knowledge of the customer journey; how to combine
di?erent techniques for maximum impact; the importance of tailoring to the channel; or taking into
consideration the impact of service and price. This study provides an invaluable resource for all of us
interested in making the most of the merchandising revolution.
We have always been focused on helping our airline customers leverage the many and evolving
opportunities that are present in the dynamic travel industry.
Today, it is clear that those opportunities can only be maximised by shifing to a retail mind-set. To that
end, we will continue to invest in developing the solutions that will support our airline customers to
make this transition.
It will be exciting to see how the merchandising revolution continues to change the face of air travel in
the coming years, for both travellers and airlines alike.
As we work with the industry to shape the future of travel, we look forward to collaborating with our
airline partners to help them execute their merchandising strategies successfully.
Julia Sattel
Senior Vice President, Airline IT
Amadeus IT Group
Thinking like a retailer: Airline merchandising 4
Frost & Sullivan combined various research
approaches; including airline executive interviews,
end-traveller surveys, external industry best
practice interviews, in-house syndicated research,
and internal expert interviews.
We utilised our internal pool of syndicated research
and the expert analysis of Frost & Sullivan’s Digital
Media and Mobile & Wireless Communications
industry research groups. We interviewed 15 airline
executives across 6 continents, ranging from low-
cost to full-service carriers, and we spoke with a
dozen best-practice companies within and outside
of the travel space. To conclude, this qualitative
research was tested through an end-traveller
survey of 306 respondents across 5 key markets
around the world – Germany, UK, USA, Brazil, and
Singapore.
The survey sample can be summarised as follows:
_ Germany – 21%, UK – 21%, USA - 20%, Brazil-
19%, and Singapore – 19%
_ 50% messaging generation (20-39 years old) and
50% voice generation (40 or older)
_ 41% business travellers and 59% leisure travellers
Retail best practice ?gures, data from airline
interviews, industry data, and survey results are
the main inputs used to calculate ROI estimates.
With these concrete ?gures, this study provides a
comprehensive view of airline merchandising along
with recommendations for airlines to improve their
merchandising strategies.
Methodology
Split by country
Germany UK USA Brazil Singapore
306 63 62 61 60 60
Split by generation
OVERALL
SAMPLE
Germany UK USA Brazil Singapore
Messaging
generation
152 31 30 31 30 30
20 to 29 years old 47 7 7 9 14 10
30 to 39 years old 105 24 23 22 16 20
Voice generation 154 32 32 30 30 30
40 to 49 years old 69 14 8 12 24 11
50 to 59 years old 41 7 9 4 5 16
60 to 69 years old 37 11 13 10 1 2
70 years old or more 7 0 2 4 0 1
306 63 62 61 60 60
Split by type of
traveler
OVERALL
SAMPLE
Germany UK USA Brazil Singapore
Business traveller 126 25 24 26 25 26
Leisure traveller 180 38 38 35 35 34
Total sample 306 63 62 61 60 60
OVERALL
SAMPLE
Thinking like a retailer: Airline merchandising 5
Providing travel services demands a customer-
centric attitude based on an understanding
of traveller needs and desires. Airlines have
traditionally o?ered a few services such as
extra baggage, seat upgrades and some third-
party services (e.g. insurance, hotels and car
rental). However, this patchwork of services was
typically introduced to maximise revenue. It
was not part of a broader customer experience
strategy, attempting to meet and exceed traveller
expectations throughout the duration of the
journey and beyond.
By rede?ning the airline business as a travel
experience business, airlines can signi?cantly
enhance the revenue opportunities generated by
satis?ed travellers, over time. Flights should be
viewed as just one of many products. Services
should be o?ered to meet both the practical
needs and the more emotional desires of
travellers, for example, airport discounts and
destination activities. Airlines o?ering services
designed around the travel experience really
di?erentiate their brand. To be successful, airlines
must think like retailers and critically focus on
adopting e?ective merchandising techniques.
Despite huge growth in the number of travellers carried, airlines are struggling
to turn demand into pro?ts. With high fuel and labour costs as well as intense
competition and diminishing yields, industry pro?t margins remain weak at 1 to
2%. With the business of ?ying under extreme pressure, airlines have invested
in additional services to drive revenues. Additional services now contribute an
estimated €10 per passenger globally. Without ancillaries, airlines would be losing
money from their core seat product. The shif from providing only a core seat
product to providing a variety of travel services has been slow and still has a long
way to go.
Thinking like a retailer:
Airline merchandising
Thinking like a retailer: Airline merchandising 6
The merchandising opportunity
Retailers have developed sophisticated
merchandising techniques to better serve their
customers. Considering the needs of customers
as a priority over short-term pro?tability
should be the starting point when applying any
merchandising technique. If needs are met,
revenues will follow. Customers must feel that
they are deriving value from a transaction,
not that they are being exploited. With excess
baggage and seat charges, many airlines have
made the traveller feel like they are being
squeezed rather than served.
To maintain a customer-centric focus, it is vital
that both revenue generation and customer
satisfaction be measured rigorously. KPIs for
revenue generation (e.g. ancillary revenue per
passenger, basket size, and conversion rates)
should all be used. Likewise, KPIs should be
designed around customer satisfaction (e.g. net
promoter score, awareness, attitudes, usage
(AAU) metrics and customer price sensitivity).
KPIs for digital success should also measure
session length, retention rates, active users and
load times.
The good news for airlines is that as they move
into the travel experience space – currently
occupied by hospitality companies, travel agents,
and tour agencies - they have a huge competitive
advantage. Our research shows that 79% of
travellers prefer to buy services from the airline
directly rather than a third-party. The airline
commands a very high level of trust, which can
be leveraged to sell additional services. Airlines
must develop a merchandising strategy that
brings together ?ve critical elements – customer
journey, technique, channel, service, and price
– all of which should be integrated with an
airline’s personalisation strategy and techniques.
Airlines must use the traveller data they collect
to personalise every o?er made to individual
travellers. Personalisation of o?ers increases
relevance, conversion and revenue.
*Not in order of importance
Inspire Shop Book
Pre-trip
On-trip Post-trip
24/48
Afer booking
24/48
Before departure
Check-in Airport
Technique
O?er creation and packaging
Customer contact
Value and usability
Channel
Service
Price
€ 5-250
Additional miles/points,
ticket ?exibility options,
travel insurance
Airport parking, airport Wi-Fi,
priority boarding
Extra luggage, cabin upgrade,
seat change,
in-?ight connectivity
Airport transfer,
destination excursions,
hotel accommodation
_ 79% of travellers prefer to buy
services from the airline directly
Thinking like a retailer: Airline merchandising 7
Timing – the time during the customer journey
at which an o?er is made – is the ?rst key
consideration. Timing is important because
travellers are more open to o?ers (and need more
help and guidance) at certain stages of the journey.
Our research shows that the best time to reach
a traveller depends on the speci?c o?er. There
are, however, certain moments in which travellers
are in a purchasing mind-set, thinking about their
trips and the di?erent components they will need.
This typically happens during the booking stage
and 48 hours before departure. The booking
stage is the ideal time for airlines to approach
the traveller with big ticket items that require
thought and comparison such as hotels, insurance
and entertainment. Two days prior to departure is
when travellers begin to focus on airport parking,
transfers, luggage and other logistics of their trip.
A quarter of travellers are open to receiving o?ers
when they are back at home, considering their
next trip. This is a need that very few airlines are
currently meeting and a great growth opportunity,
especially with frequent travellers.
When booking
?ights
Before the
?ight (48 hours
before departure)
10 %
20 %
30 %
40 %
50 %
60 %
0 %
When
checking in
At the
airport-afer
check-in
If waiting
due to delay
What is the best time for you to consider o?ers for additional services?
On board
the outbound
?ight
On board
the inbound
?ight
At arrivals
once landed
Back at home
and considering
next trip
The importance of the
customer journey
Another signi?cant merchandising opportunity is
the time travellers spend at airports and onboard
?ights. Airline customers are used to airport and in-
?ight duty-free shopping, but there are very limited
other types of services o?ered during these stages.
The mobile channel provides a perfect opportunity
to change this. With mobile, airlines can reach out
to travellers with relevant and timely o?ers. The
best services o?ered during these stages are lower
priced services providing immediate rewards. Some
examples include o?ering restaurant vouchers just
before travellers arrive at the airport, or o?ering
?ight-based services such as in?ight connectivity.
To maximise their merchandising potential, airlines
must o?er services throughout the customer
journey, e?ectively employing the mobile channel.
If an airline can do this, it becomes more than just
a commodity ?ight provider. It becomes a brand-
di?erentiated service provider, o?ering positive
experiences and adding real value.
Thinking like a retailer: Airline merchandising 8
Timing combined with the appropriate merchandising technique will optimise customer
engagement. Merchandising techniques can be grouped into three categories:
1. O?er creation and packaging
2. Customer contact
3. Value and usability
The importance of
merchandising techniques
Technique
Traveller
interest
Airline
interest
ROI
Value-added bundles 50% 98% Increase basket size +€14-19
A la carte 34% 95% Increase basket size +€5-10
Personalised packs 22% 83% Increase basket size +€30-35
Subscriptions 28% 62% Increase ancillary revenues by 2%
Options/bidding 25% 50% Increase ancillary revenues by 2%
Fare families 11% 40% Increase basket size +€19
Branded fares 15% 25% Increase basket size +€12-15
_ Value-added bundles will
increase basket size by €14-19
O?er creation and packaging techniques
With base fares being forced ever downwards
through competition, the industry has coalesced
around the idea of bundling services to increase
revenue per passenger. Bundling is not necessarily
at odds with customer satisfaction; the key is
to o?er simpli?cation and choice. The traveller
wants the ability to pick individual services both
à la carte and in a bundle that o?ers tangible
value. Airlines must focus on ensuring they clearly
communicate that value to the traveller.
Value-added bundles and a la carte
With 50% traveller interest, the most popular way
to purchase services is in a value-added bundle, in
addition to the ?ight, in this case not personalised,
and comprised of airline and/or third-party
provided services. The traveller is clearly looking
for a solution or bundle that improves the overall
travel experience.
Our survey results show that travellers have no
preference as to the number of di?erent services
o?ered in a bundle: 33% would prefer two, 32%
would prefer three, and 35% would like to see as
many as possible. Instead the value can be added
either in terms of price by making it cheaper to
buy in a bundle than individually, or by improving
the travel experience by simplifying the purchasing
process meal, which is or allowing for more
?exibility.
A well known example is the McDonalds Extra
Value Meal, which is cheaper than the burger,
fries and drink purchased individually. The TV
industry has been very successful with packaging
as well. They create channel bundles based on the
varied interests of their customers, (e.g., movies,
entertainment or sports) and these bundles add
value and simplify the buying process.
To airlines, this simplicity could mean a bundle
of services that improve the travel experience
(such as reducing waiting with priority security,
priority boarding, and airport transfer), or increases
comfort with extra legroom, premium in-?ight
headphones, and a destination spa experience. The
value the traveller gets from a particular bundle
must be completely clear.
Investing in value-added bundles will increase
basket size by €14-19. While this technique does
not o?er the highest ROI of all the packaging
techniques, it does provide the best balance
between revenue generation and customer
satisfaction.
A la carte is the second most popular way to
purchase services, with 34% traveller interest.
Airlines understand the traveller desire to have
services o?ered individually. Despite the fact that
bundling generates greater revenues, airlines
should also o?er their services à la carte, as it
gives choice and ?exibility to their customers.
Thinking like a retailer: Airline merchandising 9
Personalised packs
Personalised packs is a packaging technique by
which tailored bundles of both airline and partner
services are o?ered to travellers based on known,
observed, or assumed personal preferences.
There is a huge interest from airlines (83%) and
relatively little interest from travellers (22%) in
this type of o?er. The ROI for this technique is
an increase in basket size of up to €30-35 – the
highest increase of any packaging technique.
Some elements of personalised packaging are
already in place, using data such as frequent ?yer
tier and cabin class. However, truly personalised
o?ers using granular customer relationship
management (CRM) data, purchasing history,
social media, clickstream data and location-
based data will signi?cantly improve customer
response. There is still much apprehension
from consumers around personalised services.
To improve customer take-up and to avoid a
customer backlash, there must be widespread
education of the market as to what sort of data is
being collected. But the trend will not be reversed.
Retailers are tooling up for the personalisation
competition in which the most e?ective tool will
be data.
Subscriptions
Subscriptions are a pricing model whereby a
single service or group of services are o?ered for
a monthly, yearly or seasonal fee. Subscription
packaging o?ers value to some business
travellers and frequent ?yers because the value
of a subscription is tied to frequency of use. A
monthly gym membership is valuable if you visit
the gym twice a week, but if you only go once
a month then the membership is not the right
option. The same is true of airline subscriptions.
The limited appeal of this model means that it
can only increase additional revenues by 2%.
Branded fares and fare families
The least popular types of packages are branded
fares and fare families. Only 11% of travellers
are interested in fare families, purchasing the
?ight and services/conditions together, and
just 15% in branded fares, selecting a pack of
services/conditions separately from the fare. Such
low interest from travellers suggests that they do
not see the value-add in these types of packages.
Airlines perfectly understand the distinction
between packages because they are heavily
invested in these methods, whereas travellers
not appreciate the nuances between di?erent
packages. Airlines need to remove complexity and
be explicit about the value of each bundle.
It is possible that travellers are uninterested in
branded fares and fare families because their
value has not been well communicated to the
market. Branded fares and fare families can
o?er simplicity and consistency. Short videos,
infographics and visualisation tools should
be used to help the traveller understand the
o?ering, rather than showing a long list of tick
boxes as is ofen seen today. If communicated
more e?ectively, packaging services in a fare
family bundle will increase basket size by €19,
compared to €12-15 for a branded fare bundle.
_ Personalised packs increase
basket size up to €30-35
Thinking like a retailer: Airline merchandising 10
Customer contact techniques
The way in which the traveller is made aware
of an o?er is sensitive, as striking the balance
between a relevant customer contact and
irritation can be di?cult to achieve. 51% of
travellers stated they only want to be contacted
if they have speci?cally authorised it, and 16%
of travellers stated that they do not want to be
contacted directly at all. These percentages vary
signi?cantly between regions. Of the customer
contact techniques, context-aware email and
push noti?cations are the most e?ective.
Context-aware email
76% of travellers feel that a context-aware email
could persuade them to make a purchase that
they otherwise might not have considered. The
relevance of email is always being questioned,
as newer more fashionable communication tools
emerge such as Twitter, Facebook and Snapchat.
Today, however, these tools primarily serve
communication needs, not yet acting as robust
sales channels. Over time, these platforms may
develop into more robust sales channels, but
traveller preferences will take longer to change. In
a foreseeable future, email will remain dominant.
Post-click metrics show that email creates a
conversion rate of 3.19%, compared to 1.95% for
search and 0.71% for social media. The shif to
mobile has not diminished the relevance of email,
with 65% of emails read ?rst on a mobile device.
An email triggered by context enjoys a 50% open
rate compared to 28% for non-context email.
Likewise, the click-through rate for context-aware
email is 10% against 5% for non-context emails.
Implemented e?ectively, context-aware email
noti?cations will lead to a 5% improvement in
conversion.
Technique
Traveller
interest
Airline
interest
ROI
Context-aware
email
76% 83% +5% conversion
Push noti?cation 49% 95% +10% conversion
SMS reminder 33% 25%
Despite huge growth in the number of travellers carried, airlines are struggling to turn demand into profits. With high fuel and labour costs as well as intense competition and diminishing yields, industry profit margins remain weak at 1 to 2%.
Airline merchandising
amadeus.com
Thinking
like a
retailer
Contents
Foreword 3
Methodology 4
Thinking like a retailer: Airline merchandising 5
The importance of the customer journey 7
The importance of the merchandising techniques 8
The importance of channel 14
Using personalisation to drive sales 15
High priority merchandising techniques 16
High priority mobile opportunities 17
The last word: Brand and merchandising to lead to pro?tability 18
Thinking like a retailer: Airline merchandising 3
Foreword
The introduction of new merchandising techniques is fuelling a
revolution in how travel is purchased.
Simply put, merchandising is about providing the right product and service to the traveller, delivered
through the right channel, and at the right time, in a way that is visually appealing and easy to
understand.
Merchandising matters to airlines because it is a vital tool to improve traveller satisfaction and secure
competitive di?erentiation. However, it also matters because it represents a signi?cant opportunity to
drive up revenues and yield.
At Amadeus, we are committed to understanding how airlines can deploy e?ective approaches to
merchandising. We welcome this report by Frost & Sullivan as it provides a comprehensive overview
of the opportunity for the industry, as well as strategic insights into the components of a successful
merchandising strategy.
This study allows every part of the travel industry to better understand the impact of di?erent
merchandising techniques. It is this understanding of what works, and what doesn’t, that is crucial
for our airline partners, and for us, as we prioritise investments to better support merchandising
capabilities.
This study also goes one step further. It outlines the key elements that must underpin a successful
merchandising strategy, whether that is better knowledge of the customer journey; how to combine
di?erent techniques for maximum impact; the importance of tailoring to the channel; or taking into
consideration the impact of service and price. This study provides an invaluable resource for all of us
interested in making the most of the merchandising revolution.
We have always been focused on helping our airline customers leverage the many and evolving
opportunities that are present in the dynamic travel industry.
Today, it is clear that those opportunities can only be maximised by shifing to a retail mind-set. To that
end, we will continue to invest in developing the solutions that will support our airline customers to
make this transition.
It will be exciting to see how the merchandising revolution continues to change the face of air travel in
the coming years, for both travellers and airlines alike.
As we work with the industry to shape the future of travel, we look forward to collaborating with our
airline partners to help them execute their merchandising strategies successfully.
Julia Sattel
Senior Vice President, Airline IT
Amadeus IT Group
Thinking like a retailer: Airline merchandising 4
Frost & Sullivan combined various research
approaches; including airline executive interviews,
end-traveller surveys, external industry best
practice interviews, in-house syndicated research,
and internal expert interviews.
We utilised our internal pool of syndicated research
and the expert analysis of Frost & Sullivan’s Digital
Media and Mobile & Wireless Communications
industry research groups. We interviewed 15 airline
executives across 6 continents, ranging from low-
cost to full-service carriers, and we spoke with a
dozen best-practice companies within and outside
of the travel space. To conclude, this qualitative
research was tested through an end-traveller
survey of 306 respondents across 5 key markets
around the world – Germany, UK, USA, Brazil, and
Singapore.
The survey sample can be summarised as follows:
_ Germany – 21%, UK – 21%, USA - 20%, Brazil-
19%, and Singapore – 19%
_ 50% messaging generation (20-39 years old) and
50% voice generation (40 or older)
_ 41% business travellers and 59% leisure travellers
Retail best practice ?gures, data from airline
interviews, industry data, and survey results are
the main inputs used to calculate ROI estimates.
With these concrete ?gures, this study provides a
comprehensive view of airline merchandising along
with recommendations for airlines to improve their
merchandising strategies.
Methodology
Split by country
Germany UK USA Brazil Singapore
306 63 62 61 60 60
Split by generation
OVERALL
SAMPLE
Germany UK USA Brazil Singapore
Messaging
generation
152 31 30 31 30 30
20 to 29 years old 47 7 7 9 14 10
30 to 39 years old 105 24 23 22 16 20
Voice generation 154 32 32 30 30 30
40 to 49 years old 69 14 8 12 24 11
50 to 59 years old 41 7 9 4 5 16
60 to 69 years old 37 11 13 10 1 2
70 years old or more 7 0 2 4 0 1
306 63 62 61 60 60
Split by type of
traveler
OVERALL
SAMPLE
Germany UK USA Brazil Singapore
Business traveller 126 25 24 26 25 26
Leisure traveller 180 38 38 35 35 34
Total sample 306 63 62 61 60 60
OVERALL
SAMPLE
Thinking like a retailer: Airline merchandising 5
Providing travel services demands a customer-
centric attitude based on an understanding
of traveller needs and desires. Airlines have
traditionally o?ered a few services such as
extra baggage, seat upgrades and some third-
party services (e.g. insurance, hotels and car
rental). However, this patchwork of services was
typically introduced to maximise revenue. It
was not part of a broader customer experience
strategy, attempting to meet and exceed traveller
expectations throughout the duration of the
journey and beyond.
By rede?ning the airline business as a travel
experience business, airlines can signi?cantly
enhance the revenue opportunities generated by
satis?ed travellers, over time. Flights should be
viewed as just one of many products. Services
should be o?ered to meet both the practical
needs and the more emotional desires of
travellers, for example, airport discounts and
destination activities. Airlines o?ering services
designed around the travel experience really
di?erentiate their brand. To be successful, airlines
must think like retailers and critically focus on
adopting e?ective merchandising techniques.
Despite huge growth in the number of travellers carried, airlines are struggling
to turn demand into pro?ts. With high fuel and labour costs as well as intense
competition and diminishing yields, industry pro?t margins remain weak at 1 to
2%. With the business of ?ying under extreme pressure, airlines have invested
in additional services to drive revenues. Additional services now contribute an
estimated €10 per passenger globally. Without ancillaries, airlines would be losing
money from their core seat product. The shif from providing only a core seat
product to providing a variety of travel services has been slow and still has a long
way to go.
Thinking like a retailer:
Airline merchandising
Thinking like a retailer: Airline merchandising 6
The merchandising opportunity
Retailers have developed sophisticated
merchandising techniques to better serve their
customers. Considering the needs of customers
as a priority over short-term pro?tability
should be the starting point when applying any
merchandising technique. If needs are met,
revenues will follow. Customers must feel that
they are deriving value from a transaction,
not that they are being exploited. With excess
baggage and seat charges, many airlines have
made the traveller feel like they are being
squeezed rather than served.
To maintain a customer-centric focus, it is vital
that both revenue generation and customer
satisfaction be measured rigorously. KPIs for
revenue generation (e.g. ancillary revenue per
passenger, basket size, and conversion rates)
should all be used. Likewise, KPIs should be
designed around customer satisfaction (e.g. net
promoter score, awareness, attitudes, usage
(AAU) metrics and customer price sensitivity).
KPIs for digital success should also measure
session length, retention rates, active users and
load times.
The good news for airlines is that as they move
into the travel experience space – currently
occupied by hospitality companies, travel agents,
and tour agencies - they have a huge competitive
advantage. Our research shows that 79% of
travellers prefer to buy services from the airline
directly rather than a third-party. The airline
commands a very high level of trust, which can
be leveraged to sell additional services. Airlines
must develop a merchandising strategy that
brings together ?ve critical elements – customer
journey, technique, channel, service, and price
– all of which should be integrated with an
airline’s personalisation strategy and techniques.
Airlines must use the traveller data they collect
to personalise every o?er made to individual
travellers. Personalisation of o?ers increases
relevance, conversion and revenue.
*Not in order of importance
Inspire Shop Book
Pre-trip
On-trip Post-trip
24/48
Afer booking
24/48
Before departure
Check-in Airport
Technique
O?er creation and packaging
Customer contact
Value and usability
Channel
Service
Price
€ 5-250
Additional miles/points,
ticket ?exibility options,
travel insurance
Airport parking, airport Wi-Fi,
priority boarding
Extra luggage, cabin upgrade,
seat change,
in-?ight connectivity
Airport transfer,
destination excursions,
hotel accommodation
_ 79% of travellers prefer to buy
services from the airline directly
Thinking like a retailer: Airline merchandising 7
Timing – the time during the customer journey
at which an o?er is made – is the ?rst key
consideration. Timing is important because
travellers are more open to o?ers (and need more
help and guidance) at certain stages of the journey.
Our research shows that the best time to reach
a traveller depends on the speci?c o?er. There
are, however, certain moments in which travellers
are in a purchasing mind-set, thinking about their
trips and the di?erent components they will need.
This typically happens during the booking stage
and 48 hours before departure. The booking
stage is the ideal time for airlines to approach
the traveller with big ticket items that require
thought and comparison such as hotels, insurance
and entertainment. Two days prior to departure is
when travellers begin to focus on airport parking,
transfers, luggage and other logistics of their trip.
A quarter of travellers are open to receiving o?ers
when they are back at home, considering their
next trip. This is a need that very few airlines are
currently meeting and a great growth opportunity,
especially with frequent travellers.
When booking
?ights
Before the
?ight (48 hours
before departure)
10 %
20 %
30 %
40 %
50 %
60 %
0 %
When
checking in
At the
airport-afer
check-in
If waiting
due to delay
What is the best time for you to consider o?ers for additional services?
On board
the outbound
?ight
On board
the inbound
?ight
At arrivals
once landed
Back at home
and considering
next trip
The importance of the
customer journey
Another signi?cant merchandising opportunity is
the time travellers spend at airports and onboard
?ights. Airline customers are used to airport and in-
?ight duty-free shopping, but there are very limited
other types of services o?ered during these stages.
The mobile channel provides a perfect opportunity
to change this. With mobile, airlines can reach out
to travellers with relevant and timely o?ers. The
best services o?ered during these stages are lower
priced services providing immediate rewards. Some
examples include o?ering restaurant vouchers just
before travellers arrive at the airport, or o?ering
?ight-based services such as in?ight connectivity.
To maximise their merchandising potential, airlines
must o?er services throughout the customer
journey, e?ectively employing the mobile channel.
If an airline can do this, it becomes more than just
a commodity ?ight provider. It becomes a brand-
di?erentiated service provider, o?ering positive
experiences and adding real value.
Thinking like a retailer: Airline merchandising 8
Timing combined with the appropriate merchandising technique will optimise customer
engagement. Merchandising techniques can be grouped into three categories:
1. O?er creation and packaging
2. Customer contact
3. Value and usability
The importance of
merchandising techniques
Technique
Traveller
interest
Airline
interest
ROI
Value-added bundles 50% 98% Increase basket size +€14-19
A la carte 34% 95% Increase basket size +€5-10
Personalised packs 22% 83% Increase basket size +€30-35
Subscriptions 28% 62% Increase ancillary revenues by 2%
Options/bidding 25% 50% Increase ancillary revenues by 2%
Fare families 11% 40% Increase basket size +€19
Branded fares 15% 25% Increase basket size +€12-15
_ Value-added bundles will
increase basket size by €14-19
O?er creation and packaging techniques
With base fares being forced ever downwards
through competition, the industry has coalesced
around the idea of bundling services to increase
revenue per passenger. Bundling is not necessarily
at odds with customer satisfaction; the key is
to o?er simpli?cation and choice. The traveller
wants the ability to pick individual services both
à la carte and in a bundle that o?ers tangible
value. Airlines must focus on ensuring they clearly
communicate that value to the traveller.
Value-added bundles and a la carte
With 50% traveller interest, the most popular way
to purchase services is in a value-added bundle, in
addition to the ?ight, in this case not personalised,
and comprised of airline and/or third-party
provided services. The traveller is clearly looking
for a solution or bundle that improves the overall
travel experience.
Our survey results show that travellers have no
preference as to the number of di?erent services
o?ered in a bundle: 33% would prefer two, 32%
would prefer three, and 35% would like to see as
many as possible. Instead the value can be added
either in terms of price by making it cheaper to
buy in a bundle than individually, or by improving
the travel experience by simplifying the purchasing
process meal, which is or allowing for more
?exibility.
A well known example is the McDonalds Extra
Value Meal, which is cheaper than the burger,
fries and drink purchased individually. The TV
industry has been very successful with packaging
as well. They create channel bundles based on the
varied interests of their customers, (e.g., movies,
entertainment or sports) and these bundles add
value and simplify the buying process.
To airlines, this simplicity could mean a bundle
of services that improve the travel experience
(such as reducing waiting with priority security,
priority boarding, and airport transfer), or increases
comfort with extra legroom, premium in-?ight
headphones, and a destination spa experience. The
value the traveller gets from a particular bundle
must be completely clear.
Investing in value-added bundles will increase
basket size by €14-19. While this technique does
not o?er the highest ROI of all the packaging
techniques, it does provide the best balance
between revenue generation and customer
satisfaction.
A la carte is the second most popular way to
purchase services, with 34% traveller interest.
Airlines understand the traveller desire to have
services o?ered individually. Despite the fact that
bundling generates greater revenues, airlines
should also o?er their services à la carte, as it
gives choice and ?exibility to their customers.
Thinking like a retailer: Airline merchandising 9
Personalised packs
Personalised packs is a packaging technique by
which tailored bundles of both airline and partner
services are o?ered to travellers based on known,
observed, or assumed personal preferences.
There is a huge interest from airlines (83%) and
relatively little interest from travellers (22%) in
this type of o?er. The ROI for this technique is
an increase in basket size of up to €30-35 – the
highest increase of any packaging technique.
Some elements of personalised packaging are
already in place, using data such as frequent ?yer
tier and cabin class. However, truly personalised
o?ers using granular customer relationship
management (CRM) data, purchasing history,
social media, clickstream data and location-
based data will signi?cantly improve customer
response. There is still much apprehension
from consumers around personalised services.
To improve customer take-up and to avoid a
customer backlash, there must be widespread
education of the market as to what sort of data is
being collected. But the trend will not be reversed.
Retailers are tooling up for the personalisation
competition in which the most e?ective tool will
be data.
Subscriptions
Subscriptions are a pricing model whereby a
single service or group of services are o?ered for
a monthly, yearly or seasonal fee. Subscription
packaging o?ers value to some business
travellers and frequent ?yers because the value
of a subscription is tied to frequency of use. A
monthly gym membership is valuable if you visit
the gym twice a week, but if you only go once
a month then the membership is not the right
option. The same is true of airline subscriptions.
The limited appeal of this model means that it
can only increase additional revenues by 2%.
Branded fares and fare families
The least popular types of packages are branded
fares and fare families. Only 11% of travellers
are interested in fare families, purchasing the
?ight and services/conditions together, and
just 15% in branded fares, selecting a pack of
services/conditions separately from the fare. Such
low interest from travellers suggests that they do
not see the value-add in these types of packages.
Airlines perfectly understand the distinction
between packages because they are heavily
invested in these methods, whereas travellers
not appreciate the nuances between di?erent
packages. Airlines need to remove complexity and
be explicit about the value of each bundle.
It is possible that travellers are uninterested in
branded fares and fare families because their
value has not been well communicated to the
market. Branded fares and fare families can
o?er simplicity and consistency. Short videos,
infographics and visualisation tools should
be used to help the traveller understand the
o?ering, rather than showing a long list of tick
boxes as is ofen seen today. If communicated
more e?ectively, packaging services in a fare
family bundle will increase basket size by €19,
compared to €12-15 for a branded fare bundle.
_ Personalised packs increase
basket size up to €30-35
Thinking like a retailer: Airline merchandising 10
Customer contact techniques
The way in which the traveller is made aware
of an o?er is sensitive, as striking the balance
between a relevant customer contact and
irritation can be di?cult to achieve. 51% of
travellers stated they only want to be contacted
if they have speci?cally authorised it, and 16%
of travellers stated that they do not want to be
contacted directly at all. These percentages vary
signi?cantly between regions. Of the customer
contact techniques, context-aware email and
push noti?cations are the most e?ective.
Context-aware email
76% of travellers feel that a context-aware email
could persuade them to make a purchase that
they otherwise might not have considered. The
relevance of email is always being questioned,
as newer more fashionable communication tools
emerge such as Twitter, Facebook and Snapchat.
Today, however, these tools primarily serve
communication needs, not yet acting as robust
sales channels. Over time, these platforms may
develop into more robust sales channels, but
traveller preferences will take longer to change. In
a foreseeable future, email will remain dominant.
Post-click metrics show that email creates a
conversion rate of 3.19%, compared to 1.95% for
search and 0.71% for social media. The shif to
mobile has not diminished the relevance of email,
with 65% of emails read ?rst on a mobile device.
An email triggered by context enjoys a 50% open
rate compared to 28% for non-context email.
Likewise, the click-through rate for context-aware
email is 10% against 5% for non-context emails.
Implemented e?ectively, context-aware email
noti?cations will lead to a 5% improvement in
conversion.
Technique
Traveller
interest
Airline
interest
ROI
Context-aware
76% 83% +5% conversion
Push noti?cation 49% 95% +10% conversion
SMS reminder 33% 25%