The airline with the highest ancillary revenue in 2017 earned a staggering 46.4% of their annual revenue with ancillaries. The airline’s total operating revenue that year? Over 2.6 billion U.S. dollars.
In fact, in the last 7 years, airlines worldwide have gone from generating a combined 32.5 billion dollars in annual ancillary revenue to an impressive 82.2 billion dollars. Ancillary sales are on the rise, and if the trend continues, they will only continue to become more paramount for airlines.
A recent poll, however, found that 83% of Americans put ticket prices among their top considerations when booking personal travel, while 60% said they would not pay extra to avoid being assigned a middle seat, and 52% said they would not pay more to fly on their preferred airline. Indeed, there’s no shortage of customers complaining about being nickeled-and-dimed by airlines.
And it makes sense. With the rise of low-cost carriers, customers who see a cheap ticket and think they’re in for a bargain are frequently disappointed when they start checking out, only to realize they have to pay extra for ancillaries like checked baggage and meals.
Customers are used to the idea of paying extra for perks like first-class, but asking them to pay for something that used to be included is rubbing many of them the wrong way.
On the other hand, these pricing models do offer more flexibility to customers. Plenty of people are more than willing to go without extra baggage or to bring their own food, if it means paying a lot less for a ticket. It may require a bit of change management, but customers love having choices, and these models offer them that.
Not to worry: a lot of fliers out there are still happy to pay more to get more. 85% of the customers in the aforementioned poll said that they find alternative currencies such as wifi access, an empty seat next to them on an airplane, and quicker members-only checkout lines to be highly valuable.
So perhaps the real question is not whether customers want to buy ancillaries, but rather how to know who prefers what, and how to offer it to them at the most opportune time.
The key to increasing ancillary sales without damaging your relationship with your customer is data. Most airlines are already using “personalized” bundling tactics, product-suggestion analytics, and dynamic pricing in the booking funnel and over the course of the travel journey.
But they’re not doing it on a truly individual basis.
At best, airline marketers are offering ancillaries based on large audiences and general personas. This translates to a throw-it-against-the-wall-and-see-what-sticks methodology that, while getting results now, puts you at risk of alienating your customers in the long run.
What’s the alternative?
The Relay42 platform gathers and organizes all of your customer data across channels to create unique user profiles. Then it enables businesses to orchestrate dynamic customer journeys personalized for those individual users in real time, with the help of AI.
AI has the ability to take each user’s entire history into account to predict what their next move will be, and then decide what the best possible product is to upsell or cross-sell at that moment.
Intelligent Journey Orchestration technology helps you offer highly relevant ancillary options at the most relevant moments, transforming ancillary sales from an irritating customer experience into a supportive and helpful journey with a brand that has their best interests in mind.
This kind of real-time personalization allows you to be in the moment with your customers. Instead of threatening your relationship, it builds a mutually beneficial partnership between you and each and every individual that comes into contact with your brand.
Of course, having highly detailed and always up-to-date customer profiles is only the first step. Relay42 also helps you plan and manage end-to-end journeys across all channels and ensure that the timing, channel and content of your message is always highly relevant. This is what we mean when we talk about Intelligent Journey Orchestration.
Customer-centric solutions to the top 5 airline marketing challenges, from acquisition to loyalty.