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A deep dive on how airlines can use personalization to win the next generation of travelers

John Lonergan

Head of Digital, Airlines, Amadeus

Jane is a consultant and frequent traveler. She’s loyal to an airline that generally rewards her loyalty with drink coupons and upgraded seats.

But this week when her travel was disrupted due to weather in Chicago, the airline struggled to support her attempts at rebooking, first on her laptop, and then on her mobile as she was headed to a hotel for the night to get her work done. Then she received an email from the airline pitching vacations to Mexico while she was still struggling to ensure a flight home. Frustrated, she took her ironic story to her friends on social and wondered if her loyalty was really appreciated. Could ‘her’ airline really support travel on her terms?

It doesn’t matter what industry you operate in, airlines like other companies today, face a key challenge: how to become an experience-based business? How to focus first on the experience travelers have through the journey, from inspiration and planning to post-flight feedback and sharing?

The fundamental truth facing every business today is this –  people buy experiences, not products. Businesses must now deliver great experiences to win in an increasingly competitive world – competing for the hearts and minds of their customers – and exceeding their growing expectations at every point in the journey.

Every organization needs to break through the noise and speak to the customer in a unique voice to leave a lasting impression. This is what defines an experience-based business. 

“No matter the industry, customer expectations are now consistent across the board. At Amadeus’ Airline Executive Summit in Istanbul several weeks ago, we heard about simple, agile and open being the cornerstones of this experience. Travelers strive for this and airlines need to deliver it to win them over.”

Cody Crnkovich, Head of Platform Partners and Strategy, Adobe Experience Cloud

Experience based travel brands know the value of personalization and its impact on the bottom line. Based on research from Forrester, the 25% of travel brands who currently operate as experience-based businesses understand its promise and impact fully  — and they’re reaping the rewards with a 2x increase in revenue compared to competitors.

The big differentiator between experience-based businesses and their competitors is the ability to provide meaningful and contextually relevant personalization. In particular, the next generation of travelers have high expectations required to gain their loyalty. Ancillary revenue streams grow through customized offers capturing the interest of both existing loyal customers and the rising generations (Millennial and Gen Z). In fact, more than half of all airline executives surveyed expect the evolution to customized offers  will increase passenger revenue by 15 percent or more. (Amadeus/Skift – A New Formula for Airline Success) 

Correctly pricing ancillary choices, like checked baggage options and pre-assigned seats, is already critical to the business success of most of today’s airlines. According to Skift’s airline survey, 93 percent of airline leaders regarded pricing choices in an offer as very important or critical to their business, 19 percent said they’ve already started work on ancillary price optimization, and 62 percent responded that they would between 2019 and 2020. 

Another critical component to personalization is understanding differences in generational travel preferences. Armed with an understanding of these behavioral trends, airlines can make strategic investments to personalize the journey based on age categories.

What matters to the next generation traveler?

Pricing choices and real time capabilities for ancillary revenue is key as Generation Z has the highest interest in on the go decisions that improve their overall experience. Real time and on the go decisions for Gen Z opens up many opportunities for airlines in tomorrow’s customized offer creation.  It isn’t just about figuring out the right price based on a given customer’s needs at a given moment. Consideration of how to charge, not just how much to charge, may provide airlines an additional opportunity to satisfy the customer.

Pricing to personalize

Pricing models continue to adapt to customer demand across industries. A few airlines are considering three areas that have been gaining traction: bundling, bidding, and subscriptions.

  • Bundling

Mixed bundling means that customer may choose one or more bundles — or the customer may choose items individually. This approach is not unlike the offer of meal options at fast food chains where customers can buy, say, Value Meal #1, Value Meal #2, or a just a hamburger, or just fries, or a hamburger and fries. In recent years, a growing number of airlines are shifting toward this mixed bundling approach.

  • Bidding

One bidding model with relevance to airlines is the “name-your-own-price” model, one in which the customer proposes a price to a firm, and the firm can accept, reject, or even counter the offer. Perhaps the best opportunity for carriers to implement this type of “name-your-own-price” bidding is for the sale of upgrades.

  • Subscriptions

The concept of subscriptions is yet another time-tested pricing strategy. One forward-thinking airline has had some successes with it already. Surf Air, a commuter airline based in California, targets business travelers with a flat monthly subscription for unlimited flights. The subscription approach allows the company to offer a straightforward price that’s appealing to its most lucrative customers.

Personalization in the moment: consider context to win the customer

In order to find greatest success with personalization, it must be properly contextualized. Now travel brands can harness Artificial Intelligence (AI) and push towards active differentiation in this still-nascent area . Personalization based on individualized services, preferences and the ability to choose is familiar and important across the generations. However, activating these benefits invisibly and in the present moment via one’s mobile with location-based services is where Gen Z can be won over (and where others will follow).  This generation, more than any other, understands that technology simplifies by surfacing relevant information when needed – minimizing the user’s burden and maximizing discovery.

Two main elements for 'Micro-Personalization'

Location for Real Time

The customer journey is often literal and not linear. Travel is the one industry where a customer journey isn’t merely a model to understand customers over time—it’s a real thing people do. This means mobility and geolocation are more central to personalization than in any other industry, and contextual cues are critical as customers discover, plan, book, enjoy, and share throughout the journey. Forty-six percent of Gen Z is looking for “in the moment” location-based discounts  and 51% are looking for location-based activity suggestions.

Machine Learning and AI to drive scale

AI-driven real-time analytics engines can learn customer preferences—not only basic “likes this but not this” characteristics, but specifics relevant to a precise moment in the travel journey, or even predictive of what that traveler may want in the near future. For example, the next best offer or action can be informed by search.

The next generation of travelers have grown up travelling. They often began exploring in family cars supported by digital maps and navigation, studying abroad and then extending work trips into bleisure trips at double the rate of previous generations (14.4% compared to 6.3% - 2019 Next Generation Traveler  – Adobe). With a high affinity for travel, this generation more than any other is looking to airlines for inspiration and offerings that enhance their experience. Newer pricing models could influence these savvy travelers positively as they are the most open to new services and offerings. The most critical outtake is that contextual personalization for on the go and in the moment experiences will become the norm. All brands need to garner AI/ML in coordination with data to activate.

Amadeus + Adobe = Partnership for airline digital customer experience success

No one technology company can effectively live up to customers’ expectations on experience any longer. Amadeus is the leading airline technology platform with deep knowledge of the airline industry and travel customers. Adobe is the global leader in digital experience and digital media solutions, helping customers make, manage, measure, and monetize their content across every channel and screen. Working together, we help airlines leverage user data and assets to create great experiences that travelers remember throughout the entire journey.

 

Research supported by the Adobe & Amadeus partnership


Tags

Airline IT, Traveler Experience, Artificial Intelligence, Research, Digital transformation