Over the last few weeks I have given a number of keynote presentations to a variety of airline groups. These audiences covered the entire spectrum of airline types: legacy, LCCs , and 2nd & 3rd tier airlines with speeches in the US and Europe. The airline executives were a mix of e-commerce, revenue managers and IT executives dependent on the conference sponsor. I spoke about emerging technology trends including mobile, semantic search, personalization, social networking and meta-search.
I began each presentation with a discussion of ancillary revenue showing how the carriers have profited greatly by charging fees for baggage, meals, and other services. I used this cartoon to emphasis that from a customer viewpoint these are fees for formerly free services. I have no doubt that the airline executives are well aware of this fact, but with the fever pitch around the value of ancillary revenue particularly in this tough market, the perspective of the customer is often lost.
I received a more surprising reaction regarding the subject of fare families (branded fares). Online search whether through an OTA or Meta-search company, yields a logo and price worsening the move towards commoditization. Every airline is concerned that their product is perceived as a commodity, but few are embracing fare families.
I am old enough to remember earlier LCCs attempts at market dominance with carriers such as People's Express and Texas Air disappearing after a few years of heavy fare matching by the legacy carriers. Of course today's success of LCCs is powered by direct distribution through the Internet and thus is flourishing in every corner of the world. The simple fact is that LCCs are not going away and are actually increasing in numbers and market share. It is my opinion that fare families are the best means for traditional carriers as well as high value LCCs (e.g. JetBlue, Virgin America) to compete beyond price. As I pointed out in my presentation, every part of the distribution travel value chain will be impacted by the introduction of fare families, but despite these challenges, I am hopeful the concept will take hold. One important aspect of the shopping process that would need to change for both OTAs and Meta-search, is the ability through mouse-overs or other similar UI techniques, to provide the fare family advantage to the customer at the point of sale. See Frontierairlines.com as an example. What I envision is that a customer goes on an OTA or Meta-search site, gets back the same fare from both a LCC and a legacy or high value LCC and when the consumer mouses over that quote, the option of paying a bit more to include services such as baggage, seat assignments, access to on board entertainment systems, meals, on board Wi-Fi, and other emerging services at different family price points. It is my belief this will be the only way airlines can truly compete against the LCCs by promoting a differentiated product fighting the trend towards commoditization.
0 comments:
Post a Comment