Experience-Focused Selling and the Engaged Traveler: A New Approach to Airline Ancillary Revenues

Why does the idea that airlines are ‘nickel and diming’ customers persist? If airlines are adding value through new pricing and revenue models – and they are – why hasn’t this sentiment taken root in the minds of consumers? 

Perhaps because many airlines still lack a dynamic mobile/web booking experience, and fail to offer consumers more flexible travel bundles and self-selection of curated, personalized travel content. If airlines met those expectations, they could shed the ‘nickel and diming’ label once and for all, and boost their ancillary revenues and margins along in the process. 

The Unbundled Travel Landscape 

Thanks to the unbundling movement that started well over a decade ago, travelers now expect to self-select what they pay for, combine different travel products into packages, and earn and burn frequent flier points and miles in more sophisticated and easier ways. They’ve become accustomed to picking and choosing which ancillaries they pay for such as checked baggage or priority boarding. In fact, consumers generally love unbundling. In the telco sector, unlimited pre-paid plans are so popular because they provide more options and flexibility. And consumers only pay for what they consume (or what they think they consume).  

For airlines and other travel brands, unbundling has opened a whole new world of ancillary revenue opportunities and the ability to package and repackage inventory from other travel providers as well as their own. Traditional ancillaries such as checked baggage, and newer ones such as baggage tracking, are offered alongside hotel rooms, car rentals and destination activities, effectively turning airlines into their own retail brands.  

But airlines should also be thinking about ancillary revenue from a loyalty and customer experience perspective, not only merchandising. Unless airlines can integrate ancillary merchandising into a more holistic and digitally seamless travel experience, their bookings and bottom lines will suffer and they’ll continue being criticized for appearing to squeeze more out of less at the consumer’s expense. 

Airline Ancillary Revenue and Personalization 

Personalization is the engine behind airlines’ new pricing and revenue models. The advantage of knowing each customer personally and being able to offer relevant merchandise they need, want and are willing to buy (given the right offer) is an important one. Some customers might value the ability to ‘earn and burn’ frequent flier miles, while others might value an all-in-one booking experience through the airline website or app. In both cases, personalization—delivering what a customer wants or needs—is the key to engaging travelers and generating ancillary revenue. And while they have access to customer data, airlines need the right technology tools to make personalization using that data a reality. For instance, our Travel Personalization Platform can help airlines use customer data more effectively to help them become better merchandisers and retailers. 

Engaging Travelers Through Airline Apps 

Engaged travelers consume content and make travel purchases via the mobile channel, typically through a native mobile app (either the airline’s or another travel brand’s). Ancillaries designed to reduce the stress of travel and empower customers—like baggage tracking, for example—have the best chance to drive revenue, enhance brand perception and build loyalty. And those ancillary opportunities should be where airlines are directing their digital efforts. 

Airline apps should help the engaged traveler order their favorite drink and anything else they might need on their journey (i.e., something to keep the kids quiet for a few hours). But what if they want to order tickets to an event, or book a hotel room or car rental? What if they realize mid-flight they need a phone charger? Or what if they urgently need something to be delivered to their destination hotel? Airlines already know where their customers are going to be, so why not make travel – and life – that much easier for them? 

This is where airlines should think about ancillaries from a loyalty and customer experience perspective, in addition to merchandising and revenues. Because they’re all linked. Ancillaries may have started as a necessary “innovation” in response to rising fuel costs and revenue challenges back in 2008 (when American Airlines introduced its first checked bag fee). But a decade later, they have become much more than that and part of a larger digital shopping experience. How airlines present ancillaries on their apps is now just as critical as prime shelf space for traditional retailers. 

For airlines to really elevate their customer relationships they need the digital tools to put personalization at the heart of everything they do. And that starts with how they present ancillaries to the end customer. Our Travel Personalization Platform helps airlines better engage with their customers using existing data and branded apps.  

Learn more how we can help your airline enhance your digital travel content and grow ancillary revenue here.