Making the airline industry more profitable, by using customer data

Nearly every business aims for a high profit as their main goal, but this might be a hard working process, especially within the airline industry, where a high occupancy rate is necessary to remain profitable. According to Porter, for several decades, the airline industry is the least profitable due to highly capital intensive service industry, that only makes a profit when the occupancy rates are high, one can think of 85 to 90%. Therefore, it is important within the airline industry to sell additional and/or more expensive products in order to reach a higher profit – which can be identified as up-selling as well (Monetate, n.d.). Though, this is also a time-management thing because customers won’t always purchase more products. According to CTICO (2013), 48% are sometimes interested in upgrades or additional services in the airline industry, 0% is always interested. This means that the business should indicate the customer’s preferences in order to select the right extra products or services in order to sell more – and become more profitable. Ryan Air is a good example of up-selling. After the customer has selected a date and time to fly to a specific destination, Ryan Air offers the option to book a hotel, pre-order a car etc. In this way, Ryan Air makes sure to offer more products prior to the destination.

Oracle has published a report on how to maintain a valuable airline experience for the guests, as they see it as a top priority to maintain valuable customers. Moreover, to improve the customer’s satisfaction it is important to find the different touch points in a customer journey (Customer journey mapping article reference). When those are identified, they have to be implemented in an airline’s strategy which takes time as well. Moreover, when an airline has enough and valuable data from their guests, regarding each touch point, the business is able to personalize their offers to its guests and improve the guest‘s satisfaction accordingly (Oracle, 2012).

In the process described above, it is of crucial importance to collect the right information. According to Ed Peelen, one of the best methods is to follow the database management steps. Firstly, the data from the customer has to be of the right quality which means: current (is the data up to date?), complete (aren’t important demographics missing?), correct (aren’t there any mistakes?) and last but not least it should be unique – does the business have a competitive advantage if collected a specific piece of data, to create the most valuable product (Peelen, E., & Beltman, R., 2013)? As can be seen in the image, Oracle has created their own customer experience model, where one can see that they pay a lot of attention to knowing the customer in order to create a valuable offer aligned with the customer’s needs. Something very important within the airline industry is that enough and extra information from the guest is collected such as preferences regarding food and beverage, to complete the experience for the guest. Though, this might be a hard challenge as the business has to find out those extra bits of valuable information, and a time-consuming one. Nowadays, a guest has just such high expectations from a service or a product provided to them, and therefore it is important to make that expectation true.

Oracle, (2012)

(Oracle, 2012)

Moreover, the airlines face a difficult balance system as they have to take into consideration their customer’s demands, flight schedules and fare structures. To keep the customer happy, and profitable, it is important for the airline industry to keep all those three factors in such a line that the customers will remain loyal to your airline (Teradata, n.d.).

how to make it profitable

(Teradata, n.d.)

Bibliography

CTICOWW. (2013. Upselling and Cross-Selling in the Travel Industry. Retrieved from: http://cticoww.com/upselling-cross-selling-in-the-travel-industry-infographic-report/

Dent, J. (2013). Customer Journey Mapping: A walk in customers’ shoes, Ascend.

Monetate. (n.d.). Upsells and Cross-Sells in Travel: It’s a Timing Thing. Retrieved from: http://www.monetate.com/blog/upsells-and-cross-sells-in-travel-its-a-timing-thing/

Oracle. (2012). Oracle Data Airline Model. Retrieved from: http://www.oracle.com/technetwork/database/options/airlines-data-model/airlines-data-model-bus-overview-1451727.pdf

Peelen, E. & Beltman, R. (2013). Customer Relationship Management (Second Edition). Amsterdam: Pearson Education Benelux BV

Teradata. (n.d.). Airlines and travel. Retrieved from: http://www.teradata.com/industry-expertise/travel/

Photo credit: Retrieved from Ryanair.com (2015)

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2 thoughts on “Making the airline industry more profitable, by using customer data”

  1. Hi Lorraine
    I totally agree that consumer insights is an important factor to create engagement and loyalty.
    To be more specific and personalised, airlines should consider using different personas for a fully understanding of motives, behavior and preferences with respect to the service provider.
    Smart data analytics help.
    Kind regards
    Karoline

    Like

    1. Hi Karolina,
      Thank you for your response! I found this a very interesting topic as well to research. I personally believe that data analytics will become one of the most important factors in the (airline) industry.
      With regards,
      Lorainne

      Like

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