In this four-part series, we’ll be examining the what, why, how and outcomes of instilling a growth framework into an airline.
- Part 1: The What & Why of the Airline Growth Framework
- Part 2: How to Implement Growth in Airlines
- Part 3: Accelerating Growth with Personalization, CX & Dynamic Pricing
- Part 4: Growing Airlines with Direct Distribution & Demand Forecasting
In Part 1 of our Growth Framework for Airlines series, we looked at what airline growth means and why airlines should make growth a focal point. As part of that discussion we examined how airlines are faced with an impending onslaught of outside competition.
Now we’ll take a closer look at those competitors to draw some inspiration, as well as examine some organizational changes that can be made to set airlines up for long-term growth.
1. Draw Inspiration from Adjacent Industries
In many ways the old adage If you can’t beat them, join them rings true in business.
In Part 1 of our series, we outlined how outside competitors such as Google, Facebook and Amazon are the biggest threats to airlines. Their ability to control, analyze and activate data effectively, personalize messaging to their customers and own direct distribution puts them ahead of the game. But it also provides a blueprint for success.
Netflix and Recommendations
Netflix owns the recommendations game. They keep their users engaged in their platform by offering up content the user has a high likelihood to be interested in, based on an algorithm that analyzes previous viewing history.
As a simple example, User X might have finished the final season of House of Cards, Girlboss and Bird Box and is therefore interested in watching content with strong female leads. You could then recommended additional content such as Girlhood and Tallulah.
As an airline, you can take a similar approach. Here’s another simplified example to paint the picture. User Y has booked trips to Barcelona, Palermo and Nice during the spring months of the last couple years. You can conclude she/he is interested in European beachfront getaways. Therefore you could offer trips to destinations such as Lisbon, Split and Bodrum.
You could also analyze historical and user data to offer up recommendations of similar flights when a user abandons their cart before completing a purchase. We go in depth about utilizing recommendations in our What If Airlines Were Like Netflix? white paper.
These examples just scratch the surface on how airlines can improve their e-commerce strategies.
Amazon and Retail
When it comes to discussing retail, we’d be remiss not to bring up Amazon. They’ve set the standard when it comes to understanding customer data, personalization and creating seamless transactions. But something to not be overlooked is their ability to own (direct) distribution.
They’re so serious about it that they’ve established a rapidly growing fleet of cargo planes to cut out costly middlemen and go directly to customers as efficiently as possible. In Parts 3 and 4 of this growth series, we’ll go into more detail about personalization and direct distribution.
There are endless examples. But the point remains – it’s not a matter of having to experiment and find what works; the playbook already exists. It’s a matter of doing a bit of reverse engineering and positioning your own organization for growth, which is a perfect segue into our next topic.
2. Break Down Silos – Align Tactics with Operations
So, your target is getting clearer and you know what needs to be done. However, knowing what to do is one thing, but actually (and successfully) doing it is another. Execution is everything. With that said, let’s focus our attention on some internal organizational augmentations that can be made.
One of the first steps towards implementing a growth strategy is aligning your organization for growth. This is a supreme challenge for many airlines that are large, hierarchical and rigid in structure. Departments that need to work together don’t collaborate at all, or do so in an ineffective and inefficient manner.
A prime example is the marketing-revenue management workflow. Although it’s crucial for these teams to effectively work together, they still sometimes communicate by passing spreadsheets back and forth. Or worse yet, we witnessed firsthand an airline that stuck post-it notes on each other's desks to know which flights to promote!
Without this alignment, progress is futile. You cannot have others zigging while the rest are zagging. A common Northern Star needs to be realized. That’s why a pivotal first step is to align objectives, targets and metrics. According to MIT Sloan Management Review, 71% of travel marketing executives have visibility into other C-suite leaders’ KPIs.
Rise of the CCO
We’re already seeing this be achieved at some airlines with the rise of the Chief Commercial Officer. This person typically sits somewhere between e-commerce, marketing and revenue management and drives high-level strategy and KPIs in terms of technology adoption, customer experience and revenue.
JetBlue Airways Chief Commercial Officer Marty St. George describes his function: “We never really had CMOs in this business.”
“It’s always been more of a chief commercial officer or chief revenue officer ... where you’re controlling all pieces of the business that are tied to revenue.”
Regardless of your airline's current setup, you’ll likely want to define new (shared) targets when installing a growth strategy. Trying to optimize on legacy targets with growth tactics could be a bit like trying to fit a square peg in a round hole.
For instance, optimize on total revenue and bundle fare instead of incremental revenue and seat fare. There will be much more on this when we dive into revenue optimization and customer experience tactics.
3. Take a “Data First” Approach
Once you have an idea of where you want to go and have everyone marching in the same cadence, the next step is to create a data first mindset. This will be easier to achieve if you’ve already broken down departmental silos and have information flowing freely.
It’s becoming cliché, but it’s not without reason. Data is the baseline for everything in our digital era. Having your organization set up to think and function with a data-centric mindset opens up myriad possibilities for success. McKinsey outlined this exact topic, summizing:
“...organizational culture can accelerate the application of analytics, amplify its power, and steer companies away from risky outcomes.”
The consultancy firm goes on to stress the importance of building what they call a data culture. They stress that you cannot import data culture, you cannot impose it and most importantly, you cannot segregate it.
“You develop a data culture by moving beyond specialists and skunkworks, with the goal of achieving deep business engagement, creating employee pull, and cultivating a sense of purpose, so that data can support your operations instead of the other way around.”
CRM vs RM Data
When talking about the airline industry, there are troves of data to consider. But two primary areas must be effectively harnessed to build a strong analytical foundation. I’m talking about customer data (CRM) and revenue management data (RM). There are countless initiatives and solutions that focus on one or the other, but the most effective strategies incorporate both.
For example, your CRM data might tell you that a frequent flier is interested in a business class flight to New York. But without the proper revenue management information, you unwittingly offer him a ticket on a flight that ends up being overbooked by its time of departure. So now, instead of delighting a valuable customer, you’ve created headaches for all involved parties.
Inversely, if you link this CRM data with your forecasting data, you can steer this frequent flier to a flight that is both of interest and projected to fly with many empty seats. Not only can you strengthen your customer relationship, but you can also increase your load factor in the process.
Having to fight this two-front data war is one of the unique challenges of the airline industry. After all, it’s difficult enough to properly implement a singular data project. For example, Scott Edinger of the Harvard Business Review found that, when consulting with executives, about 90% of CRM projects fail.
The good news? If you’ve already aligned your tactics with operations and are collaborating across departments, you are well on your way to establishing an effective data approach.
Couple this with a clear blueprint of what you want to build and where you want to go, and you’ve got a strong foundation to start building high-growth practices that will reduce costs, make resources more efficient and ultimately drive revenue.
We’ll be looking at some of these specific approaches in Part 3 of this series about the growth framework for airlines.