(Image by notonthehighstreet.com)
Airline Behavioral Economics features and is often sponsored by recommended partners. However, sponsors do not pay for or control specific content, which by Ricardo Pilon. This week’s feature:
On December 5, 1872, when muscled crew members of the British brig Dei Gratia spotted a ship adrift in the choppy seas far west of the Azores, Capt. David Morehouse was stunned to discover an unguided vessel, the Mary Celeste [Céleste happens to be the name of my youngest daughter]. That ship had left New York City eight stormy days before him. He changed course to offer speedy help.
Mary Celeste was a mystery. No crew, no sailors. Sloshing water in the ship’s bottom. 1701 barrels of liquor. Enough food to feed everybody for six months, but lifeboat missing.
And so, one of the most durable mysteries in nautical history was born. What happened? Throughout the years, there has been much speculation. But lack of hard facts meant more theories about mutiny, pirates, even sea monsters. What did Capt. Briggs of the Mary Celeste do with the ship, his wife Sarah, and his 2-your old daughter Sophia [Ana-Sophia happens to be the name of my eldest daughter]?
Throwing caution in the wind, Capt. Morehouse towed the ship to Gibraltar where they wanted to collect from the ship’s insurer. Like Capt. Briggs, when he might have abandoned ship, he would have turned the sails into the wind intentionally. This can also happen when the wind itself shifts unexpectedly. That’s where the term taken aback comes from, i.e. the vessel is taken aback (born in the 15th century, like tearing ‘a part’ to ‘apart’). This aback is referring to the sails aligning with the mast. A sailor does not want that, generally, because you’re running out of steam, so to say.
But this aback thing is very relevant in airline ancillary revenue strategies, like in steaming ‘backwards’. Not in a negative way, but in terms of blowing wind in other sails.
They could be the wrong sails over time. So we can start to reel them in now to fix it.
Read on, find out more and subscribe to Airline Behavioral Economics for free:
Shop as I say
Whether on a ship or on the shore there are two things people dislike (‘hate’) the most:
Being told “No!!”, and
Being told what to do.
This applied during the time the Titanic sank, and more recently during the COVID-19 pandemic.
Airlines often say “No way!!” to something that seems customer friendly for reasons only airline staff and industry experts understand.
And now we are suggesting to tell you how to shop and purchase ancillary products and services. By stacking and stacking up until you want to buy something else that’s easier to purchase, like signing up for an Egg BBQ cooking class and wine courses, with à-la-carte options no less.
In B2B, the vendor that’s easiest to work with usually gets the deal, whether they have the best product or not. Think about that for a sec.
Stacking offers and allowing you to pick and choose. Is that really what airlines think retailing is?
What about trials, samples, or looking at flight options after I bundled other things because how I get there is not the first priority? Or shoveling mini-budgets around for changing priorities within my wallet’s limit?
Besides, inflight options are very relevant when you’re closer to departure. You may have more cash in your wallet then. Further, people typically spend money incrementatlly over time, not all at once. That feels wrong.
So, I may want to shop again when I feel OK again, but for different things and not through an automated general email that just has my name on it and does not understand my ‘state of mind’ (see article)?
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Pop-Up Stores, O&O
If airlines still had ticket sale offices, it would have been easier to hop back on the retail learning curve. [I would send my staff to Victoria’s Secret, Sephora or Lego.]
But we have almost lost that generation of airline managers. And many still believe airline retail stores would be the laughing stock of the past. Because they cannot see a novel re-introduction that includes digital experiences. They under-estimate history.
Either way, with no learning curve from the outside>in (customer), we will have to undo linearity backwards. This would take customers and vendors aback.
Airlines just do not know how they would implement it. Also because the vendors are marching along the same assembly line from flight departure > stack away! And this does not follow the flexing state of mind of customers.
But thinking about it can help airlines to also redesign online and eventually shopping experiences in the metaverse. Because it works elsewhere (Adidas, Nike, Sephora, to name a few).
I’m working on commercial designs to bring all this on aircraft using the aircraft and all electronic devices available for a holistic personalized experience that blends in with the cabin.
For sure, the future, as ancillary growth stagnates. At least those related to travel as everybody is selling the same things.
* * * * *
Dynamic procurement, not just dynamic bundling
This is why :
How we sell it matters more (interactive digital dialogue driven by the customer),
How it is presented is crucial (colors, reference frames, pricing psychology), and
How we allow customers to design and change their path, all the time. . . . .
. . . . .makes up the requirements for driving positive emotions that expel fear, uncertainty, and make doing business with the airline the easiest. The airline becomes a service assistant.
[Amazon and Walmart+ are arriving at this intersection only now].
It also means that not everything can be on the shelves. Perhaps digitally, even then we’ll miss out (i.e. choice stress). We need to again involve the customer to give us real insights, even through free-flow text (hints). Natural Language Processing (NLP) will help us incorporate this in the AI-driven recommender systems. It’s what I designed for iFlytail.
* * * * *
O&O, OMS
But we need to build the bridge to reservation systems. The layer I’m speaking of is over and above the PSS and even above the 1st gen OMS or O&O (Offer & Order Management System).
Airlines need another layer of micro-services that can be called on as per changing customers’ mindsets. Since priorities and preferences can change, this behavioral layer is driving improved recommendations based on the shopping path the customer designs, including short-cuts (‘express lane’ for flight-only).
Most upgraded PSS’ that adopt some of the OMS philosophies are still inventory and reservation systems. They’re not marketing and advertising (AdTech) platforms. And they don’t integrate with loyalty in a new enterprise workflow (and logic that is goal-centric, like share of future wallet instead of highest flight yield).
There is a new breed of true O&O systems coming [already in 2.0 I would say] that didn’t design the system from the inside>out but took future flexibility for customers into consideration.
It’s unique in that in that it was designed based on retailing technologies from the beginning. Starting with the Customer, then the Offer to the Order through to the Payment. More specifically:
The Order is like a ‘spider web’ that is the glue that holds together all the API and and provides functionalities. The PSS is just the component that supplies inventory and allows you to make changes to that inventory. Conventional RM controls on this limited ‘inventory’ are also suboptimal (see article).
The Order can also have an unlimited combination of products and services such as multiple related or unrelated passenger records and the Orders are not purged. This means that it can gather the history which makes it very easy to retarget customers and identify their travel patterns. The Order itself becomes a ‘captive audience’ and segment of one!
That’s very useful for Customer Data Platforms (CDP) that adopt, replace, and improve part of conventional CRM functions at Enterprise level.In an Offer you can have multi-dimensional sub-offerings dynamically constructed based on rich as well as scarce data creating the most relevant Offers to the Customers.
The call center can easily see all relevant bookings and services in one place, the Order is that single truth that brings it all together. The OMS provides interfaces like NDC API, customer store front, agency portal, customer service portal, agency portal, corporate portal and loyalty portal with micro-service logic for voucher, subscriptions, wallet, rewards, promotions, messaging, profiles and payment management.
* * * * *
Pop-Up
Future O&Os that are (Ad, Marketing, and Loyalty Tech) AML-selling platforms that run off ingested data from Customer Data Platforms with real-time AI-driven insights, will enable the following phenomena:
* Location-based pop-up ‘stores’ where crowds gather (incl. planes)
* Virtual-reality and metaverse airline store try-outs in airline lounges and at the gate
* New onboard applications with IFE-screens projecting to peoples’ PDAs (and v.v. and clickable)
* Behaviorally-driven impressions on digital billboards and small-store stalls onboard aircraft (PS. ULC aircraft will return as world population adds another 1 billion folks fast)
* Airports and duty-free redesigns their execution in global partnerships with airline alliances
* Partnerships on social commerce through loyalty (exclusive offers) with Destination Marketing Companies (DMCs) will drive inbound tour operating and better offsite and onsite experiences combined.
* * * * *
Guess work
Going forward, airlines can take the guess work out of booking paths and how long they will take. They can indicate various paths, like snakes at an airport. The trick is to keep inciting those that thought they were in a hurry. This can be done smartly.
New micro-services can be delivered on a layer where all this intelligence can work. It will be aided by real people, behavioral psychologists, and retail psychologists. There is more and more need from them.
Because we want to return to retailing. Knowing what we learned from massive growth through wholesale, which no longer works well in an IoT world.
The novel OMS I would go for is nimble but has an infrastructure that is open enough to change the shopping path and make it easy to do business with. Scale is not your first priority, experimenting is.
This confidence will boost willingness to invest more time exploring other options.
So, if you want to take customers aback by taking the wind out of conventional vendor’s sails, start from the back. Although the customer really should be called “first”.
Wishing you all a wonderful day, and greetings from gusty Montréal.
Ricardo
Montreal, Tuesday, 31 January 2023
Feel free to contact me for questions, comments, or a chat:
ricardo(dot)pilon(at)millavia(dot)com, or for startup and VC assistance;
ricardo(at)pomonaworld(dot)com