Increase profit via ancillary sales

Revenues from additional products are increasing significantly for airlines. In some cases, add-ons are even more profitable than the basic flight ticket.

How can additional income be increased?

Four key competencies must be taken into account:

1. The strategic fit with the airline
2. The attractiveness of the additional products
3. Our own trading expertise
4. A multi-channel distribution platform

 

Strategic fit

Take Ryanair. All we expect is a bare-bones product. We know that we have to pay extra for everything and that the rules, such as baggage restrictions, are strictly enforced. This is very different with traditional full-service carriers that have a long brand history. We expect free food and a choice of drinks. Also, some flexibility on baggage weight restrictions. Think of Condor, where you can reserve a space in the cabin hand luggage compartments – for a fee, of course. Does this meet customer expectations? New ancillary products can easily damage the brand image. Conclusion: The ancillary offer must match the expected brand promise. Otherwise, customers will churn.  

Attractive products

The choice of ancillary products can be endless, from simple products such as seat reservations to very advanced non-air products such as soccer tickets. Understanding the appeal and price elasticity is the key to sales success. Dynamic pricing can be applied to all products with limited availability, such as baggage or special seats. Conclusion: From over 100 possible additional products, the most relevant ones must be identified, ideally differentiated by customer segment.  

Trading expertise

It is a complex challenge to offer additional products at the right time, in the right “shop window” and at the best price. The McDonald-like composition of bundles on the menu also has a major impact on sales. Depending on the sales channel, additional products may not be offered or may only be offered later, e.g. a tour operator’s customer has little desire to make many additional decisions about the flight after selecting the destination, accommodation and meals. Conclusion: The marketing of additional products is a process of constant learning.  

Multi-channel distribution platform

The most time-consuming challenge and the biggest bottleneck in the implementation of additional revenue is a modern and flexible IT platform. It must meet the requirements of both direct sales and sales partners. Customers should be able to access the add-on offer whenever they want to buy something. From the booking to the flight date, sometimes even afterwards. Conclusion: The IT infrastructure requires considerable investment, the return on which depends to a large extent on the right offer design  

Outlook

Many airlines have already invested heavily in retail expertise and will continue to do so. Hardly any provider will be able to survive on the revenue from the base ticket. Power BI can be used to manage, test and evaluate retail strategies in a meaningful way. UNEX has developed a practice-based tool for this purpose. Please do not hesitate to contact us.