Are you ready for the future of revenue management? Why modern commerce with dynamic pricing is the key to maintaining viability and driving growth

Transcription

1 Are you ready for the future of revenue management? Why modern commerce with dynamic pricing is the key to maintaining viability and driving growth

2 CONTENTS Why modern commerce and why now? 2 Why modern commerce is not complete without dynamic pricing? 12 What else does modern commerce entail beyond dynamic pricing? 15 How does modern commerce work in the real world? 19 1

3 Why modern commerce and why now? What is modern commerce and why should you read an e-book on the topic? Three compelling reasons highlight why business leaders should pay attention to modern commerce. 2

4 Travelers have changed the way they shop Today s travelers expect instant and fair pricing, relevant ancillary offers, and a quick and easy buying experience, no matter the device or channel they use. This new generation of buyers, has new expectations. Millennials have grown up with technology and are looking for an Amazon.com experience in all facets of their lives. The way they shop for travel is becoming highly focused around online and mobile, with personalization and inspiration as a key. They are hitting airlines and OTAs with requests to find the best deals. The result is airlines that are seeing tremendous increases in 1look to book ratios upwards of 1,000:1. 46% percent of travelers with smartphones say they make their decision on mobile Think With Google- Travel Booking Trends,

5 2Travelers are VERY intolerant of poor experiences Today s traveler is looking for instant access to information and offers that are better aligned with their preferences. They want to arrive at the airport ready to fly. Research by IATA shows a clear preference for moving traditional airport processed off airport. For example, in 2017, the percentage of passengers who checked-in online and used a mobile boarding pass rather than a printed one at least once increased from 69% in 2016 to 71% 1. But, there are consequences to not providing an experience that meets their expectations. 88% of travelers with smartphones will switch to another site or app if the current one does not satisfy their needs. 88% percent of travelers with smartphones that will switch to another site or app if the current one does not satisfy their needs. 2 1 IATA s 2016 Global Passenger Survey (GPS) 2 Think With Google- Travel Booking Trends,

6 46% of travelers with smartphones say they make their decision on mobile, but actually book on another device. Two-thirds of leisure travelers say they double-check prices on a desktop after shopping on a mobile device. They are concerned that they are not finding the best price or offer, contributing to prolific shopping habits. Travelers on average visit up to 38 travel sites before booking a vacation, meaning the experience you provide is critical to customer loyalty with a direct impact on your pricing and revenue management outcome. Pricing and revenue management are keys to improving the customer experience. 38 Number of travel sites a traveler visits before booking a vacation. 1 1 Expedia Media Solutions, Insights into the Booking Decisions of American, British and Canadian Travelers 5

7 3Technology and data science are improving exponentially New industry standards, such as IATA s New Distribution Capability (NDC) and ONE Order, aim to transform the way air products are retailed to travelers, by addressing the industry s current distribution limitations: product differentiation and time-to-market, access to full and rich air content and finally, transparent shopping experience. NDC is finally gaining traction, with 90 airlines expecting to use it by With these industry initiatives, combined with new technology centered around dynamic pricing, airlines are looking to achieve true offer optimization. With offer optimization, an airline can provide personalized offers in real-time that include not only the seat, but the associated ancillaries. 1 Tnooz

8 Another major shift in technology is the incorporation of cognitive science and predictive capabilities to better service customers and improve operations. Examples include investments into aircraft monitoring capabilities, automatic rebooking, and better predicting flight disruptions. To meet these needs, airlines will be laying the groundwork for a more predictable future in the coming three years. Airlines are gearing up to make significant investments in to cloud (84%), business intelligence (91%), predictive analytics (84%), and Internet of Things (68%). 1 2X Executives said they expect to double their use of cognitive computing for operational optimization in the next 3 years. 2 1 SITA 2017 AIR TRANSPORT INDUSTRY INSIGHTS 2 IBM Institute for Business Value, Operations and supply chain, Cognitive computing 7

9 Sounds good - but what exactly is modern commerce? Quite simply, it s the new era of digital business, one that will ensure airlines meet changing traveler expectations and continue to attain growth goals and remain viable. That means going beyond an ecommerce strategy or merchandising ancillaries. Instead, it s about personalization and smoother digital interactions. It s happening at breakneck speed because customer expectations have changed forever. Customers no longer shop for travel in a vacuum they look to social media for recommendations and multiple applications for reviews and validation before booking. Buyers want the ability to flow seamlessly across multiple channels, whether it is Facebook, an OTA, Airline.com, or with a travel agent. They want self-service throughout the travel journey and price transparency that includes personalized offers. They want it without headaches and friction. And they want it now. 8

10 Modern commerce is rewriting the rules and defining a new basis for competition. Today, customer experience the sum of the transactional interactions a customer has with an airline, from shopping to booking to flying to post-trip is the new battleground for revenue growth. In such a turbulent environment, revenue management leaders must fully embrace a modern commerce strategy or risk getting left behind. Previously, the market share battle was fought over the reputation of the airline and mostly price or value of the ticket. This traditional commerce model characterized by lack of personalized offers and inconsistent booking experiences across channels has been forever changed. The cost of inaction is significant. Do nothing or get it wrong, and your business could leave money on the table, reduce its win-rate and yields. Travelers want self-service and price transparency with personalize offers. And they want it now. 1 CEB Study: The Digital Evolution in Marketing

11 The eight PILLARS of modern commerce Personalized Algorithmic Omnichannel Real-Time Offers based on the traveler s DNA : history & preferences Transparent Scientific and precise. Frictionless Customer buys in whatever manner, from whichever channel. No waiting for offers. Dynamic Mobile The recipe for What the buyer sees is Fast, efficient and successful commerce: what the buyer gets. modern flow. Anywhere. Any time. Adapt. Act. Repeat. 10

12 The eight PILLARS of modern commerce Personalized Buyers don t want faceless, anonymous transactions. They want relationships and two-way loyalty with personal recommendations and offers that best fit their unique needs and travel preferences. Transparent In modern commerce, pricing is transparent and consistent across all similar customer segments. It increases customer confidence and loyalty, and eliminates leakages in revenue and profit. Algorithmic Using big data, machine learning and sophisticated analyses, companies can create and refine algorithms that segment and target customers with pinpoint precision, prescribing the right offer with the right price. Frictionless In an always-on, available-anywhere world, there s little tolerance for outdated processes, delays, and frustrations. Modern commerce delivers fast, low or zero-touch transactions when appropriate, and reorders Omnichannel Whether online, on the phone or through a travel agent, travelers expect consistency and efficiency. Modern commerce breaks down the walls to create control across all of an airline s channels, enabling the traveler to buy in whatever manner they choose and from whichever partner they select. Mobile Thanks to billions of mobile devices and computers, modern commerce can take place virtually anywhere, at any time. Real-Time In modern commerce, travelers expect instant pricing. Airlines that are unable to apply automation and intelligence to their pricing activities lose out to the competition. Dynamic Commerce is no longer static. Conditions are constantly changing, including costs, ancillary offers, or market movements. That places pressure on airlines to adapt with speed and agility to ensure the latest information is reflected in their revenue management and pricing strategies. 11

13 Why modern commerce is not complete without dynamic pricing? A major source of friction in today s buying process is the revenue management process of opening and closing classes. With rigid price points based on classes, airlines risk losing revenue without variable pricing. Revenue managers cannot control pricing across multiple distribution channels and provide offers across the full value curve based off true willingness-to-pay. Without dynamic pricing, airlines risk frustrated passengers, lost loyalty and declining yields. Oftentimes, airlines can t quickly provide pricing for groups or contracted corporate customers due to a lack of insight and manual processes. $550 $550 $500 $500 New Revenue Gained with Variable Pricing $300 $375 $300 $375 $300 $300 $200 $225 $205 $200 $225 $205 $175 $175 $125 $125 $0 $0 # of Passangers # of Passangers 12

14 Airlines cannot quickly identify upsell opportunities with ancillaries and struggle to deliver offers for alternative searches that today s travelers are expecting searches like I have $500 and would like to go to the beach. With dynamic pricing, airlines can ensure offers are specific to customer profiles, are consistent with the airline s channel strategy, and flexible to accommodate a variety of search queries. Dynamic pricing allows for improved pricing across all aspects of your business including groups and corporate and allows you to price across the full value curve. 56% Percent of buyers will abandon an application after an inferior experience. Combine that intolerance of a poor experience with the prolific shopping habits of today s traveler means customer experience is critical to customer loyalty with a direct impact on your pricing and revenue management outcome

15 Dynamic Pricing is the key Airline leaders have learned that dynamic pricing is the new strategic competitive lever that is essential for what comes next the ability to deliver a modern commerce experience. It s a key component driving many of the business goals airlines have today such as offer optimization. Ordering Filtering Dynamic Pricing Dynamic Packaging Customer & Market CRM Our experience has identified 5 key components needed on the path to offer optimization. Beyond ordering, and filtering, dynamic pricing is a gateway into some of the larger goals the industry has such as dynamic packaging which allow the pricing and optimization of the right ancillaries with the right fare for that traveler. 14

16 Beyond dynamic pricing? Modern commerce is about creating a customer experience that enables revenue management to accelerate processes, increase bookings against competition and improve customer satisfaction and loyalty. Dynamic pricing drives a modern commerce strategy, but there are other important components to consider: Algorithmic Revenue Management Successful revenue management practices are based on algorithmic and proven science. Algorithmic revenue management provides powerful forecasting methodology and real-time actionable insights to understand competitive actions and trends. With optimization, an airline can see the given the demand and the value of their passengers and determine the best set of passengers to take. Algorithmic revenue management also includes flexibility to allow airlines to scientifically counter the buy-down effect resulting from intense competition. 15

17 Cognitive Computing With the wealth of external and internal data, plus advancements in processing technology, airlines now have the ability to infuse cognitive computing into revenue management. With cognitive capabilities, you run your business on facts, algorithms, and context-aware, machine-guided learning. Airlines can quickly discover new revenue opportunities and create individualized offers based on the shopper s unique DNA : their preferences and past history. Cognitive Computing Engine 3rd Party Data Public Device Insights Actions Outcomes Conversion Social Client Data Transaction Lake Warehouse Data Knowledge Insight Wisdom Feedback Measurement Customers Employees Loyalty Basket Size Competitive Positioning Auto HSE Handling Analytic Service Executives Forecast Trending Analytics ML Processes Increase Rask Watson Forecasting Models Feedback Outcomes Systems Reduce Purchase Time Delivered as an Industry Cognitive Cloud 16

18 Sales: Groups, Corporate, and Cargo Optimizing revenue is not limited to just the revenue management practice of an airline. Multiple areas across an airline, including group sales, corporate contracts, and cargo can benefit from dynamic pricing science and guided selling. Guided selling provides a scientific approach that sales reps quickly recommend the right product or service for the customer. By identifying the right offer, dynamic pricing science can then deliver fair, consistent pricing to close the deal. 17

19 To succeed, your airline must do these things: Track and analyze You need systems to assess hundreds and thousands of internal and external factors and data points to create the deepest segmentation, understand customer buying patterns and identify meaningful correlations. Create the right offers Dynamic pricing science creates the right offer for the right customer at the right time by treating each customer as a segment of one. Personalized, customized offers based on the intelligence gained from algorithmic analyses create more impact in competitive market segments. Efficiently deliver pricing to the field or customer Optimized pricing is only effective if you are able to quickly and accurately distribute fares to multiple channels, such as airline.com and GDS. Additionally, your sales teams need to seamlessly access and use the price recommendations to quote groups and corporate contracts. Tools like Group Sales Optimizer enable companies to deliver dynamic group pricing in real-time are essential to create a consistent booking experience, no matter where or how customers buy. Embed dynamic pricing science This discipline must become part of the fabric of all of your modern commerce initiatives. It can t exist as an external, standalone routine outside of the natural flow of business. It must be embedded in your systems and engrained in your processes. Ensure speed Modern commerce moves at high speed. You need to respond quickly with precision and consistency across all channels. 18

20 How does modern commerce work in the real world? 19

21 10% Transform your group business with scientific dynamic pricing Shape demand For airlines, group sales are percent of revenue, but these transactions often required phone calls and days of delays in generating price quotes. One major airline uses modern commerce to provide group pricing and seat availability in real time without the friction, delays, and frustrations. The result: 10 percent increase in incremental revenue from group bookings and an increase in market share at the expense of competitors. A R E Y O U R E A D Y F O R T H E N E W E R A O F D I G I TA L B U S I N E S S? 20

22 Now it s time to act Modern commerce is emerging as the key strategy to respond to customer expectations. By embracing dynamic pricing as the foundation, airlines can begin the journey to offer optimization. By no means is this transition a flip of the switch, but instead, airlines will look to take the required steps to fit their unique business across revenue management and sales. The cost of maintaining status-quo processes is too high to ignore, and the travel industry will be disrupted by changing traveler preferences and technology shifts. The time to embrace modern commerce is now before customer dissatisfaction, lost revenue and yield, and downward price pressure impact business vitality and long-term viability. 21

23 Author: Surain Adyanthaya, Vice President of Product Innovation Author: Aditi Mehta, Product Marketing Manager for Travel Surain Adyanthaya is responsible for the strategy of PROS airline software products. He has worked closely with various clients in multiple industries in the development of revenue management solutions that address their business needs. Since joining PROS in April 1993, Mr. Adyanthaya has served in numerous positions in product development and strategic business planning; including serving as Senior Vice President Strategic Business Development, where he was responsible for pursuing business opportunities in new industries and fostering strategic alliances. Mr. Adyanthaya received a Bachelor of Science degree in Mechanical Engineering (highest honors) from the University of Houston and a Master of Science in Operations Research from Stanford University. Aditi Mehta serves as PROS Product Marketing Manager for the company s travel solutions. She is responsible for go-to-market strategy development, and positioning and sales enablement for the O&D, GSO, and RTDP editions as well as supporting the Cargo industry. Prior to joining PROS, she worked at Sabre, where she was the Product Marketing Manager for Air Shopping. Ms. Mehta has experience in financial consulting and entrepreneurship as the Founder for Brown Girl Magazine, an online publication for young women. Aditi graduated from The University of Texas with a BBA in Marketing and received her MBA from The University of Chicago Booth School of Business. About PROS PROS is powering the shift to modern commerce, helping competitive enterprises create a personalized and frictionless experience for their customers. Fueled by dynamic pricing science, PROS offers solutions that make it possible for companies to price, configure and sell their products and services with speed, precision and consistency across sales channels. Our customers are leaders in their markets across more than 10 sectors, and benefit from decades of data science expertise infused into our industry solutions. 22