5 ways the airline industry can make dynamic offers succeed

In July 2023, 23% of offers in the marketplace at any given time
were generated dynamically. With an industry goal of 80%, there is still a way to
go.

As we continue the journey, some global airlines have invested millions in
new technology to deliver more than just dynamic prices. They are generating
truly dynamic offers that include ancillaries and other product elements. On
the other end of the spectrum are airlines of all sizes that have not yet tried
to use dynamic offers of any kind. 

In 2024, our goal as an industry should be to agree on the
standardized elements and data that all airlines need, and should have access
to, in order to deliver dynamic offers to customers at scale. Data will help
airlines deliver a dynamic offer that’s more targeted to customer’s preferences
and optimized for their business.  

Access to the right data

There are five types of data that will be required to move forward
into the next generation of price calculation: foundational data, competitive
insights, improved product performance insights, improved traveler insights
and improved economic and environmental insights. 

Each of these facets of the offer calculation includes a huge
amount of data. Delivering access to airlines requires more than a traditional
rules-based process, and now is the time for the industry to move into a
data-science based process. 

Airlines cannot just rely on its existing rules-based offer
systems for enabling dynamic offers – they need to build out their own data
science capabilities or engage with vendors who can work with these very
large data sets. This requires more micro-segmented data with additional
context to drive personalized, dynamic offers.

For example, segmenting
historically could be a business traveler versus a leisure traveler, but micro-segmenting data can get more granular showcasing differences of a family
traveling to a beach vacation versus a honeymooning couple. With airlines’ own
strategies and data science the industry can get the right offer to the right
person at the right time. 

Prioritize dynamic prices and ancillaries

The
leading-edge airlines are employing both dynamic price adjustment and adjusting
the content within offers dynamically by bundling additional ancillary services
with their offers. For those only utilizing dynamic pricing, a next good step
would be to move towards more dynamic content.

After the base ticket price, ancillaries are a
major decision factor for flight shoppers, with 22% saying Wi-Fi is the most
influential factor when selecting a flight followed by free food and drink and
leg room. 

Separate product from price

Airlines
need access to product attributes to craft dynamic offers that better match
what is important to each customer so they can create differentiated offers
using more than just price. IATA paved the way by separating hard product
attributes in their NDC standard, and the industry should embrace this concept.

Once airlines know more about the traveler’s context and desired attributes,
they need a new mechanism to craft a more customized offer. This is where a
“product catalog” comes in. The catalog contains all the individual items that
can comprise an offer. They can package offers in a multitude of ways to create
the best match for each traveler type. This catalog of products separated from
prices has three separate but related use cases. 

First,
is the airline’s own catalog in their offer system. Their offer system, armed
with the catalog of product and service items, allows them to construct an
offer in real time based on shopper context and the attributes each customer
values most. They want total flexibility to define new products quickly at any
time and to have total flexibility in what to include in an offer.

Second
is the concept of a “supplier” catalog. This contains the information of the
markets and products an airline intends to share with their alliance, marketing
and interline partners. For example, if a retailer airline is answering a
shopper request that will require travel on code share or interline partner
airlines, they need data for the products and services offered by each
potential partner to generate the best sub-offer.

Third
is an airline profile, which allows airlines to publish to sellers and
aggregators the markets they serve and the products they offer. As the sellers
and aggregators field requests from shoppers they can use this information to
provide offers that match the customers’ needs.

The airline profile may also
contain the applicable merchandising content so the dynamic offers can be
presented in a compelling way. One major opportunity is for airlines to provide
visuals, for things like premium experiences and ancillaries. This helps
airlines provide shoppers with something tangible that highlights the unique
elements of the offer.

Maintain competitive and downstream insights

As the fare filing guys, we have complete access to what airlines
are currently filing, and we’ve observed an interesting trend happening as
airlines increase the volume of dynamic offers: They are actually also
increasing their volume of filed fares.

Airlines using dynamic offers are
experiencing two things. First, they are seeing the value of creating a lot of
different offers in order to provide airline shoppers with the right offer. And
second, airlines are realizing that they benefit from having that information
available to them in their end-to-end, downstream processes, which is where
filed fares come in. While dynamic offers help with the sales process, it’s
important for airlines to have a record of that data for their own bookkeeping
and analysis while network airlines need the data to flow for their interline
partners.

The industry also benefits from understanding how their dynamic
offers compare to what’s out there in the market. Having access to records of
other filed fares provides insights that advertisers can use for competitive
pricing and positioning. 

Work together

It’s exciting to see so many airlines start to experiment with dynamic
offers, which give consumers more relevant choices and deliver higher revenue
and give. Already, dynamic offers are throwing off massive amounts of data, and
airlines are seeing that they will need infrastructure to manage that data,
gain competitive transparency and have data downstream. This is where standards
come in.

Managing dynamic offers with an eye toward data science that
supports billions of offers generated from individual product attributes and
variable prices requires collaboration across the industry and access to newer
technology including data clean rooms and product catalogs.

As long as airlines prioritize standards and embrace these new
technologies, they can tap into the potential of dynamic offers and get to 80%.