American Airlines wants to be to be the Amazon or the Netflix of air sales. The carrier envisions a day when it will bundle products for individual customers, suggesting purchases based on past behavior in much the same way that Amazon and Netflix do.
“We are in the very early stages of personalization,” Derek DeCross, American’s vice president of global sales, told the Association of Corporate Travel Executives Global Education Conference in San Francisco this week.
“Personalization has a huge upside, not only for the airline, but for the customer and for everyone who manages that customer.”
Transforming the experience
The airline industry is two steps into a four-part process that will transform the buying and travel experience, DeCross said.
Carriers have largely killed off the old model of inclusive pricing and introduced a la carte pricing. Step Two is the introduction of new products to go with the a la carte pricing model.
But the introduction of separate pricing for travel, luggage, priority boarding, itinerary changes, preferred seating and other elements has come with a fair amount of pain and customer dissatisfaction.
“As soon as you unbundle all these elements, you are not at all popular,” DeCross admitted.
The third step, introducing new combinations of travel products with more flexible pricing, should help ease the pain, he said.
The final step, personalizing every ticket and travel purchase, should win the kind of accolades and loyalty that customers reserve for the likes of Amazon and Netflix, brands that use past behavior to proactively predict the customer’s next purchase.
That’s the theory, at least. “We are moving to much more robust targeting of individual customers,” DeCross said. “The problem is that we are using a chain saw today when we need a scalpel.”
Like buying a car
Look for air travel to become as personal as buying a car, DeCross said. Buying an air ticket was once as simple as calling the company travel agent with an itinerary. Buying a car was once as simple as visiting a dealer and dickering over the price.
Today, car buying involves a chain of decisions. A 2012 Ford Focus requires an eight-step buying process with 31 separate decisions, most of them with multiple options, DeCross explained.
“You feel in that it is your personalized product,” he contended. “Your air purchase should be just as individualized.”
Chain saw approach
But the personalization of air travel is not moving quite as smoothly as the personalization of a Ford Focus. The chain saw approach has left travelers, travel managers and other customers feeling cut out of the process.
“Personalization is a powerful concept,” DeCross said. “If you freak out your customer, you run the risk of losing them forever. If I irritate that customer, I run the risk of driving that customer to my competitor.”
The good news for airlines is that all the major players are following the same general strategy. As a result, the customer irritation level is high, across the industry.
Delta’s Economy Comfort, American’s Your Choice, Southwest’s Business Select, and similar offerings from other carriers represent the same product and marketing trajectory – unbundle services; create new products; build new bundles that combine new and existing products; and personalize bundles based on traveler profiles and past purchases.
What's next in corporate contracts
The next step will be corporate contracts that include specific suites of products such as Wi-Fi and preferred seating that travel managers know are important to their road warriors, with costs that travel managers need to track.
“All of us have something to gain from personalization, airlines, customers, travel managers,” DeCross said. “It is clearly good for us, the airline, and you, the travel manager, to know what products to sell and why or why not. Personalization has an upside for everyone in travel.”