Airline Merchandising, The WIIFM (What's In It For Me?) Series: Part 3 - Challenges, Opportunities, Truth And Myth

No more pithy intros or recaps of the last article; it's time to get right into it. Here we go: The search for truths and myths about airline merchandising. For some, the reality of developing, implementing, and distributing an effective airline merchandising product is way too complex to even imagine. This is a myth.

At a macro level, there are really only two major challenges that need to be overcome in order for merchandising to flourish. There needs to be a solid value proposition to motivate buying behavior, and there needs to be operational and technical process to allow the transaction to take place. This is a truth.

First and foremost, and arguably the biggest challenge is about value proposition. Airlines need to figure out how they will offer value to the travelers in the form of new optional services and loyalty programs. The "airline value challenge" is what will drive travelers, and along with them corporate travel management programs and supporting travel management companies, to embrace merchandising as a way to obtain more choice, more productive and comfortable trip experiences, and ultimately an improved bottom line for all.

In other words, if the airlines do this right, all industry segments will quickly move beyond the malaise of baggage fees and instead be able squarely answer the question, "Airline merchandising: What's in it for me?" A huge opportunity? Absolutely. But also not an easy one to achieve.

Without a doubt, the key to the "airline value challenge" is pricing transparency and clearly differentiated products. While this sounds easy, there is a very real possibility of airlines falling into the merchandising abyss and commoditizing their optional services, as opposed to packaging and presenting them in an attractive way that stands out to the customer.

Let me share an analogy that Graham Wareham from Air Canada used when we were discussing product differentiation. As you probably know, breakfast cereal companies spend millions of dollars on creating appealing imagery for the front of their cereal boxes. A bear, a sports star, a colorful bird ... and descriptions of the product inside. Then, the side of the box is used to print nutritional facts in a simple font, with consistent standardized format. Now imagine if at your local grocery store, they decided that in order to maximize shelf space, they lined up all the boxes sideways. It would never work! Why? Because the product differentiation would never show up ... and hence neither would the value to the customer.

And this, precisely, is why merchandising does not necessarily come easy to the airline industry: The current "airline selling shelf" has lined up the offerings sideways for years, in the form of traditional agent point of sale screens and corporate booking tools. Commoditizing products seems to be a fundamental gravitational pull for many of us in the industry. Now, this is not entirely the airlines fault; until now, much of the available distribution technology has imposed significant limitations on product differentiation and control. This is no secret, and it is a general slam on our industry, and not on any particular player.

The good news is, distribution applications are changing, with even new types of sales channels (mobile, media, etc.) becoming available for merchandising to take place. It would appear that this technological shift in distribution applications is happening at a faster pace than prior changes in this industry--bringing tremendous opportunity for some, and in some cases representing threats to the slower-changing status quo. Ultimately, however, I believe that because the merchandising opportunity is so large, the demand for value and supporting technology will come from all sides of our supply chain, and faster than any of us would have predicted.

But how will this rapid adoption of airline merchandising be possible, you might ask, given the complexities that characterize airline and agency operational and technical supporting processes? We’ll talk about that in our next installment, "Airline merchandising: Just because it's complex doesn’t mean we have to make it hard."

Thanks for reading!