So far, we’ve established that there are a number of opportunities associated with flight merchandising -- new revenue streams, revitalized supplier-customer relationships, and a way for airlines to finally move beyond commoditization and truly differentiate their product. We left off our last installment, however, with an important question: “How will this rapid adoption of airline merchandising be possible, given the complexities that characterize airline and agency operational and technical supporting processes?”
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This question, in various forms, hovers around a number of industry panels and conferences, often with the unfortunate consequence of freaking out many in the travel supply chain and creating an irrational fear of what merchandising represents. This may not be entirely a coincidence, by the way. Not everyone in our industry is excited about the merchandising movement. The scarier it is portrayed, and the louder the demand for industry standards and committees to approve them, then the greater the likelihood that perceived threats around merchandising can be avoided or at least delayed.
So, let’s take a healthy dose of reality and focus on the fact that merchandising is really not that difficult. Or, to quote the title of this article, “Just because merchandising is complex doesn’t mean it's hard!”
Without a doubt, merchandising has a number of moving parts, and requires change at various points in the travel supply chain. But once broken down, the moving parts really do become manageable. In fact, we’re really talking about only three operational steps.
First, Create and price an offer. This entails technology with which the airline can identify which set of products they want to offer to which customers, based on "who’s asking," and at what price. I assure you, such merchandising engines do in fact exist; this is no longer a barrier to industry adoption of merchandising.
The next step is to Display and execute a sales transaction. This means that all the various point of sale tools out there (travel agency tools, airline web sites, corporate booking systems, and now mobile devices too), need to have the capability to display and manage merchandising options in a way that enables true airline product differentiation. Now certainly there is work to be done here, but for most modern POS systems, this should not represent a massive nor lengthy effort. I would argue that if given a high priority, most selling platforms would already be queued up to handle optional services. Yet, if you look at today’s travel agency or corporate booking selling tools, you see that most are far from ready. So…why is this the case?
Perhaps the delay in point of sale merchandising support has roots back to the view held by some that after the next round of industry negotiations, the need for airline merchandising will just go away entirely, or a one-size fits all solution will be adopted. Proponents of this view will naturally seek to stall, delay, overcomplicate and drag out merchandising adoption…hoping that the dust will settle and the issue will disappear.
Obviously I am not taking that bet. The capability to sell optional services and create closer customer relationships is a far too compelling proposition for the airlines to simply negotiate away or stop. Similarly, the opportunity to differentiate the airline product is too great to allow for a traditional one-size-fits-all model to take hold. Doing so would truly be a tragic repetition of past industry mistakes, where negotiation was favored over innovation. It is my hope and belief that our industry has moved beyond such self-destructing dynamics. (I suppose that’s fodder for a separate blog discussion.)
The third and final step required for merchandising is Deliver the purchased offer and settle the transaction. Put simply, this is about accepting payment, issuing the corresponding document (EMD), and reporting to ARC or IATA/BSP. Out of all the merchandising steps, this one is arguably the most straightforward, in that it leverages many of the existing processes we have in place today for e-ticketing. With all the work being done on EMDs and related systems, I assure you that the industry is much further along than many of us may realize.
So, there you have it: merchandising in three not-so-scary steps. OK, maybe there is a bit of oversimplification here and there…but the point is this: There is nothing from an operational or technical standpoint that poses a legitimate barrier to the travel industry embracing merchandising across the board. It’s time for our industry to step up and embrace merchandising, in a way that not only satisfies the airline goals in terms of true product differentiation, but also enables travel agencies and other intermediaries to each benefit from deeper customer relationships and the corresponding value.
And what if this doesn’t happen? What if we take too long to integrate merchandising into our supply chain? Maybe we’ll see one of the quickest transformations ever, as things shift to self-service mobile devices and corporate/social network sites as a primary the point of sale for post booking merchandising. Maybe this is already starting. Maybe we should all pay more attention.
Thanks for reading!