So here we are, Merchandising WIIFM Series Installment 5, and instead of the planned content (a rather pithy piece on portable merchandising), I'm grumpy and have decided to vent. Hopefully my rantings will prove interesting enough for you to keep reading.
I recently attended a CASMA (Computerized Airline Sales and Marketing Association) meeting in Montreal. I was invited to participate in a panel discussion entitled, "Value-based Merchandising." In fact, this year, the entire CASMA conference appeared to be dedicated to the topic of ancillary services and merchandising. This was not cause for grumpiness, in fact quite the opposite –- I was delighted to see so much discussion and interchange on the topic.
Also encouraging: this year, I did not once hear the assertion that this "merchandising thing is just a fad." Fortunately, the math has put the "fad theory" to bed once and for all. Math has a way of taking the emotion out of almost any argument… and when it comes to merchandising, the math is staggering.
Here is an example. We will keep the numbers simple for illustration purposes. Start with 1 billion airline tickets created annually. Let's say 50% of those tickets have two checked bags at $30 each…. That's $30 billion. Now let's say that another 50% of those tickets have some type of add-on product/service – seat upgrade, club pass, priority boarding, more legroom, a premium head-set, a meal, etc., for an average price of $25…. That's another $12.5 billion. We're already at $42,500,000,000 and we are just getting started! (OK remember this is high level example, so before I get attacked on my math, yes I do understand that there will be some "netting" of this revenue potential resulting from overall pricing adjustments.)
My point is that, as relates to the math and trends, the talk is all very encouraging. But after a few sessions on this, my grumpy side began to emerge, as I waited for the CASMA discussion to shift to technology solutions that will enable the larger supply chain to partake of the merchandising pie. I kept waiting and waiting. Finally my patience ran out.
Enough Already with the talk and the math! It is time for Action!
The grumpiness, or more aptly stated my concern about our industry, was in full gear now, and here's why: No one seems to be really moving in a concerted way to implement the capabilities necessary to allow for airlines and travel agencies to become aligned on business and technical operating models to do merchandising -- to move beyond their supplier.com sites or airline check-in kiosks and counters. While this may be fine for airlines that have adopted a strategy to only sell bundled and add-on products and services through their web sites, it certainly does not seem to be fairing well for the corporations and travel agencies that represent over 50% of the billion+ global airline ticket transactions made each year.
As evidence of this, at the conference we heard about several unmet needs. On the one hand, airlines claim they need improved distribution selling systems in place with which to better differentiate their products and give their customers more relevant choices not only at the initial time of reservations but also throughout the entire travel process. According to several airline executives, legacy technologies are not doing a good job of keeping up with these requirements, in particular relative to the pace of new channels such as mobile.
Next, we have corporate travel managers demanding that someone (often their TMC) help them manage this new world of ancillary services, whether it's through the corporate booking tool or post-trip data management and policy compliance. There is no doubt that this need must be met in order to keep travel procurement and policy processes running smoothly.
Thirdly, large travel management companies are describing how they are waiting for solutions from both corporate booking tool and GDS providers, who in turn have tied delivery to some industry-dictated standards or processes that will eventually "kick-in" over the next several years.
My point with the above examples is that there is a lot of need out there, yet precious few viable market-ready solutions. This is unacceptable. Don't tell us about what will be available in a few years! What is available today and does it really address the needs of all parties?
It can certainly lead one to ask, where is the greater sense of urgency and productive debate around addressing these needs? Why are the corporations not kicking down the doors of the corporate booking tools and the TMC's demanding they get this under control? Why aren't the TMCs kicking down the doors of the GDS to deliver solutions faster? Why aren't the GDS hunting down the airlines to offer and demonstrate to them unique merchandising solutions that will differentiate their products through one of the most efficient distribution channels available to over a half a billion tickets?
Put another way: why is a movement as promising as merchandising and ancillary revenue –- a movement that stands to offer true value, choice, and differentiation opportunity for all parties in the chain -- moving in slow motion relative to what the collective we (technology innovators in the travel industry), are capable of doing?
The answer, I believe, is that a good deal of companies in the travel supply chain are in "Wait and See" mode. Let's wait and see if somebody else (GDS perhaps?) will deliver the technology that TMCs and corporations need to fully thrive with merchandising. Or, let's wait and see what kind of long-term financial business models emerge around this stuff before innovating in a value-based solution. Or, let's wait and see how everybody else uses the standards so we can ensure that we end up with a "one size fits all" model. If we wait long enough the airlines will give up on having true product differentiation in how they price, sell and channel their products.
A riskier flavor of "Wait and See," is the "Sign Now See It Later" approach that also explains some of the delays we are seeing. This is where the need to protect market share or a particular business model gets much higher priority than actual development and innovation, and where negotiations sound a lot like "we will lock you in now and deliver something later." Nobody is quite sure what will be delivered when.….you just have to wait and see.
It's all of this waiting going on that has me venting and repeating the title of this installment: Enough Already, Stop Waiting, Take Action! Because guess what? If our industry waits around too long on this stuff, someone else may decide the fate of the merchandising relevancy of our established distribution channels, much as we saw take place at the advent of "dot.com." For example, are smartphones and social networks our next new distribution channel to drive merchandising? They sure think they are!
Have you heard enough yet?! Thanks for reading!