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How to build the perfect pricing plan

Posted 15 April 2020 · Add Comment

How can airlines balance economic and operational realities with the need to offer attractive fares to each customer on every service? Last November Harald Eisenaecher, chief commercial officer at Infare, suggested some key strategies.

In an industry as vibrant and fast-moving as aerospace in the Middle East, airline pricing strategies need to be under constant review.
How can fares respond to market changes quickly but never rashly? How do airlines keep both the chief financial officer and the passengers happy?
Here are four innovations that certainly help:
• Pricing intelligence:
Pricing intelligence brings an airline not only an awareness of market-level pricing intricacies but also an understanding of how those intricacies could have an impact on the carrier’s business.
For airlines across the Middle East, the key to productive pricing intelligence is to monitor the market’s pricing data and then make educated airfare changes rapidly, based on that analysis. A carrier might, for example, want to consistently offer the lowest fares in the region. Armed with real-time pricing intelligence data, that airline could quickly respond with a fare reduction should a rival carrier suddenly start offering the lowest prices on a particular route.
And pricing intelligence is certainly not limited to airfares. With the rise of ancillary revenues from baggage fees and other non-ticket sources, pricing intelligence will become increasingly capable of collecting and analysing data from these vital sources of income.
As the Middle Eastern airline industry’s appetite for data becomes ever-more voracious, expect to see carriers in the region building and expanding data science teams. And expect to see those teams rightly demanding information that can be used as quickly and productively as possible.
• Personalisation:
Targeted marketing is an essential part of the modern airline industry. The busy executive who flies from Dubai to London every week should enjoy a different set of offers and communications than the passenger who only ever travels domestically within Egypt.
• Machine learning:
Data alone is meaningless. Airlines need to know how to use information productively and, with that goal in mind, machine learning – essentially a form of artificial intelligence (AI) whereby computers learn without being explicitly programmed with new information – is a valuable asset.
Through artificial intelligence (AI)-driven chatbots, machine learning brings us straight back to personalisation. Designed to learn ‘on their own’, chatbots are basically messenger apps with which customers can appear to have conversations. Knowing the details of a customer’s past bookings, and ‘learning’ more about that customer’s needs and preferences with every interaction, a chatbot can offer increasingly targeted recommendations highly likely to be converted into sales.
• New Distribution Capability (NDC):
The International Air Transport Association (IATA) NDC technology standard aims to improve communications between airlines and travel agents. One goal is to display product differentiation beyond the current capability of global distribution systems (GDSs), which only allow limited details of ancillary offerings or customer service, for example.
Put simply, carriers that offer a better service than their rivals need to make the most of this NDC marketing opportunity and many of those carriers are based in the Middle East.
In fact, Emirates and Etihad Airways were named among last year’s top five brands for customer experience (in first and fifth place respectively), across all sectors of business, in the United Arab Emirates by professional services giant, KPMG.
An innovative spirit helps maximise the benefits of NDC as well. SunExpress, for example – a joint venture of Turkish Airlines and Lufthansa – claimed in 2018 to be the first carrier to offer customers the option of booking flights by voice command through Amazon’s Alexa virtual assistant, using NDC.
Bringing the elements above together, airlines will also be able to bring together dynamic pricing (responding to changing market conditions) and differential pricing (selling the same service to different customers for different prices, with broad market conditions less important than factors such as how much individual people are willing and able to pay).
A carrier’s revenue management IT will be able to offer price changes from base fares depending on the airline’s knowledge of the party making the enquiry. The end result? Middle Eastern airlines will soon be generating personalised, automated pricing offers more rapidly than ever before.
We are all working in exciting times. The perfect pricing strategy is approaching fast.
• Infare is a leading global supplier of airfare data and business intelligence tools.
 

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