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5 Airline Marketing Trends 2018 You Shouldn’t Miss

IZTOK FRANKO

Summary of Airline Marketing Trends 2018 survey and analysis

I’m not a huge fan of marketing trends reports. Too many times as marketers, we try to chase the next shiny object instead of focusing on our core challenges. So, when challenged by my Diggintravel community manager to do this Airline Marketing Trends 2018 article, I faced a dilemma:

How to provide an outlook into the 2018 airline marketing trends landscape without just listing the obvious? How to add value to the list of ‘buzzwords’ we all hear on a daily basis?

First I decided to actually review the most popular airline marketing trends and buzzwords. But in addition, I wanted to give ideas and examples of how you can use these things to solve your everyday challenges. This is why I would like to write about the challenges of an average airline marketer (yes, that’s YOU) and how the new trends will affect your work.

But first I wanted to see what you think. So I asked 🙂

Airline Marketing Trends 2018 – Survey

Before writing about the key airline marketing trends for 2018, we wanted to know which ones make the most sense. But rather than choosing the ones that make the most sense to me, I wanted to understand which are the important trends in your book.

So I asked you two simple questions.

First I wanted to know which airline marketing trends you see having the biggest impact in 2018.

The second question inquired as to which of the areas you will actually focus on and invest in. I wanted to provide insights into the areas you will actually be concerned with, not the ones we’re still just daydreaming about.

Here are the results (from 85 airline and travel marketing professionals who participated in the survey):

Which of the following areas do you see having the biggest impact in 2018?

airline marketing trends 2018 question - what do you think will have biggest impact in 2018

In which of the following areas will you invest and focus most in 2018?

airline marketing trends 2018 question - where will you invest in 2018

5 Key Lessons from the Airline Marketing Trends 2018 Survey and Analysis

Based on your answers and our previous analysis and research, I came up with the following five key lessons for airline marketers:

Lesson #1 – Let’s demystify personalization

It’s 2018 and we’re still trying to figure out personalization. Actually, personalization seems like teenage sex. Everybody talks about it, everybody wants to do it, but nobody has done it yet.

In our short airline marketing trends 2018 survey, personalization was identified as the top focus area.

55% of airline and travel marketing professionals said they will invest in personalization in 2018.

We got similar results last year in our 2017 Annual Airline Ancillary Revenue Survey:

Personalization was identified as the no.1 area for investment for 70% of airline professionals. However, only one of the 23 surveyed airlines in that research claimed to provide truly personalized offers.

Similarly, IATA projects a huge shift in the importance of personalization for airlines in the next few years:

 

Importance of personalization for airline distribution strategy

Source: IATA Distribution Online Study conducted by Atmosphere Research

 

Evidently, we are still facing this huge gap between where we want to be and where we actually are. The question you are probably asking is how can you get there?

In my opinion, instead of a revolution (personalized offers for every customer), you need an evolution – a step by step approach. We presented an example of a simple three-step model in our ancillary revenue framework:

 3-step model for airlines to create personalized offers

Most airlines are in the middle, at a stage where basic segmentation is done. For the next step, all areas (people, skills, marketing technology, merchandising & distribution platforms) need to be ready.

Econsultancy analysed the biggest barriers to personalization for travel companies.

Biggest challenges for airlines and travel companies to create personalized offers

 

Human elements and integration are key for large airline organizations with strong “silo organizational” tendencies. Airlines have started to leverage technology and data to create personalized offers and product recommendation engines (see examples in Lesson #5).

However, while technology allows us to collect our customers’ data during different touchpoints of their travel journey (and cross-device), this data remains mostly siloed.

Which brings us to the next lesson.

Lesson #2 – The digital airline for the digital passenger

Let’s start with the good news first. Airlines and travel companies are aware that the only way to create better (personalized) offers and a better customer experience is to master digitalisation.

In our survey, 54% identified digitalisation and connecting all touchpoints across the customer journey” as the area with the biggest impact.

You’ll probably say this is easier said than done. To do this, airlines will basically need to become tech companies, or digital airlines.

And here comes the bad news (if you’re not already one of them) – there are airlines which are already deep into digital transformation.

AirAsia, for example, has started to execute their vision – to transform AirAsia from a marketing airline into a digital airline. They’ve set up an innovation lab at their RedQ head office and are investing heavily in digitalisation. They’re also rapidly growing their family of digital services, like BIG Duty Free, BIG Pay, BIG Loyalty, Touristly, Rokki Onboard Wifi and Xcite inflight entertainment.

EDITOR’S NOTE: I was really curious about AirAsia digital transformation. This is why I did a special interview with them about how they’re building their digital culture.

The key goal is to master the digital customer journey by using data to drive a customised experience:

According to AirAsia CEO Tony Fernandes, the transformation is already paying off:

“Digitalisation is expected to boost our ancillary income from RM46 (US$10.50) [per passenger] currently to our RM60 (US$13.70) target. Some of the initiatives include dynamic pricing of baggage allowance and Tune Protect insurance, offering an extra-seat option to our customers and enhancing our inflight meal options.”

Airline digital labs

AirAsia is not the only one. Other airlines are investing heavily in digital transformation as well. Ryanair recently celebrated the opening of its third IT and innovation hub: its new Travel Labs in Madrid, Spain. Finnair is insourcing its digital development with its Digital Solutions Development (DSD). Similarly, Malaysia Airlines launched the Innovation Lab, or iSpace, with a similar goal of becoming a digital airline.

Aeroméxico claimed to be taking a similarly aggressive path to digital transformation in one of their presentations:

Example of airline digital transformation

Source: Aeromexico presentation Aviation Festival London

Jetstar’s (now ex) CEO claimed that going all-in on digital was the key turning point for the airline:

“Our business now has a different look and feel. We are a big online retailing business with software engineers, analysts, data scientists – we are in the early stages of Machine Learning and robotics and that’s being baked into our website and operations.”

Unfortunately, your airline digital transformation doesn’t end with technology.

For you to become a true digital retailer, you will need to master ecommerce, conversion rate optimization, upselling and cross-selling. Yep, you guessed it – this is Lesson #3.

Lesson #3 – Digital merchandising and ancillary revenue is (still) the key

Yearly growth of airline ancillary revenue is no new trend. We see it every year. According to IdeaWorks and CarTrawler, worldwide estimates of airline ancillary revenue will grow to $82.2 billion in 2017 (from $67.4 billion in 2016).

 

Airline ancillary revenue is growing rapidly and presents one of the key airline marketing trends 2018

Source: IdeaWorks

39% of our Airline Marketing Trends 2018 survey participants identified “Unbundling of the product and continuous growth of ancillary revenue” as one of the biggest impact areas for 2018. In addition, this was among the top three areas where participants said they will focus and invest most.

Furthermore, in our aforementioned Airline Ancillary Revenue Survey, 69% of the surveyed airlines reported that increasing ancillary revenue was one of their top three priorities in 2017.

But if ancillary revenue is growing so fast and is one of your top priorities, why are some getting a much bigger share of the pie than the others?

Why do some airlines generate more than $40 in ancillary revenue per passenger, while others generate less than $5?

Yes, business models and brand positioning and strategies are different, but the gap is still huge. If you’re on the wrong end of the curve, it’s very likely that your digital merchandising capabilities are not great.

Yes digital, and yes it’s connected to Lessons #1 and #2.

I wrote about airline digital merchandising trends extensively in this blog post, and you can find our 5-step airline digital merchandising framework here. 

Let me just add three merchandising trends I believe will continue in 2018:

  • Unbundling of the product will continue expanding to long-haul: As LCC expansion to long-haul continues, unbundling will follow. Delta, Aer Lingus, Air France-KLM did it; others will follow.
  • Technology will be the differentiator: If you smartly invested in a flexible and agile merchandising platform, you’ll be able to innovate with your products and offers. On the other hand, airlines stuck with legacy platforms that require long & inflexible implementation processes for new ancillary products will lag behind.
  • Conversion rate optimization (CRO) will be key to successful merchandising: Those of you who are not ecommerce or digital marketing junkies are probably wondering, what the heck is conversion rate optimization? Simply put, CRO makes you customer-centric and is the only way to long-term growth. Yes, it’s that important, and this is why I’ve dedicated a whole lesson to it. Read on.

Lesson #4 – Conversion rate optimization champs will learn faster, win more

Yes, I’m biased when it comes to conversion rate optimization (CRO). Actually, I’m so biased that I performed the first-ever airline conversion rate optimization research and benchmarks last fall. But why do I believe CRO is crucial for airlines to become better retailers?

This is what I wrote in my research introduction:

Yes, personalizing the process of getting the right product to the right customer certainly has big conversion implications, but many airlines often fail to understand what actually happens when their customers come to their store.

Over the years, traditional retailers (like FMCG businesses) have built a detailed process of understanding customers and their in-store behavior.

CRO is all of that for your online store. Understanding your users and being user-centric is the core of a CRO process. Understanding in-store behavior, store organization and flows for retail translates to understanding user experience (UX), the booking funnel, online user behavior, and analytics in the online world.

So, in order for you to become real digital and online retailers, mastering CRO is a must.

However, our research indicates that there is a big gap between airline CRO leaders and the rest of the industry.

Summary of findings of Airline Conversion Optimization Survey

Source: Diggintravel Airline Conversion Optimization Research 2017

As you can see, most of the airlines we surveyed are in the lower left quadrant. Basically, most of you are still at the beginning when it comes to having a structured conversion rate optimization process.

However, there are a few airlines (upper right quadrant) who really excel at it. Because they have a structured CRO process in place, they know their customers better and have higher conversion rates. Because of those higher conversion rates, they can invest more in customer acquisition and making their product better.

What do airline and travel CRO leaders do?

To understand this topic in detail, please download our Airline CRO research. However, if I wanted to summarize it in one sentence I would say this: they have a growth mindset and a culture that supports experimentation.

Experimentation (such as A/B testing) on a large scale is key here. What we found is that airline CRO leaders experiment much more than other airlines. Econsultancy found a similar trend in their yearly CRO report:

Establishing experimenting culture is one of the key airline marketing trends for 2018

Source: Econsultancy yearly CRO report

You can see that companies that conduct more than 5 experiments per month see a large increase in conversion rates. The airline CRO leaders in our survey perform 5 to 10 experiments per month – not a coincidence, right?

The travel industry elite (like Booking.com, Airbnb, or Skyscanner) experiment at an even higher rate. To keep up with the elite, airline CRO leaders have already planned out how to automate experiments with machine learning and expand their experimenting from web booking to all digital touchpoints (post-booking, web check-in, kiosks, IFE, in stay activities…).

Airline CRO in action

 

Airline conversion rate optimization in action, improving conversion rates and ancillary take rate

Airline conversion optimization in action (source: Air New Zealand Linkedin)

Lesson #5 – Artificial intelligence, machine learning, chatbots, big data are on your to-do lists; voice search and blockchain are not there yet

At this point you’re probably asking, where’s the fancy stuff? What kind of airline marketing trends article is this without one mention of blockchain?

As I said at the beginning of the article, one of the things I wanted to investigate is in which trend areas you will actually invest in 2018. I wanted to see what is still just “hype” to you versus the areas that you will tackle in real life.

If we were just following the hype, this would be the picture – and yes, blockchain is the leading trend:

 

Google trends chart for airline marketing trends buzzwords

However, what you told me via our Airline Marketing Trends 2018 survey (remember chart no.2) is that:

  • more than 23% of you will focus on and invest in chatbots, artificial intelligence, machine learning and big data in 2018
  • less than 8% of you will invest in blockchain, IoT, voice-activated devices, and virtual reality

Just to be clear, I’m not saying blockchain is not a real trend or that airlines and travel companies should dismiss it. On the contrary, digitally advanced airlines like Lufthansa are already exploring and investing in it. They see it as a great opportunity to simplify and optimise their direct distribution efforts:

“Lufthansa Group has engaged in the development of APIs, for instance supporting IATA NDC standard, to offer a direct access to its offers to customers and distribution partners. By integrating these APIs with Winding Tree’s public blockchain Lufthansa Group enables all innovative partners who develop cutting-edge travel applications to access these offers via a decentralized and intermediate-free travel marketplace.”

I believe blockchain has big potential for airlines and travel companies and is one of the most exciting new developments we’ve seen.

However, the sole point here is that most of you are not ready to go into it yet. Building a strong foundation and being aware of your core business and challenges is the key to every success story.

Only after you take care of the basics, the “musts”, can you start to follow the hottest airline marketing trends and develop as an innovator.

Examples of airline chatbots and machine learning in action

Good examples are chatbots (virtual assistants and conversational commerce). It’s an area that’s been hyped up for a while, but we’ve really seen it take off in 2017. It seems like almost every airline out there has developed or is developing one now (they are high at 30% in our survey as well).

You can listen to the podcast below to learn how Aeroméxico developed a chatbot and how they plan to use artificial intelligence and machine learning to improve it.

 

Similarly, many of you are now playing with machine learning and artificial intelligence. I wrote in my 2017 Travel Marketing article how machine learning is getting more accessible and easier to use.

Airlines like VivaAerobus are putting it to work to get better customer insights and create predictive models for product recommendations (remember Lesson #1 – Personalization).

2018 will be exciting for airline marketers – are you ready?

You agree it’s an exciting time to be an airline or travel marketing professional, right? But I can really relate to you if you’re also feeling a bit overwhelmed by all the new technologies and developments.

My best advice with all the “new stuff” is to follow what’s happening and only focus on it when you’re ready. Carefully evaluate what makes the most sense to you and supports your core marketing efforts (see Lessons #1, #2 and #3). But most of all, think about what will add the most value to your customers.

What Should You Do Next After Reading Our Airline Marketing Trends 2018 Report?

If you want to catch up with the best, you need to keep learning. We’re here to help you.

 

Iztok Franko

I am passionate about digital marketing and ecommerce, with more than 10 years of experience as a CMO and CIO in travel and multinational companies. I work as a strategic digital marketing and ecommerce consultant for global online travel brands. Constant learning is my main motivation, and this is why I launched Diggintravel.com, a content platform for travel digital marketers to obtain and share knowledge. You are welcome to reach out to me at iztok.franko@diggintravel.com.

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