Is air travel a commodity or is there room for personalization? I’ve heard this debate for 20 years. The perception of commodity comes from the history of “public service”, where air travel was indeed a commodity like taking the bus or making a phone call. Following the liberalization of travel came choice and value. Travel is a service – customers willing to pay for a better service can do so. Is it the end of the perception of travel as a commodity?
The perception of commodity
Why is there still a perception of commodity? The fundamentals of distribution of air travel are still in place. Most travel agents still request a price for a travel service between two points. The only variable is the 2-letter code of the airline, which means that the service is a commodity.
Travel is a service
The reality is different. Travel is a service. The benefit is to take someone safely from a place to a destination. The key attributes of this service are speed, on-time arrival, comfort, etc. The longer the journey the more relevant these attributes. Consumers may be more or less sensitive to these attributes, and have more or less disposable income, which drives their “willingness to pay” for these attributes.
The need for personalization
Travel comes with endless options: destinations, dates, comfort of travel, etc. The amount of options means that there is an opportunity to simplify the choice for consumers by presenting them with offers which are more likely to meet their needs. This simplification is the purpose of personalisation. The better the understanding of a consumer’s preferences, the more personalized the offer and the more likely the conversion.
Reality and challenges
Are we there yet? I’ve been based in Geneva, Switzerland, for almost 20 years, and a loyal customer of airlines for the same period. They keep sending me emails when winter comes with promotions of cheap flights to… Geneva from other European capital cities.
A recent article by a team at BCG explores the latest trends in personalization of airline offers. Key findings in the article include:
- 7 criteria that enhance the likelihood of conversion of a targeted email.
- 3 pillars that enable making the right offer at the right touchpoint
- 3 challenges preventing airlines from implementing successful personalization
- 3 scenarios (offline, online anonymous and online identified) where personalization takes place
The 2023 breakthrough
I expect the breakthrough of 2023 is the end of the debate. Travel is a service which can and should be personalized at scale. The main challenges flagged by the article can be overcome today: “incomplete customer data” with new customer-centric architectures, “personalization algorithms” with the latest AI capabilities and “limited distribution capabilities” with retailing solutions based on offers and orders.
By nature a service is produced at time of consumption, unlike a product which is tangible and can be stored and tested. Travel is a service. The service is delivered at the time of the travel. It’s funny to read the expression “travel-as-a-service”. Indeed “as-a-service” applies to products, which are tangible and bought once. “AAS” applies famously to software, which was bought once on a disk and became a service when consumer in real time, SAAS.