Ancillary revenues ‘priority’ for airlines
Wednesday, 21 Oct, 2009
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Almost 65% of airlines expect to grow their ancillary revenue profit by between six and 20% in the next year, according to a new study.
And 61% say their role has changed to incorporate more focus on ancillary revenue in the light of the financial crisis.
The research by ancillary revenue specialist Collinson Latitude reveals that 63% of carriers have a formalised ‘AR’ strategy in place.
Of those that don’t, 61% intend to implement one in the next six months.
But the majority still fail to focus on the customer.
The study, conducted in conjunction with Airline Information shows that 44% of those surveyed considered pure revenue the ‘one key metric’ used to measure ancillary revenue strategies.
Only seven per cent of the global airlines surveyed said that customer satisfaction or customer insight was their key measurement.
‘Profit per customer’ was the second most popular metric, with 28% of those surveyed saying it was the most important metric.
Collinson Latitude business planning director Janet Titterton said: “Obviously the key to an ancillary revenue strategy is to generate additional income, however in our experience, appreciation of the customer’s needs in the first instance delivers far better commercial results in the long term.
“To achieve sustainable growth look to develop long term relationships and formalise a strategy that encourages loyalty and drives advocacy to maximise your return on the relationship.
“If your starting point is pure revenue, assess the opportunity cost of short term profits. You could risk implementing a complicated AR strategy that actually alienates your customers.”
She added: “Clearly, ancillary revenue is still seen as a key growth area for airline brands, particularly as the wider economic environment is still so uncertain.
“We would advise the huge number of airlines looking to implement or invest in their AR strategies to do so with the customer firmly in mind.
“That means effort needs to be applied to gaining insight from customer data and travel purchase behaviour. Only then can you put in place a strategy that will position you to thrive when the economy recovers.”
by Phil Davies
Phil Davies
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