The airline industry has had an impact on how we buy things today, and how those things are marketed. Just a couple of examples: Electronic tickets were first developed for fare ticketing, while one of the first online booking systems was built by airline distribution company SABRE. Airline companies were also the first to practice eCommerce by founding and operating online travel agencies (OTAs).
Driven by insane competition, airlines relied on many tools to survive in the market. Not even considering innovative technologies themselves, marketing plays a huge role in running a business successfully. Because of the way people live and travel changed drastically, the industry had to adjust for the modern world conditions. Instead of smoking onboard, luxurious service, and premium class flights, low-cost travel is king now. But you can spot the difference even between the first-class service then and today, have a look at this side-by-side comparison.
Marketing is multi-dimensional, especially in the case of the airline industry. At a bare minimum, the same products are marketed to customers (leisure and business) and distributors differently. So, the aim of this article is to explain how airlines market their products. We’ll cover marketing best practices and approaches by segments addressing real-world cases where possible.
Understanding the air travel market
We’ll begin with some background on how the air travel market works and what problems airlines are addressing. The airline market can be divided into three parts:
Airline companies themselves.
Distributors are all the third-party companies that either resell travel products to the customers (OTAs), or to other distributors (wholesalers). Distribution in travel is fully controlled by Global Distribution Systems (GDSs): international companies that established an oligopoly on the travel market, being a central point of connection between airlines and distributors. You can learn more about distribution of air tickets in our video:
Customers are the buyers of travel products. Travelers are traditionally divided into segments of leisure and business:
- Leisure travelers are the largest channel of sales. It requires serious technological infrastructure to operate in that sector. The leisure traveler segment is budget conscious, so customers are primarily interested in optimal pricing, rather than additional services or higher service class.
- Business/corporate travelers are people, individuals or a group, that travel mainly for business. The chief priority here is in optimal route choice and comfort, so high service class is preferable. While business travelers occupy a much smaller part of flights, they typically bring more total revenue compared to leisure travel, especially in traditional airlines that aren’t practicing low-cost approaches.
As airlines sell their services both on direct and indirect channels, relations with distributors are also a part of marketing. Now let’s talk about the challenges airlines face in marketing their products.
What are the challenges of air travel market?
Given the market conditions, airlines have lots of opportunities to target different customer segments through direct and indirect channels. However, there are complexities that challenge building an effective marketing strategy:
Airlines are selling a service. While an airline ticket is a tangible thing (at least a paper one), the rest of the trip is a service. Services are difficult to market since you can’t touch, taste, or smell them, nor can they be explained in two words.
Travel products are perishable. Tickets and ancillaries expire. The price on the same ticket fluctuates due to various factors, so there is no constant value proposed to the user. The price offer is always dynamic depending on the current demand, and how long before the departure we’re selling the ticket. All of these things are worth a separate discussion, so you can watch our dynamic pricing video:
Globally volatile. Airlines operate across the globe and that presents difficulties. A flight destination and country can be either a marketing opportunity or an obstacle for the carrier. Carriers appear to be vulnerable to political, economic, geosocial, and climate factors, all of which make it hard for the airline to plan marketing campaigns and advertise their products.
Data loss on indirect channels. The end point of sales are travelers. But, it does make a big difference on how airlines sell their flights: via a direct channel (reservation on an airline website/app), or via a distributor. Direct sales bring an airline a lot of benefits, like customer data and the ability to market products using this data. Distribution via online travel agencies and global distribution systems are completely different. First of all, commissions are paid as a percent of a fare/service price. Secondly, due to GDS oligopoly and technological anxiety of distributors, airlines are cut off from the customer data that stays in the hands of these middlemen.
Given these conditions and constraints, let’s talk about the actual approaches and practices that airlines rely on.
Airline marketing approaches
So, as you can see the market of air travel is a tough battlefield. Technologies progress while traveler behavior and priorities constantly shift. Those factors force airlines to be creative and timely with their marketing efforts.
Let’s look at the real-world cases of how airlines market their services and products using different tactics.
Working with distribution channels is one of the most important parts of airline marketing. Metasearch engines occupy a specific place in air travel, because they allow you to search flights among thousands of airlines and compare prices. All the competing airlines are here, so customer-wise it’s really handy.
Until recently, metasearch engines only allowed travelers to view flights, while now it is possible to book via them. That became doable via NDC APIs offered by airlines to connect with their inventory, source flight information, and book without redirecting to its website. For example, Virgin Atlantic is currently testing booking capabilities through Skyscanner’s Direct Booking Platform.
Speaking of metasearch engines, it’s difficult to ignore Google. Google Flights appeared in 2011 as a metasearch, which allows users to search and compare fares. Now things look a bit different for two reasons:
- Searching for a flight destination via a Google search page will show you the results of Google Flights right away, so there is no need to go on airline.com to see the prices.
- Google, which doesn’t offer booking, facilitates direct bookings. When you choose a fare on Google Flights, it will offer you some booking options. Most often, it will redirect you to the airline.com page, but sometimes it offers booking via an OTA.
Google makes it easy for airlines to drive more sales, because in most cases it offers you a direct booking option without fees. So working with metasearch engines is profitable for an airline, because it increases the visibility of your fares on the global market. And in the case of Google, the cheapest option for a certain destination will be shown right at the search page. Google’s top rank without any SEO, how’s that?
A more unusual case of working with metasearch engines is by Icelandair. It experimented with showing flights of other airlines at their own website. The purpose of the test was to show that Icelandair tickets can be cheaper, but the idea didn’t go anywhere. However, this case is an interesting slant on positioning in the market.
Building customer loyalty via loyalty programs
Each airline is concerned with rewarding its loyal customers. Nearly all the airlines develop their own ways to cater regular flyers either on a certain route, or brand loyalists in general. However, loyalty programs at their core work the same: Travelers collect bonus points that can be turned into purchases or discounts in the future.
As for general loyalty programs, we want to focus on American Express (Amex) as one of the largest corporate travel providers on the globe. American Express offers an affiliate program for airline companies. Using an Amex card, travelers can get discount points by purchasing one of many affiliate member fares.
The points accumulated while using an Amex card to pay for airfare can be spent in many online stores as well, And, that includes Amazon and Dell. So, it might be even more profitable, as Amex loyalty programs permit a more diverse spend of points.
Useful content to promote budget destinations
Another example is Irish low-coster Ryanair operating across Europe. Low-cost airlines target cost-sensitive leisure travelers, offering the lowest prices. To enhance this idea, Ryanair utilizes its blog to promote certain destinations to its audience as recommended budget routes, rather than promoting the services themselves.
Given that price sensitivity is high across leisure travelers, Ryanair understands that affordable flights may make a compelling argument.
Integrating social networks as a part of travel experience
KLM Royal Dutch Airlines is a flagship carrier of the Netherland operating to over 146 destinations. In 2009, it pioneered the use of social networks to send customers their flight documentation. KLM first enabled flight status update via WhatsApp, Twitter, and Facebook Messenger. Additionally, customer support of the airline can also be accessed via social media channels.
In 2012, KLM Royal Dutch launched a social media initiative aimed at connecting its passengers via Facebook or LinkedIn. The project was called Meet & Seat. So, what it does is basically connects your Facebook profile page to your booked seat and makes it available for viewing by other passengers.
The feature became available for intercontinental flights and profiles can be viewed not later than 48 hours before departure. Focused on business users, KLM’s Meet & Seat gave passengers the opportunity to become acquainted with other travelers before the flight.
Live analytics to explore and engage with target audience
In 2017, social networks became a standard way to communicate with large brands and companies. So did American airlines. AA used an interactive map with geo-markers to track the location from where American was mentioned on the web. The use of real-time tracking of social mentions made geotargeting simpler, keeping in touch with its loyal customers in the bargain.
Fostering user generated content to increase user-engagement and collect customer data
In 2014, a flagship carrier of Singapore announced a large cooperation campaign between Australian media agency MEC and Singapore Airlines. The activity was named The Storytellers. The idea was to pick 4 journalists and bring them to one of Singapore Airlines’ available exotic destinations. The journalists were tasked with documenting their trip and travel experience in written and video format. The content gathered was hosted on the dedicated hub at MEC’s website. And all the interested viewers could vote, with the number of votes indicating a winner.
Fostering user-generated content is one of the simplest ways to boost user interaction with your brand. But, on a much deeper level, that campaign helped Singapore promote not only its tickets, but also chosen travel destinations as one of their products.
This case with low-cost airlines is a smart marketing move. When the flight booking opens, the occupancy is low, so the price is also low to foster purchases. Low-cost airlines tend to promote those low prices on the dedicated platforms to start the buzz around “insane offers”.
A price for the destination in general may seem incredibly low. So, here’s the trick: The given price is just a small number of fares that will be available until the occupancy increases. Then, it will appear at different distribution platforms, media resources, social networks, and “special deal” aggregators. However, this fare bucket will be closed, so an average fare for this flight will be much higher.
By promoting ultra-low-cost flights, carriers make headlines and increase the number of travelers visiting their websites, even though only a handful of them will really fly so cheap.
Advertising stopover destinations
Marketing in business is most often associated with advertising the product. A great example of how travel products are advertised can be seen in the Icelandair Stopover Campaign. The campaign, really old, was launched in the 1960s and spiraled to its highest popularity in the 2000s. In a nutshell, it allows travelers to make a 3-day stop in Iceland on the way to European or North American cities.
You can find numerous ads dedicated to its Stopover campaign, promoting different sides of its service.
The campaign became increasingly popular among leisure travelers, as it allowed for visiting a new country on the way to your final destination. Then pack your bags, make a transfer, and you’re back to your home or destination city. Icelandair open up an accessible route for tourism both for European and American travelers. Using its own infrastructure of hotels in Reykjavik, Icelandair Stopover quickly became its primary marketing engine that boosted both sales and created a base of loyal customers.
Gamification of travel experience
Gamification, a term that came up from the pedagogical discipline, means turning something into a game-like process with rules, target, and reward. Air France turned the whole travel experience into a game with the help of mobile diversion Cloud Slicer.
This game is basically a competition playground for passengers to play for “service-class upgrade.” It works this way:
- The passengers are gathered at the airport gate waiting for it to open.
- Cloud Slicer could be installed on any mobile device like tablet or smartphone.
- A number of people selected could compete in the game to slice clouds and earn points
- The winner receives a reward — a chance to upgrade to Business Class and travel in a new cabin of a 777 plane
The campaign helped Air France accomplish two tasks: involve customers in a gamified travel experience and promote both its new jet type and a business class product.
Building a strong brand visibility with the help of commercials
British Airways has always run powerful ads during. It is a major UK carrier, considered an air symbol of Britain, like American Airlines for the US. And it’s also famous for its TV commercials, as some of them became advertising classics.
The latest commercial, featuring numerous well-known British actors, musicians, and media stars, certainly brings home the BA brand as a national symbol.
How to plan a marketing strategy for your own airline company?
Speaking about real-world examples, we can clearly see where the roots of a marketing campaign coming from. In fact, nearly all the mentioned airlines derive marketing activities from their required target group or demand to promote a new product.
There is no single way to create a marketing campaign, because it involves a lot of company-specific details. But, let’s briefly sum up some valuable points that can help you.
Stick with your customer segment. Business or corporate travelers differ in their travel behavior and priorities. So, running a marketing campaign should highlight this factor as a primary concern.
Focus on the product you’re going to market. This point assumes you’re considering all the possible product dimensions (digital, physical, service), how do you want it to market, what are your secondary aims, and how can you benefit from customer actions.
Foster as much interaction with your travelers as possible. Not only does it help to build loyalty and establish human relations with your brand, it also can help you to source valuable data about your customers and create a personalized experience for them in the future.
Be loyal. As long as you’re not an ultra-low-cost airline operator, you will probably have to reward the loyalty your frequent travelers give you. Loyalty programs, special offers, and discounts make your brand a company to stick with.
Keep an eye on competitors. As the airline market is fueled by competition, any marketing strategy should include two key elements: our market position and our competitors.
Maintain a balance between competition and customer loyalty.
Originally published at AltexSoft tech blog “Airline Marketing and Advertising Use Cases from American Airlines, Ryanair, Air France, and Others”