5 reasons low fares alone won’t win back travelers

by | Aug 27, 2020 | Airlines, News

Author: Rob Fagnani, VP of Business Development, Formation

While COVID-19 still looms large in the minds of the traveling public, there’s no doubt that some recovery is happening in fits and starts. Earlier this month, S&P Global published a new report predicting global air traffic to sink by 60% to 70% year over year in 2020, which is much steeper than what they projected back in May.

As passengers trickle back onto flights, the competition to win their business will be fierce, leaving airline industry watchers speculating on the possibility of a discount-based “race to the bottom” between carriers. But there are smarter and more cost-effective ways to be competitive than offering one-size-fits-all mass discounts. By understanding each consumer on their individual road to recovery, airlines can develop offers that meet customers where they are and make them feel more confident in traveling—without having to undercut every deal from the competition.

5 reasons not to rely on one-size-fits-all fare sales for your comeback

1. They don’t meet each traveler where they are on their customer journey.

The decision of whether and where to travel has always been personal, but the post-COVID era has made it more individual than ever. Customers are not only weighing factors like personal finance and timing, but everything from public health in their area to the individual health concerns of their families and friends. Acceptable risk will look different to each customer, and where they are on the journey to purchase and reengagement will vary accordingly.

One-size-fits-all fare offers won’t be relevant to customers who are disengaged, and won’t sway those who are researching travel from a safety perspective. Personalizing communications to these customers would go much further to engage them than a blanket discount.

2. The insights provided are limited.

When you send a mass offer, the customer insights and learnings it yields are pretty limited. It is difficult to understand why customers engage or do not because every customer is responding to the same thing. Limited learnings make it difficult to predict what follow-up actions will maintain their loyalty and lifetime value (LTV).

Testing personalized offers, on the other hand, may reveal more about the customer’s motivation to travel. For example, let’s say a customer has a travel destination they visit yearly during the holidays. If you send them an offer for holiday travel to that destination, and they don’t act, you might try sending them one for the same destination but in an off-peak window. If they act on that, you can hypothesize that this customer is seeking less crowded flights and destinations, which can then inform your future offers to them.

3. They don’t utilize your promotional budget effectively.

By offering the same discount to every customer, some of your budget is allocated to customers who will never use the offer, while other customers who have low LTV may receive too large of a discount compared to their price sensitivity. Personalizing your offers gives you the opportunity to be more generous to those who are most likely to resume travel, most brand loyal, or those who have the highest LTV. Targeting discounts this way improves the ROI of your offers and discount dollars.

4. They are reactive rather than proactive.

Offering mass discounts because your competitor does leaves you playing a continuous game of catch up. Every time they adjust a price, you adjust a price. In fact, many pricing algorithms in use before the pandemic were focused on achieving this parity. But in a time when many airlines are vying for fewer passengers, this is a great way to get into a price war—which ultimately may not benefit any of the parties involved.

The pandemic has also made behavioral modeling more challenging, but with a combination of machine learning and human intelligence, you should still be able to make educated predictions of future customer actions. That could enable you to beat competitors to the punch and have your offer accepted first, instead of rushing to catch up by offering parity pricing.

5. They don’t meet consumer expectations.

Expectations for the customer experience are higher than they’ve ever been, across all industries. It’s critical for travel companies in particular to understand their customers’ rapidly changing motivations and preferences to feel safe and secure. This is why consumers expect personalization, and the relevance and value it provides. One-size-fits-all offers simply can’t provide that level of relevance.

At Formation, we recently surveyed 2,000 consumers to learn exactly what they consider valuable when it comes to personalization. The study revealed that they now expect marketing to be individually tailored to their needs. 81% of consumers said they were willing to share basic personal information for a more personalized experience, while 73% said the brands they engage with the most recognize them on a one-to-one level.

Smarter loyalty offers and brand communications will win back travelers

As air carriers work to regain travel volume, the question is no longer just who can deliver the best price, but who can reengage each customer most effectively. Which brands will be able to address customers’ individual goals, hopes and concerns without seeming too invasive or transactional? The airline that focuses their marketing on these personalization priorities will be able to deliver the most value to the most passengers, and be the best poised to win market share as travelers return.