A few months ago I was given a book by Frank Grasso, CEO of e-channel search, and the subject really hit home with a topic I am always interested in; debunking old wives tales in marketing and replacing them with real science. Long time readers here will know that this is especially true when it comes to questioning insights gained from marketing driven customer survey data from some of the dubious press releases masquerading as market revelations. I finished the book in question this week on my flight to Brazil – it is by Byron Sharp and is called How Brands Grow: What marketers don’t know.

Firstly, any marketing book that cites Karl Popper is immediately going to get at least one star from me. Popper was potentially the greatest philosopher of the 20th century, but how does his advancement of the scientific method or this book from Byron Sharp have any applicability to airlines? Popper held that every scientific hypothesis must be testable, and the way to test it is to search for circumstances in which it does not hold. Sharp’s book picks apart many so-called marketing theories and in the process goes head to head with marketing gurus like Kotler and Aaker. The end result is a thought provoking book that takes a very different view on brand loyalty and loyalty programs in general – a topic of interest to any airline these days.

Loyalty certainty exists, but it is tempered by opportunity. People who buy from a category less often have less opportunity to be disloyal. Similarly people who shop from stores that stock fewer brands also appear more loyal (e.g. people who live in smaller towns).

The second sentence above is interesting as airlines always perceive top tier frequent fliers to be more loyal than non program members or those in the lower tiers. But one of the things that differentiates airlines from the supermarket loyalty program Sharp despises so much is, in my mind, the fact that for one of these the most active members are typically not spending their own money. Similar to what I wrote recently about the IBM booking duration data, it is much easier to be loyal when you are spending someone else’s money.

Back at the Phocuswright conference in November last year (where I first met Frank Grasso), one of the most profound on-stage comments that I recall came from Rich Barton when he said something like:

Don’t spend money on advertising because it lets companies get lazy about product

It definitely hit a note with me, as too often the lack of science in marketing leads to so much money being wasted, money that would have been much better spent on enhancing the product. If an airline website has enough compelling functionality and a UI layer that stands out from its peers, then maybe this is like the quote from the book about people buying from stores that stock fewer brands appearing more loyal – maybe spending less on generic airline branding and more on website (ie. store) functionality is a much better use of scarce resources.

Most of a brand’s customers think and care little about the brand, but the brand manager should care about these people because they represent most of the brands sales; the brand needs these people if it is to increase sales.

I’ve put another contentious quote from the book above, but in the video below, the author Byron Sharp uses a great example to debunk the often claimed story about how much Harley owners love the brand. Even more compelling, he illustrates how little profit these so called “loyal”  customers actually represent.

Maybe it is a tenuous link to discuss this book on a blog site dedicated to the airline direct channel, but I would challenge anyone to show me an industry where so much is spent on advertising aimed at influencing our perception of brand attributes and product differentiation with so little apparent impact. A little more science in marketing would do the airline industry a world of good.

Just to set the scene:

Brazil’s airports handled a record 155 million passengers in 2010 (that’s more than all airports in France combined), an impressive increase of 21.3% on 2009. Domestic traffic still dominates as almost 90% of airport passengers travel within Brazil. This year has also started well, with both domestic and international passengers up around 16% in January.

And GE is predicting Brazil’s air traffic could double in the next three years. I’m currently sitting in a hotel room in Sao Paulo listening to planes buzz overhead about once every two to three minutes. Brazil was almost certainly the fastest growing mobile internet market in 2010 with an over 500% increase in mobile search queries, and the payments innovation in this market is also something I’ve also written about before.

Another interesting thing about Brazil is that it is one of the rare markets where Facebook is not the leading social network. Google’s Orkut product is around three times bigger and outgoing CEO Eric Schmidt recently said:

Brazil is, for example, already on its way to becoming our sixth-largest country in revenue.

With so much growth in aviation and in mobile, Brazil will continue to be an important market for airline direct channel trend spotters to keep an eye on in the the months and years ahead.

Sometimes people mistakenly complain about unbundled airfare pricing when I believe they would be better off focusing their attention on the advertising and display of non-final airline ticket prices – that is, fares that it is simply impossible to purchase for the displayed price.  Carol Pucci in the Seattle Times has a piece looking at this practice in the US by comparing the websites of all the majors with what is being displayed on the main OTAs.

Federal laws require airline and online travel sites to disclose the total price (base fare plus taxes and fees), before customers click to buy a ticket, but how and when the airlines do that varies. Most travel websites quote a bottom-line price in their initial fare displays. Some airlines don’t, making it appear their price may be lower than it is.

I suspect one reason why this is not a more contentious issue in the US is that it is common to not know the final price when buying just about anything in a shop here. Most merchants add sales tax at the cash register, so this makes it more difficult to sustain an argument against airlines, even if the so called taxes assessed are far from identical across airlines. Angus Kidman at Lifehacker writes that the competiton regulator in Australia has been taking a more dim view of this practice.

Now the airline industry has come under fire, after a review of the sites for several of the most active airlines in the local market — Jetstar, Tiger, Air Asia, Air New Zealand, Malaysian, LAN, Etihad and American — found that they were not displaying prices in accordance with the law. (You’ll note that the dominant local players, Qantas and Virgin Blue, aren’t on that list.) Each of the airlines was told to change its sites so that all international airfares out of Australia, plus any domestic activity, clearly displayed a full price. That’s happened, but ACCC chair Graeme Samuel made it clear that any further non-compliance will be costly

So just when most markets outside the US appear to have forced airlines to show final prices at every stage on the website and not just on the payment page, a new idea comes out of left field:

In a filing to the Department of Transportation, Allegiant wants to have the option of offering a fare that could fluctuate based on the price of oil. This would mean you could buy a ticket for uber cheap now and then possibly have to pay more later if the price of oil goes up.

There is actually a very good interview with Andrew Levy, president of Allegiant Air in today’s Las Vegas Sun. In the article he goes into quite a bit of detail about how his airline (considered to be one of the leaders in ancillary revenue) will take it to the next level. He talks about plans to launch a fee for carry-on cabin baggage in the first half of this year, the tax advantages of ancillary revenue versus putting it on the ticket, and even whether the airline might introduce a loyalty program.

Recently I was writing quite positively on a research report from comScore, and today I saw an invitation for a webinar covering this same report. Part of the invitation goes as follows: 

Key questions addressed during the webinar will include:

  • How have market enablers like 3G/4G, smartphones and unlimited data plans driven mobile media usage among consumers?
  • What were the year’s top device trends, how have smartphone devices changed the market?
  • What mobile content categories are most popular among consumers, how do these differ across geographies?
  • How do browser and application access influence mobile content consumption?
  • How are consumers using mobile media to stay connected, how has daily consumption changed?
  • What will be important in the coming year for mobile, what role will mobile advertising and commerce play in 2011?

It is being held Tuesday, March 15 at 1.00pm Eastern and the title is The Mobile Year in Review 2010 U.S. I’ve registered, but I don’t have a generic link to share so if you are interested you’ll have to hunt around and secure your own invitation. It shouldn’t be too difficult. I think mine came from downloading the original research report.

Let’s hope that that webinar goes a little more smoothly than today’s mobile payments webinar from Kony. Kony are the company behind the mobile apps for the majority of US carriers, so quite a successful company. Despite having pre-registered, the CISCO Webex software seemed to max out with too many people trying to log on (I got an error message saying only the first 100 people could join). In the end I had to resort to dialing in via telephone and I missed out on viewing the slides.

David Eads, Product Marketing Director for Kony was good, but calling into a webinar on a mobile phone that cuts outs when you have 100 people listening was a bit surprising. Then again, I remember when Ben Kazez pulled out at the last minute from Phocuswright last November and I thought it was a bit strange, only to hear a couple of days later that he had just sold his company to Expedia. I can only assume that David Eads must be working on some mega deal to be calling into a webinar with no backup landline. Andrew Morris was also on the call and even though I’ve only spent 5 minutes skimming the report he referenced, the Mobile Retailing Blueprint: A Comprehensive Guide for Navigating the Mobile Landscape, my first impressions are that it is an impressive piece of work.

In other news, I know this blog is aimed at airline people, but I’m also aware that some hotel people read it. Timothy O’Neil-Dunne wrote a great piece today for Tnooz (and not just because he mentiones me by name), so if you are interested in a well written piece that cuts though the Hipmunk hype and Room 77 sensationalism, check out his story.

Hat tip to my colleague Eric Olesen for pointing me in the direction of today’s post. Last week I wrote about Ryanair signing a deal with INK to show ads on their boarding passes: (the media model is a hot topic right now). I’ve reproduced part of that post below:

With much of the world apparently moving more to a Groupon-like model, maybe the Ryanair idea of concentrating more on airport offers than on destination content might result in a better take-up (and definitely better trackability) of the offers. In the article, the CEO of Ink (company behind the solution for Ryanair) seems to be implying this, claiming that initial contracts are already being signed with advertisers priced at several times the rate for similar web ads.

Speaking of Groupon, I recently received a new home phone number and it turns out to be the old number of one of the many Groupon clones in existence. Now my home phone is running off the hook with bizarre enquiries which I am sure you can appreciate is a far from my ideal way to spend evenings at home! But back to INK.  It seems not everyone is happy with the Ryanair deal. The text below was posted on a Linked-in forum in response to a comment by the ancillary revenue manager at Spanish LCC Vueling, Maria Cardenal.

Mark Scott: Maria, You are right airlines have been doing this but not in a dynamically targeted way ie most messages are fixed. Sojern does something like this on Passes but not on all document types, eTicket Confirmations, mobile and Print-at-Home. Securidox does and introduced INK to the proprietary concept when they sold advertising on VLM’s confirmation. We are currently taking legal advice

This is the same Mark Scott as quoted below in an April 2010 press release about Qantas and their mobile boarding passes.

Mark Scott, Managing Director of Securidox, explains “Research shows that traditional check-in systems cause significant dissatisfaction at the airport with the process being too time consuming and stressful. The mobile check-in system offers a convenient solution for passengers and positive brand reinforcement for the airline. There are also excellent opportunities for revenue generation through advertising targeted to the passenger profile.”

So Securidox are on the record with this idea almost a year ago, and maybe they’ve had it for longer than that, but it seems whenever the topic of ads on boarding passes comes up, everyone finds the need to refer to Sojern. I asked Patrick Fisher who is their VP of Business Development to respond:

Sojern has strategically partnered with the leading airlines and travel industry organizations to deliver dynamically targeted and useful destination information and offers for Travelers since 2008. In essence, every boarding pass with Sojern content is customized in real-time based on the trip details of each particular trip. Sojern’s innovative approach also allows advertisers to reach audience segments throughout the travel continuum and increase campaign performance on premium web sites as well as impactful airline space such as print-at-home boarding passes and itineraries.

But with all this bickering over who was first to really understand the potential of segmented promotions in passenger communications (and to implement!), please read this link from a few years ago, as it was none of the companies mentioned so far in this post. The funny part is that Eric Olesen actually played a big role back then in making it happen.

A little over a month ago I interviewed Marcos Issac regarding a recent research report on using third parties to drive new revenues for travel industry participants. One of the topics in that report was the rise of the media model for airlines. As I wrote at the time:

One of the predictions coming out of the report is that in future “Airlines becomes digital marketing and media firms.” This is the so called media model – OTAs have gone down this path, and some airlines are starting to think in this direction but will the airline website of the future be plastered with third party ads?

What does this really mean? As with so many things e-commerce related, one need to look no further than Amazon to get a clue on what other merchants are likely to adopt in future. Below is a screen shot from a recent search on Amazon for luggage, but look closely and you can see Amazon is actually selling space on the site to retailers outside of amazon.com.

 

Peter Hammer at United Airlines has been appointed to run an area that is tasked with making the media model a reality at the airline that is currently in the process of merging with Continental.

United Airlines quietly created a new in-house media operation a few months back that’s designed to sell potential marketers integrated, multiplatform ad campaigns throughout its fleet of planes and terminal locations. The effort is similar to what Walmart and other giant retailers have done with the use of TV monitors and aisle displays to convert their stores into media outlets for hawking products and providing consumers with some content as they shop.

 

And in one of the emails I did not unsubscribe from recently, I saw this example today from Qantas pushing an ad for mens suits in the same email promoting flight offers.

The media model is here to stay, but I’m sure it will not be an easy model for most airlines to implement. There will always be the conflict of balancing how much space to give to flight related information, how much to give to trip related third party ancillary revenue partners, how to implement a media model that does not damage the airline brand or distract potential flight segment sales within the booking path, plus a host of other challenging factors to manage.

How long before we see an airline as bold as Amazon actually putting third party links within the booking flow? Implement that one incorrectly and the knives will be out in no time.

The Sydney based full service carrier Qantas is an airline I have quite a bit of time for, partly because in the past I worked very closely with their online efforts. Recently I had heard some whispers about how they were moving forward in the right direction with mobile, but I never discuss or comment on stuff like that until I see the airline itself is happy to publicize the fact. Today The Australian newspaper has a profile on Stephen Wilson who runs technology at Qantas, and he makes a few interesting points:

“We’re looking at mobility as a key driver. It offers us significant opportunities to engage with our customers and add new, valued services,” Wilson says. “We believe mobility solutions will enable us to improve the experience for customers end-to-end.” Wilson rates the consumerisation of IT and adoption of mobile devices as reasons for the push in the mobility space. Plans are afoot to enhance its online and mobile check-in channels so the pre-airport and airport experience can be aligned, he says. More than 25 per cent of domestic check-ins are done online. Qantas is looking at “multiple areas” to integrate mobile devices and mobility into internal and external environments.

My other friends down under (Virgin Blue) have been having no end of bad luck recently, with another recent outage. Whether it is Navitaire going down, power supply problems, or flood impacted data centers, I remain positive that the guys in Brisbane will turn their luck around soon.

On an unrelated note, I saw this interesting story in the LA Times.

Almost 20% of travelers spent five or more hours shopping and booking flights, according to a survey by a division of technology giant IBM Corp. of more than 2,000 business and leisure travelers. Business travelers were generally more efficient in booking a flight than leisure travelers, but almost 40% of business travelers spent at least two hours shopping and booking.

I’m not sure the takeaway there is that booking tools for business travelers are better than B2C (actually, I’m positive this is not the case), but the real reason is more likely to be that it is easier to find a suitable fare when you are spending somebody elses money!

Marketing VOX has a good roundup of some of the companies vaguely similar to Sojern (although they don’t actually mention Sojern) in a piece on the partnership between Ink and Ryanair that will see ads printed on boarding passes.

Ryanair, however, is tweaking the model to concentrate on retailers at the airport of departure – as opposed to the destination

With much of the world apparently moving more to a Groupon-like model, maybe the Ryanair idea of concentrating more on airport offers than on destination content might result in a better take-up (and definitely better trackability) of the offers.  In the article, the CEO of Ink (company behind the solution for Ryanair) seems to be implying this, claiming that initial contracts are already being signed with advertisers priced at several times the rate for similar web ads.

Finally, if you are interested in the travel inspiration space, USA Today has a piece inspired by the recent move by Southwest and their new GetAway Finder. It covers the pros and cons of companies like Wanderfly, Goby, Tripbase and Cheapflights who are trying to influence where you take your next vacation, and thereby get a cut of the revenue along the way. I’m still hearing a number of airlines say they want to get more deeply involved in this space, but it seems most are preferring to stay on the sidelines or only dip a toe very gently into the water for now. The potential is big, but unlike mobile which lends itself (or at least has up to now) to a more incremental approach, travel inspiration by an airline really needs to have a clearly defined strategic plan upfront as this is not an area where you will just stumble upon the right answer.