ancillary revenue: a win-win for your guests and your airline · revenue for vx your brand...
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Ancillary Revenue: A Win-Win for Your Guests And Your AirlineOctober 7th, 2016
Rustom BirdieAncillary Products Manager, Virgin America
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Agenda
• Ancillary 101
• The Virgin America Story
• The Future of Airline Ancillary Revenue
• Five Key Learnings
First, A Bit More About Me
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• Originally from Karachi, Pakistan
• UCLA 2012 (B.A., Economics and B.A., Human Biology)
• L.E.K. Consulting (management consultant with focus on Aviation & Travel practice)
• Virgin America since April 2015
• If you find this talk interesting, connect with me!
@zebirdman
wwww.rustombirdie.com
@zebirdman
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Agenda
• Ancillary 101
• The Virgin America Story
• The Future of Airline Ancillary Revenue
• Five Key Learnings
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The Virtuous Cycle of Ancillary Strategy
Better
merchandized
offers
Enhanced
choices for
guests
Capture
guest
preferences
Higher
customer
satisfaction
Ability to
reinvest in the
product
Improved
competitive
positioning
Increased
brand loyalty
More high-margin
revenue for VX
YOUR
BRAND
Ancillary 101
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Example Ancillary Strategy Roll-out
Build a platform to drive
consumption &
acceptance
Change the customer
mindset through effective
merchandizing
Better merchandize
existing optional
services
Focus on new high-
value “no regrets”
ancillary options
Near-term ‘core’ of ancillary options
Fully merchandized
‘core’ suite of
ancillary options
Growing set of
guest vetted
ancillary options
Long-term ‘portfolio’ of ancillary options
Over time, develop and
test additional options
New concepts
Ancillary 101
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What’s Holding Us Back?
Ancillary 101
No standardized unit of measure
(Lack of) Organizational Design
Technology Investment
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3
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Agenda
• Ancillary 101
• The Virgin America Story
• The Future of Airline Ancillary Revenue
• Key Learnings
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Express: A Successful Ancillary Bundle
The Virgin America Story
Express
Priority
Security &
Boarding
Preferred
Seat
Selection
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But We Saw An Opportunity to Further Maximize Revenue
While Addressing Growing Guests Needs
The Virgin America Story
Want ability to choose either only
seat or priority access
“I’m willing to pay a bit more for a
window seat on my red eye”
“I hate having to pay last minute
change fees”
Unbundle
Charge for seat assignment
Create a new change / insurance
product
Guest Needs VX Opportunity
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Thus We Replaced Express With A Suite of Unbundled Products
The Virgin America Story
Express
Priority security &
Boarding
+
Seat
Selection
Priority
Security &
Boarding
Preferred
Seat
Selection
OR
Before After
Priority
Security &
Boarding
Preferred
Seat
Selection
Plans
Change
Pass
Checked
Bags
A La Carte Bundle
Denotes free benefit for Elevate Gold & Silvers
Power Trip
(30-50%
savings)
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These Products are Sold in the Booking Flow, Only on our Website
The Virgin America Story
Flight
Selection
Seat
SelectionPayment
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Power Trip: Bundle For Business Guests, Ensuring Upsell & Limiting Dilution
The Virgin America Story
Clear message
of savings
(% or $)
Bulleted, concise
list of benefits
Bundle more popular than a la carte products!
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Priority Security & Boarding: Why Do Guests Want to Board Early?
The Virgin America Story
$19 vs. $20
Easy selection for each flight
Convincing messaging makes
significant change in up-take
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Checked Bags: How Can We Incentivize More Guests To Check Their Bag?
The Virgin America Story
Discount to
encourage pre-sales
More incentives to test:
(1) Time guarantee
(2) Bag Valet
Convincing messaging makes
significant change in up-take
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Plans Change Pass: Unique Product That Improves Competitive Advantage
The Virgin America Story
Convincing messaging makes
significant change in up-take
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Preferred Seats: How Much To Charge & For How Many Seats?
The Virgin America Story
Free
middle seat
in
discounted
back zoneHigher
priced front
zone
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Agenda
• Ancillary 101
• The Virgin America Story
• The Future of Airline Ancillary Revenue
• Key Learnings
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Ancillary Fees Are Not Limited to LCCs Anymore
The Future of Airline Ancillary Revenue
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Next Big Opportunity? Personalize the Inflight Experience
The Future of Airline Ancillary Revenue
• Why do we offer the same content
regardless of who’s eyes are looking?
• Using a FFP sign-in and dynamic retailer
products, we can personalize the IFE
experience
- Opportunity to push offers for F&B,
wifi, destination events, etc.
• Needs: IFE technology and omni-channel
database of customer purchase behavior
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Next Big Opportunity? Improve Merchandizing of Existing Products
The Future of Airline Ancillary Revenue
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Agenda
• Ancillary 101
• The Virgin America Story
• The Future of Ancillary Revenue @ Airlines
• Key Learnings
Key Takeaways From Today
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1. Merchandizing is key – hold your guests’ hand
- Right product, at the right price, at the right place, to the right person, at the right time
2. Be Nimble, Be Flexible
- Ability to make quick changes and create at least three customer segments
3. Unbundling can provide revenue upside, but guardrail yourself from dilution risk
4. Align ancillary strategy to support channel, distribution, and marketing goals
5. Create a truly cross-functional team
Five Key Learnings
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Agenda
THANK YOU!
Rustom BirdieAncillary Products Manager, Virgin America
@zebirdman
wwww.rustombirdie.com
@zebirdman