Your marketing team deployed a customer-level mobile promotion for a discounted upgrade and it yielded a high redemption rate. Success! Or was it?
Did the promotion truly drive customers to upgrade or did the discount offer simply subsidise purchases that would have been made anyway? Would they have upgraded without the promotion?
Your team frequently sends expensive marketing materials to your highest spending loyalty customers, confident that this is the best way to retain these high-value customers and generate additional bookings. But might you already have maxed out these passengers, throwing marketing budget at a segment where there is little opportunity to grow?
Airlines are constantly trying to figure out which strategies – from bundled promotions to accelerated loyalty status offers – successfully increase loyalty and drive direct bookings. For instance, Delta has recently reduced fees for its customers, announcing it will drop fees for tickets purchased at the airport or over the phone. Meanwhile, United Airlines is attempting to re-engage formerly loyal flyers with aggressive bonus point promotional offers.
However it’s challenging to understand which of these initiatives are truly effective as airlines struggle to accurately attribute changes in performance to a particular initiative or campaign. This challenge stems from the natural day-to-day variation in revenue data and the many ongoing initiatives an airline and its competitors have in-market at any given time.
The result is that it is difficult to tease apart what works and what does not.
Deploying in-market business experiments can provide airlines with insights about which promotions and loyalty initiatives drive revenue and market share gains, as well as which customer segments, flights, or markets should be targeted to generate maximum revenue.
By trying an idea – such as a new loyalty benefit or fare bundle pricing – with a small subset of customers, flights, or markets, airline executives can gain a view into which programmes drive increases in KPIs that would not have occurred without the programme.
These KPIs can include revenues, booking volume, customer satisfaction or met profit, among others.
This “test and learn” approach consists of four key steps: