For several years, airlines have yearned to adopt “merchandising,” a term that is applied indiscriminately to everything from fare families to checked-bag fees.Depending on who is doing the talking, they are held back by their own systems, which don’t easily accommodate innovations in how products are sold, or by the global distribution systems, which some airlines accuse of dragging their feet on investment in new technology.
But Montie Brewer, former chief executive officer of Air Canada, adds another reason that airlines are held back: When it comes to merchandising, they haven’t got a clue. “Airlines are terrible merchandisers,” he said. “They don’t even know what the word means.”
Brewer, who participated in a panel discussion of merchandising at the UATP Airline Distribution Conference in Madrid, said airlines “are so far into the Dark Ages about what we are really selling.” The key factor, he said, is that “they see it as a revenue stream instead of differentiation.”
When Air Canada unbundled its fares and created a set of fare families in 2003, it was looking for a way to match fares with a spate of new low-cost carriers and still maintain its full-service status, he said. “We had to get the customer’s trust back, matching the fares with the low-cost carriers, and still add value,” Brewer said.
The branded fare families each had a set of attributes that could be modified to a certain extent. The Tango family was the price leader, and if passengers agreed to not check bags, they could get a further discount of C$10 each way.
Changing the airline mindset to merchandising mode is easier said than done, Farelogix chief executive Jim Davidson said. “If you are selling a commodity product, you don’t suddenly wake up one morning and say, ‘Hey, it’s not a commodity product,’” he said. “They’ve built systems that are good at selling commodities. When the rust comes off, they don’t know what’s going to happen.”
He agreed that airlines have a lot to learn about merchandising. “Some airlines may be heading down the wrong path, thinking of bag fees as ancillary revenue,” he said. “They’re not tuning into what the customer needs and how important the customer is.”
Aidan Brogan, senior vice president global sales at Datalex, said airlines are missing out on untold numbers of opportunities to give customers what they really want. They could, for example, work with other companies to package the real essentials of a trip.
“Yesterday, I parked my car at the airport,” he said. “Then I went to Starbucks. But the airline only got the air fare.”