airline marketing innovation

Innovations in the Aviation Industry: Trend and

Developments

Dr Narudh Cheramakara

Sep 2017

Agenda

• Innovation: Introduction

• Aircraft Manufacturing Sector

• Airline Sector

• Airport Sector

• Q & A

Innovation: Business Context• The process of translating an idea or invention into a good or service

that creates value or for which customers will pay.

• Customer-centric !!!

• Evolutionary innovations (continuous or dynamic evolutionary innovation) that are brought about by many incremental advances in technology or processes and

• Revolutionary innovations (also called discontinuous innovations) which are often disruptive and new.

Innovations: the benefits

• Cost

• Competitive Advantage

• Customer Experience

• Branding

• Marketing 4 Ps (Product, Price, Place//Distribution channel, Promotion)

• Customer Loyalty

• Regulatory compliance (Voluntary or Compulsory)

• Customer’s willingness to pay

=> Improving financial performance

What else?

Airline Customer Journey: Touch Points

Watkinson’s 10 principles of customer experience1. Great customer experiences strongly reflect the

customer’s identity – self value brand level2. Satisfy your higher objs, product or service level3. Leave nothing to chance, interaction level4. Set and meet expectation 5. Effortless6. Stress free7. Indulging the sense8. Socially engaging9. Put customer in control10. Consider the emotions

2. Product life cycle

3. Product Innovation

For a successful product innovation E.M. Rogers suggests the following points of consideration

3.1 Relative Advantage

• new products must be substantially better value-for-money than those they are replacing, in order for consumers to accept the risks of using them

3. Product Innovation

• 3.2 Compatibility

• An innovation is unlikely to be successful if it is a very radical departure from the existing ways in which business is done in the market sector in

- This could be wrong for inflight product (e.g. flatbed on BA, Etihad Suite)

- But could be right for standing seats

- How about charging for cabin luggage? (like Spirit and Wizzair)

3. Product Innovation

• 3.3 Complexity

• Some innovations fail because they are perceived as being extremely difficult to use, requiring purchasers to invest a great deal of time and effort

• Nok Air has a policy of not collecting irrelevant passengers’ data (DOB, passport no, etc.) This is a double-edged sword for CRM Analysis.

3. Product Innovation

• 3.4 4. Divisibility

• It is often easier to persuade consumers to take a series of short steps, rather than one very large and risky one.

• The principle of Divisibility is very well illustrated by the growing popularity of so-called Fractional Ownership schemes for business jets. (In which the manufacturer expect the fractional owners will buy the plane outright at the later stage

3. Product Innovation

• 3.5 Communicability

• Customers are unlikely to be persuaded to buy a product if the benefits this product will bring cannot be communicated to them persuasively.

• Miscommunication and the so called ‘internet drama’ is very difficult to handle by airlines

Innovations: in Aircraft Manufacturing Factors

• Stagnation in Technology• Duopolistic market Market power A v B / Particularly pronounced in the

regional aircraft segment.• No willpower to produce radicalised design - NO Longer about speed

- Fuel Efficiency Only focus since 1970- Engine- ETOPs- Material- Manufacturing Process

Development First Flight: 1903

Oldest airline with continuing ops (95 years)

Progress:

WW I -> Air Mail

Colonial powers: The golden age of flying boat

WWII -> Long range passenger planes

Fast-paced development in technology

https://www.youtube.com/watch?v=S4s2spL0O0Q&list=PLDF12C831C41E1B44&index=4

History: The Flying Public (60s-80s)• Safe and reliable

• The Jet Age

• Sexual Appeal

• The Jumbo jets – Unit cost

• The deregulation – Free competition

• Oil crisis – cartel

• The rise and fall of Concorde – Govt spending

• The fall of British jets – Govt intervention

• The charters – unit cost

https://www.youtube.com/watch?v=v9bVFkDhGPE

4. Product Life Cycle in the Aviation Industry: Boeing

4. Product Life Cycle in the Aviation Industry: Airbus

- ETOPS revolution

- Engine Change

Sonic Cruiser 7E7 Dreamliner

Regional Aircraft: Lack of replacement

The Future: Green and Efficiency

Problem with Airport configuration!

Practicality

Economic questions

Passenger Acceptance

The Harsh Reality

Key Take Away

• Stagnation

• Airline has no market power

• Where next?

Innovation In Airline Industry

• Following Touch Points: Pain Points!

• Remember Innovations cover all marketing aspects!

• Digitisation

• Personalisation

• Seamless Experience

• Automation

• Underlying Points: Driven by Costs // Profit Maximisation Through marketing

Innovation: Distribution

• Lesser-developed markets appears to be much more innovative than developed ones.

• Primarily led by the growth of LCC sectors (Thailand is a prominent example

• PAYMENT CHANNEL: Absolutely Vital

• E-commerce

• Online Travel Agency

Online Innovation: Chatbot

Online Innovation: Chatbot

Online Innovation: One transaction takes time

Speech Recognition: Useful in the US

Farelock

Social Listening // CRM or spamming?

Mobile web/App: fastest growing

• Thais are particularly addicted to mobile phone

• Nok Air has 21% from mobile we have dedicted mobile department – Most are from app than m.web

Payment Channel

Innovation: Check-in

• Telephone Check-in

• LCC – Compulsory auto check-in

• Ticket / Boarding pass (single

fleet)

• IT is the key stumbling block

Early/Overnight Check-inCity Check-in Train Station Check-in

Gate/Lounge Checkin (mostly disappeared after 9-11)

Automation Pro and cons?

Labour IssueCostImplementationAirport Operator ApprovalPassenger Acceptant!

E Tag: Self-printed, E-ink, GPS, RFID

Boarding:

: IFE

- Audio- Feature film- Personal Screen- AVOD- Larger screens- Touch Screen- What’s next?

BYO // Connectivity // Power Outlets // Personalisation

Panasonic Waterfront Concept

Seats

- Lounge Chair- Flat Bed- Aisle Access

777 Cabin: JAL v Philippine Airlines

EconomyLight and Slim

Pocket

IPAD Holder

Seat Recline

Innovation: Making Money out of thin air

Air New Zealand: Innovation for sale

Premium Economy Led by EVA Air

Fill the market gap

Business Class:Highly innovative

Business Class Development

• Hardshell

• Privacy

• Aisle Access

• Connectivity

• Power Port

• Working/Resting

First Class: Increasingly matched by Business class

In-flight lounge

Business Concept Innovation

Service InnovationJetblue: Mint Service

Compared with US Airways

Narrow-bodied Transatlantic

Openskies FFP as advantage

BA Sleeper (No-cost Innovation)/A318

- Shuttle Service (Go-show) on important airbridges

Lounge

SAS City/Gate Lounge

7. Airline Product

Fly and Ride, Fly and Ferry

Premium Seat: No-cost innovation

Ancillary Revenue Innovation

TUI: Using BYOD to order meals

Customised buy on board meal: Air Baltic

VR for Premium Economy Upgrade

Inflight Payment: MTR // Applepay

Airport

Airport Nature

• Physical Constraints

• Largely monopolistic – low incentive to improve efficiencies // Partly or wholely government owned

• Non-Aeronautical revenues

Airport Innovation: Airport Access

Transportation to and from the airport is important

Think about UTP

Pre Clearance

Amenities

Airport Innovation: Air Traffic Management

Airport Innovation: London City Airport

Virtual Control Tower

compared with SVB?

Airport Innovation: AMS/SIN

Innovation: Heathrow

Airport Innovation: Environment

Airline Innovation Sources:

Air Shows

• Farnborough

• Paris Air Salon

• Singapore Airshow : Next February