Ancillary Revenue Squared

No structure can survive on weak foundations. No matter how intricately the masonry has been carved, even the most beautiful cathedral will collapse if built on sand. All efforts will have been wasted. The same principle applies in business and commerce. You must build on solid ground. And in the world of ancillary revenues, foundations are made of data. Unless you know the needs and desires of your customers, how can you possibly provide relevant and appealing programmes?
 

Data is so important because each company’s customer base is different. A better ancillary revenue programme does not necessarily mean a radical overhaul of a business plan; the first step could simply be better analysis and exploitation of the customer data you already hold.

Here, the travel industry has many advantages over other sectors. Hotels, for example, know so much about their customers, from their preferred newspapers to their favourite after-dinner drinks, that putting together a customised package of benefits – lifestyle benefits that extend far beyond the hotel itself – is a real possibility. Those benefits can then be offered through a subscription-based membership programme, for example, or a loyalty rewards programme. Similarly, even basic data analysis will tell airlines which customers fly every month on business trips from London to New York, for example, or which passengers love annual golfing holidays in Portugal. Targeted ancillary revenue programmes should follow.
 

Anyone doubting the commercial value of data need only take note of the tensions and conflict we have already seen this year, in the airline industry, over the so-called ‘direct connect’ philosophy. Data is a key prize in this battle. Airlines want direct booking connections with their customers largely because third-party bookings deny the airline visibility of the wider customer spend at the time of the transaction. The airline knows of the flight booking, of course, but did the passenger also order cultural guided tours at the destination city, for example, or winter sports insurance? Without such customer-specific data, airlines will struggle to offer the kind of customised loyalty and rewards packages that allow them to build long-term profitable relationships with customers.
 

Modern consumers understand the commercial value of data, and also understand the threats of cybercrime to electronic data security. The Sony PlayStation security breach should serve as a warning that every organisation is vulnerable to cyber attack. Complacency is not an option. The brand and reputational damage of compromising customers’ personal data can hardly be overstated. Customers trusting your business with personal details expect a return on that investment. Anyone signing up to a frequent flyer programme, for example, is entitled to expect their details to be handled respectfully and intelligently. Each of those customers is providing unique information to differentiate themselves from everybody else on your database. They rightly expect to be treated differently now, with relevant offers and information.
 

Targeted ancillary revenue programmes can help you meet customer expectations of ‘the personal touch’. Sustainable solutions are the key to sustainable revenues. Make sure your cathedrals are built to last.

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