In the past, airline revenue management was a strategy to determine which customers were served and pricing. But now revenue management has largely become thought of as a part of the overall strategy rather than a separate strategy.
Revenue management should be a tool that is used to implement the overall corporate strategy. Aligning revenue management with corporate strategy and vision will aid in customer service, loyalty, sales, and schedules.
Keep reading to learn everything you need to know about revenue management today and how it can validate and align with corporate strategy.
Validation with Revenue Management
There are three ways in which airlines differentiate themselves from their competitors: schedule, product, and pricing/ancillary.
Product
Usually smaller airlines focus on this differentiation. This is because the focus here is on customer service. While larger airlines have a significant schedule advantage, smaller airlines focus on unique customer service experiences to offset those advantages.
This allows the smaller airlines to stay competitive though they may not be able to offer the same amount of flight times as larger airlines would.
Scheduling
Larger airlines have an advantage when it comes to scheduling. This is because they have more flights which in turn provide customers with more flexibility. Not only do customers have more choices in when they fly, but also where their layovers are and how many.
While airline prices seem to be ever increasing, scheduling has become one of the most important factors for consumers when choosing an airline. Likewise, having a scheduling strategy allows airlines to offer flights customers want, maintaining customer loyalty.
Pricing/Ancillary
This advantage involves offering lower base prices for tickets while offering ancillary pricing to increase total revenue. Airlines like Allegiant Air sell all aspects of travel by classifying themselves as a travel company and not just an airline.
How to Align with Corporate Strategy
There are many ways to align revenue management with the company’s overall business strategy. The following are the top two ways to integrate revenue management with corporate strategy.
Customer Selection
One of the purposes of revenue management is to prioritize an airlines passenger. This prioritization is based on fares and involves giving seats to the highest fare. Even when the highest fare is only $1 difference. However, those $1 differences, when totaled across all flights, can add up to a significant amount of revenue. But this doesn’t help with customer selection.
Rather than banking on collecting that $1 difference from non-targeted market segments, revenue management should focus on target based market segments. This means determining who the airline’s target demographic is going to be and how best to reach them and give them priority over others.
Brand Image
Airline prices are already an incredibly confusing thing, and beyond impossible for consumers to follow. Because of this, many consumers become frustrated with prices, not needing much of a reason to go with a competitor.
This is why an airline’s brand image is so important. And revenue management plays a major role in that.
Revenue management works within the airline’s brand image and strives to foster that image and support the ideals the company stands for. When customers are overwhelmed by prices, they will latch onto brand names they can trust and rely on.
Focusing revenue management to align with brand image will help to increase customer loyalty, generate sales, and increase conversion rates.
The Next Generation of Revenue Management
Much like consumers and available technology, revenue management needs to be ready to change and adapt as new challenges and obstacles arise.
Whereas before airlines could get away with focusing on revenue per seat, they now need to be focused on revenue per customer. This is where the next generation of revenue management comes in.
This new revenue management needs to be incorporated into all aspects of the airline’s overall strategy. Focusing on customer retention and loyalty, brand awareness and loyalty, as well as increasing lead generations and conversion rates.
Revenue management will need to be geared more towards customer service and less about generating as much revenue as possible by any means necessary.
Airlines and Revenue Management
When it comes to maintaining a competitive advantage in today’s market, revenue management is the key for airlines. Rather than developing it as its own separate strategy, as was done in the past, today airlines are incorporating it into their overall strategy.
This is because the demands of the markets of changed and customers want better customer service experiences where they aren’t able to get better prices for airline tickets.
Incorporating revenue management into the overall strategy will ensure the overall success and longevity of the airline.
