5 things you need to know about offer management

In the context of airline retailing, offers refer to the various products and services airlines present to customers. These include flights, seat upgrades, additional baggage allowances, in-flight meals and lounge access – as well as offerings from third parties such as car hire, airport transfers, accommodation and excursions.

Orders are the transactions through which customers purchase the offers presented to them. Once a traveler selects an offer they create an order. This order contains details such as the chosen offer, the price, the customer’s personal information, payment details and any additional preferences or requirements.

Offer management refers to the end-to-end process of creating, managing, optimizing and delivering the various products and services (offers) that an airline provides to its customers. This includes everything from the initial ticket purchase to ancillary services and post-booking add-ons. Offer management is a crucial aspect of an airline’s strategy and transitioning to offer- and order-based airline retailing will support:

In summary, offer management is a strategic function that plays a vital role in driving revenue, enhancing customer satisfaction and maintaining a competitive edge in the airline industry.

Offer management holds the key to unlocking significant incremental revenue opportunities early in the airline transformation process. The creation of data-driven, rich and personalized offers that better meet traveler needs drives higher conversion, optimizes revenue and enhances customer loyalty. Offer management encompasses both airline direct sales channel(s) and, more significantly, using NDC in indirect channels.

In their business case for airline retailing transformation, IATA validates projections from a 2019 McKinsey report to arrive at a potential benefit of $7 per passenger per year as a result of retailing transformation. It’s a huge opportunity – one that airlines can’t afford to pass up.

Of the $7 per passenger incremental value, the vast majority (around 75% or $5.30) is unlocked through offer management. Selling new ancillaries and implementing dynamic offering – consisting of adding more price points and creating bundles dynamically – generates approximately $4.10 per passenger per year. The other $1.20 is derived from distribution cost savings thanks to new commercial models.

It is worth noting that while offer management can help airlines realize significant financial benefits, order management is essential if airlines are to unlock the full benefits of NDC – specifically when it comes to selling and servicing a wide range of lucrative third-party offerings – and airlines that do not have robust order management could severely limit their ability to service new offerings in the future.

Offer management is arguably the most logical starting point in the transition towards modern retailing, with clear and easy-to-measure financial benefits. Many airlines are already experimenting with more personalized offers and they are realizing the revenue rewards.

In terms of the overall transition to offer- and order-based retailing, the subset of offer management often referred to as offer optimization represents ‘low-hanging fruit’ for airlines.

Offer optimization involves tailoring and fine-tuning the various products and services offered to travelers to maximize revenue, enhance customer satisfaction and increase overall profitability. Leveraging the latest technological advancements – in particular AI/ML – and breaking free from traditional pricing constraints (such as booking classes and pre-filed fares) airlines can open up new revenue opportunities as they embark on their transformation journey towards modern retailing.

Sabre technology enables airlines to progress along the offer optimization maturity curve at a pace that best suits them. From our best-in-class solutions for dynamic availability, dynamic pricing of airfares and dynamic pricing of ancillaries, through to upcoming product releases such as dynamic bundling, Sabre provides a flexible transition path to offer management to meet the needs of individual airlines.

Getting started with offers can be relatively quick and easy, and most importantly it has the potential to add value for your airline from the outset. In a world of offers and orders, modular and open platforms such as SabreMosaic enable airlines to integrate offer optimization solutions into their existing tech stack and processes today. The incremental revenue generated can then be channeled into other transition-related areas, empowering airlines to advance along their own transformation path independent of what other airlines and partners are doing.