5 things you need to know about offer management
In this Article:
- What are offers?
- Why is offer management important?
- What are the financial benefits of offer management?
- What does the transition to offer management look like?
- How can airlines get started with offers?
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What are offers?
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.
Why is offer management important?
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:
Revenue optimization. Effective offer management enables airlines to maximize revenue by optimizing the pricing and bundling of core and ancillary products. Dynamic pricing models help capture higher revenues by adjusting prices in real-time based on market demand.
Enhanced customer experience. Personalized offers improve the travel experience by catering to individual needs and preferences. This can lead to higher customer satisfaction and loyalty.
Competitive advantage. Airlines that excel in offer management can differentiate themselves in a highly competitive market. By providing attractive and relevant offers, they can attract and retain more customers.
Increased ancillary revenue. With effective offer management, airlines can significantly boost ancillary revenue streams. Ancillaries often have high profit margins and can contribute significantly to the overall financial health of an airline.
Data-driven decision making. Offer management relies heavily on data analytics. By analyzing customer data and market trends, airlines can make informed decisions about pricing, inventory, and promotions.
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.
What are the financial benefits of offer management?
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.
A potential benefit of $7 per passenger per year as a result of retailing transformation.
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.
What does the transition to offer management look like?
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.
Sabre’s innovative Air Price IQ is a key driver in our move from static pricing to dynamically created personalized offers.
Jiri Marek
CEO | Air Serbia
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.
How can airlines get started with offers?
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.
Explore SabreMosaic
The transition to offer- and order-based retailing is a multi-year industry-wide undertaking, with individual airlines at different stages of the transformation journey. See how SabreMosaic – our revolutionary airline retailing platform can help you get started.
