On the face of it, the landscape for commercial airlines is increasingly challenging. Passenger revenue margins are being squeezed, growth in European and North American markets is set to slow compared to Asia Pacific and commoditisation is eroding brand loyalty. Recent research shows that only 22 percent of travellers care whether their preferred airline is offered in a booking process.
Digital experiences – from apps to manage check-in and other aspects of passengers’ schedules - to inflight entertainment – represent a clear opportunity for airlines to differentiate themselves, boost per passenger revenues and build brand loyalty. Yet even here, airlines are falling behind consumers’ digital expectations. Shaped on the ground by the likes of Apple, Amazon, Netflix and Spotify, customers are carrying these expectations on board only to find the airlines can’t meet them.
What’s more, millennials and the generation following them will have more demanding expectations of digital experiences. There are around 13.8 million millennials in the UK. This demographic already travels more for business than any other age group. Their expectations of a great digital experience will only grow, and airlines that don’t meet them will lose out to those that do.
The good news is that digital disruption offers a huge opportunity for airline brands to leverage technological innovations such as improved internet connectivity and in flight Wi-Fi in order to drive new revenue streams. However embracing technology alone isn’t enough. To anticipate and meet customers’ expectations in the future, airlines needs to develop great digital experiences. At Smart Design we believe that when markets become commoditised, customer experience is the differentiator. From working with airlines and automotive companies we’ve learned there are three actions airlines must take to bring a digital experience to life:
1. Be quick
To differentiate you need to be first, and to be first you need to be quick. Virgin America is a good example of an airline that has been quick to offer new digital services. The first airline in the U.S to launch on demand food ordering, it was also the first to have fleet-wide Wi-Fi and to allow streaming of Netflix and Spotify. This kind of differentiation can lead to real value for an airline through customer loyalty and the ability to charge a premium for tickets vis-a-vis competitor airlines. In Virgin America’s case, it was awarded best US airline for the past three years by the Airline Quality Rating and was purchased last year by Alaska Air Group for $2.6 billion.
2. Invest early and often.
Building new digital experiences for today’s customers requires substantial, regular investment and a new way of working. There are many examples of companies outside the airline industry that are facing similar competition and turmoil and are investing strategically in becoming more experimental and design driven. Ford is one such example: Smart Design worked closely with the car manufacturer on its experimentation and investment in becoming a mobility business. In 2015, Ford CEO Mark Fields announced that the company would use innovation to take it to the next level in connectivity, mobility, autonomous vehicles, the customer experience and big data. He announced 25 global experiments to diversify the business beyond manufacturing cars and into wider mobility services including the Ford Dynamic Shuttle project, a shared, on-demand shuttle service aimed at tackling urban gridlock by bridging the gap between public transport and taxi hire.
In Smart’s experience, it’s important for airlines to have an appetite for innovation and a willingness to invest in design and experimentation quickly. Not all experiments will result in successful digital services but the ones that succeed, have a chance of being first to market and of delivering tangible business returns.
3. Look outside the industry.
While In Flight Entertainment (IFE) providers are beginning to catch up with the digital experiences that we enjoy at home, at core they are hardware manufacturers rather than leaders in digital experiences, e-commerce, or personalization.
For this reason, it’s critical that airlines learn from or partner with digital pioneers such as Google, Apple, Amazon, Netflix, and Spotify to provide on board digital experiences that are seamless and state-of-the-art. Harnessing the skills and capabilities of these partners will allow an airline to create an experience in the sky that matches consumers’ expectations on the ground. Through innovative partnerships, airlines will not only be able to delight customers but also uncover new revenue opportunities. It’s also worth monitoring the activities of digital leaders like Amazon which prides itself in staying ahead of customers’ expectations and whose e-commerce operations are world class.
We believe that if airlines lead the market by being first, have the courage to invest in innovation regularly and learn lessons from leaders in other industries, they will engage in disruptive innovation projects that will transform passengers’ experiences and expectations of their brand.
About Heather Martin and Smart Design
Heather Martin is the VP of Design at Smart Design. Smart Design is a strategic design company that brings real life to big ideas. They use design to improve people’s lives and grow businesses – creating solutions that are meaningful for both. Founded in 1980 Smart has studios in New York and London and clients all over the world.
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