Mobile channel creates loyalty for travel brands

Sean Hargrave wrote recently on mad.co.uk (subscription required) that travel companies are looking to mobile travel services to create brand loyalty:

"This need to build loyalty is moving many travel brands towards the mobile channel because it's apt for people on the move and is generally considered by travel companies to be too private a channel to advertise on. So it lends itself to additional services that will encourage people to use a brand again."

Essentially, Sean is talking about providing travellers with relevant information, when they're on the move, to make their trip less stressful - creating a virtual travel concierge, which is the focus of this blog.

A number of companies have already launched, or are planning, these types of services:

• We launched easyJetText with easyJet in August


• We launched Monarch Mobile with flyMonarch.com in September. And, Sean quotes Liz Savage, MD of Monarch Airlines in his article.


• Opodo will soon launch Tarmac, although we're not involved with this project.


• Earlier this year, BA (also quoted by Sean) talked about their mobile travel concierge plans

I suspect in 2008, we'll see existing services expand the content they offer to passengers and we'll see more airlines and travel companies offer similar services to their customers.

How can airlines make money from mobile services (Part II)?

In part 1 of this article I identified 3 factors curbing the roll out of mobile services by airlines:

• Headline passenger numbers are misleading


• Mobile service providers offer limited content


• Premium rate mobile services offer appalling margins

In this post, I propose a model that overcomes these issues and creates a platform for a profitable relationship between mobile service providers and airlines:

• Source mobile content from multiple suppliers


• Decide which passengers get offered which services


• Take payment up-front

Source mobile content from multiple suppliers

There is plenty of mobile content on the market today that is relevant to airline passengers. For example: flight information, weather forecasts, ski forecasts, traffic updates, destination guides and quizzes.

However, many of the organisations who provide this information focus on a single business area. So, some companies provide an excellent traffic update service and others provide a great weather service; but, few provide both services.

For airlines to make money from mobile they need to offer multiple services to their passengers. So, they either need to source content from multiple providers or they need to outsource content aggregation to a third party.

Decide which passengers get offered which services

However, sourcing great content is only part of the answer. Airlines next need to decide which passengers get which services. The best way to do this is by analysing the airline's booking data.

For example, to identify passenger types:

• You might classify skiers as passengers travelling with sports equipment to airports near ski resorts.


• In a similar way, you might classify golfers as passengers with sports equipment travelling to Spain and Portugal.


• And, in the summer months, you might classify a family travelling for their summer holiday by looking at their destination, party size, and duration of visit.

Some services (e.g. a ski forecast) are only relevant to a certain type of passenger. Other services (e.g. a weather forecast) apply to multiple passenger types. To increase subscription rates, you can promote services in a different way to each group. For example: golfers and family holiday makers may both be interested in a weather forecast, but to increase the relevance of the service to each group you would promote it in a different way.

Taking payment up-front by credit card offers much higher margins than premium rate SMS and lets you reassure passengers they won't receive any nasty, unexpected mobile charges.

The downside of this approach is that some people may be reluctant to pay with credit card for a relatively low value transaction. So, the question is: should you bundle a number of mobile services to create a product with a higher price-point? This is an area we are currently exploring with our own services.

How to implement this

In an earlier article I provided some guidelines for airlines who want to set-up a mobile travel concierge service. My recommendations for launching mobile services are:

• Test the concept outside your booking process - so you can execute quickly and keep costs low


• Invite passengers through your confirmation email - utilise an existing touch-point


• Direct passengers to a web micro-site to opt-in and pay for the service - for speed this is separate to your main web-site but uses the same branding.

How can airlines make money from mobile services (Part I)?

Many airlines view mobile services as potential money-spinners. At the same time, many mobile service providers believe airlines can offer access to huge numbers of users. This sounds like a match made in heaven ... so, why aren't we seeing more airline branded mobile services?

I think the reason is largely because airlines aren't experts in understanding the mobile services business, and mobile service providers aren't experts in understanding how airlines work. Specifically, I see 3 major issues:

• Headline passenger numbers are misleading


• Mobile service providers offer limited content


• Premium rate mobile services offer appalling margins

Headline passenger numbers are misleading

Although an airline's headline passenger numbers may get mobile service providers drooling, the reality is that an airline has a direct relationship with less than half of its passengers. So, the revenue-shares modelled by mobile service providers, in their financial forecasts, look less attractive to airlines in the cold light of day.

Mobile service providers offer limited content

Most mobile service providers focus on single service solutions (e.g. traffic updates, weather forecasts, mobile quizzes). And, as we've seen, a single mobile service is unlikely to generate sufficient cash to excite an airline. However, airlines can make money by offering a range of content designed to appeal to their diverse passenger base (although choosing who gets what takes real skill).

Premium rate mobile services offer appalling margins

Most mobile service providers use premium rate services to collect payment. Unfortunately, premium rate services offer appalling margins because mobile network operators take such a large share. Working on such thin margins means its almost impossible for both the airline and the mobile service provider to make a decent financial return.

However, there is a model where airlines can make money from mobile services. This model works by:

• sourcing mobile content from multiple suppliers (and potentially outsourcing the running of the service to someone like Mantic Point)


• using intelligence to decide which passengers get offered which services


• taking payment up-front by credit card

I'll explore this model in more detail in the second part of this article.

The secret to increasing airline profitability in a tough market

Even in tough market conditions, successful low cost airlines deliver impressive profits.

Their secret? Ancillary revenue innovation.

Whether by introducing new products or un-bundling existing ones, the best low cost carriers repeatedly find new ways to increase their passenger's spending.

Now, savvy airlines, who've already optimised pre-travel web and email touch-points, have spotted a "communication gap" starting when a passenger leaves home, ending when they board their flight. Bridging this gap, creates a new, departure day, ancillary sales channel for the airline and its affiliates to offer upgrades, last minute travel essentials and other flight-related purchases.

The passenger's mobile phone provides the perfect channel for conducting a departure day dialogue. But, to encourage passengers to opt-in to this service, airlines must offer them something of value. Typically this means providing passenger's with mobile flight information, updates and reminders.

If passenger's value this free information, they'll willingly sign-up for the service. And, by ensuring the free information appeals to the broadest possible audience, you'll create the largest possible audience for your departure day sales channel.

Here are 5-tips if you want to create a departure day dialogue