Deconstructing the Purchase: Leveraging Behavioral Economics to Drive Ancillary Revenue

When students in a college classroom sit in the same seat each class, what do you suppose is going on? Is it habitual or laziness that causes this behavior? Or is it a sign of something that we can use to understand the deeper motivations of people in general? One study suggests students are attempting to protect their territory and control their environment - to create a safe space for themselves. Consider an airline passenger in a similar position, trying to maintain control in situations where they have little to none. By analyzing how their passengers feel and react to their environment each moment along their journey, airlines could deliver a more desirable journey. For example, offering a passenger advanced boarding when they’re running late provides a valuable service and option. Even if a passenger doesn’t purchase it, merely having the option provides a sense of relief and control over their environment.

More than relief, revenue

When is a traveler’s moment of greatest need - where is their greatest stress? If an airline isn’t offering advanced boarding to their passengers in the hours leading up to a flight, they are missing a golden opportunity. Not only have they neglected to make an offer to de-stress travel, but they have also missed out on potential ancillary revenue. Behavioral economics suggests that a passenger is more likely to want to jump a line when they’re actually stuck in that line. If airlines can make these timely offers, they’re likely to discover revenue streams that had previously gone untapped.

Timing is key to understanding the need

There’s no faster conversion on a sale than when a customer purchases on impulse. Nearly 90% of Americans admit to making impulsive online purchases. Airline passengers are more likely to treat themselves to a luxury on the day travel, more so than when they booked the flight. Predicting and capitalizing upon these impulses is key to driving ancillary revenues. Mobile connectivity becomes vastly important now. The ubiquity, proximity, and ease of using mobile devices is clearly a game changer for retailers looking to serve up the right offer at the right time. This maybe explains why consumer data is the new currency of the millennial generation. Purchasing drivers such as FOMO (fear of missing out) are demonstrating to airlines that they can benefit from spontaneous purchasing by making personalized offers delivered to their passengers’ mobile devices in real time - and at the right time. Armed with existing travel data, airlines can intuit exactly where their passengers will be at any moment in their= journey, how long they’ll be there, and what they’re likely to need or desire.

An airline’s brand is tied to its service

Every minor stress that passengers encounter adds up over time. The overall travel experience is summed up by the tally of these stressors. Some stresses are caused by an airline, while some others are not (airport security, weather conditions, etc.) Whenever an airline can reduce, remove, or relieve impediments causing stress, their brand likability goes up along with customer loyalty. So while inclement weather may not be the airline’s fault, they can score huge points with customers by offering them complimentary lounge access, for example. 

At the heart of this story is a travel commerce platform. Airlines can leverage travel data, mobile connectivity, and a marketplace of virtual products to be able to serve up personalized and timely offers. The Guestlogix commerce platform was designed with the principles of behavioral economics in mind. Airlines might experience their own fear of missing out if they’re not leveraging today’s travel technology landscape to drive revenues and improve the travel experience. Contact us to learn more.