Organising an airline's sales team used to be a relatively straightforward affair. You established a network of regional offices, which each recruited a team of people to sell the airline, primarily via travel agents who received commission. Sales managers were transferred around the world regularly to expose them to different markets.
That was fine when the world was regulated and the sales force was not used as a competitive weapon. Now, in the words of Lufthansa's executive vice-president sales Stefan Pichler, 'we think of sales as a strategic success factor'.
Most major airlines are now having to rethink their sales strategies completely. Two main factors are behind this. First, the growth of global hubbing and alliances means that it's become inappropriate to think in terms of geographical regions. An airline needs to think in terms of an integrated network and a global community of customers. A passenger taking a short flight in to a hub may appear to be small fry, but when substantial numbers of passengers are connecting, often on to a partner airline or franchise operation, what matters is the total value of a person's itinerary. A major reason for alliances is to promote customer loyalty on a global basis, and only global thinking across geographical and corporate boundaries can achieve this.
The second big change is the distribution revolution. Driven by the desire to reduce costs and exploit new technology, all carriers have placed distribution under intense review. This goes far beyond changing travel agents' commission structures and enters the heart of airlines' sales organisations.
A completely new way of thinking is emerging. Instead of a regionalised sales structure at the convenience of the airline, the forward looking carrier is now creating a structure which meets the needs of customers, based upon the fact that different sets of customers will take different routes in purchasing air travel.
1 Big corporations will use travel agents on a fee basis. They will pay the agent for powerful management tools and for cost savings, with commissions being split between the corporation and the agent.
2 Medium and smaller businesses are ripe for new technology solutions, such as Internet booking and ticketless travel, as well as direct selling through more traditional means such as call centres. These methods are also suitable for independent leisure travellers with relatively simple itineraries, such as the weekend break market.
3 Many business and leisure customers will continue to use the traditional retail agencies for some time.
4 Traditional tour operator and consolidator relationships will continue to work for many leisure customers, with an emphasis on using wholesalers where they can add value, for instance by disposing of unwanted inventory.
Lufthansa, for example, has restructured its sales efforts within Germany to reflect this, and will make similar changes elsewhere, says Pichler. The new structure has key account managers responsible for different channels, including retail, corporate, leisure, tele-sales and Internet sales.
Pichler says Lufthansa aims for direct sales to double to 10 per cent of its business in five years' time. By then Internet sales, mostly to business passengers, will account for 4-5 per cent of revenue, with telesales, primarily focused on leisure passengers, accounting for 3-4 per cent, says Pichler.
Sales via the Lufthansa Internet site are expected to reach DM60 million (US$33 million) in 1998, up from DM10 million last year, but the 4-5 per cent target implies another ten-fold increase.
Lufthansa has established four interlinked call centres and plans five more, to give a 24-hour worldwide service. As sales by phone quadruple over four years, the carrier hopes to cut the cost of selling by this method by 40 per cent.
These illustrate the sorts of changes which carriers need to think about. At the same time, there are many unknowns. What will be the take-up rate on new distribution channels? Will dynamic new competitors, such as banks and retailers, use new technology to enter the travel business? What is the value of alliances between different players?
As travel distribution is becoming much more complex, global and customer oriented, a recent report by Andersen Consulting remarks: 'We believe that no single distribution channel will dominate in the future. . . Multiple, parallel channels will co-exist, with different channels appealing to different market segments. Customers will select channels according to the complexity of the travel experience and the occasion of travel.'
For airlines, this boils down to a single key requirement: know your customers. As Andersen Consulting points out, carriers need to provide appropriate products and channels to secure the loyalty of those customers who have the highest lifetime value.
Source: Airline Business
