Ancillary Revenue is Growing by Leaps and Bounds

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In the travel industry, cheap prices can be viewed as a double-edge sword: it creates a competitive advantage if you can offer a lower price on fares, but it can come with a with a little bit of grumbling from the consumer who’s used to having everything included in their price. In a new study produced by CarTrawler and IdeaWorks, global ancillary ­­revenue is expected to reach almost $50 billion in 2014, which represents a 121% increase from 2010. Even more interesting is that $21.4 billion (almost half) of that revenue comes from non-fee activity such as the sale of frequent flier miles to program partners, and commissions earned on the sale of services to travelers, such as hotel accommodations and car rentals.

But our experience indicates that health insurers face risks if they follow the fee-based path with little planning. Consumers are best served when choice is accompanied with better value. Merely charging a fee for a service that was once free may quickly degrade the brand of a traditional airline and alienate their core consumer base.

On the other hand, recent research that Ancilyze commissioned Forrester Consulting to perform looked at the current state of non-fee based ancillary services. The study came away with these key takeaways:

Businesses are employing immature ancillary sales strategies.

Companies are often offering the same products to all customers and are not proactively cross-selling. Cross-selling through their online channels often leads to missed opportunities for personalization and increased engagement.

Executive buy-in is seen as a roadblock to ancillary sales optimization.

Aside from technology-related implementation challenges, the greatest roadblock to an optimized ancillary sales program is that some executives simply do not understand nor prioritize the opportunity.

Third-party vendors can help with optimization and targeting.

Many organizations are open to consulting third-party vendors to lend their expertise to various components of web optimization, testing, and targeting.
Clearly ancillary revenue streams are here to stay for the world’s major airlines (who generate the lion’s share of the $50 billion) and other consumer-facing industries. However, it is more important than ever to know who your audience is, where they are and what they want while traveling. Knowing your customer’s preferences from data that you have collected on previous visits and securing them customized offers is the best way to increase ancillary sales and in turn your bottom line.

Are you confident that you know who your customers are and what they want? Contact us to receive your own copy of the Forrester research summary and learn how you can maximize this permanent trend for your own benefit.

– Bob Dufour