At the typical airline, revenue managers take themselves very seriously. They don't like to do anything that could dilute their numbers. It's nice to see Alaska taking a fresh approach.
For many Americans, a Hawaii vacation leads the travel bucket list. But most of those travelers book early, leading airlines to scramble to fill seats near departure.
It’s not easy. You might think travelers would jump at cheap last-minute sales. Some buy them, but airlines often struggle to persuade people to take a vacation they might prefer to plan for six months or more.
Alaska Airlines last year tried a more creative approach. For a four-day period in early November, the airline offered discounts based on wave heights, as measured by monitoring stations at 14 locations across the Hawaiian Islands. Discounts, which were good for flights throughout much of November, ranged from 10 percent for 10 foot swells, to 30 percent for swells bigger than 21 feet.
Ostensibly, this was a promotion for surfers. More broadly, Alaska wanted a unique idea that would excite last-minute travelers, many of whom do not surf. Typically, these leisure travelers might ignore even the best fare sale, but Alaska calculated the promotion would generate more buzz than a typical off-peak discount.
“We generated hundreds of millions of media impressions with that deal,” Natalie Bowman, managing director of brand and marketing communications, said in an interview. “We definitely felt the impact of the sale, which doesn’t always happen.”
The was part of a new strategy for Alaska. Rather than just putting destinations on sale, and buying advertising to promote it — come for $49 fares! — the marketing department wants to work with revenue management to come up with unique ideas to manage excess inventory. They want to tell a story with each sale.
This is unusual. Outside the airline industry, marketing teams often help guide pricing strategy, putting items on sale to help the business more broadly. But at airlines, revenue management, or RM as insiders call it, usually is in charge, with math whizzes seeking to maximize profit for each flight. They often don’t think about marketing, reasoning customers will find their fares as long as they undercut the competition.
It’s a mindset Alaska is working to break.
“That mentality does not exist as much here as it might at other airlines but it definitely is there,” Bowman said.
Recently, Alaska has been dropping its silos, with marketing and revenue management becoming closer, Bowman said.
“When I first started three years ago, marketing wasn’t as engaged from revenue management standpoint,” said Bowman, who joined from retailer Neiman Marcus. “Now it is a very tight partnership. We have a seat on the table.”
This week, the groups launched another unique fare sale. Travelers who book flights to Fairbanks, Alaska through Jan. 17 for travel through Feb. 12 will receive discounts based on current Northern Lights visibility. Alaska is using the KP Index, a forecasting system developed by academics, to determine the quality of viewing. The better the view, the higher the discount, up to 35 percent.
It’s a similar strategy to the Hawaii deal. The Northern Lights may be famous, but customers don’t buy many last-minute tickets to Fairbanks in February. Even if the airline offered rock-bottom prices — heck, if it made the seats free — passengers probably wouldn’t book, unless they knew why they should visit.
“What they are doing is so much more creative than simply a fare sale,” said Henry Harteveldt, a travel industry analyst. “Absent the Northern Lights, there probably aren’t a lot of people who want to go visit Alaska in the depths of January. The state of Alaska is a hard sell in the winter.”
More promotions could be coming. The marketing team, Bowman said, has come up with several ideas, including discounts for college students based on grade-point-average (better students receive the best coupons), promotions for skiers based on snow fall, and sales for hikers based on snow melt.
Alaska is also working to make traditional fare sales more dynamic, with marketing prepared to tell a story about any market revenue management wants to discount, even if there’s no cute tiered promo codes (like the Northern Lights one) to go with it.
A fare sale to the Midwest could be accompanied by a campaign recommending people “go back to your roots and explore America,” Bowman said, while a deal to the Southeast could be accompanied by copy about food tourism in Georgia.
“There’s a lot more storytelling that I would like to see us do,” she said. “We don’t do enough to tell the story about the trip you can take with that great fare.”
Revenue Management Still Leads
Revenue management has worked with marketing in part because the team understands the importance of selling discounted tickets to the right customer mix, Bowman said.
“I think everyone appreciates that you might be able to fill the seats with a low fare, but you may not get the quality of guests,” she said.
The thinking goes like this: A customer who pounces on a $299 flight to Hawaii when Alaska undercuts the competition is probably someone who always looks for the cheapest fare, and would defect if the price was right.
But someone who plays along with a game about wave heights, is “someone we can help groom and grow,” Bowman said, into a more lucrative future customer.
Ultimately, though, even at Alaska, revenue management tends to make the final call about when to discount. Unlike marketing, revenue management must worry about competitive factors, like whether another airline will take so much offense at a fare sale that it attacks Alaska in other markets.
“There have been instances where our marketing promo sales have triggered competitive response and that makes RM uncomfortable,” she said, adding that while Alaska’s revenue managers are “progressive and take risk,” their goal is still to “protect the revenue.”
It is never going to be a perfect match. But Harteveldt, a former airline marketing executive, said he credits Alaska for thinking differently.
”It is is great to see marketing and revenue management actually working together,” he said. “Too often in airlines and frankly at other travel companies, marketing and revenue management are not only separate departments, they are not even always physically located near each other in their office buildings.”
Photo credit: Alaska Airlines is getting more creative with its marketing approach. Pictured is the tablet holder on one of its economy class seats. Alaska Airlines