Skift Take

Selling unbundled services doesn’t automatically translate to bottom-line results. As travel brands navigate the road to recovery, a successful ancillary strategy relies on a balance of human creativity and machine-based learning to deliver the right message about the right product at the right time.

There are plenty of uncertainties facing the travel industry — labor shortage issues, inflation worries, and new Covid variants, to name a few — but one thing is clear: The future is all about ancillaries. From paying $20 for a late check-out that lets a guest enjoy the afternoon at the hotel pool to opting for a premium package that includes surf and turf on a cruise ship, the unbundling revolution which began onboard budget airlines is spreading across every piece of the travel industry.

Attaching a separate price tag to each product or service doesn’t mean customers are going to be willing to pay for them, though. Driving ancillary revenue depends on creating the right opportunities and right messages that resonate with customers in the right moments of their booking journeys. It’s a complex puzzle that Allianz Partners has worked to master as a global leader in travel insurance. The company draws on more than 166 billion data points, 2.1 million annual surveys, and a mix of human creativity with machine-based learning to deliver a premier customer experience with better ancillary product choices.

As more travel leaders adopt a la carte product structures, here are five key tips from the Allianz Partners’ playbook.

1. Think About Your Customers’ Emotions

Begench Atayev, head of product management and innovation at Allianz Partners USA, spends plenty of time thinking about data science and the always-evolving capabilities of Fusion CORE, the company’s proprietary quotation and optimization technology platform. However, his thoughts on ancillaries are rooted in a more fundamental piece of the analog human experience: empathy.

“Even for an ancillary product like travel insurance, it is important to consider the phases of a traveler’s journey — the emotions they are feeling throughout the trip, as well as the rational financial decisions along the way,” Atayev said. “From dreaming to planning to booking and the actual travel portion, each customer works to satisfy different needs and address different anxieties about their trip.”

It’s no secret that plenty of prospective travelers make it through part of the purchase experience, only to change their minds. With excessive online shopping cart abandonment rates in the travel industry — as high as 98 percent for cruise bookings — Allianz Partners works to make sure that customers know their product can help cover some of their biggest worries about their trips. Consider the type of reassurance that travel insurance can offer in the booking journey. It becomes easier to make it all the way to the confirmation page if you know that your funds are protected for missing a trip due to sickness or you’ll be airlifted in a health emergency while traveling internationally.

“In travel insurance, we don’t view our offering as just a product — but more so a solution,” Atayev added. “We seek to understand the characteristics of each trip and each traveler to better understand what concerns they may be having throughout their journey to provide the most relevant offer at the time of booking.”

It’s not just about earning the revenue with an easy-to-add offer during the reservation process, though. Atayev explained that it’s essential for the recommendation to prove its value down the road. “We need to make sure that it’s the right solution, so travelers are happy if and when they actually need to utilize it,” he said. “That’s a difference-maker in the customer experience. Nothing feels better than knowing that the product you bought actually made your trip better.”

2. Limit the Number of Decision Points

Upgrade to premium economy on your flight; book a room with an oceanfront view; pay for your rental car with loyalty reward points, and more — there are so many options for add-ons. Offering too many choices, though, comes with a big risk: The customer might decide to make no choice at all because they are overwhelmed with the number of choices.

“While it is often considered that consumers want more and more control, there is also the heavy burden of decision fatigue that comes with that,” Atayev said. “Faced with too many decisions, consumers often end up abandoning their bookings to either take more time to reconsider or seek alternative, simpler options.”

With that in mind, Atayev is focused on delivering an easy decision-making process that avoids “throwing them the kitchen sink.” Instead of offering an endless number of choices that might hit the mark, he wants to continuously experiment and include just a few options — all of which deliver personalized value and ease the decision-making burden on the customer.

3. Let the Context of the Trip Create a Deeper Sense of Personalization

Speaking of personalization, travel brands have been betting big on the concept. However, personalization isn’t simply about using data from the past to tailor an experience to an individual. Atayev explained that the details surrounding the present booking — the booking window, the time of year of the trip, the end destination, the number of travelers on the itinerary, and more — are the ultimate drivers in predicting what customers really want.

“Personalization is not just about the traveler, but also the context of the trip,” Atayev said. “Traveling with multiple children? Maybe positioning advanced boarding and extra baggage at the right time in the booking could help de-escalate some of the stress brought on by seat selection. Long layovers? A perfect time to offer lounge access. Staying in the hotel for four nights with kids? Perhaps an offer to upgrade to a junior suite with more living space may be an ideal fit. ”

4. Always Be Optimizing

When customers start adding ancillaries to their carts, it’s not time to celebrate success — it’s time to think about how to continuously innovate and improve. Atayev’s team of more than 50 optimization experts works diligently, analyzing data and combing through ancillary adoption rates to understand what matters to customers. Additionally, Allianz Partners conducts more than 1,500 marketing experiments each year to fine-tune messaging and offer timing. The results speak for themselves: Allianz Partners drives an average of 18 percent, year-over-year insurance revenue growth for its partners.

“Evolving beyond simple A/B testing, we consistently are able to drive unmatched revenue growth and improved customer experiences through an advanced ancillary product optimization program that leverages machine learning to quickly implement changes and promote ‘winning’ offers faster,” Atayev said. “We constantly review and update experiment ideas based on prior experiment results, collaborative ideation, as well as ongoing customer and industry research.”

5. Let the Customer Value Drive the Company’s Revenue

As Atayev’s team analyzes data to fine-tune ancillary offerings, he said they are focused on answering one question: As customer expectations evolve, what can we do to deliver more value?

“Ancillaries are optimally successful when approached through the lens of delivering customer value first,” Atayev added. “Not only are there short-term benefits to the business, but when you lead with customer experience, it’s easier to drive customer acquisition and lifetime value. Happier customers typically lead to more revenue.”

This content was created collaboratively by Allianz Partners and Skift’s branded content studio, SkiftX.

Tags: Allianz, ancillary revenue, ancillary services, revenue, revenue management, revenue strategy, SkiftX Showcase: Technology