bryan-porter-formula-for-airline-growth

This simple formula is guaranteed to increase average order value for airlines.

The challenge facing airline and travel ecommerce teams today is the pressure to consistently grow market share, sales and revenue in highly competitive trading environments.

With so many digital marketing solution providers, consumer touchpoints and internal demand for digital promotion from various departments within the organisation, digital marketers and ecommerce managers struggle to cut through the noise.

To address this need, we recommend adopting a simple strategic framework for growth that enables you to identify opportunities, choose the right toolset and measure and demonstrate the value back to the rest of the business.

The key lies in visualising the flow of your customers as a funnel. At the top of the funnel, at its widest point, the mouth stretches to incorporate your Reach, or the number of individual exposed to your marketing collateral within a given period of measurement.

This can include your video and display ads run on third party sites and networks as well as through programmatic buys; dynamic ads incorporating live inventory feeds and rich content; search engine marketing campaigns; social media investment; metasearch and affiliate programs and myriad other marketing channels at your disposal.

A percentage of those potential customers you reach through your marketing activity will, in turn, make Visits to your website (for the purposes of this framework we count Unique Visitors). The ratio of Visits to Reach is known as your Acquisition Rate.

Airline-eCommerce-Acquisition-Rate

Acquisition Rate (%) = Visits (Unique Visitors) / Reach

In order to benchmark what it costs to acquire each visit, we calculate the Cost of Acquisition by dividing our Total Cost of Paid Media by the number of Visits received.

Airline-eCommerce-Cost-of-Acquisition

Cost of Acquisition (€) = Cost of Paid Media / Visits (Unique Visitors)

But having a large number of visitors to your site through a high acquisition rate is only half the battle won. It’s what those visitors do next that we’re really interested in.

Our next area of focus is moving these potential customers down through the funnel until they have completed their Transactions. The ratio at which we convert Visits to Transactions is aptly known as our Conversion Rate.

Airline-eCommerce-conversion-rate

Conversion Rate (%) = Transactions / Visits (Unique Visitors)

As with acquisition, we benchmark both our Conversion Rate (to establish and measure our success in converting visitors to purchasers) and our Cost of Conversion in order to benchmark and measure the return on investment from our marketing activity.

Airline-eCommerce-Cost-of-Conversion

Cost of Conversion (€) = Cost of Paid Media / Transactions

While the funnel is visualised as a singular flow from Reach to Visits through Acquisition and then from Visits to Transactions through Conversion, more sophisticated marketers will want to benchmark and measure conversion and acquisition flows as they apply per dimension such as marketing creative, campaign or channel; target market; customer profile and product type or value.

Tools for Widening the Funnel

As the funnel is fluid in shape, marketers and ecommerce practitioners have tools in their arsenal to widen the funnel at each variable point.

At Reach one solution may be to increase spend on a campaign or media channel that’s performing well, or to optimise spend across the media mix to reach a broader audience, or a more relevant audience that results in a higher Acquisition Rate by delivering more visits at an improved Cost of Acquisition.

Similarly, Conversion Rate will increase through interventions focused on ensuring Visits are from potential customers with a higher propensity to transact, or by ensuring the products presented to customers are more relevant, appealing or better priced to increase the number of Transactions from the same base of Visits.

Much of the most successful effort involved in improving the Conversion Rate is spent on initiatives to improve the usability and user experience of a booking flow by removing impediments to purchase through iterative changes combined with A/B and Multivariate testing.

Figure 1: Tools to shape your funnel for a more detailed view on the tools available to marketers and commerce practitioners.

Airline-eCommerce-funnel-tools

This will empower marketers to apply the relevant tools to each stage in the funnel to affect growth.

Because there is a causal relationship between the funnel variables, (i.e. the change in one variable causes the change in the values of the variables in the funnel below) small, positive changes in each stage of the funnel has the exponential effect of widening the entire funnel. This is the true power of the funnel model.

Inverting the funnel

While driving the potential customer toward conversion and increasing the number of transactions may seem like the end goal, additional levers remain to widen the funnel and deliver even more value.

The first is to encourage customers to purchase additional items, thereby increasing the size of their shopping basket. Retail techniques include volume discounting and assortment presentation or bundling of complementary and ancillary products and services.

Average Basket Size is calculated by dividing the Total Number of Products Sold by the total number of Transactions to give the number of items getting sold in a single purchase.

Airline-eCommerce-Average-Basket-Size

Average Basket Size (Z) = Total Number of Products Sold / Transactions

In addition to diversifying the product set, this strategy diversifies revenue through additional streams, driving up the average amount of revenue generated per transaction.

Average Order Value tracks the average amount spent each time a customer transacts with you. It is reached by dividing Total Revenue by the total number of Transactions.

Airline-eCommerce-Average-order-value

Average Order Value (€) = Total Revenue / Transactions

Average Order Value can also be increased off the back of a static Average Basket Size using yield-focused pricing strategies such as stimulated demand and dynamic pricing.

Ultimately, tactical actions employed to influence any one of the variables above will likely result in a positive jump in revenue equal to the effort.

But in order to drive sustained growth, in a measurable fashion, disproportionately greater than the effort employed, it is crucial to focus on a strategy based on constant, iterative improvements to each variable in the framework.

Speak to OpenJaw today about how we can help you develop this strategy for your business.

 

consulting-product-page-upgrade