Indirect sales continue to be the main channel of distribution for airlines.
IATA report shows that in 2021, airline indirect sales will constitute about 50% of airline sales, which brings us to the question, what are the best practices to manage indirect sales channels?
But before that, let us understand this in depth. The Indirect Channel mainly comprises of consolidators and retail travel management companies. A more functional break-up of these agencies is mentioned below:
- Consolidators: Consolidators are wholesalers of airline tickets who purchase tickets directly from airlines at special negotiated rates and then re-sell them to other retail travel agencies or end-consumers.
- Tour Operators/Leisure Travel Agencies/MICE Agents: These types of agencies provide holiday packages combining air travel together with other tour components such as hotels, car rentals, site-seeing, etc. They typically provide end-to-end travel solutions to customers as per their requirements.
- Online Travel Agencies: Online travel agencies are like tour operators. However, they provide their travel services through an online platform which can be accessed through their website and mobile phone applications.
- Corporate Travel Agencies: Corporate travel agencies manage the travel arrangements, most commonly through agency implants and long-term partnerships.
The Need for a Strong Relationship
One can understand how complex it could be to manage relationships in such an evolving distribution landscape.
Airlines have to deal with stronger partners than before. We have seen big consolidations in the corporate travel industry, AMEX and HRG being one case in point.
Online Travel Agencies such as Expedia, are predominating the leisure travel space. This means you are dealing with a segment whose bargaining power is getting stronger.
So, how can you manage your agency channel with greater efficiency and precision?
1- Leverage data well
Have you realized the full potential of your commercial insights? Ask yourself these questions.
- What is the sales and growth potential in my existing and new markets?
- Where am I losing revenues and market share, and what/who are the key defaulters?
- What are the opportunities for increasing sales revenues?
- How do I segment agents for increasing market share?
- Do I have an optimized incentives program?
- Do I have access to the right commercial data at the right time and in the right way that allows me to make informed decisions?
If your answer to any of these questions is no, then you have not harnessed the full potential of the commercial data available to you.
Data has become the driver to all industries. Airlines are no different. Sophisticated analysis of massive data volumes brings more granularity to your knowledge about the agencies This means you can improve your service offer as well as the demand for your products. Imagine receiving triggers and actionable insights on your growth potential! If you are not using sophisticated analytics and technologies yet, you are missing out on this huge growth opportunity.
2- Don’t look at your processes in silos
Managing the indirect channel starts from setting the right sales strategy all the way through the incentive payouts to your performing channel partners. This means there are multiple processes as well as data points that you need to have full control over.
Process automation and data integration are key to having access to complete insights on your strategy and performance. Plus, there is merit in managing all your processes in one place.
- Segment agencies based on their revenue contribution, market share, geographic presence and other key characteristics.
- Set sales targets for agency segments and design incentive strategies based on agency profile.
- Track and monitor channel performance and identify areas of improvements and actions.
- Manage your critical processes, such as incentive computation and ROI measurement, with automation.
- Launch spot incentives and reward programs for new revenue streams.
Now, with this kind of visibility and business process management, you have precise and complete data to take action on, at the same time not missing any steps in the journey.
3- Give the right incentives!
Agency sales strategy and incentives go hand in hand. Setting incentives in the right manner goes a long way in securing channel loyalty. At the same time, you need to keep your own costs down. So, what is the secret sauce recipe?
- Design and manage best-fit incentive programs: Build a mechanism to simulate and model your incentive programs considering the impact on different KPIs such as revenues, cost of sales, passenger growth, etc. Depending on historical performance and key objectives for the future, you can then select the best mix of rewards for different agency segments. Keep monitoring and analyzing performance to identify gaps and design actions.
- Give out accurate and timely Incentives: It’s important that you provide accurate and timely incentives to your agents. This calls for automation in your incentive processes. Current processes, such as using spreadsheets or other manual to semi-automated tools, aren’t always accurate and result in higher costs and revenue leakage.
- It is important to continue discussing performance insights with agencies with complete transparency and audit capabilities, and agree on mutually beneficial strategies for a win-win situation.