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An Airline’s Ancillary Revenue Soars Thanks to Test-and-Learn Experimentation
Experimentation at scale yields the ideal mix of product, price, and attachment, boosting revenue and customer experience.
An airline carrier set an ambitious goal to increase its ancillary revenue, establishing a target of 50% growth per passenger over three years. We partnered with CarrierCo* to help develop the best, sprint-based strategy for bolstering its ancillary sales, emphasizing three key value drivers: product, pricing, and consumer brand attachment. We then tested these variables using experimentation at scale until we achieved the combinations that generated the most value.
Our first step was finding the right product mix. In reviewing the company’s ancillary product offerings, we determined the best mix of products to appeal to consumers and drive revenue and ensured that the mix aligned with CarrierCo’s value proposition. Our assessment identified opportunities to fill gaps in the current product lineup, such as enhanced travel partnerships and the introduction of more amenities onboard, including Wi-Fi and pet services. Additionally, we codeveloped the company’s roadmap for adding additional ancillary products over time.
We then collaborated on defining and optimizing pricing strategy across markets, customer segments, and channels. We helped CarrierCo determine the price level for ancillary products to maximize revenue, based in part on a variety of tests that focused on everything from seats and bags to service upgrades, perks, and lounge access and memberships.
In total, we conducted more than 20 test-and-learn exercises, experimenting with messaging, product, and pricing variables on nonticket sources of revenue, including seating, luggage, booking flow, and catering, among others. We scaled tests successfully across the business. We then integrated this experimentation at scale capability within the organization so that CarrierCo could continue to test different parameters after our engagement was complete.
Finally, we examined consumer brand attachment, working together to drive increased attachment to ancillary products across channels, customers, and geographies. Increasing product availability and buying ease across channels helped expand merchandising opportunities at each point of sale. Improved distribution and tech platforms provided a better user experience and included expanding payment options to make it easier for customers to purchase ancillary products.
To make sure CarrierCo stays on track to meet its ambitions, we codesigned a process roadmap that maintains focus on product, pricing, and attachment. We assigned initiatives to the following categories over the next several years: quick wins, intermediate plays, and full potential opportunities.
Our work with CarrierCo resulted in a 1.5% EBIT increase. The company continues to lay the foundation for further gains, identifying improvement areas with the aim of exceeding its year-three ancillary target and potentially doubling its ancillary revenue per person by year four of the program.