There are so many amazing product development opportunities in the airline business. But it would be a rare designer who never sees his or her ideas thwarted by bean counters who are always focussing on the costs and have forgotten (if indeed they ever knew) about the wonder of flight.
Unfortunately if the product designer makes a business case around the wonder of flight, the airline’s brand, and the great ways that bespoke galleys, smart seats and limitless IFEC will make customers feel happy about the airline, the bean counters will feel that all their pre-existing prejudices about designers have been absolutely confirmed especially prejudices about their “expensive” Apple computers when, as they see it, everybody should be using the cheapest PCs available.
If only there was a solution. A way for designers to stand up to the bean counters and show clearly why their products will pay for themselves. I believe that there is, and it lies within pricing and revenue management (PRM).
Not all readers of this blog will be familiar with PRM, although almost every airline does it. It is the art and science of selling the right seat to the right passenger at the right time. People who work in PRM are, by and large, positive and happy people whose focus is bringing in revenue rather than containing costs. Their outlook is normally quite different to that of the bean counters.
Not only are PRM people quantitatively inclined, they also (like designers) seek to understand as much as possible about the people flying on their routes. Like designers, they do not forget that passengers are not just numbers on a spreadsheet, but real human beings with good reasons for traveling.
Most importantly, PRM people are skilled at developing business cases based on revenue contribution, which is just the sort of thinking that you need if you want to come up with the numbers that show the bean counters why your beautiful new bespoke galley really will improve the bottom line. That’s why revenue managers could become the product designer’s new BFF (best friend forever).
Over the coming year I will be contributing monthly blogs to Aircraft Interiors International that will help you tap into the PRM skillset and I hope dramatically improve your ability to understand how your new products drive an airline’s revenue.
Among other things I will explain the mechanisms through which product improvements pay for themselves through driving revenue growth, show how demand influences your LOPA, explore why there are more opportunities to make amazing premium cabin opportunities profitable than bean counters are normally aware of, and explore how customer behavior analysis can help you optimize waste management and deliver real savings that can be re-invested in product development elsewhere.
As the series progresses I hope that you will become able to identify the best prospects from the PRM team, convince the head of department that it is a worthwhile exercise for you to make use of some of the resources available, and understand how to make the most of your new relationships with the numbers guys.
Oliver Ranson is the founder of Ranson Pricing. Oliver was educated at LSE, where he took a First and then a Masters in economics. The rigorous microeconomics grounding that he received at LSE formed the basis of his passion for pricing.
After graduating Oliver joined leading consultancy Analysys, where he helped a mobile phone network operator justify their prices in front of their local regulator and conducted research for the European Commission.
He then moved to revenue management at Qatar Airways, creating from scratch the strategy framework and tools necessary for the airline to completely redefine their pricing. Before founding Ranson Pricing he was head of product research at Qatar Airways, where he applied his deep understanding of pricing concepts to investigate how product enhancements drive revenue.
Oliver believes that effective pricing based on both rigorous analysis and sound intuition is the key to long-term profitability.