RM and marketing have typically been two distinct functions but with new ancillary fees, the drive towards personalisation and greater demand for clever merchandising, this is changing, writes Tom Bacon

Marketing and revenue management (RM) sometimes seem to work at cross-purposes. Yes, their objectives are largely aligned around long-term revenue gains but they may focus at different points in the traveller purchase funnel and may also have different time horizons. These somewhat different perspectives can cause conflict.

Let’s first take a closer look at how typically the two functions differ.

• Sophistication versus touchy feely. RM is considered more quantitative; it has historically attracted highly analytical employees who tap into large datasets and who manage sophisticated algorithms, ‘proving’ their approach is ‘optimal.’ Marketing, on the other hand, is sometimes considered ‘touchy feely’ or ‘soft’. This sometimes translates into more visibility within an organisation and more attentiveness by senior executives and property owners to the RM function than to the marketing function.

• Short-termism versus the long haul. RM may have a shorter-term focus. With most bookings occurring in the month before the flight or before the hotel stay, RM manages fares/rates intensively during this period to maximise revenue. RM may rely on cheap tickets sold through OTAs or initiating flash sales if that is what it takes to fill empty seats or hotel rooms. Marketing, as keepers of ‘the brand’, often take a longer-term view, viewing both third-party distribution and a heavily discounted product as potentially damaging to the long-term brand image.

• Data and metrics history vary. Organisations rely on certain, well-defined ways to collect and view data. As RM has traditionally been more data intensive, it has essentially locked in its perspective, focusing on views like days before departure, percentage of group travel, and fare mix. Marketing’s view (look versus book, purpose of trip, demographic profile) typically doesn’t have the same daily reporting or historic metrics.

• What the tests reveal
  Marketing relies heavily on tests, which can result in failures (isn’t that what a test is?). RM’s tests may be less transparent (who understands the RM ‘tests’ inherent in combatting spiral down?)

How and how and why the two functions are converging

What is becoming clear, however, is that the two functions are converging, and RM and marketing need to work even more closely together going forward. Here is why.

• Marketing and e-commerce play a large role in ancillary revenue and sell-up. For this reason, RM and marketing need a coordinated effort to maximise ancillary revenue. Marketing’s role in sell-up, leads to both new performance metrics and a new shorter-term focus, like RM. And, RM will need to better coordinate its initiatives with a longer term view.

• Marketing has become much more quantitative. So, like RM it now often requires the same analytical skills. The purchase funnel, search analytics, and heat maps are all examples of new analytical tools used by marketing. Marketing is no longer so ‘touchy feely’ and needs the same effort in recruiting skilled analysts.

• Emerging new relationships. The objective of personalisation in merchandising, like ancillary revenue maximisation, will require new collaboration between RM and marketing. Customer segmentation in support of personalised travel merchandising will certainly include purpose-of-trip and potentially even psychographics – very different from RM’s historic reliance on days-before-departure and refundability.

• Testing for travel merchandising is mandatory. There isn’t a known algorithm for accomplishing personalisation. RM will need to coordinate such testing with marketing and tests will need to be framed in such a way that the entire organisation can learn.

In the past, revenue management and marketing have been distinctly different functions requiring different skills and focused on different objectives and time horizons. With new ancillary fees, and with new goals for merchandising and personalisation, however, the two functions are converging in three ways – skills, objectives, and time horizons. 

Tom Bacon has been in the business 25 years, as an airline veteran and now industry consultant in revenue optimisation. He leads audit teams for airline commercial activities including revenue management, scheduling and fleet planning. Questions? Email Tom or visit his website