1. Rethink your KPIs – focus on Cost of Sale (CoS) targets
Consider the reality of the market:
- Unpredictable market: Budget and revenue goals should not be the focus; these are based on historic information.
- Empty planes in the sky: During the restart phase, planes will have a very low load factor; any new ticket sold via SEM will be considered incremental.
- Load factor will be unpredictable: Leverage user search behavior and Impression Share metrics to forecast demand.
Set realistic goals; there is less demand, less sales, and a longer customer journey:
- Move to Cost of Sale (CoS) targets: How much are you willing to pay for a seat that would have been empty otherwise? An incremental sale is much higher during the restart strategy.
- Set realistic CoS targets: Historic low CoS targets are based on a stable/predictable market.
- Change the monthly mindset to a weekly mindset: Demand and yield will change constantly, therefore we need to re-evaluate goals every week.
Sales targets and budget planning was typically determined by historical data and a stable market. This is no longer applicable, not at least during the restart phase. Revenue and specific budgets for media channel and marketing strategies are meant to be for a predictable market only. That being said, shifting to a mindset of Cost of Sale targets for every new strategy will be crucial going forward.
Cost-efficiency will be critical during the Restart, together with an assessment of incrementality and the right price to pay for it. In a low load factor environment, airlines must reset the cost of sales expectations in pursuit of load factor. Any new ticket sold at the moment will be considered as incremental, given planes are empty both in the skies and on the ground, so airlines should do whatever possible to make sure they are filling those seats.
Incrementality of a sale right now is much, much higher than in the past, and will remain so for a while. That means the airline needs to assess the variable cost of a passenger; the fixed costs of putting a plane in the air will happen no matter what, so what is the true gross profit of each passenger that buys a flight?
Set up flexible Cost of Sales targets that will help reacquire new customers. In addition, airlines will need to change the monthly mindset to a weekly mindset. Demand and yield will be changing constantly, therefore we need to reevaluate goals every week.