Background and Challenge
One of the world’s largest airlines was facing declining revenues during difficult economic times. The company selected L.E.K. Consulting to reexamine its core offerings and recommend new strategies to increase sales. L.E.K. brought a new business model concept to the airline that would significantly bolster the company’s sustainable revenues – and reshape the entire airline industry.
Approach and Recommendations
By bringing a retailer's “merchandising” perspective to the airline, we identified a substantial opportunity to enhance the customer's travel experience via new service options. This was a significant mindset change for our client – and an industry that had focused on streamlining operations for the past 30 years (i.e., limiting customer choices). A key mindset change was getting the airline to think of itself as an incredibly effective distribution channel to an attractive demographic, and therefore a very powerful merchandising platform.
L.E.K. guided the airline through the complete product development innovation process. By combining extensive consumer research, competitive mapping, economic modeling and business plan development, L.E.K. and the airline’s management team developed a comprehensive implementation plan that the board of directors strongly endorsed. L.E.K. developed a sophisticated and nuanced segmentation and pricing strategy for a variety of new products and services. The L.E.K. team also promoted a long-term vision to exploit a captive, high-end demographic and condition consumers to customize their airline experiences. L.E.K. then played an integral role in implementing the business plan, as well as building and recruiting staff for this new part of the airline’s business.
The changes adopted by the airline have generated significant new revenues and have been transformational for both our client and the industry, as all other major carriers are following suit. Unlike the industries traditional “share gain” strategies, this new model is value accretive to the entire industry.