Are you NDC-ready? If not, you better read this!
With its expected industrialization by 2021 in view, it is really worth to consider the benefits of NDC now – for any airline of any size and business model. It enables you as an airline to transform the way your products are retailed to your business and leisure travelers with full and rich content, and into a rewarding shopping experience for your customers. It also enables you to streamline your fulfillment processes, allowing for more transparency and flexibility.
New Distribution Capability (NDC) – everybody talks about it, but I am not sure, that every airline exactly knows what it is, what to do with it or even where to start with. Many airlines that I know already launched project teams and initiatives around this topic, which is part of IATA’s industry priorities to transform distribution and payment and is expected to be an industrialized approach by 2021*. In case you haven´t started NDC activities yet, then this blog might serve as a starting point for you.
What is NDC?
New Distribution Capability (NDC) is a travel industry-supported program launched by IATA to develop and implement a new XML-based data transmission standard in order to transform distribution and payment in the airline industry. Apart from the technical standard, there is also a business aspect: The NDC standard enhances the capability of direct communications between airlines, consolidators, travel agents and most importantly the travelers as end consumers. It enables the industry to transform the way airline products are retailed to business and leisure travelers with full and rich content, and a transparent shopping experience. But let me explain all this in detail:
Maximizing revenue opportunities
All airlines have the same commercial objectives when offering their products to customers. It is all about maximizing the revenue opportunities for the current network offered. This is possible by implementing strategies for product differentiation and innovation, ancillaries, fare families, personalization of offers and dynamic offers. And here comes the obstacles for all of that: the prevailing traditional distribution model and the complicated IT landscape in the background.
Current pain points of the traditional distribution model
The traditional distribution model makes it difficult for you as an airline to follow the above strategies in full extent. It inhibits you with current distribution limitations. Why? Today, as an airline you don’t have the option to distribute your products across channels without them being commoditized. The Global Distribution Systems (GDS) are a costly purchase point between you and your customers, but they don´t give you direct access to the traveler. These GDS’ purchase-points provide fare-based items, but not with personalized products or dynamic offers. Merchandizing activities also become very complex: you can handle ancillary services, but often in a limited and error-prone way. What about the provision of rule-based fare families? They are not at all a satisfying solution as they still base on static and limited fare rules and booking class structures. Last but not least, from a time to market perspective it is very difficult under this traditional distribution model to quickly respond to changes.
The problem even goes beyond. Travel agents might have a problem with their ease of access to many of the products that are available on your website. This limits your potential market penetration. Your customers’ shopping experience should be consistent regardless of the touchpoint they start planning their travels from. They often face complicated product information related to fares and fare components. You need to remove limitations to showcase your products, by use of pictures, videos or virtual interactions (known as rich content).
Digital retailing is the answer – with NDC as the main enabler
NDC allows you as an airline to fully control your offer. It lets you decide whether your distribution strategy shall involve third party intermediaries, such as GDSs or aggregators. Or whether you want to directly engage with the traveler. Many airlines are currently undergoing digitalization processes in several domains across their value chain. They especially need to catch up with state-of-the-art retailing and to build capabilities to better focus on consumer needs and expectations. The key components of such an approach will be a more personalized offer & order-management philosophy (e.g. Amazon) as well as dynamic prizing.
As a result engaging in NDC will primary open up for you broad opportunities to communicate directly with your customers and offer them your products the way you like. In detail, this means:
- Greater independence for the airlines in selection of their distribution channels
- Multiple direct distribution channels, with full content control on the airline side
- More personalized and rich content directly to the end customer, offering the right price to the right customer at the right time
- True dynamic pricing and dynamic offer and order management with close-to-real-time information
- Full control of the inventory and effectively streamlined backend processes for payment and revenue accounting with the implementation of ONE Order
- Improve time-to-market on a simplified and transparent IT landscape, with shorter development times for new products and for bringing them to the touchpoints
With its expected industrialization by 2021 in view, it is really worth to consider the benefits of NDC now– for any airline of any size and business model. It enables you as an airline to transform the way your products are retailed to your business and leisure travelers with full and rich content, and into a rewarding shopping experience for your customers. It also enables you to streamline your fulfillment processes, allowing for more transparency and flexibility.
This is just some food for thought. You are more than welcome to leave your comments or questions. And if you want to find out about your airline’s readiness for NDC, please feel free to contact me.