Upselling
 

I am surprised that KLM does not do more to upsell to heir customers.

Yes, there is now the seating upsell in economy, worth 50 EUR. But why not upselling where the big money is? Upselling to business class.

I fly with KLM regularly, about 70000 miles a year. My flight patterns are very predictable. I buy the cheapest economy seats above V or N class. I fly one route only, 5 to 6 times a year. With a possible trips to a second destination.

Now, I am willing to pay more for better service.

Yet they do not target their offers to me or even try to upsell. If there are free seats in C, why not try to sell them to me for a reduced price just before departure? I normally fly in economy anyway, and KLM should know that by now. Surely they would prefer their clients to pay them more money, no?

I understand that if it became a rule that frequent economy passengers was offered upsells to business class that some would speculate in this and not buy a WBC ticket, but on the other hand. Most WBC tickets are not paid by the people who fly, but by companies. There is a big difference. These companies would not face the risk that their employee or client could possible be placed in economy.

I also think there is money to be made upselling food service on board. I would gladly pay 10, 20, 30, 40 even 50 EUR for a nice meal in economy. Depending on the quality, of course.

KLM does not understand the possibilities here. But what really makes me think that their marketing department might not be among the most dynamic ones, is that KLM does not know me as a person. By that I mean that I get no targeted offers related to my travel history. With SMS, the internet etc it has never been easier to contact individuals. Why don't they? Upselling should also be a part of targeted marketing to individual KLM customers.

Hi FlyerJack,

There has always been a lot of debate on this subject, for many European airlines. The conventional logic is that it's all about revenue protection. If people think they can get an upgrade for cheap just before the flight, why would they buy an expensive fare?

You mention that you basically take the cheapest fare that earns you 100% mileage. Why would they be interested in selling cheap to you? Why not to the higher fare classes only. Just like upgrading with miles, only certainly fare classes are eligible.

Traveling from AMS, you do have the option of buying an upgrade with cash and miles, depending on your fare class (V is excluded). So I think that KLM is looking at this option, while working on protecting their business class revenue.

Yes, I'd like to have more upgrade options too, but on the other hand, AF/KL are making money, while the American airlines are on their way back to bankruptcy. Does revenue protection play a role into this? Yes. Is it the only factor? No.

In short, I understand your thoughts, and KLM does offer this option from AMS (and a few outstations) in terms of using cash and miles. Should it be really cheap? No, as it would hurt their revenue.

Cheers,

GenevaFlyer

Hey Geneva,

My point is that KLM does not use their database very well. Also, they do not have a great upselling strategy. If I normally spend EUR 10000 with KLM one year, surely it would be better for KLM if I spent EUR 13000? This is indeed revenue protection. The whole idea of a frequent flyer program has to do with ensuring one-time customers spend more money with the company. Now, if loyal customers that have certain flying habits would pay more, this would increase KLMs revenue.

As mentioned, as it is, I am willing to pay more. I am not willing to pay full business class fare, but occasionally I would be tempted to shell out something extra if I felt the offer was right. If KLM has empty business class seats, this is money straight to their pockets.

KLM does not use upselling actively. Yes, I do make use of upgrade tactics, but why don't they advertise these possibilities more aggressively. They are losing money on me. And the question is - why don't they know me well enough to know this? They have all my records from 3 years back, they know my flying habits better than anyone. Remember, advertising in 2008 does not mean mass advertising. With KLMs databases you can target your offers really sharply.

How much more would you be willing to pay to upgrade to business class?

As an example, the lowest 100% mileage earning economy ticket AMS-LAX is now only euro 766.

The lowest WBC ticket for this route is euro 2363 but is a restrictive holiday fare (the cheapest normal WBC ticket is 4479 and more last minute or higher in demand fares go as high as euro 6431.)

For the one way segment "upgrade", considering that the cheapest WBC ticket would apply, is euro 794 more.

Would you be willing to pay euro 794 more to upgrade each segment if there is availability? If so, why not just buy the restrictive WBC ticket when possible in the first place?

If you and others are only willing to pay around half or 1/4 of that amount (say 395 or 195), then soon everyone would be gaming the system and only upgrading on the cheap at the last minute. While KL could charge the full-paying, last-minute business traveller 6431 euros, in your scenario they would only get maybe 400 euros more than an economy ticket on a RT ticket.

Considering the importance of the margins in the premium cabin on overall profitability of a flight for most airlines, this doesn't seem like a winning strategy.

As an alternative, as others have mentioned, they do allow you to upgrade out of AMS on a space available basis by first paying the difference in amount to an upgradeable ticket and then using miles for the upgrade. If you do the math, then you are in effect paying for the WBC ticket at slightly more than the cheapest WBC prices (assuming you value your miles based on their buying power). Of course you can only do this as long as you have been loyal long enough to have enough miles.

If they "used their database" to offer you business tickets on the cheap they would cannibilize their full fare business sales. Their database would also show them that you are a cheap ticket/value purchaser and that your years of purchase behavior demonstrate that you do not value their flexible fare or business class products (or can't pay for them or get permission for them). You say you are willing to pay more for better service, yet your personal behaviour recorded in their database demonstrates the opposite. Giving away valuable product to those who cannot and will not pay for it would seem to be a poor direct marketing strategy.

Hey there KLM is Dead - Long Live KLM,

Margins are important in every business. My point is that upselling works for every other business. If I spend 10000 EUR a year with KLM, would their margins increase if I spent 13000 EUR instead? Clearly upselling means increased revenue. KLM knows an awful lot about their customers, and would have no problem offering targeted upgrade offers to selected people at certain points in time.

I would also like to see a better use of SMS and mobile phone services, email offers and in general the way KLM recognizes you on their site. As it is now I think that all the offers that pop up on site or in my inbox, are general offers most people get. KLM should take in to account previous flying history and preferences. But they suck at this. For example, even after almost 3 years of flying the same aircraft back and forth more times than I care to recall, KLM doesn't even know which seat I prefer to sit in. Or even if I like asile or window seats? This is not very impressive, and I think the future will see a more intelligent approach to giving customers what they want.

Up-selling would not involve just different cabins, although this is the major money earner. But if you doubt that upselling is important, try thinking about why KLM is about to introduce a premium economy class. Getting economy passengers to pay more is an excellent way of improving margins. If they had a first class cabin, this would be an additional upselling opportunity from business class.

I don't believe that everyone would be gaming the system if KLM where to offer exceptionally good upgrades to select people at select and unpredictable times. Most people who travel in business class (if you take out of account KLM employees and friends and people who are upgraded without paying for it) are people who do not pay for their tickets themselves. They are employees or clients of companies that need to secure a place in a premium cabin for their people. Often these deals are contractual, and an essential part of the benefits. The idea of upselling to certain passengers in certain situations does not necessarily mean that upgrading is possible on all flights or even to all people. I am talking about targeted offers given when the business class cabin has availability.

Look...their food sucks, yet I am willing to pay for better food. The fact that their food is bad, is an excellent opportunity for KLM to sell a premium product (better food in economy - maybe these days even in business class for that matter:p). I am also willing to pay extra for a better seat. This is where premium economy may enter the picture. On certain occasions I am willing to pay more for a business class ticket. And I have in the past. This are all examples of upselling. KLM should explore it further.

Yes, it would be better if you spent more. But, what is that extra €3.000 revenue compared to the loss that they might make due to not being to sell those seats to others [opputrunity costs]?

What loss? First of all...selected offers would mean that these upgrades would only be available at a certain time before departure. And, of course, only if you have availability. It's about managing unsold products. This is what the web@wards are all about, for instance. Get more economy passengers to pay mor, and you make more money.

I would make the offers targeted, though,and use the database to find the people most likely to buy this upgrade. This means looking at people who have already bought the ticket, or who is buying last minute.

Hey there KLM is Dead - Long Live KLM,

Just a quick note on this topic, once again

First of all, I have upgraded my tickets the way you describe on my last 3 flights. So it is not an unfamiliar strategy for myself. However, this kind creative booking is lost on the inexperienced flyer. I think KLM should advertise and sell more actively. And specifically, upsell to existing customers.

What do you mean by a cheap customer? A customer that does not fly in business class or with tickets that are flexible without a surcharge? Excuse me, but this is missing the point on many levels. An economy passenger in itself can be much more valuable than a business class passenger seen in context of a year. Or a fiscal quarter, for that matter. And a passenger that is loyal is much more interesting than a non-loyal one. Surely as a frequent flyer you would agree.

Also...there is much more potential profits in a client buying cheap fares, than a client buying full fares. A client buying full fares has reached the possible spending limit. The challenge is always to get people buying cheaper tickets to pay more. This way you save money advertising and marketing to prospects that doesn't have a relationship with your company. All it takes to contact me is one SMS or one email. What does it cost to reach a non KLM-flying prospect via other marketing means?

Also...one person upgraded, frees one seat in economy class.

KLM needs a more intelligent upselling system. It's all to do with how you treat your existing database, and how well you know them and their needs. Wouldn't KLM make more money if there were fewer KLM employees traveling in C and instead they filled the cabin up with upgrade-hungry economy passengers willing to pay some euros extra?

Lastly, you seem to have a distorted view of what makes an airline work. If pure business class travel was a viable option for an airline, why are all pure business class airlines dropping dead by the week? Look at KLMs 777-300. There are 390 economy seats and 35 business class seats. Which class has most importance for revenue? Sure, business class is important for the margins, but without economy class...? KLM would indeed be dead, KLM is Dead - Long Live KLM. The clue is to get as many economy passengers as physically possible (390 seats in a 773) and vice versa with business class (35 on the 773). If for some reason business class is not full, there is opportunity for KLM to make more money. This only works one way though, economy class to business class. It is much easier to upsell to already existing economy passengers, than to people who have not booked the particular flight at all...Do they offer their existing passengers upgrades actively enough?

As far as my "personal behaviour" demonstrating the opposite because I have disclosed to you that I normally fly economy class as cheaply as possible except V or N class...well, you have proven my point! KLM has failed in upselling.

KLM needs to be more active in offering selected, targeted offers in order to make more money. If there is availablity in C, KLM is not doing their job. Sell the available seats to people on the same flight, in economy, who are willing to pay a somewhat higher fare to be upgraded in this manner. It's a win-win situation.

Maybe this is in the worng thread but recently I paid to upgrade at the gate for a Delta flight and the miles have posted to my FB account as economy. In this case should I have got Biz miles or does a paid upgrade at the gate get the Biz miles?

On a side note I paid $150 for a 6hr flight. What a bargin ^

You're right, it is the wrong thread. And you're also right: gate upgrades do not qualify for Business Class miles. What you earn is based on the fare class of your ticket.

FlyerJack... First of all you consistently consider your behaviour as the yardstick for KLM/AF. I am pretty sure it isn't. Many people here have tried to explain to you that it is not about increasing your spending with 30% but protecting and increasing overall revenue.

All kinds of marketing theory would suggest that devaluating your prime product by allowing others to get it cheaply is not a smart move.

Even offering a 'split ticket' to the US for instance (day flight in Y, night flight in C) would be a very bad idea for KLM/AF. I would buy them all the time instead of C returns.

You see, revenue maximalization is not about what each individual would like best.

Yet certain KL corporate deals permit exactly that.

Johan

is $150 worth it for a Delta transcon if you don't get the miles? I rather have an Exit row and save the $150. If overbooked they might upgrade you 'volunteer' to give them your seat ;)

I can just see it
 

KL person: "Would you like to upgrade this segment to Europe Select for just 150 Euros?"
pax: "mwahahahahahahahahhahahaha...and did you hear the one about the dyslectic pimp? He bought a warehouse!"

KL person: "If you don't pay 150€, I'm going to upgrade you to Europe Select. It's mashed peas and eggs today!"
pax: Here, take the money.