It hasn’t been a bad year for Kenny Jacobs, Chief Marketing Officer of Europe’s largest airline Ryanair. After joining at the start of 2014, he has presided over sweeping changes transitioning the company to a softer ‘New Ryanair’. And if the results to date are anything to go by, the changes have had the desired effect. Over 82 million passengers will have flown with Ryanair in 2014, and it is predicted that this figure will rise to 110 million over the next 5 years. The share price (which had been languishing around €6 after a profit warning in 2013) has reached the dizzy heights of a record €10 at the start of 2015 (up 58% yoy). And judging by advance bookings and load factors nudging 90% ‘Europe’s favourite airline’ is going from strength to strength.
So what are the key drivers behind the turnaround? In this two part series Alan Gleeson, firstly explores how their embrace of digital has played a key role in Ryanair’s growth, before outlining what needs to be done to improve their offering further.
The global airline industry as a whole is an intensively competitive one, where external factors can have a significant effect on performance i.e. ranging from the price of oil, to geopolitical shocks, to supplier power exercised by the duopoly of Airbus and Boeing.
Despite incredible growth, airlines have not come close to returning the cost of capital, with profit margins of less than 1% on average over that period [Last 60 years]. In 2012 they made profits of only $4 for every passenger carried. The Economist
In Europe, competition remains intense, particularly between the low cost carriers like Ryanair and Easyjet, and legacy ‘flag carriers’ like British Airways. To date, Ryanair’s success had been founded on a cost leadership strategy, married to a strong route footprint in Europe, and a highly effective marketing strategy reliant primarily on PR generated by their ebullient CEO, Michael O’Leary. However, in recent years, and on the back of two profit warnings, it had become clear that alongside weak demand, ongoing customer service issues were negatively impacting the brand and inhibiting further growth. Their hitherto reluctance to embrace digital was also letting rivals steal a march. Something had to give.
Cue ‘New Ryanair’.
Underpinning the transition to New Ryanair were two simple, but key strategies -
Transform the Customer Experience
Jacobs was tasked with tackling both of these. Identifying which elements of the customer experience needed to change was not hard. The evidence was all around him.
Out went the annual Ryanair cabin crew calendars and an almost antagonistic approach to the customer experience. In came seat reservations, 2nd free carry on bags, less onerous charges for printing boarding passes, mobile apps and an easier to use website, amongst a whole host of other changes. Fixing these quickly fed into an enhanced view of the brand, and Jacobs set about leading the change agenda, introducing a cultural focus on continuous improvement, with a steady flow of incremental changes. Adding these to a mix which already includes an ongoing relentless focus on lower fares, and the addition of new routes has proven to be an irresistible combination for increasing numbers of customers.
However, it is Ryanair’s digital transformation that has also underpinned their strong performance this past year, and will help to drive even further growth in the years ahead.
So what are the key elements of their digital strategy?
1/ The Creation of a Team of Top Digital Talent
Hot on the heels of hiring their first CMO in Kenny Jacobs, Ryanair hired John Hurley as CTO. The very creation of Labs is instructive, given the stated aim is to build the “best digital travel team on the planet”. This team, consisting of developers and marketers working together, in their own discrete agile environment, have been the powerhouse behind the transformation to date.
2/ The Deployment of Learning from other Industries like Retail.
What is also particularly noteworthy in recent months is the shift in language. Jacobs talks repeatedly about ‘acquisition, conversion and retention’, and Ryanair being ‘data-driven’ . This is very much the language of tech, especially software as a service (SaaS) but also the language of retail where Jacobs spent much of his career (incl at Tesco where the dunnhumby inspired Clubcard was a resounding success.)
This change also reflects the transition away from a consumer transactional focus to a relational one, with the increased emphasis on engagement, and retention. And it is thus likely that in the months to come Ryanair are likely to dial up the focus on ‘becoming a member’, encouraging users to ‘sign up for a newsletter’ or to ‘download a mobile app’ as they look to further deepen the relationship they have with their customers.
3/ The Adoption of Market Segmentation
Again it is noticeable that Ryanair have an enhanced appreciation of the benefits of segmenting their user base, and targeting the segments with bespoke products, e.g. their family and business propositions. With the latter in particular, they have created a new ‘Business Plus’ product which offers real value to business travelers, without the frills (nor price differentials) of business class products from other airlines. With Ryanair it is less about the installation of a curtain between the classes, and more about meeting real needs around ticket flexibility, extra luggage allowances and access to ‘fast track’ security. In essence, they are targeting ‘time’ as the key business customer pain rather than ‘appearance’, while also adding access to core airports as part of the mix ensuring business customers have access to a wide range of leading commercial centres.
4/ The Focus on Revamping the Website
Trying to navigate the old website was a real challenge, with the UI and UX leaving a lot to be desired. The focus on digital has led to a number of significant improvements with the website, and with a top level navigation focused on Plan Trip/ Manage Booking/ Useful Information, navigation is easier and the direction it is heading in is much clearer. The room for improvement is still significant, and as long as the user journey remains polluted with irrelevant add-ons for most, the user experience when booking a flight will continue to be frustrating.
5/ The Prioritisation of Mobile
The obvious importance of mobile has also been reflected in the launch of a much improved mobile app in July (Android and i0S). And while the UI and UX lacks the polish of the likes of British Airways’ App, the functionality is ‘getting there’ and it will continue to evolve delivering features along the product journey from booking and paying, to managing travel on the day of the flight. As the penetration of mobile devices and tablets continues at pace, and the fact their consumers are on the move (particularly on the day of travel), the importance of the airline industry staying abreast of the latest mobile developments is paramount.
As a company whose entire marketing strategy to date has revolved around ‘Michael O’Leary being controversial’, the willingness to let Jacobs have the autonomy to recalibrate their focus on the customer (and on marketing) has been instrumental. As a result, Ryanair have had a number of firsts this year including their hiring of UK based advertising agency Dare and running their first TV adverts in 25 years. However, sending pre-flight emails with the subject ‘Avoid Additional Fees’, the garish yellow interiors of the planes, and their continuation with low brow productions like their recent Christmas jingle indicate some legacy old Ryanair marketing tactics still remain.
2014 has been a phenomenal year for Ryanair, and the outlook for 2015 and beyond is even brighter. In the next installment, I explore some of the key areas Ryanair need to focus on with their digital strategy in 2015 to ensure their growth trajectory stays on track.
Follow Alan on Twitter: @alangleeson
Originally published at www.linkedin.com.