April 2011 | In recent years, airlines have been experimenting with a wide range of non-traditional distribution channels, a development dubbed ‘Pricing Pandemonium’ by trendwatching.com. Examples include flash sales, happy hours, Facebook and Twitter-only fares, eBay and reverse auctions, as well as vouchers offered for sale in supermarkets and newspaper kiosks.
Airlines are using these new platforms to temporarily offer heavy discounts without disturbing their main distribution channels. However, after initial experiments, some airlines also have made some of these new channels a more mainstream feature. For example, Tnooz reports that Air New Zealand has recently turned its popular reverse auction into an always-on service. ANZ’s ‘GrabASeat’ auction originally launched around three years ago and was only used ad-hoc to shift seats on specific occasions. However, as it did attract a reasonable following, the airline now offers a ticket deal through reverse auction every 15 minutes, 24 hours a day.
The latest online phenomenon that has caught the eye of airlines is Groupon, a web site and e-mail service that offers extremely discounted deals only if enough people sign up. Subscribers must first pay for a Groupon (‘group coupon’) that unlocks the deal. Typical offers include discounted hotel stays, spa treatments and restaurants and Groupon makes money by keeping approximately half the money the customer pays for the coupon. Groupon rapidly became hugely popular and is credited for making virtual coupon-clipping exciting by having offers expire after just a few hours and cancelling them if they do not attract a minimum number of buyers.
Launched in November 2008, Groupon already had over 50 million subscribers worldwide by the end of 2010 and in December 2010 turned down an USD 6 billion takeover bid by Google. Meanwhile, Groupon’s success has attracted numerous competitors, including Facebook, which has just started a similar service called ‘Deals on Facebook’.
Says innovation website VentureBeat: “Groupon has perfected the art of creating consumer frenzies through a combination of deep discounts, witty marketing copy, and exploitation of viral sharing.” […] “The airline business, saddled with constant price wars, could turn to Groupon as a way to fill empty seats without permanently lowering its prices on routes.”
In February 2011, Virgin America was the first airline to initiate a campaign on Groupon to promote its new Chicago to San Francisco and Chicago to Los Angeles services. The offer was a USD 77 discount on the USD350 fare for those that bought a USD 7 coupon. In typical Groupon fashion the offer sold out in just 8 minutes in Chicago and in 45 minutes in San Francisco and Los Angeles. Spurred by the popularity of its Chicago offer, Virgin America offered another deal in early March for flights out of Dallas Forth Worth. Nearly 3,000 people signed up for this deal.
Southwest in April 2011 partnered with Groupon to offer discounts of USD80 (for a USD 40 fee) on its already discounted ‘Wanna Get Away’ fares on any flight out of New York Newark in July 2011. The deal would become available when 50 people signed up, with nearly 900 people buyng an USD 40 coupon.
Simpliflying reports that Lufthansa’s first Groupon campaign worldwide recently took place in Brazil. Lufthansa Brasil issued 4.900 discount vouchers of BRL 170 (USD95, EUR64) to be used by customers directly on Lufthansa.com at the time of the ticket purchase on any LH operated flight originating in Brazil. Tickets had to be purchased by 31 May, 2011 and the the flight must be taken by August 31st. The price of the coupon was BRL 20 and GroupOn sold 422 coupons more than doubling the target of 200 that would unlock the deal.
Allplane alerted us that Estonian Air, a SAS subsidiary and flag-carrier of the tiny, but internet-savvy, Baltic nation had to stop selling discounted tickets through Cherry.ee – a local Groupon-like group-buying website – when sales started going through the roof. The airline planned to sell 2,500 vouchers for EEK600 (EUR38) which would provide a discount of EEK1000 (EUR64), but within 24 hours 6,500 vouchers were sold. The airline said in a press release that the success of the campaign took everyone by surprise as it only operates 7 aircraft.
British Midland International (bmi) in early March 2011 offered Groupon followers a return flight in Business Class from the UK (London Heathrow or Manchester) to Basel in Switzerland for GBP149 as well as from Heathrow to Vienna for GBP169. The deals were less than half the full fare, included all taxes and charges, and the Groupon voucher costed GBP25. A total of 2,000 coupons were made available, but consumer interest hasn’t been spectacular so far, which may have to do with the type of deal offered (short-haul Business Class seats aimed at leisure travellers), as low-cost fares between the destinations on offer start at GBP50.
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