How SAS Transformed Customer Experience with a New Ancillary Approach

Transcript

Peter Smith:It's been super insightful to sit and listen to all of the content today, and particularly the part around diversity was quite a hot topic earlier on this morning. So I'm delighted to bring up the balance of the underrepresentation of bald people. So I've not seen many bald people on the stage today, so I'm hoping to strike the balance A little bit. But I'm feeling very lucky today. I heard the average Trump tariff this morning was 22%. We only got 10% in the UK. So it's amazing what perspective can do to the way that you think about something, hey? But thank you for those of you that are sticking around for this. I'm Peter Smith, Senior Vice President of Strategic Partnerships at CoverGenius. CoverGenius is the global insurtech for embedded protection, and we protect the global customers of the world's largest travel brands. Within the airline industry, this includes airlines such as Spirit, Turkish Airlines, British Airways, Ryanair, and I'm delighted to say Scandinavian Airlines. On that point, It brings me pleasure to welcome onto the stage, joining me today, Caroline Bergström from Scandinavian Airlines. Caroline, welcome.

Caroline Bergstrom:Thank you.

Peter Smith:It's great to have you here today to discuss the transformation journey of Scandinavian Airlines and how you're meeting the evolving needs of the market. But before we start, perhaps you can just introduce yourself to the audience. and tell them a little bit more about SAS. Yeah.

Caroline Bergstrom:So, hi everyone, I'm Caroline, Head of Ancillary Products, Connectivity and Retail at SAS. So looking after all the travel extras that you can add on top of a flight and also making sure we include the right products in the tickled bundles. For you that don't know anything about Scandinavian Airlines, we are the largest airline in Scandinavia. So high presence in Denmark, Sweden, and Norway. We fly to 146 destinations worldwide with a mix of domestic, European, intercontinental flights to Northern America and Asia. We carry around 100— no, 25 million passengers. And we also, we emerged from chapter level in the end of the summer last year, which resulted in some new owners. So one of them is KLM and Air France. And we also changed alliance in the end of the summer last year. So we are now part of SkyTeam. And I have to brag, we did it quite fast. We did it in only 6 months.

Peter Smith:Wow, that's quite incredible. 6 months. Gosh. So I guess that's seen as a success story within, within SAS. But like many of the airlines joining us over this last couple of days, I'm sure you've had a number of other challenges along the way over the last couple of years. Can you maybe talk a little bit about some of the challenges that you've experienced and what it is you've been doing to overcome them?

Caroline Bergstrom:Yes. So of course, during the pandemic, we were loss-making like many of you. And on top of that, if that wasn't complex enough, we also had a strike. We got intensified competition from low-cost carriers. This mix made us go through Chapter 11, but we have now a really clear strategy on how to come back on our feet again and be even more successful than we were before. Some of the things, or our strategy right now, is first to secure cost competitiveness, and number 2 is to be the preferred airline within Scandinavia.

Peter Smith:Okay.

Caroline Bergstrom:Number 3, invest in sustainability and the future. And number 4, to increase revenue and find new revenue streams.

Peter Smith:Gosh, so I guess it's easy. It absolutely does not sound easy. It sounds like it's quite a huge effort and quite a comprehensive effort to really address the challenges that you've just mentioned and more. What are some of the key initiatives that you're undertaking to, I guess, address the changing needs of the market and to better service your customers?

Caroline Bergstrom:Yes. So like I said, one of the priorities is to be the preferred airline within Scandinavia, and the market has shifted a little bit after the pandemic. We have actually more leisure travelers now than before. Before, it was mostly business travelers. So now we are really focusing to make sure that we give the passengers what they want. But so we are investing in a few different areas to enhance the product. But number one is to make sure we get the passenger to the destination and on time. It sounds easy, but we all know it's quite difficult. So we have really focused on that and we have been really successful. During the last few months, we have been the most punctual airline in Europe, and we see that that has a huge impact on the NPS score. It's increasing every day, so that's really good. And then we are enhancing our service. We're going to introduce business class on European flights, so that's super exciting. We will see it in, in the fall. We know digital experience is the key, especially in Scandinavia. We have a really good app that won actually a lot of awards. I really like it. But we felt like our website wasn't at that level. So now during the last year, we rebuilt the website. So we are launching a new one now within the coming months. So that's super exciting. And then we know it's important for all of us, but probably more for the future generations to stay connected. So we will invest in high-speed Wi-Fi. So we will start on the entire fleet. So we start to roll it out in the end of this year. So that's also exciting. And then we're looking after like, how can we enhance the customer journey for all our travelers? Okay.

Peter Smith:And when you say, how can you enhance the customer journey, can you elaborate on that? What else it is you're looking to do?

Caroline Bergstrom:Yes, of course. It's like different things that we can do, but it's mostly like we want to invest in products and services that we can see that our customers want and that we can see a result in the NPS score. But sometimes it's also doing things that may not cost that much for us, but that we know have an impact. And one thing that we did that I think is kind of bold is that we started to charge for seating in all cabins at reservation. So even for business travelers. And the reason behind that is that the people that bought the most expensive tickets, maybe like last minute, they were the ones that had the least choice of seating in the business cabin. So we wanted to change that. So now you have to pay for it at reservation, but we have some exceptions. So our top tiers and our corporate program, they still get it for free. But we see good results from this. Our top tiers are really happy. From operational perspective, it's great, and also from a—

Peter Smith:Customer satisfaction.

Caroline Bergstrom:From an ancillary revenue perspective, it's good. And we see that business travelers actually are willing to spend more money on ancillary products than the one traveling in economy. It's probably because they have a larger wallet, maybe.

Peter Smith:Yeah, very interesting. And quite a shift in terms of the way a lot of airlines approach it in terms of their business class versus economy customers. So would it be fair to say that ancillaries is quite core to this sort of transformation For you. So how then are you evolving your ancillary strategy as an airline?

Caroline Bergstrom:It is— we saw after coming out of COVID that we could do much more when it comes to the ancillary business. So huge potential there, both to increase revenue but also to increase customer satisfaction. So we have focused on becoming more of a retailer The first priority we had is to make sure we have the right high-quality products to offer our passengers. So we have mostly unbundled all our products like Fast Track, some of the flexibility products. And also we're looking into becoming this one-stop shop to make sure we have all the products that our passengers need to enrich and enhance their trip. So we have partnered up with a lot of partners to be able to sell car rental, insurance, activities, transfer, etc. And then number 2 has been to really make sure how do we integrate all our products. It needs to be easy to buy our ancillary products, otherwise they won't buy the products from us. So that has been, um, what do you say, yeah, super important journey for us. And we know we're really excited now with the new website Because now we will actually be able to integrate ancillary products from the beginning, before we have the website, and then you add ancillary products, and it hasn't really been integrated in the best way. So now, from now on, you will be able to add ancillaries by just one click. Before, it was maybe 5 clicks. And then the third area has been to commercialize our communication. We are no longer scared of promoting our ancillary products. Because we see it as more enhancing the passenger's journey. So for example, we need to let our passengers know that if they're flying on the morning flight and they want breakfast, they need to preorder it. And then the 4th thing, but not the least, is to get the whole organization with you on this ancillary journey. And one thing that— one example is that we, for the first time, actually investing in sales training for crew.

Peter Smith:Yeah.

Caroline Bergstrom:So super exciting for that.

Peter Smith:It sounds— this whole organization, getting the whole organization involved in ancillaries, it's really quite encouraging to hear that. You know, I remember the days, most of you in this room do, where an ancillary team consisted of 1, maybe 2 people if you were lucky within an airline. And it's really good to see that the shift over the years to having a whole organizational view of ancillaries, clearly because of the importance. And it sounds like sort of customer choice and personalization are really quite critical elements of this whole approach for you. How do you ensure that as you continue to innovate and invest and bring forward new ancillary products, that they really resonate with your customers?

Caroline Bergstrom:Yeah, of course, we listen to customer feedback and of course we can't just add more and more products. We also need to look over the products that we already have to make sure that they have high quality and see how we can improve them. And one thing that we've added now is gamification. We now introduced lifetime real-time bidding when it comes to upgrade, so our passengers can now see how strong is their bid versus all the other bidders. So you can see if you have the highest bid or if you're on place 10 or 20. So they actually have a chance then to— if they really want to win, they know they need to make sure they have the highest. And we can see that this has— our customers, they really enjoy this. We have got a lot of great feedback, and it also generated quite some good revenue because people who enter into the live bidding increased their bids significantly compared to the other ones.

Peter Smith:That's super interesting. Perhaps some takeaway there for the audience. But gamification is something I guess we're all engaged in daily, perhaps without even thinking about it. You know, our phones, our iPhones, they're clearly intended to keep us engaged through gamification. So it's nice to see that you're utilizing the way that humans interact To the benefit of your revenue line, I guess. And let's just come back for a moment. You mentioned earlier a retail approach and being a one-stop shop. How important is it to ensure that you're working with the right technology partners to really enable this vision?

Caroline Bergstrom:Chris, it's essential for us. It's super important. We need to make sure that our partners can integrate their products in a seamless way into our touchpoints, and to make sure that they have a sophisticated platform. It is not just like good enough just to have a white label, put it out there, and don't give it any love. It's not going to generate any revenue at all. So you really need to integrate the product and make sure it is a seamless customer journey. And I think we have done it really good with travel insurers and with you. We have integrated travel insurance in the booking path, in Manage My Booking, and also in the check-in window. So we can sell travel insurance in all the touchpoints that the customer goes through before they travel. So I think that's a really good way to integrate the product.

Peter Smith:So certainly making progress. There are lots of airlines that do a similar thing or certainly intend to. But how does this partnership, to use your own words, help you to be bold in your approach and your strategy?

Caroline Bergstrom:Because we know— if we know that we have a good product, we know it works, it's easy to add, it's been integrated in the right way, we can actually be a little bit bolder. We can try new things to see how we can increase the revenue. And one thing that we have done with travel insurance is that We added a mandatory decision point in the customer journey, which we've seen have generated a lot of great money for us. We have also been able to add a Trustpilot score next to the product so that we can actually show our customers that other customers really like this product, and we wouldn't have been able to do that if this product wasn't good enough.

Peter Smith:I understand. And it— so it sounds like this is helping to drive some significant growth for SAS. Would that be right?

Caroline Bergstrom:Yes, it's right.

Peter Smith:And are you able to share with the audience any sort of numbers or metrics around that?

Caroline Bergstrom:Yeah, I'm happy to share. We have actually increased like the ancillary revenue per passenger by 80%. 80% since before COVID So super happy about that increase.

Peter Smith:But 80%, that's not sustainable, right, into the future?

Caroline Bergstrom:If you ask our CEO uncle, he would say, yes, it is, of course. No, but that's going to be super hard. But there are still a lot of things to be done. We can do way more A/B tests when it comes to pricing. the UX design. I also think going— be a little bit bold, try new things. Like with UpGrade, for example, we thought we had a really good product and we couldn't do that much more with it. But now we're trying real-time bidding and see, okay, wow, we can really increase the revenue for this product.

Peter Smith:So, got you. So clearly these changes that you're making are having the right impact on revenue, but what's the impact on customer satisfaction?

Caroline Bergstrom:I think that was shared earlier today in one of the discussions that we've actually seen that the NPS score is increasing right now. And we can see that for some of the ones that added an ancillary product actually score higher sometimes when we like— score higher than the ones that have not added.

Peter Smith:So when they add an ancillary product, The customer satisfaction is higher than when they don't?

Caroline Bergstrom:Yes, in a lot of— yeah, many times.

Peter Smith:Why is that?

Caroline Bergstrom:I think it is because we enhance the trip, we enrich the trip for them. Like in the breakfast example, for example, if they wouldn't have added that breakfast, they have been on that flight for 4 hours and been hungry, and that's not a good customer experience.

Peter Smith:Got you. So that outcome, I guess, coming back to, you know, Breeze earlier on the stage with David Neelman, and he said about how they're one of the highest ancillary revenue and they're also one of the highest NPS. So I guess you're saying a very similar thing here, which contradicts the traditional thoughts of the industry, which is if you present customers with more products, you're actually going to scare them off and they're not going to have the best experience, or perhaps it will negatively impact. core flight conversion, but you're seeing the opposite is what it sounds.

Caroline Bergstrom:Yes.

Peter Smith:Yeah, so it's good to hear 2 airlines on the stage saying a similar thing today. So as we come to a close, our time's nearly over. What takeaways do you have for the audience and for those that are perhaps considering a similar either evolution of their ancillary strategy or a similar sort of transformation to Scandinavian Airlines?

Caroline Bergstrom:It's a tough one. I would say put the customer first. Make sure you add high-quality products, but also be bold. Take one step outside your comfort zone. Partner up with the right partners that can help you reach that vision that you have. And also be bold and change. Like, status quo is always going to be there. So if you want to increase revenue and then NPS score, you need to try something new.

Peter Smith:Wonderful. Caroline, thank you so much for your time today. We appreciate you.

Caroline Bergstrom:Thank you.

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