Lufthansa is on a journey to transform its marketing from what it describes as a cost centre to a monetisation centre as it looks to create services that people will eventually pay to use.
As a result, its relationships with agencies partners is inevitably changing, as will – eventually – the model of remuneration as the brand demands more commercial thinking in tandem with creativity.
Describing the process as “reverse engineering” its traditional approach, marketing director boss Alex Schlaubitz said that the brand first has to prove that it can add value to people’s lives. To understand exactly where it can do this, Lufthansa has invested heavily in behavioural economics as well as a two-year project to consolidate its 85 different databases into one in order to get a better view of the average customer’s journey from their first flight search through to arriving home from a trip. From this one, centralised database Schlaubitz and his team are able to extrapolate insights into friction points and develop hypothetical services which might solve the issue.
“If we start understanding patterns of how people are acting we can discern their needs better and start to actually create value,” he said. “And if we create the right amount of value we might be able to monetise it.”
Speaking to The Drum, Schlaubitz revealed Lufthansa‘s advanced seat reservation’ system was born from this process. The service gives customers the option to choose their seat; for example, someone on a long haul flight might want an exit row for the additional leg room. Depending on the type of flight and seat the person wants it can be free to change or cost up to 90 euros.
It’s a simple example but Schlaubitz says it allows the airline to address a need but also make it commercially lucrative. Although he declined to give any detail into current ventures, there is a suite of auxiliary services and products in the pipeline that it believes will initially add value to fliers before eventually growing the company’s bottom line.
“If we do this right marketing is really going to be able to transform itself and the value it provides to large organisations,” he added.
Of course, this is having an impact on the way it works with agency partners. Schlaubitz admitted that it’s adding complexity to the relationship as it shifts from working with one big “monolithic” shop that could handle everything to now partnering with several smaller outfits.
“We’re going to work with [an agency] for two years but I don’t know what things will look like in three years’ time,” he said. “So the best thing is to build a model that allows us to be more agile and pull in a lot of smaller, activation agencies, rather than large establishments.”
As these smaller agencies are called upon to work in greater depth on solutions to customer pain points that can eventually be scaled and monetitsed, Lufthansa accepts that it may eventually have to reconsider how it financially compensates them.
It’s something Airbnb – a major disruptor to the travel sector – recognised early. It pays its agencies on a “per night” basis where they take a cut every time accommodation is booked through the site, a model it believes is an incentive for them to create work that will help the business grow.
While it’s not a model that has been built into existing agency relationships at Lufthansa, Schlaubitz does envisage a time when the brand reaches a tipping point for monetising services and will have to consider an alternative solution.
“It would be a very meaningful approach to share the success and responsibility with the agency,” he added.
Schlaubitz was speaking at an event in London today (17 May) hosted by Karmarama and Nice on ‘The Future of Travel’.