Segmentation

1. Segmentation Fabio Maria Lazzerini

2. Why to segment ? • Customers have different needs • Customers have different price elasticity • Competitors • Best fit with Customers needs • Improve “commercial profitability” • Improve Customer loyalty • Focused promotion and comunication Fabio Maria Lazzerini

3. Segmentation High Recurrent Value B A Relationship buyer Price Transaction C D Negotiation power Bargain hunters Low Low Customer management cost High Fabio Maria Lazzerini

4. Example of segmentation GDS Fabio Maria Lazzerini

5. Amadeus: Criteri di Segmentazione • Market segmentation along two major criteria: • Volume: based on yearly air segments generated • Specialization: Customer’s cose business and focus Fabio Maria Lazzerini

6. Volume Multinational > 100.000 5.000 - 100.000 < 5.000 Fabio Maria Lazzerini

7. Specialization Fabio Maria Lazzerini

8. The Italian Market Fabio Maria Lazzerini

9. Overview of GDS competitive landscape (2/2) 12.1% 25.8% 32.8% 29.2% Amadeus Mkt Share 30% 29,8% 29,6% 19,3% 3 M bkgs Fabio Maria Lazzerini

10. Overview of GDS competitive landscape (1/2) 23% 57% 4,6% 7,9% 7,5% Amadeus Mkt Share 61,4% 37,6% 56,7% 26,1% 18,7% 3.2 M bkgs Fabio Maria Lazzerini

11. The on-line market Fabio Maria Lazzerini

12. A new variable: relevance for Customer 100% ??? Prezzo Relative importance 0% 100% 0% Reelvance for Customer’s Core Business Fabio Maria Lazzerini

13. Micro • Independent Travel Agencies: • Serve small Customers and individuals • Limited investments in technology • Basic and non sophisticated needs • Goal is to reduce operational cost and to access content • Main decision driver: price • Loyalty: low Fabio Maria Lazzerini

14. SME • Multisite Independent Agencies: • Manage medius/big Custoemrs and individuals generating medium volumes of business • Negotiated fares • Tour packages • Out-going and In-coming • Goal of efficiency and automation • Main decision drivers: • “turn key” solutions • Price • Content • Customer’s loyalty: medium/low Fabio Maria Lazzerini

15. Large • Travel Management Companies: • Manage very complex Customers • High need to integrate with their Custoemrs’ processes and systems • Very high automation • Focus on Business Travellers and MICE (bowling pin) • Goal to increase processes and efficiency through automation • Main decision drivers: • Services • Product • Continuous relationship with Provider • Customer’s loyalty: medium/high Fabio Maria Lazzerini

16. On-Line • Business Critical Customers: • Fierce competition and acceleration of business • Maximum automation (touchless) • Maximum process complexity • Goal to imimprve processes and manage Company’s growth • Main decision drivers: • Solution (product + Customer services + Value Added Services) • Provider/Customer interdipendence • Joint development • Customer’s loyalty: maximum Fabio Maria Lazzerini

17. 18 Compagnie di Crociera 790 Compagnie Aeree 74.000 Alberghi 185 Tour Operator Leisure • Business Critical Customers: • High complexity • Content content content content content • Need of solutions which ease integration (dynamic packaging) • CRM • Main decision drivers: • Content • Solution (product + Customer services + Value Added Services) • Customer’s loyalty: medium Fabio Maria Lazzerini

18. The choice of the target segment • Criteria: • Potential volumes and growth • Profitabiity • Current and potential future competition • Fit between segment and Company’s capacity of interacting with the segment (products, organization, distribution channels, geographical coverage, services, etc.) • Possible Choices: • No differentitation • Differentitation • Focus • Niche Fabio Maria Lazzerini

19. Choices No Differentiation Focus Niche Differentiation Fabio Maria Lazzerini

20. Growth strategy at Amadeus • Increase products and services for SME Customers • Develop new Products and Services to complement the “traditional” offer • Develop a Value Proposition specific for each target segment led by M3: products, services set, pricing policy, sales coverage, etc. • Alignment Marketing and Sales and compensation schemes • Sales channel alignment: Telesales, Geo Sales, Account Managers, Indirect Channels • Possible Up and Cross Selling Fabio Maria Lazzerini

21. Results KPIs Segment Profitability Market Share Fabio Maria Lazzerini 1 i.e. excluding churn in

22. Overview of GDS competitive landscape (2/2) 12.1% 25.8% 32.8% 29.2% 30% 29,8% 29,6% 19,3% +11.7% mkt share in 2 years Fabio Maria Lazzerini

23. Caveat • Market segmentation IS NOT Product Segmentation • Do not over-analyze and Execute • Segment based on REAL Customers’ needs and charachteristics • Focus on Customer and not on Product Fabio Maria Lazzerini

24. Customer’s life cycle Lever 2: Optimize profit from customer Lever 1: Reduce customer acquisition cost Lever 3: Increase customer longevity Fabio Maria Lazzerini

25. Each pillar has evolved! The travel distribution industry 3 pillars • Content • Technology • Reach

26. 1. Content • Content is fragmented across different channels • LCCs content • Web fares • Preferred channel agreements and POS selection • Content for distribution means today relevant travel content • Addressing the full journey needs for the traveller and trade • Addressing the multiple ways to sell – dynamic packaging • Content presentation and merchandising • More than just the neutral screen • Today incorporates shopping functionality

27. 2. Technology • Travel distributors transact huge volumes • Un-rivalled economies of scale • However transaction volumes are and will increase • Internet distribution (look-to-book ratio, low fare search tools …) • Future improvements in content presentation and merchandising • New technologies are part of the solution • Mobile & Social !!!

28. 3. Reach evolution • Direct online distribution will continue to grow • But indirect distribution is and will be vital • CAGR 2006 - 10: 4.3 % • CAGR 2006 - 10 • 0.4% • 9.5% • 14.5% • 0.2% • Source: Amadeus, IATA, ICAO

29. What are the perspectives? • More by-pass attempts • Coping with content dis-aggregation and re-aggregation costs • Travel agencies are increasingly competing with direct channels to deliver the lowest price • All the airline focus put on the cost of distribution…

30. What about selling more & selling better?

31. How to enable more and better sales?Can food retailing offer clues?

32. Customer shopping experience • Maximising revenues and profitability • Differentiation Lessons from food retailers

33. Let’s look at consumer behaviour in the airline industry • Future Traveller Tribes 2020 – Bringing together major macro, consumer and technology trends • Report commissioned by Amadeus to • Understand what the future of air travel may hold • Stimulate debate across the industry • Analyse how airlines can respond

34. Future Traveller Tribes 2020 • 4 important traveller groups have the potential to transform the sector in the next decade, • Their needs • How airlines can meet them • The humanisation of technology is the key driver of technology development • The journey experience will be more intuitive and responsive to traveller needs now and in the future

35. Key trends impacting the future of travel • Burgeoning global population • Growth in global migration • Globalisation of business • Globalisation of travel and tourism • Increased travel • Rising affluence • New developments in aircraft

36. Critical uncertainties affecting travel • Growing awareness of carbon emissions and environmental issues • Rising cost of oil • Climate of fear

37. The four future Traveller Tribes • Active Seniors • Cosmopolitan Commuters • Global Clans • Global Executives

38. Active Seniors Who are they? • Adults, mixed genders • Aged 55+, physically healthy and active • Retired / working part-time and senior pros Key purpose for travel? • Short holiday for relaxation and enjoyment • The more affluent are likely to take 4-5 holidays per year as they have time available (either retired or senior pros who can take time off work) • For retirees, enjoying their time and the freedom of retirement Specific travel needs? • Health focus • Comfort • Price Details of travel? • Travelling predominantly economy class (may upgrade for one special holiday per year) • Short haul trip and long-haul • Booked and researched online (or offline via travel operator depending on region)

39. Global clans Who are they? • Immigrants travelling to see family Key purpose for travel? • Visiting family and friends for holidays which enable them to be together and re-connect Specific travel needs? • Likely to be price sensitive • If travelling with children, tied to specific dates such as half-year and end-year holidays and other key festivities • May be more focused on groups Details of travel? • Travelling in economy class • Long haul flight & short haul connection to destination • Booked online (or offline depending on region)

40. Cosmopolitan commuters Who are they? • Businessmen / women • Predominantly younger (20s, 30s, 40s) Key purpose for travel? • Frequent business trips • A key sub-segment is weekly business commuters who fly from home to city of work on Monday and return for the weekend (e.g. internal commuting in the US, intra-European commuting such as Spain-England, France-Germany) Specific travel needs? • Price sensitive • Schedules • Convenient airport locations • Ability to work • Flexibility • Details of travel? • Travelling LCC for short haul or premium economy class • Typically short-haul • Frequent flyer • Managed booking

41. Global executives Who are they? • Senior executives travelling from/to BRIC markets Key purpose for travel? • Key international business meetings • May Include leisure elements – taking partner or catching up with old friends / colleagues Specific travel needs? • Comfort & relaxation • Ability to work • Status • Details of travel? • Travelling in business class • Long-haul / short haul • Managed bookings, dealt with by PA

42. Technology implications • Travellers want more control, comfort, security and personalisation • Improving customer experience • Significant role for technology to underpin delivery of tailored, personalised and streamlined experiences • Ensuring differentiation • Need integration of systems, and new technology developments across all stages of the journey from booking, to check-in, in-flight and baggage collection • Maximising revenues and profitability

43. And in the future? The ‘humanisation of technology’ • Trusted digital personal identities • Integrated information systems • Access to real-time, geo-relevant information • New communications technologies

44. Technology to meet the traveller needs • What would future travellers require from you? • Travel to be bought and sold as a commodity • Flexible journey management • Dynamic visualisation of the trip • Web-based group forums • Personalised premium packages • Personalised healthcare services

45. Marketing Industriale Customer Satisfaction Fabio Maria Lazzerini

46. La dinamica della base Clienti Customer acquisition Customer Base Customer retention Customer cancellation Fabio Maria Lazzerini

47. “Three most important business KPIs: • Customer satisfaction • Employees satisfaction • Cash flow Jack Welch 1990 Fabio Maria Lazzerini

48. Customer Satisfaction • Customer Satisfaction: is one of the top KPIs monitored in the business evolution of a Company • Customer Satisfaction needs to be incorporated in any strategic process • Customer Satisfaction is a Marketing issue • Marketing has to get ownership of every process which impacts Customer Satisfaction Fabio Maria Lazzerini

49. Customer Satisfaction: Why ? • For a simple, basic relationship: New Customers Revenues Satisfied Customer Loyal Customer Profit Fabio Maria Lazzerini

50. Customer Satisfaction & Profitability Unsatisfied Customer Satisfied Customer ProfitableCustomer 1 2 3 4 UnprofitableCustomer Fabio Maria Lazzerini