Interview with Paulo Pecchiari, head of direct sales, Alitalia

TDS Europe 2006 special: By EyeforTravel Correspondent

Comparison shopping technology is still irrelevant for our sales, PPC is the most important with 10-15 percent of tickets, followed by SE optimisation in particular for non-Italian markets, says Paulo Pecchiari, head of direct sales, Alitalia.

“We are using quite extensively PPC  - with good success for keyword advertising, much less with PPC advertising -  and it remains for me the most important form of online marketing at least in the medium-long term. You can module your investments, you can easily measure your ROI. Nevertheless I think that in our case other forms of online marketing will become more and more important like affiliation and use of “push” technology to promote our best fares like the “Ding” tool of Southwest,” says Pecchiari.

In an interview with EyeforTravel.com’s Ritesh Gupta, Pecchiari shared information about direct sales and various commercial channels involved, differentiating features of Europe as a market and much more. Excerpts:

How do you assess progress made by your airline as far as direct sales is concerned?

By direct sales in Alitalia we mean three commercial channels: our own web site, call centres, and city/airport ticket offices (CTO-ATO). At the beginning of 2005 we launched a turnaround on direct sales with the following goals:

Web
·          Reduce gap with competitors w.r.t. site attractiveness, commercial effectiveness, services provided (defined around 40 initiatives to be completed within beginning of 2007)
·          Reach 20 percent of sales through the web in three years in our main markets (i.e. Italy, USA)

Call Centre
·          Organize activity in regional call centres (grouped by homogeneous countries/languages)
·          Outsource operations (standard contracts with significant part of costs based on respect of SLA and sale incentives)
·          Standardize processes/systems
·          Introduce CRM platform and focus on commercial activities
·          Unify monitoring and reporting approach/tools

CTO-ATO
·          Rationalize the network (in particular in Italia market)
·          Extend network in selected countries with high potential for offline direct sales(e.g. Russia)

At least another year is needed to complete the turnaround, but some results are already visible. For instance in the web area, Alitalia released recently many new functionalities (e.g. ticket award, web checkin, dynamic packaging) and there will be a site relaunch in June with a brand new booking engine.

Talking about Europe as a market, what according to you are striking or differentiating features about direct sales?

The key feature is the obvious partition of Europe in 3 main areas regarding web sales:
·          Northern Europe is a mature “web” market quite similar to USA
·          Southern Europe is well penetrated in terms of web usage, but web buyers are quite limited (even if growing a lot year over year)
·          Eastern Europe market is still not relevant for web sales

Taking this into account we have differentiated our direct sales approach focussing on web in Northern Europe, web/call centre in Southern Europe (in particular in our home market), CTO-ATO/call centre in Eastern Europe.

A flight is a commodity, Alitalia’s Roberto Ioriatti told me last year in an interview. How you as a supplier think about online travel as a marketplace? Can it help to increase distribution whilst maintaining brand integrity? Or are they simply another step towards a price driven, commoditised market?

Online marketplace brings both treats and opportunities for “traditional” airlines. On the web it is much easier to make price comparison and you loose the direct contact with the customer. On the other end the web channel opens many possibilities to explore like services not available with other channels (e.g. web checkin or push technology giving customers your best offers on their PCs in real time), improved time to market of commercial/pricing initiatives, increased capability to monitor sales results and apply correctives.

The most effective search engine strategies are the ones, which include all elements of the marketing mix, according to analysts. What’s your opinion on this?

I totally agree on this. Every effective commercial initiative has to be well constructed from all points of view: product, pricing, etc.

What according to you have been the major challenges in this arena? How have you coped up with them?

Our main challenges are:
·          The online market is moving fast (and we have to fill quickly a gap with best practices) - we have defined an aggressive implementation plan till beginning of 2007 involving a large part of Alitalia directions with strong commitment from the top management
·          Average revenue per flight is going down – we just started to experiment with dynamic packaging. We will become more and more aggressive  in this area and in general on ancillary revenues
·          In countries where your market share is small, no one knows your site – we use aggressively PPC techniques (in particular keyword advertising)
·          Many people (in countries like Italy) surf the web, but they do not buy – we will experiment as soon possible pay later methods

What’s your prediction for future in this arena for this region?

Northern Europe looks more and more like USA (where you have more than 40% of flight sales through the web). Southern Europe probably is moving towards that model, but it will take some years and it is very important to fight now to get your market share. For Eastern Europe I do not see an explosion of web sales in the short term (even if Poland is already quite interesting from this perspective), but let us see.

What’s on your agenda? What are your plans?

I already mentioned that Alitalia is in the middle of a turnaround of its direct sales:

·          Web -  our  main objective for 2006 is to reduce the gap with best practices of our web site (e.g. introducing functionalities like seat assignment and reprice/reissue). In 2007  we  will focus on how to increase our commercial capabilities, dynamic packaging/ancillary revenues, extension of countries served by our site, marketing 1to1
·          Call centre – 2006 will be devoted to consolidate our outsourced regional call centres. In 2007 we will concentrate  to improve our CRM  capabilities (we launched an ambitious project few months ago )
·          CTO – ATO – in this area I want to complete our rationalization of the network (within beginning of 2007).