Happy Medium: Tackling Premium Economy for Brand and Profit – Part One
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APEX contributor Marisa Garcia explores the rise of premium economy in a three-part web series, released every Friday starting November 20, 2015. In this series, we will look at how various airlines perceive their premium economy product and why the time is now for airlines to bring this class on board – if they haven’t already.
APEX Insight: Premium economy, the “middle” class, is the hardest to get right. It’s neither luxurious nor frugal, but perhaps the perfect seat for passengers looking for something in between. Virgin Atlantic introduced the concept in the 1990s. Now more airlines are hopping on board the trend, branding their seating product according to their target market and maximizing revenue potential.
In economy class, the trend has been toward increased cabin density and an unbundled raw product. This leaves a middle gap opportunity open for an alternative class of service – premium economy – to finally come to its own. It is the trickiest product to get right, but some airlines believe its potential for brand and revenue building is well worth the effort.
When Virgin Atlantic introduced the concept of premium economy in the 1990s, it set a new standard for comfortable travel on a budget. The differentiated product offered better seats, unique service offerings, meals and perks to those who would not splurge on an Upper Class suite; but was not so lavish as to get Upper Class customers to reconsider downgrading their booking choice.
Premium economy is a long-haul cabin product suited to airlines with clear brand positioning who understand their customer base well enough to identify the needs of a middle market passenger to tailor a product accordingly.
It is the trickiest product to get right, but some airlines believe its potential for brand and revenue building is well worth the effort.
These middle market customers are, many of them, “invisible” business flyers: freelancers and entrepreneurs, who are lost in the crowd. They are waiting for something tempting to spend more of their travel budget on, and their numbers are growing. Without the right product, they will shop by fare and show little brand loyalty.
Many other airline brands have taken inspiration from Virgin’s winning formula and conducted the market studies required to design strong premium economy products that fit just right.
They include a special premium economy seat, unique service offerings and other traveler benefits which offer value on a ticket cost that is more expensive than a full-fare economy ticket, but discounted enough from the business class ticket to deserve an “economy” label. These products are also clearly differentiated from the superior business and first classes, ensuring high-earning customers aren’t tempted to buy down.
Some airlines have taken their time to examine the market carefully, even as competitors beat them to the premium economy offer. Singapore Airlines, for example, waited to study its middle market demand on select routes and understand its needs before it introduced a new premium economy cabin this year. While some questioned what took Singapore Airlines so long to decide, the product proves they used their time wisely.