SpiceJet Sale: Former CIO Shares Company's First Big Sale11th Feb 2013
Folks in the Indian aviation industry hate the months following New Year’s. It’s that time of the year when airlines—that were making money hand over fist, piggybacking on the holiday season—begin to see a dip in sales.
Between January and March of 2012, for instance, SpiceJet’s net profit was Rs 249 crore in the negative. Compare that to the Rs 102 crore profit it made from October to December of the same year and you begin to understand the pressure on SpiceJet’s management to find a way to pull up sales during the first few months of a year.
- How to support an impromptu business campaign
Finding a way to make sure every quarter is profitable is a challenge every company faces. But not being able to do so bites more deeply in the aviation industry with its sizeable fixed costs.
One of the ways SpiceJet could make more money was to charge more for every seat it sold during January to March. But with low demand for air travel at that time of the year, and a watchful DGCA (the regulatory body for civil aviation), that idea wouldn’t really fly.
The only other option was to sell more seats. That wasn’t going to be easy either, not with a passenger load factor—an industry metric that measures the utilization level of an airliner’s planes—already running at about 74 percent (the industry average is 76 percent), there wasn’t really much room to grow.
But there was.
“It was a collective management decision to do something new, something that would acts as a catalyst and create an opportunity which would force people to fly in the lean season,” says Virender Pal, CTO, SpiceJet. The airline wanted to do a Godfather: Make an offer passengers could not refuse.
It called its tempting offer the Big Sale. Targeted at travelers who wanted to take a weekend off or plan a trip between February 1 and April 30, SpiceJet announced a three-day sale of 10 lakh tickets—out of a total of 50 lakh seats it would sell during the season—at Rs 2013 (a play on the New Year), on all its domestic routes.
Out in the market, it was an offer that fell straight from the sky. At Rs 2,013, SpiceJet was selling tickets that were 70 percent cheaper compared to regular fares on some sectors. The campaign caught the entire industry off-guard.
The market, however, wasn’t the only group that would be surprised by the promotion.
The rivalry in the Indian aviation industry is among the most intense in the world. Price wars and promotional imitations are a fact of life.
That makes it imperative for ideas to go from concept to execution extremely fast.
But that also meant that SpiceJet’s IT team couldn’t be given a lot of time to prepare for the onslaught that the Big Sale would subject the company’s IT infrastructure to. All the IT team had to prepare was four days; not a quarter, not a month, not even a full week.
“The time-to-market for an idea has to be minimal and management was looking to launch the sale in two days. But we didn’t want it to end in a disaster and negotiated to launch it in four days, not two,” says Pal.
While the IT team rolled up its sleeves, SpiceJet’s marketing team went in overdrive pitching the Big Sale to customers, bombarding every medium it could find. The offer was put up on SpiceJet’s website and circulated via Facebook and Twitter. It also utilized the television and FM network of its parent company Sun TV to spread the word.
“Taking into account the reach of our marketing campaign and the number of hits that were expected, IT took the lead and assessed our server infrastructure capability and decided on the channels through which we would conduct the sale,” says Pal. SpiceJet’s website and online travel agents (OTAs) were chosen as the most apt channels to conduct the sale.
Fortunately for Pal, SpiceJet didn’t have to invest or deploy additional infrastructure to meet the demands of the promotion. When it comes to infrastructure, Pal says, airlines are always over-provisioned. The global distribution systems (GDS)—responsible for online reservations—are not run out of simple rack servers. Because of the large volume of iterations these severs undergo, multi-tiered mainframe type machines are deployed. “So, it was more a question of how to manage the processes on the servers. You have the option to set priorities for different channels and that is what we were managing in real-time,” says Pal.
In reality, piloting this plane wasn’t going to be as simple.
Also Read: Virender Pal - CIO 100 2012 Profile
“The most important factor of this offer was that the sale had to go on for three days—no matter what,” says Pal. This was a deviation from the regular norm of sales which offer limited amount of inventory and close the sale when the inventory is exhausted.
SpiceJet’s management reasoned that such an approach would help create momentum and help in positioning the company’s brand over time. But it also meant that there were no templates Pal could replicate in order to make this possible. “Although my server capacity was able to handle twice or thrice the load it normally does, we decided to monitor and control the inflow of visitors from our website,” he says.
Pal had to tweak his systems to ensure that the ticket inventory wasn’t sold out before the stipulated time. “If I opened the gates completely the whole inventory of 10 lakh tickets would have been sold out in just one-and-a-half days,” he says.
But how would he control that?
Pal says he took a leaf out of the Balaji temple’s (in Tirupathi) management handbook. As a case study in crowd control, few serve as a better example than the temple.
“They allow only a fixed number of people into the halls at a time. But it was challenging to replicate this into an IT system,” says Pal.
Any attempt at regulating the flow of customers would give them the impression that SpiceJet’s servers had crashed or were unable to take the load. Pal decided that people who were already in the booking flow should not suffer. “We were managing the sessions in such a way that the next set of people were let in only once the people who were already into the system had come out,” he says.
And he had to achieve this while insulating the core systems that manage the entire gamut of airline operations.
“We had a dedicated team that monitored the allocation of priorities to different processes onto my servers, second-by-second,” says Pal. This team watched over important areas—such as the performance of the website, internal applications, airport check-ins—and had systems in place to monitor and raise alerts that would be escalated to Pal or even up to the CEO if the situation demanded it.
Up in the Air
SpiceJet’s Big Sale was a huge success.
The airline sold 7 lakh tickets in 72 hours. When you compare that with the 3.7 lakh tickets that IRCTC sells a day, you get an idea of the scale of the operation.
According to Pal, during peak loads, the system handled 26,000 transactions per hour (about seven to eight transactions per second)—as opposed to its regular peak loads of 2,000-4,000 transactions an hour.
But along with bouquets come brickbats. Not everyone who tried to grab tickets during the sale was able to beat the traffic congestion online. Customers unable to book tickets vented their ire on Facebook and Twitter. Customers who tried the OTA route were unable to book tickets under the offer. While MakeMyTrip and Yatra claim this was due to limitations of SpiceJet’s IT systems, Pal points to the OTAs’ inability to handle the unexpected load.
“The system was always available. If during seat selection, the limit on the number of people was reached, the next set of people were re-directed to a cooling server, from where there was an automatic timed redirect to the website,” says Pal. This was echoed by SpiceJet’s CEO Neil Mills who was quoted in an Economic Times article, saying: “We regulated the flow and we booked about 10,000-15,000 seats every hour during the weekend,” said Mills.
Purely in terms of revenue though, this offer was a huge success. SpiceJet says it earned over Rs 140 crore from the campaign—more than 35 percent of its monthly sales of Rs 400 crore—in just three days.
It’s also changed the way SpiceJet’s executive see the New Year.
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