Chris Amenechi is a VP of Pricing and Revenue Management at Copa Airlines, and Managing Director at Amencil, Inc. He is a transformative travel leader who is an expert in Merchandising, E-Commerce, Distribution, Pricing, Revenue Management, Planning and Corporate Strategy, Digital and Data Strategy, Marketing Optimization, and Business Process Transformation.
In this episode, Chris shares about how revenue management works in designing a pricing mix for an airline company. He went on to discuss the people and skill sets needed to form a strong team to meet a company’s objectives. At the same time, he points out what leadership traits you need to possess to be an effective VP of Pricing.
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Why you have to check out today’s podcast:
- Learn how the airline industry comes up with optimal pricing to maximize profitability
- Find out how to come up with optimal pricing to move the industry appropriately even in a competitive environment.
- Discover the needed skill sets of a leader to keep driving to get things done
“Pricing is not a sprint, it’s a marathon. And so, yes, in as much as you’re shortsighted to make a quarter work, you want to elevate the year and the next year and the next year. The whole idea is to get your product, depending on what it is, to be at the top of the marketplace.”
– Chris Amenechi
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Topics Covered:
01:20 – What led Chris onto the Pricing path
02:11 – How does revenue management differ from yield management
04:30 – How much of the fees passengers pay add up to an airline’s profitability
07:45 – Thoughts on everyone being upset over airlines starting to charge for checked luggage
11:19 – How about giving a discount to passengers with no checked luggage
12:13 – The characteristics needed to become a VP for Pricing
15:57 – Why the need to look at pricing from a customer perspective, from an industry perspective and a competitive perspective
19:09 – Talking about the risk-averse nature of most management
21:06 – Who gets to be promoted or not
Key Takeaways:
“If you want to get the optimal revenue point you’ve got to get into some revenue management, which means there are loss leaders, there’s this cheaper prices, there’s this more expensive prices based on all the demand, all the demand profiles you have, the customer profiles you have. Revenue management is the ideal pricing and allocation of inventory and combining the two is an optimal way to generate the most for the system of that airline.” – Chris Amenechi
“Everybody in the world, whether it’s the phone companies, your cable companies, they’re able to restructure their rate structures. So they would give you the minimal package and they’ll go up to the big packages and then if you wanted anything additional was your choice. It’s the customer choice model and it was an upsell model.” – Chris Amenechi
“I would say two most important things needed to get promoted to VP are a dedication to being a bit of an innovator, a bit of an expert, and also a bit of a routine player. You’ve got to be able to do all three.” – Chris Amenechi
Connect with Chris Amenechi:
Connect with Mark Stiving:
- Email: [email protected]
Full Interview Transcript
(Note: This transcript was created by an AI transcription service. Please forgive any transcription or grammatical errors. We probably sound better in real life.)
Chris Amenechi
Pricing is not a sprint, it’s a marathon. And so, yes, in as much as you’re shortsighted to make a quarter work, you want to elevate the year in the next year in the next year.
[Intro]
Mark Stiving
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the soaring relationship between them. I’m Mark Stiving, today is the third episode of our season of pricing executives. We’re going to do 5 to 10 episodes in a row to learn how pricing executives think and hopefully figure out how to get you promoted. Today, our guest is Chris Amenechi. Here are three things you want to know about Chris before we start, he has been in the airline industry his entire career. He actually spent 20 years United Airlines Continental. He has a side job as a Managing Director of an investment consulting company. He is currently VP of Pricing and Revenue Management for Copa airlines. And I am fascinated by airline pricing. So welcome, Chris.
Chris Amenechi
Hey, thank you. It’s a privilege to be here.
Mark Stiving
How did you get into pricing?
Chris Amenechi
Well, interesting story. At the time, or in the airline business, we call it, it was called yield management at the time I got there it was pricing, yield management, or revenue management. And that was considered trendy at the time. And the way to figure out how to maximize revenues. The airline business, I guess, before I got into it, I’d heard about these complicated ways of making money. Because one price did not make it happen in terms of profitability. And of course, in college, you’re like, well, there’s got to be a better way to do it. It’s got to be very scientific, very mathematical. And so, an opportunity came and I took it.
Mark Stiving
Okay. And so first off, what’s the difference between revenue management and yield management? Is there a difference?
Chris Amenechi
Yes. And no. That’s a pretty bad answer. But I would say this. I think one is a bit of an old school situation, one is the proper way to do it. So, yield management was the idea brought that, we’ll call it the old school way of mentioning it was to say, ‘How much could I get out of a customer?’ A max, I could get out of a customer by managing the inventory we have. So, what was the max yield I can get on an airplane? And that to the practitioners was the best thing ever. But that’s at the end of the day, you got to make a profit, right? And you’ve got to maximize the entire network of an airline if it was just one flight, and you had all the demand in the world and you’ll maximize yield. Right? However, if you wanted to get the optimal revenue point you’ve got to get into some revenue management, which means there are loss leaders, there’s this cheaper prices, there’s this more expensive prices based on all the demand, all the demand profiles you have, the customer profiles you have. And so, revenue management is the ideal pricing and allocation of inventory and combining the two is an optimal way to generate the most for the system of that airline.
Mark Stiving
Nice. So, in my mind, I always thought yield management was I want to manage the revenue of a single flight we’ll say, and revenue management might be more, I want to manage the revenue I can get from a single customer.
Chris Amenechi
The other way around, I want to manage the most and in today’s language, I want to manage the most I can get out of the wallet of a customer which becomes so what’s the best optimal price I know the customers are going to pay, and that’s the new world we need to get into. And therefore, that becomes the best revenue you can get out of the customer at that time, but you have to think about the long term as well.
Mark Stiving
I promise we’re not going to talk about airline pricing the whole time, but I’m apparently curious about some of these things. I heard that airlines were not profitable until they started all of these fees that we see added on to flights nowadays. How much of the profit comes from the fees?
Chris Amenechi
Good question. I would say that is not an overwhelming truth. I would say in the United States, it depends on the lifecycle of the airline. In the United States the really big airlines who had grown in the good old days it was difficult to make a profit because of the cost structure. And there has been business for 30, 40 years, and you build up a significant overhead like any other business And so to make money with competitors over the place, instead of raising prices as some businesses do, they basically prices were coming down, your infrastructure costs are going up so those difficult to make money and other airlines that were newer airlines that could make money at those low fares because there’s a low-cost structure hence the term LCC, a low-cost carrier. Southwest is one of them, Allegiance Spirit, all these guys have come about and are able to make a buck.
Mark Stiving
I would think that way was People’s Express, I think.
Chris Amenechi
Yes, speed abolishes, if you want to go back to that time. Yes, there was Laker Airways, which was probably in some cases one will say the originator of the low-cost transatlantic business. Peoples Express was a huge game-changer for the US domestic market. And then they got into the international business as well. So, the $39 fares for a big hub carrier was sort of the idea there. So, you have that. But now I think what you’ve seen is, with consolidation, or restructuring of the business or restructuring of the finances of the airlines, and we’re going through that. Now again, you’ve seen airlines make money. Size matters. Also, the smaller airlines would make money, in fact, the most profitable airlines are not the bigger airlines, they’re the smaller airlines. Copa, for example, is one of the most profitable airlines. Ryanair, EasyJet in Europe, so they figured out a way to make money. Now, let’s get into the ancillary piece, which is what you talked about the fees. Yes, everybody in the world, whether it’s the phone companies, your cable companies, they’re able to restructure their rate structures, right. So, they would give you the minimal package and they’ll go up to the big packages and then if you wanted anything additional was your choice. The customer choice model and it was an upsell model. The airline was still doing one price for all. But that doesn’t work. And so yes, the idea that you would give the customer the choice as to the service they want, or that the service you were offering was the right thing to do. And yes, that has helped increase profitability. For the big guys, it’s a big piece of the profitability.
Mark Stiving
I remember I was teaching pricing when all the airlines decided they’re going to start charging for checked luggage. And I use that as an example in my class on people thinking something’s fair or not. You would not believe how upset everybody was over that one issue.
Chris Amenechi
Yeah, I would say you would expect something like that. But I want to take you back to similar exercises that have happened. And this is just a structural change in time. If you remember with phone bills before we even got into mobile phones. At one time, it was just a big, they’re just these big monopolies, right? And whatever they charged, you paid, it was regulated. And then it got deregulated. But there were still these great charges that you paid for a long-distance call. Then it started to morph into, you know, daytime, nighttime, national, and now it is data and it’s got into all of these different packages and time, everybody’s still pissed off. But it is, over time it has become part and parcel of human nature in the world to just accept phones is something that you do, and this is what you pay for. Right? And so, you just go to the cheapest provider or you stick with a provider you trust. The same thing happened to cable right here, one price and you got these many channels and that was it. And it kept going up. Right? How come people didn’t get pissed off then? Now, it is basic, it’s super, it’s super. And you’ve got all kinds of different variations of price. But everyone has gotten used to it, doesn’t mean they’re not pissed off, they’ve gotten used to it. Similarly, whoever started doing batteries was going to get hit. That was just a natural phenomenon, you’d have the courage to do so. And that’s sort of what has happened. If you look at the car business, everybody stuck, the big car companies, stuck a sudden model of pricing. And then you have the new entrants that have said, No, we’re going to do it differently. We’re going to price higher. We’re going to change the way we model the car, the way we build the car. Well, people are willing to pay for that coming up and stuff.
Mark Stiving
Yep. Well, so the other example I love to use is still in the airline industry. And if you go back 10 years prior to that, remember when they started charging for meals. They stopped getting free meals.
Chris Amenechi
Yes. Right.
Mark Stiving
And so, yes, get used to it we become. It’s now…
Chris Amenechi
Desensitize…
Mark Stiving
Desensitize, yeah. The checked luggage, people are not upset about it anymore I mean they’re upset but nothing like they were when it first happened.
Chris Amenechi
I’m not absorbed in the airline business of being the smartest marketers in this respect. And I’m sure I’m going to get a lot of heat for saying that. But I’ve always said it across the board. We’re pretty bad marketers. And the idea for us was, if we’re going to introduce these things, we should have done it in a customer appealing way, make it the customer’s idea, right, as some other industries do, and then market it appropriately. The problem we have and we had at the time, most of us didn’t have the kind of money to go into that sort of consumer-branded perspective, which no one will understand and no one cares about, but that’s just the backpack but if you just did the price those who are going to pay were going to pay because that’s part of the business. And if you’re going to travel, you got to carry luggage, right? And so, you just charge the price. That was it.
Mark Stiving
So, could you imagine had you not said, we’re going to charge for check luggage? You said we’re going to give a discount to anybody who doesn’t check luggage?
Chris Amenechi
So, the beauty of all of this is that the conventional wisdom is, ‘Oh, yes. If you always give a discount, things work very well. ‘ That’s just the best thing to do. Now you get you can’t think you will be out of business. Right. And so, one of the things you will find is that what customers say what customers do is very tricky, right? And there’s always the idea of, oh, we’re going to follow everything the customer says, that is not the case customers behave differently.
Mark Stiving
So please, Chris, don’t imagine that I was saying we’re going to give a discount as we raise prices by $25. That’s right. W would give a discount to anybody who didn’t want to check one.
Chris Amenechi
One. Yes. But unfortunately, a lot of business, you cannot do that. If you try to do that and the other airlines don’t do it.
Mark Stiving
Yeah, it’s a competition. Absolutely. Okay. I’ve had so much fun just talking about airline pricing. What I really want to talk to you about is career and people and skills. And so, let’s start with your career. What do you think helps you get promoted to be a VP of pricing? What were the tricks?
Chris Amenechi
Important question. I wish I could give you the recipe but I’m sure most of us will figure out a way to say that. I would say the two most important things were just a dedication to be a bit of an innovator, a bit of an expert, and also a bit of a routine player. You’ve got to be able to do all three. And so, let me start with just being an expert. Yes, the natural tendencies you have in terms of skills and capabilities. And so really understanding your business, knowing what your competitor does, and what other industries do, and you’re not one-dimensional, you need to be multi-dimensional. That’s one, two. And the innovator means you are able to use all the skills to influence the output of the expertise that you have. And that means just bringing some science into some of this, bringing technology into it, changing processes, dues, and cost of performing the job, and also building the right team around you and championing your team, sometimes when no one else believes. You’ve got to be able to take people, show them things can happen, and success can come from the ground up. It’s difficult for some folks to do that they always want the best of the best. But I believe in a diverse team. And I believe in a hungry team and a hungry team of doers gets you to where you need to go for the right guidance.
Mark Stiving
I think all three of those were great. Can we dive into each one just a little bit?
Chris Amenechi
Sure.
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Mark Stiving
So, we start with the expert. One of the things I find, and I’ll use the word pricing professionals meaning people who are in the role of pricing in an organization or in an industry. They seem to be really good at their specific industry or their specific company, but they don’t see outside their industry that much. Well, how do you advise or get people to look at what’s going on in other industries or other businesses that aren’t what we do today?
Chris Amenechi
Yeah, I would say just because of a matter of practice, you know, living life every day by talking about pricing here. But as you go to the grocery store, you know, if you’re really passionate and you’re an expert about that piece of the business, and your pricing, generally, you’re going to analyze everything you see, you may not care necessarily as a shopper to say, you know what, I’m just going to negotiate this to death. But you’re going to be fascinated with how do I come up with $3 a pound? Right? And why is it this? Why is it that you’re going to ask those questions? And, you know, you broaden your skill sets by connecting to some of these folks in these industries and ask why, you know, why is it this way? I’ll give you a very specific example around ancillaries that’s done very well in the travel businesses, the cruise lines, one of the things that generate a ton of money for the cruises. It’s not necessarily the biggest profit maker but a photograph? All emotional buying. And if you ever look at your bill, at the end of the day, the cruise line should going to be outstanding as to how much you just spent on taking pictures. Right? And the answer is why a customer’s so I’m using a personal tip gullible enough to spend that much you can take these pictures themselves, all the selfies even with all of the technology, you’re still paying that much to take the pictures on these cruises, right? It’s an experience. It’s not about economic prices. It’s really about behavioral prices. Right. And so, knowing the context of closing the deal is important. And being very curious is essentially needed to know why people do what they do. From a customer perspective, from an industry perspective and a competitive perspective. You’ve got to also look at other industries to see the reactions that are happening. Right? Pharmaceutical prices, why is it the way it is? Right. Your airline business is very dynamic. Why is it the way it is? The phone business is even more dynamic. Why is it the way it is? And the other piece is to understand your distribution pipeline, follow the money, right? Everyone says to follow the money, okay, go follow the money. Why is it that the time the customer gets it to the time the product is created? The difference between that, is it wasteful, additive cost, right? Is it just rent costs? Or is it true costs? And if it is, then you’ve got to understand where you should be pricing and how you need to move the industry appropriately in a competitive environment.
Mark Stiving
I think that was a fabulous answer. Let’s jump into innovator for a second. And when I think of innovation and the things that you described, technology-wise, it’s almost like we’re trying to change the way the company does something today, as we might need to automate it. We might need to put in new tech systems something and causing a change in a company is really hard. heart?
Chris Amenechi
Absolutely.
Mark Stiving
Sounds like it’s a leadership influence type issue. Is that the way you’re thinking about as well?
Chris Amenechi
Yes, it’s, well, there are two sides to it. One, you have companies where, by nature, the leadership needs to be conservative, the caretakers of the value of the basic value of the company, and the profitability of the company. So, they’ve got that fiduciary right. And so, the risk is not necessarily what they do best. Right? And you’ve got to manage around that to make sure it’s the risk-averse nature of most managements. There is a window that says it’s not that risky, you can do it, you’ve got to pitch it the right way. And when it fails, we’re always very successful about that because the concepts that you’re trying to bring to the table are complicated, so difficult to explain. And you got to bring it down to the way a five-year-old will understand it, which is not easy when you deal with pricing algorithms, AI, technology, you’ve got to see who’s looking at you like what the hell are you talking about? Talk to me like five years old? If you can’t sell me on that, then it’s risky.
Mark Stiving
Right? We have worse and so why would I change it?
Chris Amenechi
Exactly? Why will I add more people? Why? Why would I? Why would like to take the chance of decreasing people and spending more money on capital to do this? You know, you’ve got an all the situations are different, but you just have to bring the pitch appropriately. Whatever the pushbacks are, you go back and do your homework and come back with a second pitch if you believe in it that much, right? And you know what’s going to work, then that’s what you’re paying your price leader for is to help you make money and to convince you that it’s going to make money. It’s no different than trying to get an investor to invest, right? It’s the same thing.
Mark Stiving
I think what you just said was really key in this area. If you believe in it enough, and you think it’s going to work, then you got to keep trying. Yeah. Keep pushing.
Chris Amenechi
I’ve gotten a lot of noise in my time.
Mark Stiving
So that brings us directly back to the third one you said was the team. And so, as you put your team together, you know, I want everybody who’s listening to this to figure out how they’re going to go get promoted. And so, who do you promote? You’re looking across your team, you say, ‘Oh, this is the type of person who’s going to get promoted or not.’
Chris Amenechi
Yeah, I mean, this area gets into all sorts of touchy issues, you naturally want to promote the person who complements you. When I say complement, you put the context to that, meaning, as a leader, you have certain skill sets, and that skill sets someone who has the same and drives in the same manner as you do will naturally be a favorite. And if the demeanor is very much like yours, you naturally gravitate to that person, that’s just normal. But you have to have the discipline to be a bit more critical in that sense and say, ‘Look, okay, I know this person. Yeah, I’m going to promote this person. Certainly, everybody that comes to my group, I will promote all of them, because that’s, they’re like me, and therefore, I want everybody in the department to be like me, it is a natural fallacy of every leader. Right? And then you find if everyone is like you, at the end of the day, you don’t progress, because you never have that counter thought. And you’re always in a one-track zone. So, you’ve got to then say, look at the spread of the folks. Who is the grinder, does the work, who follows the directions, questions a couple of things, not to say the person is not smart, but they’re a grinder, that’s the person who gets stuff done. Who’s your finisher, that’s who that person is? Then you’ve got the folks who shake up the system. And sometimes you need those sorts of people to balance the team. And you go get someone like that because that person is going to shake up the status quo and help you. Right, then you’ve got the facilitator, the person who listens to that innovator, and also knows how to work the grinder to get stuff done. Right? three key skill sets that should be in your immediate team. And you know, if you had a team of 200, and you needed four leaders to move a team of 200 you need to have the balance of those guys, right? Because if you are the drivers to lead all the time, then you’re going to need these guys to work together. Right? And so, you need some form of a balance to make sure you can have everybody driving, right? Who’s going to get stuff done? And unfortunately, a lot of teams fail, because there are people who don’t get stuff done.
Mark Stiving
Yeah, fascinating. Okay, and so I need to know, which one of those people gets promoted?
Chris Amenechi
It all depends. It all depends on what you need at the time.
Mark Stiving
So, you’re saying you need representation from each of the three in the management levels?
Chris Amenechi
Yes.
Mark Stiving
Okay. And it seems like by the time they get to your level, you need to understand all three?
Chris Amenechi
Absolutely, you need to have a balance of all three, I believe, right? In most of the leaders, which is why if you look at the study of the organizational trends we used to have back in the ‘80s, ‘90s, and 2000s, you need to, the GE models to rotate your across everything, put you in different scenarios, and build out in a well-rounded manner. So now you’re ready to go run the business. Well, in today’s world, you don’t have time for that you don’t have a set of companies anymore. And so, you either you’re going to build that skill set driving a startup, you’re going to build that skill set in a midsize company. And if you’re in a large company, those rotations are not happening as much, right? And so, you’re going to have to create that within the group that you’re going to grow up in. If that’s the way that company works, and then you need to make the move yourself to push yourself out of your comfort zone into other groups, where you have to be a facilitator as a leader because you’re not the expert. You need to be the grinder because you’re not, you’re not the innovator, you’re not the facilitator.
Mark Stiving
I think the thing I like what you just said the most though, is you have to push yourself outside your own comfort zone.
Chris Amenechi
Absolutely.
Mark Stiving
You got to figure out how you’re going to grow. You have to take responsibility for yourself.
Chris Amenechi
Yes.
Mark Stiving
Chris. We’ve already gone over time. I knew I was going to love this conversation. But I have to end with this question. What’s one piece of pricing advice you would give our listeners that you think would have a big impact on their business?
Chris Amenechi
I mean, that’s a big question with many different answers. But I would say, you know, pricing is not a sprint, it’s a marathon. And so, yes, in as much as you’re shortsighted to make a quarter work, you want to elevate the year and the next year in the next year. So, your strategy needs to be sound, this will be adaptable. But the whole idea is to get your product depending on what it is to be at the top of the marketplace.
Mark Stiving
Nice, absolutely. perfect answer. Chris, thank you so much for your time today. If anybody wants to contact you, how can they do that?
Chris Amenechi
I’m on LinkedIn and it’s the quickest easiest way today to reach anybody and I’m open and not closed. So, you can just reach me on LinkedIn.
Mark Stiving
Okay, I will make sure your name is spelled correctly in the show notes so people can find your LinkedIn.
Chris Amenechi
Thank you.
Mark Stiving
All right, Episode 83 all done. Would you please leave us a review? They’re very, very valuable to us and I also said that I would start reading some of these. Quirky Z on iTunes wrote ‘What an incredible value. Seeing a new episode of Impact Pricing in my feed is one of the best parts of my week. Mark delivers structured, insightful interviews with fantastic guests that really get me thinking about how I can go make an impact. Thank you, Mark.’ So please join Quirky Z and leave us a review. Also, don’t forget to join our communityofchampionsofvalue.com. That’s where you’ll see all of the free content I put out, memes, blogs, videos, podcasts. If you have any questions or comments about the podcast or about pricing in general, feel free to email me, [email protected]. Now, go make an impact!
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