Apr. 18, 2012 | by Jeremy Head
I’m participating in an event next Wednesday which iCrossing is hosting in association with Travolution called When Travel Brands Fight Back. I felt it would be great to set the scene a little ahead of times and maybe even start the debate early!
So, what prompted us to choose this particular topic? Here’s a perspective on where the online travel sector is now and how we got there for big travel brands like legacy airlines and major tour operators. It’s intentionally simplified to make a point and, I hope, to catalyse the discussion.
Cutting costs, cutting service?
It starts about a decade ago when online purchasing technology really started to work. Suddenly websites could be much more than just a bit of window dressing. These technical advances offered huge opportunities for achieving economies of scale. You could now service lots of people at the same time – who needs telesales people or travel agents if a customer can query the booking database themselves and book their own flight or holiday? Cue big investment in web dev and cutting back on traditional customer service and sales channels like travel agents, brochures and telesales agents.
In the short term it probably worked – margins improved, the finance team were happy. But the technology wasn’t as good as it first appeared. (I often think we forget how maddeningly slow it was and how often it fell over in the early days.) From feeling like they were in control (and liking that feeling) customers began to sometimes feel powerless. And that made them really frustrated.
A customer service vacuum developed. The new technology promised more than it delivered – but when it went wrong, companies often weren’t well enough resourced to deal with the problems.
In the meantime a group of challengers innovated with the technology some more. Price comparison and then metasearch sites sprang up – offering customers the chance to compare prices much more easily and to query a host of databases all in one go. These newcomers focussed people remorselessly on price as the only distinguishing factor between similar products. They made a stack of money on referral fees and commission. They ploughed it back into aggressive advertising that pushed the price message even harder. It made the travel brands feel they had to compete on price too. Which they did. In some ways, cutting costs is the easy option too. Who needs to innovate with new, better products when you can just use technology to squeeze the costs out of the supply chain?
The next technical leap forward
Social web was the next big thing to arrive – and it allowed customers to find an outlet for their frustrations. Divorced from those more traditional avenues for help making decisions or answering questions, they resorted to asking their peers on new forums and review sites. (Who’d have imagined a few years go just how powerful Trip Advisor in particular would become in driving bookings?)
The net result? Frustrated customers, focussed on price, increasingly vocal about a company’s occasional mistakes and mishaps, increasingly brand agnostic.
With the benefit of hindsight, maybe just letting the customer choose their own holiday and book it was quite a risky thing to do.
Brands lost control. Other people stepped into that space left behind and started to develop relationships with their customers. And customers started talking online about their products in ways completely at odds with the carefully created expensive brand messages they were broadcasting.
But travel is a complex product. And it’s getting more complex. Customers are becoming more and more demanding too – they want exactly the right holiday for them and increasingly they expect to find it. And yet they still struggle to do this.
There’s huge opportunity for brands to fight back… do you agree and if so, how?
wade noble Users are becoming increasingly sophisticated and the ability to research a tour operator, an airline, hotel and even local restaurants is only ever a click or two away. I think this has made it very difficult for many Brands to rely on traditional methods of actually driving profits. For example, some brands I've worked with have relied on up-sells such as adding insurance, day trips and car hire to what was a low margin holiday in order to drive a profit. The actual holiday package or flight was in many cases a break even, or even a loss making product. Although only one example, in today's world the savvy traveller often now knows if these add ons are a good deal or not and is prepared to tailormake a holiday experience to suit their own preference or budget, potentially buying from several suppliers. Brands need to understand this and similar dynamics - with their Branding strategy changing accordingly. That said, there will of course be a demographic, both online and offline that will be prepared to pay a premium for this one stop shop kind of approach and this is an example of where Brands need to be very sophisticated in their approach to marketing. A market that is increasingly fragmented, not only by levels of user sophistication, but also by purchasing power is going to be difficult to service profitably in any kind of generic manner.
I fully agree with Jon that it's going to be difficult for any travel brand to be successful when it tries to be all things to all clients. Some large, well known Brands that operate this way may struggle to differentiate themselves against smaller, unique and demographically and/or product targeted Brands.
One important aspect of our current economic environment is Brand recognition and subsequent levels of trust. With some relatively high profile brands struggling and many others going under, emphasising ATOL/ABTA protected status and/or other similar guarantees is essential and may also be a way for some larger brands to maintain market share through the perception of size equalling greater stability and user belief that any of their purchases are protected against default. This could and should be leveraged wherever possible, either by advertising, or reinforcing the guarantees onsite.
Despite the fact that the tools are available, there are still many travel Brands there are have a limited understanding of how to measure their digital performance with what I would say is a general lack of understanding of how their search, display, social, affiliate and other channels work together. Successful Brands will need to have a solid grasp of how these channels impact each other and can allocate their budget accordingly.Apr 23, 2012 08:39 pm
Jeremy Head Hi Jon
Yes. This is exactly how I see it too. I was really struck by how a certain very large mainstream travel co I once worked with was very good at buying up nice small tour operator businesses making them more profitable by integrating them onto its proprietory systems and cutting costs... only to wonder why a few years later no one had a clue what the brand stood for anymore and why anyone should book with it... price was by then the only differentiator.
I agree too about the possible impact of google in the travel vertical online. It's very clear where the'd go if they could without causing a storm with competition authorities and the big travel brands that advertise with them.
Looking forward to discussing this some more!
JeremyApr 23, 2012 10:42 am
Jon Munro What I find interesting about the issues raised in this thread is that once again it demonstrates that a lot of what we understood as good marketing practice in our traditional world still applies very much to the web. Understanding your customers, creating strong relationships with them based on personal service and delivering on the brand promise continue to be as important as ever.
For me a travel brand should have a clear point of view around the products and services it provides; one that clearly conveys what it believes in and differentiates itself from its competitors. This point of view provides a platform for developing the brand story and engaging with the customer and the conversations they are having around the brand, it’s products and services and the specific destinations it serves. Of course that needs to be backed up by delivering a great experience. One that supports the brand’s point of view – both in the real world and online. For example, a luxury travel brand providing specific functionality and using existing tools that support it’s ethos of personal customer service or a green travel brand supporting community engagement around ethical travel issues for the benefit of the destinations it serves.
The inevitable conclusion for mass-market travel brands that are trying to be everything to everybody is surely blandness and mediocrity. They have no clear point of view and that creates a void that is all to often filled by price led competition and it provides a very weak starting point for adding value and great customer experience.
Whilst price comparison is inevitable and there will always be a clear place for it within travel does this argument support the development of more meaningful niche brands that can deliver a clearly differentiated experience - which also defines the way they behave on the web? If the big players like Google continue to get more involved in travel and supporting a direct route to market for individual travel businesses surely travel brands will need to work even harder and smarter to compete?
History would suggest however, that if travel follows other sectors there is and will continue to be plenty of opportunity clear for smart brands to compete and redefine the space they operate in. Interesting times ahead for sure.Apr 23, 2012 08:10 am
Jeremy Head Here are a few suggestions about how travel brands can fight back... it's top of mind stuff bashed out over my lunch hour... what do you think?
1) Personalised service should really matter
Social media has really focussed attention on this – but let’s face it, customer service is a key differentiator especially in quite commoditised marketplaces like travel. Smart travel brands should push excellence in customer service as a core element or their offering and commit funds to it. Customers increasingly expect fast and personal responses to their questions. Using new tools like twitter to manage customer relations is key. Airlines like easyJet are doing a great job already. Smaller tour companies get this – I think bigger travel brands have maybe lost sight of it.
2) Data insights should be ramped up
Your easiest sale and your highest margins probably come from that customer base of regulars who book with you every year. Do you know who they are? Are you nurturing those relationships like never before? Are you devoting the right resource-time to the right customers and prospects? Data mining skills have never been more important and will continue to be so – particularly as the richness of data available about both customers and prospects gets ever greater.
3) User experience needs to really improve
Another key element of customer service is about how well your website works for the user. Too many travel websites remain bloated monsters full of unnecessary information and complex booking processes. Four Seasons just spent USD 18 million on revamping their site from scratch. Now, that’s a real investment in better user experience - http://www.fourseasons.com/. Expect more smart travel brands to invest in content strategies informed by careful user and user experience research – really honing the book process and the information on their websites.
4) Brand advertising needs to be more aggressive
I remain bemused at how most above the line travel advertising ignores the threat of price comparison and meta-search sites. In the Financial Services space people like of Direct Line make clear that their products are ‘not on price comparison websites’. OTAs have long featured the split screen shot of two customers experiencing the same hotel/holiday but ‘one paid far less’ angle competing aggressively with travel brands. I’d be fighting back making clear the downsides of using UGC sites for holiday research and booking with metasearch sites. How about a split screen with two people trying to book a holiday with one doing it all in 15 minutes flat and the other taking hours?Apr 20, 2012 12:57 pm
Stuart To expand...
I know you’re talking about brands (and increased direct sell in effect), and agree to your post in relation to traditional travcos – your Thomsons and TCs – and cruise (pulling back inhouse), and hotels (see the new for season site) but there has been a different journey over the last decade for airlines (LCCs and legacy), independents, car, T & As etc (IMO).
Secondly what does the future hold. Will Apple or Google get into travel and iTravel in a big way. Will that feck the big travel brands or is that an opportunity at a time of fragmentation? Might do. Certainly shook up and killed a lot of the music industry.
Methinks this story is far from over.Apr 18, 2012 04:24 pm
Ifraz Mughal Interesting approach Jeremy!
I work in the online travel industry and instinct tells me that we need to open up our closed business structures so that we can provide real value to customers. I feel the web has delivered on its main promises - allowing the customer to research trips at their leisure without a commissioned sales person hassling them, the ability to check multiple providers at their leisure, the ability to see what others have said about providers.....this list grows all the time.
Yes the Internet has disrupted things in the beginning but things needed shaking up desperately in my view. Bloated prices, bloated bellies of travel agents, consumers in the dark....
Travel and Finance are not so complex - they are made complex by the companies flogging them so they can add their mark-ups without question. It is time to embrace the connected consumer and move and adapt with him or her wherever they may chose to go.Apr 18, 2012 04:18 pm
Stuart No it hasn't, but it has certainly given them a massive boot up the arse. The good ones are still doing ok, the poor ones have been squeezed. I like the way the conversation is moving away from just price to the really important stuff; getting pax what they paid for, and delivering omn service. Long way to go I suspect.Apr 18, 2012 03:30 pm
Jeremy Head Hi Andy
Thanks for commenting. I agree - for me a big part of this is about getting back to the tried and trusted basics of good marketing practice. Maybe it's just because I'm getting old - but the web so often promises things in a moment and then actually fails to really deliver. Great products, dedicated customer service - it all sounds so dull, but actually it works.
It's not just the travel sector where I see this - financial services too.
PS Just read that link you provided. Wow. Truly remarkable... rental contracts stipulating what you can and can't say about the property online once you have stayed thereApr 18, 2012 02:28 pm
Andy Jarosz Interesting topic. When you you mentioned travel brands fighting back my first thought was this story:
http://www.elliott.org/blog/new-confidentiality-clauses-can-influence-vacation-rental-reviews/ - I hope that's not how the fight back is going to look.
Will brands ever again be able to have the control they once enjoyed over the way consumers received their message? I don't think they will and that's probably a good thing. Whatever the flaws of UGC (and there are many) at least those businesses that offer a customer experience that is consistently a world away from that of their promotional messages are called out for their failings.
I suspect the most effective 'fight backs' will involve delighting customers with excellent experiences (boring, I know) and then making it easy for them to tell the world via whatever channel is the current flavour of the day. Doing the basics very well (as you allude to with the remarks about customer service) is not that commonplace and those that do it can still stand out on something other than price.Apr 18, 2012 01:55 pm
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