Étiquette : online behavior

Catégories
Marketing @en

Retargeting: A growing trend in advertising

The US travel industry will spend US$3.35 billion on online advertising this year, a 14% increase over 2012, according to eMarketer. When it comes to optimizing the results of ad campaigns, some methods, like retargeting, generate truly impressive results.

What is ad retargeting?

Ad retargeting, also known as remarketing, is a behavioural segmentation strategy that leverages browsing data. When visitors leave a brand’s Website, a cookie is placed on their browser, which means they will subsequently see banner ads from this same brand when navigating on other sites or search engines (see image below). The business thus boosts its return on investment for advertising by targeting these potential clients, who are more likely to purchase than those who are unfamiliar with the brand.

AL_Reciblage_publicitaire_image1
Source: LaPresse.ca

the placement of the ad is less important than the person targeted.

As Andy Kauffman, Vice President, Global eCommerce Marketing at Marriott, explains, the placement of the ad is less important than the person targeted.

Different types of ads

The three types of banner ads present different content:

  • • The first displays just the brand, with a slogan that is catchy but not personalized. This generic banner reminds consumers of their visit to the site.
  • • The second features the most recent product viewed by the searcher before leaving the site. This type of banner can be used to target visitors who failed to make a transaction or else abandoned their shopping cart before purchasing. Since visitors like these were very advanced in the buying process, it may be easier to convince them to make a purchase. The brand may also offer a discount for the product in question.
  • • Finally, the third type of banner shows products similar to those viewed or purchased. Banners like these are the most relevant and personalized, because their content responds to the interests of the individuals targeted.

Real-time bidding

Real-time bidding (RTB) platforms for the sale and purchase of advertising space make retargeting even more effective. Known as ad exchanges, they operate according to the needs of advertisers and the availability of publishers. According to online marketing firm Mediative, RTB enables buyers to assess the value of an ad impression in real time and determine its current relevance to their campaign. Publishers no longer have to set a price in advance for a predetermined number of impressions, while buyers can purchase advertising when the current bid meets their budget.

Available to a variety of businesses

businesses with relatively modest budgets can give the impression of advertising across the entire Internet

Josiah Mackenzie, Director of Business Development at ReviewPro, notes that the primary advantage of retargeting is that businesses with relatively modest budgets can give the impression of advertising across the entire Internet. While there are specialized firms such as AdRoll, ReTargeter, Mediaforge and Criteo working in the field, businesses can also create their own retargeting campaigns using the Google Display Network to publish ads on affiliated sites or the search engine itself. In addition, this system offers users the option of targeting different customer segments (e.g., customers who have made a purchase in the last 30 to 90 days, customers who have previously taken action on a site, etc.).

In the travel industry, Expedia offers retargeting to its clients (hotels, airlines, etc.) through its marketing service, PassportAds. Banner ads are then displayed on selected sites or on Facebook, and videos can be posted on YouTube as well as major news sites, with the goal of directing consumers to the advertiser’s site.

 AL_Reciblage_publicitaire_image2

Source: advertising.expedia.com

For example, the Las Vegas destination management organization used this tool to boost reservations for its member hotels listed on Expedia. The campaign enabled it to increase its return on investment for advertising expenditures by 120%.

Does retargeting work?

According to John Hach, Vice President, eMarketing Solutions, for TravelClick, retargeting is more effective than traditional advertising. Max Starkov, President and CEO at Hospitality eBusiness Strategies, maintains that Google retargeting campaigns generate more revenues for the hotel industry than the Google Hotel Finder metasearch engine.

Personalized banners are more successful than traditional banner ads. Pascal Gauthier, of Criteo, notes that the average click-through rate of a personalized banner is 0.6%, but that this rate can rise to 2.5% for certain campaigns, in other words, five or six times the rate of a generic retargeting ad.

Hipmunk, a travel metasearch engine, conducted a remarketing campaign with the help of AdRoll. The result was increased conversion rates (when a user visits the site) of 75% in the case of visitors who had previously searched its site, and 50% in the case of those who had seen the banners after having purchased a product via the metasearch engine.

Social networks get involved

Although it is still being tested on Twitter, retargeting has been available on Facebook since 2012. Using real-time bidding, Facebook Exchange (FBX) enables brands to insert their banner ads in the right sidebar of users who have visited their Websites or, since March 2013, in their news feed (see image below). The results have been dramatic: according to a report from AdRoll published in June, retargeting ads displayed in the news feed generate a click-through rate 49 times higher than those displayed in the right sidebar and 21 times higher than retargeting banners displayed outside social networks.

 AL_Reciblage_publicitaire_image3

Source: mdgadvertising.com

Facebook’s mobile application takes things a step further by enabling businesses to retarget users who have already downloaded a brand’s app. A banner ad can be inserted in the news feed with a clickable button (Book Now, Watch Video, etc.) leading to the application (see the example of Hotel Tonight below).

AL_Reciblage_publicitaire_image4

Source: mobilemarketer.com

More and more tourism businesses will likely adopt these ad campaigns, given the excellent return on investment. This communication and loyalty tool is particularly suited for mobile devices, as it can use geolocation to provide even more relevant content. The future looks bright!

Catégories
Customer segments Products and activities

More to luxury travel than meets the eye

The transition from an emphasis on the tangible to a focus on the emotional is changing the face of luxury travel. Products are evolving to include uniqueness, eccentricity and exclusivity in the travel experience. In the luxury market, authenticity is key and providers have to keep things fresh.

Without doubt, today’s luxury consumers are increasingly diversified and their behaviour has changed over time. Travel industry insiders now talk about traditional luxury versus new luxury: the former is associated with five-star hotels, posh resorts and high prices, and the latter, while still expensive, is the anti-thesis of material consumption and the desire to possess costly objects. Focused on emotions and experience, it has more to do with the manner in which one consumes luxury items.

Luxury means…

  • a spacious hotel suite, a room with a view, a penthouse, a limousine
  • an upscale brand, a place where the staff knows your name

But it also means…

  • time, space, silence, privacy
  • an emotional experience
  • getting away from daily concerns and the complexity of the world at large to a place where everything is simple and easy
  • something original, out of the ordinary, and above all…
  • exclusivity!

A diversity of experiences, from the eccentric to the unique

A luxury traveller can rent a fifty-room castle in the Scottish Highlands for a family reunion or charter a fully crewed yacht for a honeymoon in the Mediterranean. He can practice an extreme sport and look forward to a butler and spa services at the end of the day. Interested in personal development, she can learn photography, sailing, join an archaeological dig or cook with a famous chef. Consumers are pushing the envelope in their quest for what is new and exclusive. Established standards are falling by the wayside; more and more, luxury clientele want to be where the action is and optimize the self-fulfilment aspect of their experience.

The upscale travel site www.thebluefish.com offers clients the chance to become a fighter pilot for a day (Top Gun Challenge), fly over the Himalayas and see the summit of Mt. Everest, take part in a high-performance boat race from Miami to Key Largo (Poker Run), take a private jet to an exclusive golf and safari experience in South Africa, and more.

Conversely, luxury travel can also cater to a completely different set of needs: relaxation, privacy, a focus on health, personal pampering and an opportunity to experience renewal. These other needs mean that companies operating in the luxury niche have to offer a wider variety of more sophisticated products – from spas to spiritualism and from mud wraps to meditation.

At the same time, there is the desire among luxury consumers for ownership – even partial – of something like a villa, yacht or condominium on board a cruise ship. There is also the « small is beautiful » concept, where guests seek the privacy of a residence club or the ambience of a small hotel to fulfil their desire for intimacy.

Many destinations that are still considered exotic, such as South America (with Brazil at the top of the list), the Baltic states, Africa, China, the Middle East, Asia and the Pacific Rim, are attracting new customers, while established urban and resort destinations (London, Paris, Tuscany and the Côte d’Azur) are holding their own.

Soul and style now the signature of the hotel industry

Prestigious institutions in the world of luxury accommodation have recently created chains. For example, the Crillon luxury banner has the celebrated Hotel de Crillon in Paris as its flagship, while the Waldorf-Astoria has given rise to the new Waldorf-Astoria Collection. Another new chain, Capella Hotels & Resorts, has been launched under the direction of Horst Schulze, the man behind the recent success of the Ritz-Carlton.

For the past several years, celebrated architects and icons from the world of fashion and design have been developing hotels stamped with their signature style (there are hotels named Armani, Bulgari and Versace, and each of the 11 floors of the Hotel Puerta America in Madrid was designed by a famous architect). Bathrooms are getting bigger and more lavish. Many hotels are taking on local accents by using materials and décor that reflect the culture of the host country.

Customized and « tailor-made » solutions are now the order of the day. The size of a hotel is becoming a distinguishing factor because it is still quite difficult to deliver quality, personalized service in an establishment with over one hundred rooms. Long-established luxury hotels must shake off the dust if they want to attract Gen Xers (25-40 year-olds), a growing customer segment. In fact, the reputations and austerity of such hotels tend to intimidate these young consumers who are looking for a more modern image and the ease afforded by high-tech amenities.

Spa products very popular

Neil Jacobs, senior vice president-operations, Asia-Pacific, for Four Seasons Hotels, stresses that spas are now a given, just like restaurants and meeting space. Spas have become a deciding factor when selecting a place to stay. Although still in their infancy, destination spas are experiencing tremendous growth. Spas come in various forms: eco-spas, thalassotherapy spas, medi-spas, urban spas and ayurvedic spas (employing traditional Indian folk medicine), to name a few. The privacy afforded by spas, the service focus of these resorts, experienced therapists, authenticity, elegance, refinement and excellent cuisine (famous chefs) are all elements of a luxury experience.

Airline services taking off in all directions

The inconveniences of air travel (crowded airports, restrictive security measures, waiting times, deteriorating service, delays, etc.) discourage most passengers. To avoid these problems, to make every minute count, and to enjoy point-to-point travel with no transfers, many wealthy travellers are turning to various alternatives.

Air taxi services are becoming more common (e.g. Boston-Newark), offering competitive fares and reducing the delays associated with traditional airlines. A helicopter service (US Helicopter) now takes passengers between downtown Manhattan and Kennedy Airport in only eight minutes for US$160.

Rental, charter, co-ownership and ownership of jets are just some of the other options explored by wealthy customers. Growing demand has made the process easier and chartering a jet is becoming as easy as renting a car. The very latest service innovation is the membership card (which requires a large deposit) that enables the holder to subscribe for prepaid charter time at a lower hourly rate.

The new A380 airplane is redefining the notion of luxury service. Its interior can be configured to offer a bar, office, casino, gym, lounge, private sleeping area, open area so passengers can stretch their legs and, the height of luxury, showers! However, water for showers remains problematic because of the weight.

If you are in the business of luxury, it’s got to be real!

In this market segment, the « best » is standard. Although high prices remain a given, they are not the only mark of a luxury product. A number of words contribute to the perception of value: exclusivity, reputation, brand integrity, experience. The « take-care-of-me » attitude of this clientele, the desire for personalization and recognition of one’s standing all require flawless service and flexibility. Moreover, a personal butler for each guest is becoming the norm in the highest luxury bracket.

Although the luxury travel industry is booming, it is worth noting that the life cycle of a luxury product is relatively short and the concept of quality is no longer so narrowly defined. Company executives are feeling market pressure to create more diversified, authentic and unique experiences. Companies must constantly: refresh their products and embrace innovative concepts; update their products to keep them timely, modern and current; adapt products for every customer so that clients enjoy a personalized experience; and recruit exceptional staff who can deliver on the experience.

However, there is an industry trend towards one-upmanship that should be avoided. Is it necessary to offer a choice of 18 different pillows in every room? Does bottled water have to be served by a sommelier? Should customers be able to select from among 12 different pens simply to sign a restaurant bill? If a company is known for impeccable quality, customers should have total trust in the brand.

As clients in this sector become increasingly demanding, customer relations management is key to building loyalty. For this reason, providers must emphasize service quality, attention to detail (like a hand-written note) and extend their efforts both before and after the customer’s stay.

Sources:
– HotelMarketing.com. « Survey: 2006 Consumer Trends in Affluence & Luxury, » June 23, 2006.
– Smith Travel Research. « Experts Discuss Future Of Luxury Travel, » June 26, 2006.
– Travel Weekly, special issue « 2006 Consumer Trends in Affluence & Luxury, June 14, 2006:
– Chipkin, Harvey. « Hotels Indulge the ‘Give Me More’ Generation. »
– Chipkin, Harvey. « Spa-centric Hotels Part of an Evolving Trend. »
– Gebhart, Fred. « Private Jet Travel Taking Off in All Directions. »
– McDonald, Michele. « Airbus’ A380 To Send Luxury Transport Soaring. »
– Weiner Escalera, Karen. « Luxury Travel Now… And What’s Next, » [Hotel-Online.com], October 2005.
– Weiner Escalera, Karen. « Luxury Travel Now And What’s Next for 2006, » [Hotel-Online.com], March 2006.
– Weiner Escalera, Karen. « Luxury Travel Now And What’s Next III, » Smith Travel Research, May 2006.

Catégories
etourism and technology Trends

You haven’t heard the last of Web 2.0!

As the number of web users keeps growing, so the internet keeps evolving. It now features much simplified, more flexible and lower‑cost technology that encourages interactivity. Thanks to broader applications, internet users are now truly benefiting from the web’s participatory philosophy, forming virtual communities in which they share information about personal experiences, interesting websites, photos, and so on. Blogs, RSS content feeds, travel journals, meta‑search engines and podcasting have all emerged in the constantly changing new‑generation internet. Welcome to the Web 2.0 era!

The first generation has come and gone

Why is e-tourism evolving so rapidly? It’s important to first understand how e-tourism came about. Initially, it arose as an alternative to the traditional « off-line » reservation methods, and had just one motivation: find the best price. The consumer gained great transparency on prices and fares; this was the era that the firm PhoCusWright today calls « Travel 1.0. »

How Web 2.0 is taking shape will inevitably change the rules of the game for the travel industry. Consumers and businesses alike can now turn to ergonomic and useful solutions of all types that clearly alter the way people surf the web and change the travel-product sales approach. If the Web 2.0 phenomenon were to be described in one simple statement, it would be: « It is how internet users have taken control of the web. »

Now that we’re nearing the point where 50% of American internet users reserve their trips online, consumers’ increasingly intuitive use of innumerable applications enables them to play an active role. There are countless tools to assist tourists as they seek to find, or design, not just the cheapest trip, but the perfect trip.

Another aspect of Web 2.0 involves a rejection of traditional marketing channels as a source of persuasion. The internet user has become difficult to influence with classic advertising strategies, preferring to look for more neutral information sources, such as word-of-mouth recommendations or online forums.

As an example, Carnival added a section to its website called Carnival Connections that invites customers to use a discussion platform to plan a cruise (see photo). Carnival Connections offers forums (private or open to all) that let site visitors organize a cruise in detail, alone or through interacting with other visitors. It also features a journal of comments from past cruisers about their experiences.

What is social networking?

While Web 2.0 is still an incredibly abstract concept for most consumers and companies, 2006 is expected to be the turning point at which consumers and tourism organizations will begin to integrate social networking – a gathering place (virtual in this case, as it’s online) where relationships are formed among a great number of people with the aim of discussing a given subject.

First and foremost, social networking sites let internet users communicate with each other in an extremely efficient way, thanks to applications that enable them to locate specific interest groups. For instance, a birdwatcher can now easily share his passion with other birdwatchers through exchanging information, sharing photos, forming travel groups, etc. – in short, anything related to the interest they have in common.

Catching on

The « Social internet » is spreading, with specialty sites like YouTube, MSN Spaces, Classmates.com, Myyearbook.com and so on mushrooming. The New York Times even went so far as to attribute the rebirth of Silicon Valley to the phenomenon. The most popular of these sites is MySpace, which has some 80 million members and is clearly a leader. It had more than 51 million unique visitors this past May (30% of the total number of American internet users) and is poised to become, by autumn, the single most-visited website of all. People go to Myspace mainly to swap info about destinations, talk about their latest trip, post their photos, plan a journey with friends, meet like-minded people, etc. According to PhoCusWright, about 10% of e-tourists who buy travel online have already joined such virtual communities in order to get guidance while planning trips.

Multiple Web 2.0 developments

RSS Content Feeds
One word kept coming up at recent conferences on e-tourism: « involvement. » Simplified applications and intuitive user interface allow consumers to play an active role and let businesses know what they want. The best example are the RSS (Really Simple Syndication) content feeds that allow internet users to receive streaming information right in their computers, instead of having to do internet searches. The user employs these applications (feeds) to select particular topics of interest or websites from which he/she wants to obtain the latest information. Once the parameters are defined via a personal profile, the feeds become an alert tool and web content transmission mechanism tailored to the internet user’s needs.

As an example, online agencies like Expedia and Orbitz offer customers the opportunity to automatically receive all new promotions as soon as they’re posted on the site. Another example of the application would be a sports-news fan who receives from Cyberpresse all articles published in the sports section of the site.

Corporate Blogs
Meanwhile, more and more companies are offering feedback forums for customers. Many corporate blogs are set up with the aim of getting more direct feedback from customers, of soliciting their participation and getting their comments. Designated as a community space for the consumer, the revamped Sheraton website is a good example. Visitors are encouraged to share stories, advice and photos relating to their top travel discoveries, favourite destinations, etc. Sheraton management says the portal is a reflection of how people now research and buy their trips. In a context where businesses seek to show as much transparency as possible, such discussion areas help achieve this goal.

Wikis
Among many other concrete examples of what Web 2.0 has given rise to, the travel « Wikis » are worth mentioning. These are collaborative websites where any internet user can easily participate in authoring the content. The pioneering and most popular of these sites, TripAdvisor, has positioned itself as an encyclopaedia of travel destinations built upon the reviews of real travellers. The collection of all these personal tourist experiences is a powerful tool of influence on traveller decision-making and is enormously popular because of its completely neutral and transparent nature.

Implications for businesses

Now the big question is: what should we do to prepare for the coming Web 2.0 era?

Personalization of online content and community spaces provide whole new marketing opportunities for businesses wanting to target a very precise customer profile. These « involved » internet users, if properly approached, if solicited in the right place with offers pertinent to their profile, are liable to react very positively to product offers.

As most community sites include search applications in the form of a search engine or tags (key words related to content), it is easy to buy advertising space associated with categories that are innately compatible. For instance, many different groups gather and discuss travel-related topics at Myspace.com. In the illustrated example, you can see to the right of the page an advertising banner containing sponsored links related to this theme.

MySpace.com

Note that Myspace.com offers participants the option of identifying the information and products that interest them; for tourism companies, this is a crucial component of social networking. Every traveller who uploads a holiday itinerary identified with a keyword (tag) or a personal photo from a trip, or designates a favourite page, is giving managers very pertinent information about his/her personal interests and tourist behaviour.

You may not be familiar with these new players, but some of them are already among the most-visited sites on the web. Experiments on how to best utilize Web 2.0 from a marketing standpoint are only at the embryonic stage. Managers still have much to learn in terms of optimizing the use of these new technologies and the potential interactions with customers. It is perhaps too soon to overhaul your marketing strategies, but you would certainly be well-advised to adopt an open mind in order to properly anticipate the way Web 2.0 will influence how you do business and how to get the most out of it.

Sources:
– Aho Williamson, Debra. « The Social Net Catches More and More, » eMarketer [www.emarketer.com], June 26, 2006.
– Bray, John. « Web 2.0 Begins to Sprout in Travel, » PhoCusWright, April 19, 2006.
– Bray, John, Cathy Schetzina and Susan Steinbrink. « Six Travel Technology Trends for 2006, » PhoCusWright, February 2006.
– ehotelier. « ‘Social Computing’ and Enhanced Rich Content to Shape Future of Hotel Electronic Distribution, » 2006 HEDNA Conference [www.hedna.org], June 5, 2006.
– eyefortravel. « Online Branding Has Proven To Enhance Brand Awareness and Search Performance, » TDS Europe 2006 Special [www.eyefortravel.com], June 6, 2006.
– Lamarche, Simon. « Influencez en utilisant les communautés, » Adviso Consulting [www.adviso.ca], June 14, 2006.
– Poudrier, Sophie. « Le Web 2.0, les entreprises emboîtent le pas, » Bulletin SISTECH, CEFRIO (Centre francophone d’informatisation des organisations) [www.cefrio.qc.ca], June 2006.
– Ri, F. « internet 2.0, un nouvel eldorado? » Libération [www.liberation.fr], March 24, 2006.
– Schetzina, Cathy and Bob Offutt. « Social Technology Ushers in New Era of web, » PhoCusWright, April 2006.
– Wolf, Philip C. « Travel 2.0 Confronts the Establishment, » PhoCusWright, June 2006.

Catégories
etourism and technology Management

Price customization: bold… or deceptive?

Is it farfetched to believe that an online shopper’s browsing history could affect a travel site’s search results? It most certainly is not. Although the internet gives consumers a powerful tool for easy price comparisons, the downside is that it also enables retailers to collect detailed information about online shoppers’ spending habits. Thanks to the internet, businesses can now use a myriad of new approaches to efficiently adjust their pricing to increase profit margins.

Warning, you’re being tracked!

Thanks to browser technology, businesses now have the ability to store profiles of their customers’ buying habits, preferences, financial resources, and so on. Some companies judiciously use this type of strategic information to adjust their pricing according to a user’s profile.

According to Charles Leocha, a journalist for MSNBC.com, online travel agencies like Expedia use sophisticated software and browser cookies to analyze customers’ previous transactions. This means a consumer’s search results can vary according to the profile recorded. For example, if a particular consumer is shown more higher-priced fares – or fewer discounted fares – it could be because the system has identified him or her as a « good customer » who is more likely to purchase higher-priced items. In fact, this is a subtle way of preventing certain types of consumers from purchasing lower-priced items. It’s a little like banning well-heeled shoppers from dollar stores!

A concrete example

Although this type of marketing practice may seem like a paranoid example of Big Brother at work, it is nonetheless closer to the truth than to fiction. Online travel agencies may insist that such biases don’t exist, but our experience shows otherwise.

To test the truth of this hypothesis, we conducted a test with members of the Tourism Intelligence Network team. We ran a simple search on the Canadian Expedia site for a plane ticket from Montreal’s Dorval Airport to Paris’ Charles de Gaulle Airport, departing January 8, 2006, and returning a week later on the 15. However, our three searches, conducted simultaneously on three different workstations, produced three different results (see illustrations).

Profile 1

In the case of Profile 1, the lowest price offered was $800 for a connecting flight or one with 2 stops or more, with no direct flight option. As for Profile 2, the lowest price displayed was once again $800, but this time, we were offered a non-stop flight for $978. Finally, Profile 3 was offered a flight for the somewhat surprising price of $699, in other words, $101 less than the other two! And yet, it was the very same US Airways itinerary, with exactly the same departure times.

Profile 2

 

Profile 3

Read the fine print

Expedia’s policy with regard to using information collected from customers is as follows:

«Expedia.com collects certain technical information from your computer each time you request a page during a visit to Expedia.com. This information is collected from your computer’s Web browser to enhance your experience on our site…»

Few consumers are aware that retailers are able to manipulate online shoppers’ personal information to conduct what some experts call « psychological marketing. » The Annenberg Center at the University of Pennsylvania examined this phenomenon in a study entitled Open for Exploitation, released in June 2005.

The study’s results demonstrated the naiveté of US online consumers, 68% of whom believe price comparison sites like Expedia and Orbitz are required by law to display the lowest available price. Furthermore, 87% of the people surveyed said they strongly object to online retailers offering different prices for the same product, depending on the information gathered on customers’ shopping habits.

Somewhat questionable, but still legal. Use with care.

Price customization is therefore a very real practice and, contrary to popular opinion, it is entirely legal. As long as discrimination is not based on factors like race, religion, nationality or gender, there is no problem. Such approaches have been around for a long time, like discounts for students and seniors, for example.

This type of strategy is a legitimate business tool because it follows the trend of yield management and companies must satisfy the needs of shareholders. Although businesses that offer a flat price at all times may satisfy their clientele, they will definitely deprive themselves of a higher profit potential.

There’s nothing new about dynamic pricing. The major difference stems from the fact that the internet offers businesses a number of new ways to efficiently adjust their pricing. Since consumers are still not very aware of the incidence of price customization, businesses employing this strategy must be very careful not to cause dissatisfaction and erode customer loyalty.

The internet unquestionably offers businesses an opportunity to acquire highly relevant and strategic information about their customers and thereby target different market segments with different prices for the same product. Technical tools enable retailers to study not only the purchasing behaviour of online shoppers, but also their non-purchasing behaviour, in other words, their information searches.

In today’s context where the internet plays an increasingly important distribution role in relation to global distribution systems (GDS), more and more travel agencies are going online to find prices. This raises another question: what happens when travel agents consult the internet on behalf of their clientele? Could such agents be penalized due to their frequent use of sites that employ dynamic pricing?

Tourism-based businesses with the technological ability to do so must ask themselves a key question: is it profitable to take advantage of our clientele’s electronic profiles to implement dynamic pricing?

A double-edged sword

Retailers trying to determine their web strategies in relation to dynamic pricing must define these strategies with great care. For example, is it better to offer lower prices to customers who visit the site frequently, but rarely buy, or to those who are loyal and rarely shop elsewhere? It is a difficult question because, in fact, a business could decide to offer higher prices to loyal return customers, gambling that their loyalty will blind them somewhat and make them unlikely to shop elsewhere. Or the same business could just as easily adopt the opposite strategy, in other words, reward loyal customers by offering them the lowest prices possible.

The stakes are high because bad decisions could cause a business to lose many customers. On the other hand, automatically rejecting any type of dynamic pricing is also a way to miss out on some lucrative profits that would be difficult to make in other ways. To make an informed choice, retailers must look at all the parameters that could help guide them. In particular, they should not only consider the frequency of a customer’s site visits, but also the time of year, the type of products purchased, the profit margin on previous transactions, etc.

Possible backlash

Since the practice of dynamic pricing is in its infancy, businesses can still take advantage of the fact most consumers know nothing about it. However, in the longer term, organizations that rely too heavily on this approach could well pay the price.

One possible risk is an increase in the number of intermediaries created to fight back against businesses « guilty »of too much greed. Although the goal of such initiatives would be to denounce abusive practices, they could also, for example, rank travel websites according to their level of « honesty » and try to protect customers – or even steer them away – from businesses seen as too manipulative.

Although it is difficult to accurately assess the extent to which dynamic pricing is used in Quebec, we can safely assume that few organizations have adopted it as yet. Although companies are technically capable of amassing a ton of information about their online customers, very few do so in order to analyze it, while others simply do not have the resources needed to efficiently collect this type of information.

Managers will definitely have to weigh the pros and cons before blindly adopting dynamic pricing. However, there is an amazing wealth of strategic information that can be gleaned by analyzing online clicking behaviour. Without going so far as to customize pricing, businesses could benefit – at the very least – from learning more about their site visitors, whether they buy anything or not.

Sources:
– Elliott, Christopher. « A Low-Fare Browser? », National Geographic Traveler, July-August 2005.
– Feldman, Lauren, Joseph Turow and Kimberly Meltzer. « Open to Exploitation: American Shoppers Online and Offline », Annenberg Public Policy Center of the University of Pennsylvania, June 2005.
– Knowledge@Wharton. « What Consumers – and Retailers Should Know about Dynamic Pricing », Hotel News Resource [www.hotelnewsresource.com], December 2, 2005.
– Kontzer, Tony. « Online Shoppers Growing Wary Of Sharing Data », InformationWeek, August 15, 2005.
– Ramasastry, Anita. « Web Sites Change Prices Based on Customers’ Habits », CNN [www.cnn.com], June 24, 2005.
– Ramasastry, Anita. « Websites That Charge Different Customers Different Prices: Is Their ‘Price Customization’ Illegal? Should It Be? », FinLaw, June 20, 2005.

Catégories
etourism and technology Trends

Why purchase online?

A 2005 tourism management study sheds light on the purchasing habits of North American Web users with respect to tourism products. The two primary factors motivating them to conclude online transactions are the quality and accuracy of on-site information and a simple reservation process.

Study context

The main reason consumers have overwhelmingly adopted the Internet is that it enables them to shop 24/7 in the comfort of their home. However, there are a number of factors that differentiate Web user purchasing habits. For instance, those who purchase travel products online are influenced by the complexity of the product. Other important considerations include the ability to compare prices, discounts and a user-friendly interface.

With that in mind, experts have studied the relationship between the purchaser’s motivation to buy and the complexity of online travel products. Since Web expertise plays a significant role in this, consumers have been divided into expert users and novice users. The study aimed to prove that ease of navigation was the primary reason for variations in purchase decisions between online products.

Airline tickets, accommodation and car rentals are considered relatively simple travel products. All-inclusive trips, cruises and tours constitute more complex products.

In an attempt to simplify navigation, many sites have become « content aggregators » that offer one-stop shopping. This strategy has been extremely successful for such agencies as Travelocity and Expedia. Dynamic packaging, whereby Web users create their own package while retaining a certain degree of flexibility, have added a new twist to the tourism landscape.

Motivating factors for Web users

The study examined the top six factors that motivate consumers to make online purchases (see Tables 1 and 2). The factors are as follows:

  1. The opportunity to earn points through a customer loyalty program. Some sites have even set up a special page for members to track their reward points (marriottrewards.com, for example).
  2. The availability of the desired product.
  3. Clear, detailed information that enables the user to make an informed decision.
  4. A simple reservation process is a key factor in the online purchase decision. Especially in the case of more complex travel products, customers must be able to find the information they need to make a decision.
  5. The reputation of the company or site’s banner, as this reassures the purchaser and may positively influence the outcome of the transaction. 
  6. Consumers are more sensitive to the price of online products than they are to conventionally purchased products. This is partly due to aggressive advertising campaigns that have gradually led consumers to expect discount products.


 
 


 

The experts used data from a Canadian Tourism Commission study conducted in November 2001 that surveyed 1,161 Canadians and 1,145 Americans. Although Web user behaviour has admittedly changed since then, the study’s findings nevertheless constitute a valid basis for comparing and understanding travellers’ online purchasing habits, based on their experience with the Web and the type of product in question.

Behaviour varies according to sector

A user-friendly interface is a key factor in the decision to buy any kind of online travel product, regardless of the amount of Web user experience, leading experts to conclude that consumers want a simple reservation process. Competitive prices play a greater role in the purchase of less complex products, such as airline tickets, packages or car rental.

The quality and accuracy of the site’s information was a deciding factor for travellers looking for activities, events, tours, attractions and accommodation. Company reputation was less important to those making « simple » transactions -such as renting a car- compared to those purchasing more complex products. Finally, customer loyalty programs constitute a greater draw for expert users and mainly affect purchases of airline tickets, car rental and attractions.

Sources:
– Beldona, Srikanth, Alastair M. Morrison and Joseph O’Leary, « Online shopping motivations and pleasure travel products: a correspondence analysis, » Tourism Management, No. 26, 2005.
– Ham, Sunny, « The Use of the Internet for Hospitality and Travel-related Activities, » e-Review of Tourism Research (eRTR) [ertr.tamu.edu], vol. 2, No. 6, 2004.

Catégories
Customer segments Marketing @en

Hotels: the feminine factor

An increasing number of women are circling the globe on business, forcing hotels to change to keep pace. To please this demanding clientele, whose requirements include higher levels of comfort and security, hotels are offering fitness facilities, organic food, perfumed candles and much more.

A 2003 study commissioned by Wyndham International Inc. and conducted by the NYU Tisch Center shows that, in that year, 40% of people travelling to the United States on business were women.

Study authors confirm that, in 2005, this figure will increase by more than 10%; moreover the percentage of women occupying management positions is rising steadily. With distinct preferences and significant purchase power (they have an average annual income of between US$25,000 and US$70,000), women business travellers are opting for places that combine security, tranquillity and comfort.

The following list presents some important facts about women business travellers. They:

  • Are usually single;
  • Are younger and more highly educated (minimum B.A.) than their male counterparts;
  • Have an annual salary of up to US$75,000;
  • Prefer dining alone in the hotel restaurant;
  • Like to feel at home in their hotel room;
  • Are usually members of a customer loyalty program such as Frequent Flyers;
  • Consider business travel an important part of their job (75% of respondents);
  • Never travel with their children (80% of respondents);
  • Schedule free time during their trip (65% of respondents) to go shopping, visit historic sites or enjoy an outdoor activity.

As for their attitude toward technology, the study found that:

  • Most women use the internet to plan their trip (80% use it to book plane tickets and 75% to reserve accommodation);
  • 25% of women like to have high speed internet access in their room;
  • 42% have never used high speed internet;
  • They make calls from the hotel using their own cell phone;
  • 68% do not use a Wi-Fi network;
  • 80% never use the dial-up or high speed access service provided by airports.

From special pillows to silk pyjamas, with or without curlers

Hotels are becoming increasingly aware of this growing market and, in response, are providing products and services specifically geared to their female clientele.

At the risk of reinforcing certain stereotypes, a number of hotels now place perfumed candles in their rooms. Other perks include aromatic oils, women's magazines, padded hangers, a sewing kit, special pillows, relaxation CDs, cook books and even curlers!

High-end hotels provide complementary extras such as shower gel and skincare lotions. Others charge a fee for luxury items like make-up or silk pyjamas, or offer a full range of relaxation services, such as spas, massages and facials. The fairer sex can also count on valet parking or a door-to-car escort.

For ladies only

In some European cities (London, Berlin and Florence for instance) women-only hotels are opening their doors.
In Zurich, Switzerland, the Lady's First Hotel offers services that are important for women: fitness facilities, special menus (organic food), spas and wellness centres, and much more. Owned and operated by women, the hotel welcomes an exclusively female clientele.

Germany also has several women-only hotels:

  • Hotel Artemisia in Berlin;
  • Intermezzo Hotel, also in Berlin, that operates as a B&B;
  • Harz Mountains – Arleta Pension, near Goslar, in north central Germany.

Based on the survey results given by its female guests, in March 2003 the Hilton Park Lane Hotel in London opened a floor exclusively for women. Unaccompanied men are not allowed on that floor.

This was a first, both for Great Britain and the hotel chain. Surveillance cameras and reinforced locks provide added security. In addition to an Internet connection, all rooms on that floor are supplied with fashion magazines, make-up mirrors and health-food room-service meals served exclusively by female staff.

Some detractors see these hotels as a form of segregation, asserting they actually represent a step backward for women because of the isolation involved. The hotels counter with the claim that they provide a particular kind of environment where women can feel totally secure.

Will Canada follow suit?

Even though the trend has not caught on much in Québec or the rest of North America, it is clearly a primarily urban phenomenon. Could it be associated with the perception that our urban centres are unsafe? According to Christiane Germain (president of Groupe Germain and owner of several Québec, Montréal and Toronto hotels) safe, intimate accommodation has been a priority for women travellers for many years.

So, before you sink your profits into building a women-only hotel, you should definitely conduct exhaustive research on the needs and preferences of your current female clientele. Perhaps, like the London Hilton, you might prefer to test the waters by opening a female-only floor.

Sources:
– Vanzi, Sol Jose, « Suite Bliss for the Female Traveler, » Philippine News Online, November 17, 2003.
– Wall Street Journal Europe, « Make Way for the Female Business Traveler, » July 6, 2001.
– Andréani, Frédérique, « Hilton soigne ses clientes, » Le Point, No. 1593, March 28, 2003, p. 26.
– Hotel News Resources, « Study of Women Business Travelers Reveals Their Opinions and Attitudes toward Travel, » October 28, 2003.
– Gaboury, Louise, « Une chambre à soi, » La Presse, February 23, 2002.
– Preston Robert Tisch Centre For Hospitality, « Coming of Age: The Continuing Evolution of Female Business Travellers, » Tourism and Sports Management at New York University (NYU Tisch Center), March 2003.