In online travel, is price king?

March 23, 2007

The online travel customer is a fickle beast. We’ve known this for a long time and many trends have emerged which have helped us to predict our customers behaviour and purchasing habits. This behaviour however seems to be changing quite dramatically at the moment.

We’ve seen customers persevere with poor booking experiences purely because they want to book their holiday with certain tour operators, customers who compare prices across 10’s of websites before deciding on who to book with (not always the cheapest) and customers who only ever book with the same brand due to a good previous experience. Loyalty has been evident in the past (seen by visit rates, repeat visits and time to book metrics) as a key attraction in choosing who to book with, often superceding the online experience they get with that provider. The offline experience with a travel company is often enough to make users struggle through the online.

The growth of online agents such as Expedia and Opodo has seen market share online swiped away from traditional tour operators although in recent months this trend seems to be reversing (albeit slowly) as these sites begin to face the same issues now (lack of loyalty, competition). Price comparison sites are also taking market share away from both the traditional and online players as they find better ways to make wide choices of products available to consumers.

However, one factor seems to be becoming the deciding factor for customers. Price! No longer is the experience you have online enough to sway you to one provider, neither is the brand name or how established they are (in the customers eyes). Web 2.0 trickery isn’t enough to draw them in and social media (while almost essential in travel) is not enough alone. Price is king!

This may seem like a given to anyone involved in e-commerce, and it is true in almost every online retail market, but travel has long shown evidence of unusual customer behaviour online. Travel companies have had it easy for a long time. The online travel arena has been developing for years and now it’s hit maturity (and the customers are getting more savvy) factors such as brand name aren’t drawing in the sales anymore. It’s true that in travel brand search terms drive the largest volume of traffic that converts well, but this isn’t growing that much anymore and the other traffic sources don’t convert as well unless the price at the end of the customer journey is right.

The way you message offers and deals on your websites is key. Merchandising in travel often relies on messages such as ‘Up to £… off’ or ‘Prices from £…’, these just aren’t strong enough anymore to guarantee conversion unless the price at the end of the booking process ties up with the initial headline (and is a real deal worth hunting for). With so much competition out there it could be a tough year for traditional players (and I include the Expedias in this group) as budget players and price comparison sites take sales and drive traffic away from the traditional sites.

If the price isn’t right then your offering has to be so strong that the customer feels compelled to buy with you over one of your competitors. Brand alone isn’t enough to do this. Making your website sticky by adding all the latest Web 2.0 fads and reams of content also isn’t enough. A combination of content, offers, user experience and really great prices is the only way to ensure longevity in the online market (especially at the cheaper end of the market) unless you happen to have a unique offering of some sort.

Of course, none of this means anyone is going to go bust or move back to more traditional routes of selling. It simply means we all have to adapt and ‘get real’. Marketing directors in their ivory towers who are adamant that the brand will do it for them need to ‘get real’. Product directors need to ‘get real’ and focus on delivering prices that compete with the opposition. E-commerce directors need to ensure that their websites are delivering the user experience that customers expect nowadays and ‘get real’ if they think that adding the latest Web 2.0 goodies is going to dramatically increase their conversion rate on their own.

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