Whether it be the looming uncertainty of Brexit, and what this means for current OpenSkies agreements, varying PR scandals, or the constant tug of war for brands to acquire customers directly, the travel industry seems to be facing one challenge after another.
This of course, is nothing new; however, there are a few ways in which marketing budget can be used to aid some of these concerns. Now I’m not saying that marketing is going to solve the concerns over Brexit, but I wanted to address some of the challenges being faced by travel brands at the moment and how marketing activity could support this.
Distribution
Whether it be amongst airlines, hotel chains or train companies, there’s a constant and growing struggle for brands to acquire customers directly, removing the power of intermediaries. BA/Iberia/Lufthansa have all recently added extra ‘charges’ for any bookings not made through their owned channels and Hilton went as far as to launch a multi-market, multi-channel ad campaign to promote the benefits of booking directly.
It’s clear that brand loyalty within travel is not what it used to be. Consumers are savvier than ever and know how to shop around; aided by the likes of metasearch partners, loyalty sites and other comparison engines. If a consumer can find a price cheaper elsewhere, they’ll take it, regardless of where it’s booked. Where this is price parity between brands and their intermediaries, there is more that can be done to secure that customer ownership from brands.
To ensure both travel brands and their partners are delivering the best results for customers, the ideal approach is to allow metasearch partners to own the customer booking process, whilst brands own the customer. This improves the customer experience whilst giving the brand the ability to retain that customer for future marketing and customer service. Working together to make this experience right for the customer, with the ability to purchase ancillaries and have a seamless online booking flow, will give the best of both worlds for consumers and brands alike.
With the rise of Google in the travel space, and the constant rumours of Amazon jumping on board too, traditional travel brands need to find ways to work with marketing partners to further enhance and expand ‘direct’ customer acquisition.
Differentiation
According to latest research, price is the number-one factor when booking travel; a trend that’s been growing amongst holidaymakers. Whilst this statistic is less so amongst hotel chains and car rental services, price is still the largest factor in decision making.
Where decision isn’t completely driven by price, brands need to find ways to differentiate with customer offerings that enhance experience before, during or after consumption.
Product ancillaries is a growing differentiator, especially amongst airlines. Whether it be a seat upgrade, in-flight Wi-Fi or the ability to choose your meal before flying, travel brands need to find the right add-on’s that mean something to customers. Understanding your customer base can ensure brands promote the right offering to the right person, with tailored messaging that ultimately leads to results.
Qantas’ recent launch of a chat bot to provide its customers with personalised travel inspiration, is a great example of brands using media channels to provide relevant information in a relevant environment. Using AI, Qantas will learn from customer interactions, making for an increasingly powerful customer service tool, providing a strong differentiator and new acquisition channel.
Margin
With demand for travel only increasing, and the emergence of value-focused operators such as Airbnb and Uber, industry prices are steadily declining. With this, margin has become increasingly tighter and travel brands are searching for ways to do more with less.
Marketing has rarely been protected when it comes to these cost reductions and budget is regularly scrutinised to ensure it’s being spent efficiently. Whilst brand marketing will continue to have an important role, more can be done by travel brands to focus their budget at a product level.
For example, an economy flight from London to Paris has a significantly smaller margin than a first-class ticket to New York, just as a suite in a Central London hotel would have a different margin to a country bed-and-breakfast. As such it doesn’t make sense for brands to pay the same to acquire those bookings.
The first, and most important step, is to understand what margin you’re playing with. This isn’t always easy, but marketing teams need to work more closely with revenue management teams to understand what level of CPA is acceptable for different types of bookings. Marketing teams can then work with their digital media vendors to set specific CPA goals, that benefit both themselves and their partners.
Varying CPA structures is hardly new; however, it’s rarely done at a product level, ensuring you’re only paying partners as much as you can afford based on what was sold. A one size fits all model to budgeting no longer makes sense in a cost-focussed environment, especially with the amount of data available today.
With marketing budgets coming under more and more scrutiny, and travel brands being urged to do more with less, it is more important than ever to ensure you’re seeing success with marketing spend. By managing distribution more effectively, focusing on differentiating factors and aligning CPA with margin, travel marketers can achieve success and ultimately improve customer acquisition.
If you’re ready to set more diversified commission structures, and better work with your marketing partners, reach out to the Performance Horizon Travel Team today.
