Pricing and Relevance
At Triometric, we have identified 4 pillars or key areas of influence in the conversion process for distributors and suppliers. Each pillar plays a crucial role in the business of selling travel products through intermediaries, be it a hotel room, an airline seat or a related ancillary such as a hire car or an excursion. In much the same way as a chair has four stabilising legs to stay upright; the same argument can be made for an integrated and holistic view of the key elements involved in selling travel products online, especially through distribution partners via a network of APIs. In Part 1 we focused on the twin pillars of Availability and Performance – the basics for a distribution system, in Part 2 we discuss how analytics helps determine the best Price for conversions and the importance of the context of the search to ensure the Relevance of offers made.
Pillar 3 – Pricing
The third pillar in optimising online conversion is Pricing, which of course is closely allied to available inventory. Price has a strong impact on the revenue achievable for a finite set of products. In today’s fragmented and competitive market, pricing rooms dynamically, i.e. adjusting the price based on demand and availability over time can drive a lot more total revenue. But how do travel companies identify the optimal price — and what is the probability of getting that price or the next seat or room?
In a perfect world, hotels and airlines would love to sell all available rooms and seats at the best rate for them – maximum yield. Realistically, this isn’t going to happen every day of the week, however, by using data it is possible to maximise the chances of booking as many rooms and seats as possible for an optimised price based on real-time demand and supply data. To achieve this means using a clever combination of real-time search insights, forecasting based on historic bookings and revenue management techniques. In a nutshell this is selling the right room, at the right moment, for the right price and through the right distribution channel, with the best cost efficiency. Getting all these ‘rights’ aligned involves the use of performance data and analytics, which helps to more accurately predict demand and other consumer behaviours. Having these basics in place enables more informed decisions regarding pricing and distribution to be made, in order to maximise revenue and, therefore, profit.
API Search Analytics – the Differentiator
When we talk about our pricing pillar as part of the influences on online conversions we look at two things. Firstly, the detail contained within the individual search responses including product and pricing elements and secondly the information about the bookings as a whole over a given period. Analysing API search traffic in this granular detail can arm distribution, revenue and even sales and marketing departments with a range of deep insights about their customer, the product, and the market conditions. For example:
- What is being searched for – demand
- What is offered in response and at what price – the offers
- What is the Look to Book for various offers
- How does the booking rate change over time
And for channels:
- Which channel delivers the best value based on metrics such as Revenue per Search versus traditional metrics like Look-to-Book?
- What margin or contribution is attributable to the channel?
- Which products are popular in searches and conversions and which ones are not
- Revenue generated from those bookings
Once you start analysing API performance and content flow, raw data can be quickly transformed into a treasure trove of answers to the many questions that can help optimise the financial decisions in distribution.
These factors are much better performance indicators as well as signals for a pricing strategy. Getting real-time intelligence from API traffic enables revenue managers to more closely match price to demand. This gives them the opportunity to capture bookings that are more profitable during high demand periods, as well as use more flexible pricing to stimulate demand in low seasons. Analysing search transactions rather than just bookings provides the understanding to tackle the “known unknown” conversion opportunities that would be otherwise missed.
Analysing API traffic using a platform such as Trio can deliver vital visibility into real-time search demand as well as actual bookings to support a pricing and distribution strategy that reflects the changes to supply and demand as it happens rather than wait for tomorrows or next week’s report to make necessary adjustments.
Pillar 4 – Relevance
Our final pillar addresses the importance of considering relevance when returning an offer. By relevance, we mean the effort made in understanding the context of the search request and responding with the most appropriate offers and potential choices that are available. The more the offer meets the stated need (at the right price), the better the conversion chances. Obviously, this needs to happen as quickly as possible to be in with a chance of getting on or near the top of the list. With today’s market fragmentation of distribution channels and proliferation of the product options available – this is no mean feat.
Reading the Buying Signs
The offers presented to consumers by online travel agents are often acquired from intermediary partners such as bed banks or aggregators. Intermediaries don’t have direct relations with consumers, but this does not preclude them from considering search context and applying rules for segmentation. When making search requests, travellers are as standard sharing specific information points about their journey which can be translated into a set of anticipated needs (some obvious and some less so). As a very simple example, a search request for one room with a child, departing and returning on a Saturday to a holiday destination suggests a leisure trip. A request made by a traveller for a room for one weekday night in the early part of the week to a city destination suggests a business trip. Responding with family friendly options with lots of facilities in the first case and a centrally located hotel with loyalty and business perks in the second case is the logical way to go. These are obvious examples from both ends of the market but there are many subtle variations in between that combined allow us to segment our anonymous prospective customer into meaningful categories.
One size doesn’t fit all
Today, too many travel companies still tend to respond to searches with as many options as possible as quickly as possible often without too much thought on being relevant. However, sending fewer options but more of the right ones, would improve conversions. It is not about limiting choice, rather it is about making choices easier through effective presentation and understanding that consumers want practical solutions, not infinite results. This means that the search responses need to be intelligent, and go beyond price, towards value.
Boosting Conversions through Relevance
Doing a couple of things right can bring a whole lot of intelligence to the selling process. Firstly, defining a meaningful segmentation is key to relevance. Understanding the core characteristics of the customer and the context of the search enables more relevant products and offerings that better fit the search query. Segmentation offers travel businesses an effective tool for breaking the potential market up into groups of travellers with similar wants and needs.
Secondly, to achieve relevance means using data, and in particular the data already embedded within the search message streams that circulate between travel agents and their suppliers usually in XML or JSON format through a network of APIs. Offline analysis of this data conveys a lot of clues about the nature of the trips being searched and allows marketing teams to develop their segmentations and related product or packaged offers. Translating these results into a set of rules used by the booking platforms in real-time to identify the buying signals and respond with more targeted choices, rather than all options available, delivers a customer centric approach which helps to not only narrow the search but also secure the booking.
This concludes our thoughts on the corner stones of optimising conversions. The objective has been to isolate each pillar and consider it in turn given all other considerations remaining equal. The end result is a clear view of what is required to positively influence in each of these four key areas of IT Performance, Product Availability, Pricing and Relevance.
Analysing search traffic using this approach with a platform like Trio gives companies in the travel supply chain the valuable and structured insights they need to better understand their customers’ needs and those of their customers.