With competition intensifying across online businesses, the focus is shifting from the discounting game to offering superior customer experience. Large players have learnt the hard way — by burning billions of dollars — that discounting hardly converts to customer loyalty. Players across the e-commerce space are now moving resources to generating ‘customer experience’.
The online travel space — the strategies of online travel aggregators (OTA) — is a good case to examine and understand what is currently driving the industry. Competition has intensified in this space over the year and, as across the e-commerce bandwidth, incumbents as well as new entrants have been generously throwing discounts to attract customers.
Seamless service
Online or digital aggregators are becoming ubiquitous. Be it Airbnb, Cleartrip or Oyo, they bring together a set of service providers as their partners and sell those services under their brand. Since the aggregators are a brand by themselves, they have to provide services that have uniform quality and price. It is important to understand that the service providers are not the employees of the OTA; they are partners to the business.
OTAs act as general purpose contractors — they are the digital front to the traveller, seamlessly integrating different service providers (airline, hotels, local logistics) through a digital supply chain, to provide superior experience to customers. Partners have the freedom to accept or reject the offer on a case by case basis. The contract that the OTA signs with the service providers in its value chain, and the service providers’ adherence to service level agreements, are crucial for ensuring that the OTA’s brand is not diluted. To that extent, the choice of the service provider or the portfolio of service providers in an OTA’s value chain is extremely important.
Having realised that discounts are not sustainable in the long term, few companies have already broken away from the pack and are now single-mindedly focussing on ‘customer experience’. Cleartrip, for example, provides experiential services to customers. It strives to engage the customer and offer them outstanding local experiences, such as outdoor activities, cultural events, food and beverages. Airbnb is also taking this route.
Customer experience
So, what is a customer experience? It is the interaction between the OTA as an organisation and the customer during the course of the itinerary as perceived through the customer’s conscious and subconscious mind. It is a blend of all the experiences of the customer, across service providers, as part of the value chain (flight, hotel, cab, events, food), those that excited the customer, those that let them down; all of these measured against customer expectations.
What does an OTA strive to achieve? Through technology, it attempts to deliver a highly customised and superior travel experience to the customer, without any friction between service providers. Especially with the deep penetration of mobile phone and apps, the OTA provides customers seamless travel, hotel transfers, and manages their sightseeing and restaurant appointments. Events, fitness and specialised themes and itineraries such as eco-tourism are thrown into the value chain.
What capabilities need to be built by OTAs to deliver precisely? Understanding a customer’s ‘pain points’ is crucial. This is highly data intensive; OTAs use high-end analytics to achieve this. It is all about understanding expectations of customers with different age profiles, geographic locations, behaviours and lifestyles, and accurately assessing what will attract and entice them. The OTA platform needs to remain simple yet powerful enough to deliver superior experience across every stage of the value chain.
Carefuly selection
‘Experience’ is, thus, becoming an emerging segment and a big source of revenue for OTA players. Are there any parallels to be drawn or lessons to be learnt for Indian OTAs from global examples as they go about building the experiences segment?
The entire digital supply chain, from customer to the service provider, lies at the heart of value creation by the OTA. This is heavily supported by digital technologies that include artificial intelligence, deep machine learning supported solutions, big data and predictive analytics. OTAs are spending billions of dollars to excel in such technologies. Passionate, innovative and customer-focussed staff are also key ingredients.
OTAs need to carefully choose their service providers and align their offerings to the customers’ requirements. Providing a standardised quality of experience to every user is the objective; unfortunately, most of the experiences turn bad when this part of the value chain is not strong enough.
Priceline Group and Expedia Group, who own a number of travel aggregators and meta-search engines such as Trivago, are focussed to ‘walk the talk’ in creating superior customer experiences. Unfortunately, they are yet to perfect the art. The last mile connectivity is where such models give way.
Cyclical pattern
Partner portfolio management and integration are crucial components in the overall OTA value chain. Customer reviews are a good tool to fine-tune value. TripAdvisor, for example, is a classic case of how customer reviews wield enormous power in subsequent customer choice.
Effectively, it’s a vicious circle with a ‘snow ball’ effect; highly relevant and differentiated services offered by the OTA drive more customers, which, in turn, improve the number and quality of service providers, resulting in better ‘customer experiences’ and an increase in the number of customers. This cycle goes on.
Disruptions can emerge from many directions. The service providers also strive to convert their OTA guests to their own by improving their website experience and providing incentives to book directly. But what puts an OTA on a higher pedestal is their presence across the value chain and their ability to provide a complete experience, which individual service providers can’t.
In effect, customer proximity becomes the heart of the business and how an OTA can differentiate themselves from the competition. In a digitalised world, with AI, machine learning and analytics gaining prominence, technology will play that crucial role in achieving customer proximity.