The travel industry, like so many others in the internet age, is seeing margins on its core products being squeezed like never before.
NB: This is an analysis by Bob Dufour, president at Fusion.
The internet has enabled something that travelers never had before – price transparency and use of aggregators.
Our industry’s margins are suddenly laid bare, and through the power of the web, shrunk down to painfully small levels.
What the industry is discovering, however, is that there’s a solution: ancillary sales.
These smart “impulse buys” at the checkout can be appreciated by customers and travel companies alike - especially when they are relevant cross-sells driven by real data and customer insights.
For the savvy online travel industry merchant, these are incredible opportunities to enhance customer experience and improve margin.
But while ancillary sales create an opportunity for margin, there’s no margin for error. When executed incorrectly, ancillary sales can be a frustrating, time- and IT-consuming endeavor with few results.
For this reason, it’s important to recognize what I think are three key factors in making sure ancillary sales are done right, to generate revenue:
1. You must properly “curate” the experience for the individual consumer
This sounds obvious, yet it’s not being done more than half the time.
A recent Forrester Research Group survey commissioned by Fusion of more than 120 US and UK-based ancillary product decision-makers showed that nearly half of respondents (48%) are currently offering the same ancillary products to all their customers.
Only one in five (20%) are basing their offerings on past searches and even fewer – just 12% – indicated they are currently ranking offerings based on real-time data.
(If you’d like to learn more about this, you can watch a webinar here.)
The ability to personalize (or “curate”) the experience for each customer is available today, and I believe it’s expected by the consumer.
It’s the savvy 12% of the industry who recognize and act upon this fact, and they’re the ones who are reaping the customer loyalty and customer dollars as their reward.
2. The ability to be even more precise and optimize your ancillary offerings for today’s mobile devices
We all know that our customers are increasingly viewing websites on hand-held devices, be it a smart phone, tablet, phablet, or something in between. (And maybe soon an Apple Watch?!)
For this reason, website operators have recognized the need to have responsive sites that display correctly on smaller screens.
Yet many times the ancillary offerings are not being displayed responsively – i.e., not visually pleasing or easy to use on a hand-held device. This obviously frustrates the consumer, and significantly lowers the likelihood they will purchase an ancillary product.
This is an example where there’s no margin for error, if you want to increase your profit margins – the ancillary offerings, just like the rest of the site, have to display perfectly on the desktop and on the move.
The technology to know how the customer is viewing the site is available – it just needs to be part of the real-time process by which the ancillary offerings are customized and displayed.
3. The need to identify the customer across multiple channels, and follow them between devices and over a period of time.
Put another way, think of your customer as having two journeys – the purchasing journey before their trip, and the physical trip itself.
If you want to improve your profit margin, you cannot make a misstep here either.
Along their purchasing journey, the customer is likely to visit your website not just once, but multiple times (on multiple devices).
This might include updating their itinerary, adding more services, checking schedules, entering traveler information, or other reasons. And they might do something old-fashioned – pick-up the phone and call your customer service department.
To maximize your ancillary sales margin, you need to be able to recognize, track, and curate not just their first visit to your site, but every single visit to your site over time.
And your customer service software needs to recognize the customer and offer your sales associates suggestions for ancillary offerings in real-time, while they’re on the line.
Your customer is also likely to stay digitally connected during their trip, for a variety of reasons. This constant connectivity creates new interaction opportunities for a customized ancillary sale, such as a land tour, ground transportation, or other service.
In other words, a final opportunity – if you seize upon it – to improve your margin before the trip is done.
And even after the trip has concluded, the customer might come back to give feedback, or book again!
In summary, our industry has profit challenges like never before, thanks to the power afforded to consumers by the internet.
But the internet, combined with data analytics, optimization technology and real-time customization, can also give travel industry merchants the power to create and maximize new revenue sources through ancillary sales.
This needs to be done in a sophisticated manner, as I’ve described above, since the margin for error is thin.
But when done correctly, the customer and the merchant both succeed, and the dollars land on your bottom line.
NB: This is an analysis by Bob Dufour, president at Fusion. It appears here as part of Tnooz's sponsored content initiative.
NB2:Image by Shutterstock