Thomas Cook - dynamic packaging! ancillaries! CRM! Let's go...News / DistributionBy Martin Cowen | November 26, 2014Share This article was originally published on Thomas Cook Group is aiming for 50% web penetration by 2015, with the business possibly doing itself a disservice by using terms which sound like something from a 2006 press release.Its full year results released today are a mixed bag - an £98 million year-on-year improvement in underlying EBIT to £323 million but still a net loss of £115 million - and are being overshadowed in mainstream media by the shock departure of CEO Harriett Green and the resulting share price collapse.Within this context, the digital transformation of the business is not getting the attention it deserves. Green was the driving force behind the modernisation of Thomas Cook, and it appears that everything is now place for it to reach the tipping point of 50% for web penetration during the next year.This is a very bold target - for 2014 web penetration across the group came in at 38% - below its target of more than 40% - so getting to 50%+ this time next year means it needs to grow by nearly one-third.It goes without saying that online is a cheaper form of distribution than the high street (once the investment has been made, of course). Even the most committed retail estate fundamentalists have accepted this but the presentation to analysts this morning quantified this cost differential.Correct me if I'm wrong but I don't recall anyone ever being this explicit: "Digital cost to serve is £50 per customer cheaper than the retail channel"Share this quote This means that a 15% increase in online share for its core tour operation business will reduce costs by £32m. The arguments are compelling - the next stage is the delivery.A key part of this delivery is rolling out initiatives which have worked in one market across all territories. So the OneWeb platform, which led to a 14% increase in UK bookings on www.thomascook.com within three months of going live, will be live in Germany and Netherlands next year.Coming the other way is omni-channel marketing. In Germany, a three-month campaign across devices resulted in an 80% increase in bookings on the www.thomascook.de web site.Nordics are the digital stars of the business, where web penetration for 2014 came in at 73%, up from 71% last year. This unit is leading the way in what new CEO Peter Fankhauser nostalgically refers to as "CRM", a term which is often looked down upon by advocates of merchandising, retailing, retargetting and personalization, even if it means the same thing, give or take.He said that its Nordics unit has "integrated CRM capabilities...which drives the sales of high margin ancillary products, resulting in £15 per customer more margin than in other markets."We are implementing the Nordic CRM solution to realise this opportunity in other markets including the UK and Continental Europe."Ancillaries are everywhere at the moment and it is no surprise that a tour operator with a big airline operation is starting to talking the talk. Only a few days ago, Thomas Cook announced a double-deal with Amadeus bringing its Germany, UK, Scandinavian and Belgium airlines onto Altéa at the same time as renewing a long-term distribution agreement between Thomas Cook's tour operating business across Europe.Amadeus' release specifically referred to "travel agencies' distribution of ancillary service."In the UK, Thomas Cook thinks it can get between £8 - £10 of incremental margin from each of its 4.1m tour operator customers, equating to between £34m and £42m.Responsive design is another area where Thomas Cook has been active. All web sites across the group are now responsive, and the business now has a dedicated mobile development centre in Stockholm. As a result, its mobile and tablet bookings over the year increased by 58%, although volumes are not disclosed and chances are the bulk of these bookings will come from the tech-savvy Scandinavians.Nonetheless, there are a few headscratching moments, notably Fankhauser's comment that Thomas Cook will be rolling out "dynamic packaging across our full portfolio in all source markets during 2015," begging the question what on earth has Thomas Cook been doing for customers who don't want a pre-packaged deal but want to bundle a seat with a bed, just like they might do at Expedia or Ryanair.With Green gone, questions over Thomas Cook's ability to understand digital might resurface, but that would be unfair on the team she has assembled. The senior digital team is now 40 strong, 25 of whom are new to the business.When she took over, e-commerce was an aside. If I remember correctly the e-commerce/web/digital part of the business didn't have a dedicated board-level presence. Now, there is a chief innovation officer Marcus Ryan who will sit on the executive committee when he takes on the role next year. And there is digital advisory board, made up of external experts.But the gap between theory and practice is a deep one. This time next year we will really find out how sincere Thomas Cook's "digital spiritualisation" really is.