Fortnightly No 2000/3 - Paris, Wenesday, July 19, 2000
|Biztravel.com concentrates its marketing efforts on its best customers. A good example to follow.||
terms are extremely generous: a $100 credit note for a delay of between
30 minutes and 1 hour, $200 for a delay of more than an hour and full
reimbursement together with rebooking on another flight for a delay of
over 2 hours.
To avoid being completely overwhelmed by this, biztravel.com has, however, set up a few safeguards.
Moreover, the reductions only apply to delays caused by bad weather or air traffic control problems and not to mechanical problems.
The reductions the site is ready to grant its customers if they do not get good service from its Internet Contact Center, prove that biztravel.com totally trusts its support teams and is fully confident in its technological means.
These moves make it quite clear that customer service is one of the site's priority investments.
Before deciding to set up these new services, biztravel asked 2,500 online customers what annoyed them most when they travel. Interestingly, the questions were not just aimed at the actual booking process (biztravel.com's core activity).
The vast majority of customers replied that they are dissatisfied with the quality of airline service, particularly with flight delays. After all, what's the point of using the Internet to book tickets in a faster and more flexible way, if you then have to hang around waiting for hours at the airport?
The survey and biztravel.com's immediate marketing reaction are, we feel, extremely intelligent moves, totally in line with a customer-centric approach.
In pursuing its aim of giving total customer satisfaction, biztravel.com is gambling on the fact that the enhanced service will increase customer loyalty.
These days, when the cost of acquiring a new eTourism customer can reach $100 or more, the choice of investing this amount in promising a high level of service seems to us to be a very pertinent one.
By choosing to do this, biztravel.com no doubt feels it will stand a better chance of keeping customers, who will then book regularly on its site.
Of course, this kind of loyalty-orientated strategy can only be set up if the eTourism site already has a well-established brand image and a large customer base, capable of ensuring increased turnover by increasing the average customer value. Obviously the money that is spent taking care of users who are already customers is money that is no longer available to be used for establishing brand awareness.
At the same time, biztravel's marketing policy should also be focused on a return on investments. The preliminary results communicated by the site indicate that the gamble looks like it will pay off in the medium term.
First of all, the programme has been an immediate hit with users - between 5% and 12% more people are registering on the site and leaving their full profile. This high increase in valuable customer information is already an important benefit (better customer knowledge, possibility of more accurately targeting emailing campaigns, etc.).
But, above all, the sky-high increase in the number of bookings has proved how successful the operation is: the number of biztravel customers has increased tenfold since the operation was launched!
To find out whether the strategy is viable in the long-term, all we have to do is to look at the economic equation:
The average amount spent per booking is $580.
The rate of commission is 5%, i.e. a profit for the site of an average of $29 for each booking.
Biztravel.com will have to reimburse one ticket out of 10 at an average cost of $125.
Conclusion: out of 10 tickets sold, biztravel only earns $165 ($290-$125) instead of $290.
But if its turnover increases by 50%, the site will make its original gross margin - and, in addition, will have obtained a base of very loyal customers!
|Jador.com delays its IPO. Our analysis|
The concept behind jador.com started with the success of HotelBoulevard.com, a hotel booking site. Its founders then decided to offer a full range of services for foreign tourists coming to France and successively created TicketAvenue.com and then GourmetSociety.com (a restaurant guide). They then united the 3 sites under a joint brand name - jador.com.
Last year, the company said that they had made a turnover of 26.4m francs against a net loss of 1.7m.
Developed first of all with equity capital, the company then went through the standard procedures for start-ups: raising funds (22m Francs), big communication campaign, announcements of projects for international expansion, and WAP services!
Following these investments, Jador.com planned to go public in July. However, a few days before the IPO, Jador.com suddenly decided to delay the operation, saying that market conditions were poor. They would have been the first eTourism site to be listed on the Paris stock exchange.
Jador.com's business model is structured around a process which has already proved its success on the market: setting up an efficient online booking system, marketing aimed at a specific market niche (in this case, foreigners coming to France) and commissions on sales.
Jador.com's approach, which has apparently won the approval of investors, brings together the complementary services of hotel, entertainment and restaurant bookings under a single umbrella brand.
The idea of developing the synergies between the different segments is a good one. Imagine the following scenario, for example: John Smith reserves 3 nights at a hotel in Paris, the site gives him a list of restaurants near his hotel, and suggests a different show that he might like to see each night.
But this means that the information systems of the 3 sites need to be linked up so that customers can go seamlessly from one service to the other and only need, for example, to enter their details once.
However, the main benefit for the moment is limited to putting all 3 services together on the jador.com site, a site which, it has to be said, bears no resemblance to the other three. Its graphic design and colours are quite different, which is rather disorientating for users. In fact, they may even wonder if they haven't inadvertently changed cyber-retailers.
If jador.com can develop the 3 services, while maintaining close relationships with their customers, whose choices it will be able to orientate, it will be able to justify high rates of commission.
If it is unable to do this, the jador.com brands, HotelBoulevard.com in particular, will remain heavily under pressure from a host of rival sites (hotel chains and virtual agencies) and Jador.com will not be able to generate the margins expected.
This is true for its plans to expand to other countries too, since expanding internationally does not, in my opinion, fundamentally change the business model.
For eTourism sites, there are few real-scale economies to be expected in setting up foreign sites: fresh marketing investments have to be made for each new site, and, in practice it's often difficult to share the costs of IT developments (translation problems, specific developments needed for each country, etc.).
What the jador.com team needs to do now is prove that it is capable of seamlessly linking the 3 different services, which users would certainly appreciate. This would give it the means for generating a higher turnover per booking than its competitors.
In the meantime, jador.com also needs to add more products to the sites, since the product ranges are still pretty limited.
For example, when you click on the calendar of events on the TicketAvenue.com site, the only show presented, practically no matter which day you look at, is "Notre Dame de Paris". It comes as a surprise to find that none of the dozens of other top quality shows are listed.
Compared to sites such as the television channel, ParisPremiere.com, which lists hundreds of events together with full comments on each, Jador.com's offer is pretty disappointing. If sites such as ParisPremiere.com were available in English, TicketAvenue would have no hope of surviving in the long term. It has to be said that, attempting to go public when its contents are so limited is rather rash.
The same remarks can be made about the HotelBoulevard.com site, which only proposes 300 hotels in Paris and the French Riviera. This shows that they have not managed to set up many partnerships yet, particularly since some of these hotels are in the 1 and 2 star categories.
HotelBoulevard.com already has a number of competitors who have just as many, if not more, hotels on offer, such as France-Hotels-Online.com or Hotelswitch.com which has 1,334 hotels in Paris alone. This is a long way from HotelBoulevard.com's meagre offer of 200 hotels in Paris.
The same thing goes for GourmetSociety.com.
In short, Jador.com's weaknesses are, for the moment, much more obvious than its strengths.
Certainly, the sites all perform well and are easy to browse, so they are worth visiting, but, on the whole, users are looking for a much wider choice.
Of course, Jador.com, says that it only represents specially selected hotels, events or restaurants. This explanation is not good enough for a city like Paris, which has a host of top quality establishments not listed by Jador.com.
then, given both the limited range of its products and the efforts it
needs to make to link the three services seamlessly, that it was prudent
of the company to put off its IPO.