Tuesday, March 14, 2006

Dynamic Packaging: hot or not?

The travel industry has been touting the benefits of “dynamic packaging” for some time, hailing this as the “killer app” of online travel booking.

Consumers have never had so much choice; they now have more flexibility, more visibility of pricing and this puts them firmly in the driving seat.

Travellers can build and book their entire holiday through one site, selecting the options that best meet their needs on price, dates, convenience and location.

Dynamic packaging allows them to juggle flights, accommodation, car hire, excursions and more from just one visit to a website.

Research from Multicom from 2005 predicted that dynamic packaging sales will total £2.4 billion and account for almost 35% of the UK travel market by 2007.

But do consumers even know what “dynamic Packaging” is? Do consumers understand the benefits? Do they want it?

At AOL UK we’ve just completed some research into our members’ attitudes to online travel in general and specifically into what they make of dynamic packaging. With nearly 2.5 million members out there, we’ve perfectly positioned to find out what consumers think about online travel topics.

We used a mix of in-depth interviews and focus groups conducted over a period of 2 weeks, with participants being asked for their knowledge and experience of using dynamic packaging, for their opinion on it and whether it was something they were using now or were likely to use in the future.

Most were unfamiliar with the term “dynamic packaging”, which comes as no surprise since this is a term that tends to be limited to the industry. Nonetheless they were favourable to the concept, although the majority had yet to book in this way.

The over-riding concern, however, was the suspicion that there were hidden margins and the majority said they would still prefer to shop around, visiting 3+ of their favourite sites to ensure that they were getting value for money.

So, looks like we’ve still got someway to go to encourage consumer confidence in this product, and while convenience is a key factor in purchase decision making, the main driver still seems to be price, consumers are still prepared to shop around to get the best deals.

Heather Sommerville, head of lifestyle and travel, Interactive Marketing, AOL UK

1 comment:

FrankOrman - LeadGenerators said...

Very interesting article Heather.

I agree that consumers lack confidence to fully embrace dynamic packaging and that the travel industry needs to encourage more holidaymakers to take advantage of the way the web is developing.

However, I do not believe that confidence in price is the only or even the main hurdle in making dynamic packaging more commonplace. Both customers and operators alike have issues that need better solutions before each will be able to benefit more fully.

For the consumer, in my experience, the issue is not as price sensitive as many claim. It is true that some elements of a holiday are more price sensitive. For example, for flight only, when choosing between airline A from one site and the same airline from another site, the operator with the lower price might probably achieve a higher conversion rate, however we must not forget that visibility of offer, service, presentation and other factors still have an effect on the purchasing decision process. I have seen conversions for our clients’ sites increase dramatically not because of lower prices but because of providing an enquiry form (service?), redesigning the graphics (visibility of offer/presentation?), improving the layout and user experience (service/presentation?) and by providing expert advice on selection (service?).

In addition to our tour operator clients, we also have much experience in holiday extras such as online airport parking marketing and here too, the cheaper price does not always prevail.

In my mind a large part of the problem lies in the promise of dynamic packaging – at least to the operator. In essence, dynamic packaging promises operators the opportunity of generating business with minimal manpower input. On the surface there is nothing wrong with this, however in the process of incorporating dynamic packaging into their online marketing strategies, many operators are seduced into the trap of thinking of customers as automated buying machines, instead of people.

My clients will tell you how often I go on about the internet being another place for “people to do business with people”. Although price is important, customers are somewhat more complex when it comes to a purchasing decision and we need to remember that, even with decent offers, we still need to think in terms of being sales people. Somehow when companies go online they too often forget to take customers by the hand and show them what they want to see, offer them good options, advise them on best purchase, package and describe their holiday products in an attractive manner (copy and graphics) and offer service – all the essential elements of good salesmanship that we learned and mastered well before the internet.