The other day, I was looking at prices for a simple round trip international flight. Like most people, I searched on online sites like Expedia, known airlines’ Web sites, and my travel agent. I also look at the ITA Matrix, a very powerful tool by a company that was bought out by Google in 2010. For those who don’t know it, the ITA Matrix is a very powerful flight search engine. You can search with a broad range of criteria, it will show you prices in a calendar for any given day for any number of days in an excellent visual format (Tufte would be proud), and gives you not only the best prices, but multiple prices for each combination and even on the same airline at different fare classes.
What you cannot do on ITA is buy tickets. They are purely a search engine. They will give you the entire ticket breakdown and fare classes, which you can take to the airline or to your travel agent.
The problem is, what if you call your agent, or look on the airline’s Web site, or even Expedia, and the fare you found just isn’t there? Worse, you find the fare, but when you click “Select” to purchase, the fare disappears with some form of, “sorry, these fares go fast, it is no longer available.” You become annoyed, you become convinced you are being “played”, that the Web site or airline is pulling a bait and switch, or even that your agent doesn’t want to sell you the cheaper ticket, perhaps because it has a lower or no commission.
Most of the time, however, it isn’t a bait and switch. It is a true and honest error, but one with a large negative customer impact. Here’s why.
You assume every time you hit up Expedia and search for a flight from, say, JFK to London Heathrow (LHR), Expedia reaches out to the computers of United, American, Virgin, British, etc. and says, “give me all of the availability on the flights on these dates.” But they don’t. Because these carriers charge Expedia a few pennies each time they search. If they sell one ticket (optimistically) with an average commission of, say, $50 (probably much much lower), for every 20 searchers (again, probably a much smaller ratio), each of whom performs 4 searches until they buy, but each search needs to check 10 flight per airline, then they are making a $50 commission for each 3200 searches (20 searches * 4 searches per customer * 4 airlines * 10 flights). Since each of those searches costs (realistically) $0.02 per search, that is $64 in fees. I am not a mathematician or an accountant, but I am pretty sure that paying $64 in costs to get $50 in revenue is a good way to go out of business!
So how do they do it?
When Expedia looks up those 10 flights on United, and Travelocity looks up those same flights on United, chances are really good nothing has changed in the intervening 5 minutes. If only Travelocity could use Expedia’s results and not have to pay the airlines to do the exact same lookups! If only there were some company that consolidated those lookups. Enter ITA and other consolidators. Instead of hitting the airlines, the search sites (and airlines themselves) connect to the consolidators, who keep copies of the information and update it only infrequently. After all, seats don’t sell that quickly!
Now, the problem starts to become obvious: what happens if I search on Expedia and find exactly one ticket left at $500, which causes ITA to retrieve my flights, then on Travelocity, which gets the same “saved” (in technical parlance, “cached”) information, and book on Travelocity for $500. Then you come along and search on Expedia. Expedia uses the same cached information, which shows the $500 ticket available, because ITA has not been updated! You try to book it, and get “sorry, that fare went too quickly. Try this ticket at $700.” It looks like a bait and switch…
In truth, there is an incentive problem here. The airlines are the ones with the most correct data. After all, if British says it has 10 seats left in inventory, then that is absolutely true. If ITA says British has 10, then it definitely had 10 the last time ITA looked, but in the interim, British may have sold 0, 1 or all 10. But British is selling access at pennies per lookup. And when the fare you try to book disappears, you don’t get angry with British, do you? No, it is Expedia or Orbitz who takes the blame. The one with the best data has no incentive to lower their prices and disintermediate ITA – actually a negative incentive, since they would prefer you search and book directly with them – while the ones with the negative image problem has no control over the information.
So if you are one of these companies – Expedia, Orbitz, Travelocity, Kayak, ITA – how do you manage it? How do you prevent customers from thinking it is a bait and switch?
First of all, there is no perfect solution. As long as airlines refuse to accept that they are just one player among many, and customers will always go to a site that shows multiple airlines – British and American and United and Delta – rather than just one airline, there will be an information gap.
Given that there is no perfect solution, in other words, you cannot fix it, how do you manage it? This is about psychology: the customer will accept failure in a system provided it is managed well.
- Communicate: Tell your customer. Make it clear that the price is the best you know, but is a few hours old, and might have gone away in the interim. Customers will accept that the price was lost in the last 4 hours, even several times. They will never believe that the best price was lost multiple times, each in the last 30 seconds!
- Differentiate: If you are Expedia, why are you not talking directly to United, American, British and Virgin? Because it is expensive. Not all your customers are the same. This isn’t a problem, it is a revenue opportunity! Here are two of several ways you could do it:
- Status: If a customer has booked at least $2,000 worth of tickets on your site in this calendar year, they get real-time, direct, guaranteed prices… because these customers are worth spending a few more dollars on each lookup. Airlines do this all the time, it is called Elite Status. Travel Web sites can do it as well.
- Upsell: Sell access. A customer who travels once a year won’t care, but one who travels 3, 4 or more times per year will happily pay a $20/year “membership fee” that guarantees price availability. Airlines sell “Fare Lock” or similar on actual tickets and make money on them. Travel sites can as well.
- Invert: Find ways to invert the incentives. Make sure that the airlines feel the pressure when information is out of date.
There are other techniques you can use to manage the relationship. The key, as always, is understanding the customer and his/her expectations and managing it appropriately. Understand them, satisfy them, sell more to them.