Thursday, April 18, 2013

#10: Determining Online Booking Targets

Metric Type                                                      Level
     SAVINGS: Yes                                              MASTER
     SERVICE: Yes                                               ADVANCED
     SAFETY: No                                                   BASIC
     SUSTAINABILITY: No

Description


                                          48.23%.

I sat in a review with a TMC and that's the number they presented for my client's online adoption. 

I complimented them on their exactitude (I mean, down to the hundredths of a percent!) and then asked them why they were wasting our time. 

This number, as a stand-alone data point, meant nothing. It had no context, and most of all, it provided no explicit or even implicit guidance on what, if anything should be done.

Recovering stammeringly, they shared that their "clients' online adoption ranged from 24% to 88%, so this number is somewhere between those figures." Really? My client and I sat there quietly waiting for something useful. 

The account rep started saying something like "I think maybe companies like yours seem to..." and I took pity and cut him off, "Let's start at the beginning. How many airline tickets has the client booked overall?" Let's say the answer is 10,000.

I next asked what percentage of those were simple point-to-point itineraries (e.g. leaving Boston, flying to Chicago and returning directly back to Boston). For our purposes here, let's say 80% of the total trips (8,000) were simple itineraries. Except for the most skilled of traveler, multi-city itineraries are better booked using a live agent.

My client's firm travels to many far-flung destinations around the world, and he was concerned with making sure that travelers had all the information and visas needed for those trips. Therefore, we asked the TMC to exclude, from the 8,000 simple itineraries, any transcontinental flights other than those in and out of London, Frankfurt, and Paris. There was a total of 1,500 trips that were eliminated using this filter, leaving us with 6,500 trips, or 65% of the total trips booked through the TMC. 

This is the important number. This figure represents the total number of trips eligible to be booked online, based on the client's criteria. So...if the online adoption was the very exact 48.23% (or 4,823 trips out of the total 10,000), that would mean that 74.2% of my client's eligible trips were booked online (4,823 / 6,500 = 74.2%). Placing this figure in context makes it a more actionable figure.

Now we can decide how much effort, if any, we should apply in order to improve this number.  

If we were to get 100% of the eligible trips booked online, that would mean an additional 1,677 trips. If the fee differential between online and offline booking was $20, that would result in an incremental savings of $33,540. In this case, my client's total travel spend is roughly $8.5 million. So in the best case, reaching 100% would save his company 0.4% of his total travel spend. Not a huge impact, and it is of course unlikely that we can reach 100%, so the true savings would be less than that.

Now that we know the savings potential, my client can prioritize whether to spend his time trying to maximize this figure, or to spend his capital elsewhere; encouraging advance purchase, or booking hotels through the TMC, or whatever offers the greater potential return. 

This is not to say he will completely ignore online booking, but simply that he won't make it the primary focus in his communications. 

Context is king. Truly knowing where you stand let's you figure out where you should go.