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The High Cost of Ignoring Value
Price Transparency in a Connected Age
2
Agenda
• Internet usage drives price transparency• The impact of the mobile Internet• Responses• Results
3
The Internet enables price transparency
4
And it integrates marketing and distribution channels
5
Oh. And it’s growing
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08
Expedia Kayak
-5% YOY
+30% YOY
Source: Compete.com (http://siteanalytics.compete.com/expedia.com+kayak.com?metric=uv)
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Mobile? Even more so
Slifter.com 4Info
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Growth of mobile Internet
• 3.3 billion mobile phones worldwide– 50% market penetration worldwide - in 26
years
• 50% of Americans over 65 have mobile
• 58% of all American adults use mobile for non-voice, data application every day
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Possible responses
• Race to zero• Transparent value
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Race to Zero
$30
$3.50
$4
$6
$1$5.50$20
Ticket price
Checking 2 bags
Bottle of water
Priority boarding
Credit card handling
Subsidy from more expensive flights
Advertising per passenger-hour
RyanAir “$20” flight LON-BCN Source: Wired Magazine
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Requirements
• Rational pricing per add-on– Skewed pricing to maximize revenue
• $17 per minute phone service• $62 Continental breakfast
– Unhappy customers
• Risk tolerance
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Transparent value programs
• Rate parity/Best Rate Guarantee• Breakfast included• Guaranteed dollar program• One More Night• Leading Suites• Amazon Free Shipping
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Successes
•Transparent value programs generate 15% higher prices
•Customers participating in transparent value programs stay 17% longer
•Revenue per reservation 35% higher
•34% incremental business
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Conclusion
• The future is already here, it’s just not evenly distributed
• The internet creates price transparency
• Marketers need to ensure their value is equally transparent
14
Thank you
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