Yesterday I mentioned that I had planned to write about Expedia, but was sidetracked by the announcement of the new Yahoo! CEO and her views on enabling innovation via a tolerance for failure. The reason I am interested in Expedia is because they are probably the best example that I know of in the travel industry using what I predicted would become much more important for airlines (and probably everyone else) in 2009. It is what I referred to as nudge marketing – basicaslly push, but much more targeted (a gentle push) and therefore a lot more effective.
For example, one program that we have is if we know that you have searched for a flight from Los Angeles to New York and you haven’t bought and we see those prices go down by let’s say 10% or 15%, we’ll send you another email that says, “We saw you search for this flight. The price has changed. Do you want to buy?” That email converts at multiples of call it an email that’s not personalized 10 to 20 times non-personalized emails. We’re going to expand those programs into the European markets and hopefully we’ll see some good returns there.
I assumed that it was TRX that had built this for Expedia, especially as they get 45% of their revenue from this one customer, but someone familiar with the situation recently informed me that Expedia has built this functionality in-house. As an aside, I was very interested to see Expedia prepaying TRX their invoices based on expected transaction volumes. Either someone at TRX is a great negotiator, or they have dropped the price to get cash in the door more quickly.
I’m currently working with a couple of airlines to implement nudge marketing, although in a different way to that done by Expedia. Before the middle of this year I hope to be in a position where I can release some very detailed statistics on the extra revenue this has generated for them, but in the meantime I am very pleased to see airlines waking up to the enormous possibilities from adopting this approach with ancillary revenue. I’m starting to wonder if it might even make me more of a believer in the legendary long tail? Only time will tell.