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

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Thank you