a culture of success: adopting experimentation in the...

A Culture of Success: Adopting Experimentation in the Travel Industry

How Winning Strategies Drive Revenue, Growth, and Testing Maturity

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Table of Contents

Introduction

Key Findings

Research Analysis • Creating a culture of experimentation

• Aligning testing with business growth

• Driving regularity and future success

Key Recommendations

Appendices • Appendix A: Methodology

• Appendix B: Cited Research

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Introduction

The informal, internal motto at one Boston-based travel company is “Speed Wins.” After the company began running several tests in its first month of experimentation and optimized its customer experience, it doubled its revenue in record time. The initiative got them up and running quickly, and the company now runs thirty or more tests per month using an iterative approach.

In the travel industry, experimentation is becoming increasingly successful as it can be applied to improve every aspect of the customer experience—from product development, to email marketing, to the customer service, and more. Testing in digital environments in any industry can also help to improve personalization. This is particularly important in travel, where personalized pricing, features, and recommendations are key to differentiating organizations selling a wide range of products, services and experiences. Today’s travel consumers demand special pricing on airfare, for example, as well as smart hotel recommendations and a wide range of personalized add-ons for any travel experience.

To what degree are travel organizations implementing and succeeding with experimentation? How are they facilitating its success, and what aspects of testing and experimentation are driving their businesses forward? Digital Travel partnered with Optimizely, the world’s leading experimentation platform in Q1 2017, to conduct a benchmark study of 91 industry leaders in order to better understand the impact of testing in the travel industry.

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Key Findings

Travel organizations of all types and sizes invest in testing and experimentation to support key growth initiatives, such as increasing conversions, acquisition, and revenue. Most travel organizations align experimentation directly with improving conversions and acquiring new customers, as opposed to nurturing, design, and cost reduction. Travel organizations see their greatest results from testing in their acquisition and purchase phases over prospecting, upselling, and retention.

The most mature organizations are already analyzing data and test results to make educated decisions about improving the customer experience. This begins with increasing the frequency of tests and analyses to capitalize on new data, or performing more targeted experimentation. For example, a travel organization could analyze both market and keyword data to understand the potential value of new prospects.

Travel organizations’ greatest barrier to implementing winning tests is cost. Nonetheless, most travel organizations earmark at least 1% to 10% of their online budget for investment in experimentation, and most also attribute at least 1% to 10% of their commerce growth to testing. 4% of organizations earmark 20% or more of their budget, and 9% of organizations attribute 20% or more of their commerce growth to testing as well.

In the study, travel organizations still on the threshold of formal testing and experimentation indicate that overcoming barriers to adoption is a more complex process than simply acquiring financing. They must first assimilate personnel into new testing initiatives and ensure their internal IT departments are trained and ahead of the curve in their mastery of experimentation. By adopting a testing culture, they can encourage executive buy-in, properly train personnel, and acquire the right resources to support testing initiatives that will move business forward.

Travel organizations must create a culture of experimentation

to drive testing initiatives forward.

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Key Findings

Understanding Maturity

To bring about maturity in testing, leaders are providing more staff training with new technologies while evangelizing employees to become more sensitive to the changing environment. As they adapt, leaders are filling gaps by hiring the right expertise so that all staff will be trained and on board before experimentation is applied successfully.

Perhaps one of the most important findings of the study is that the majority of travel organizations (64%) are implementing at least 5% of their winning tests, and over a quarter of them (28%) are implementing 20% or more. As we saw in the story of the Boston-based company, their iterations in testing are driven by increased successes. At its conclusion, this study provides key recommendations for travel organizations as they take their own paths to maturity in experimentation.

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CREATING A CULTURE OF EXPERIMENTATION

Research Analysis

How many employees does your company have, and in what industry?The study subjects represent a range of travel organizations, from those with greater than 5,000 employees to those with less than 100. 40% of respondents represent companies of less than 100 employees, and almost half of the respondents represent hospitality organizations. Others represent travel agencies and direct sellers, as well as airlines, travel management, travel retailers, and others to a lesser degree. As the research uncovers, the majority of these companies earmark a portion of their budgets and attribute a portion of their commerce growth to experimentation.

Travel organizations of all types and sizes invest in testing and

experimentation to support key growth initiatives, such as increasing conversions, acquisitions, and revenue.

Less than 100

40%

20%

16%

10%

14%

10010 - 5000

100 - 500

5001 +

501 - 1000

Direct Seller

9%

14%

42%

35%

Other

Online Travel Agent

Hospitality

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5%

23%

24%

Awareness

Purchase

Retention

In which stage of the customer journey are you seeing the most success?Most travel organizations’ experimentation objectives align with customer acquisition and increasing revenue, rather than post-purchase, nurturing, and retention. Acquisition is the most popular stage of the customer journey among retailers in terms of their greatest successes with testing—37% of travel organizations agree.

Only 11% have success with testing at the upsell stage of the customer journey, while only 5% have success with testing at the retention stage, which may illustrate that companies are hyper-focused on generating new business.

37%Acquisition

11%Upsell

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What are the strategic initiatives driving your experimentation program?Travel organizations consider increasing revenue per customer and increasing customer lifetime value only moderately important in terms of testing. Initiatives such as designing websites and reducing costs are considered the least strategically important of all six options available.

Improving efficiency, design, and even the post-purchase process may be more mature initiatives that emerge as travel organizations subscribe to ongoing experimentation and discover new applications that improve business. Currently, revenue-driving opportunities at the top of the funnel take precedence.

For example, a majority of travel organizations (57%) consider improving conversion rates strategically important—where 36% consider improving conversion rates the most strategically important among six categories presented. Another majority (52%) considers increasing customer acquisition strategically important, where 32% consider it the most strategically important.

On the path to maturity, measurability may be a barrier to testing adoption in areas besides acquisition and sales. Design performance is less easily quantified than conversions, for example; and measuring cost reduction or efficiency demands time and investment that might require deeper consideration, and thus generate greater resistance to executive buy-in. Testing initiatives that drive immediate financial benefits, and those that can be readily reported, are much easier to sell internally.

Improve Conversion Rates

14%

10%

8%

16% 18%

36% 21%

6%

7% 17%

32% 20%

Redesign Your Website

Increase Customer Lifetime Value

Increase Customer Acquisition

Reduce Costs

Increase Revenue Per Customer

Strategically Important

Most Strategically Important

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What percent of winning tests do you end up implementing?The majority of travel organizations implement a significant portion of their winning tests. Over half of travel organizations (59%) report implementing 1% to 20% of their winning tests, while 28% of travel organizations report implementing 20% or more. Only 13% of travel organizations implement less than 1% of their winning tests.

Travel organizations are making greater investments in winning tests as they identify experimentation's direct contributions to the bottom line. These gains are driving adoption of winning tests, despite common barriers to doing so.

The majority of travel organizations implement

winning tests. Over one quarter of travel

organizations implement 20% or more.

Less than 1%

10-20%

1-5%

More than 20%

5-10%

13%

23%

25%

28%

11%

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What are the biggest barriers to implementing other winning tests?According to 55% of travel organizations, cost is a big or the biggest barrier to implementing winning tests, among six options. And while data overload is the next most often cited barrier, stakeholder buy-in, culture, and technology are nearly as often cited as such. Each is considered the big or biggest barrier by 32% to 34% of companies. Only 19% consider expertise a substantial barrier.

Cost and data capacity are limiting by nature, but less tangible factors like stakeholder buy in, culture, and even willingness to adopt new technology can slow down successful testing initiatives as well. It’s in these smaller categories that we see how stratified travel organizations are in their barriers to adoption.

Cost

9%

11%

17%

34% 21%

22%

10%

15%

18% 16%

16%

17%

Culture

Technology

Data Overload

Expertise

Stakeholder Buy-in

Big Barrier

Biggest Barrier

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ALIGNING TESTING WITH BUSINESS GROWTH

What percent of your online budget do you earmark for investment in testing? A substantial majority of travel organizations earmark a significant portion of their digital investment in experimentation. Most travel organizations (61%) earmark between 1 and 10% of their online budget. An additional 17% earmark 10 – 20% of their budget, and 4% earmark more than 20% of their budget for investment in experimentation. Only 18% earmark less than 1% of their budgets.

The potential for success with experimentation is great—when properly applied, it can be exponential. But travel organizations must first identify the areas in which they can bring about this success. According to Harvard Business Review, executives should consider testing initiatives’ effects on various customers, markets, and segments, and invest in areas where the potential paybacks are highest. The correct question is usually not, “What works?” It is, “What works where?”1

Less than 1%

10-20%

1-5%

More than 20%

5-10%

18%

30%

31%

4%

17%

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With regard to your testing investment—in what areas are you investing related to headcount?The majority of travel organizations (73%) are focusing their testing investments in marketing as it relates to headcount. Almost half (44%) are investing in data analysis. 24% are investing in developers, and 23% are investing in program management. This shows the need for a cross-functional team dedicated to experimentation programs in order to achieve success.

4%

Marketing

44%

24%

23%

Program Management

Data Analysis

Other

Developers

73%

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In what areas are you investing related to technology?Most travel organizations are investing in mobile (66%), personalization (57%), and web technologies (56%). 20% of travel organizations are investing in recommendations, and only 10% are investing in server-side technologies. Ultimately, success requires greater investment in technology, training, and time. In this case, those investments are centered on marketing and data initiatives through mobile, personalization and web technologies.

As highlighted, travel organizations tend to focus on the top of the funnel for testing in order to drive metrics and revenue. As the majority of travel organizations invest in marketing and data analysis, this provides the most direct means for driving the revenue and data they need to encourage internal buy-in and improve the bottom line.

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10%

Mobile

57%

56%

20%

Recommendations

Personalization

Server-side

Web

66%

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DRIVING REGULARITY AND FUTURE SUCCESS

What percent of your commerce growth do you attribute to your investments in testing and experimentation?A substantial majority of travel organizations attribute at least a portion of their commerce growth to investments in testing. A majority (62%) of organizations attribute 1% – 10% of their commerce growth to their investment in testing. 11% of organizations attribute 10% – 20% of their commerce growth, and, 9% of travel organizations attribute more than 20% of their commerce growth to investments in testing. Only 18% of these companies attribute less than 1% of their commerce growth to their investments in testing.

The fact that over three quarters of these organizations claim at least 1% of their commerce growth—and in many cases at least 20%—comes from experimentation indicates the practice is a large driver of success.

62% of travel organizations attribute

1% – 10% of their commerce growth to their investments in testing and

experimentation. 20% of travel organizations attribute even more.

Less than 1%

10-20%

1-5%

More than 20%

5-10%

18%

34%

28%

9%

11%

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Key Recommendations

1. Identify test subjects, create a plan, and align those efforts with key business initiatives.If the pathway to testing maturity begins with creating a ‘testing culture’ followed byinvestment, iteration, and escalating success, it must be seen as a ‘ground up’ initiative.Beginning with a strategic vision, travel organizations must establish a game plan thatcan be communicated and executed effectively to begin. Perhaps the most importantdimension of experimentation strategy and implementation is understanding what shouldbe tested, when to test, and what are the business benefits of doing so. Only thencan advocates for testing overcome the barriers of cost by revealing opportunities forbusiness success.

2. Create a culture of testing that will encourage executive buy-in and encouragefuture growth. Organizations must then assimilate that strategy into their standardprocesses and be disciplined in their efforts to carry the initiative forward, as they striveto achieve executive buy-in and success within the organization. This means travelorganizations need to be aware of existing trends within the market and identify new, bestsegmentations for key markets with a high probability of visitation to their sites. Travelorganizations must bring together what they know about their customers and their mostsuccessful experiments to deliver personalized customer experiences with clear benefitsto the bottom line.

Let’s conclude by looking at a few key takeaways and recommendations from this study. We’d like to share with you three that we believe will help you on your journey.

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3. Ensure testing continues to support improvements to the customer experience.‘Data overload’ is a moderate-to-substantial barrier to implementing winning tests for overhalf of retailers, preventing otherwise good data from contributing to improvements.There are countless other complications that can prevent organizations from best utilizingtesting data. Experimentation should always have a purpose, and travel organizationsmust always identify methods that contribute to the bottom line—to drive forward practicalmethods of testing on a path to maturity.

Customers spend more money within superior experiences; and a great customer experience also makes it easier to acquire new customers. Mature organizations who adapt those experiences to changing customer needs make existing customers more valuable, and are accelerating ahead of their peers.

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Appendices

Appendix A: Methodology

The results analyzed in this report were gathered from responses to a digital benchmarking survey delivered to members of the Digital Travel Conference Community. 91 travel executives responded to the survey.

Appendix B: Cited Research

1. Thomke, Stefan and Jim Manzi. “The Discipline of BusinessExperimentation”, Harvard Business Review Dec. 2014.https://hbr.org/2014/12/the-discipline-of-business-experimentation

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ADOPTING EXPERIMENTATION IN THE TRAVEL INDUSTRY

Digital Travel Summit is the digital marketing, eCommerce strategy and customer engagement event for travel, hospitality and leisure companies. The industry is going through an unprecedented period of change – coping with heightened competition in a multi-channel environment, the pressing need for brand differentiation and eroding customer loyalty. Digital Travel Summit will focus on how travel, hospitality and leisure companies can act more like retailers to embrace digital strategies, harness technology to improve operations, and enhance the consumer experience.

Optimizely is the world's leading experimentation platform, enabling businesses to deliver continuous experimentation and personalization across websites, mobile apps and connected devices. Optimizely enables businesses to experiment deeply into their technology stack and broadly across the entire customer experience. To date, marketers, developers and product managers have delivered over 700 billion experiences tailored to the needs of their customers.

WBR Digital connects solution providers to their target audiences with year-round online branding and engagement lead generation campaigns. We are a team of content specialists, marketers, and advisors with a passion for powerful marketing. We believe in demand generation with a creative twist. We believe in the power of content to engage audiences. And we believe in campaigns that deliver results.

Optimizely Powers Experimentation for the World's Leading Travel Brands

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http://digital.wbresearch.com/

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