Are You Ready For The Era Of ‘Big Data’?
I have just read two fascinating McKinsey Quarterly articles on this subject. The premise of the these articles is that “the amount of data in our world has been exploding, and analyzing large data sets—so-called big data—will become a key basis of competition, underpinning new waves of productivity growth and innovation” and “radical customization, constant experimentation, and novel business models will be new hallmarks of competition as companies capture and analyze huge volumes of data.”
It has caused me to think about how well travel companies are leveraging the huge volume of data they are capturing as their customers interact with them throughout the entire research, enquiry, sales, booking, fulfilment, travel and post travel processes.
Travel companies who not only realise the value and potential of this data, but are able to leverage it to their advantage will have a big competitive edge. As McKinsey observed:
“Over time, we believe big data may well become a new type of corporate asset that will cut across business units and function much as a powerful brand does, representing a key basis for competition. If that’s right, companies need to start thinking in earnest about whether they are organized to exploit big data’s potential and to manage the threats it can pose. Success will demand not only new skills but also new perspectives on how the era of big data could evolve—the widening circle of management practices it may affect and the foundation it represents for new, potentially disruptive business models.”
So, as a starting point here are three key questions for travel companies to consider:
1. What are you doing today to analyse and leverage the data you are capturing?
Analytics tools such as Google Analytics provide a wealth of information on web site visitors, browsing and search patterns, referrers, click-through rates, page drop-offs, look-to-book ratios etc. How much of this information are you using to analyse how your potential and actual customers are interacting with one of your sales channels, reacting to your product information and pricing and making purchase decisions? Is this data informing your decision making process with respect to changes to your web site, how you are presenting your products and even pricing decisions?
Modern reservation systems can provide customer and booking data and analysis for you, giving you insights into both individual and customer group buying patterns by destination, by advance booking period, by product type, by price range, by duration, by product value etc. How much of this information are you analysing and how could knowledge of these patterns influence your product and sales strategies?
2. If you could test all of your decisions, how would that change the way you compete?
As McKinsey observes,
“Big data ushers in the possibility of a fundamentally different type of decision making. Using controlled experiments, companies can test hypotheses and analyze results to guide investment decisions and operational changes. In effect, experimentation can help managers distinguish causation from mere correlation, thus reducing the variability of outcomes while improving financial and product performance. Leading online companies, for example, are continuous testers. In some cases, they allocate a set portion of their Web page views to conduct experiments that reveal what factors drive higher user engagement or promote sales.”
Travel companies with flexible reservation systems have the ability to quickly and easily create new product offers, special discounts, value-added options, new product/marketing types etc. that can be used to experiment and test hypotheses. When coupled with the ability to quickly collect and analyse the results, this provides these companies with the powerful capability to cost-effectively see what does and does not work and to make informed (as opposed to ‘hunch’) investment decisions.
3. Would it make sense to offer more precisely tailored products or services?
Big data allows ever-narrower segmentation of customers and therefore the opportunity to offer much more precisely tailored products or services. How might you better tailor your holiday offers, for example, if you could see a period where the majority of the last minute bookings were for two specific destinations and were generally families booking family or connecting rooms? Or, if you found that there were significant visits to your web site looking for 3 night breaks in Paris in May but almost no-one booked?
Consumers are now very used to seeing more targeted marketing and offers and they expect this of travel companies too. The rapidly growing use of mobile devices and of social networks also provides both a challenge and an opportunity for savvy travel companies to use these channels to target product offers to specific audiences. But if you haven’t analysed your data, how do you know where to start? Hunch or informed decision making? Your choice!
The world of “Big data” has arrived. Here is a story from one of the McKinsey articles:
“The top marketing executive at a sizable US retailer recently found herself perplexed by the sales reports she was getting. A major competitor was steadily gaining market share across a range of profitable segments. Despite a counterpunch that combined online promotions with merchandizing improvements, her company kept losing ground.
When the executive convened a group of senior leaders to dig into the competitor’s practices, they found that the challenge ran deeper than they had imagined. The competitor had made massive investments in its ability to collect, integrate, and analyze data from each store and every sales unit and had used this ability to run myriad real-world experiments. At the same time, it had linked this information to suppliers’ databases, making it possible to adjust prices in real time, to reorder hot-selling items automatically, and to shift items from store to store easily. By constantly testing, bundling, synthesizing, and making information instantly available across the organization—from the store floor to the CFO’s office—the rival company had become a different, far nimbler type of business.”
So, one final set of questions. How does the above scenario play out in the travel sector and in your particular part of it? What happens if it is one of your major competitors that seizes the opportunity? Or, what would happen to your competition if you seized it?
Carpe diem! Carpe ‘big data’!
The two McKinsey articles can be found here:
“Are you ready for the era of ‘big data’” – http://www.mckinsey.com/Insights/MGI/Research/Technology_and_Innovation/Are_you_ready_for_the_era_of_big_data
“Big data: The next frontier for innovation, competition, and productivity” – http://www.mckinsey.com/Insights/MGI/Research/Technology_and_Innovation/Big_data_The_next_frontier_for_innovation