Book direct: Hoteliers, you may be better prepared than you think
Today’s post features an interview with Faith Marshall, a CHR Advisory Board member and director of travel, transportation, and hospitality at NTT DATA.
Driven by discussions of rising distribution costs, terms like book direct and personalization are becoming widely used in industry. The hotel industry recognizes that they should encourage guests to develop a direct relationship with the hotel through offering favorable rates, personalized experiences, and an engaging relationship. Of course, executing this vision will require infusing technology and data (hopefully analytics as well!) throughout the guest journey. Further, as I discussed with Michele Sarkisian in our blog post, it will require well-trained, engaged employees, who can interact with all this technology and ultimately deliver the service.
It isn’t easy, though. As product of the digital transformation, consumers today are starting to compare their interactions with hospitality companies to every service they do business with—and their expectations for the quality of those interactions are getting higher and higher. You don’t just have to be better than other hotel companies; you have to be at the level of all retailers, banks, grocery stores, and insurance companies that consumers come in contact with, all of whom are constantly innovating in their consumer experience. If expectations for seamless experiences are not met, particularly in digital or technology-enabled interactions, it is not hard for consumers to go somewhere else.
Right after I spoke with Michele, I caught up with Faith Marshall from NTT DATA. Faith brought up this same issue of the importance of a seamless customer experience. As technology enablers, NTT DATA thinks a lot about facilitating that seamless experience. She told me that the challenge from their perspective was that there wasn’t really a focused framework to evaluate the ease of a customer experience process. NTT DATA wanted to be able to quantify the ease or difficulty of the interaction, so that companies could truly understand the issues in that process and begin to make impactful changes. After all, you manage what you can measure, right?
Friction and the customer experience
Faith and her colleagues described NTT DATA’s “Customer Friction FactorSM” methodology to me. The term “friction” in this context comes from the technology industry, referring to users’ difficulty during their interaction with a piece of technology. As NTT DATA explains, customer friction is “any aspect of the customer interaction that has a negative impact on the customer experience.” Keep in mind, customer friction doesn’t always have to be a total failure, but rather, could be a series of little difficulties that can add up to an overall negative feeling about the experience.
I happen to be a big fan of this concept. Given the complexity of the guest experience, and the seemingly endless array of technology options available to deliver personalization, an approach that eliminates friction could be a great way to focus a personalization initiative. Rather than starting with the technology, or the hotel’s end goals, put the guest at the center and understand the experience from their perspective. Guest data, technology, and personalization will be a big factor in removing friction, but use them to achieve the goal of a seamless experience. You may find, within this friction-elimination goal, similar opportunities to increase conversions, upsell, and increase repeat visits—but these will happen within that seamless experience, not at the expense of it.
Disney’s MagicBand is a great example of how the concept of friction has been used in a hospitality context. The stated purpose of the MagicBand program is to remove friction, anything that could distract the guest from total immersion in the magical Disney experience. The band acts as a wallet, a placeholder in attraction lines, and a room key—and a general identifier throughout the experience. Guests don’t have to stop to pay, don’t have to bring anything extra with them into the park, and don’t even have to remember their room key (http://www.wired.com/2015/03/disney-magicband/). They just swipe the band and go. By focusing on this guiding principle, Disney accomplished their goal of keeping guests immersed in the experience, and found many opportunities for innovation (and, one imagines, revenue generation) along the way.
Customer Friction FactorSM
The customer-friction-factor metric that NTT DATA developed assigns a score, or Friction Factor, to each component of the interaction, and then sums these individual scores to an overall Customer Friction FactorSM (CFF). The higher the score, the more friction there is in the experience. Examples of friction could be requiring customers to switch communication channels (from web to email), not applying knowledge of customer history or preferences (saving room preferences for the next visit), insufficient or unintuitive interfaces (can’t find the booking link!), or technical challenges (frozen webpages or broken links). Without going into too much detail about the calculation of this metric, basically, points are added when a customer experiences friction (e.g., being put on hold while the employee finds a manager), and points are taken for elements that simplify the transaction (e.g., text message alerting that the room is ready, rather than the guest having to check back repeatedly or not until a specific time).
NTT DATA suggests that friction can be thought of in five broad categories:
- Technical – Related to any issues with technology
- Engagement – Related to customer touchpoints, like hold time during a call
- Ecosystem – Related to interactions across the broader enterprise—like a lost dinner reservation, taken by one area, not translated to another
- Knowledge – Related to use and misuse of customer or organization knowledge—like not carrying customer preferences forward
- Process – Relating to the activities in a business process—like having to reenter the billing address when it is the same as your home address
The amount of points accrued depends on the type of friction and the degree of the impact on the customer experience. Similarly, points can be subtracted according to the impact of the friction-easing technique. The customer-friction factor is also adjusted according to industry, transaction type, and proximity to the customer (i.e., in person versus online).
Customer friction research
As the book-direct debate heats up, I’ve been wondering whether the hospitality industry is prepared to compete in the online-guest-booking experience with the major distribution channels. After all, the OTAs are in the ecommerce business, focusing all of their attention on conversions. I worried that if guests have difficulties in their first experience with the hotel site, they are likely to go right back to the OTA (special rates aside, of course).
This is why I was particularly excited to talk to Faith and her team about some of the research they have been doing to validate their framework. If we know where friction is in the booking process, we can anticipate challenges guests may have as bookings shift to brand.com. NTT DATA has conducted cross-industry research with CFF, and has already validated a connection between transaction ease and performance. For example, they applied CFF to online transactions with major retailers and found that those that had the top-five-lowest CFF (easiest to do business with) had a compound annual growth rate (CAGR) three times greater, over several years, as compared to the top-five-highest-scored retailers (hardest to do business with). This supports the notion that ease of interaction increases conversions and encourages repeat business.
So, how do hotel companies measure up in terms of the online booking experience, particularly as compared to the same type of transaction executed with an OTA? As a point of reference, according to NTT DATA, if the CFF is in the range of 150 to 200 points, the customer becomes unimpressed and could look for alternatives. Once you get above 200 points you are at serious risk of losing that transaction because you have made it too difficult for that customer to do business with your organization. NTT DATA applied the framework to hotel-room purchase with the major North America brands. The scores ranged from a low of 93 to a high of 229, with the average being about 161. You might be surprised which of the brands were at the low and high ends. (Unless you’ve actually tried to buy from all of them, in which case, I guess probably not!). The average of about 161 is right in that range where the guest could be unimpressed. This indicates that most hotel companies do have some work to do to ease the transaction.
Analysts noticed that, in general, hotels were very good at persisting information for loyalty members. However, some companies did not adequately guide the booker through the booking process, offering multiple paths to achieve the same goal, which was confusing. Only one-third of the hotels immediately offered a map option when the consumer did a location-based search. Finally—my personal pet peeve—nearly two-thirds offered multiple rates for the same product without adequately distinguishing the differences in the offering that drove the price differences.
However, when NTT DATA ran the same analysis against the booking process with the major OTAs, our ecommerce experts, the results were a bit surprising (to us, but that’s why we do research, right?!). The lowest score was 243 and the average was 298, with a high score of 356! The analysts at NTT DATA noted that, pretty much universally for the major third-party distributors, the booking process was interrupted quite often with upsell offers like packages or insurance. The shoppers frequently had to enter the same information in multiple places because it was not auto-populated in subsequent screens. There were many pop-ups and banner ads throughout the process. The reservation transactions refreshed six-plus times per transaction across the sample, which slowed down the checkout process. As I mentioned earlier, all of these little negatives added up to a potentially frustrating experience.
OTAs have the reputation of being really good at ecommerce, and speak about how they use their data to improve conversions on the website. These results seem to indicate that the OTAs have focused on optimizing for conversions and revenue, not for customer experience. This could be an opportunity for hotels to gain an upper hand through an easy and consistent experience from research to booking to the stay experience (provided hotels are able to convince the guest that they can get a similar or better price by booking direct).
These findings are purposefully high level, and definitely raise more questions than they potentially answer. For example, as I discussed the implications of these findings with Faith, we wondered how much friction a consumer would be willing to endure if it resulted in the best possible deal. The analysts felt that both the third-party distributors and the hotels offered “too many choices,” which impacted their scores. While some research has been done in this area, there’s probably more work to be done in understanding how many options to present before you create confusion and fatigue.
I think these high-level findings support the idea I presented at the beginning of this blog. It is really important to keep the guest at the center of your service-process-design initiatives. You can have high conversions, increase ancillary revenue, and provide a seamless guest experience, but only if you keep the guest in mind as you design the process. The other thing that struck me from this discussion is that it could be quite useful to have a metric to evaluate your current process and to benchmark against as you improve (but then I’m kind of a data geek, so this shouldn’t be a surprise). Quantifying the friction in each stage of the process keeps the team focused on areas where they could have the most positive impact on the process. Regardless of whether you want to follow a formal methodology like NTT DATA has developed, or not, I would strongly recommend that before you embark on any innovations or improvements in your service process, you consider how the guest will experience it, and make every effort to remove any difficulty they may experience.