Flash Sales &    RevenueManagement   Complementary or    disruptive forces?                        Kate VariniYOUR ONE STO...
Breaking News• Discounting sees ski holiday prices tumble• Lift passes, ski rental and living costs have fallen up to 20% ...
Breaking News: A new era is            beginning!• Tour operators ceasing trading after nearly 40  years in business.• Tho...
What are flash sales?• Large discounts offered for a very  limited time• Not usually last minute• Sometimes linked to grou...
Flash Sales Can WorkBoost Sales             Boost Cash Flow                            YOUR ONE STOP SHOP FOR REVENUE OPTI...
Why are “deal sites” so successful• Boredom with traditional  offers• Commoditization/frames of  reference• Recession, ris...
Possible benefits• Segment and target audiences  – Specific demographics  – Origin or destination points• Opportunities to...
Suppliers said…• 32%• 42%• Causes?  Price discounts erode brand value in the long term  & a low rate of …..  – repeat cust...
Challenges• Results need to be measurable during and  after – CRM/lifecycle of customer acquisition• Can destroy or enhanc...
Good Bad and ?                                  or …?• Livingsocial                    •    Jetsetter• Sniqueaway       ...
Pros Low cost, low risk customer acquisition and brand introduction channel Offload distressed inventory New customers...
Cons Customer confusion regarding who to contact when things don’t work Liability when working with 3rd parties Custome...
On the bright side…..• A recent study showed that the benefits of  offering a social coupon seem to out weigh  the disadva...
Redemption Factor?            YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
US Concerns• Employee perception, morale, motivation• Customer loyalty, propensity to return, spend• Study showed that the...
Best Practice 1• Considerations  – incremental cost of sales  – the average sale  – redemption percentage  – percentage of...
Best Practice 2• Daily deal $100• 25% Discount• Must book 10 days in  advance• Only 1 per customer                  YOUR O...
Living Social – A good alternative?• Once a week – offers to members 10-12, 4 & 5 star properties, all  brand types…bundli...
Example of LS Deals              600 sold                  500 sold• Most sales on first day of promo with 15% buy within ...
How it works: Discount does not equal              low price• Shift in consumer behavior• Power of mobile generation• Caut...
How it works (cont…)• (50%) discount on total value not price - $115  – 100 room price  – 80 dinner  – 40 champagne  – 10 ...
Top Tips Digital                                Sales Strategy• Integrating marketing, distribution, revenue• A thoughtful...
What else?• Get more creative in driving direct sales through  your own hotel website  – Try dropping rates for particular...
Conclusion• Deal-sites put pressure on profit margins.• Some consumers display desired add-on purchase  behaviours• Create...
Arrive at 7am, wait untilReverse Flash        10am for ticket office to   Sales!                pen. 500 tickets          ...
What business are you in?               YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
                                       References    Atkins D. (2011) Digital Flash Sales, private sales, daily deals, gr...
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Revenue Management & Flash Sales: Complementary or disruptive?

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Can flash sales add profit to the bottom line?

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  • 100 = 25…VC 15. If can do price differentiation….in low demand periods. Time differentiation rather than price differentiation…
  • Consumer interest in deals fueled by the ubiquity of the InternetGlobal economy enabling huge audiences
  • Offers outside of booking window …. For low demand times…
  • like Kayak and HotelsCombined.to make your hotel stand out more
  • Revenue Management & Flash Sales: Complementary or disruptive?

    1. 1. Flash Sales & RevenueManagement Complementary or disruptive forces? Kate VariniYOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    2. 2. Breaking News• Discounting sees ski holiday prices tumble• Lift passes, ski rental and living costs have fallen up to 20% compared with prices 2 years ago – comparison of prices in 10 resorts• Switzerland only exception• Bulgaria best value for money for beginners at 17% cheaper, costing less than half the price of Italy and Switzerland.• Family ski and boot hire was cheapest in Austria, helping push the Austrian resort’s prices down 11 per cent from their 2009 high.• In Canada and the US prices have plunged with ‘kids ski free’ deals leading to prices dropping by 23% – Travelmole.com, today. YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    3. 3. Breaking News: A new era is beginning!• Tour operators ceasing trading after nearly 40 years in business.• Thomas Cook• American Airlines YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    4. 4. What are flash sales?• Large discounts offered for a very limited time• Not usually last minute• Sometimes linked to group buying• Sometimes bundled value items• Can be a tool to move guests to the locations you want them to use YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    5. 5. Flash Sales Can WorkBoost Sales Boost Cash Flow YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    6. 6. Why are “deal sites” so successful• Boredom with traditional offers• Commoditization/frames of reference• Recession, rising food prices• ……are they the new OTA? YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    7. 7. Possible benefits• Segment and target audiences – Specific demographics – Origin or destination points• Opportunities to build loyalty with existing customer base• Create demand• Gain visibility/new customers for firms YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    8. 8. Suppliers said…• 32%• 42%• Causes? Price discounts erode brand value in the long term & a low rate of ….. – repeat customers buying at full price – customer spending beyond coupon value YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    9. 9. Challenges• Results need to be measurable during and after – CRM/lifecycle of customer acquisition• Can destroy or enhance revenue management plans• Overuse negatively impacts WTP• Needs long term objectives e.g. use as a tripadvisor add-on?• Requires specific goals for each offer YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    10. 10. Good Bad and ?   or …?• Livingsocial • Jetsetter• Sniqueaway • Groupon • Providers keep no-show • Rue lala revenue • Voyage Prive • Helps with cash flow • Bloomspot • Focuses on building a value experience • Yuupon • High prices • Eversave • Discount capped to • Google..….etc. maintain brand image YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    11. 11. Pros Low cost, low risk customer acquisition and brand introduction channel Offload distressed inventory New customers Cross selling opportunities Cash flow benefits Billboard effect Build relationships with 3rd parties Decrease reliance on traditional OTA Sell experiences not just a discounted rate No comparison shopping/website cruising Copy written by professionals hence less boring, more entertaining Guaranteed minimum number of sales Buzz YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    12. 12. Cons Customer confusion regarding who to contact when things don’t work Liability when working with 3rd parties Customers unrealistic expectations may generate negative reviews Wrong customer Over drinking, ruining experience for others One time bargain hunters that use all value of bundle Existing customers whose WTP is affected Loss of control of copy except for specific facts Breakeven or loss No non-redemption advantage YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    13. 13. On the bright side…..• A recent study showed that the benefits of offering a social coupon seem to out weigh the disadvantages – Buyers young, married, higher income – Some cannibalisation – frequent customers – Brought back infrequent &a substantial % of new customers that said they would return and paid regular price and recommend (the restaurant) to their friends – Would not have tried without daily deal Kimes & Dholakia (2011) YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    14. 14. Redemption Factor? YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    15. 15. US Concerns• Employee perception, morale, motivation• Customer loyalty, propensity to return, spend• Study showed that these concerns are overstated• No sign of difference between daily deal customers and others except more impulsive, like to try new things and appreciate deals• Conclusion: A well designed restaurant deal will benefit both the operator and the customer Kimes & Dholakia (2011) YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    16. 16. Best Practice 1• Considerations – incremental cost of sales – the average sale – redemption percentage – percentage of coupon users who are already customers – how coupons does each customer buy – what percentage of coupon customers turns into regular customers – the advertisement value of the business being promoted to the population – how much does it usually cost to attract customers through advertising YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    17. 17. Best Practice 2• Daily deal $100• 25% Discount• Must book 10 days in advance• Only 1 per customer YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    18. 18. Living Social – A good alternative?• Once a week – offers to members 10-12, 4 & 5 star properties, all brand types…bundling experiences, not in market for selling just on room• TRM and more interesting experience• Overall package discounted – value. Extras can be things provided by hotels that can earn bigger margin for example early checkin• Discounting call to action does not mean reduction of total hotel revenue• 600,000 room nights in the last 12 months• A high growth, genuine channel: 400-800 room nights from a promotion lasting one week• Travel magazine copy with purchase functionality• A well constructed social commerce should… – Generate new demand ( when you want it) – Tell your story and strengthen your brand and loyalty – Be completely measurable – Protect total revenue – Work for all brands YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    19. 19. Example of LS Deals 600 sold 500 sold• Most sales on first day of promo with 15% buy within 30 minutes of getting email• Customers travelled from up to 2 hours journey• Merchants do not pay if LS does not deliver• Travellers want experiences hence you need to tell your interesting/inspiring…fantastic stories.• OTA all about price and very little about quality of your hotel.• Structured so it works for everybody – post event write up including links to hotel – 200% increase in traffic…no cpc applied• 3 room categories – wanted to sell suites – LS social produced a video of hotel, most sales at high price point… YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    20. 20. How it works: Discount does not equal low price• Shift in consumer behavior• Power of mobile generation• Caution: think carefully about who you are working with…need to feel building something together, understands your industry.• LS only recruit people with a travel background $2000 - 1 night stay, 10,000 $1 night• Look at discounting levels 114 sold within 7 days carefully (not a good idea to use rack rates, better BAR to not show too huge a discount YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    21. 21. How it works (cont…)• (50%) discount on total value not price - $115 – 100 room price – 80 dinner – 40 champagne – 10 late check out• Cost to hotel? 15 + 30 + 20 = $65.• Contribution: $50• Merchants paid 80% of revenue in 15 days then rest after 80 days• Cash flow• Pay on purchase not usage….so full revenue comes to hotel YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    22. 22. Top Tips Digital Sales Strategy• Integrating marketing, distribution, revenue• A thoughtful review of what each deal site offers – possible sales actions and financial gains• Who is the target customer?• Use value propositions• Discount if you book now (easyjet approach) – Lengthens the booking window and helps you better forecast• Flash sales directed at guest while they are in the hotel using LBS YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    23. 23. What else?• Get more creative in driving direct sales through your own hotel website – Try dropping rates for particular dates but only for a time span of 1 or 2 hours – Consider lowering rate sat 7pm and raise it again at 7am – Willingness to pay is higher on a Monday morning that on a Sunday night• Offer a lower % commission to attract more volume through meta-search sites• Use an 10% early bird discount & Google Places tagline• Invest the same amount in SEO as paying in OTA commissions• Use cashback & rebates to offer lower rates YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    24. 24. Conclusion• Deal-sites put pressure on profit margins.• Some consumers display desired add-on purchase behaviours• Creates practical implications to isolating consumer segments resulting in discount vouchers cannibalizing the existing customer base.• The advertisement potential of deal-sites as a good opportunity to increase brand awareness and online buzz• Deal-sites increase online reviews but often in negative ways• deal-sites are a recessionary phenomenon with a flawed business model that will continue to hurt the hospitality industry as long as merchants continue to use them. YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    25. 25. Arrive at 7am, wait untilReverse Flash 10am for ticket office to Sales! pen. 500 tickets available. Must use same day YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    26. 26. What business are you in? YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION
    27. 27.  References Atkins D. (2011) Digital Flash Sales, private sales, daily deals, group buying sites promo offers. Hospitalityupgrade.com Arabshahi, A. Undressing Groupon: An analysis of the Groupon Business Model. Available at www.ahmadalia.com, Dec. 2010 Byers, J.W., Mitzenmacher, M. & Zervas,G. Daily Deals: Prediction, Social Diffusion and Reputational Ramifications, arxiv:1109.1530v1, arXiv.org, September 7 2011 Dev C., Winter Falk L., Mougeot Stroock L. (2011)To groupon or not to groupon: A tour operator’s dilemma. Cornell Center for Hospitality Research. Dholakia, U.M. (2010) How Effective are Groupon Promotions for Businesses? Available at http://ssrn.com/abstract=1696327 November 10 2011 Dholakia, U.M. (2011a) What Makes Groupon Promotions Profitable for Businesses? Available at http://ssrn.com/abstract=1790414 November 10 2011 Dholakia, U.M. (2011b) How Businesses Fair with Daily Deals: A Multi-Site Analysis of Groupon, Living Social, Opentable, Travelzoo, and Buywithme Promotions Available at http://ssrn.com/abstract=1863466 November 10 2011 Edelman, B., Jaffe, S. & Kominers, S.D. (2011) To Groupon or Not to Groupon: The Profitability of Deep Discounts, Harvard Business School Working Paper Golz, J. (2010) Doing the Math on a Groupon Deal Kimes S., Dholakia, U. (2011) Restaurant daily deals: Customer responses to social couponing. Cornell Center for Hospitality Research Luca, M. (2011) Reviews, Reputation & Revenue, Harvard Business School Working Paper Malcolm, J. (2011), Daily Deal Sites Must be Profitable And Relevant for Local Merchants Available at: www.businessinsider.com/sai November 10 2011 Starkow, M. (2011) The Pitfalls of Last Minute Sales in Hospitality, HeBS Internet Marketing Blog. Available at: www.hebsdigital.com/blog/the-pitfalls-of-last-minute-sales-in-hospitality/, October 14 2011 Xotels.com YOUR ONE STOP SHOP FOR REVENUE OPTIMISATION

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