The relevance of the Purchase Experience Moment and why it matters to hotel operators!
Updated: Sep 21
Travel has experienced a total reset with the current pandemic crisis and the environment has changed with lasting implications, but will there be a change of how hotel operators approach their marketing and distribution strategies? Other than implementing and promoting new hygiene concepts to make travelers feel confident again, hotel operators are occupied to reopen their hotels and doing the x-number of reforecasts while missing the point that there has been an acceleration towards online purchasing.
If businesses don’t reinvent the online buying experience, they will find themselves outsmarted in the new normal and dependencies on third-party distribution players will become even stronger than pre Covid-19. A worse practice is eventhrowing advertising money into search engines yet continue to ignore the own purchase experience which is often inferior to third parties. When this is the case, conversion ratios actually are going down.
Throwing additional funds towards advertising can only drive minimal success and would not be the best return of the investment. Of course, way too often we read the data as we want to read it to justify our actions in the first place and are not probing or testing new assumptions. As the saying goes, the devil is usually in the detail.
Let us take traditional retail practices for example, where we distinguish between the point of purchase (POP) and the point of sales (POS), yet often only represented as one touch point mentioned as “purchase” or as the First Moment of Truth when shown in customer experience maps.
However, the distinction has merits and helps to craft and analyze the customer experience in general. In physical retail shops for example the POP and the POS might be in different locations with different implications for the buying process. A long queue at a cashier may cause a drop out of the intended purchase and customers walk out the store without even being noticed. That might not be a problem if it happens a few times managing demand variations but if queues are caused due to administrational or process driven insufficiencies, it becomes a real opportunity cost. Obviously for a hotel website the POP and the POS take place at the same location (the website) and are much more intertwined but they happen instead at different steps of the buying process. I refer to this interaction as the “Purchase Experience Moment (PEM)” and delivering a congruent and transparent overall experience can add a lot of value to customers and hotel operators.
For example, additional ancillary services or upsell opportunities could pop up any time during the buying process or before the booker confirms the reservation. The better the interplay and composure of the POP and POS experience, the better the overall customer experience, site conversion and potential increase of share of wallet. Of course, also the opposite can happen, in particular if there are large disconnects between the POP and the POS, which is unfortunately more often the case.
So why does this matter at all? The point of purchase impacts brand advocacy!
When looking at classical business strategies, you can gain a competitive advantage by building scale or through differentiation. While hotels are trying to differentiate themselves heavily through their brand, marketing and experiences offered and big chains are gaining distribution power through consolidation, OTAs have successfully commoditized hotel experiences by making them very comparable. This is unfortunate since the differentiation efforts of hotels are therefore not really impactful.
Third party distribution channels often provide even a better, more defined or trustworthy way of making a reservation. In the worst case, these channels offer the same stay options even cheaper or with more personalized recommendations. For example, while OTAs provide a hazzle free booking experience with many alternatives, good travel agents in contrast provide an individualized purchasing experience with personal recommendations. Now common wisdom suggests, that the distribution channel which ultimately converts the sale, owns the customer and is in the best position to build brand advocacy for future business, as well is setting initial customer expectations. This is also why OTAs or Tour Operators do not pass on all contact details of their customers for the booked hotels (at least not free of charge). They also operate their own loyalty programs and engage heavily in CRM tactics to keep customers engaged. Even though you might argue that hotels should own the customer, they are starting from the back foot from bookings generated through third parties and must re-capture that customer for future stays. So, if hotels want to improve their direct business and be in the position to own the retail journey, they also must become the preferred distribution channel for their guests and that requires that their Purchase Experience Moment has to deliver real value for customers in comparison to the value delivered by third party distribution experiences.
There is no one size fits all!
The choice of the preferred distribution channel however is also subject to the purpose of travel and the related customer needs, impacting the buying behavior. Different sales channels provide different value contributions and are more or less suited better to different travel purposes.
For example, if I am planning a more complex vacation with the family, I may tend to involve a travel agency to consult and support me on the decision-making process. For a simple one-night business trip for myself on the other side my preferred sales channel might be an OTA, offering a number of options including price ranges that meets my budget and onsite location requirements.
See below examples of the different types of value contribution tenets which are important when contrasting a more functional stay (like a one-day business trip) with a more emotional stay (like a family vacation):
When targeting functional stays for example, the Purchase Experience Moment should include easy bookable room setups, visible and good reviews, as well as brand recognition gives the booker an ease of mind. All of these are very helpful when converting those travel segments.
For emotional stays in contrast, the Purchase Experience Moment should cater more to personal needs, focus on engagement and this can make all the difference. Hotels are well advised to eliminate as many disconnects as possible between the actual experiences shown on the website and the booking process itself to reduce dropouts.
Consideration for hotel operators
So subject to the type of hotel and the respective business mix catering to more functional or more emotional stays, operators should craft the Purchase Experience Moment for their own channels, and this should be an important part of the overall marketing and distribution mix activities! Since traveling has become special again with the current crisis and customers are looking even more for personalized offerings, hotels have a 2nd chance to get it right and avoid the mistakes post 9/11 when they were giving it away to aggregators.
According to the Hotrec European hotel distribution survey 2020, European hotels received in 2019 an average of only 8,8% room reservations through their own booking engines on their websites, compared to 14,2% through phone or 17,1% through email or online forms. A large portion of the business is however coming through third-party distribution channels and there was an increase of 44% of online intermediaries between 2013 and 2019, of which almost half of the increase was from OTAs alone. So, there is a high danger that instead of increasing the direct business share post Covid-19, it could go the opposite direction, making OTA’s even more powerful and increase the cost of sales again impacting the hotel’s net profit.
How can the Purchase Experience Moment (PEM) be improved?
There are numerous known retail strategies available, which hotel operators could embrace. I like to highlight four retail tactics, which are commonly used in e-commerce:
a) Principles of persuasion (Robert Cialdini): This includes things like social proof – using reviews & review sites for example, authority - validating the quality by an expert or an institution, scarcity – showing how many rooms are left, likability – what are my friends or Social Media sites saying for example.
b) Ikea-Effect (Norton et al.): This is a cognitive bias when consumers place a disproportionately higher value on products where they are partially involved in the creation. In case of hotels, this is achieved for example by being able to create your own vacation package selecting your desired room and location, specific attributes, F&B choices and ancillary services.
c) Gamification: It keeps guests engaged during the booking process, like placing a bit for a specific upgrade for example.
d) Personalization: the use of chat bots for example engaging with the customer during the booking process and allowing to address individual needs.
Customer experience should come first!
Whilst common e-commerce tactics can be very powerful, there is a small line between overdoing them or providing a great customer experience. For example, tactics like showcasing scarcity, creating a sense of urgency with “book now” etc. can also turn consumers off depending how aggressively this is being used. So, it is always important to approach the Purchase Experience Moment (PEM) from a customer perspective, making it as personalized as possible and avoid non-value adding steps.
So, what, now what?
We believe the Purchase Experience Moment (PEM) has a significant impact on the overall hotel business performance and brand perception. It has the power of driving higher conversions, higher share of wallet, reducing the gap between guest expectations and booking experience leading to positive guest reviews and elevating the entire brand perception.
NOW is the best time for hotel operators to get their distribution strategies right and instead of re-forecasting a lost business year over and over again, finally making some key changes and adapt their approach.
It is not about making radical decisions overnight but taking a step by step approach, focusing on what matters – your guests! And what it takes to provide a personalized purchase experience to them when staying in your hotel.
The current market environment has evidently changed the travel behavior, and we are in for another period of low and uncertain demand. Leisure travel is the most resilient in this climate and hotels which are able to successfully target their domestic markets will have an advantage. Revenue share per customer and driving conversions are now crucial for all hotel operators to thrive, hence the Purchase Experience Moment becomes even more important, being a key tool to drive demand and yield higher revenues per customer!
The World Hospitality Alliance is a group of experts around the world that is available to advise and provide more information how those tactics can be implemented and which steps to take first.