Kayak: Leading the Evolution of Online Travel Services In more traditional times
ID: 1136127 • Letter: K
Question
Kayak: Leading the Evolution of Online Travel Services In more traditional times, booking an airline ticket involved one of three basic options. First, a customer could call the airline directly to speak to a customer service representative. The second option involved speaking to a travel agent over the phone or visiting with a travel agent at the local travel agent's office. The third option required traveling to the local airport to purchase the ticket from a ticketing agent. All three of these options still exist today; however, many customers have opted to purchase their airline tickets from web-based services such as Expedia, Orbitz, and Travelocity. In addition, the airline's own websites such as united.com, singaporeair.com, and lufthansa.com have become popular methods to purchase airline tickets. There are many benefits to offering and purchasing tickets for sale via the web. From the company's perspective, the web offers an additional distribution outlet that not only makes tickets more available to the public but also provides an additional means to communicate the firm's promotional messages. Given the web's self-service nature, additional ticket sales are obtained without the aid of customer service representatives, which in turn lowers the firm's overall labor cost. For those customers who use the web for purely informational purposes, but still prefer to transact business with a “live” customer service representative, the web facilitates the efficiency of the purchase. After reviewing potential options on the web and conferring with family members and/or business associates, customers are more specific regarding their ticketing requests, increasing the speed in which the transaction can be completed. Customers also enjoy a number of benefits from using web-based services to purchase airline tickets. First, web-based services are typically readily available. There are no busy signals, no being placed on hold or waiting in line for one's turn. Second, web-based services such as Expedia, Orbitz, and Travelocity all display a number of competing options in terms of price, schedule, and number of layovers for the same destination. In 2004, the cofounders of Expedia, Travelocity, and Orbitz formed a new company called Kayak. Originally created as a metamediary search site for travel, Kayak.com aggregates search results from other travel websites to make finding airline flights, hotel rooms, and rental cars easier for consumers. Customers can also easily obtain information about the type of aircraft to be flown, select seat locations, and redeem frequent flyer miles if desired. The company's primary revenue comes from generating leads for other companies. After negotiating with third-party service partners, Kayak now enables consumers to book directly with Travelocity, Air Canada, Expedia, Getaroom, Hertz/Advantage, and Avis/Budget via the Kayak website. The advantage for Kayak is that a customer no longer has to leave their website, which greatly improves the likelihood that a transaction will be completed in full. Better still, Kayak uses the third-party service provider's reservation system but does not have to provide the actual service (e.g., flights) or even manage customer service. The obvious advantage for Travelocity, Air Canada, and other third-party service partners is increased traffic to their websites and higher revenue. Said Kayak's chief marketing officer, Robert Birge, “We're trying to focus on the customer experience, and provide better choices and a simpler booking experience.” Toward that goal, the company focuses efforts on mobile app users—those consumers who book online using smartphones and tablets. In the third quarter of 2012, Kayak's mobile revenue per thousand inquiries increased by 63 percent over the prior year. By November 15, 2012, Kayak had reached one billion mobile inquiries for the first time, and its mobile apps had been downloaded 20 million times. In November 2012, Priceline bought Kayak for $1.8 billion—a premium price for a company that operated at a loss just one year before. Financial experts surmise that Priceline saw Kayak as an emerging threat to its core business, as well as a rising star in direct booking. How do the unique service characteristics of intangibility, inseparability, heterogeneity, and perishability apply to the online travel service business in the case about Kayak?
Explanation / Answer
Introduction:-
Goods and services have become two major broadlines in which trade happens in the new age era. Services are becoming very pouplar over the years for the advantage that they give to the consumers. The major difference between a good and a service is that good is refers to a physical item.
Wheras a service is defined as " Intangible products such as accounting, banking, cleaning, consultancy, education, insurance, expertise, medical treatment, or transportation.
At times services are difficult to identify because they are closely associated with a good;
Example:- Combination of a doctors diagnosis with the administration of a medicine.
What differentiates a good from a service:-
1) No transfer of possession happens when services are sold,
2) They cannot be stored or transported,
(3) They are instantly perishable
(4) They come into existence at the time they are bought and consumed."
Case Study Answer:-
While it is clear from the above example, that services are intangible in nature and can only be felt, these are usually also bundled with the good that is sold. This then becomes part of the total package or product which is sold to the customer. Take an example of a car. The physical car which is sold by the agency is a good whereas the monthly service that takes place is a service both are sold as part of the product. Seperate or not depending upon the customer and the final purchase.
In the case study as highlighted the following characteristics can easily be described.
Intangibility:-
The service that Kayak provides to the customers is of comparing the online tickets and being able to select therefore a ticket that suits the need and price at which the consumer is ready to buy.
It is an experience which is sold using tablets, computers by making use of the internet technology. It cannout be touched and felt which is what the meaning of inseprability is.
Hetrogenity:-
Hetroginity refers to the fact that the service which Kayak offers differs from transaction to transaction, day to day even minute to minute with the same or with other customers also.
Example:- The price of ticket varies every day from one airline carrier to another. Further some passengers might want to save money by buying tickets that cost less say a student travelling for studies while at the same time a businessman might prefer only expensive business class ticket.
Therefore by hetrogenity we mean, that the experience that one gets by using a service differs from person to person.
Perishibility:-
This highlights a very basic characteristic of services and can broadly be applied to this case study also. A service cannot be stock piled like goods. It has no concept of storage.
It is consumed as produced at the same time. Kayak for example cannot store the experience of buying a ticket as inventory. It is consumed when produced and at the same time.
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