Lead segmentation for Travel Industry

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hello i am alex madeway founder and ceo at altexsoft welcome to this brand new series of videos about strategic decisions that will help grow your travel industry product [Music] we will discuss how to explore customer segments articulate a value proposition and eventually match those up with related financial targets and available technology solutions now i sense a question in the air you're wondering what qualifies me to talk on the matter i've been in the technology business for the last 20 years 15 of which i have been a ceo of a technology consulting company i'm also a serial investor in over 30 services and product companies and a board member and advisor to ceos in a few other companies doing consulting work for them altic soft is one of the top tech consultants in the travel industry we work with both leisure and business segments helping online travel agencies alternative accommodation hospitality and companies coming from the other travel branches more than a half of our business is focused on travel and hospitality and we also do a lot of product development work in the other industries so what is a product strategy it's the way you answer the key questions about your product what do you sell who do you sell it to how do you make it successful and how to make money sounds simple but the details matter that's exactly what we are going to talk about in this series in our first video i'll highlight the key aspects of product development strategy and travel things that you must drill down into to understand your business visibility can it survive on the market and succeed to make things easier for you folks let's use the case of one of our partners who build their travel platform with altxof imagine a powerful regional holding that has been in business for the last 40 years it branches out into several industries including carplay travel and banking keep these two in mind as they're going to play a special role in this story so their corporate travel management division works with large private sector and governmental clients the guys have some tech infrastructure in place but by no means is it a digital and automated platform so in a way we may also call it a digital transformation journey as the company works in corporate travel segment they have a pretty good grip on what's been happening on the market the local economy has been growing for years more and more people started spending significant amounts of money on both international and domestic travel so the idea was straightforward let's start an online travel agency now catering to leisure travelers sounds great right prior to engaging altex soft they attempted to launch their online platform twice and they eventually wasted almost 7 million dollars but the third time was the charm together we've managed to rebuild the logic of the business and even survive the pandemic in a matter of 18 months we hit the first launch so as we talk about product strategy what are the essential points here and how did they translate into our partners business let's start with understanding of the market and customer segments prior to doing anything we have to narrow down the niche and measure its size we want to make sure we have people who are going to buy our product as i mentioned our partners recognized untapped potential in the original leisure travel there was a big domestic market the local citizens traveling across the country and multi-billion or actually 18 billion dollars in outbound travel from their home state that was the first big segment but besides locals they also saw that many people were traveling into their country from the region this one was pretty interesting their country is a major destination for travelers from the neighboring nations who fly in for religious holidays and cultural experiences they usually come in groups and this travel is seasonal they arrive on particular dates stay at particular places so we have two major segments local travelers and seasonal unbound travelers okay it seems there is the market but is there a need for a new product see these people already travel and it's not like they're sitting and waiting for somebody to take them on a journey right so the first thing you have to understand about your niche is what this thing that customers currently lack is it a direct connection is a cheaper way to travel or maybe the customer service is horrible you have to understand their pain points when we duck into this market we saw that most of these people use international travel agency platforms and a few local ones in fact global platforms didn't specifically cater to this region the language localization the currency support were poor with no regional perks no localized loyalty programs basically no value propositions specifically designed for these type of travelers another problem was that inbound travelers who came for religious holidays experienced all sorts of travel booking frustrations they had to pick flights match them with hotels make sure the payments are settled it all gets pricey because it's high season they had to deal with visa paperwork and on top of that they usually do it for groups and another layer of complexity now it seems there are a lot of problems what can we do about that can we address these needs to engage people that's the next milestone in your journey you have to articulate a unique value proposition that should be based upon the actual need of the client this uep will translate into a product vision so what's a unique value proposition it's a promise to bring value to your customers and address their problems your product vision has to revolve around that promise let's get back to our example the first thing that our product must offer is a localized service it has to support all languages in the region as well as all currencies so people can seamlessly book their travel second we don't want people to visit dozens of different websites to book flights and then hotels and then again to rent cars we want to offer a comprehensive experience especially to the locals who travel domestically and abroad they must be able to combine all bookings in one place using both mobile devices and evap what about inbound visitors they come in groups visit particular places at a particular time what we can offer is destination management they can book into our group packages with flights and accommodation and we will even help them deal with visa processing finally travel is expensive and since most travelers are very price sensitive to get people to shift from global brands we offer regional perks and discounts for instance we can give a discount on group travel these four main promises define the product's vision a one-stop shop for regional leisure travelers and offer a localized bespoke service by a recognizable and trusted area brand as you remember they've been around for 40 years okay it all sounds great but how can we deliver on these promises what are the enablers the first one is partnerships now we have to touch on the one big thing travel is a distribution-centric industry so partnerships direct contracts with suppliers distributors aggregators and wholesalers are critical not just must-haves but critical what are the main partnerships that would enable such product vision remember that they had a separate banking business why don't we engage the banking division and other partner banks in the region to provide travel perks to the existing bank clients they already had the contacts so these people can use bank cards to get discounts and perks another major group of partners is global distribution systems gds's are the major players in the travel market the video about them will be right here since the company was in corporate travel before they already had several gts accounts with best value fares from airlines and car rentals tied to that and finally they struck a deal with a local bad bank that provided rooms wholesale for the inbound segment combining all three and having a strategic level of relationships they could engage existing corporate clients along with the big volume of individual leisure clients all of which help to get the best cost structure among their competitors so let's talk about that another critical consideration point is how are you gonna make money what are the revenue streams and how do you balance them with the cost structure so the traditional revenue stream in a travel agency is obviously charging markups on bookings the problem here is staying competitive as travelers are price sensitive you have to invest a lot in marketing and win the price war more on marketing in online travel agencies here so what did we do the previous platform that our partner tried to work with was a wide label system that did not have flexibility to tweak markups and discounts the vendor was also receiving their share of commissions from each booking so the first step was to move from a transactional model where our partner had to share their money with somebody else to an economically scalable model where they didn't have to pay for every transaction they made now consider that we wanted to create a strong loyalty program and offer perks to bank clients as well as discounts for group and package travel so in terms of revenue streams instead of applying the same markup to bulk of channel products we decided to introduce a flexible markup and discount system it would allow for adjusting prices individually depending on the type of service destination and acquisition channel and as they had partnerships with gdss and banks they could get incentives for each booking from them as well such incentives could compensate for a lower markup so this granular approach to pricing helped earn more on those transactions where the competition is lower and at the same time use discounts where the competition is higher and engage more customers but no matter what you think you want to do it's all about how you're gonna do it what are you gonna get as a result of your journey so the final point of your strategy is technology vision which features do you need to enable all those things the first is a fully automated search and booking engine it must allow people to configure diy tools or book a pre-configured package ad language localization for every country in the region and the payment gateway that supports the currencies of these countries to enable granular and dynamic markups it must have a flexible commission engine it would allow revenue managers to set up discounts perks and markup rules for different combinations of travel products in terms of integrations the platform must connect to gdss and meta search websites as their main channels for engaging with price sensitive clients a lot of things eventually allowed our client to transform their existing business and get a full cycle one-stop-shop solution that will serve a particular region that's it for today next time we'll have a closer look at the ways you can validate your product idea and consider a value proposition in the meantime go ahead and check the series by my colleague andre who explains the technical aspects of creating online travel agencies and if you like the video give it thumbs up and subscribe thank you for being with me today see you next time you