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hello my name is Alex Meadowwood and I am the founder and CEO of Baltic soft in today's video we continue to focus on product development and innovation in travel I'll address the refine of your product hypothesis finding competitive advantage and throw in some Trends and opportunities to consider so you have a product idea you want to create a new product and travel for example a super Innovative online travel agency to book an app or software application to manage hotel properties the key and fundamental questions are what problem do you solve why would people use your product start simple try to frame your idea around any of these three basic needs will your product cut costs for your customers will it help them earn more money or will it save their time it may actually be a combination of any of those three and if your product idea addresses these basic needs you're on the right track you have a hypothesis of the problem you want to solve you may understand the market you may not but you have an idea of how to address these identifiable problems how do you verify this idea well you have to ensure that you are solving the real Market problem or basically is there a problem at all here are some considerations so first and foremost answer the question who is currently solving this problem and how probably foundational is having somebody you can recognize as competitor and say hey this business has a solution that actually solves that type of problem however having a direct competitor is not necessary what I'm saying is when the team behind Uber was launching their product there was no alternative right hailing app that would connect drivers with passengers but effectively what Uber was doing it was competing with the taxi industry itself in their Medallion system in the United States a medallion is a permit to operate a cap purchased from City authorities and the number of medellins is limited in certain areas some cities the prices to get those permits were simply ridiculous they were reaching as much as seven hundred thousand dollars and if you're a taxi service with such a high cost basis you have to pay that off somehow this drove the prices up for passengers as well so Uber made a breakthrough in that particular segment of service and as we know they demand democratize the entry cost for drivers and eventually the prices for passengers so find competitors and see how the market solves this problem it's not necessarily the same business model but the bottom line is you have to find somebody who directly or indirectly solves the type of problem that you think actually exists on the market it's very rare to find a so-called blue ocean a niche where nobody solves the problem that you think exists and if you're the first to solve it you're going to build a multi-billion Dollar business but I would say in a majority of cases if you don't have competitors the problem that you see is an imagination now you have identified your competitors next find an interview at least three to five potential customers who are going to pay you to solve that type of problem a little hint here never ask people if they are willing to pay for it they will answer that they are because they like you because they don't want to be rude and at the end of the day they are not making a decision right now ask them how much are you paying now and it's not always about paying for some competitor software product or service it's about paying for solving that type of problem if people already pay for it this means you have your Market okay assuming that we have a problem competitors and potential customers who have already been paying for solving that type of problem we should consider why at least some of people are going to pay us let's talk about a competitive advantage ultimately a competitive Advantage is the reason why some part of the market is going to choose you and why you can survive in the market is the value that product brings to your customers and makes them switch from their existing solution to what you offer for example you know that it takes a regular traveler let's say 30 minutes to choose and book a flight if you can reduce that to 10 minutes your product may have a competitive advantage but don't get me wrong not only must it be worst Shrine it must be worth switching to now let's get more practical with some ideas of where and how to Source competitive advantages in the travel industry a classical framework for considering types of competitive strategies was suggested by Economist Michael Porter cost leadership you win by lowering the cost differentiation you win by providing some unique value and focus you narrow down the market to a couple of specific segments and either when by cost leadership or differentiation inside of those segments so how do those competitive strategies work in the travel industry what are the opportunities let's start with cost leadership if we are talking about consumer travel in the majority of cases the biggest driver in customer decision making is price visual Travelers are extremely price sensitive but if you're a small company is going to be hard to make cost leadership your competitive strategy first of all it's hard to advertise that you have the lowest cost unless you really have it but everybody claims to have the best offering price don't they but if you do go down this path you have to deliver on This Promise still price can be an important part of your competitive Advantage but you have very little control over it especially in travel distribution primarily because it's a cost basis driven business for example if you're selling flights 90 to 95 percent of the end ticket price is the cost basis that you pay to A supplier an airline GDs or consolidated what you're left with is five to ten percent that you can consider your Revenue after spending on marketing customer acquisition product development customer service and other operational expenses you get two in the best case scenario up to five percent margins left how can you influence the cost basis first you have to expand the number of available inventory options and negotiate better conditions with suppliers or Distributors at this point your personal business connections your Rolodex can get you better deals say in Flight distribution commissions and incentives from suppliers are most likely going to be your only sources of profit second you must have a robust solution to pick up the right inventory for a particular destination and dynamically control your margin to optimize your cost structure so unless you're a large company with lots of supplier deals and the best inventory it's hard to make cost leadership your only competitive Advantage what about the differentiation strategy while options to bound I'm going to focus on some key market trends and opportunities one of these areas of improvement in travel is extensive booking and post booking flexibility before or during a trip that's anything that allows travelers to adjust their decisions on the Fly and design it bespoke travel experience amendments cancellations refunds choosing some extra services with perks you name it yes this will drive the cost higher but the more flexible the conditions the more likely that customers are going to stick with you and you can earn extra by upselling and sellers I have to admit customer service was always in place it was always the second Factor after the price you can't get around it but you can capitalize on exceptional customer service please check the video by Andre here to learn more about technical aspects of customer support another big opportunity to differ is customer facing Innovation and decision support making decisions has always been a headache in travel which destination should I choose which airline where should I stay finally when should I book to capture the cheapest fares if you can help Travelers with these decisions you can bid the competition which is what an early stage Hopper was doing by predicting flight prices they helped Travelers book when first below and this is just one example consider a traveler who looks for something more complex than a week and a five-star all-inclusive hotel in Turkey so say they want to have a seven day trip around the south of France it would take them days to research and combine flights hotels activities and Winery visits a perfect decision support system would recognize a traveler's preferences create such an itinerary in a matter of minutes customer face and Innovation leads to better engagement driving your revenues off while saving costs on acquisition on top of that as you help with buying decisions you can create the impression that your service is cheaper not necessarily that your service is much cheaper but if you're able to communicate to a customer at scale that you're going to help and choose a cheaper option you can create the impression that they're saving money with you and finally one of the biggest opportunities from my personal perspective is to narrow down your focus to a specific Niche and make a difference there if you are in the travel distribution business it's hard to compete with giants you know that goliaths exist now it's possible to build the lives but you would better have a well-designed stone to put on your slingshot booking Holdings and Expedia control the majority of the online travel agency market they cover the entire Market but still leave specific niches underserved so you should look for those in terms of geography type of service unique inventory or any segment where you can provide customer experience Fuller and richer than any of the goliaths say my dream idea of a niche product is the one focusing on foodie tours I love those and it would be great to build an app helping Travelers find special restaurants cooking master classes Michelin spots best chefs along with the accommodation that fits the tour another Rising Trend here is the so-called vocation when people travel work away from home for a long period of time from a week to several months the location is a result of a work and life Paradigm change that started happening during the pandemic and kept on a woven after because of lockdowns and working from home people tend to lose control of their work-life balance and eventually they start burning out so businesses are becoming increasingly more flexible in terms of accepting and even appreciating remote work the way people change their surroundings get new experiences to work and travel with their families so vocationals are driving the change in the concept of business hotels and have increased demand for alternative accommodation business hotels have always been good places to sleep and okay places to work but they don't have facilities to support a vocational lifestyle our vocationer needs a quiet room to work in with a fast internet connection to support extensive video calls by the way for this very reason the major gripe about Airbnb is that you can't filter Properties by internet connection speed then you need some entertainment for your kids while you work traditional business hotels haven't been focusing on this Paradigm change just yet so vocational started switching to Alternative accommodations that can provide a setting for both work and family time it will drive large Capital expenses for traditional business hotels to catch the trend and has a great opportunity for strategic Focus you definitely should explore it ok now that you have verified the problem and decided on competitive Advantage you can articulate your value proposition to your customer in my next video I'll talk about your value proposition and how to match it with your product Vision if you like this video give it Thumbs Up And subscribe thank you for being with me today and see you next time [Music]