Reference no: EM131463519

Question: One of the original online travel agency sites, Travelocity, has been bookmarked by millions of people seeking low prices on airline tickets, hotel rooms, cruises, and rental cars. The site books $10 billion worth of travel annually to destinations near and far. Customers can search for flights on six major carriers, read descriptions before reserving at one of 20,000 participating hotels, compare car-rental prices, and click to browse and buy specially priced travel packages. Travelocity began its e-business life as a site for finding the lowest airfares. However, its chief marketing officer notes that the company actually makes its money on hotel rooms and travel packages, not on airline tickets. This is why the site goes beyond emphasizing price to feature vacation packages and hotel choices more prominently-a change that has increased sales of these lucrative offerings dramatically. Intense competition from Expedia and other online rivals has prompted Travelocity to find new ways of differentiating itself and keeping customers loyal. According to the CEO, the company is particularly interested in creating "an emotional connection with customers, one that builds more trust and bookings." Instead of focusing solely on low prices, Travelocity has invested $80 million in its "Roaming Gnome" ad campaign.

The colorful garden gnome attracts attention and brings both personality and humor to the message that Travelocity stands for the whole travel experience, not just low prices. In addition, the site has posted a "Customer Bill of Rights" guaranteeing customers that "everything about your booking will be right, or we'll work with our partners to make it right and right away." Although many e-businesses offer customer service by live chat, e-mail, and FAQ (frequently asked questions) pages, Travelocity encourages customers to call if something goes wrong with their travel arrangements so that company representatives can fix the problem. The CEO observes that customers whose problems are resolved satisfactorily have a 90 percent return rate, compared with an 80 percent rate for customers who have a good experience. Not long ago, Travelocity had the opportunity to put the spotlight on its guarantee when it posted a super-low airfare for flights to Fiji. The rock-bottom price was supposed to apply to companion tickets only, but because the fare was posted in error, travelers were unsure initially whether Travelocity really would issue the tickets.

The company decided to honor the fare, despite the mistake, to prove its commitment to taking care of customers. This brought a lot of positive media coverage, further enhancing Travelocity's reputation. The company recently redesigned its website so that customers can find exactly what they want and have more tools for planning all aspects of a trip. For example, customers can buy tickets to city tours, price travel insurance, buy gift certificates, check flight status, read about different destinations, and read what travelers have to say about the hotels. Before making major changes to the site, Travelocity conducts usability testing to see how customers react to new features and to uncover problems customers might encounter when trying to buy. For example, the company learned that many people forgot their passwords and clicked away at the last minute because they needed the password to complete a purchase. To solve this problem, Travelocity removed the requirement and allowed customers to buy without inputting a password. Sales soared by 10 percent almost overnight, increasing revenue by millions of dollars. Travelocity operates a number of other travel sites, including lastminute.com. The company has been branching out into corporate travel services and specialized travel sites for international markets. It also provides travel services for the members of retirement and community organizations. Where in the world will Travelocity's Roaming Gnome turn up next?9 For more information about this company, go to www.travelocity .com.

1. Each year, Travelocity helps millions of customers find low prices on airline tickets, hotel rooms, cruises, and rental cars by providing a website that is easy to use. What type of business model is Travelocity using? Support your answer.

2. Today, competition between Internet travel firms such as Travelocity, Expedia, and other online travel agencies has never been greater. What steps has Travelocity taken to retain its market share and increase revenues and profits?

3. Why would Travelocity publicize the availability of telephone customer service when higher call volume raises the company's costs?