The Problems of Innovating Travel - Essay Example

? Refurbishing Life Innovating travel: the story of paradise travels, UK. By Submitted to (March Contents List of figures 7 Photo credit 7 Section 1: Industry Overview 1 1.1 Macroeconomic and environmental factors 1 1.1.1 Environmental impact 1 1.2 Issues faced by the industry 1 1.2.1 Weak demand 2 1.2.2 Weak sterling 2 1.2.3 Shifting away of holiday bookings 2 1.2.4 More packaged tour bookings 2 1.2.5 Growing market share of online operators 3 Section 2: Generating innovative solutions 5 2.1 The context 5 2.2 Problem Definition and approach to problem-solving 6 2.3 Situational analysis 6 2.3 The Solution 7 2.3.1 Theoretical Basis 8 2.3.2 Application of theories 9 Section 3: Critical Evaluation 12 3.1 Product innovation 13 3.2 Process innovation 15 3.3 Innovation in positioning 15 3.4 Innovation in paradigm 16 3.5 Limitations of the solutions 16 References 17 Appendix 1: About the Context Company 19 Appendix 2: Problem Solving Approach 21 Appendix 3: Special Provisions to be made in the website 23 Appendix 4: Some Innovative ideas in service delivery 24 4.1 Converting prospects to customers 24 4.2 Increasing consumer confidence 24 4.3 Innovations in Service delivery 24 4.4 Innovations in aftersales delivery 25 4.5 Creating a sub-brand for each segment 25 4.6 Increase brand awareness 25 List of figures Figure 1: U.S. Packaged travel market by tour operators and online travel agency packages, 2000-2008 (US$B) 3 Figure 2: U.S. and U.K. total travel market and package travel share 2008 (US$B) 4 Figure 3: Forces affecting on Paradise Travels 7 Figure 4: The four P innovation space 9 Figure 5: Forces acting on Paradise Travels and the strategy to be adopted by the company to counter these forces 10 Figure 6: The process of innovation process for Paradise Travels 11 Figure 7: Framework for critical evaluation 14 Figure 8: Paradise Travels – location of high street shops 19 Figure 9: Adopting Shibata's problem solving model adapted to help solve Paradise Travels’ problems 21 Photo credit Cover page Image URL: http://www.wanderwoman.com/images/hiking_samaria_gorge.jpg Section 1: Industry Overview 1.1 Macroeconomic and environmental factors The impact of the global financial meltdown was also visible on the travel industry, and particularly on air travel and tour business. A large numbers of small players vanished from the tour operators’ radar during these years; more than 75 air travel and tour operators closed their shop within the past three years (Air Travel Insolvency Protection Advisory Committee, 2010, p.13). The industry is currently cruising through one of the most difficult times due to a number of macroeconomic and environmental factors. These are discussed as follows: 1.1.1 Environmental impact Eruption of the Eyjafjallajolkull volcano closed the UK airspace for six days and a considerable portion of EU airspace, causing flight delays and cancellations throughout the world (Air Travel Insolvency Protection Advisory Committee, 2010, p.6). This incident affected adversely on the consumer confidence as it was observed that immediately following the eruption, bookings dropped sharply (Air Travel Insolvency Protection Advisory Committee, 2010). 1.2 Issues faced by the industry Air Travel Insolvency Protection Advisory Committee (2010) listed some of the issues currently faced by the industry. These are discussed below: 1.2.1 Weak demand An offshoot of weak consumer confidence was seen directly on the weak demand it currently exerted on the industry. To regain consumer confidence is perhaps the most important issue the industry faced currently. 1.2.2 Weak sterling Once in their holiday destinations, weakness of Sterling had eroded the holiday makers spending powers; a trend noticed mostly in Eurozone holiday destinations. This affected adversely consumer perception as consumer expectations did not match the consumer experience. 1.2.3 Shifting away of holiday bookings Another alarming trend was shifting of bookings to traditional holiday destinations such as Spain and France to Turkey and other non-European countries. This too was a direct onslaught on the air travel and tour operators in UK. 1.2.4 More packaged tour bookings Likewise, over the last few years, consumers wanted to have more certainty over the total cost of their holiday, and opted for all inclusive packages (Air Travel Insolvency Protection Advisory Committee, 2010, p.4). The air travels and tour operators were uncomfortable with the development of this trend as the packaged tour exposed the tour operators to macroeconomic developments and the risks thereof. 1.2.5 Growing market share of online operators The air travel and tour operator business in UK is mainly occupied by two types of players, (1) the relatively older and traditional high street type and the relatively newer online ones. Though consumers continue to feel comfortable by face to face booking, yet, the high street air travel and tour operators are gradually facing the heat of the online tour operators as their market share is gradually captured by the online operators. For instance, according to Euromonitor International (2007) in the UK, online bookings increased from 7% in 2002, to 35% of all bookings in 2006 (Euromonitor International, 2007). According to ehotelier.com a top hospitality industry site worldwide and publisher of “ehotelier News”, tour operators in US and UK have steadily lost market share to online travel agencies. The US packaged travel market by tour operators and online travel agencies are placed in the figures below. It is expected that a similar trend prevails in UK too. Figure 1: U.S. Packaged travel market by tour operators and online travel agency packages, 2000-2008 (US$B) Source: The U.S. Packaged Travel Landscape: 2006 – 2010; cited by ehotelier.com, 2011; Accessed 30 March 2011. Figure 2: U.S. and U.K. total travel market and package travel share 2008 (US$B) Source: PhoCusWright Inc.n.d; cited by ehotelier.com, 2011; Accessed 30 March 2011. In addition to these factors, repatriation and refund of customers’ money due to failed air travel and tour operators also contributed towards erosion of consumer confidence (Air Travel Insolvency Protection Advisory Committee, 2010). Section 2: Generating innovative solutions 2.1 The context The context of this case is a fictitious company by name Paradise Travels, which happens to be a lesser known company established in the year 1989, which celebrated its 20th anniversary two years back. The company has five high-street type shops all in the outskirts of Oxford city. Paradise Travels represents majority of small independent air travels and tour operators and is an epitome of the problems and prospects they face. The rationale behind choosing a fictitious company over a real lies in three factors. Firstly, of the five categories of tour and travel operators i.e. (1) outbound – companies that offer holidays for British people traveling abroad; (2) inbound – tour operators that service the needs of overseas visitors to the UK; (3) domestic – companies that develop and sell holidays in Britain; (4) independent – tour operators that are not part of a large, integrated travel company; and (5) specialist – holiday companies that specialise in a particular type of holiday or destination. Secondly, they have a sizable portion of the industry. As per ABTA, the Travel Association, UK, ABTA - The Travel Association - now represents over 5,000 travel agencies and more than 900 tour operations, throughout the British Isles. Our Members range from small, specialist tour operators and independent travel agencies through to publicly-listed companies and household names; from call centres to internet booking services to high street shops (ABTA, n.d.). These are mostly owner-managed, and are uniquely placed to provide personalised advice based on first-hand experience (Association of Independent Tour Operators, 2011). Thirdly, these companies being smaller in size, older in age, and limited to a couple of high-street type outlets, mostly have similar problems and face almost identical challenges. For instance, dynamic packaging - when travellers use the internet to research their holidays and make their own travel arrangements direct with airlines, hotels, car hire companies, etc. (Travel and Tourism Publishing Ltd., 2007, p.27); distribution channel and integration problem; budget airlines (Travel and Tourism Publishing Ltd., 2007). Fourthly, Because of their size and the experience of their staff, independent tour operators are often able to provide a more personalised service to their customers and therefore are well suited for the study (Travel and Tourism Publishing Ltd., 2007, p.40). These are a few reasons why the author decided to work on a fictitious company over a real company, so that it can be representative of the industry. See Appendix 1 for more detailed about this context company. 2.2 Problem Definition and approach to problem-solving For Paradise Travels, the problem was rather clear: “falling demand”. To solve this problem, the author followed problem solving approach proposed by Shibata (1998). A discussion on the same is placed in Appendix 2. 2.3 Situational analysis As Shibata suggested, for solving problems, problem-solvers need to split issues into specific actions (Shibata, 1998). Shibata's problem solving model adapted to help solve Paradise Travels’ problems is placed in the figure placed in Appendix 2. Therefore, as discussed earlier, the issues before the companies were multiple, the chief among them include (1) Macroeconomic factors such as (a) weak demand arising out of weak economic condition; (b) weak consumer confidence due to political factors; (c) weak consumer demand due to environmental factors; and (2) Micro-environmental factors such as onslaught of the online operators. Therefore, Paradise Travels has to address the micro environmental factors at a strategic level and find solutions on a long-term basis. Another reason is that the company has little control over the macro environmental factors. Figure 3: Forces affecting on Paradise Travels 2.3 The Solution To counter the problem of falling demand due to macro and micro environmental factors discussed above, the author suggests a complete radical thinking on customer experience on buying and enjoying the product. 2.3.1 Theoretical Basis As Kotler et al. (2009) suggests the appropriate marketing strategy for Paradise Travels would be to defend market share from online operators, which would require continuous innovation. This can be done by “introducing innovative products and customer service, improving distribution effectiveness and cost cutting. Undertaking all these while increasing competitive strength and value to customers by providing comprehensive solutions” (Kotler et al., 2009, p.237). In doing so, the company needs to adopt creative marketing, which means, it has to discover and develops solutions customers did not ask for but to which they would enthusiastically respond (Kotler et al., 2009, p.237). This way the company can become a market driving firm instead of being market driven. For undertaking continuous innovation as suggested by Kotler et al. (2009), the company may the four P innovation process as suggested by Tidd et al. (2005) in their “4Ps Approach to Explore Innovation Space” framework (Tidd et al., 2005). Figure 4: The four P innovation space 2.3.2 Application of theories The online players are able to make inroads into the customers’ pocket due to the convenience they are providing, i.e. the customer sits in the convenience of her own environment and is able to plan the entire trip. This is a major challenge for traditional high-street style players. The strategy To counter this Paradise Travels can build up its strategy in the four ways, as: (1) focusing on target customer segment; (b) providing convenience; (3) providing credibility; and (4) building up customer confidence (Fig 4 below). Figure 5: Forces acting on Paradise Travels and the strategy to be adopted by the company to counter these forces The details of the strategy are discussed below: Targeting a specific customer segment Presently, the company does not address a particular customer segment. It just does reservation for all those who approach them across the counter. To stem weak consumer demand, the company need to identify customer segments, and approach it with a variety of products to suit the consumer needs. Accordingly, a niche target segment would be women and the product would be packaged tours. The author’s research into the ABTA membership data reveals that there are not many that serve women centric tours and hence this segment largely remains under satisfied (ABTA, n.d.), and therefore, clearly provides an opportunity to serve. Increasing convenience Given that the most important advantage the online competitors are providing to the customer is convenience, Paradise Travel can address the problem innovatively in three phases of its operations as mentioned in the figure below: Figure 6: The process of innovation process for Paradise Travels Presales innovations To increase the prospects base, the author would advise to approach presales innovations by developing a website, and supporting it with public relations and socialisation. Creating an online community The company can plan for strong website, to counter the online players. The website need to provide creative online solutions such as providing an online support chat, plan your journey facility, where the customers can fill in their details on their preference linked to budget and what they can expect from the package they have planned. The underlying idea is to create an online community which will drive sales in the long-run. This will also enable the company to gather and track customer information which is useful in conducting future promotional activities and CRM. A few ideas are suggested placed in Appendix 3, many of which are already provided by the online operators. In addition, Paradise Travels can plan for an online newsletter, which is “perhaps the most online marketing technique” (VanAuken, 2004, p.145). Supporting with PR These online activities can be supported by public relation (PR) activities, for instance, the company can organise workshops for the prospective customers. There can be innovation in many other areas too such as innovation in the way the company converts its prospects to customers; the way it bolsters customer confidence; in its service delivery; in the after sales delivery; creating a sub-brand in each category of operation; and increasing brand awareness. A brief discussion on these is placed at Appendix 4. The list in fact can go on and can be worked out on a case to case basis during actual deployment of the solution. Section 3: Critical Evaluation The solutions presented above by the authors are critically evaluated from two angles: (1) is the women centric customer segmentation practicable, and has it been proven somewhere; (2) do the innovations suggested meet the four dimensions of innovation space? The answers to these are discussed in the succeeding paragraphs. Women centric business approach is a not a novelty. In fact, there are many industries which have been successfully focusing on women and having flourishing businesses. The apparel industry is a bright example. Similarly, there are numerous other examples of industries and business that are now focusing on women; for instance, women.com fashion; women.com lawsuits; women.com employment; women.com entrepreneur, all have been successfully meeting the needs of women. A case in point would be the Omaha based realtor who could successfully sell woman-centric homes. In his own words, “We had between 80 and 100 people each day in our new Woman-Centric homes day and Sunday,” (September 11th and 12th) reported Dave Fisher with Freedom Home Group, a builder in Great Falls, MT.” (designbasics.com, 2010). The problems faced by the real estate business in the US are well known. From the above example, the author believes that selling tours with a woman-centric approach will be much easier than selling homes. 3.1 Product innovation The solutions provided by the author in the previous section addressed innovations at all the four levels. For instance, at the product level, it introduced three new focused products aimed for women such as (1) adventure travel for women groups, (2) sightseeing travel, and (3) leisure and shopping travel. This was not earlier provided by the company, which was providing a mere logistical service, getting their tickets done, booking hotels and so on. Similarly, it also did a radical innovation in its process. For instance, the solution totally revolutionises the way presales activities would be conducted including its innovative approach to enlist the prospects, and also to convert the prospect to customers. Especially, conducting audio-visual workshops in community centres with photographs, maps and interesting facts about various tour destinations is a novel way of doing this process. Similarly, while converting prospects to customer teams though similar workshops assisted by a female anchor who also happens to be a former customer is yet another novel way of winning consumer confidence. It takes desk sales to the next level of selling to the customer to an emotional level where the customer sits comfortably in his own surroundings, along with her friends and plans for a trip, where a previous customer is available at the spot as testimonials of the good times that are in store for them. Not only this, the testimonial poses as a guarantee and stands by the guarantee throughout the trip as she also happens to be the tour manager. Figure 7: Framework for critical evaluation 3.2 Process innovation The sales delivery process proposed by the author is also a radical shift from the standard definitions of sales delivery in the industry that encompasses activities such as providing information and flawless logistics. Here, the author not only is servicing the customer, but also proposing to solve the customer’s family members by sending audio-visual clips of the customer’s fun times to her children and family members almost on a daily basis, thereby engaging them throughout the entire tour trip. Similarly, for the aftersales process the author has suggested a novel of keeping the customer engaged by sending photographs of their previous trips on important dates in the life of the customer. It not only wishes the customer on these important dates, but also reminds of the good time she had. The implicit message in this is that she can have more fun in future if she wishes to for which the company is ever ready. But, the most important innovative idea in this is recruiting past customers as anchors and tour managers. This takes customer relationship management to the next level by not only providing a memorable reminder, but also providing another free trip for which she will be paid. 3.3 Innovation in positioning The solution recommends positioning its services and packaging in products in three categories specifically to meet unfulfilled the need of large segment, may not be a novel idea for the industry, but to the company as it has never resorted to this approach. It, to some extent did make changes in the context in which the products and services are introduced. 3.4 Innovation in paradigm The solution offered by the author also recommends changes in the underlying mental and business model. For instance, adding the brand extension to cater to inappropriately or unfulfilled need of an entirely large customer segment, the company’s entire orientation to business has to change. From the present stature of impersonal and mechanical way of doing to presenting itself as a suave, fun loving, confident and modern women friendly brand. 3.5 Limitations of the solutions The chief limitation of the solution presented by the author is the cost factor. It would increase some additional cost. The second limitation is that the execution of the solutions has to be rehearsed well and delivered in an impeccable manner with no tolerance to errors. This model also can be copied by the competitors. Notwithstanding this, as Oakhurst said, ‘all great discoveries are made by people whose feelings run ahead of their thinking” (Oakhurst, n.d.; cited by Gemma, 2011, p.19), Paradise Travel need to think ahead of time. References Unsupported source type (Misc) for source Gem11. ABTA, n.d. About ABTA. [Online] Available at: http://www.abta.com/about [Accessed 31 March 2011]. Adams, R., Phelps, R. & Bessant, J., 2006. Innovation management measurement: a review. International Journal of Management Reviews, 8(1), pp.21-47. Air Travel Insolvency Protection Advisory Committee, 2010. ATIPAC Annual Report 2009-10. Association of Independent Tour Operators, 2011. Why AITO. [Online] Available at: http://www.aito.co.uk/corporate_whyAito.asp [Accessed 30 March 2011]. Bessant, J., 2004. Enabling innovation in small and medium-sized enterprises. In M. Heitor, ed. Learning and knowledge for the network society. New York: Purdue University Press. Bessant, J. & J. Burnell, e.a., 1992. Helping UK industry achieve competitive advantage through continuous improvement. Industry and Higher Education, September, pp.185-189. Birkinshaw, J., Bessant, J. & Delbridge, R., 2007. Finding, Forming, and Performing: Creating Networks for Discontinuous Innovation. California Management Review, 49(3). designbasics.com, 2010. Approach to Home Design, Building, Marketing and Sales. [Online] Available at: http://www.designbasics.com/wcm/index.asp [Accessed 31 March 2011]. ehotelier.com, 2009. Tour operators have steadily lost market share to online travel agencies. [Online] (Jul 17, 0) Available at: http://ehotelier.com/hospitality-news/item.php?id=A16684_0_11_0_M [Accessed 30 March 2011]. Euromonitor International, 2007. Traditional tour operators fight back against online travel companies. [Online] Available at: http://www.euromonitor.com/traditional-tour-operators-fight-back-against-online-travel-companies/article [Accessed 30 March 2011]. Federation of Tour Operators, 2006. Tour Operators and Travel Agents. [Online] Available at: http://www.fto.co.uk/operators-factfile/tour-operators/ [Accessed 31 March 2011]. Francis, D. & Bessant, J., 2005. Targeting innovation and implications for capability development. Technovation, 25(3), pp.171-83. Francis, D. & Bessant, J., 2006. Targetting innovation and implications for capability development. In D. Mayle, ed. Managing innovation and change. London: Sage Publications. Hobday, M..H.R.e.a., 2005. Reaching the innovation frontier in Korea: A new corporate strategy dilemma. Research Policy , 33, pp.1433-57. Kotler, P., Keller, K.L., Koshy, A. & Jha, M., 2009. Marketing Mnagement. 13th ed. Pearson Education Inc. Phelps, R., Adams, R.J. & Bessant, J., 2007. Models of organizational growth: a review with implications for knowledge and learning. International Journal of Management Reviews, 9(1), pp.1-30. Philips, W., Lamming, R., Bessant, J. & Noke, H., 2006. Discontinuous Innovation and Supply Relationships: Strategic Dalliances. R & D Management , 36(4), pp.481-91. Readman, J. & Bessant, J., 2007. What challenges lie ahead for improvement programmes in the UK? Lessons from the CINet Continuous Improvement Survey 2003. International Journal of Technology Management , 37(3/4), pp.290-305. Shibata, H., 1998. Problem Solving: Definition, terminology, and patterns. Occasional Paper. Copy rights © H. Shibata. Tidd, J., Bessant, J. & Pavitt, K., 2005. Using the 4Ps Approach to Explore Innovation Space. [Online] Available at: http://www.managing-innovation.com/tools/4Ps.pdf [Accessed 28 March 2011]. Travel and Tourism Publishing Ltd., 2007. BTEC National Travel and Tourism. [Online] Travel and Tourism Publishing Ltd.: Travel and Tourism Publishing Ltd. Available at: http://www.google.co.in/#hl=en&source=hp&biw=1280&bih=699&q=Composition+of+online+and+high+street+type+tour+operators+in+UK&aq=f&aqi=&aql=&oq=&fp=e304bce5a4c1f6f9 [Accessed 30 March 2011]. VanAuken, B., 2004. The Brand Management Checklist: proven tools and techniques for creating winning brands. London: Kogan Page. Appendix 1: About the Context Company Amidst the bleak outlook for the travel industry, Paradise Travels, a lesser known company decided to take on challenges head on. Established in the year 1989, Paradise Travels celebrated its 20 anniversary on a gloomy wintry day, when business confidence for the industry appeared to be at the nadir. The founder, a logistic sailor form Royal Navy, by virtue of perseverance, hard work and military precision from a single basement in Tiddinton has over the years grown to five high street type air travels and tour operators located at Waterperry, Water stock, Tiddington, Milton Common and Great Milton, all located in the outskirts of Oxford City. With the economic prosperity of people in the vicinity, Paradise Travels also kept growing until the series of recent events forced it to innovate, as Peter Drucker said, “Whenever you see a successful business, someone once made a courageous decision” (Petre Druker, n.d; cited by McGrath, 2011, p.17). Figure 8: Paradise Travels – location of high street shops Image source URL: http://directrooms.com/england/img6/maps/map-oxford-outskirts.gif, [accessed 20 Mar 2011]. Appendix 2: Problem Solving Approach Shibata (1998) states, “a purpose decides a problem” and it is what the company wants to do, or what the company wants to be. The purpose of Paradise Travels to be engaged in this evolution was therefore twofold, (1) to increase sales immediately and maintain the tempo in short run, and (2) to increase customer loyalty by increasing brand equity so that the customers remain loyal to the company year after year. Figure 9: Adopting Shibata's problem solving model adapted to help solve Paradise Travels’ problems Adopted from source: Shibata, H., 1998. Problem Solving: Definition, terminology, and patterns. Occasional Paper. Copy rights © H. Shibata. As Shibata (1998) explains, a situation is just what a circumstance is, and Problem essentially comprise of some portions of a situation that can’t realise purposes (Shibata, 1998). Since, a cause is what brings about a problem; a problem-solving cannot be specific without distinguishing causes from problems (Shibata, 1998). Further since, an issue is the opposite of a problem and within the cause laid hidden the solvable cause. Therefore, to find the solution, i.e., identifying specific actions aimed to solve a problem, the author first tried to identify some of the issues. Appendix 3: Special Provisions to be made in the website The following provisions are to be made in the company website: 1. Bulletin Board (these are less expensive and more controllable than chat rooms). 2. Chat rooms 3. Surveys/ reviews 4. Daily tips, tricks or rules of thumb 5. Daily quotes especially on travel and tourism 6. Personal user lists kept on the website 7. Guest books 8. Matching people with like interests through search and browse features provided on the website 9. Custom published web magazines on travel and tourism 10. Website opinion postings 11. Online events 12. Featuring regularly updated news headlines on topics related to travel and tourism 13. Searchable library of articles by tour and travels experts 14. Keeping track of where consumers are going ask them what they like and change the experience how they use the website 15. Provide ample opportunities for community members to interact with each other. Start a blog. Appendix 4: Some Innovative ideas in service delivery 4.1 Converting prospects to customers Once travel groups start emerging, the company then can help the consumers to identify a suitable travel destination. Here the company has to take leadership position and also be a good moderator until the group is able to zero on the destination. This also needs to be undertaken close to the consumers’ neighbourhood, preferably in their own settings, such as local community centres. 4.2 Increasing consumer confidence While the consumer conversion discussions are in progress, the discussion has to be moderated by an anchor, preferably a woman, who is likely to be the tour manager and would accompany the group and aided by audio-visual equipment. The moderator, who also would be the manager for the trip, should preferably be a former customer to bolster the consumer confidence. 4.3 Innovations in Service delivery The service delivery can also be innovatively provided, e.g. while the group’s tour is in progress, a specialised team of staff need to engage their family member with the latest photos of their relation having fun. This will enable the entire family to go through the fun experience that the customer is presently enjoying and will help build brand equity in a big way, as by recruiting a single customer; the company is actually providing fun to the entire family. 4.4 Innovations in aftersales delivery One way to do this is by sending memorable photographs of the trip after some time is elapsed; preferably, on important dates of the customer’s life such as birthdate, marriage anniversary and so on. Secondly, company may also recruit some immediate past customers as anchor for the customer conversion process. 4.5 Creating a sub-brand for each segment To cater to the need of emerging segments in future, the company need to display that it seriously intends to serve this segment. An extension to the brand name would serve the purpose well at a very low cost. For instance, the present logo of Paradise Travels can be modified with a new brand “Fem-d’-fun” and adding a tagline “Refurbishing life of women, as, Paradise Travels fem-d’-fun Refurbishing life of women Besides, there is presently not many customised tour products are available which actually focused on total customer experience of its customers. 4.6 Increase brand awareness To increase brand awareness among the target consumer segment, one innovative way is to arrange travel workshops in community neighbourhoods. With audio-video presentation, the customers to visualise the destinations more vividly and anticipate the fun associated with the trip; besides this would also provide a sound footing for word of mouth advertising. Read More