The web is enabling travel suppliers to sell all manner of products to a wide audience. Kevin May and Tricia Holly Davis look at the Long Tail model and ask if it can be applied to the travel industry
Our sales are only as good as the length of our tails!” You could almost be forgiven for thinking that was a line from an animated version of Glengarry Glen Ross, David Mamet’s raw portrayal of a boiler-room sales environment, where a cut-throat executive, played by Alec Baldwin, admonishes his troupe of down-and-out property salesmen.
But far from fiction, this statement is fast-becoming the mantra of thousands of travel suppliers, who are using the web to supplement their sales with a seemingly never-ending ‘tail’ of niche products.
In his book, The Long Tail: How Endless Choice is Creating Unlimited Demand, Chris Anderson observes how the Long Tail has worked wonders for the publishing and music industries, breathing new life into once-forgotten titles and finding a broad audience for obscure garage bands, which, before the Internet, would have had to rely on a major record label to escort them into the homes of mainstream listeners.
Success stories such as Amazon, Anderson observes, prove that the Long Tail model not only works, but has turned the classic 80/20 rule on its head, where the minority of products no longer account for the majority of sales.
By encouraging consumers to venture from the ‘hits’ world, where there exists high acquisition costs, to the niche world, where the costs are much lower, smart sellers have the potential to drastically improve retail economics, Anderson says.
There remains a strong debate over whether the Long Tail can effectively do for online travel sales what Anderson argues it has done for the likes of books and music.
Although he does not specifically address how the Long Tail can apply to the travel sector, he does suggest that the Long Tail is all around us, noting that even something as seemingly generic as flour has a Long Tail, in that there are now dozens of different types of flour, from organic to wholewheat to blue cornmeal.
Dr Keith Mason, from Cranfield University’s Department of Air Transport, suggests the most successful Long Tail businesses are where inventories can be stored virtually (eg music, software, news) or warehoused remotely, using production-on-demand techniques, such as Amazon demanding publishers produce small print runs.
“Here, there is a problem for the scheduled airline industry as inventory is set up to six months in advance,” says Mason. However, he says there is evidence of a Long Tail in city-pair markets. Hub-and-spoke systems developed as airlines recognised a large proportion of travellers wanted to travel in very small city-pair markets. For example, only a small number of people want to travel from ‘Marseilles to Cincinnati’.
By developing hub-and-spoke systems the major carriers developed networks that could carry any passenger from any city to any other city. “Therefore,” Mason says, “there is a clear recognition of a Long Tail in the network airline industry.”
The problem is that, unlike Amazon’s success in the Long Tail of books, the network airlines have not been able to serve the Long Tail in a profitable manner and have subsequently moved away from these markets, serving the very thin spokes at lower frequency.
The Long Tail model may find more success in the niche holiday market. “It is logical that there is a Long Tail in specialist holidays,” says Mason.
In Anderson’s flour example, he acknowledges that the Long Tail of flour exists because of consumers’ rising affluence, which has allowed us to shift from being bargain shoppers, buying branded or unbranded commodities, to becoming mini-connoisseurs.
In this same way, Mason observes, there has been a huge growth in leisure travel companies offering niche products (eg Club 18-30 for young singles; Sandals for young couples, etc) to suit consumers’ widening tastes.
In addition, Mason says the limit of the shelf space in agencies is becoming overcome by e-brochures that further segment the market into smaller niches.
“These products are further leveraged off of social-networking websites and special-interest Internet forums. A guitar forum of which I am a member runs mini-trips for members to NAMM, the main guitar sellers’ convention.”
Following the Long Tail principle, Mason believes the online travel market can expand simultaneously in two ways. Firstly, through a growth of very small specialist travel companies and, secondly, through the growth of groups dynamically packaging their own requirements.
“The ability to have all travel services (insurance, luggage, airport shuttles, car rental, hotel, etc.) in a single location and booked from one screen will increase the uptake of dynamic packaging and provide extra profit. This is a Long Tail business as the content is provided on an ‘on demand’ basis and with virtually no cost to the host,” says Mason.
Cheapflights boss David Soskin, believes the Long Tail model is extremely relevant to travel. “The Long Tail is the reason we have a business,” says Soskin.
Before the web, Soskin says, independent travellers were the niche.
Today, everyone is a niche traveller. There is no longer a correlation between the size of a provider and the price they provide. “The web is the reason we have weird and wonderful places to travel.”
While that may be the case, marketing experts still question whether the Long Tail is the answer everyone has been looking for. Certain travel suppliers have certainly recognised the benefits of the Long Tail model from a pay-per-click, online advertising perspective. But rather than just focusing on popular ‘head’ terms such as ‘holiday’, suppliers purchase thousands of less expensive ‘tail’ search terms that help to improve traffic and provide generous margins of return.
Martin Dinham, business development manager at digital marketing agency Neutralize, believes the academic principle behind the Long Tail is a sound one, but the reality for advertisers is not as simple as travel businesses might assume.
There is no actual ‘history’ for the thousands of phrases that make up the Long Tail for PPC schedules, Dinham argues, leading to search engines such as Google to ask for a “nominal fee” for bids.
“Google is actually cutting off the Long Tail in order to get people to bid on higher value search terms,” Dinham says. “This leads the advertiser to invest in higher volume phrases – so search engine optimisation is actually the better way of accessing the longer tail.”
Lewis Lenssen, managing director of online travel consultancy Netizen Digital, takes a different view. “I can see where the Long Tail principle works for PPC, but I question whether it explains the growth in online travel sales,” he argues.
Are more people buying travel on the web because, according to the Long Tail model, suppliers can afford to stock more inventories online, or, is the surge in online travel web sales due to the fact that we are living in an affluent society, as Anderson pointed out, where consumers can afford to be more discerning, asks Lenssen.
Put another way, Lenssen says: “Maybe the over-50s segment is buying more holidays because there are more over 50s holidays being sold on the web, or maybe it’s just because of the fact that there is an ageing population.” It’s a good point.