Why Taking Aim at Apple Fans Was the Smart Move for Orbitz
If you're looking for a travel bargain, you may be better off using your mother's ancient Gateway desktop when planning your next vacation. Word is out that if you're checking out getaways on a Mac, you could be getting tempted with more expensive travel options as a result.
But don't be mad at Orbitz: The online travel company is just giving its customers what they want.
Orbitz (OWW) has explained that it has determined that Apple (AAPL) users tend to like more upscale hotels, which is why that's what it's showing them.
"Just as Mac users are willing to pay more for higher-end computers, at Orbitz we've seen that Mac users are 40% more likely to book 4- or 5-star hotels as compared to PC users," Orbitz CEO Barney Harford said.
Its shoppers are shown identical prices for any one hotel, but PC and Mac users may see different hotels in the "recommended hotels" section after they click on a particular property, Orbitz said.
How You Are Profiled: Personal Branding
Whenever someone visits a website, the user's browser sends a packet of information to the web server with details about the computer system being used -- including the user's operating system (e.g. Mac OS, Windows, Linux, Android) in order to make sure that the website is optimized for that person's device. Orbitz takes advantage of this personal information to tweak its selections for luxury-inclined Mac users.
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"That's just one of many factors that determine which hotels to recommend a given customer as part of our efforts to show customers the most relevant hotels possible," Harford said.
But it's a detail that tells a broader story about the customer. For example, nine out of every 10 personal computers bought for over $1,000 were Macs, according to a 2009 Techcrunch report, but beyond the higher prices those buyers were willing to pay for their computers, Mac users meet a particular character profile. It's not surprising, therefore, that Orbitz wants to get inside its customers' heads and see how they purchase based on the brands they choose.
"No one has raised the [identity marketing] to quite the same explicit level as Apple with its Mac vs. PC ad campaign, in which stereotyped characters were offered up as the very embodiment of competing computer brands," according to a 2011 Psychology Today article. "Remember how each ad began with the words "I'm a Mac" and "I'm a PC"? You don't get identity marketing much clearer than that. (And the central message was equally clear: to avoid being fatally dorky, get a Mac)."
But beyond the hip vibe Apple may have tried to convey in those ads, Orbitz is tapping into the real ways these brand choices reflect customers' wider lifestyle choices and preferences.
"We know how overwhelming it can be to have to choose from hundreds of hotel options, and we are focused on using technology to help our customers find the best deals on the most relevant hotels," Harford said. "We look at hundreds of variables to build the algorithms that determine which hotels we recommend during the shopping process."
And that profile can be more fully refined by focusing on one of the most important tools we use, the personal computer.
"Consumers, incidentally, jump at the opportunity to use products as a way of defining and broadcasting their personal identities, as documented by Rob Walker in his interesting book Buying in: What We Buy and Who We Are," the Psychology Today article reads. "These days, to drink Pabst beer rather than Heineken or to use French's yellow mustard over Dijon-style is more than just a matter of personal taste. It says something about who we are."
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Fighting Against The Travel Current
Orbitz may be on to something in this attempt to boost profits by more accurately targeting customers willing to buy premium deals. And these tactics are becoming ever necessary for the company. Between high airfares and the eurozone crisis, the travel industry has been hard pressed. And Orbitz has long been mired in third place among online travel sites, trailing Priceline (PCLN) and Expedia (EXPE).
Orbitz has to become more competitive, said Mark Mahaney, an Internet analyst at Citigroup. "[This Mac-user targeting] says this company has pretty advanced and sophisticated marketing techniques."
Orbitz has too long focused on the air travel side of its business, Mahaney says, which typically yields under 5% commission from airlines, as opposed to 15% yields from hotels. To build up its hotel sales, the company is banking on techniques like this smart market segmentation.
In the fourth quarter of 2011, Orbitz had a 3% decline in revenue year-over-year, but has started to rally since then. The company reported first quarter figures of $73 million ahead of consensus expectations on gross bookings, according to a May Goldman Sachs report on the company, and $190 million in revenue, up 3% from 2011.
%Gallery-148889%The company is continuing to fight against the tide: Hotel booking transactions fell 10% in the fourth quarter of last year, and rallied slightly for 1% increase year-over-year in the first quarter. Hotel room nights grew 3% year-over-year for Orbitz.
Sales at Orbitz have been pushed higher by vacation packages and an increase in mobile bookings, but offset by expensive air travel prices -- a clear reason for it to tap into any data it can find to steer potential bigger spenders toward pricier resort choices. Given that Orbitz says 90% of people who book a hotel choose one that appears on the first page of results, targeting those to the individual shopper is essential.
The flight ahead for Orbitz might be slightly turbulent: Goldman Sachs estimaties that 22% of Orbitz's second quarter revenue will come from Europe with the dollar-euro and dollar-pound comparison decreasing 3% and 7%, respectively.
But perhaps tapping into the psychology of our computer-buying habits will help Orbitz navigate a smoother path into the future.
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