Guest Post: What’s the hidden cost of over-complex pricing models?

Zolv founder Olly Wenn asks are travel firms aware of the lost revenue from over-complicating their pricing models?

Are travel companies making their business models too complicated in an attempt to squeeze an extra 1% margin at the expense of customer experience and considerable IT cost?

We all know customers hate supplements and hidden costs. These extras are a consequence of complex business rules triggering supplements based on information collected during the customer’s journey.

It’s not a question of deceit or cunning. It’s the pricing model I’m concerned about, not the delivery mechanism. Reservation systems are increasingly complex to set up, populate with data, report on and audit. This is due to ever more complex, novel and ingenious ways of flexing prices around dates and basket combinations.

For the guys in the commercial department, the systems probably still aren’t complex enough – or in their terms, flexible enough.

Tour operating has always been a numbers game – it’s buy and sell with some added value along the way. But let’s look at this from another angle.

As web developers specialising in travel sites we integrate with travel tech from many of the big players in the UK.

It can be time-consuming, but that’s not the fault of the vendors – they’re delivering the functionality operators demand. But it does mean more look-up tables, formulas, dependencies, linked products, supplements, both optional and mandatory – and hidden, of course. It’s even hard for techies to understand how a price ends up as it does.

All of this is meant to give companies an edge – to allow the operator to load prices, margins and discounts combinations to maximise sales conversion and profitability. But is there a cost that should be weighed up against these marginal gains in profit? Yes.

The real business price we pay for this increase in complexity is responsiveness. For many readers, a 10-second response time might sound like a pipe dream but in Google time, 10 seconds is about 9.8 seconds too long.

Online searches can take 20, 30, 40 or more seconds – which is the kiss of death for sales conversions. So the question is – do the pennies we make on successful complex deals compensate for pounds we lose on every lost conversion?

This is a question that can only be answered by analysis. If we could track customer behaviour all the way through the journey then we could assess the impact. Then we’d be able to manipulate the pricing model more scientifically. We’d be able to see the results of making complex changes, learn what combinations work with which customers, and which combinations are a turn-off.

Complex doesn’t always mean bad. Needless complexity is bad. And complexity that destroys customer goodwill and purchases is super-bad.

Cloud services mean that processing and storage are available to meet any computing problem you can dream up.

However, there will always be a practical limit to what you can do on the fly – and that’s the customer’s patience. The aim of every travel business should be to become real-time, and to deliver nice surprises, not nasty ones.

Putting business rules at the heart of your business makes great sense. Building systems that can operate with business rules naturally and efficiently is even smarter. That way, you’ll be sure that it’s the complexities that are hidden, not the charges.

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