Last June, in our interview with analytics evangelist Avinash Kaushik, he touched upon a point that is dear to our hearts – “segmentation is key to truly finding any insights from… web data.” Indeed, marketers can use segmentation to better understand their consumer base, identify valuable customer groups and develop strategies to proactively target these groups individually.

As the web has become more social, the importance of behavioral segmentation has increased. Still, demographic segmentation can often yield powerful insights. Take as an example, the online travel industry. Many consumers shop for flights and hotels in tandem and one might expect similar age profiles for airline and hotel websites. Excepting for a slight skew toward older consumers among airline websites, this is in fact what we find.

However, these groups convert, or complete online transactions, at different rates. By normalizing the conversion rate of each age segment against the average conversion rate of hotel and air websites in general, we discover how these age groups perform relative to the performance of the average site visitor.

Read as: In January 2009, hotel shoppers in age segment 18-34 were
9% less likely to convert than the average hotel website shopper.

Key Findings:

• On the one hand, airline websites, in aggregate, display relatively homogeneous conversion performance. That is, no group significantly over- or under-performs against average airline shoppers.
• On the other hand, hotel websites display marked differences among age groups – hotel shoppers between ages 18-34 convert at significantly lower rates and hotel shoppers over 55 convert at significantly higher rates than average hotel shoppers.

While airline and hotel websites have a similar mix of shoppers by age bracket, demographic segmentation leads us very clearly to the discovery that the two categories have striking differences in their conversion performance by age. In fact, we find that older consumers are hotel websites’ best customer group. This insight would lead savvy hotel marketers to craft marketing campaigns that drive more traffic specifically from qualified older consumers. (One tool that can be used to this end is Compete’s Behavior Match product suite).

In the final analysis, while demographic segmentation should not be discounted, it is worthwhile to note here that behavioral segmentation (i.e. segmenting users based on traffic sources, level of engagement with a website, search keyword types, etc.) frequently leads to more immediately actionable, higher ROI findings. Nevertheless, all marketers would benefit from the insights generated by not only tracking segmented performance at the market level, but also by benchmarking this group-by-group performance against competitors at the brand-level. For more information, see Compete’s webinar on Segment-Driven Marketing.

On February 27th, TripAdvisor took the wraps off of its new air Meta Search engine. It includes industry-first features such as a built-in fees estimator that other sites do not offer. What makes TripAdvisor the most formidable new competitor within Meta Search, however, is the millions of existing site users who theoretically can be nudged into adopting the product. The challenge will be convincing consumers to put down the hotel reviews for a moment and give the new flight product a try.

Compete data shows that TripAdvisor.com now attracts over 8 million U.S. visitors per month. Since most of TripAdvisor’s content is related to trip, resort, lodging, and other travel reviews, the consumers on the site are predominantly hotel shoppers. Thankfully hotel shoppers tend to also need flights and other travel products, which is where TripAdvisor has an opportunity with its air Meta Search tool. 55% of existing TripAdvisor.com users already shop for flights on other websites in the same month.

The trick for TripAdvisor will be getting its existing site users into a flight-shopping mindset. While 55% of existing site users also shop for flights elsewhere, they don’t look for both at the same time. In fact, when TripAdvisor users shop for flights, only 13% will do so on the same day as their TripAdvisor.com usage.

The market opportunity for TripAdvisor within the air category is significant – a fact that certainly was not lost on the company when it made this decision. Existing TripAdvisor users, however, are spread across thousands of different content areas on the site related to destinations, hotels, and reviews. In order to be successful, TripAdvisor must aggressively channel these consumers into the new “flights” tab, otherwise people may not find it on their own. With the right strategy to do this and grow usage of the product, TripAdvisor is poised to be a major new competitor to the current Meta Search engines.

We recently saw how effective rewards sites could be for hotels, but is it still working for the airlines, whose frequent flier programs have been rewarding repeat customers for more than two and a half decades?

These programs are still going strong - an effective airline rewards program and accompanying online rewards site can greatly diminish cross-shopping and lost-bookings. The program with the greatest online presence, Delta’s SkyMiles, attracts nearly a million unique visitors per month. Delta.com’s rewards penetration rate – the percent of site traffic clicking on rewards content is the highest among the competitive set. However, when it comes to loyalty, Northwest’s World Perks and Southwest’s Rapid Rewards are the strongest programs.

Rewards penetration rate measures how effectively a supplier site engages visitors into rewards content. Behind SkyMiles’ 20% penetration rate, NWA, Continental and US Airways drive more than 10% of their homepage traffic to rewards pages. Other competitors, Southwest, American, and United all lag the competitive average in this regard.

NWA and Southwest are the most effective at creating loyalty amongst site visitors clicking on rewards content. NWA captured 79% of the bookings of World Perks visitors in December 2008, while Southwest held 77% of the transactions of its rewards traffic. The laggard in this metric is Delta.com, losing 71% of the bookings of its rewards audience in December.

An effective frequent flier platform is imperative to an airline’s brand loyalty. Two critical success factors for programs are driving online platform usage and loyalty. Newly married competitors Delta and NWA appear to have all the right ingredients for an effective combined offering. Both sites effectively drive traffic to their respective rewards pages. Delta, however, lags behind NWA at creating loyalty amongst this audience. By folding both companies’ routes, programs, and other perks together, the combined entity has an opportunity to resonate with fliers like never before.

Judging by how often I’m asked to join a rewards program when booking any sort of trip, it’s clear that their popularity is on the rise in the travel industry. But just how effective are they?

Hotel Rewards websites, such as Marriott Rewards or IHG’s Priority Club, can attract hundreds of thousands of visitors each month. The largest hotel supplier reward site, Marriott Rewards, engages 19% of the total traffic to the overall Marriott.com website. For hotel chains, growing their rewards sites is critical to improving online channel effectiveness. Travelers who use rewards sites are on average 40% more loyal than non-users.

Most major programs have grown their online traffic in the past year, from November 2007 through November 2008. On average, each site grew by 21% over the past 13 months. The only site that did not manage a traffic increase was Choice Privileges, which declined 4% in users compared to the prior year.

Share of Wallet – the percent of hotel bookings that a given hotel brand captures among its customers or prospects – is a key gauge for measuring loyalty and rewards site performance. Marriott.com captured 68% of the bookings among members who visited Marriott Rewards in November 2008, the highest Share of Wallet among all competitors. On average, rewards sites were able to capture 50% of the bookings of their members.

With difficult market conditions surrounding the travel industry, increasing loyalty among online prospects is integral to hotel supplier’s 2009 success. With consumers more likely to cross-shop and price check than ever before, the incentives and benefits of a rewards platform will often be the deciding factor in the online travel purchase process. Rewards program managers must ensure that their online portals are best in class in order to drive the necessary usage and loyalty.

Given the severity of the problems in other markets, less mainstream attention has been placed on the state of the travel industry. Compete analyzed online activity within the air and hotel categories to identify if shifts are taking place in consumer interest in these products. The findings show a clear decline in online travel research activity, with actual booking and purchase activity also trending downward.

Air and hotel shopper volumes (consumers researching but not necessarily purchasing) have both gone into negative territory compared to a year ago, a first for 2008. In each month of 2008 to this point, online air and hotel shoppers had been up versus the prior year periods. Cautious consumers then began thinking less about travel in September, and started to abandon travel websites in October. While only a fraction of shoppers end up completing a purchase in any given month, these declines represent an important shrinking of the pool of vacationers, last minute shoppers, and undecided consumers to which travel marketers can generate transactions from.

On the positive side, online travel bookers for air and hotel are still up compared to a year ago, however significant wind has been taken out of the sails. Shopping and researching activity is a leading indicator of future travel purchasing, and unless a positive catalyst introduces itself, it appears that bookings growth will be pressured further in the coming months.

Travel marketers have reason to be concerned and must pay close attention to the signals that their customers and online prospects are sending. Given the decline in shoppers to work with, a well-planned online marketing strategy is more important now than ever. With the right mix of online advertising to bring in new shoppers, helpful website functionality to cleanly present a variety of choices, and compelling offers to seal the deal, savvy competitors will weather the storm.

Traditionally the online hotel conversion process or funnel has been viewed as consisting of at least 5 basic steps:

1. A consumer visits a hotel website homepage
2. A hotel search is performed
3. A room is selected
4. Personal and credit card information is entered
5. The booking process is completed and a confirmation is viewed

In addition to these steps, under the traditional conversion funnel, consumers may choose to click through and view a hotel property page after performing a search and before selecting a room. Lately however, the structure of the hotel supplier conversion funnel has changed due to consumers’ increasing use of search engines to shop for products online, including hotel rooms. Compete finds that the total volume of search queries has steadily increased over time, led by Google.

Moreover, the percentage of referrals to the aggregate hotel supplier segment coming from Google has steadily increased since January 2007.

Aided by the work of search engine optimization and marketing specialists, hotel shoppers who input certain brand and location keywords into Google and other search engines often land on hotel property pages. These consumers bypass the top of the traditional hotel conversion funnel (the homepage and search results pages) and the marketing, loyalty, “brand experience” and core value messaging that occurs therein. Moreover, these shoppers interact first with hotel property pages that are often not optimized to serve as the brand’s point of introduction to the user.

As one measure of the prevalence of this behavior, Compete examined the percentage of Google-referred unique visitor traffic to hotel property pages at 6 hotel supplier sites since January 2007. It is first apparent that there is a relatively steep upwards trend through the 20 month period for most sites tracked. In August 2008, among these sites, 27% of hotel property page traffic came immediately from Google on average, up from 18% in January 2007. In addition, during this same time period, hotel property page traffic among these sites is up 28%. Thus, not only is the percentage of Google (and other search) referred unique visitor traffic to hotel property pages increasing but the number of unique visitors viewing hotel property pages is increasing as well.

As this trend continues to spread, the role of hotel property pages becomes an increasingly important one. Consumers reaching these pages from search are likely using branded or location-specific keywords and thus are more engaged than casual hotel shoppers. Consequently, hotel marketers would do well to focus on these consumers’ experiences and regard property pages as pivotal landing pages that contribute significantly to a brand’s online strategy.

Under the model of the traditional conversion funnel, interaction with property pages is optional (at some websites) and accordingly analysis of these pages is secondary. However as the search-influenced model becomes more common, applying detailed landing page optimization techniques to hotel property pages is vital to the conversion funnel’s success.