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ACQUIRING NEW CUSTOMERS IN THE HOSPITALITY INDUSTRYb

PROBLEM BACKGROUND

Airbnb is an Internet firm that helps travelers discover and book unique accommodations offered by hosts around the world, with a room or house available for short$-$term rental.

Airbnb was founded in the summer of $2008$ in San Francisco, and quickly became a disrupter to the traditional hotel and lodging industry. The company bypassed the brick$-$and$-$mortar business model by creating a brokerage service between prospective guests and decentralized lodging locations. Airbnb's service can be accessed via mobile applications for Android, iOS, and Apple Watch. System users may search for accommodations by filtering data such as date, location, lodging type, and price. Prior to booking their lodging, users must authenticate the process by providing their name, valid email address, photo ID$,$ telephone number, and payment information. Airbnb earns revenue by charging service fees to both guests and hosts.

The cost of Airbnb lodging and accommodation is determined by the host. By not directly owning physical locations, Airbnb has been able to quickly scale its business to accommodate demand. Currently, the company offers more than $3$ million listings in over $65,000$ cities and nearly $200$ countries.

As of late $2016,$ Airbnb was valued at around $$30$ billion, a similar amount to the Marriott hotel group, even though it does not own any of the properties it lists.

Some local governments have deemed Airbnb as illegal or subjected it to severe local restrictions. Imagine a city, where listing homes on Airbnb was illegal due to concerns that it was raising home values and making ownership unaffordable, now decides to allow the firm to operate as long as it pays travel taxes. In order to grow in the local marketplace, Airbnb hires you to come up with a plan and execute it$.$

PROBLEM STATEMENT

As documented in this chapter, customers change over time due to industry fluctuations. Failing to understand and address these dynamics can lead to poor business performance. Since variation in customers' preferences over time is an inherent condition facing all marketers, an effective marketing strategy must manage these dynamics $($MP#$2).$

Airbnb's problem would appear to fit the second fundamental marketing problem all firms face while formulating marketing strategy, that is$,$ multiple

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VitalSource Bookshelf: Marketing Strategy

PROBLEM STATEMENT

As documented in this chapter, customers change over time due to industry fluctuations. Failing to understand and address these dynamics can lead to poor business performance. Since variation in customers' preferences over time is an inherent condition facing all marketers, an effective marketing strategy must manage these dynamics $($MP#$2).$

Airbnb's problem would appear to fit the second fundamental marketing problem all firms face while formulating marketing strategy, that is$,$ multiple factors were working together in multifaceted ways to make all customers change in the market. Airbnb must constantly analyze which needs, desires, and preferences across its buyers are most important to attract $($onboard$)$ customers and retain hosts. Thus, Airbnb needs answers to the following questions:

Which product attributes are most desired by customers during acquisition and retention?

How can the market be effectively segmented to decide:

Which customers to acquire?

Which customers to expand?

How should Airbnb work its targeting and positioning strategy to deal with customer dynamics?

To help inform the decision, suppose Airbnb embarked on an analytics exercise in Eugene, Oregon, to power a choice model$-$based analysis.

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VitalSource Bookshelf: Marketing Strategy

Traveler Data

As a local Airbnb manager, you partner with Alaska Airlines to promote your firm. As a pilot test, Airbnb will pay Alaska Airlines $$9,000$ for the ability to email a promotion to the next $3,000$ passengers who book a flight from Seattle to Eugene.

You design three emails: $1)$ promotion of $$25$ off an Airbnb booking, $2)$ promotion of free transportation from the airport to the Eugene destination booked on Airbnb $($taxi cost is $$25,$ pre$-$arranged through Oregon Taxi$),$ and $3)$ a simple welcome email from Airbnb with a $30-$second video that shows some of Eugene's highlights $($no additional cost$).$ The email promotions are randomly distributed to the first $3,000$ passengers who booked a flight from Seattle to Eugene on Alaska Airlines and did not already have an Airbnb account based o