Learning from the Airline Industry
Before computers stepped in, if you wanted to find a book in your library, you walked over to a shelf of drawers (or a few walls of drawers depending on the size of your library), scanned the labels on the outside of each drawer, opened the drawer that corresponded with the author or title for which you were searching, and then flipped through the cards until you found the title. It took going through this process to find out if a specific book was available in your library. If the card wasn’t there, either the book wasn’t available, or (as was often the case in my elementary school’s library) someone took out the card and didn’t put it back, or put it back in the wrong place. For this reason, if I didn’t find Ramona Quimby Age 8 within the Title catalog, it was in my best interest to check the Author catalog to see if a card was there. If it was, that would indicate that another third grader had likely rendered the Title card for Ramona Quimby Age 8 MIA, but that the book did exist within the library. The next step would be to check the shelves. If it wasn’t there, a check through the carts of unshelved books followed. Last stop was checking with the librarian to see if she knew the book’s whereabouts, followed by a reservation placed for the book if it was, indeed, checked out by one of my schoolmates.
Today, though… I don’t need to leave my home to see what’s on the shelves of my local library — or to scan the millions of books available for sale online. And, if I want it now, in most cases, I can download the book and start reading it within minutes.
The airline industry went through the same experience, transitioning from a paper filing system to a computer system, in order to streamline the reservation process. Its transition to a new system and the events that follow make good reading for the publishing industry, which is still lagging behind.
As told by David Wardell in his paper “Airline Reservation Systems“,
After the Second World War, air travel and airlines expanded rapidly. The “jet age” arrived in 1958, and with it more passengers and larger aircraft, as air travel quickly replaced train and bus as the main form of mass public conveyance. As airline schedule planning became increasingly complex, reservation management systems reached unwieldy proportions. Reservations were typically recorded on cards, each card corresponding to a trip between specific city pairs. Cards were then organized by departure date and stored in tubs that were rotated among various reservation agents as necessary. Reservation requests from outlying offices were either telephoned to a central facility or transmitted via teletypewriter and processed manually upon receipt. Reservations could only be made 30 days in advance of flight departure. In the early 1950s, when the idea of electronic reservation systems first became practical, it took approximately 2 hours to completely process an average reservation transaction. By the early 1960s, this time had been shortened to 45 minutes—still in a mostly manual mode.
A chance 1953 meeting on a flight from Los Angeles to New York led C.R. Smith, president of American Airlines, and R. Blair Smith, a senior sales representative for IBM, to develop a “data processing system that could create and manage airline seat reservations and instantly make that data available electronically to any agent at any location.” That system, known as Sabre, streamlined the reservation process for American — and then did the same for travel agents worldwide, when they were given access to the system.
And Everyone Lived Happily Ever After, Right?
After the Sabre system was marketed to, and then adopted by, other airlines and agents as an “accepted” business tool, screen bias became a problem. Again, from Warddell:
After travel agency automation became an accepted business tool, the CRS recognized that manipulating screen displays results in incremental bookings, for one carrier at the expense of another, depending upon how the screen display is influenced. Between 70% and 90% of airline flights booked by a travel agent are reserved from the first CRS availability screen displayed, assuming the agent’s initial availability request was accurate, with 50% of flights being booked from the first line of the first screen. In a competitive industry, where product differentiation is often tenuous, some CRS elected to actively influence agent flight selection based solely upon screen management. So called screen bias in the Apollo and SABRE was well-documented, while PARS and SODA were less overt and DATAS II used its unbiased nature as a point of competitive differentiation. Extensive user and consumer pressure eventually lead to the introduction of federal CRS standards that eliminated the most overt forms of screen bias.
In the publishing world, “screen bias” is found on the tables and shelves within bookstores. As individuals within the travel industry figured out, the first books seen — or the first flights seen — became the impulse/first buys. The difference is that publishers pay to have their books displayed on tables at the front of bookstores — or agree to other promotions to up the bookstore’s buy of their titles — while the airlines (as far as I know) didn’t pay for preferential treatment when screen bias within that industry was an issue. For a long while, it was found within the no-longer-existing book review sections of major newspapers and magazines, too. Books from the larger houses dominated the book review sections. Though I’ve not heard of proof of publishers paying the editors to write reviews, the reality is that their books were always first-screen books. With the rise of the Internet, this changed, offering independent publishers and authors more opportunities to get their books in front of readers.
But It’s Just So Easy
Travelocity and other travels cites grew from the Sabre system, bringing a greater variety of travel options to consumers. A 1989 article from the New York Times shares the following experience from one traveler, who found the option of online booking to his advantage:
While planning a trip to New Orleans, for example, he discovered that by staying one extra night, he could get a fare that was $180 less than if he left immediately after his business meeting.
”By spending an extra $35 on a motel in New Orleans, I saved about $150,” he said. ”And I got an extra night in New Orleans.”
No Such Help From an Agent
A travel agent or airline representative would not have saved him that money, he said. ”They ask what time would I like to fly and then give me the lowest fare available on those flights,” Mr. Sanderson said. ”But what they don’t realize – and probably can’t accommodate – is that I have a flexible schedule.”
He could see all the options and make a choice on how and what to buy.
In publishing, sites like Amazon and Barnes & Noble have made it easier to view all the options, too.
There’s a Price
Just as Amazon and book publishers have been going back and forth on pricing and distribution, so has the airline industry with various travel sites.
Earlier this week, American Airlines announced that it was pulling fares from Orbitz.
According to the Wall Street Journal,
Travel sites like Orbitz, larger rivals including Expedia Inc. and third-party ticket distributors are in continuing negotiations with airlines over booking fees. Some carriers are pushing for lower fees to cut costs as they try to remain competitive with low-cost carriers—and airlines that eschew online travel agencies.
Airlines are fighting to lower the cost of working with big distribution systems that corporate travel agents use to book their business clients, which has led to some litigation.
Carriers are also pushing online agencies and global distribution systems to improve their technology. They want the websites to seamlessly sell options like preferred seating and expedited security screenings—offerings that the airlines do well and inexpensively on their own sites.
Reread the last bit of the Wall Street Journal quote above: “ . . . offerings that the airlines do well and inexpensively on their own sites.” They could do it on their own, just like they used to.
Going back, companies — whether selling covered wagon rides or books – sold via the direct connect. It took longer, required paper and pen and sometimes a few other steps, but in the end, things worked out.
Travel agents and bookstores, and then advanced technology, got the covered wagon ride sellers out of the past, allowing them to book greater quantities of reservations, from a larger number of people, in locations around the world. Same thing for those booksellers. For consumers, it became easy to find everything wanted in one place. And, just as the companies adopted global distribution systems, buyers adapted their habits, getting used to the ease of shopping offered.
As distribution systems grew, problems arose on all sides — with arguments being made for and against all parties involved. Depending on where you’re standing, Amazon is the bad guy and Hachette is the good guy — or Hachette is the bad guy and Amazon is the good guy (or they both are at fault and you are moving away from both). Same with the airline industry. According to Michael Strauss, in his book Value Creation in Travel Distribution, it can be concluded that American Airlines’ move “towards independence from Global Distribution Systems . . . punishes traditional distributors, which are driven mainly by political decisions and fruitless negotiations, by reducing their market share.”
Just as the Internet made it easier for distribution channels such as Amazon and Orbitz to connect with buyers, it has also made it easier for Hachette and American to bypass Amazon and Orbitz and direct connect with buyers. Hachette and American have their own stores. It makes sense for them to sell direct. The end result is a greater per-unit profit. No middle men to take their cuts. Yes, it would mean buyers might not have all the buying options in one place to review, but, if the direct connect experience itself provided value, buyers would adapt, just as they have before. Quoting from Strauss again,
“There is the clientele which cares only about the lowest price. There is another which always insists on the best. Between these extremes are a thousand further differentiations.”
For those looking at the direct connect, the challenge is standing out from others offering the same product. The experience has to be a part of the package.
One more from Strauss,
The problem for the airlines remains that they all sell the same product: a seat. Airlines must differentiate themselves and instead sell experiences and emotions. . . . Particularly with regard to flight, differentiation by brand is one of the most important criteria for the future. A seat is always just a seat, but there are significant differences between sitting in a Mercedes, Porsche, Audi or a BMW. As supply increases, the airlines must also achieve this sort of differentiation.
Replace the word airlines in the above with publisher or author.
As history has proven, so much of what we all experience is a repeat — or “harmonizes with the past” (thank you Stephen King). While the publishing industry has a lot on its plate as is, adding the airline industry as a case study to examine (and learn from) would be time well spent.
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