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Archive for October, 2009

Why airlines deserve to lose money on fat-finger fares

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There is an ongoing fiasco involving British Airways. Apparently earlier this week BA had fares from the US to Mumbai going for a low US$40 base fare. This fare was bookable on various channels including popular online travel agencies such as Orbitz. However, once BA found out about the problem, the fare was pulled and all bookings for the “fat-finger” fare were cancelled.

This “fat-finger” fare might not have been apparent to many of those who booked – US$40 was the base fare and once taxes and surcharges were added in, the fare came up to US$500+. In travel ombudsman Christopher Elliot‘s opinion, only “industry insiders” would have known that this was a “fat-finger” fare since most normal customers would probably think BA was offering a fare special. Chris Elliot further stoked the online travel community by saying that people who exploited the “fat-finger” fare and had their tickets canceled deserved it because exploiting such fare glitches and making airlines lose money as a result, in his opinion, is an “immoral” act.

As much as I would like to get into Christopher Elliot’s good books by agreeing with him since he is such an influential figure in the online travel space, I have to disagree.

First things first – BA was not offering fares for US$40 – it was a US$500+ fare after factoring in fuel surcharges and airport taxes… with the fuel surcharge component making up nearly US$400 of the total price. I am not sure if things work differently in the US, but in Asia it is very common to see airfares going for $0.01 or even FREE… one just have to pay the fuel surcharges, transaction fees and whatever other miscellaneous charges which would come up to quite a bit. In fact just last week I saw a S$254 fare from SIN – Osaka but after adding in taxes the total was nearly S$600 which made it just a normal deal.

Second, I argue that airlines making mistakes or having glitches on their systems should not expect customers not to exploit them. While it is definitely not 100% ethical to exploit a fare glitch, it isn’t wrong either. “Fat-finger” fares surface due to errors made by the airlines or their employees. Instead of lamenting about people exploiting such fares, airlines should make it a point to learn from their mistakes, honor the bookings, and make it a lesson learnt not to repeat the same mistakes in future. People and corporations make mistakes all the time — it is an inevitable problem. We may not be able to entirely eradicate human errors but we can learn not to make the same mistakes again.

Just as a student making a careless mistake in answering an exam question cannot expect to be given a second chance to provide a correct answer, airlines cannot expect consumers to accept their reasoning that “hey, we made a careless mistake and offered you some mistake fares… we are cancelling your tickets now and will make a refund to you”. It just doesn’t work this way – why should airlines be given second chances when most people don’t get second chances in the workplace or in school? In fact, if there is a specific individual responsible for BA’s mistake fare, he/she may have already received a warning letter or gotten the boot for creating this fiasco. If that’s the case, all the more we should not give BA a second chance.

A-Club promotion pulled 2 days before official deadline

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Time and again, marketers (or their agencies) from the hospitality and travel industry come up with ridiculously poorly thought out promotions that not only provide awesome deals for consumers, but also create massive financial losses for the companies and brands they work for.

From the way things look, it seems that many online marketers are still not aware of how Internet-savvy consumers today are. Either that or those online marketers are just not smart enough to come up with foolproof promotions that will not be over-exploited.

One case in point is Accor’s recent A|Club anniversary promotion, where new members who signed up between 10 – 30 Sep 2009 received 2,000 A|Club points that can be redeemed for a free EUR 40 or USD 60 hotel voucher usable in almost all Accor properties worldwide.

The promotion was pulled 2 days in advance on 28 Sep, presumably due to heavy exploitation by Internet-savvy consumers. Some users bragged on online forums that they managed to order up to hundreds of vouchers. One wonders how much money this promotion had cost Accor, and what was the process by which the promotion was conceived and approved for implementation.

It doesn’t take a genius to figure out that one person can sign up for hundreds of accounts under different names in order to earn vouchers. And it doesn’t take much to prevent such a problem from occurring in the first place – marketers need only include a simple clause such as “Only 1 voucher per household” in the promotion terms and conditions to prevent excessive exploitation and the resultant financial losses.

To be fair to Accor, I noticed that cookies were used to prevent multiple member registrations using the same browser – however, any reasonably tech-savvy user will know how to clear the cookies from an Internet browser – I am sure even 10 year-olds know how to do this.

Personally, I signed up my family members and we received a total of 4 vouchers – I am not supportive of unfair exploitation, and I always urge people to play by the rules (T&Cs) and not create ‘phantom accounts’ out of greed. Overtime, such exploitation will just make marketers wary about coming up with generous promotions and this effectively will kill the deals for everyone.

Another recent example – Expedia.co.uk’s Refer a Friend Promotion
Expedia.co.uk recently ran a Refer-a-Friend promotion which gave out GBP 40 vouchers for each successful referral of a new member. Each referred member also earned a GBP 20 voucher. This was also heavily exploited, and for a while vouchers were invalidated by Expedia but the company eventually made good on its promise and re-activated the vouchers again.

Although the T&Cs stated that each member could only earn a maximum of 10 vouchers, the problem with this promotion was that people could set up ‘phantom accounts’ to earn more vouchers. Also, the voucher values were also too attractive for people not to exploit the promotion – GBP 40 can easily buy 2 nights’ accommodation in some Asian cities.

What made things worse was that Expedia’s system had certain flaws that prevented users from using more than 1 GBP 40 voucher per account and credit card, although each member could earn up to 10 vouchers according to the T&Cs. This meant that users ended up creating more accounts just so that they can use the vouchers they earned.

Besides the lack of foresight, another possible reason why this fiasco happened might be the fact that marketers often have to justify for marketing budget with measurable results – by having lots and lots of new accounts being created from a promotion, it may seem on the surface that the promotion was a huge success – however the caveat is that many of those new accounts were simply clones created by people exploiting the promotion.

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