Increase revenue (and user happiness) with simple design changes
Some time ago, a well-known company invited me to participate in a product management exercise to review their travel app and make suggestions to improve revenue while ensuring a good user experience. I also had to estimate the possible increase in revenue. I’m going to share what I did. Feel free to add your comments, suggestions and criticism.
Usually, when I’m presented with an established product, the first thought is something like: “This is an excellent product; what can I possibly suggest here”. That’s probably our imposter syndrome talking, lack of confidence, or something along those lines. But then, you breathe and shift your line of thought more towards a customer/value-centric approach.
Clarity only comes when we first put ourselves in the customers’ shoes and understand what value we’d like to extract from that app. That’s how I approached the problem to make three possible assumptions.
I’m not going to reveal the app’s name, but suffice to say, my assumptions are all about the hotel’s room view and selection. All changes I suggested were not present in the app at that time (beginning of 2022).
Assumption #1
According to research, customers pay more attention to visual information and pricing. Assuming this is true, we’ve got to review how we present our room selection.
Change: Feature and order the pictures shown to the customers based on what offers the most value to them. The room they would be staying in rather than the hotel’s swimming pool or lobby. When the room’s picture matches what they expect regarding the comfort they’re willing to pay, there is more chance they will go on with the booking process.
Approach:
- First-time users: Showcase the most booked room.
- Returning users (with booking history): Showcase the room compatible with their story.
Action plan:
- Work alongside the suppliers for up-to-date and compelling quality images of all rooms. Currently, some pictures are not a good representation of the actual room.
- Adjust the app based on the approach above.
- A/B testing should be implemented to refine the approach.
Risk: Low
Difficulty: Medium — Getting all the pictures from the supplier might be the challenge
Potential Impact: Medium — Appealing to users’ feelings when looking at the hotel information will induce more bookings.
Assumption #2
According to research, too many options can cause “analysis paralysis”. Customers want to know what’s the best room for them. The faster they find it, the more likely they go through with the booking.
Change: Customers can always use the filter/sort options, but the suggestion is to improve the ordering so that no additional “taps” are necessary and the most appealing room is displayed up top, reducing any hesitation.
Approach:
- Always present the featured room first to maintain consistency. From the second room on, follow the next rules.
- For first-time users, order based on the most profitable (based on the hotel’s history) rooms in the middle range of price, then the more expensive ones, then the cheapest ones.
- Returning users (with booking history): Order the rooms based on what is most compatible with their history, reducing the time they stay on the screen and go forward in the booking process.
Action plan:
- Creation of algorithm taking into consideration the user history and the hotel’s available inventory. Correlation with supplier-specific information is helpful in such an algorithm as metrics come in. It should be an ever-evolving algorithm.
- A/B testing, especially for first-time users where there’s limited data. Location, age and gender information might indicate different approaches.
- Adjust app based on described approach and action plan
Risk: Low
Difficulty: Medium/High — It’s necessary to create the algorithm and collect metrics correlated with the user’s history and the A/B testing.
Potential impact: Medium/High — It’s considerably more likely that users will go on with the booking process when there’s less need for scrolling down and searching for the “correct” room. Attach this to compelling pictures (hypothesis 1) to have a more positive impact.
Assumption #3
Customers are always looking for the best value and need the feeling of having some advantage when buying something. About 60% of travellers are considering reviewing their trip budget due to inflation. Currently, this app has a “Pay Upfront” option for a lower price which is very useful; however, based on our assumption, we can improve that to increase revenue.
Change: Highlight the discount or savings for the “Pay Upfront” option and work with the visual (colour). The goal is to give the customer the good feeling of paying less for more. Work with suppliers to get better deals for the “Pay Upfront” option.
Approach:
- First-time users: Highlight the discount and savings by paying upfront, inducing a more robust commitment with the booking and reducing the chances of cancellations from little-known customers.
- Returning users (with booking history): Depending on the customer’s behaviour on previous bookings, highlight the “Pay Upfront” or “Pay Later” to increase the chance they will select the most profitable option for the company.
Action Plan:
- Work with suppliers to get better deals for the “Pay Upfront” option, especially for first-time customers.
- A/B testing, especially for first-time users where there’s limited data. Location, age and gender information might indicate different approaches.
- Adjust app based on described approach and action plan.
Risk: Low
Difficulty: Medium — Getting better deals from suppliers and working with the customers’ history would be the more consuming jobs.
Potential impact: Mostly High — The current scenario of inflation worldwide indicates that customers are more likely to buy “value deals.”
Digging Deeper
Based on the three assumptions above, I went to expand a little more on one of them. I selected assumption #3.
Since assumption #3 is the one which combines low risk, medium difficulty and high impact, we break down the possible results of implementing it first.
- According to recent travel statistics, about 56% of travellers are more budget-conscious because of the current global inflation trend.
- I'm considering 1.5M unique visitors monthly
- 840K are likely to be very conscious of their trip budget.
- The current overall estimate conversion on OTAs is around 2.2% which equals 18.5K transactions (averaging $300K per transaction) = $5.5M
- A new estimated conversation with the suggested improvement could reach 2.7% (+0.5pp) translating into 22.7K transactions (averaging $300 per transaction) = $6.8M, representing an increase in revenue of 22.7%.
- A lower conversion improvement of only +0.2pp (=2.4%) could represent an increase in revenue of 9.1% with a reasonably simple change in the app.
Customer Happiness
How do we know the customer experience is good with minor changes like the one suggested, besides the aforementioned increase in revenue? We can track some interesting metrics such as:
- Time to book: The faster the user confirms the booking, the better the experience. It tells me the user didn’t hesitate when deciding what to book.
- Customer retention: As the customer returns for another booking, that’s a good sign of a good user experience.
- Amount of scrolling: When the users are presented with the best option up top, less scrolling is needed. It tells me we understand our customer’s needs.
- Cancellation rate: I know the customer is happy with their choice with fewer cancellations. Good experience has been delivered.
- Pay upfront rate: If customers select the “Pay Upfront” option, our message is working, and customers are having a good time. Correlate this with the cancellation rate, and we learn how this change leads us to more revenue in more than one way.
- Better supplier deals: If the company is getting a better deal from suppliers and correlating this with the revenue per supplier, I know our customers are having a good experience because suppliers are happy to offer the company better deals.
What’s your opinion on this. As a product manager or product owner (depending on the moment and company), I like to do such exercises to practice my ‘product skills’. Only by practicing do we keep our skills sharp. And sharing here is another way to learn with the (much more skilled) community.
References
- Park, Sangwon & Yin, Yizhen & Son, Byung-Gak. (2018). Understanding of online hotel booking process: A multiple method approach. Journal of Vacation Marketing. 25. 135676671877887. 10.1177/1356766718778879.
- https://www.destinationanalysts.com/insights-updates/
- https://www.condorferries.co.uk/online-travel-booking-statistics
- https://www.similarweb.com/ — for traffic statistics
