Online Marketing In China: The Travel Agencies' View

According to figures released by China Internet Network Information Center, between the end of 2009 to July 2010 the number of Internet users in China increased by 36 million to 420 million, surpassing the 400 million mark. At the same time the Internet popularity rate increased 2.9 percentage points to 31.8%.

The number of broadband users was 363.81 million, accounting for 98.1% of the country's total Internet users. The number rural residents using the Internet hit 115.08 million, accounting for 27.4% of the total, 7.7% more than that at the end of last year. The number of users above the age of 30 rose to 41%, compared to the 38.6% at the end of 2009.

The CNNIC report showed that the Chinese people are increasingly using the Internet for commercial, entertainment, and communication purposes. In the first half of 2010, more people in China used the Internet and the user base of online applications continued to expand. Commercial applications have been in a spotlight. The number of users of online payment, online shopping and online banks is reported to have increased by about 30%, far more than any other purposes. Social net-working websites, Internet literature and online search services have also become more and more popular. The mobile phone network application developed smoothly, with users focusing more on information and communication.

These figures suggest that the purpose of Internet has shifted from information to commerce at a n increasing pace. Online marketing has become an essential tool for modern businesses. As for the travel industry, the Internet has been widely used both by travel agencies and newly-emerging travel websites, and this enables users to receive information, do product and price comparisons and complete transactions online. But for traditional travel agencies, how widely can online marketing be used and is there any room for advancement? How to use online-marketing on targeted clients and increase user retention so as to meet the goal of promoting themed products? Our reporter interviewed some industry experts.

Become the controller of resources, increase added value
In an interview with China Hospitality News, Shi Laishun, the vice president of China Travel Service Head Office, said that online marketing is a new media channel for traditional travel agencies and the modern service sector, as well as the whole of modern society. From the point of view of modern dynamic management processes, travel agencies, no matter whether traditional, old or new, big or small, all can take advantage of the method.

Shi believes that it would more flexible for small-sized travel agencies to establish an online system. However, such companies will not establish their own websites but will choose to take advantage of the whole Internet. Large-scale travel agencies, on the other hand, will set up their own websites as well as their own online marketing platforms: e.g. Mangocity.com, which is owned by China National Travel Service (HK) Group Corporation. Shi also said that these travel information search engines and portals were designed based on different markets. These are open information platforms, where users can get any information they are looking for and release their own products and exchange values. E-media, which serves as a reinforcement of traditional media and, as a new media method in modern society, will actively promote the development of travel agencies.

Online marketing is very convenient. But should travel companies cooperate with each other or establish new platforms? Shi said there are two sides as not every firm will pour money into this. A series of activities, including the establishment of Internet systems, employee recruitment, program development and maintenance and market operation such as operating models, are commercial activities and have profitable precedents. As to whether to invest or not, or how to invest, this is similar to the question that concerned many Chinese decades ago. That is, should China develop on its own, or should it cooperate with the outside world to connect its economy with the rest of the world? So, should travel firms take advantage of the whole Internet or establish their own platforms? Different firms have made different choices, according to Shi. China's largest travel agency, CTS, and Mangocity.com both are independent corporations and both are subsidiaries of two separate enterprises. Tian Di Lian Wang, which was co-established by CTS and Mangocity.com, comprises the two firms' products, services, and information. The cooperation between the two results in strong support off line and offers a comprehensive sales network for travel agencies.

Take China's current tourism sector for example, the companies which do not control resources, have found it more difficult to gain a market share via different of resources. One has to become the controller if it wants to increase its competitive edge. In the meantime, it has to be the creator of market added value, Shi said that CTS aims to become the resource supporter and service provider. Mangocity.com serves as a professional platform offering travel information. Modern technology plays an essential role in connecting new products and new markets.

Shi also said that the effects on B2B brought by online market are all about the strong and weak in market. B2B is more about win-win or about drawing on the strengths of others to offset one's own weakness. At the initial stage, B2B is about co-existence, later it is about the balance between profits and benefits. If the balance is realized, common development could be possible; if not, the resource controller may back off to explore new sales channels; or the resource controller may ask for more money for Internet support or quite from online marketing.

As a large-sized travel agency, what does CTS think of online marketing and bricks and mortar stores? Shi said that one can not substitute for the other. According to the application papers, most clients prefer to going to stores due to the friendly manner and sense of trust which matter to most young people as well as those who are above average age. On one hand, the Internet doesn't have these advantages which stores have, on the other hand, stores certainly can not be a substitute for the Internet. Different customers have different preferences, leading to different consumer choices. Shi explained that stores can better represent a firm while communicating person in person with customers. The Internet is a platform which offers around-the-clock trading and all kinds of information. The two will have different results based on different targets but they are both very important for travel agencies. To be specific, the online marketing appeals more to young people. The online comments and online payment suit semi-self-guided tours and individual tourist groups better. According to official figures, the age of the Internet user base spans from 28 to 35 while users aged between 17 and 35 view websites most. Users who make online payments age from 26 to 35 but their spending power is not that strong and they are not the major spending group. Despite all those factors, the group still have the shopping momentum even though they can not afford expensive products priced above CNY5,000 as their spending power is limited. However, they can afford off-line products. As for high-end customers, they usually arrange meeting with them to get to know their thoughts and feelings. They start by searching for destinations, features and prices, and then they will decide which agency to cooperate with. All those steps they take determine that they would prefer online trading. As a result, romantic and adventure tours are usually put online.

Online marketing has its disadvantages while bringing conveniences to consumers. Shi said the biggest problem is trust. First of all, there should be a trust system. Management staff need to create a clean environment on the Internet and related markets. Secondly, those pragmatic issues should be addressed. Besides trust, a large ammount of bad information exists, affecting the whole Internet. To solve this problem is a long-term task. According to Shi, online marketing, which is an important method in modern society, will bring revolution to modern media. Revenues and influence will greatly exceed those of traditional media. However, the combination of the two marketing strategies will coexist for a long time.

Traditional travel industry to fully enjoy the advantages of the Internet
Guan Shentong, the CEO of Hua Yuan International Travel Company, told China Hospitality News that the Internet means a lot to the traditional travel sector, which suffers from poor efficiency. Problems including delivery, and sending faxes and e-mails will affect a firm's efficiency. Traditional firms has always been trying to solve problems such as how to get their products to customers initially and how to cut labor costs and trading costs. Therefore, popularizing information is very important to traditional firms.

Shen said the company hopes to sign agents and let them know its products from the beginning via the Internet. And that's what B2B is about. At the current stage, the company's sales department is engaged on such a project. In the future, the company may put the business online, which will help those agents market and promote the products. Currently, B2C still depends on the Internet. It is about letting traditional sectors sense the advantages that the Internet has.

Shen said that, firstly the travel industry has a huge market base, and we can learn that from the appearance of various travel websites. Moreover, the application of the Internet is a new thing for the travel sector, which has its own specialties. The more competitive the market becomes, the faster it develops. Thirdly, byecity.com is a agent while other websites lack experience in the products research and development and they don't have ability to run a product. For the whole travel market, travel agencies have much to sell but the market will need further improvement and clear cut aims in the future.

Byecity.com currently offers air tickets, hotel reservations, visas, and self-guided tour services. As an e-commerce platform, users are able to find out about destinations and place their orders. In fact, the major business lies in individual projects and self-guided tours. The company offers integrated services along with consulting services. Without stores, the website relies on the Internet. Though the website develops at a faster pace than the traditional travel industry, customers who place orders online are rare and the number who pay online is even smaller. As a result, the company combines its online and off-line businesses.

The establishment of any website is the process of continuous optimization, Shi said, adding that travel websites are no exception. He said that there are still many problems awaiting solutions. User experience, including the whole booking procedure, products promotion, and trades, still needs improvement. The Internet is just a tool, and the key is to use it properly. The firm's needs should be put first, and then a firm should see how it works with the firm's back office, and whether it meets the market demand or not.

When it comes to the current situation of online marketing, we should first understand what online marketing means. Chen Yongqing, the chief director of the network operation department of utour.com, said there is misunderstanding: on one hand, some believe that online marketing is about setting up a website; on the other hand, once the website is established, online marketing is about promotion: including biding and buying advertisements. More and more people have access to the Internet and talents are introduced to this area by travel agencies. There are fewer people who confuse online marketing with establishing websites, while there are still some people think in this way. The nature of online marketing is the marketing of products or services over the Internet in an effective, continuous and instant manner. Information provided on the Internet, including brand, product service and promotions, will help form brand influence and promote sales. Therefore, a travel agency has to decide which platform to use, who to communicate with in which way, and what kind of information to share. Online marketing includes the effectiveness and consistency of information.

The value of online marketing lies in communicating information, which means effective communication both outside and inside a company. Chen said that, as a non circulating company, the traditional travel agency has its issues: non standardized products, inconsistentcy in product service; unreal storage; intensive production periods; short selling periods; uncoordinated and varied customer demands. Online marketing is not just about setting up and promoting a website, and it brings lots of changes to travel agencies. Online marketing develops traditional travel agencies in following ways:

First, information within groups as traditional firms attach more importance to the process. It is not about catching up but a necessary choice that every firm has to make during business promotion. The traditional mode is B2C via e-mail and fax, which is low in efficiency but high in labor cost. Merely setting up websites and marketing online will accelerate channel distribution and services, meanwhile, provide operational support for online channel expansion.

Secondly, to effectively integrate resources. Internet technology makes it possible to fully integrate resources. The traditional travel agency integrates business partners, upper sector partners, GDS providers, and entertainment resources, improving its own ability to integrate resources more effectively and extend the reaches of its resources. Travel agencies continue to increase the amount of new resources while increasing their competitive edge, and so increase their profits.

Thirdly, operations need to be standardized, which is the process of a firm's information. A traditional travel agency has to set up its own operation standardization system if it wants promote online marketing. In the meantime, it has to instantly exchange information, reservation and cash flows via online marketing. The only way to keep information updated and dynamic is to standardize operations, and only in this way, distribution channels will get information on new products and services and accurately target customers.

The last but not least, becoming market-oriented. Modern society requires travel agencies to be highly market-oriented. The traditional operation mode cannot disseminate travel information widely, therefore, travel agencies have to use set sales channels to spread and distribute product and related information. To some extent, the traditional mode partly unbalanced the customer information terminal. The time of online marketing has come with its own form and influence. The vertical comparison of travel information and price becomes possible thanks to the fast-developing online search engines. Tourists will likely relay on the travel booking websites throughout the whole tour. The development of travel firms' online marketing will get a boost from the third-party distribution platforms as well as the fast-developing travel information platforms such as lotour.com, 51766.com, 17u.com, and tuniu.com. In the meantime, consumption habits are also changing due to the development of the Internet, 3G technology and video terminal. More and more consumers get used to looking for sufficient travel information which can help them book services online or by telephone. Based on the factor that people shop online, travel agencies need to promote online marketing, be more market-oriented and to stay open to the whole market, not just a regional market. To face the highly competitive travel market, travel agencies should improve their online marketing strategies in areas like product line, packing, price system and promotions.

Chen said that travel agencies value online-marketing in two aspects. First, online platforms can help integrate resources, so as to create various products that meet market demand. Second, effective communication with end consumers via Internet channels can help focus on targeted market sin a very short time. In addition, the promotion of new products and brand image also benefit from the maximum coverage of the targeted market, in this way, communication cost and operation risk will be reduced.

Utourworld.com focuses on two B2B development modes, according to Chen. Firstly, keeping an eye on the development of the whole industry's B2B platforms and establishing partnerships with them. Forming partnerships with industry chain partners via the third-party B2B platforms, exchanging information on products and services with industry chain partners and expanding B2B businesses. Secondly, to set up the company's own B2B distribution platforms, via which channel and settlement management will be enhanced. Providing distributor services including information search, products, and instant reservation and online payment, in a bid to increase service efficiency for distributors and marketing efficiency of distribution channel. In 2008, the company established B2C booking services websites and formed a call center, offering consulting and reservation services for terminal users. B2C online, which was established on the basis of the company's ERP resource system, will strengthen the registered user marketing and club function. In the meantime, new items will be added so as to upgrade the website structure and appearance. The website will be offering online travel information and products search, instant reservation and online payment services, becoming a multi-information provider and professional website offering outbound tour services. Utourwold.com will set up its call center at its Beijing headquarters, providing round-the-clock services to users nationwide, with one-stop consulting and booking services. The website will integrate its business department while effectively integrating different businesses units. As the company's dispatching center, the call center will pick and transfer calls for the company's stores and will be engaged in activities that include product counseling, order confirming, and payment confirmation.

What problems does the online business have that still wait for solutions? Chen said that, firstly, the product service standardization should be established. The humanization and standardization are inconsistent; secondly, the integration of service systems. Users always hope for a better service experience. How to integrate the separate service units of the traditional travel industry and the old ways of evaluating performance on individual salesman and enhance user experience are of great importance for integrating service system. Thirdly, how to make B2B and B2C develop in harmony? The value of a channel lies in the convenience in communication it brings to users and letting users have the shopping momentum after knowing the channel. The nature of peaceful development of B2B and B2C is how to place channels and how to set up channels, and through which channel can user receive our channel information. Which markets are our weak points and what strategies will be adopted via B or C? What methods should be taken and what continuous marketing strategies to be made? In which way can they keep in touch with B users? How to support new channels and new markets by authorized product differences and the lever of price?

Furthermore, there is the management problem of traditional agents and newly-emerged cooperation channel. Traditional agents were organized by regions, adopting regional management and services. The mode has become mature. But for those new B2B platforms such as 17u.com, and B2C platforms such as tuniu.com and ctrip.com, things are different as they are not limited to regions. Those platforms will be affected by management problems such as cooperation methods, service interface and tracking and cooperation strategies, therefore the two parties' interests will be affected too. As a result, it is of great importance for operators to make the right strategies for new channel management and development. Lastly, given that the Internet economy is virtual, a company's brand image will directly affect consumers with their decision-making. How can online business gain the consumers' trust is a key problem that needs to be solved by Internet companies.