ITA Software improves Continental's Internet sales
Published on August 27, 2003
on CNET's TechRepublic.com
Companies can maximize ROI on their Web sites by improving customer experiences, converting more shoppers to buyers, and reducing transaction costs. Sometimes it's possible to accomplish multiple goals with one technology application, as Continental Airlines demonstrated recently on its Web site.
By integrating Cambridge, MA-based ITA Software's Global Airfare Pricing and Airfare Shopping technology, Continental has cut the cost of selling tickets on its site and made it more attractive for users to shop there. The ITA platform provides rapid airfare search and pricing technology for airlines.
Continental begins its product search
In 2001, Continental began looking for ways to improve how customers shopped for tickets on Continental.com. An expiring contract with a vendor and increasing competition prompted Continental to make the change. Continental's agreement with its previous search function provider, Worldspan, was up for renewal at the end of 2002. And a variety of online services, such as Orbitz, Travelocity, Cheaptickets, and Expedia offered search-by-price options that Continental didn't.
"Customers were frustrated going to the site because they knew they could find [on other sites] information about fares that they couldn't see on the Continental Web site," said ITA Software founder and CEO Jeremy Wertheimer. After considering Worldspan's new E-Pricing service (competitors Continental didn't evaluate include Sabre Holding's Sabre Airline Solution and Amadeus), Continental ultimately chose ITA Software. Continental used the following points to evaluate the offerings:
- Quality of the search results
- Response time to search queries
- Cost per search
To analyze the first two, Continental put testers to work on entering search criteria into ITA's application. The testers then printed out the results of each search, noting the response time. Each search result was evaluated for accuracy. The clear leader was ITA Software, according to Ron Anderson-Lehman, managing director of technology at Continental.
ITA sells its product on a perpetual license ASP model, with a set base price for using the application and additional fees for each search performed or fees for each ticket sold via the service. Wertheimer said a typical user, a large customer doing about $1 billion in sales a year, would pay about $1 million annually to license the product. Continental declined to state its actual licensing cost.
Installing the product
With the product selected, Continental and ITA began implementing the technology. Although the complexity involved with searching airfares could appear daunting—there are more than 150 million published fares in the airline industry and an equal number of ways of getting from one destination to another, said Wertheimer—the process of integrating ITA's software into Continental.com was fairly simple.
Most companies using the ITA product, including America West Airlines and Cheaptickets.com, had developed Web sites prior to integration. Continental had a site also, so integration was largely a matter of plugging in the search facility—integrating an XML exchange, APIs, and appropriate business logic, said Wertheimer.
Continental used two software developers to focus on the XML exchange and business logic and another person to do Web page development. At the peak of the four-month project, Continental brought in 10 testers to bang on the application and adjust the parameters of the XML requests that provide instructions to ITA on how to respond and interpret pricing data, said Anderson-Lehman. Because accurate pricing and the reliability of ITA's data centers are essential for a positive customer experience on the Web site, Continental dedicated 75 percent of the project schedule to testing. "It took us a little more than we'd thought, but not terribly more," said Anderson-Lehman regarding Continental's installation.
ITA scaled the product to meet demand, ordering additional telecom lines, adding machines to its server farm, and installing appropriate routers. Another critical aspect for the project was developing a shared vocabulary and understanding of pricing rules between Continental's engineers and ITA's.
The first rollout, which provided low price searches for domestic airfares, occurred in early January 2003—on time and on budget, said Anderson-Lehman. The timing was intentional. Any online business with heavy traffic around the seasonal holidays knows the dangers of launching at the height of traffic, said Anderson-Lehman. "In the airline business, you don't launch things between Thanksgiving and Christmas. It's just a no-no because there are too many risks," he said. Continental launched international price searches April 15, choosing to delay this rollout due to the more complex logic and rules required to compute international taxes.
Now that the rollout is complete, Continental is waiting to see how many more shoppers are converted to buyers by the new shop-by-price facility. Although it's too early to say if an increase in ticket sales on Continental.com is due to an upswing in people's willingness to travel, the new search tool, or both, Continental has already benefited from the rollout, said Anderson-Lehman. The cost of each search is lower under ITA's contract than with the previous vendor. And every ticket sold on Continental.com reduces overhead costs by keeping ticketing transaction data in-house.
Analyst sees success
All the cost savings point to the success of the project, according to analyst Lorraine Sileo of PhoCusWright, a travel research firm focused on the intersection of travel and the Internet. By keeping ticketing transactions out of the big Global Distribution System, used by 30,000 travel agents to book airfares and hotels, Continental could be saving as much as $12 for every ticket sold on Continental.com.
"If an airline doesn't have to pay a transaction fee and there's no fulfillment in terms of filling a paper ticket, and if the reservation works properly and goes directly into the central reservation system automatically, that's the cheapest way to touch the airline," said Sileo. "So they'd prefer that you do that and go direct." For Continental, the benefit is simple: "The better low fare search we give to our customers, the more likely they are to select one of those options," said Anderson-Lehman.
The Continental Airlines Web project shows how contractual obligations can drive project timing and how, when a company selects an appropriate product and implements it methodically, it's possible to seamlessly roll out new features to Web users and reap the bottom-line benefits.