Marketing
Introduction
Airbnb online platform has been a market leader in listing, finding and booking accommodation in the global market. The past success of the product can be replicated in the emerging market, especially while targeting the middle and upper class segments whose disposable income has constantly been increasing. An estimated high customer lifetime value indicates that the firm can experience sustained growth in these markets. The plan for Airbnb growth involves targeting the Platinum customers in the emerging markets by providing a variety of products on its online platform.
Company Overview
Airbnb is product owned by Airbnb, Inc., and whose operations are based on an online platform as a marketplace where people can list, find, and book accommodations across the world. The platform also allows individuals and businesses to place their order using a mobile phone. The firm allows users to showcase any extra space and rent it out to their audiences. The users of the platform can share their traveling experiences with others. In addition, the firm publishes Airbnbmag, a travel magazine that users can easily find online. The reputation of the platform has caused it to be a very successful peer to peer hospitality industry model and has managed to pull the attention of practitioners who are able to share information about the industry. The firm describes it as a trusted marketplace for the community where individuals can "list, discover, and book" exclusive accommodation everywhere in the world.
Opportunity for Profitability Growth
Given the current success of the product in the market, it has great potential to remain a market dominant in peer to peer accommodations around the global market. The sustenance of its place in the marketplace would require a high potential target segment, in form of emerging markets, which can ensure its higher profitability in the future.
One of the most notable trends in the tourism industry is the impact the affluent travelers from emerging markets, especially on travel expenditure. These markets are starting to outdo the developed markets in terms of creation of affluent households. This occurrence means that the Airbnb can be of great use to the users from the emerging markets if the firm also targets this segment. A look into how promising the industry in the emerging markets indicates that it is necessary for the company to position its product in a market where there is a bright future. With other players continue to emerge and grow in the industry, the Airbnb platform has to focus on winning and retention of customers over the long-run. Customer mix involves acquiring new customers, developing the customers, and making the customers stick with the business organization (Perry, n.d.). The firm has to target customers who have several choices, extreme product features, competing prices, and various platforms that they can use or follow. With increasing commoditization in the industry, the firm can use its reputation to expand its operations among the affluent customers in the emerging markets. The strategy will enable it to easily connect with the customers and present the product in a way that fits their requirements. The increasing information on the platform, as more individuals from the developed market share their experiences, will enable the firm to observe the responses of the new markets, and position the product in line with their needs.
The marketing management strategy that has been employed to target customers entails connecting travelers with local hosts, where they can book needed accommodation over a short period at a price. The business model largely varies from conventional models that involve huge investments in hotel accommodations. The firm does not offer any direct customer service to the guests or hosts, and the users of the platform are not exposed to the operations of the service. With over 200 million users of the service, the firm manages the customer base with a large pool of employees who carry out the service delivery. Most of the operations are conducted in the developed market, with little presence in the countries with low or emerging economies. However, the business model puts Airbnb in direct competition with the rental market and hotels, and the competitors view in light of unfair competitive threat due to varying regulatory constraints and tax. The geo-localized strategy used in promotion by the firm involves the creation of content targeting a particular location and employs social-media analytics in targeting the desired audience for the different products listed on its platform. The use of social media platforms is important to Airbnb when it comes to managing communication with customers.
Airbnb Valuation 2015 …. $ 25 B, Revenue for the year … $1.5B, Rough annual revenue $900M, 60M users at the time
Estimated church – 20 %
Estimated Interest rate --- 5 %
Estimated LTV = $ 60
Growth plan for Airbnb
Given that the potential for new growth will be seen mostly in the emerging markets, the plan for Airbnb will target this market base. The plan will involve targeting the emerging middle and upper classes segments of the market with new types of property that fits their need. The strategy for growth will involve targeting the Platinum Customers in the emerging markets who are likely to spend a significant amount of their incomes in the company's products. The Platinum customers are usually heavy users and have enough trust in the organization to try new products offered in the market (Perry, n.d.). The aim is to tap into this segment of the market as the major growth strategy in the emerging markets. Attaining this user base for the Airbnb's platform will ensure that the firm attains loyal customers, which will enhance the efficiency of the strategy.
In addition, the new offerings on the platform will provide a great selection of accommodation options to the guests and ensure there is increased transparency over the available choices of accommodations. The plan will be supported by the tools available to the platform's hosts, which allows for categorizing of listings with increased details. The sophisticated capabilities for searching for items on the platform will ensure that, even with the added offerings, travelers can easily find various hosts. The creation of the additional products will serve as solutions to the wants of the travelers in the emerging markets, and this will function as an important marketing tactic in fast-tracking the growth of the Airbnb in future. The new product bundle including vacation homes and unique space - which will enable hosts to display their offerings - will ensure that the needs of the target market are met. The introduction of new products must ensure that the product bundle suits the strengths and weaknesses of the business, and that acceptable return tradeoff or acceptable risks are provided. The new properties ensure there is diversification and are supported by an improved platform that facilitates the interaction between the hosts and the travelers. The pricing strategy of the product will involve a value-based approach, where users' perception of the products offered will dictate the price. Emphasis on high quality for offerings by the host will enable the firm to set a reasonable price for using the platform. The price will also be competitive enough to capture not only the upper segment but the middle-class customers in the emerging markets. To acquire more customers, the plan will involve redesigning of procedures and processes to improve customer services, and the users can refer others to the platform after considering their experience.
The emerging competition in the industry has informed the customer-centricity strategies of the firm. The continued improvement of the services offered on the Airbnb platform will ensure that the firm continues to outperform its peers with a larger market share and increased revenue growth. A major strength of the plan will be a centralized team that will look to improve the platform's capability. The team will aim at driving various customer-centric practices in the entire firm, and enhance financial outcomes through the creation of better customer experience. The emerging digital disrupters and technologies will inform the firm's relationship with the new customers, considering that Airbnb is disrupter itself. The digital platform offers an opportunity for the implementation of the strategy in a manner that the firm differentiates itself from other players in the industry. The redesigning of processes and procedures will offer high customer experience, which in turn will help in acquiring more users of the platform in the emerging markets. Satisfied customers are more likely to use their word-of-mouth to influence the behaviors and beliefs of others regarding specific products they have used in the past (Goddard, Raab, Ajami, & Gargeya, 2016). In addition, customers who are satisfied with the product or services, and with the relationship they have established with an organization, are willing to pay premium prices. The prices set for the products will ensure profitability is achieved according to the plan. The retained customers will be more profitable and therefore, sustaining the operations of Airbnb in the emerging markets.
The number of users of the Airbnb is expected to grow explosively in the emerging market and within the target segments of the market. If the plan uses $ 30000 each year for marketing, leading acquisition of 1000 users, the Customer Acquisition Cost will be $30.00. The cost is lower than the estimated Customer lifetime value of $60. The plan would be a success for the company.
Risks and Downfalls of the Plan
The major risks and downfalls of the plan arise from focusing on investing in the emerging markets. These risks mostly involve the social and political uncertainties of the countries, which may have a great impact on the economy and the markets. Adverse government decisions or actions may lead to regulatory interventions or market policy changes. The overall effects include high taxes and incapacity to control inflation, which can erode the disposable income of the target customers in the market. Social upheavals in the markets can destabilize the economy, and thus, affect the performance of the plan in acquiring customers in the area. The downfall of the plan may be experienced when exposure to such vitalities cannot be avoided.
Conclusion
The potential for continued growth for Airbnb can be achieved through a plan to target the middle and higher income segments of the emerging markets. The right market mix including competitive pricing will ensure that the firm retains an edge in these markets. However, political and social risks may be a major drawback in obtaining the real value of this market.
References
Francis Buttle, F. (2004). Customer Relationship Management-Concepts and Tools. Elsevier Butterworth-Heinemann. Vol.13.pg 297-324
Perry, H., (n.d.).Value Driven Marketing. Customer Centric Marketing. Presentation.pg 3-4
Goddard, M. G. J., Raab, G., Ajami, R. A., & Gargeya, V. B. (2016). Customer relationship management: A global perspective. CRC Press. Pp. 64-65
