Wednesday tutorial- 5pmKathleen Chell

AMB340- AIRBNB SERVICE AUDITMitchell Branson N9449361

Taylor Hayes N9396101

Ernest Lee N9028935

Raquel Hardie N9154574

Table of Contents1.0 Introduction...................................................................................................................................2

2.0 Service Marketing Mix Analysis...................................................................................................2

2.1 Service Product and Positioning...............................................................................................2

2.2 Pricing, Productive Capacity and Demand..............................................................................3

2.3 Physical and Electronic Distribution........................................................................................3

2.4 Integrated Service Marketing Communication.......................................................................4

2.5 Service Process...........................................................................................................................6

2.6 Managing People........................................................................................................................7

2.7 Servicescape and Physical Evidence.........................................................................................8

3.0 Recommendations........................................................................................................................10

3.1 Recommendation 1..................................................................................................................10

3.2 Recommendation 2..................................................................................................................10

3.3 Recommendation 3..................................................................................................................11

4.0 References....................................................................................................................................13

5.0 Appendix............................................................................................................................................15

1.0 IntroductionThe web based hotel application AirBnB has teamed up with home owners around the world to

offer a unique accommodation booking service for travellers whilst also providing a platform for

residents to monetise their extra space through listing and renting their property (AirBnB, n.d.).

Founded in 2008, Airbnb now has over 2 million listing worldwide accommodating to over 60

million guests, and is disrupting the hotel industry by opening up this new ‘share economy’

industry for accommodation. In accordance with Lovelocks service classification framework

Airbnb is a people processing service with Airbnb’s part being intangible. (Lovelock, Wirtz &

Chew, 2009)

2.0 Service Marketing Mix Analysis2.1 Service Product and Positioning

AirBnB’s service product is based around a ‘peer-to-peer’ business model by connecting hosts

and travelers and matching travelers to an accommodation facility (Jason & Birud, 2009). This

makes up their core service product. Appendix 1 shows how AirBnB incorporates both

facilitating and enhancing services to provide supplementary services. (Lovelock, 1996). To

enhance the consultation component of the framework, AirBnB should consider having a live

chat available when you consumers are on their website (similar to Optus) so that consumers can

talk to an operator in real time, especially nor non tech-savvy or new users.

AirBnB recently underwent rebranding to position themselves as a place where people can

‘belong anywhere and live like locals’ (See appendix 2). AirBnB also has an underlying ‘reliable

and safe’ positioning strategy that appeals to both target segments. (AirBnB, 2016)

From the traveller/guest market segment perspective, AirBnB targets the adventurous and

curious traveller. They positon themselves as a service which allows users to ‘experience the

city, live like the locals and belong anywhere’ with a variety of prices, particularly focusing on

low prices, and locations depending on the traveller whilst also pushing that ‘uniqueness’ factor

(Chesky, 2014).

From the host/suppliers perspective, they position themselves in a way that showcases the money

making aspect for the hosts and creating value for hosts out of their already owned inventory

(AirBnB, n.d.).

2.2 Pricing, Productive Capacity and Demand

The company’s value-based pricing strategy focuses upon covering the company’s

service/payment processing costs whilst offering guests’ quality, reasonably-priced

accommodation options and giving hosts’ ways to earn money.

AirBnB charge guests a 6%-12% non-refundable fee that decreases as the cost of their

reservation increases, and hosts a 3% fee (Nath, 2014). This business model encourages adoption

and trial of AirBnB’s services which successfully builds the company’s market share; Mahmoud

(2016) explains, “The average rate paid for an AirBnB unit was $148.42, which is 25% higher

than the average hotel rate of $119.11”.

AirBnB hosts use price-bundling methods when determining their prices. According to

Zeithaml’s (1988) Expression of Value, price bundling is best when undertaking a value-based

strategy that focuses on the mindset of value is what I get for what I give.

AirBnB uses a maximum capacity model, which continuously accommodates customers until the

number of host’s available declines. They rarely turn customers away due to the extensive

amount of accommodation options. Although, a problem AirBnB has with this model is that the

capacity may end up being constrained at any time. Potential AirBnB customer may experience

demand exceeding capacity. In this case, no customer is turned away but accommodation types

may have lower quality.

2.3 Physical and Electronic Distribution

AirBnB use three distribution channels to deliver their service; their website (AirBnB Australia,

2016), the iTunes store for their Apple mobile application (AirBnB on the App Store, 2016) and

the Google Play store for the Android mobile application (AirBnB Android App, 2016).

The service AirBnB offers is essentially only offered through self-service usage channels where

the traveler is in control of all aspects of their booking. This is a cost-effective method, although

Scherer et al., (2015) questions whether there are long-term impacts of self-service on customer

retention.

There is room for improvement in AirBnB’s distribution style. Nicolas Ferrary, France’s director

of AirBnB, notes that meetings about collaborating with the Global Distribution System (GDS)

have happened, but “no partnership is being considered at the moment” (Khlat, 2014). Investing

in GDS could improve AirBnB’s distribution strategy through interpersonal service sales with

travel agencies for example.

Information and promotion flow is distributed through social media channels using storytelling

as the main focus of their content marketing (Wegert, 2014). For example, Pineapple is a print

magazine “earmarked for AirBnB hosts” (Wegert, 2014), and shares “honest stories” that are

“told by the unexpected characters” of the AirBnB community (Pineapple, 2016).

In relation to their distribution, and in accordance with Lovelock’s Flower of Service (Lovelock

& Wirtz, 2007), AirBnB offer’s information-based supplementary services that are electronically

distributed such as information for guests and hosts, consultation with AirBnB’s 24/7 around the

world customer service team and order-taking with AirBnB’s automated self-service booking

facilities open 24/7 (Trust at AirBnB, 2016).

2.4 Integrated Service Marketing Communication

AirBnB has a strong integrated service marketing communication strategy that is able to

communicate their vision and message of ‘belonging anywhere’. (Wirtz, Chew & Lovelock,

2012).

Figure 1 – AirBnB’s Integrated Services Marketing Communication

AirBnB’s focuses on content marketing to create and communicate a memorable brand image by

sparking emotions, feeling and drivers to increase brand awareness and user engagement.

(Yannopoulou, Moufahim & Bian, 2013). They use their communications to inspire consumers

through the use of strong visuals and “unique” locations that create a “homely and authentic”

feel. All of their posts and marketing content is structured in this way to create this message and

use a tone that is secure, trustworthy and welcoming (Chesky, 2014). To overcome intangibility

issues, Airbnb use their communications to tell a story/narrative for the brand through sharing

user-generated stories and testimonials.

Having a younger more adventurous market as a primary target, they understand the most

effective ways to communicate with this audience by being very active of social media and other

forms of digital marketing (PPC, blog etc). They then pair this with their website, customer

service, sponsorships, TV advertisements, print direct marketing, their own magazine and Airbnb

TV. Being low contact and being more of a peer-to-peer facilitator, AirBnB thrives on word of

mouth and earned media. However, AirBnB could work to provide consistent cross-channeling

as some of their communications platforms vary slightly from their main message of “live there”

i.e. Twitter should focus more on those inspirations, memorable brand images of “living there”

like the other channels.

2.5 Service Process

The AirBnB service is simplistic yet effective. AirBnB’s service can be broken into a

consumer’s behaviour of need recognition, evaluation of alternatives purchase decision service

encounter and post-experience. (refer to Figure 2).

Figure 2 – AirBnB Services Blueprint

Firstly, consumers login via the AirBnB website and proceed to browse locations. This is

supported by invisible IT interactions like maintaining and updating the website and keeping

customer records to ensure consumers can login to their accounts. This interaction regards need

recognition and evaluation of alternatives.

Secondly, consumers have decided on a location and want to book, this is the customers

purchase decision. AirBnB provides an easy booking service and provides information regarding

the location such as if there is parking, how many guests are allowed and things to do nearby. An

invisible process of this interaction is notifying the hosts of a booking and therefore allowing the

host to set up the location for the consumers stay. Bookings can be instant or customers have to

request to book which the host must then confirm.

Consumers then confirm their location and now come to the payment interaction. AirBnB, holds

billing records as well as processes the payment through various payment companies such as

PayPal, MasterCard and Visa. However consumers are unable to do split payments, for example

if a group of friends are dividing the amount up. (AirBnB, 2016) After payment, AirBnB will

send a text message to confirm the booking. The final step is for the customer to actual

experience the accommodation service provided by the host. Post-experience evaluations can

also be included should the traveler or the host review the other party. However looking at

AirBnB’s review system process, there is room for improvement. Airbnb should implement a

strategy that allows users to give honest reviews without the fear of themselves being publicly

exposed and pressured, for example an anonymous option.

2.6 Managing People

AirBnB has built a culture of trust and freedom among its employees both its internal employees

and its external employees- the hosts. For their external employees, the relationship is built on

trust. Service quality, or “performance”, is measured through customer reviews and rating

systems etc. to monitor these ‘employees’ who provide the actual produce and deliver the

service/experience. (Airbnb, 2016).

For the internal employees, Airbnb believes in shaping the good judgment of its employees and

removing the need for traditional rules that may hamper the creativity and freedom of its

employees work. (Airbnb, 2016) Figure 1 below shows the core values Airbnb instills in its

employees.

Figure 3: AirBnB Core Values and Culture.

Hosts Champion the Mission

Every Frame Matters Be a ‘Cereal’ Entrepreneur

Simplify Embrace the Adventure

Belonging among staff Safety and reliability

(AirBnB, 2016)

Airbnb works in the cycle of success where they believe in hiring good-quality staff that will

provide high quality service (Airbnb, 2016). There are several employment benefits that creates a

conducive working environment for employees. These benefits include daily meals and snacks,

supported paid volunteer time, personal time off and more (Airbnb, 2016).

Airbnb focuses on employee welfare and providing support, by pampering them with enriching

meet ups which increases the overall happiness of its employees. According to Lovelock, Wirtz

& Chew, the happier the employees, the better the quality of their services. This in result, allows

customers on the receiving end to experience high quality services, which may lead to customer

loyalty.

Airbnb’s human resource management framework is reinforced by the service talent cycle by

hiring the right people, enabling its people and motivating and energizing its people (Lovelock,

Wirtz & Chew, 2009).

2.7 Servicescape and Physical Evidence

According to Jean Folger of Investopedia, “AirBnB is an online community marketplace that

connects people looking to rent their homes with people who are looking for accommodations”.

AirBnB as a company does not have a physical servicescape as compared to a normal rental

agency. However, AirBnB possesses an e-servicescape as their business model relies on an

online community and thus given this peer-to-peer market place, the accessibility and

trustworthiness of the website and systems if extremely important. (Lee & Jeong, 2012).

The e-servicescape of online business models is considered in three defining factors, ambient,

design and social factors of the virtual environment (Lee & Jeong, 2012). In context to AirBnB

e-servicescape, AirBnB personifies the process of renting an accommodation through people in

an online community. By using light and bright colours that embodies calm and relaxing moods

on AirBnB website, this allows users to be more relaxed and trusting towards AirBnB brand

image (Pelet & Papadopoulou, 2011). The design of AirBnB’s website is user-friendly and

serves its functional purposes. There is an array of information regarding the business model and

services. The design layout allows users to find what they need with ease. There is also inclusion

of customer/employee feedbacks and reviews that generate a trusting image for AirBnB. Social

factors contributes to the success of the website as it is more believable and relatable (Pelet &

Papadopoulou, 2011). Furthermore, AirBnB’s main connection point is its phone application,

which drives usability. The website and phone application also acts as a form of tangibility for

consumers. However given that this business is focused mainly on a website and there is no

personal interaction, AirBnB should opt for a personal chat option when entering the website to

allow for more personalized consultation for either new customers, non tech-savy customers or

questions with questions.

3.0 RecommendationsThree recommendations have been provided below, using the SMART goal-setting criteria, to

help improve Airbnb’s efficiency and effectiveness.

3.1 Recommendation 1 Combining Self-Service Usage Channels with Interpersonal Service Usage Channels

Airbnb currently uses self-service usage channels; the traveller books their own accommodation

online through Airbnb’s website. Although, room for improvement could include combining

self-service usage with interpersonal service usage; such as collaboration with the Global

Distribution System (GDS). GDS is essentially a bookings and reservations software primarily

used by travel agents; if Airbnb could produce sales through the use of global distribution

systems- such as Galileo- and through their website their would be another channel added to

their revenue stream and they would reach a larger audience.

Specific Airbnb needs to create a partnership with the Global Distribution System (GDS) used in travel agencies with focus concentrated towards employing either SABRE, Galileo and Amadeus booking systems (“Global Distribution Systems (GDS) – Web Reservation Systems”, 2016); combining self-service usage with interpersonal service usage through individual customer bookings and bookings through travel agencies. Creating this partnership will mean that travel agents will have the ability to recommend and book Airbnb accommodation with their clients.

Measurable These GDS booking systems have and keep a large database of previous and future bookings. These features can be utilized to preview the success of implementing GDS.

Attainable Cost-wise, GDS includes a one-off cost of approximately $500 plus monthly charges between $12-$75 per reservation (“Top 10 GDS Frequently Asked Questions”, 2016). These moderately priced costs are easily attainable for Airbnb.

Realistic Cruise lines, airlines and hotel chains use GDS as part of their daily functions; as a consequence, these systems have proven success. GDS “powers the content of ‘traditional’ travel agency platforms” (“About GDS Distribution”, 2016) whilst incorporating pricing systems, availability databases and reservation availability to travel agencies worldwide. Such success proves for GDS to be a realistic option for Airbnb to seriously consider.

Time-bound Implementing GDS starts with completing, signing and returning a signed contract with the GDS provider of Airbnb’s choice. A setup form is then sent out to be completed ASAP. Overall, the process takes between 4-6 weeks and “allow 2 weeks for visibility” (“Top 10 GDS Frequently Asked Questions”, 2016).

3.2 Recommendation 2 Offering more personalised consultation

Airbnb should offer a ‘popup’ conversation with an operator when users enter the website where the operator can send a friendly message through the live chat to ask if the customer needs any help. This recommendation helps to offer an extra supplementary service of consultation and bringing that personal interaction into a service that is otherwise all done online with no interaction. Customers will be able to have their questions answered quickly and new users/ no tech-savvy people will be able to feel as though there is someone there to help guide them. During periods when there is no operators, a message option can be left. (See appendix 4)

Specific To increase ‘personal’ interaction with website visitors. To enhance the consultation component of the framework, AirBnB should consider having a live chat available when consumers go onto the website (similar to Optus) so that consumers can talk to an operator in real time, especially for non tech-savvy users, new users or users with questions. This provides that ‘personal’ interaction and that ‘real time’ help that is sometimes lost with online businesses.

Measurable During the ‘trial period’ data can be collected on the amount of people that engage in the popup conversation option. If there is engagement with this option then this can become a permeant.

Attainable To be able to implement this, there will need to be online operators available to start a conversation with new people who enter the website. Additionally, a software system will need to be installed to allow operators to see when a new customer comes onto the website or setting up an option on the page to allow customers to click on the box and start a conversation. Given that Airbnb can supply both of these components, this recommendation is very attainable.

Realistic Many companies use this on their websites such as Platinum Electrical and Optus and are able to engage and help their customers. Therefore it is realistic for Airbnb to implement this ‘personal’ interaction tool for their service.

Time-bound This trail period will run for 3 months to gauge interaction rates.

3.3 Recommendation 3

Providing an anonymous option for reviews and testimonials

Given that Airbnb strives to make their company safe and reliable, reviews and testimonials

provided from both hosts and guest about each other are an essential part to the service. However

should a bad experience occur, hosts and travelers may be less inclined to both provide truthful

feedback in the fear of being exposed publicly with their name and details on a public platform

and therefore feel pressured to post something positive or stay quiet about their experience. This

can compromise the safety and reliability of Airbnb. Therefore Airbnb should alter its review

process and allow an ‘anonymous’ option when reviewing or given testimonials for hosts or

guests.

Specific Airbnb should change their review system process by setting up an anonymous option for reviews and testimonials to ensure that guests and hosts feel comfortable leaving reviews that are truthful about their experience with that guest or host to help ensure that AirBnB’s safety and reliability isn’t compromised due to lack of reviews. This will also help to increase physical evidence as an increase in truthful reviews will flow through and will help to provide more evidence for the accommodation/service quality and to help form consumer expectations.

Measurable After 6 months of operating the ‘anonymous’ option, Airbnb can review the amount of reviews to see whether there is an increase due to this option.

Attainable Having an anonymous option is attainable as it would only requires an extra option added to the website. In terms of more truthful and constant reviews flowing through, when people feel as though they cannot be targeted for honest opinions they are more likely to be honest with their review and feedback. (Schwarz, 2013)

Realistic As above, it is realistic to assume that more people will feel less pressured to a positive review as they will be anonymous and to just reflect truthfully on their experience. Obviously, in the backstage, Airbnb will know who the person is and their details should an issue arise, however this allows users to not be exposed or feel uncomfortable for the fear of repercussions from giving a truthful representation of their experience.

Time-bound This recommendation can be measured over 6 months and if the implementation increases the rate and honesty of the reviews then this is a process that can be permanently changed.

4.0 ReferencesAbout GDS Distribution. (2016). Amadeus.com. Retrieved 24 October 2016, from

http://www.amadeus.com/web/amadeus/en_1A-corporate/Hotels/Amadeus-LinkHotel/About-GDS-Distribution/1319593371760-Page-AMAD_DetailPpal?industrySegment=1259068355773

AirBnB Android App. (2016). Google Play. Retrieved 10 October 2016, from https://play.google.com/store/apps/details?id=com.AirBnB.android&hl=en

AirBnB Australia. (2016). Airbnb. Retrieved 10 October 2016, from https://www.airbnb.com.au/

AirBnB core values. Retrieved Oct 14, 2016 from https://www.airbnb.com.au/careers

AirBnB on the App Store. (2016). iTunes App Store. Retrieved 10 October 2016, from https://itunes.apple.com/au/app/airbnb/id401626263?mt=8

AirBnB. (n.d.). About Us. Retrieved October 15, 2016, from https://www.airbnb.com.au/about/about-us

Chesky, B. (2014). AirBnB Belong Anywhere [Blog]. Retrieved October 15, 2016 from http://blog.airbnb.com/belong-anywhere/

Curtis, Mike. (2014) Engineering Culture at AirBnB. Retrieved from http://nerds.airbnb.com/engineering-culture-airbnb/?_ga=1.86253208.1031428339.1476442783

Folger, J. (2016) The Pros and Cons of Using AirBnB. Retrieved from http://www.investopedia.com/articles/personal-finance/032814/pros-and-cons-using-airbnb.asp

Global Distribution Systems (GDS) - Web Reservation Systems. (2016). Webreservations.com.au. Retrieved 24 October 2016, from http://www.webreservations.com.au/index.php?pageid=722

Jason, A., & Birud, S. (2009). An E-commerce business model of peer-to-peer interactions among consumers. Journal of Cases on Information Technology (JCIT), 11(2), 12-21. doi:10.4018/jcit.2009040102

Khlat, M. (2014). AirBnB: to start collaborating with travel agencies?. TourMag.com. Retrieved from http://www.tourmag.com/Airbnb-to-start-collaborating-with-travel-agencies_a69985.html#

Lovelock, C. & Wirtz, J. (2007). Chapter 4: Developing Service Concepts: Core and Supplementary Elements. werner-kunz.com. Retrieved 28 August 2016, from http://ww- w.werner-kunz.com/mkt407/wp-content/uploads/2013/10/Chapter_03+4.pdf

Lovelock, C. H. (1996). Adding Value to Core Products With Supplementary Services in Services Marketing (2nd ed.). NJ: Prentice Hall, pp. 337-359.

Lovelock, C., Wirtz, J., & Chew, P. (2009). Essentials of services marketing. Singapore: Prentice Hall.

Mahapatra, H. (2013). Services Marketing - Demand & Capacity (1). Presentation, http://www.slideshare.net/hisema/services-marketing-demand-capacity.

Mahmoud, A. (2016). The Impact of AirBnB on Hotel and Hospitality Industry. Hospitality Net. Retrieved from http://www.hospitalitynet.org/news/4074708.html

Nath, T. (2014). How AirBnB Makes Money. Investopedia. Retrieved from http://www.investopedia.com/articles/investing/112414/how-airbnb- makes-money.asp

Pelet, J. É., & Papadopoulou, P. (2011). The Effect of E-Commerce Websites’ Colors on Customer Trust. International Journal of E-Business Research (IJEBR), 3(7), 1-18. doi:10.4018/jebr.2011070101

Pineapple. (2016). AirBnB. Retrieved 10 October 2016, from https://www.airbnb.com/pineapple

Scherer, A., Wanderlich, N., & Wangenheim, F. (2015). The value of self-service: Long-Term Effects of Technology-Based Self-Service Usage on Customer Retention. MIS Quarterly. Retrieved from https://www.researchgate.net/publication/267024368_The_value_of_self-service_Long-Term_Effects_of_Technology-Based_Self-Service_Usage_on_Customer_Retention

Schwarz, R. (2013). What Anonymous Feedback Will (and Won’t) Tell you. Harvard Business Review. Retrieved from https://hbr.org/2013/06/confidential-surveys-undermine

Seonjeong (Ally) Lee, & Jeong, M. (2012). Effects of e-servicescape on consumers' flow experiences. Journal of Hospitality and Tourism Technology, 3(1), 47-59. doi:http://dx.doi.org.ezp01.library.qut.edu.au/10.1108/17579881211206534

Top 10 GDS Frequently Asked Questions. (2016). Alternateimage.com. Retrieved 24 October 2016, from http://alternateimage.com/post.cfm/post/4540/top-10-gds-frequently-asked-questions

Trust at AirBnB. (2016). AirBnB. Retrieved 10 October 2016, from https://www.airbnb.com.au/trust

Wegert, T. (2014). How AirBnB Is Using Content Marketing to Stay on Top. Contently. Retrieved from https://contently.com/strategist/2014/12/05/how-airbnb-is-using-content-marketing-to-stay-on-top/)

Wirtz, J., Chew, P., & Lovelock, C. (2012). Essentials of Services Marketing (2nd Edition). Pearson Education, Australia.

Yannopoulou, N., Moufahim, M., & Bian, X. (2013). User-generated brands and social media: Couchsurfing and AirBnB. Contemporary Management Research, 9(1), 85.

Zeithaml, V. (1988). Consumer Perceptions of Price, Quality, and Value: A Means-End Model and Synthesis of Evidence. Journal Of Marketing, 52, 2-22. Retrieved from http://areas.kenan-flagler.unc.edu/Marketing/FacultyStaff/zeithaml/Selected%20Publications/Consumer%20Perceptions%20of%20Price,%20Quality,%20and%20Value-%20A%20Means-End%20Model%20and%20Snthesis%20of%20Evidence.pdf

5.0 AppendixAppendix 1 – Facilitating and Enhancing Services of AirBnB

Facilitating Information Information on locations, room prices, how to make a booking and

information on safety and security Low contact therefore information is obtained through the website. Through the host’s profile, AirBnB customers obtain their

information through the reviews, recommendations and online reputation of that host.

Order-taking AirBnB profile is required for all necessary information for order-taking

Online booking method Travellers can either request to book or instantly book then the host

will confirm/accept. Billing Confirm booking through text message or online.

Itinerary and statement is sent to travellerPayment Payment is done over the internet

Secure internet payment

Enhancing Consultation 24/7 customer support, phone numbers you can call to get assistance

Even though AirBnB is an online service and promotes self-service, they should still consider the personal touch of having some live human consultation.

Hospitality Given that this is an online business, the hospitality elements comes from the traveller’s online use. This includes warming welcome messages when entering the website, the actual website design and ease of use to navigate through the pages as well as the overall booking experience.

Safekeeping AirBnB works on trust between the host and guest Verifies personal profiles Strong insurance policies Ability to flag profiles which are risky (for both hosts and travellers) Secure collection and transfers of payments

Exceptions Airbnb does allow exceptions for unforeseen circumstances. Airbnb has cancellation policies that are lenient, if the unexpected is

to happen, for both the hosts and travelers.

Appendix 2 – AirBnB pushing message of ‘living there’ and live like the locals to create a feeling of belongingness.

Appendix 3 – AirBnB Culture for their employees.

Appendix 4- Example of after-hours message/ conversation option