01128834

Component

This paper develops a model of airline customers' online search and purchase behaviors using page-by-page clickstream data collected from a web-based Interactive Pricing Response (IPR) system that was implemented by Freedom Air, a former low cost subsidiary of Air New Zealand. The IPR system represents a new business model designed to stimulate demand by dynamically offering discounts to highly time-flexible travelers in a way that does not trigger price responses from competitors. A new model based on Markov-methods that incorporates reference price effects is proposed to capture the dynamics of search and purchase behaviors of these highly time-flexible leisure travelers. Empirical results show that higher search intensities and purchase conversions occur as the relative discounts increase. In addition, while product attributes displayed on the previous screen are highly correlated with product attributes displayed on the current screen, fundamental customer choices related to whether to continue shopping, to purchase, or not to purchase are driven predominately by the relative discount level displayed on the current screen. Simulations are used to illustrate how these highly-predictable search and purchase behaviors can be integrated back into the IPR system, effectively enabling firms to control conversion rates and the relative discount rate ranges offered in the market, thereby maximizing incremental revenue generated by the IPR system.

01120148

09-1568

English

34p

2009

Transportation Research Board 88th Annual Meeting

DVD

Figures (9) ; References (21) ; Tables (5)

Airlines; Customer satisfaction; Electronic commerce; Empirical methods; Leisure time; Purchasing; Travel behavior; Travel surveys

Airline passengers; Online booking

Aviation; Planning and Forecasting; I72: Traffic and Transport Planning

Transportation Research Board Annual Meeting 2009 Paper #09-1568

TRIS, TRB

Jan 30 2009 5:48PM