Welcome to the Travel Marketeer, a weekly series where we examine data, insights and ideas around travel marketing, creative testing, and ways travel brands can improve the online customer experience for their customers. In this week’s installment we explore travelers’ perceptions of booking prices and how price perception is influenced by things other than the actual price!
Do lower prices lead to more bookings?
If humans were completely rational, we would buy more airplane tickets, book more cruises, and extend our hotel stays when prices go down. Econ 101, right? Well, not exactly. When we examine price messaging across thousands of SEM ads from numerous advertisers, we find that this is not consistently true.
What seems to matter more is how travelers perceive prices. Our data shows that price perception is shaped by the way in which the price is presented.
The threat of overpaying is a greater motivator than the promise of discounts
Boost data shows that when it comes to price messaging in travel ads, consumers respond more readily to ad creative that promises to protect against the loss of overpaying. Ads that directly present a discount don’t seem to generate as strong a CTR.
Why might this be?
Behavioral economists studied loss aversion by bribing school children to do better in tests. In one variation, students were promised a conditional financial reward if they did well on a test. In another variation, the experimenters put cash on the students’ desks and threatened to take it away if they did not improve their test scores. Guess which scenario resulted in better test results? Yes, the threat of loss was a stronger motivator.
The same is true with travelers. They’d rather hang onto money they already have, protecting against overpayment than trying to score a discount.
Pay now, enjoy later: the challenge with travel bookings
We see a pattern emerge in travel ad creative where travelers are less likely to respond to ads that emphasize future benefits like comfortable seats or beautiful views. These are benefits travelers realize in the future. But it is right now when we ask travelers to input their credit card numbers. As they search for tickets and hotels, travel customers enjoy the comfort of a couch or office chair; extra legroom in the future doesn’t seem like something worth paying for immediately.
Behavioral economists refer to this phenomenon as “hyperbolic discounting.” We devalue future gains and costs while overvaluing present gains. For example, when picking a movie to watch right now, people tend to pick fun, entertaining romance, action or comedy films. When choosing a film to watch at some later point (such as when adding a movie to one’s Netflix queue), people are more likely to choose something high brow like a documentary or foreign film. This is because we devalue the mental expenditure of reading subtitles if it is something we plan to put off until later.
Similarly, we devalue beautiful views and luxury suites because we won’t get to enjoy them until later.
The Price Perception Paradox
These two cognitive biases of loss aversion and hyperbolic discounting together show us that travelers’ perception of price is influenced by factors besides the actual price. Brands can influence price perception simply by experimenting with different messaging. This makes SEM ad creative testing the perfect avenue to test hypotheses on how to influence price perception without actually changing the price. We can test multiple ad variations using the same price point and the landing page, easily isolating variables to identify how creative positions perceptions of pricing.
Testing the Price Perception Paradox in Practice
How can you experiment with price perception in your ads? Stay tuned, we will soon be posting a cheat sheet on what to test and why!
For full details and more insights on the travel ad creative data we studied to generate these insights, check back soon as we will be posting the full white paper to the Boost Knowledge Base.