The Gnome Helps Fuel a Turnaround at Travelocity
Travelocity was launched in 1996 by Sabre Interactive, a division of AMR Corporation, which at the time owned the Sabre Reservations System and American Airlines. Today, Travelocity is the most popular travel service on the Web and the sixth-largest travel agency in the United States, with bookings of more than $7 billion. Teams of employees working in seven U.S. offices work together to bring consumers the best in airline reservations, hotel rooms, cruises, vacation packages, car rentals, and last-minute deals. Travelocity operates or powers websites in five languages across four continents. It was named the "World's Leading Travel Internet Site" for the ninth consecutive year at the World Travel Awards in 2006, and it has led all travel sites- including airline and hotel sites-in customer respect, based on a study released by the Customer Respect Group.

It holds the highest possible ranking from Consumer Reports. When Travelocity began in 1996, it was one of the first Internet travel websites. By 2000 and 2001, however, it had stopped growing and was fading as the pioneer brand. Travelocity executives recognized that they needed to refocus the company on more profitable products. The reality is that selling airline tickets does not make money, but selling hotels and travel packages does. Consequently, Travelocity implemented a strategy of cross-selling and up-selling to help customers get a more complete travel experience. It focused on serving as a more complete advocate for travelers by providing a more affordable and more rewarding travel experience.

The result: Travelocity's package segment grew by more than 100 percent a year between 2003 and 2005. Despite the improving outlook, executives felt that the company needed to stand behind travelers in a way that no other online travel company did. They decided to spend a year developing a Customer Bill of Rights to guarantee that everything that customers book will be right, and if it isn't, then the company will work with its partners to fix the problem.

For example, if a customer books a hotel with a swimming pool but finds that the swimming pool is closed on arrival, Travelocity will, at its own expense, find a comparable or better-quality hotel and move the customer there. Travelocity maintains a 24-hour hotline open seven days a week to ensure that customers get what they want. The Travelocity Guarantee allays the concerns of Travelocity customers who may be worried about booking online. The company stood by the guarantee even when it made a mistake and sold $0 tickets to Fiji for a short time. The company paired the new guarantee with the "Roaming Gnome Enforcer of the Travelocity Guarantee" in television and other advertising. The Roaming Gnome advertising campaign represented an effort to humanize the Travelocity brand.

The character embodied the joy of travel and symbolized getting out of the garden and seeing the world with new eyes. The advertising campaign created a tremendous buzz about Travelocity and boosted revenues by 37 percent. The gnome also won the American Marketing Association Gold EFIE award for "Best Retail Advertising Campaign." Travelocity partners with American Express Travel, AOL Travel, Yahoo! Travel, and many other firms.

In this way, Travelocity has a much larger market share, and because it represents so many firms, it has more power both with consumers and with suppliers. The network partnering is especially important when it comes to marketing to customers. Travelocity can piggyback off its partners to use their triedand-tested marketing techniques with its own customers. In this way, Travelocity and its partners gain from the synergies of their partnerships. Travelocity is also experimenting with creative ways of marketing to its customers. It was a sponsor of the CBS series Amazing Race, and the competitors even had to find a gnome and carry him across the finish line. Although it was a huge investment for Travelocity, it paid off with increases in sales in only eight weeks.

Executives believe that by going beyond 30-second commercials and banner ads, Travelocity is part of the complete entertainment mix of customers. Travelocity also uses search-engine marketing, spending much of its online advertising budget on paid keyword search ads. Although click-through advertising is vital, Travelocity has estimated that as many as a quarter of the people who came to Travelocity through search marketing would have come to the website anyway because Travelocity is such a well-known brand. Travelocity also regularly tests its website for ease of use. It has seven testers in a room to find out where people are confused and where things can be improved. It has used this method to radically change its website.

One of the things it realized was that people forget passwords. To counteract this problem Travelocity changed the system so that customers reentered their credit-card information, address, and e-mail address and used these things to pull up their profile rather than relying on passwords. This change resulted in an overnight increase in revenues of 10 percent. Executives realized that if you make using the website hard, then people will go elsewhere.

Questions for Discussion

1. What is the role of consumer-generated information in helping Travelocity succeed?

2. Describe the marketing decisions that have helped Travelocity be so successful.

3. How did Travelocity use the Roaming Gnome as a symbol to communicate with its target market?