Learning from your customers - the Airbnb way
It’s hard to think of Airbnb as anything other than an amazing success story but that was not always the case.
The company struggled to get that hockey stick growth for a few years and in a now famous incident had to resort to selling custom designed cereal to make ends meet.
It turns out the idea of selling unused living space to strangers on the internet was not always going to work and took considerable effort and probably a lot of luck to turn into a viable, let alone successful, business. So if it isn't just the idea (as it arguably was with Facebook) or the tech (for example Google) what drove Airbnb? I would argue it is how they went about understanding their customers and learning from them at every step of the way.
Fortunately for us, AirBnB has also been quite open about their growth practices. We have collected the best of these under one roof so you don’t have to look for them.
1. Don’t underestimate word of mouth growth
Travel is often a social experience. We don’t necessarily tell our friends about the last mattress we bought but would almost always mention the last trip. Moreover, consumers have very little to rely on when booking a holiday. They probably have not bought that same holiday before, online reviews can be deceptive and even a well-known brand does not always guarantee a great experience.
So it’s no surprise really that consumers trust people they know more than any other channel of information about the product.
Assuming you already have a few eager customers, there is really no excuse not to use them to get new ones. Airbnb increased their bookings by 25% in some markets by doing referrals the right way. Here is what they did:
- Use the right metrics to measure the success of referrals.
- Personalise the experience.
- Make referrals easier to discover for customers.
- Start somewhere and keep tweaking the referral program for better results.
The optimised referral flow performed 300% better than the initial implementation. However, Airbnb would not have been able to learn this if they were not tracking performance at every iteration. While the scale of Airbnb allows them to track the important conversion rates directly in a relatively short time frame, for most companies it is best to focus on another metric Airbnb also tracks religiously: Net Promoter Score (NPS). It is an aggregate of guests’ answers to a simple question “Would you recommend Airbnb to a friend?” (also called “likelihood to recommend” or LTR).
NPS was designed to (among other things) provide an early indication of word of mouth growth. It does this job well. But the metric itself is just a start. It helps to benchmark performance over time and across segments and cohorts but it does not by itself provide much insight. the most important part of the NPS survey are the open-ended questions that follow the 0 — 10 rating. If you want to understand the drivers behind word of mouth growth, you need to look at the comments and categorise them by topic and sentiment.
2. Build trust into the heart of the platform
It is a common knowledge that marketplaces live and die with trust. But for Airbnb trust presented a whole other world of problems. On eBay trust is built through stars and reviews but the most important driver is the platform itself interfering when things go wrong. This is usually not possible in travel. Airbnb may compensate me for the bad experience but my holiday would still be ruined.
Even seeing the host has registered with Facebook and has 50 friends there, provides an additional level of trust. But the main source of additional trust on the Airbnb network are the reviews from other guests who look like real people. Online reviews are tricky. The incentive to game them is just too high so platforms like Yelp and TripAdvisor frequently become victims of fake reviews. Airbnb has also suffered from this problem but initially took several measures to prevent this from happening. Fake reviews provide a short term boost at the expense of long term viability of the platform. Once it becomes common knowledge that fake reviews are prevalent, the whole platform can collapse.
At Airbnb trust is enhanced by:
- Reviews are moderated by Airbnb
- Reviews only come from actual guests and hosts (as opposed to TripAdvisor)
- Reviews only appear once both sides had their say
- Reviews are featured prominently and feature real people
- There is a private way of giving feedback to the hosts
Reviews serve an additional purpose by supplementing the NPS process in pursuit of great customer experience. Typically you can ask for a review after every transaction and it’s not bad practice to insist on one. As a consequence reviews often end up becoming a large and ever growing data set. For that reason companies often leave them untouched, which means they miss out on one of the most valuable sources of information to drive hockey stick growth — what customers actually think about your company and why. Airbnb analyses reviews and other feedback channels together with the NPS, under one roof.
The best information we can gather about the offline experience is from the review that guests complete on Airbnb.com after their trip ends.
Lisa Qian, Data Scientist at Airbnb
As in any marketplace, Airbnb also needs the reviews to provide useful feedback to guests and hosts and maintaining overall quality level on the platform. Overall trends can then be used to promote best practices on both ends of the transaction.
3. Learn what experiences drive loyalty
There is nothing new in the idea that repeat business from existing customers can be a huge driver of growth for most companies. Yet it still does not get the attention it deserves. Companies often only focus on new business because it is more exciting but if the customers are only coming for a one-off experience, you will exhaust the easy marketing channels fast and soon the cost of acquisition for new customers will cease to be cost effective.For Airbnb loyalty is even more crucial. Guests can become hosts and vice versa.
There are many SaaS solutions that help measure and predict loyalty by tracking customer’s behaviour on the website but in travel most of the experience happens far away from the computer.
For most guests, however, the defining moments of the “Airbnb experience” happen in the real world — when they are travelling to their listing, being greeted by their host, settling into the listing, and exploring the destination. These are the moments that make or break the Airbnb experience, no matter how great we make our website.
Lisa Qian, Data Scientist at Airbnb
Here again, Airbnb uses NPS and other review-related metrics to spot the problems and opportunities earlier. But the indicator, even an early one, is not worth much by itself. What we are looking for are the real drivers of loyalty. At Chattermill, we help the companies understand what drives the NPS.
I usually suggest a few simple procedures:
- Identify trends from the free form NPS comments and reviews
- Look at how trends compare between customer segments and cohorts
- Read individual comments in problem areas
- Figure out what separates passives and promoters
- Focus on improving customer experience, not growing the NPS
4. Prioritise with the customer in mind
Customer experience has become more important as a performance driver than even product and price. But who is responsible for it? Having a dedicated Customer Experience Officer is probably a good idea but is hardly enough. The whole company needs to be customer focused. A lot of companies talk customer centricity but few live it.
Airbnb takes customer experience very seriously. So they made it into a cornerstone of the company culture. This is a complicated process that requires a lot of courage and persistence from the management but here are a few tips on getting you started:
- Promote customer experience insights within the organisation.
- Give employees easy ongoing access to original customer verbatims for their area.
- Know your key strengths and weaknesses, both overall and in each business area.
- Make sure each business area has a measure of NPS impact. This is possible through tagging the comments by department. Some will naturally get more comments than others, so don’t base decisions just on volume. A solution like Chattermill can help you understand how different areas of the business affect the overall customer experience.
- Make customer experience determine each team’s rewards and recognition.
- Use customer experience impact as a tool to prioritise projects.