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Digital disruption has taken hold of consumer behaviour (or vice-versa)

Digital disruption has the potential to overturn incumbents and reshape markets. Retail, insurance, banking, travel – no industry is immune. Those that don’t grasp this risk it all.

Agile start-ups, challenger brands and large brands that understand the need to transform are using new technologies to ensure they have the advantage. Consumers of the services and products of these industries are evolving to expect a digital entry point to their purchase.

Millennials – the digital natives – have rocked everything we know to be true and companies competing for their mindshare need to remove any assumptions they had about the way they shop, interact and do business. Millennials also have influence over older generations and are redrawing the norms from food to fashion to travel.

Digital disruption is digital normality for millennials

Taking the travel industry as one example, a recent survey of 2000 Brits revealed that one in three of us never use travel agents to book our travel and holidays. The digital age has taken a firm grip on this industry and it is not letting go. Travel businesses need to get on board the digital train, or risk losing out.

The survey also revealed that contrary to Ryanair’s CEO, Michael O’Leary’s view that there is no need for price comparison websites to exist, 50 per cent of Brits in fact prefer to use these websites when it comes to booking their holidays. This is a universal truth, no matter what age, gender or area you are from in the UK. A further sign that digital is disrupting travel.


These figures highlight the change in holiday and travel shopping habits, and provide strong evidence of consumers’ increasing price sensitivity.

Millennials are breaking the pricing rules

Interestingly though, millennials are far less price conscious and are four times more willing to spend more on flights and travel during the summer period, versus a mere 5 per cent of over 55s who are prepared to spend more. This is evidence that traditional fixed pricing models are outdated and that dynamic pricing is accepted by younger generations in the age of Amazon and Uber. This is a game changer for many industries.

The travel industry has been at the forefront of dynamic pricing, with price flexibility based on certain variables, including demand, the time of year and public / school holidays. This model is accepted by younger consumers, and is shaping how we shop around for the best deal.

The ability of travel companies to react, in real-time, to the market and consumer desire is a crucial issue for the travel industry in the digital world today; dynamic pricing helps increase revenue and profits. By also using predictive analytics, travel businesses can ensure they have enough availability to cover demand during peak periods.

Digital disruption and pricing in other markets

Pricing is a core strategic area for retailers too and the digital era is enabling them to replace gut-feel pricing decisions with a machine–learning led strategy to find the right balance between the number of sales and the price to deliver the greatest return.

According to a 2010 study by Rafi Mohammed, a 1 per cent change in price on average leads to an 11 per cent change in profit margin.

Millennials happy to pay more for ice cream

In the same research conducted into travel, it was found that millennials are more accepting of changes in prices in retail during times of peak demand. During a heat wave, the demand for ice cream, soft drinks, paddling pools and sun cream rises.

The research found more than 80 per cent of millennials – versus 40 per cent of over 55s – are happy to pay nearly 5 per cent more for ice cream and cold drinks during a heat wave.

Bringing pricing back to the future

Pricing that is influenced by demand and what customers are willing to pay is as old as trading itself. 100 years ago, pricing was based on the individual bartering for an individual item. It was based on what could be achieved at that time and how much a customer was willing to pay – consumers had the control.

Then, Frank W. Woolworth, founder of F.W. Woolworth Company and ‘Five-and-Dimes’, started buying directly from manufacturers and fixing prices. This practice has been the status quo for a century, but new technology advances are disrupting this and bringing us back to the future of shopping.

Data analytics helps success

Retailers – and other industries – can now access accurate information that allows them to offer everyday low prices to their customers. Retailers mark these products down to minimise ‘margin erosion’, but machine-learning algorithms can provide information around optimising the mark down prices to maximise margins.

But, of course, nothing stays the same forever, and changes in customer demand are no exception. Changes in pricing have a direct consequence on customer behaviour. Continuous, rigorous tests and measures of the response to price changes, by analysing interactions between that price change and subsequent changes in demand, are a must.

However, the problem lies in the fact that most companies today lack the software required to approach pricing strategically and automatically, instead relying on a number of methods that have limited value. Automated technology systems can deliver strategic advantage to e-commerce retailers by removing the unscientific approach of gut-feel.


What does digital disruption mean for the future of travel, retail and other industries? Behaviours are changing and pricing models are evolving as technology advances.

Retail, holiday and travel companies need to fully understand the shifting dynamics and utilise the technology available in the digital age, or risk being left behind.

Rakesh Harji, UK MD, Blue Yonder (opens in new tab)