James Lan Tang

“The second big difference about working at a local Chinese company is that the decision making process is fast. There are no long discussions or presentations and reports you have to go through to reach a decision.”

by MINA CHOI

When James Lan Tang joined the Ctrip team in 2005， he already had a wealth of experience working in marketing， having held related positions at Yue-Sai Kan Cosmetics and Perfetti Van Melle， maker of the popular Mentos candy in China. Since assuming his current role， Tang has led the creation of numerous successful marketing strategies， including targeted e-mail direct marketing and an iPhone application. With over 50% of the online travel market share， Ctrip remains the leader in the sector， with continuous plans to expand its reach， purchasing travel companies in Hong Kong and Taiwan， negotiating with the Railway Ministry to sell train tickets， and pushing users to make more use of its online booking system. Ctrip now has a customer database of over 10 million and reported RMB 1 billion in profits last year. Known for its attention to service in all of its products， the company sees Hong Kong as the next market for it to tap into.

A keen analyst of consumer trends since the start of his career， Tang sat down with CIB to talk about how Chinese travelers’ habits differ from Westerners， and how Ctrip tailors its offerings to best service its clientele.

Where did you work before joining Ctrip?

EI graduated from Shanghai Jiaotong University in 1990. Immediately after graduation I started a job as a trainee in the sales department of the Okura Garden Hotel on Maoming Road [in Shanghai]. It was a quite an eye-opener. I was working for a five-star hotel in Shanghai at a time when there were almost no other five-star hotels in the city. My position was considered very high level， with extremely high pay — I was making RMB 500 (USD 77.32) a month whereas all my classmates who went into the import-export business were making RMB 70-100 a month. Not only did I get to eat great food every day， I also got to visit all the foreign-owned businesses. I had never heard of many of the world’s top companies I was visiting; it was quite an education.

I then had the good fortune to go to Virginia [in the US] for four years and earned my masters degree there. I worked for AMF， which was a bowling equipment manufacturing company. They had a subdivision which sold cooking equipment and industrial sewing machines and I worked with them from 1993-95. They sent me back to China to sell their industrial sewing machines. Of course all the factories in China were investing heavily in these sewing machines so it was a great time to be selling them.

I then joined Yue-Sai Kan Cosmetics (YSK) in 1995， and worked with them as an analyst and marketing researcher. I helped the company， which then was part of Coty， analyze where to spend their marketing dollars， and in particular helped them develop the Adidas male fragrance brand.

What did you learn from analyzing the cosmetics market at that time?

EWe determined that radio advertising was not effective because back then most people didn’t drive private cars like they do now. Also， we realized that certain malls opened and closed very quickly， which meant that that those counters were not worth spending the marketing budget on.

We were working with some very professional people who had just left Proctor Gamble， and were working to a very high standard. Following a management change at YSK I moved in 2000 to work for an Italian candy producer， Perfetti Van Melle (PVM)， the makers of Mentos and Alpenliebe.

You’ve done sales marketing across a diverse range of businesses， are there many differences?

EMarketing is the same in all businesses: you have to sell the brand. You have to know the product you’re selling and then see how the product is purchased. When I was working for PVM， I visited all the basement food markets where the luxury candy products were sold. I observed how the product looked on the display and who the consumers were who were buying the items. When Ctrip asked me to join them， they were specifically looking for somebody with FMCG (fast moving consumer good) expertise for their marketing strategy. For Ctrip， the questions are the same: What is our product? How can we sell it best? Ctrip has different products: hotel booking， airline ticket purchasing， package tours， etc. We then look at our channels of promotion and ask， where can we best sell it? But at the end of the day， the product is the most important thing. It has to be right， it has to be attractive， and it has to be useful. Marketing just adds value.

For Ctrip， the questions are the same. First of all there’s a common theme to all our products — air tickets or hotels —and that is service. When people make hotel reservations through Ctrip， they are using us because we are reliable and convenient， not because our prices are the most advantageous. Understanding this theme， we can promote the best thing Ctrip has to offer – our quality of service. This way， we can focus our marketing budget on the key points that differentiate Ctrip from other travel services.

When did you start at Ctrip and what have you discovered about the company during your tenure?

EI joined Ctrip in 2005. One of the most striking differences is that Ctrip is a local Chinese company. At the other companies I worked for， all my emails were written in English， even to other Chinese colleagues. That was the policy so that all the managers and international managers could be kept inside the communication loop. As soon as I arrived [at Ctrip]， all the emails were typed in Chinese. It took some time to get used to it. Chinese takes longer to type， but now I find it almost impossible to type in English again.

The second big difference about working at a local Chinese company is that the decision making process is fast. There are no long discussions or presentations and reports you have to go through to reach a decision. If you can make a good suggestion and somebody’s there to back you up， the new strategic decision is executed in a matter of weeks， not years as it might be in the foreign enterprises where I’ve worked.

Can you give us some examples of this at Ctrip?

EWhen I suggested that Ctrip launch an EDM (Email Direct Mailing) to acquire new customers， we launched the project right away. I got the OK from James Leung， the founder of Ctrip， and we were able to get a project team together with key strategic people in each department. There were no Powerpoint slides; just a good idea and immediate execution.

The aim at the time was to acquire new customers and get our returning customers， now numbering 12.7million， to use our service again. EDM was the most obvious method because direct marketing was too expensive and required hiring a lot of people. So we asked ourselves: how can we use our database of email addresses effectively? We started the EDM in 2007. We divided our five million customer email addresses into defined categories: high-end users， low-end users， business users， leisure users， etc. With a team of fifteen people from different departments， we got this procedure set up in a week and started sending out emails and analyzing the results. Since then， this marketing approach has become a standard procedure at Ctrip. Every customer gets a sticker， and these stickers tell us your customer profile， and we are able to send a more targeted promotion to you.

Initially， we tested our marketing technique on a set sample of 2，000 customers with the exact same profile. We sent targeted emails to 1，000 people and none to the other 1，000， and we compared their follow-up purchases. The people who received direct emails had a 15% repeat purchase rate， whereas the ones who didn’t get an email had a 10% repeat purchase rate. These were great results. We realized that good use of EDM means that we don’t need to pay a lot of money to generate results.

But you said that you have 12.7million returning customers and only 5 million email addresses.Why this discrepancy?

EMany customers prefer to use their telephone number. However， we have been actively trying to get more of them to give us their email addresses by offering Ctrip points. We tell them about special packages or promotions that are only available via email. We offer them free coupons.

Ctrip is facing serious competition from companies like eLong， Qunar and Kuxun.How do you plan to stay on top?

EWe do have a lot of competitors but the market is large. Ctrip has over 50% of the online travel market， but the entire online travel service only accounts for only 2-3% of the entire travel service market in China. Of course we’re concerned that eLong and others might take our market share. But our focus is on enlarging the market. The whole cake is [currently] only worth 2-3% of the total travel market in China. If we can grow that cake to 5-6% of the entire travel market， even if our market share declines， we will be growing very fast and we will still make more money. We’re still 3-4 times bigger than eLong.

Your CEO Fan Min said during a recent press conference that the most profitable business for Ctrip is hotel bookings.

EThat’s right. Air tickets are a very low-margin business. When we first started， our air ticket margins were higher， even up to 8-9%， but the margins were squeezed over time. But still， if you sell 10% of all airline tickets in China， that’s a great business.

How many employees does Ctrip have?

EWe have more than 12，000 employees. When I joined in 2005， we had 3，000 employees. If you look at my badge， my number is 4336; everybody keeps their number according to when they started with the company. I would guess that the new employees are receiving badge numbers in the 18，000s.

Our number of employees will grow. Our focus is service， and that means we’ll be hiring more people for our service center.

Is that to service the phone orders?

EOur online-booking rate is still only 40% while our telephone booking rate is 60%. However， many people who book on the telephone have already checked out prices online， but prefer to finish the transaction on the phone.

That’s quite a difference from the US where almost all booking is now done online.

EIn the US， online booking is 98% of the market. With companies like Expedia and Travelocity， there is no offline booking. At Ctrip， offline booking is 60%. However， our customers are moving over to online booking. In 2005， 30% of our customers booked online. This number has grown by 2-3% every year. When people book online， that is better for us. However， we realize that a majority of our customers still use our call center. So we must focus on the call center to make sure that the level of service is excellent. If we had completely copied the Expedia model， then Ctrip wouldn’t be where it is now.

What’s interesting is that of the 60% of the people who use our call center， 20% of them have already checked out the travel service online. For these people， finalizing the purchase on the phone feels better and more secure.

Are prices for telephone booking higher at Ctrip?

ENo. It’s the same price for both. I’ve been trying to make telephone service more expensive， or lower the price for online booking. But we cannot do that because our competitors are not doing that.

With smart phones becoming more and more popular， how are you utilizing this new channel for marketing?

EWe use smart phones as a means for people to interact regularly with Ctrip. Our project team for mobile communications was set up in 2009， with a focus on iPhones. We now have a Ctrip App， where if you shake the iPhone， it will find a hotel within 2 km of your location. The app is also an easy way to check the status of any flight. We want our applications to be fun.

How did Ctrip deal with the global financial crisis?

EWe really panicked during that time. We were very worried about how much our business was going to drop， but it was only 15-20%.After six months， our business bounced back by 40%. Now， we’re seeing an annual growth rate of 20-30%.

What were your revenues last year?

ENet revenue was RMB 2.9 billion. We have an operating profit of 1 billion. Our goal is to maintain a 2-digit growth rate and become a Fortune 500 company.

Can you talk about your English language website?

EWe launched the English website in late 2006 and saw results immediately. There are many English speakers in Shanghai and Beijing.Half the staff who work on the English website are foreigners. We also have a blog in English. The English-speakers have a very different mindset and we have adapted our image and content to cater to this.

What about the announcement that Ctrip might start selling railway tickets?

EWe’re still preparing for this and are in discussions with the Railway Ministry. Railway tickets will be a very good business. Ten years ago， the train ticket prices were such that we couldn’t make money selling tickets. It’s different now with the high-speed rail.

We’re always looking at new products we can sell such as restaurant booking， or a dining secretary service. All services that our customers might need before and during travel: eating， lodging， transportation， entertainment， and shopping. We want to offer more products. We recently launched a ‘Mystery Hotel’ feature where our customers would be informed of the specifications of the hotel， but not its name. This has been very successful.

Do you plan to expand internationally?

EWe have acquired companies in Taiwan， Easy Travel， and Hong Kong， Wing On Travels， to help our expansion. We want to attract more people outside China to use us for their travels in China. And we need to do more brand promotion in the US， UK and Europe. But this is difficult， so we are taking it step by step. Hong Kong is the next frontier for us. The Hong Kong market is huge.

What are some of the differences between the Hong Kong and the Chinese mainland market?

EFirstly， Ctrip doesn’t have as much brand recognition in Hong Kong. The other main difference is that Hong Kong consumers don’t understand our hotel booking model. At Ctrip， you book through us， but you don’t pay us; you pay the hotel when you check out. It works like a confirmed reservation. We do have some hotel bookings that are prepaid， but the majority of our hotel booking is that we make the reservations， the customers pay when they check-out and we get a commission from the hotels. For the Hong Kong customers， this is a new concept and a very good model， but they are unfamiliar with it.

Running a business based on confirmed reservations seems like a very risky project. Do you have many no-shows?

EChinese customers like our hotel booking model because it gives them a choice. And no， we do not get many no-shows. For no-shows， we deduct points or the customers get no points. For the same-night bookings， if they don’t show， we deduct money from the credit card. But our no-show rate is less than 10%.

What do you see as the future for online travel?

EIt’s going to continue to grow at a very fast rate. Higher incomes will mean more money to spend on travel. Shanghai is more advanced and sets the trend， but we’re going to see more and more people from second-tier cities traveling within and outside China. Ctrip will continue to offer the best deals， the best service and more products to meet this growth.