Digital intermediaries and Internet search technologies have commoditized many products, resulting in intense price competition and channel conflict. Firms use decommoditization strategies to regain control over distribution channels, as well as to implement resonance marketing and hyperdifferentiation, which allows them to improve margins through differentiation. We test two hypotheses: the decommoditization hypothesis and the resonance marketing hypothesis. We use data from an airline with a new à la carte pricing mechanism, which allows consumers to tailor airline ticket bundles to suit their individual preferences. We compare à la carte ticket pricing, whose features can be modified by the purchaser, and fixed (bundled offer) sales, which cannot be modified. We found that a significant number of travelers do use à la carte pricing, which allows the airlines to regain some control over distribution. We find that travelers customized standard bundles when it was possible for them to make à la carte ticket bookings, but mainly for low-feature standard bundles. Frequent-flyer members purchased higher-feature bundles more often when they had the opportunity. The findings support the proposed hypotheses. We discuss the implications for distribution strategy and channel conflict management.
Information technology (IT) advances often create turmoil and disturb existing industry structures. In the travel industry, electronic distribution has existed for decades via the global distribution systems (GDSs), reservation systems that were introduced in the early 1980s on mainframe platforms. Yet with the Internet, new digital intermediaries have threatened the viability of these legacy GDSs. We examine this transformation of e-travel distribution to test the theory of newly vulnerable markets, which predicts how markets become vulnerable to fundamental changes triggered by IT. The tenets of newly vulnerable markets theory are supported. The GDS market became newly easy to enter due to a decrease in barriers to entry caused by the Internet and other technologies, attractive to attack due to their out-of-date and inefficient pricing mechanisms, which made opportunistic pickoff possible across customer profitability gradients, and difficult to defend due to their lack of vision and strategic inflexibility. We use our findings to expand the application of this theory to newly vulnerable e-markets, in general.