What are you selling? Products or services
By Daryll Page*
IF you talk to most travel agents today and ask them who is their number one competitor you will get a stock standard response – the internet. Secondly, they will quote other agents promoting low cost travel – but not necessarily delivering it.
Yes we are all aware of some deals being available on the internet that are not accessible to agents and all aware of incidents of airlines selling tickets direct from points of origin outside Australia without respecting the NUC rulings but these incidents are in the main relatively small in the bigger scheme of things – not a great deal we can do with these.
The current competitive environment raises the question of what travel agents are actually selling and more importantly what consumers perceive that they are selling. Put simply, are agents travel bookers or travel consultants? The difference being just booking what the client wants or alternatively providing some consultation in relation to options, choice and pricing.
Product price v solution cost
The price of an individual travel component (an airline ticket for example) can be a very competitive environment because you are competing on restricted product base – little variation, little choice and predetermined market pricing. As such the ability to rationally charge a service fee is also restricted – outside of agency security, 24 hour help and so on.
However if you have multiple components then there are more variations, more choice and subsequently more pricing options. The focus from the clients’ perspective then moves from an individual product price to one of a total solution cost and this provides consultants with the opportunity to sell their expertise and as such warrants the charging of a fee.
The consultant opportunity sits with either the bundling of the individual components to provide a total cost that is less than the sum of the individual parts and therefore able to demonstrate to the client that their service has provided a value benefit, ie dollars saved, or by providing choices that better meet the expectations of the customer therefore providing a better client experience. Or indeed a combination of both.
Both of these will provide the opportunity to differentiate between product and service and therefore provide the opportunity for the addition of service fees.
Product Only Selling
A lot of agents today will not even try to compete because of a fundamental belief that they cannot price match on stand-alone products. If you can’t just book an airline or hotel for a client in a cost effective manner then why do it?
The real question here is why can’t you do it? If you can turn around an international point-to-point in 15 minutes is it not profitable?
The other consideration here is consultant utilisation, that is, time spent actually generating revenue. There are some agencies that won’t entertain trying to compete on price only, however they do recognise that their consultants are not busy enough?
Part of the problem is around service fee application, many agents will do their cost-of-seat assessments and pre-determine an appropriate service fee for a limited range of transaction types.
In doing so they restrict the decision making process as far as fees are concerned for their consultants.
What this effectively does is restrict the consultant ability to sell themselves and their services.
The key behind this is to educate consultants on the time/value equation.
The other part of the problem is consultant creativity when it comes to pricing construction. Some consultants are very good at taking advantage of market conditions and optimising yield without disadvantaging the sale, others however are very formulaic in their approach and in being so probably don’t take advantage of market conditions as well and pass on more to the customer in the form of financial benefit.
The key behind this is consultants understanding the value of their bookings to both the business and the customer.
If we view each potential booking opportunity on its merits rather than on a predetermined formula then the selling opportunity and the conversion opportunities increase. Compete on the quick transaction time bookings – one of two things will happen; firstly, as a minimum you will generate an additional sale with some level of income, secondly, it may well evolve into something bigger and better.
The message here is simple – if consultants understand the cost of delivery, base revenues (commissions) and transaction time they will automatically have a view on what fee should be applied and this like our customers will vary with every telephone enquiry or opening of the door.
In a nutshell, if you are just booking then expect to work a lot harder to meet the competition because you will need to replace lower yields with higher volumes, that is, more transactions – however if you are consulting, then demonstrate the value to the customer and charge your fees accordingly.
As a final thought, every customer that comes to an agency is a traveller and once they become your customer – no matter what the price – you will always be in a position to proactively engage that customer in more and more travel. Your business grows with your client base.
Happy selling with your travel products – but don’t forget to sell the value of your service.
* Daryll Page is the travel industry specialist for the Resurg Group and works with individual business owners and travel groups in financial performance improvement, profitability and productivity programs.