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Monday, July 26, 2010

Opportunity = Work

I love this quote by Thomas Edison about opportunity.

"Opportunity is missed by most people because it is dressed in overalls and looks like work."

One of the unique things about opportunity is that in order to benefit from it, you must be in a place where you can both recognize and act on it.

With corporate planning cycles measured in months versus weeks, when opportunity presents itself, how do you react?  Can you reallocate resources from lower priority projects?  Do you have a "skunkworks" group that looks at new opportunities as a part of their regular work cycle?


Opportunity is out there waiting.   Don't be put off by the work necessary to evaluate the benefits of moving away from the status quo.

Make sure that your strategic planning process allows for tactical shifts along the way as new opportunity presents itself. 

If you would like to explore Solutionz' integrated 3-day strategic planning process, which can take you from a concept to an actionable, measurable Microsoft Project Plan in less than 36 hours, see our website.

Friday, July 23, 2010

Top 10 Distribution Fallacies

Fallacy #1 - Consumers will purchase how and where I want them to.
Although this seems hard to believe, there are still suppliers and intermediaries who believe this to be true. They are myopic in their approach to customers and do not believe the power has shifted to the consumer, nor do they understand the role that this fact plays in their future distribution success.

Customers choose the channel and the vehicle used to purchase travel. They vote with their wallets.

Fallacy #2 - If distribution costs come in line, the industry will be healthy again.
Distribution is a portion of marketing, and marketing is a key cost component for suppliers, but other costs (like labor and capital) have a much greater impact on the bottom line, as does revenue.

In many sectors of the industry, pricing and yield management functions are flawed. Suppliers are shifting distribution to lower cost channels, but are getting less for their product on average as a result of the focus on price as the channel differentiator.

Distribution cost control can help the P&L, but it does not ensure the health of the industry.

Fallacy #3 - Revenue is King
All revenue is not good revenue. As you operate on a P&L basis, if your costs constantly exceed your revenue, you will eventually fail.

Top line growth may appear beneficial, but cost (vs revenue) as part of the success equation cannot be denied.

Profitability is king, long live the king.

Fallacy #4 - A customer is a customer is a customer
Customers come in all shapes, colors and sizes. Once you think you know your customer, they change behavior [and channels] without notice. Sometimes it is a shift due to a change in purpose of trip or who they are traveling with.

Segmentation of your customers and targets and understanding their purchasing behavior are important steps toward establishing a rational multi-channel distribution strategy.

Fallacy #5 - Technology is a business driver.
Technology may be an enabler, but it is not a driver (unless you are a technology company).

Your business should seek out the best solution (both functionality and cost) based on your needs or those of your customers, but new technology offerings should not overly influence your business strategy.

Create your strategy and then obtain technology solutions as part of your operating plan to facilitate the implementation.

Fallacy #6 - Business travelers will pay whatever we charge.
It has been proven [in the recent past] that businesses are indeed price sensitive and that they can and will shift their travel spending or even eliminate it altogether.

With the price transparency that the Internet facilitates, business travelers are finding the fares and rates that are clearly intended for the leisure/occasional traveler. This is dramatically eroding overall supplier revenues, and in many cases the savings in booking fees and commissions pales versus the loss in revenues .

Fallacy #7 - GDS (and travel agents) are dinosaurs.
GDS and travel agents may be part of the travel distribution heritage, but they are not extinct. If the longevity of the dinosaur is any indication, both the GDS and travel agents will be with us for some time to come.

Although challenged by the hyper-growth of the Internet and the shift of business to new players, each are utilizing the Internet in new, heretofore unforeseen ways to expand their businesses.

Fallacy #8 - Build it and they will come.
Although this phrase is normally attributed to technology vendors, it can be applied to almost any business.

A key problem with many new products and services is that market research and/or customer input isn’t completed in advance of introducing the product. And other issues could be that the business model and/or the market penetration process are not well thought out.

Customer acquisition won’t necessarily follow a decision to shift (or even eliminate) channels. It certainly isn’t automatic!

Fallacy #9 - "Going direct" is always the cheapest channel.
Many businesses do not consider all their costs when making this assumption. Direct distribution may offer lesser costs than some other channels, but if customers desire to purchase via these other channels, it may not be the cheapest route – especially if you lose the revenue.

Fallacy #10 - The Travel Agency Channel is the first one that I should eliminate
While this may be true for some suppliers, (i.e. for airlines or other suppliers that have eliminated base commissions), others may find that the agency channel has become a more cost effective channel, even with GDS usage/costs. [Don't forget that this may be the only variable cost channel left - where you only pay if you sell something.]

Analysis of your revenues and your costs for this channel are essential. If you sell higher priced or margin products and services through this channel than you are able to on your own Web site, then you may be losing more in revenue than you are gaining from the reduction in booking fees and commissions.

And if you heavily utilize wholesalers and consolidators, or the new “merchant” model where you may be giving up 20-30% off your rack rate pricing, then this group should be your first target to review, not retailers.

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This timeless list of fallacies was first published [sans the parenthetical comments] in 2001 in The Essential Guide to Multi-Channel Distribution, by Chicke Fitzgerald and Kathy Misunas.


A Potent Combination - Customer Centricity and Multi-Channel Distribution

Customer Centricity meets Multi-Channel Distribution
                                                                            
Plotting out your strategy for distribution can be a daunting task. 
  • Do you focus on your consumer direct distribution via your website?  
  • Do you invest in social media?   
  • Do you explore social commerce?  
  • What about your call center? 
  • Do you still invest time and energy in the travel agent channel and the GDS? 
At the end of the day, whether we are working with suppliers on their distribution strategies, or working with travel intermediaries on how to most effectively reach their customer, there is one approach that is the winner every time. 

Put the customer [aka guest] at the center of the equation versus your products and services and you will find it much easier to see the patterns of how each channel is used and then you can take the next [and in my mind the most critical step] and see which channel has the best yield.

If you are a supplier and not doing channel profitability analysis on a regular basis -- before you start headlong into a strategy of channel shift to consumer direct distribution -- then you owe it to yourself to stop and invest time in that essential step.

And if you need help......  you know where to find me.

Monday, July 19, 2010

.....You had me at differentiate



To download DARE TO DIFFERENTIATE, click HERE.  Once you register, you will receive an email with instructions of how to download this free "not-so-white paper".

Monday, July 12, 2010

Why differentiate?

The more competition you face, the greater the need to highlight the differentiation -- the unique advantage of your product or service -- in order to succeed in the marketplace.
Evan Carmichael, entrepreneur and speaker

Industry leaders do not get where they are by deciding to commoditize their products and services.
Successful companies in all industries have long engaged in head-to-head competition in search of sustained, profitable growth. They have fought for competitive advantage, battled over market share, and struggled to balance differentiation with both risk and available resources for development.
The companies in the travel industry are no different.

Over the course of the last 30 years, the various constituents of the travel industry have knitted together an amazing distribution ecosystem, marrying members of the value chain with consumers to support both business and leisure travel, serving individuals and groups alike.

The value chain includes a wide range of travel suppliers [air, car, hotel, tour, cruise, rail, attractions, insurance, destinations and content companies], marketing products and services to consumers through wholesalers, consolidators and retailers, both offline and online.

Travel is sold through retail establishments, call centers, through catalogs and newsletters, online, mobile and even via social media tools. By and large, the consumer is the one who decides how they elect to buy (e.g. through which channel) and from whom. Billions of dollars are spent annually using traditional and online advertising and marketing methods to try to sway that decision.

A host of technology, service and content companies provide a wide set of tools and aggregation services to assist in the marketing and sales of the travel products and services over a number of channels.

The model for the industry is largely the commerce model or stated more simply, the sale of products and services for a fee. Various constituents benefit from that transaction, from the retailer that typically earns a percentage based commission on the sales price, to the GDS company that earns a booking fee for putting the supplier’s product on their global “shelf” in front of thousands of retailers, to the supplier themselves who earn the net of those fees.

Destinations make money from bed and restaurant taxes and membership in their destination marketing organizations.

Technology companies make license fees and service fees from the provision of the tools needed to support the value chain.

Online players enjoy commissions, as well as augmenting those revenues with advertising.

I could go on and on, but while the models in our industry could use retooling, the model itself is not currently a source of differentiation.

But it could be.

Sustained, profitable growth often comes from stepping outside the status quo and looking for new opportunities for differentiation, including new models and new markets.

- an excerpt from DARE TO DIFFERENTIATE -  Register HERE to download FREE

Friday, July 09, 2010

Inside Business segment on the Solutionz Group

Fred Thompson hosts the Inside Business show and in this segment showcases the Solutionz Group.  If you need more information, check out our website.

12 Step Program for Air-Centric Travel Industry Executives

 
The Air-Centric Executives Anonymous Creed
  1. We admitted we were powerless over our past behavior in focusing only on WHERE and WHEN the customer was traveling—that by focusing on just the 15% of travelers that fly that our future revenues had been limited for our stakeholders.
  2. Came to believe that a Power greater than ourselves could restore us to sanity.
  3. Made a decision to turn our customer focus to the whole traveler, that drives as well as flies to their destination, whether on business or for leisure and “life” travel.
  4. Made a searching and fearless moral inventory of ourselves as companies and our reliance on the status quo and the cash cow.  I [we] have vowed to adopt a long term, sustainable business model that is multi-faceted - beyond booking fees and transaction oriented commissions.
  5. Admitted to God, to ourselves, and to another human being the exact nature of our self-centered and product-centered viewpoint.
  6. We are entirely ready to brainstorm how to get from where we are in our focus to true customer centricity, removing these corporate defects of character.
  7. Humbly asked our customers to forgive us our shortcomings and learn more about what they really do when they travel by car and how we can shift our efforts to make that easier.
  8. Made a list of all ways that we have focused instead on our own products and services and our profits, to the exclusion and sometimes to the detriment of our customer (B2C) or the customer of our customer (B2B).
  9. Made direct amends to our clients that need a drive market solution, by shifting our focus away from WHERE and WHEN they are traveling to WHO they are traveling with, WHY they are traveling, WHAT they like to do when they are on this particular type of trip and HOW they are traveling.
  10. Continue to take a “focus” inventory and when we are wrong promptly correct it.
  11. Seek continuous input not only from our customers, but from our front line that support the customer.
  12. Having had a spiritual awakening as the result of these steps, we tried to carry this message to the rest of the air-centric travel and tourism industries, and to practice these principles in all our product, program and technology development efforts.


 




  • Wednesday, July 07, 2010

    Stop the Obsession with the Air Traveler

    Did you know that 85% of all overnight trips in the U.S. are taken by car?  And that 78% of all spending on travel in the U.S. is done by people traveling by car?  Hitwise reports that 6 out of the top 10 search terms in the travel category include mapping and driving directions.

    So in light of all that, how to we account for the travel industry's obsession with the air traveler?

    The obsession that the travel industry has with the air traveler is superficially logical.  The foundational technology for the retail side of our industry was built by the airlines.  And the air traveler spends more per trip; stays away longer and quite frankly, the mechanics behind planning a point-to-point trip are much easier than one taken by car.   

    However, with air travelers representing just 15% of all overnight trips in this country and just 22% of all travel-related spending, if you are looking for a competitive edge and if you need to grow, you owe it to yourself to evaluate the untapped drive market.

    To download a COMPLEMENTARY copy of a new paper on the drive market, entitled DARE TO DIFFERENTIATE, click HERE.  

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