We are a “deal” obsessed culture, and the “lowest price” mentality seems to be predominant everywhere. As business people, however, it behooves us to think cautiously about any business strategy focusing on price as a way of attracting attention to our services. Not only are we training our clients to hone in on exactly the wrong issues, we also deeply damage the integrity of our own brands in the process.
If you make the decision to compete on price and do so without a full understanding of the economics and commitment involved, some aspect of your business model is badly flawed. Yet, I’ve see many travel agents revel in winning business regardless of the cost. Here’s a pretty solid business principle – winning business is not the most important thing – however, making a profit is. Far too many travel professionals are led by a model of winning business at any cost, justifying the exercise by the promise of future business from the loss leader.
The customer won on price will be lost on price. The hapless travel agent trains clients to focus on price and then expresses surprise at the lack of “loyalty.” In fact, however, the client is not at fault, they are totally loyal to price and product, not to the relationship with the agent.
Marketing your “services” on the basis of price is a viable business model for very few. Some travel retailers can market on price and do well. These retailers are selling a commodity and they understand the numbers involved. If they sell enough cruises at a $35 profit each, they can make money. Meanwhile, the oceans turn red with the blood of novice and unprepared travel agents joining the fray.
Profits allow for you to provide service. The truth of the matter is you cannot be in the business of marketing “services” at razor thin margins. You are instead marketing travel at a retail level. Those who claim to be also providing “great service” are in reality using the earnings from full margin sales to pay for the services provided to the bargain hunters. If most agents try to pack service into the model, they will starve. You cannot make a loss up on volume.
But so it goes.
Being cheaper than the competition is not the only virtue on which you can compete. Cutting your price is for most businesses a flawed and dangerous tactic, jumping from ice flow to ice flow in search of a profit. Living from transaction to transaction is a sure path to a burn-out for most travel planners.
The clients most travel planners need to be profitable are not the ones haunting the likes of Cruise Compete. Consumers don’t need you to sell them travel. They need you to help them make an intelligent buying decision. That is the distinction you need to understand to properly align your business model.