In an earlier blog post, we reasoned that rethinking revenue optimization—in part through smarter retailing—is a key to success in the highly competitive travel agency industry. Rather than focusing on selling as many bookings as possible, we believe that successful agencies should embrace a revenue strategy that maximizes the potential revenue from every booking made. Implementing that strategy is the next step.
It is a shift that requires time- and resource-strapped agencies of all sizes to assess how they earn revenue today, identify current challenges to maximizing revenue and institute changes that will lead to improvements. The good news: with some planning, persistence and the right information to guide decisions, any agency can engineer a profitable shift in strategy.
Once an agency embraces the need for smarter retailing and a new revenue optimization strategy, the natural next question is how to do it. What are the daily practices and keys to success?
1. Provide extraordinary customer experiences.
Delighting customers should be the core mission of any travel agency. It also makes good business sense. The cost of acquiring customers in the travel industry is always increasing; keeping the ones you do have happy and loyal, is paramount to success.
By remembering that any changes to improve revenue should also lead to more satisfied travelers, agencies can preserve their existing customers, increase repeat business and create evangelists who will help grow their customer base.
2. Maximize the margin for every product you sell.
With the right level of commitment to the customer, you can begin maximizing how much the agency is compensated through commissions, mark-ups, and service fees. Know your costs and know what the market can sustain by way of price. Take notice of the tradeoffs between revenue types and how they are perceived by the customer (for example, a back-end commission vs. a visible fee). Every time you sell something, you will know you are making the most revenue possible.
3. Improve the mix of your most profitable products each time you book.
Value is contextual, defined by the sweet spot where your and your customers’ wants and needs converge. After you know which products drive the most value, optimize the mix of what you’re selling always prioritizing content and products that positively increase value for both you and the customer. Position this content where your consultants are most likely to find and offer it. When all other factors are equal, ensure the most profitable content is sold. Also, know the tolerance level of customers when the revenue potential is close but not identical—like if there is a five-dollar difference between the fare that drives revenue and the lowest fare that provides no revenue. Front-line consultants and your point of sale aren’t the only things that have to be aligned to this. Your best products and content should also be promoted in marketing and advertising plans.
Not at the starting line yet? Read why your agency needs a revenue strategy in the first place.
Build a blueprint
Agencies that conduct a thorough examination of how they earn revenue will have a roadmap to the changes that can bring in more money. For instance, an agency may discover that its service fees can be adjusted to cover the extra efforts required to handle frequent or more challenging bookings.
Revenue optimization can also be realized through smart retailing and placement. Think about grocery stores: although the typical store is packed with thousands of items, those that bring in the most revenue for the grocer tend to be positioned where shoppers are most likely to put them in their cart.
The same can be true for the placement of content within the point of sale (POS) system that agents choose from when planning itineraries for their customers.
Whatever the strategy, remember how important it is to achieve immediate results and to reevaluate your approach on a regular basis. A quick boost in revenue is fairly easy to achieve: tweaked service fees or positioning the most lucrative content in your POS so that agents choose it should deliver noticeable results within the first six weeks. This is important because it reinforces the commitment required to fully implement a new revenue optimization strategy.
After six months, agencies will have an even better view of how their strategy is working and, importantly, how it may be impacting travelers. For instance, a revenue strategy and smart retailing that involves booking as many flights as possible on particular carriers in order to reap the benefits of favorable net fares or commissions may be achieving its goal. But if it is not adequately meeting the needs of travelers, it’s not a sustainable or wise strategy. After six months, agencies should be able to pinpoint ways to improve, streamline, automate and scale their revenue optimization strategy, while ensuring that compensation for consultants rewards them for complying with the strategy.
After one year, and with the right adjustments, agencies should observe not only significant improvements to their revenue but also a stable and growing customer base. At this point, a revenue optimization strategy focused on efficiency should be self-sustaining—and any questions about whether it was worth pursuing should dissipate.