When no one has a crystal ball it’s time to use internal data to get tactical
Like the housing market before it, the travel & tourism sector faces uncertainty. It knows it is facing upheaval - it just doesn’t know exactly how painful it will be.
Not surprisingly, people are suddenly at lot more interested in market information. And indeed a daily flood of headlines, predictions, scaremongering and irrational optimism pour forth - many of them completely contradictory.
Mixed messages both reflect and fuel the uncertainty. It is not that the data is necessarily wrong, its just small pieces of a very big and complicated picture and a snapshot cannot convey the full story.
So, do you ignore the information altogether? Pick and choose what you want to hear? Do nothing while waiting to see who turns out to be right?
My view is while this big picture data matters (especially at the government and national marketing level) at the individual business level there is more to gain by ditching the crystal ball. Instead it is the best possible time to turn tactical by wringing profitable actions from the information you already have.
Control what you can - eg marketing costs and barriers to conversion
It’s a cliche that you should hope for the best and prepare for the worst - personally, I think you should aim to control what you can. That means working with what you have and leveraging data to help your money work harder. And while you cannot control currency rates & oil prices, you can use existing data to improve your conversion rates and tighten your marketing return on investment.
Conversion equates to action. From a business perspective, the conversion rate is typically the proportion of potential customers that convert into actual customers. But its also worth turning it around to the customer perspective - the conversion rate is also about the proportion of your website visitors or enquirers who were able to successfully achieve what they came to do. (That could be buy, call you, find directions, make a booking, check the price etc).
2% conversion from your marketing activity was never ideal, but with fewer tourists to target, you may need to convert at 4% just to stay still. If the overall customer pool is shrinking, it becomes essential to convert more of those that do come your way. But without spending more than those additional customers are worth (which is where ROI comes in).
Yes it takes focus and effort - but improving conversion & more importantly ROI can actually involve spending less rather than more money, as you can cut back on what isn’t working.
For example, by looking at the overall return on investment of specific marketing activities you will identify those black holes that are swallowing spending without delivering a suitable return, whilst spotting well performing campaigns you can expand.
The marketing return on investment is calculated as a percentage and the formula is as follows:
For more on measuring ROI I suggest you login to MarketingProfs to read the article Financial Intelligence for Strategic Planning by Jim Lenskold or check out Jim Novo’s in depth piece on Calculating ROI.
“It is critical to cut the excessive waste of marketing dollars that is abundant in most businesses. Efforts must be concentrated on winning the greatest share—not of customers or revenues—but profits” Jim Lenskold
You take control once you understand both conversion and return on investment, meaning decisions get made on fact not fear. Here is data that I believe is way more valuable in uncertain times than scaremongering headlines.
Conversion rate at the business wide level
Understanding that only 5% of all enquirers to the business actually turn into customers triggers two important questions. “Why?” and “What do we do about it?” Are you making it hard for potential customers to buy from you, to trust you, to understand your value offering? The quest to make it easier for enquirers to achieve their objectives is a potentially very profitable one, because by addressing the conversion process weaknesses you’re increasing your prospect pool regardless of whether there are more overall visitors in the market.
Conversion and ROI at the sales channel level
Web, third party website affiliates, agents, phone and face to face all represent different sales channels and will convert prospects at different rates (and importantly at different value levels & costs, hence the importance of looking at ROI). Are the commissions you are paying justified by the overall ROI? Are your efforts being focussed on the best performing channels? If something has to be cut back, this data will help you ensure it is the right thing.
ROI at the marketing campaign level
The most expensive advert, third party website, brochure insertion etc is not necessarily the best performing one. Likewise, the one that generates the most responses does not always trigger the most conversions or the best return on investment. Online campaigns are extraordinarily measurable without having to ask the visitor. You can also observe online conversions of offline campaigns by measuring search trends. But simply making “how did you here about us?” a routine question during all enquiries and purchases means that offline campaign effectiveness can be tracked too (as long as the answer is stored and can be referenced to the transaction).
Conversion & ROI at the customer segment level
All customers are not created equal. We regularly conduct segmentation exercises on client transactional information and databases and find the most valuable customer segments are often small and not immediately obvious. But, if you are able to distinguish between different groups of customers, it becomes possible to target your acquisition and retention marketing activities on those customers that represent the most profitable prospects. (Of increased importance when you can’t afford to market to everyone).
For example Customer A may make a single high value transaction while on a once in a lifetime holiday, Customer B may make a mid value purchase twice a year, every year for a decade, Customer C may have made a couple of low value purchases over the years and may or may not be back. If I was conducting a direct mail or email marketing campaign to previous customers I would want to differentiate conversion rates from these customer groups, because I know their potential lifetime values to to be very different.
I may be prepared to invest more in marketing to retain Customer B than I would Customer C and it may not be worth my while spending to retain Customer A at all. (Close attention to the data is required here though as its rarely clear cut).
Sometimes the small picture tells more than the big picture
When external, macro data becomes at best confusing and at worst distracting, your internatal data comes into its own - be it revenue, repeat booking rates, satisfaction data, advertising return on investment, website conversion or marketing ROI.
This is because while an individual business can rarely influence the overall volume of tourists in the market, it can influence the proportion of those who respond positively to their business and shift from being potential to actual customers. And given finite or shrinking resources, your internal data can help you spend on the right place and on the right people - and usually more effectively than a crystal ball.
This entry was posted on Friday, July 25th, 2008 at 6:17 pm and is filed under Business research, Data, Marketing strategy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.