There has been a lot of talk about how to increase sales lately… while Sales are great (especially for us - thanks!), you need to make sure you are also making the most $ you can yourself!
The 5:50 “Change In Price To Change In Sales" - Ratio.
This is an important ratio – it’s simple but has BIG implications! It means that each decrease in price by 5% means you have to sell at least 50% MORE just to stay even, each increase in price by 5% means you can sell 50% less and you will still stay even. You can go further and break it down to 1:10 or .5:5 or even .1:1 etc... even the smallest change to price has an much greater effect on the sales you need to make the same profit.
Simple Example
Many of you may know this, but at risk of preaching to the converted let me run through an example of what I mean. Let’s use a simple example, Imagine I am selling Apples; I buy my apples for $1.00 each, and apply a 15% markup, selling them for $1.15. This works well, and I sell 1,000 apples. So my sales are 1,000 apples, and my profit is $150. (15 cents profit on each apple sold x 1,000 apples).
What if I lower prices by 5%?
OK, suppose I wanted to make more money and decide to lower my price and sell more apples. So far so good! So I lower my price to $1.10, but now to make the same $150 profit, I will have to sell 1,500 apples ($150 divided by 10 cents = 1,500 apples). That’s an extra 500 apples, or an increase in sales by 50%, just to make the same profit!!! To sell the needed extra apples would also take a lot more work, and there is the risk that if I don’t sell at least 500 more that I won’t make as much profit as the $150 I’m making at the moment! IF for example I only increase my sales by 30% selling 1,300 apples, at $1.10 I’ll only make $130 profit. That’s a lot less than the $150 I was making before!
What if I raise prices by 5%?
OK, suppose I thought instead of trying to sell more I would try and raise my prices. So instead of selling at $1.15 I would sell my apples for $1.20. At $1.20 an apple I am making a margin of 20 cents an apple, so now to make my $150 I only have to sell 750 apples. (That’s 50% less apples to make the same profit!) If for example I can sell 800 apples at $1.20 would make $160 (20 cents x 800 apples); so even though I would be selling fewer apples than I am at the moment, I would actually be making more profit!
It’s a scary ratio, 5 to 50! It’s intuitive that at a lower price you need to sell more ...but 50% more that’s A LOT!! Of course, it’s not always that simple... If the customer only wants to pay $1.15 then I will have a hard time selling him an apple for $1.20! If the guy next to me is selling his apples for $1.10 then I will have a hard time selling any for $1.20! And it may sell be that if I sell for $1.10 I will sell thousands more apples making it well worth my while... But it may not. And I don’t want to work twice as hard all week selling apples, then at the end of the week find I made less than the week before!
Monday, November 27, 2006
Tuesday, November 21, 2006
Wanting to add Movies and 3d tours to your website?
Download movies and 3d tours from THL's image library!
Or if you are worried about space, link to the movies on You Tube! Like Spike, The Dancing Britz Lizard!
Tuesday, November 14, 2006
What is THL's new CEO saying about the Web?
In todays Annual Shareholder Meeting, Trevor Hall, THLs New CEO had the following to say:
"At the forefront I put the trends in information technology – particularly the ongoing and rapid change in distribution and the impact that the Web is having on consumers purchasing travel.
We are seeing the marketplace change before our eyes. THL needs to be at the forefront in offering consumer choice in purchase points whilst continuing to support and focus on our traditional Agents and Wholesale networks.
It is no longer enough just to operate an information website with an email link – dynamic pricing and availability is a growing requirement, as is a solid understanding of social interaction sites such as TripAdvisor / IgoUgo / Myspace / You Tube etc.
THL currently is not well positioned for the change occurring in new media distribution channels. We have started working hard to define our direction. There is a need to lift our investment in the Web environment, and connectability to our reservation and IT system is a must. Speed to market will be a key driver of business growth as is speed of change to compete with ongoing innovation. It is critical that THL moves rapidly to an IT platform that supports these two key market drivers.”
- Trevor Hall, CEO, Tourism Holdings Limited
Speech Notes, Annual Shareholders’ Meeting, 14 November 2006
Read the Full Speech Notes Here
Monday, November 13, 2006
Want more sales? What's your Split between AU and NZ?
If you are a web based agent based in Australia chances are you sell mostly Australian product. If you are based in New Zealand, you probably sell mostly New Zealand product… Why?
At first glance it makes sense, as they are close to the market, but how then do German or UK agents manage to sell both? Given the location of most agents I visit I have to wonder.. does it really matter where you are?
I think it’s more about focus! Agents in Australia have Australia top of mind, but New Zealand sales could be just as big for them!
To sell both countries you need to have the information, optimisation etc all working for both countries. But if you are looking for more sales and are not sure how much more you can get out of one market, looking to another market might be the edge you need!
Or what about Southern Africa? While the campervan Market is much smaller in Southern Africa it could be an extra source of bookings for you!
At first glance it makes sense, as they are close to the market, but how then do German or UK agents manage to sell both? Given the location of most agents I visit I have to wonder.. does it really matter where you are?
I think it’s more about focus! Agents in Australia have Australia top of mind, but New Zealand sales could be just as big for them!
To sell both countries you need to have the information, optimisation etc all working for both countries. But if you are looking for more sales and are not sure how much more you can get out of one market, looking to another market might be the edge you need!
Or what about Southern Africa? While the campervan Market is much smaller in Southern Africa it could be an extra source of bookings for you!
How do XML Links work?
Like most things in life, XML Links can be made to seem very complicated, but when you think about the basics of what an XML link is trying to do it suddenly seems much simpler!
Let’s take an example, suppose I have a website selling campervans that doesn’t have XML links… what happens when someone comes to my site and wants to make a booking?
Well let’s say I have a form for customers to fill in. They fill in the boxes like their name, what campervan they want, the dates and cities, etc. When they click submit, the system running my website takes all that information and turns it into a standardised “easy for me to read” form that it emails to me.
OK, so far so good… what happens next? Well I open the email and I have to make the booking. Let’s say I want to book it online via the campervan operators B2B Agent booking site… I log on, and I take all the information from the computer generated form and put it in the right places on the B2B Agent booking site. And I click book.... What happens then? Well, behind the scenes the system powering the B2B site then takes the information I have entered and puts it into a form that it can understand, something like this:
PickUpLocation LocationCode="DRW" Darwin/PickUpLocation ReturnLocation LocationCode="CNS"Cairns/ReturnLocation ...Etc
It’s the same information I entered but in a different standardized format so that the Campervan Company’s reservations system can understand it. The reservation system then checks the vehicle is available, makes a booking and sends back a reply in its standardised language that looks a bit like this:
VehAvailCore Status="Available"…
charge" IncludedInRate="false" Amount="5535.00" Purpose="1"
Calculation UnitName="Day" Quantity="41" UnitCharge="135.00" /
/VehicleCharge ...Etc
The reply will have all of the information I need (I haven’t put the full reply in) but It is not in a very easy to read format! So the system that runs the B2B will turn it into a nice human-friendly format which I see on the screen.
I have now made the booking, but I still need to confirm this to the customer, so I take the Information I have gotten from the B2B site, and enter that into my system to generate a confirmation to the customer. Done.
OK, so where does XML come in?
What if, as soon as the customer enters in a form on my website, instead of having my system turning that into a format that I can read, it turns the same information into a format that the Reservations system of the Campervan Company can read? And then instead of sending that to me in an email, it sends it straight to the Campervan rental reservations system?
Like this: PickUpLocation LocationCode="DRW" Darwin/PickUpLocation
That shouldn’t be too much of a stretch. I just need to get my system to change the format and give it the address to send it to. But then what?
Here’s where the tricky bit is: The campervan rental site would then send back a reply, like it does to the B2B site, my system would then need to be able to understand that reply, and turn it into something that the customer on my site can make sense of. It might also need to do other things, (like add my markup for example!).
XML links are just a standard format of sending and receiving data, like a question and answer. If you can get your system to talk the write language so that it can ask questions in the right format, and understand the answers it gets you can use XML links to fully automate your bookings.
THL uses a standardised XML language called the “Open Travel Alliance” (OTA). If you think XML links are for you, you can find out more here.
Let’s take an example, suppose I have a website selling campervans that doesn’t have XML links… what happens when someone comes to my site and wants to make a booking?
Well let’s say I have a form for customers to fill in. They fill in the boxes like their name, what campervan they want, the dates and cities, etc. When they click submit, the system running my website takes all that information and turns it into a standardised “easy for me to read” form that it emails to me.
OK, so far so good… what happens next? Well I open the email and I have to make the booking. Let’s say I want to book it online via the campervan operators B2B Agent booking site… I log on, and I take all the information from the computer generated form and put it in the right places on the B2B Agent booking site. And I click book.... What happens then? Well, behind the scenes the system powering the B2B site then takes the information I have entered and puts it into a form that it can understand, something like this:
PickUpLocation LocationCode="DRW" Darwin/PickUpLocation ReturnLocation LocationCode="CNS"Cairns/ReturnLocation ...Etc
It’s the same information I entered but in a different standardized format so that the Campervan Company’s reservations system can understand it. The reservation system then checks the vehicle is available, makes a booking and sends back a reply in its standardised language that looks a bit like this:
VehAvailCore Status="Available"…
charge" IncludedInRate="false" Amount="5535.00" Purpose="1"
Calculation UnitName="Day" Quantity="41" UnitCharge="135.00" /
/VehicleCharge ...Etc
The reply will have all of the information I need (I haven’t put the full reply in) but It is not in a very easy to read format! So the system that runs the B2B will turn it into a nice human-friendly format which I see on the screen.
I have now made the booking, but I still need to confirm this to the customer, so I take the Information I have gotten from the B2B site, and enter that into my system to generate a confirmation to the customer. Done.
OK, so where does XML come in?
What if, as soon as the customer enters in a form on my website, instead of having my system turning that into a format that I can read, it turns the same information into a format that the Reservations system of the Campervan Company can read? And then instead of sending that to me in an email, it sends it straight to the Campervan rental reservations system?
Like this: PickUpLocation LocationCode="DRW" Darwin/PickUpLocation
That shouldn’t be too much of a stretch. I just need to get my system to change the format and give it the address to send it to. But then what?
Here’s where the tricky bit is: The campervan rental site would then send back a reply, like it does to the B2B site, my system would then need to be able to understand that reply, and turn it into something that the customer on my site can make sense of. It might also need to do other things, (like add my markup for example!).
XML links are just a standard format of sending and receiving data, like a question and answer. If you can get your system to talk the write language so that it can ask questions in the right format, and understand the answers it gets you can use XML links to fully automate your bookings.
THL uses a standardised XML language called the “Open Travel Alliance” (OTA). If you think XML links are for you, you can find out more here.
Saturday, November 04, 2006
What is your competitive advantage?
Fighting on Price alone is not a sustainable way to gain a competitive advantage: It is the easiest thing for your competitors to beat - all they have to do is lower this price as well and any advantage you may have hoped to have gained is gone!
Looking at web agents sales both in campervans and what is going on with bigger travel websites arround the world (eg expedia, travelocity) it is not the cheapest who are selling the most, but the ones who have the best sites!
Price is important, but it seems it is not the most important factor.
So what makes your site different? Why should customer book at your site than your competitors? Or book direct or with a travel agent? If when you ask yourself these questions all you can answer is price, then you will find it hard to hang on to that competitive advantage.
Success is all about Value. You don't have to be the cheapest, you have to give the customer the most value for his dollar. What can you do to add value for the customer? What can you do that will set you apart?
Looking at web agents sales both in campervans and what is going on with bigger travel websites arround the world (eg expedia, travelocity) it is not the cheapest who are selling the most, but the ones who have the best sites!
Price is important, but it seems it is not the most important factor.
So what makes your site different? Why should customer book at your site than your competitors? Or book direct or with a travel agent? If when you ask yourself these questions all you can answer is price, then you will find it hard to hang on to that competitive advantage.
Success is all about Value. You don't have to be the cheapest, you have to give the customer the most value for his dollar. What can you do to add value for the customer? What can you do that will set you apart?
Friday, November 03, 2006
How to fight a price war
"If you find yourself facing a price war, you'll need to understand how it started in order to respond effectively. Often the best counterattack does not involve a retaliatory price cut. " - Harvard business Review Mar 2000.
You can read the full article at http://www.csom.umn.edu/Assets/71544.pdf
You can read the full article at http://www.csom.umn.edu/Assets/71544.pdf
The Law and "Price Maintenance"
Here's what the ACCC says on Price Maintenance:
" Suppliers may try to impose a resale price to maintain brand positioning or to give resellers attractive profit margins.
Any arrangement between a supplier and a reseller that means the reseller will not advertise, display or sell the goods the supplier supplies below a specified price is illegal.
It is also illegal for a supplier to cut off, or threaten to cut off, supply to a reseller (wholesale or retail) because they have been discounting goods or advertising discounts below prices set by the supplier.
A supplier may recommend an appropriate price for particular goods but may not stop retailers charging or advertising below that price. In most cases, a supplier may specify a maximum price for resale. "
"There is nothing wrong with using a supplier’s recommended resale price (RRP) list so long as it is just that—recommended. However, it would be illegal for the supplier to put pressure on you to charge the listed prices or any other set price (for example, RRP less 10 per cent).
Don’t be tempted to ask your supplier to use its price list to stop your competitors from discounting. You, as well as the supplier who agrees with your suggestion, would then be breaking the law, that is, inducing resale price maintenance or a price fix."
Source http://www.accc.gov.au/
" Suppliers may try to impose a resale price to maintain brand positioning or to give resellers attractive profit margins.
Any arrangement between a supplier and a reseller that means the reseller will not advertise, display or sell the goods the supplier supplies below a specified price is illegal.
It is also illegal for a supplier to cut off, or threaten to cut off, supply to a reseller (wholesale or retail) because they have been discounting goods or advertising discounts below prices set by the supplier.
A supplier may recommend an appropriate price for particular goods but may not stop retailers charging or advertising below that price. In most cases, a supplier may specify a maximum price for resale. "
"There is nothing wrong with using a supplier’s recommended resale price (RRP) list so long as it is just that—recommended. However, it would be illegal for the supplier to put pressure on you to charge the listed prices or any other set price (for example, RRP less 10 per cent).
Don’t be tempted to ask your supplier to use its price list to stop your competitors from discounting. You, as well as the supplier who agrees with your suggestion, would then be breaking the law, that is, inducing resale price maintenance or a price fix."
Source http://www.accc.gov.au/
What do you want to know about?
I'm keen to hear what you would like to find out more about!
Post or email me your ideas and I'll do my best!
Cheers, Adam.
Post or email me your ideas and I'll do my best!
Cheers, Adam.
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