By George Volsky, Instant Software - Director of Research
In a recent blog, I suggested that you look for ways to become more efficient in 5 categories.
In this blog, I include my thoughts about the third of these: Revisiting each of your company’s major promotional expenses with a view to identifying/downsizing programs whose benefit can no longer be justified.
I recently accompanied a visiting rental manager who visited three of the four largest rental companies in a particular vacation destination. The visits left me with questions of simple but stunning implications.
I’ll share my impressions and leave you with my questions.
Each of the three companies told the visitor that they spend a lot of money on a specific program that then knew none of their competitors had. I won’t identify the programs, but each are designed and promoted to help managers generate more bookings.
Each company told the visitor, in effect, “I guarantee you the cost is worth it.” Each could produce at least one statistic to back up their guarantees. I suppose each program could be worth the price.
But here’s the rub: Over several years, none of the three has won significant new ground over the other two--and all three have lost market share to a fourth competitor that doesn’t use any of the programs.
The fourth has won its newly gained market share by offering lower prices to generate more bookings. It touted its superior bookings to successfully attract more high-end rental homes. It’s showing no signs that its strategy is losing strength.
This has “gotta” make us ask, “What did each rental manager have in mind when they told the visitor that their unique program was expensive but well worth it? “
If each lost market share to the fourth competitor and none increased their market share relative to each other, how could their expensive programs really generate any unique economic benefit?
- Are all three paying a lot of money just to maintain parity among themselves while the fourth continues to steal their market share?
- How much of their confidence is rooted in past benefits?
- How much is rooted in the natural need to believe that a past decision to spend money was a good one? Or in statistics that—examined closely by a business consultant--are cancelled by stats they didn’t think to measure?
I was drawn to these questions by my observation that the website specials page and innovative Internet marketing are allowing both managers and rent-by-owners to steal bookings from conservative mainstream managers merely by lowering prices as needed.
I have seen all too many examples to support the unfortunate conclusion that homeowners pay more attention to the number of bookings than to the net amount of their rental revenue.
So we have to ask:
- Has the Internet made pricing so important that it trumps almost every other activity in the mainstream manager’s promotional budget?
- Are mangers’ most expensive workhorse programs—and the assumptions underlying them—still viable in today’s Internet world?
- Going back to the visitor, was his “take-away” that the benefit of each company’s expensive program was lost over time to a competitor who has lower costs (doesn’t pay for similar services?) I can tell you that the visitor’s program generates more bookings through aggressive pricing, and he hasn’t changed his marketing since his visit.)
I have reluctantly come to believe that the Internet has turned competition into a jungle where the overconfident, slow and meek fall prey to the quick, lean and mean.
The point: Re-examine each big-dollar program in your budget. Play devil’s advocate and force yourself to re-prove that each program is cost justified today.
Don’t get side tracked just because:
- Your percentage of on-line bookings may have increased;
- Your revenue has increased; or
- Your best renters and homeowners are happy.
The only important measure of your competitive health, beside your profit and loss statement, is whether your share of bookings and desirable rental homes is (a) increasing, (b) holding steady, or (c) decreasing and—whichever of these is true—whether any competitor is doing better!
If you are paying for expensive programs (as opposed to the homeowner paying), consider the fact that our industry’s most aggressive managers are passing the full cost of discounting on to homeowners and still managing to increase or maintain their inventory.
Force yourself to prove that your company’s most expensive programs are today increasing your “share” of renters and homeowners. Consider whether that same money could be better spent (or given back to homeowners to help them tolerate the dynamic pricing that is often the most pivotal generator of more bookings).
The streets are getting mean!
