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Discounting travel industry

flowcomm, Flickr (CC license)

Cape Town – During a slow sales period, a common business practice is to provide discounts, loyalty offers and bulk-buy pricing to move products and services, attract new customers, and reach sales targets.

While this is frequently the case in retail, it’s also a key element of tourism businesses and operators – especially during the quieter low season – says Enver Duminy is CEO of Cape Town Tourism.

“It’s a strategy geared towards ensuring ongoing income, employment sustainability and that the business endures. Done well, it can maintain a steady stream of profitable business. When done poorly, it can have a negative impact that threatens businesses.”

Discounting

Scale is a consideration and a large enterprise will have specialists with the financial skills to deploy a strategy that will see discounted business effects spread widely across the company. SMEs, on the other hand, are far more sensitive to even slight adaptations in pricing and in market activity.

SMEs, too, may not have an individual with specialised financial knowledge to calculate potential gains or losses according to changes in what’s on offer, says Duminy.

The basic principle of discounting – when marking down products or services – is that you need to sell more to achieve the same levels of profitability, taking into account operating costs and ensuring that discounting doesn’t lead to a loss.

This can be done as a stand-alone strategy or combined with increased awareness via marketing of the discount (bearing in mind that this marketing will also have an impact on profits) or in conjunction with a loyalty programme that encourages more frequent use of products or services.

Building loyalty in quiet times

Loyalty programmes rely on a large consumer base in order to perform profitably. An example could be the Marriott Rewards loyalty programme, the world’s biggest, with more than 100 million members and a million new ones every month benefiting from pricing premiums.

Not only do members benefit, the hotel group is put in a strong position: provided that the rewards are incentive enough, their customers will keep coming back.

“In the case of business travel, this is an important consideration. Elite members on the MR programme travel between 25 and 100 bed nights per year – a phenomenal number that showcases how effective loyalty programs can be within the right context,” says Duminy.

“A pitfall that may be experienced for such large enterprises is that all aspects of the business must be aligned with the business strategy, from having sufficient products to meet the demand to ensuring that workforce management has the capacity to deal with potentially large interactions during sales periods.”

Cape Town-based contact centre specialist Wynand Smit of INOVO, agrees.

“Attractive offers such as massively discounted airfares achieve their objective, with the market responding in great numbers. What has been experienced, however, is that the contact centres and websites dealing with increased traffic may not have the capacity to cope with short-term, high-volume interactions,” says Smit.

“The capacity to cope with this must be worked into the business strategy, right down to workforce management tools that allow for adequate staffing during peak times, based on monitoring from previous sales campaigns. In addition to sales, companies must remember that increased sales will, in turn, lead to more customer service interactions.”

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