Are We There Yet? KNOW WHERE YOU ARE GOING YOUR MARKETING PLAN A Tourism Resource Guide
Know where you are going your Marketing Plan
CONTENTS The Four P s of Marketing 4 Setting your marketing budget 6 Identify your target markets 6 Who does Tourism NT target? 8 Product 9 Price & Rates 11 Things to consider when setting your rates 18 Terms & Conditions 20 Place (Distribution) 22 Promotion 23 Tourism NT acknowledges the Small Business Development Corporation of Western Australian for their permission to incorporate segments of the Tourism Boost guide into this resource. Tourism NT acknowledges Tourism Australia for their permission to incorporate segments of the Planning for Inbound Success guide into this resource. 3
Know where you are going your Marketing Plan As with any business venture, your entry into new markets should be well planned. A detailed marketing plan should be developed to provide a blueprint for your marketing activities, regardless of whether you are targeting the domestic or international markets. The purpose of marketing is to match the right product to the right market, providing an optimum return on investment. Product Price The Four P s of Marketing Essentially there are four elements (the four Ps) of marketing: Product Price Place (Distribution) Promotion Place (Distribution) A good marketing plan incorporates a combination of these elements and should form the basis of your plan. Writing a marketing plan is one of the most important steps you can take to improve your business s effectiveness and efficiency. The plan will guide your marketing decisions and assist in allocating your resources. Promotion 4
Your marketing plan should incorporate: Overall business objectives what is it that your organisation wants to accomplish? Assessment of the market environment what are the factors, internally and externally, that will affect your business and servicing of identified markets? Market identification what are the specific markets and segments that are most likely to use your product? Marketing objectives are the objectives for each target market measurable, achievable, time-specific, non-ambiguous and flexible? Marketing strategies what is the best combination of the four Ps for each of your target markets? The action plan what are the actions needed to make the plan work, who will do it and when? The marketing budget how much do you have to spend and how will you allocate the resources? Monitoring and evaluation how will you measure the performance of your marketing efforts? Use these headings as the template for your marketing plan. 5
Setting your marketing budget There is no rule that specifies how much of your turnover you should allocate to your marketing budget. As a rough guide, most small businesses allocate between 3-10% of their budget to both domestic and international marketing. If possible, it is useful to make comparisons to other similar sized businesses. As domestic tourism is the bread and butter of most tourism operators, most marketing budgets are spent on domestic marketing activities. Therefore, it is important to thoroughly research and plan your targeted international marketing activities to maximise the small portion of your budget allocated to this area. Identify your target markets Identifying and understanding your target markets should be the foundation of your marketing plan. In order to succeed in the international market, it is important to tailor your business and product to your customer s requirements. By understanding how your region and product might appeal to the international market, you can tailor your product, marketing and promotional activities to attract new business. Understanding your consumer target markets will guide the development of your product, how you price your product in the marketplace, where you offer your product for sale and how you promote your product to consumers. Don t try to enter every market at once. Select your markets carefully and take the time to plan your approach, allocating your resources to the markets that will generate the greatest return. 6
Consider the following when selecting a target market and consumer segment: What does the consumer (or market) want? What can I provide to meet the consumer s needs? What is the size of the market? Is the market large enough to support the marketing costs required? Will I receive a return on my investment? If targeting international travellers, how long do these travellers stay in Australia? Do they make repeat visits? How much do these travellers spend, what do they eat, and what do they buy? What type and standard of food, transport, accommodation, touring, activities and attractions do these travellers prefer? What parts of Australia do these travellers visit? Do they visit your area? Do these travellers prefer FIT, group, backpacking or another style of travel? Do their interests suit my product and why? How will my product fit into a wider itinerary? Can I work with any complementary products in my region to bundle an experience? How do they travel to my region? How will they access my product? How do they book their holidays? 7
Who does Tourism NT target? It would be beneficial to review and align with Tourism NT s target market and their supporting strategies. Tourism NT s identified key target market is the Spirited Traveller. The Spirited Traveller is made up of 5 segments who share common motivations and values, but who also have some important and unique differences that help us to tailor and refine our communication messages, and the media we use to reach them. The 5 segments include: Young & Restless Ready, Set, Adventure Great Outdoors Looking for Inspiration New Lease on Life Travel is about freedom and adventure with friends Travel is about bonding through outdoor activities Travel is about escaping busy lives and appreciating nature Travel is a lifestyle choice that enhances personal growth Travel provides the opportunity to grow, expand and learn For further information visit www.tourismnt.com.au NEW Lease on Life Young & Restless Key Target Market The Spirited Traveller Ready, Set, Adventure Looking for Inspiration Great outdoors 8
Product Your product is the combination of goods and services that make up the visitor experience, including the standard of your facilities and equipment, the level of service you provide and the quality of your interpretation. An individual product will make up only part of the total travel experience for a consumer. The complete travel experience includes all the elements that a tourist consumes from the time they leave home until they return. This includes transport, accommodation, meals, attractions and activities. These may be purchased independently by the consumer or bundled into a package for sale by an ITO or wholesaler. Developing Your Product The development of your product should be guided by the type of experience your target market seeks. When developing your product you should: Always consider the product from the consumer s view and focus on the benefits for them; Define your unique selling proposition (USP), your point of difference from the competition; and Remember that the characteristics of your product or service that directly meet your consumer s needs may differ according to the market and the traveller you are targeting. 9
When planning your product for inbound travellers consider: Location are there attractions and facilities nearby which enhance the appeal of your product? Price is the product competitively priced and does it allow for all levels of commission? Accessibility how do visitors get to your product? Is transport available? Seasonality are you open to coincide with peak arrivals from your target market? Hours of operation are they regular and compatible with transport times? Time how do you fit into an international itinerary? Do visitors need to stay overnight? Will they miss out on other attractions if they visit you? Information availability for both tourists and your distribution partners; Reservations How easy is it for consumers to book your product? Bundling Your Product It is often difficult to attract visitors to an area outside established destinations as they may have limited time and knowledge of the area. By working cooperatively with your region to promote the destination as a whole, there is a better chance that visitors will take the time to visit. Work in cooperation with local operators and create a bundle that will make your product more enticing. Bundling refers to aligning and marketing complementary products together to form compelling and unique experiences for the consumer. It helps to improve visitation through regions and increase tourist revenue through multiple suppliers offering complementary products, or via single suppliers providing services that complement their core offering. It also assists by offering a stronger commissionable proposition for distribution partners. 10
Price & Rates What are the different types of rates? If you plan to sell your product through the travel distribution system, you will need to factor commissions into your price structure. Commissions are the fee paid to the inbound tour operator, wholesaler, online and retail agent to market, distribute and sell your product. This is their income, paying for their operation and the services they provide. Each level of the distribution system receives a different rate of commission. If the price of your product does not allow for these levels of payment, you will find it very difficult to market your product through an inbound tour operator, wholesaler, online or retail agent. Gross Rate = Nett Rate + Agent s Commission Travel agents, wholesalers and ITOs provide valuable distribution that you may never be able to secure on your own. Commission is only paid once a sale has been made. When dealing with the travel distribution system, you must understand the difference between nett and gross (or retail) rates and protect your rates by providing the correct rates to each level of the distribution system. Rates should be clearly marked as either gross (retail) or nett. The gross or retail rate of a product is the amount that the consumer pays and should be consistent across all distribution channels. For example, a customer should pay the same price if they book direct, via an international travel agent or via the Internet. Consumers will not purchase the product from a travel agent in advance if they know they can purchase it directly from you at a reduced price. Agents will not promote and market your product if they know the consumer is not going to buy from them. Your price is the cost to consumers at various points in the distribution chain. It includes the price that consumers pay when they buy direct from you, the commission and nett rate structures offered for intermediaries and the rates for children or students. It also includes your booking terms and conditions. A product must be priced consistently, accurately and competitively to be successful in the market place. This requires a clear understanding of each individual cost component, including commissions and their impact on the total price of the product. Getting your pricing right is a key requirement for success. The price should be set according to: Your competitors pricing; The level that your target market is prepared to pay; The cost of distribution (i.e. commissions) built into the overall price; Fixed and variable costs; Seasonality; Your profit margin. 11
How much commission should I pay? The level of commission varies depending who sells your product and which distribution method is used. For example, you will pay less working directly with a Visitor Centre than working with an International Tour Wholesaler, however you need to assess what provides with you with the greatest return on investment. Here are the average commission levels payable to third party sellers: You don t have to pay commission, it is your choice. But, if you don t pay commission you cannot expect promotion or sales from third party sellers. Commission is often referred to as a marketing cost of doing business. Third party seller Average commission Examples Retail Travel agents 10% 15% Flight Centre, Harvey World Travel PCO s / DMC s 10% 15% Conference Logistics, YRD Visitor Information Centres 10% 15% Tourism Top End, Tourism Central Australia Online 10% 15% Wotif, lastminute, Expedia Tour Wholesalers 25% 30% Qantas Holidays, Kuoni, FTI Touristik Inbound Tour Operators 25% 30% ATS Pacific, AOT, Pan Pacific Where does this commission go? You pay an INBOUND TOUR OPERATOR 30% commission directly INBOUND TOUR OPERATOR (ITO) 30% TOUR WHOLESALER 20% RETAIL TRAVEL AGENT 10% 10% retained The ITO keeps 10% and gives 20% to a TOUR WHOLESALER 10% retained The Tour Wholesaler keeps 10% and gives the remaining 10% to the RETAIL TRAVEL AGENT 10% retained 12
Calculating the correct commission GROSS Retail Price Consumer pays $100 $100 $100 $100 10% commission Retail $10 $10 $10 20% commission Wholesale $10 $10 30% commission Inbound $10 Nett price Operator $100 $90 $80 $70 Diversifying your income stream Don t put all your eggs in one basket is a common phrase for investing, but it also applies to your business income. Diversifying your income stream is a great way to protect your business against the unknowns such as a downturn in the market, segment or loss of a major third party seller. Consider your target markets and their consumer travel booking trends. It is a good idea to spread your sales through avenues such as wholesalers, inbound tour operators, direct bookings, retail agents and Visitor Centres. Direct sales will give you instant money and help your cash flow. Tour wholesalers sometimes take 90 days to pay an invoice, which may impact on your cash flow. Product Pricing an example: Step 1 What Are The Sources Of Your Sales? It is important to track where your customers book and pay for your product. Understanding where your sales come from helps you develop your Market Mix. For example: Source of Sales Mix Number of Customers Market Direct Bookings (eg walk-ins, Internet) 4,000 40% Retail Travel Agents 2,500 25% Wholesalers 2,500 25% Inbound Operators 1,000 10% TOTAL 10,000 100% 13
Step 2 What Are Your Costs? Fixed costs: are costs that will remain the same no matter how many customers you have eg rent and insurance. Variable costs: are those which will fluctuate depending on your level of business activity eg tour guide wages and fuel. Some costs may have a fixed and variable component eg water rates. Where there is a minimum charge which you must pay, however you will have to pay more if you use over this minimum amount. Example: Fixed costs of $80,000 and variable costs of $100,000 and hence a total operating cost of $180,000. Step 3 What Is Your Profit Margin? The profit margin is the amount over the business costs which provides a financial return to the owner. Using the above example we will assume a profit margin of 30%. As a result the total operating costs including profit is $234,000 ($180,000 + (30% x $180,000). The next step is to calculate the nett rate. This is the total operating costs plus profit divided by the total number of passengers. In our example that is $234,000 profit divided by 10,000 passengers = $23.40 per person. Therefore the nett rate is $23.40. 14
Source of Sales Step 4 What Is Your Average Commission For information on commission rates that you may pay to different types of agents please refer to the section on commissions. To be able to accurately price your product you need to know what your average commission is. This can be calculated from the market mix determined in Step 1. For example: Number of Passengers % of Total Sales Commission Payable Direct Bookings 4,000 40% 0% 0% Retail Travel Agents 2,500 25% 15% 3.7% Wholesalers 2,500 25% 25% 6.2% Inbound Operators 1,000 10% 10% 3.0% TOTAL 10,000 100% 100% 13% % Commission (# Passengers/total # Passengers x Commission Payable) Average Commission 13% Your nett rate, calculated in Step 3 then needs to be marked up to include the average commission. This is calculated by nett rate divided by (1- average commission). Therefore for our example: $23.40divided by (1-13%) = $26.89. Therefore if you price your product at $26.89 you will pay an average commission of $3.49 ($26.49-$23.40). 15
Step 5 Adding GST Before advertising your price you need to add GST. Generally, this is done by totalling the costs, profit margin and commissions, then adding 10 per cent. Therefore using the same example: $26.49 + (10% x 26.49) = $29.14. This would usually be rounded to $30.00. Step 6 Looking At Your Price In Context It is important to consider your product s price in light of your particular operating conditions and your desired position in the market place. How price sensitive are your customers? What prices do your competitors charge? What is the demand for your product? Consideration of these factors may prompt you to revisit your profit margin and hence re-calculate your nett rate. Remember that your profit margin is the mark-up which allows you to make money and stay in business and that price wars with competitors are rarely successful. The other important consideration which needs to be taken into account at this stage is the need for you to be able to maintain your prices for the standard brochure period (usually 1 April 31 March). Do not be tempted to revise your brochured prices (eg with stickers) during the brochure s validity period as it may lead to disgruntled customers and even being cut out of the distribution chain. Types of Prices You May Be Asked For In dealings with tourism wholesalers and other industry partners, it can sometimes get confusing with the variety of prices/rates you are asked to provide. Here are some quick definitions to help you ensure that you are providing the correct price. Rate Definition Nett Rate Gross Rate Rack Rate Stand-By Rate Industry Rate FOC Rate excluding commission (usually includes GST) Total rate including GST and commission Publicly listed rate, usually maximum rate Discounted rate available to passengers willing to travel standby Discounted rate extended to members of the travel/hospitality industry Free of charge or at no cost 16
EXAMPLE Rate Sheets Example wholesale rate sheet for a tour operator NAME OF YOUR BUSINESS Confidential nett rates for (insert name of third party seller) Valid from 1 April 20xx to 31 March 20xx Note: All rates include GST Name of tour/departure time/duration City sightseeing Departs at: 8am Duration: Full Day Sunset cruise Departs at: 6pm Duration: 4 hours Passenger type NETT Rate GROSS Rate (less 20% commission) Adult $180.00 $225.00 Child (4-12) $112.00 $140.00 Adult $140.00 $175.00 Child (4-12) $60.00 $75.00 Example wholesale rate sheet for an accommodation provider NAME OF YOUR BUSINESS Confidential nett rates for (insert name of third party seller) Valid from 1 April 20xx to 31 March 20xx Note: All rates include GST Room Type and Check in details Room Features Breakfast Included NETT Rate GROSS Rate (less 20% commission) Deluxe Room Check in 2pm Check out 10am King Bed Harbour views Yes $300.00 $375.00 Standard Room Check in 2pm Check out 10am TV/DVD City views No $200.00 $250.00 Note: Nett rate = rate excluding commission, this is the price that you receive after commission. Gross rate = rate inclusive of commission, the price charged to the consumer. This is the rate that should be used for all marketing. This rate should not differ whether you are selling directly to the consumer, or through a wholesale distributor. 17
Things to consider when setting your rates Transport and Touring Rates Advise the gross rates and nett rates on separate pages. These should be valid from 01 April until 31 March each year, and are fixed for this period (i.e. non changeable) Ensure rates include GST and indicate accordingly Be very specific on inclusions and exclusions (e.g. Uluru- Kata Tjuta National Park fee is not included etc) Use tour codes where possible: Include all details, e.g. duration, pick up locations etc. Be clear on exactly what concessions you offer e.g. seniors, pensioners, students etc. Child Rates Is your product suitable for children of all ages? Include child rates and applicable ages Is there a minimum age where a child is not accepted on any of your tours? Days of Operation Advise days of operation including days you do NOT operate (e.g. Daily except Christmas Day) Minimum and Maximum Numbers Advise minimum number of passengers required for your tours to operate Advise maximum seating capacity 18
Accommodated Touring If you offer accommodated touring, please advise the type of accommodation used: Hotel/motel Cabin Tent Combination Advise single, twin, triple and child rates Foreign Speaking Tours Advise if any of your tours operate with a foreign-speaking driver/guide and indicate which language (German, French, Italian, Spanish, Japanese etc.) Indicate if tours operate with a driver/guide or a driver and separate guide Cancellation Policy Advise your cancellation policy FOC Policy Advise FOC policy for tour escorts and guides Payment List payment policy ITOs prefer payment 30 days on receipt of invoice You can ask for pre-payment (eg common place with B&Bs), however you need to stipulate this on the contract 19
Terms & Conditions Accommodation Rates Please include the following information: Nett rates for the period 01 April until 31 March each year (fixed rates, non changeable) Rack rates for the same period Rates for all room types and descriptions Rates applicable to single, twin/double, extra person (both adult/child) Room bedding configuration for all room types Maximum number of guests per room ensuring that this includes the provision of additional bedding i.e. existing bedding plus rollaway Advise porterage rate for groups (if applicable) Ensure rates include GST and indicate accordingly Important: Nett rates should be applicable to FITs and groups up to a minimum of 20, preferably 25 rooms. For groups requiring more than 25 rooms, rates will usually be requested separately. If you have a set group rate, then provide it. Child Policy Applicable age Does the bedding configuration of the rooms make it possible for children to share using existing bedding FOC? For apartment properties, please advise of any: Surcharge for daily service (if applicable) Long stay rates for seven nights inclusive or more Special International Event Rates Usually ITOs will not accept surcharges for local events / regional festivals etc. They can work with surcharged rates for international events however nett rates should be around 20% below the rack rate applicable for that event. You will need to advise exact dates applicable to the surcharge. After the contract has been finalised they cannot accept additional surcharges. Further Information Required: Check in time Check out time Please advise if you offer a complimentary airport transfer service If an airport transfer service is available at a cost, please advise cost Parking do you offer complimentary parking or will you charge a daily rate? 20
Meal Rates Breakfast, lunch, dinner (include all options) for adult/child prices. Group Policy Please state your group policy as it relates to FOC rooms, meals and other expenses. Important: For bona fide tour escorts and guides, it is usual to offer one FOC room for groups of 10 rooms, up to a maximum of two rooms. With regard to meals, bona fide tour escorts and guides should be offered FOC meals when dining with the group in the hotel s restaurant. The same applies to porterage. Cancellation Policy Please outline your cancellation policy as it relates to FITs and groups. The following is standard cancellation policy for ITOs. FIT Cancellation Policy May be cancelled without penalty up to 24 hours prior to arrival. A cancellation charge of one night will apply within this period. GROUP Cancellation Policy May be cancelled without penalty up to 30 days in advance of arrival. Allotments It is a good idea to include a note in your contract advising the operator to contact you directly if they require allotment. Do not just give away allotment without a guarantee of business production. On any allotment contract ensure you include a right to review materialisation every three months and cancel the allotment if it is not materialising at an agreed percentage (ITO and wholesaler to agree on a % materialisation) Payment List payment policy ITO s prefer payment 30 days on receipt of invoice. You can ask for pre-payment (eg common place with B&B s), however you need to stipulate this on the contract. Special Terms and Conditions Note any special terms and conditions. 21
Place (Distribution) Distribution is the vital link between your product and the consumer. A distribution strategy considers the place your product is sold and the range of different ways a consumer may use to make a purchase decision. For example, international consumers may buy a wholesale package from a local travel agent before they leave home, or book at their hotel s tour desk following their arrival. The booking may be channelled through an inbound tour operator or conference organiser. Consumers may have found your product on the Internet, in a guidebook or received a recommendation from a friend via a social media site. Less independent travellers are far more likely to go through traditional travel distribution channels. More experienced travellers might organise the bulk of their arrangements once they arrive in Australia. Therefore, don t overlook distribution points such as visitor information centres (VIC s) and hotel concierges that your target consumers may approach, and factor these into your business and marketing planning. Your trade marketing strategy should address the following points: How does your target market purchase this type of product? How does your target market research their visit? How will they find out about your product? How do you distribute your product through those outlets? What are the costs involved? Have you set goals for your distributors? Are they trained in selling your product? What feedback do you expect? How frequently? Do they handle direct competitors? Once you have established distribution channels, it is important to set up a system to track your bookings, recording where they come from. It is essential to monitor how each of your distribution partners are performing, as knowing where your bookings are coming from and which partners are generating business for you, will help to maximise your marketing expenditure. It will also allow you to strengthen your relationships with agents and partners who are performing well. 22
Promotion Promoting your product to consumers and the travel trade requires an understanding of your target market and the most cost effective way to reach them. The promotional mix usually comprises a combination of the following: Advertising print, broadcast, direct mail and the internet; Public Relations media release, media kits, press conferences, media familiarisations, interviews and speeches; Personal Selling trade and consumer events, sales calls, sales missions and staff training; Sales Promotions competitions and sales incentives. A good promotional strategy should include a mixture of activities that you can refine as your business experience grows. No matter what promotional activities you choose, tracking the impact of your marketing spend is paramount. It will help you decide which campaigns to continue and which ones need refinement. 23
For further information contact: Tourism NT Business Development Level 1, Development House 76 Esplanade, Darwin NT 0800 Ph: +61 8 8999 3900 Fax: +61 8 8999 3920 Email: industrydevelopment.tourismnt@nt.gov.au