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The Time is NOW - by Michael Finn Many people believe that our Industry changed when hospitality brands entered the picture. That was a blip on a chart compared to the change we are about to go through. Like most change in business, it’s all about money. If it were not for turn-of-the-century unions and protesters, there might still be a lot of sweatshops today. Business owners did not make working conditions better because of any humanitarian reason, it was financial. If they did not make improvements workers would strike or government would impose fines or shut down the offender. These are all financial considerations. It is financial considerations that will drive the changes that we are about to see over the next few years. There are three reasons our Industry will change; Development Costs, Marketing Costs and Liability. Development costs are a double-edged sword. While competition for clients drives companies to spend more money on product, the client is actually getting a better product for their money. If you were to ask a banker in our Industry what acquisition and development costs were ten (10) years ago to today, they would probably point out an increase of 50-75%. Since prices have not gone up that high then the customer is actually getting a better value for their money, but still a cut into profits. Now on to Marketing. A study just out by ARDA (American Resort Development Association) shows that client cost, straight marketing costs, are up over twenty percent (20%) last year. That is six (6%) percent of product cost, in other words six (6%) percent less in profits. Considering many resort companies operate on an 8-14% profit margin, that would be a big chunk. Why has marketing gotten so expensive? If this were simple to answer, my life would be much easier. There are the usual suspects:
You get the idea. The cost of marketing has gone up. And something else that adds to this is compliance. Those inexpensive sweepstakes mailings that filled our lobbies fifteen years ago are gone. If the Attorney General’s office does not shut you down, then Dateline or the local newspaper will. Not being able to trick people into coming to see your product is not the only financial consideration here. It’s a matter of Liability. I remember about 10 years ago seeing a marketer put out a flyer in a "SuperCoups" type of a mailing that offered "Four (4) FREE Airline Tickets" with little to no disclosure at all. Now I know there are some good airline certificates out there and they will also tell you that full disclosure is necessary. This mail piece went out to over 500,000 households. I am not a legal expert, but I did a few calculations and figured that if this company had to pony up for four (4) airline tickets averaging $500 each and $2000 per offer and if those 500,000 households got together on a class action suit, they would have a suit of one billion dollars. Now if you are XYZ marketing operating out of home office, you simply bankrupt the business and hope that it does not go any further (not that that has ever happened). Although if you are even the largest of multi-national corporations, that would do irreparable damage. Again, good reasons to sell and market clean. Just so I can get on my horse again, disclosure, disclosure, disclosure. But that is for another day. So how, you ask, is this going to change our Industry so suddenly. It is quite simple: money, money and more money. Even the largest of hospitality companies have let timeshare divisions do as they wish, because they made money. In many cases timeshare was the most profitable division of the company. Plus the fact that most hospitality executives did not know what we were doing anyway; we were an enigma to them. Well many of them know us now very well and some of us have become them. With our potential for profits and liability, large companies can not stand idly by. The days of "masses of a**es" marketing and "an up is an up" mentalities is going by the wayside. The answer will come with strategic alliances, targeted database marketing, loyalty programs and the like. If you don’t catch it you may get caught. |
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More Finn | Home Michael S. Finn, RRP,
writes an insightful bi-weekly column regarding issues of ethical and profitable sales & marketing. Read his bio here |
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