An Analytical Approach to Trade Distribution
Value, Compensation & Support
Managing and rewarding a complex trade network — and the sales team that supports it — is an area ripe for fresh thinking and innovation. The standard KPIs used by many leisure travel operators haven’t changed in thirty years. Data can illuminate long-ignored dimensions of distribution value and costs. These insights can foster open, collaborative discussions between operators and trade partners, aimed at tweaking the alignment between real value, compensation and support.
Allocating Resources Across Multiple Trade Layers
In most global travel markets, retail distribution requires three levels of attention. Individual “front line” advisers usually have the greatest influence on customer decisions, but few advisers are truly independent. Most are directed, guided, or incentivized by their employer or contract to favor preferred suppliers. Networks negotiate these agreements on behalf of member agencies.
Operators must allocate finite resources like sales attention, training, marketing support, FAM trips, and incentives among these three levels to achieve the best results, but attributing these individual investments to results can be exceedingly difficult.
The Spectrum of Trade Support
Almost all travel sellers represent multiple brands in a given product category. For operators, salespeople in the field must first assess the account’s situation and potential before drawing on the various tools and training at their disposal. Brand awareness and basic product education is the foundation. This helps neutralize any detractor effect arising from seller unfamiliarity and misconceptions. Next comes advocacy — when the seller favors one’s own brand over competitors in qualified situations. Active advocates do more than recommend. They pro-active evangelists, supported by sales with expert advise and marketing tools.
In theory, because proactive advocates do a lot more than take bookings and process transactions, their compensation should be higher than other types, but this often not the case. Most operators use sales volume (bookings or revenue) as the exclusive measure of performance. OTAs and other large, aggressive retailers can appear as superstar accounts even though their real support is neutral - or less.
Compensation & Value
Traditionally — for both sales teams and the accounts that they manage — booking volume is fasted and surest way to the prize. But the sum of this approach is close to zero. When allowed, a typical salesperson is more than willing to concede some price to gain volume, but this approach isn’t sustainable when capacity is fixed and when high utilization is a given. Yield — which includes most distribution costs — is the only open ended opportunity. The internal competition to sell first and most regardless of quality can be extremely counterproductive to real revenue growth. Controls enforced by both sales and revenue management are required to keep this in check.