How to make marketing spend produce results

FACED with decreasing

margins, international

tour operators have

started analysing profitability

per agency so they may

allocate marketing spend

more precisely to accounts

that produce results.

The models are a way of

measuring the value of each

of their travel agency clients.

This trend of customer

profitability analysis has also

resulted in tour operators

measuring their sales staff’s

performance on profitability

rather than sales growth.

A London-based sales

manager (who asked to

remain anonymous) who

works for an international

tour operator, said it had

introduced a GD1 and GD2

customer profitability model

as part of its new policy.

The company had

been bought out by an

international venture

capitalist. The parent

company owns more than

50 travel companies around

the world.

He said a GD1 analysis

broke down the gross

profitability of each

customer. This requires a

calculation of sales, less

marketing and advertising

costs, to be completed

for each customer and

gives an indication of

whether marketing efforts

are producing returns on

investment.

A GD2 calculation would

show a more complete

break-down of profitability

per customer, deducting

marketing, advertising,

distribution, travel costs,

sales staff salaries and

incentive deductions from a

particular customer’s sales

revenue.

“This exercise has been

extremely valuable in

showing us which marketing,

advertising and sales

initiatives are producing

results.

“Often, sales and

marketing functions are

separated, with return on

marketing investment being

difficult to measure, but in

the case of working with

large travel consortiums,

we can clearly see which

joint advertising initiatives

are paying off through this

exercise.

“We also take brochure

production, distribution

costs, incentive and override

deductions, BDM salary and

travel costs into account,”

he explained.

“This has helped us to

invest more marketing funds

with profit-making agencies

and to cut down on

expenditure with customers

that we had believed were

performing from a sales

perspective but who actually

created very little end

profitability. In travel it is

particularly easy to erode

profitability through override

agreements and event

sponsorships,” he added.