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Differentiation Strategies

Value Disciplines & Differentiation

The value disciplines are an interesting extension to Michael Porter’s generic strategies for competitive advantage.

The Origin Of The Value Disciplines

The value disciplines have been developed and promoted by Michael Treacy and Fred Wiersema in a famous Harvard Business Review article “Customer Intimacy and Other Value Disciplines” and in their book “The Discipline Of Market Leaders”.

The conclusions are based into research into successful businesses in the USA and Europe and emphasise the importance of market segmentation and staying focused on the key success factors of your decision.

The Three Value Disciplines

The three value disciplines are:

  1. Operational excellence – based around the market segment who want a standard product at a low price
    .
  2. Customer intimacy – based around the market segment who value customised products and close relationships
    .
  3. Product leadership – based around the market segment who want and appreciate the latest innovations and fancy product features

According to Michael Treacy and Fred Wiersema, every market divides into these three generic segments although the size of each will vary.

For a firm to be successful, it must choose to follow one of the value disciplines while striving for reasonable levels of performance in the other two.

The Value Discipline Of Operational Excellence

The authors define operational excellence as “providing customers with reliable products or services at competitive prices and delivered with minimal difficulty or inconvenience.”

At first glance that sounds like a low cost operator providing a standard product and winning business by providing it at the lowest price in the marketplace. That doesn’t sound like it offers much opportunity for differentiation.

It’s certainly true that firms following the operational excellence value discipline will tirelessly look for ways to take cost, time and energy out of the production process.

But it doesn’t mean that the customer doesn’t value the “quick and easy” way of doing business with a company following this strategy.

Price is one factor in the buying decision but I’d like you to just stop for a moment and think about examples where you wanted to buy but the supplier got in the way:

  • what you wanted wasn’t in stock
    .
  • they couldn’t get it quickly enough
    .
  • the transaction was difficult for some reason – poor knowledge, bad attitude, difficult payment process etc

It’s true that if multiple competitors in a market follow the operational excellence value discipline there will be a tendency towards commoditisation but that doesn’t mean that they will all excel at all aspects of operational excellence.

Trade-offs exist and even in a commodity business like steel, there is a chance to emphasise different aspects of operational excellence like cost, quality, speed and reliability of delivery.

The Value Discipline Of Customer Intimacy

In this second of the value disciplines, the focus moves from internally within the business to the customers.

In particular how the market can be segmented into different groups of wants and needs and how products can be created to closely fit the requirements of the niches.

Businesses that choose to excel at customer intimacy will also need to develop flexible operational capabilities to allow products to be customised to meet special requests from customers.

The customer intimacy value discipline is very much one of product and service differentiation.

Recognising that the market has many combinations of needs doesn’t mean that the business has to offer solutions in all of them. It can pick and choose which are most appropriate to its capabilities and where the biggest opportunities appear. This means that many competitors can follow a customer intimacy strategy without driving the market towards commodity levels.

Following the customer intimacy value discipline rather than operational excellence will move the focus away from transaction profits to customer lifetime relationship profits.

The Value Discipline of Product Leadership

In the third value discipline, the emphasis moves away from the customer and its current needs towards creating a continuous stream of state-of-the-art products and services which anticipate and create future customer needs.

Companies following the product leadership strategy know that they must make their own successful products obsolete with the next generation of solutions, because if they don’t, a competitor will and the business will lose its reputation for product leadership.

This product leadership value discipline is another classic differentiation strategy focused on providing unique features to win customer preference.

The emphasis is on generating new innovations and speed to market them before a competitor can beat them to the punch.

Choosing Which Of the Value Disciplines Is Best

Michael Treacy and Fred Wiersema argue that for a business to be successful, it must choose which of the three value disciplines – operational excellence, customer intimacy or product leadership – it must follow.

This is a multi-dimensional decision since it combines:

  • Who the customer should target as its customers – price and convenience buyers, relationship buyers, innovation seekers.
  • How to compete.

This makes sense and although it seems obvious when presented here, you may be able to think of examples where there is a mismatch which leads to confused customers and broken promises.

It’s not done intentionally but is often a reaction to competitive pressures. If a competitor appears to be getting an advantage from following a particular strategy, it is tempting to copy aspects of it rather than improving the way the business implements its own chosen value discipline.

I think this is a difficult choice because of the need to maintain some kind of proximity on all three of the value disciplines. Yes you will lead with one which you want to excel but you need competence in all three. I discussed this in The Experience Curve & Innovation.

Do You Find The Value Disciplines Approach Helpful?

I’d appreciate your thoughts on whether the value disciplines approach to business strategy and differentiation in particular is helpful so please leave me a comment.

Have they added to your understanding of the generic strategies created by Michael Porter?

in 3 – Your Strategic Positioning

Key Success Factors And Their Link To Factors Of Difference

There’s a big temptation to make business strategy and strategic planning too complicated to be successful. This is why the idea of focusing on your key success factors (KFS) and your key factors of difference (KFD) is so important.

There are so many things that you could do to make your business more successful. There are plenty of experts promoting their methods as the one you must master if you’re going to achieve your big goals.

There is a problem. Following too many ideas can confuse and distract you when you need focus on the things that really matter.

That’s why the concepts of key success factors and factors of difference are vital to understand and use effectively.

First some definitions:

Definitions of Key Success Factors & Factors Of Difference

A key success factor for a trade, profession or industry is something that a business must do to be successful. It is a necessary condition for success.

A key factor of difference is a dimension of performance which influences customers in their choice of supplier and a criteria you have chosen to emphasise in a) your marketing and b) your business design, processes and personnel.

Critical success factors are a unique combination of industry key success factors and particular key factors of difference which together summarise the strategic plan of the business to achieve its mission.

Contrasting Key Success Factors & Factors of Difference

To contrast these two, KSFs are performance dimensions that you’d expect any successful business in an industry to perform well, the KFD are performance dimensions that make individual successful businesses in an industry unique and distinct from each other.

Key success factors can be internal or external factors in the business. Cost competitiveness may be a key success factor in a mature business. Key factors of difference focus on extra factors that add value to the customer.

Both may be used to differentiate one business from its competitors.

On the KSF, think good, better, best.

Everyone is good but it is possible to win customer preference by being better. You can aspire to be the best in a particular purchase criteria.

Key success factors can be order winners and order qualifiers.

The Difference Between Order Winners & Qualifiers

Order winners provide reasons why customers should choose your business, product or service.

In contrast, failure to meet the minimum standards on order qualifiers provide reasons why customers will reject or ignore your business, product or service.

I don’t like airlines (see Airlines Suck But We Still Fly) but you can see the contrast in order qualifiers and order winners as key success factors clearly. (For more information about the difference between order winners and qualifiers please read my article called Order Winners & Qualifiers)

Order Winners & Qualifiers Example 1 – The Airline Industry

A good safety record for an airline is a qualifying key success factor.

I don’t care how cheap a flight is, if there is a significant risk that it will crash, I don’t want to fly and nor do you. Some things are just too important to save a little money.

A high on time take-off and landing record is an order winning key success factor.

We don’t fly because we want to fly, we fly because it’s the best way of getting from point A to point B quickly. Waiting around for hours in an airport or being stuck on the plane sitting on the tarmac isn’t part of the deal I want.

Order Winners & Qualifiers Example 2 – Hotels

In another example, I recently wrote about differentiating hotels. Here cleanliness is a qualifying key success factor. The room is clean enough or it’s not. And if it’s not, then I don’t want to stay there but if I don’t have any choice, then I’ll complain until it’s fixed.

A great breakfast is an order winning key success factor. I haven’t reached a level of delight yet where I think it just can’t get any better although I have had some super breakfasts and especially in South Africa.

The Fit Between Key Success Factors & Key Factors Of Difference

So where do the key factors of difference fit in if you can differentiate your business with key success factors?

The key factors of difference create uniqueness.

They are order winner performance criteria which competitors don’t offer or don’t offer in the combination that you do.

They are optional extras that you choose to deliver to make your business stand out.

I must be hungry but returning to the breakfast theme, then every safari I’ve been on has sundowners out in the bush when you have a drink and perhaps a few nibbles as you watch the sun go down before you drive back to camp looking out for the nocturnal animals.

Only one has ever given me a proper full breakfast in the bush. It was great. An experience I’ll remember for the rest of my life although I did worry about whether a leopard might fancy my bacon, sausage, tomato, eggs etc.

Following the safari theme as a way to give you examples of KFD, another camp had a resident academic elephant researcher to study the large elephant population. We had the chance to go out with her one morning. It was terrific to hear about the family stories and how she could tell one huge elephant from another. This, together with other specialist researchers for animals was one of this safari lodge’s  key factor of difference.

Key success factors and key factors of difference are similar concepts which help focus the business and its management and staff on what it must do well.

Industry Key Success Factors Can Be Taken For Granted

Sometimes key factors of success get taken for granted. That becomes a weakness for firms in the industry, an opportunity for any company looking at the industry as a new entrant.

Industries think “we have to do X, Y and Z because we’ve always done X, Y and Z.”

But it may not be true.

Market changes happen in terms of what customers want and expect and what technology can deliver which render traditional key success factors obsolete.

How A Blue Ocean Strategy May Change Your Focus

A very popular book on strategy called Blue Ocean Strategy specifically looks at innovation to create new market space which isn’t being contested by competitors. This includes six different pathways to find new solutions to existing problems.

One of the main techniques is to map out the key success factors from the customer’s perspective on a strategy canvas to highlight areas of similarity and difference.

Industry Success Factors Can Be Broken By A New Business Model

A new business model can be created which delivers a very strong competitive advantage because it breaks one of the traditional key success factors.

In banking, having a wide brand network used to be a key success factor and it still is for some customer groups. But First Direct challenged this idea with the development of telephone banking and it’s been pushed much further with Internet banking.

The infrastructure to operate a bank is still a huge investment to get the IT systems, people and processes established (these are still key success factors) but it’s a much lower cost than the brand network with a physical branch on every High Street.

Another example is Amazon.

To sell books, CDs and DVDs on a large scale to retail customers, you used to need plenty of stores with location choice as a main key success factor. Now Amazon don’t care about store locations but do need an accurate picking and packing system and prompt distribution.

Key Success Factors & Increasing Profit

The purpose of strategic management is to review and then help to find better ways to achieve its goals which for a business is usually an increase in long term profitability.

My six step profit formula fits in well with the success factor thinking since every step can provide one or more critical performance indicators. Some businesses will put more emphasis on particular steps than others.

Have You Used Success Factor Analysis?

I’m very interested to hear stories of how you’ve used success factors to help guide your business towards its mission and vision.

in 3 – Your Strategic Positioning

7 Big Questions & Answers Of Business Success

How do you differentiate your business?

You answer the 7 big questions of business success in a way that is distinctive:

  • Who?
  • What?
  • How?
  • Where?
  • When?
  • Why?
  • How Much?

Is differentiating your business really that simple?

Yes and No.

These questions are an immensely powerful way to design your business to be different from your competitors.

But, while you have the ideas and answers, it’s not your opinion that matters in the end.

Your potential customers have the power to reward a well-designed and differentiated business.

And to get your reward, you need to motivate them by appealing to their self-interest.

You’ve probably seen the letters WIIFM before if you read business blogs.

They stand for “What’s In It For Me?”

It’s a question you must keep in your mind at all times because if you don’t, your market will ignore you.

You need to answer the 7 big questions of business success by looking through your customers eyes to make sure that what you are doing is adding value to them and strengthening your relationship.

in 3 – Your Strategic Positioning

The full title of this book by Robert Woodruff and Sarah Gardial is

Know Your Customer: New Approaches to Understanding Customer Value and Satisfaction

In my review posted on Amazon.co.uk, I gave this book Four Stars. This means it is Good and Well Worth Reading, provided you don’t mind the academic nature of the book.

Here is my book review.

A challenging read

I read a great academic summary by Robert Woodruff on customer value and how you had to consider issues at the different levels of the customer’s thinking.

I was encouraged to buy this book, expecting to learn a lot. [continue reading…]

in Best Business Books

Get to Aha! by Andy Cunningham

The full title of this book by Andy Cunningham is

Get to Aha!: Discover Your Positioning DNA and Dominate Your Competition“.

Normally I have a simple rule, the book has to earn four stars to be considered worthy of featuring on this blog. I only gave this book Three Stars in my review at Amazon.co.uk and yet, I’ve decided to feature it.

Let me explain why.

It’s a specialised technology strategic marketing book masquerading as a book written for the general market. As a result, I graded it as Three Stars, but, if it had included Technology Businesses in the title/subtitle, I’d have given it Four Stars.

Here is my review.

Very interesting for technology based businesses (Four Stars) but for the rest Three Stars

This book about positioning is interesting since it says that your position in your market isn’t so much about choice but is hardwired into the type of business you have – your business DNA.

You make the most of what you are and the natural advantages you have and, if you try to go against your DNA, success will be hard if not impossible. [continue reading…]

in Best Business Books

Stop Competing on Price by David Gomez

The full title of this book by David Gomez is

Stop Competing on Price: What every salesperson, entrepreneur and business professional needs to know to differentiate their product or service and make price irrelevant“.

In my review at Amazon.co.uk, I rated it as a Four Stars book, which means that I consider it to be good or very good.

Here is what I posted.

Thoughtful guide to differentiation

I read a lot of books about differentiation strategy and how to communicate those differences quickly and believe there is always room for more to increase understanding and clarity over what to do. [continue reading…]

in Best Business Books

The full title of this book by W Chan Kim and Renee Mauborgne is

Blue Ocean Shift: Beyond Competing – Proven Steps to Inspire Confidence and Seize New Growth“.

In my review at Amazon.co.uk, I rated the book at the FIVE Stars level, which means that I consider it to be excellent.

Here is what I posted.

A detailed how to guide for developing blue ocean strategies

I’ve been very impressed with the authors’ blue ocean thinking, ever since I read the early articles in the Harvard Business Review. I gave the Blue Ocean Strategy book a five star review.

When the revised Blue Ocean Strategy book was published several years ago, I appreciated the extended text and give it five stars again but I was a little disappointed as well. [continue reading…]

in 3 – Your Strategic Positioning, Best Business Books

I’ve had three people ask me how to sell (more) premium priced watches online.

This popularity is part of the problem. It appears to be an attractive market to be in from the seller’s perspective with an interesting product and a high transaction value. However some of the underlying issues make the opportunities for success very limited including how comparatively easy it is to set up a business selling watches online.

Winning The Watch Buyer’s Confidence & Trust

I can’t emphasise enough the importance of winning the buyer’s confidence and trust. Premium watches are an expensive purchase for most people and they have a natural fear that things may go wrong with the transaction. You know if you can be trusted (or not) but they don’t.

The easiest way to understand is for you to put yourself in a similar buying position where you are spending a few hundred pounds online. It doesn’t work so well if you’re using imaginary money but you may get part of the way there but you won’t have the risk of loss.

I’d try two types of products

– an unbranded item where you have uncertainty about the quality.

– a branded item, where, if genuine, the quality shouldn’t be an issue but where you have a nagging doubt on whether you can get a better deal for exactly the same item elsewhere.

This will give you a feel for something I call the buy / don’t buy scales. It helps you to weigh up the issues that encourage someone to buy and the concerns that hold back the purchase decision. [continue reading…]

in Business Problems And Mistakes

Chase One Rabbit by David Parrish

The full title of this book by David Parrish is

“Chase One Rabbit: Strategic Marketing for Business Success: 63 Tips, Techniques and Tales for Creative Entrepreneurs”.

In my review at Amazon.co.uk, I rated the book at the FOUR stars level, this means it’s in the good to very good category.

Here is what I wrote.

A good introduction to strategic marketing that deserves to be read by many small business owners

Although this book is targeted towards entrepreneurs in the creative industries, I believe it deserves a much wider audience of small business owners. The general messages in the book apply to all sectors and whilst the examples and stories used are from creative businesses, they are easily understood.

The main purpose of the book is to introduce the ideas of strategic marketing as opposed to operational marketing. You’re probably familiar with operational marketing because it tells you how to use marketing media – how to have a good website, how to get ranked in search engines, how to use display advertisements in newspapers and magazines, how to create a direct mail letter or how to use social media. It’s probably how you think about marketing. [continue reading…]

in Best Business Books

How To Differentiate Your Travel Agency

I believe that any business which faces competition will benefit by focusing on how it can differentiate itself away from competitors and that particularly applies to travel agents.

Every business has three big risks:

  1. Demand risk – do customers want what you are selling?
  2. Competition risk – are there plenty of customers but are they attracted to competitors (or close substitutes) rather than to your business?
  3. Capability risk – if you identify a promise or offer which is attractive to customers and which cannot be easily copied by competitors, can you deliver on it consistently?

In recent years travel agencies have become vulnerable to demand risk and competition risk because of a failure to communicate a customer proposition which gives the customer great value and which creates differentiation from those offered by other travel agents.

If you differentiate your travel agent, you give certain customers a strong positive reason to use your agency although the very act of making your business more attractive to some people is likely to make you less relevant to others.

The simple fact is that no one buys OK or average unless they are in a big hurry and don’t care too much about outcomes. That’s certainly not the case for personal holidays and while business trips may be planned in a hurry, the executives usually have the budget to care about quality and convenience.

The Strategic Threats To Travel Agencies

It’s worth thinking about threats to your travel agency business along two dimensions.

Some threats affect all travel agents, others affect your particular competitive situation.

Factors affecting the general desire to travel

  1. Terrorism – the reluctance to travel after the September 11th atrocities was understandable as aeroplanes were used as a terribly destructive weapon.
  2. Economic decline – less disposable income means an inevitable reduction in either the number of trips individuals will take, the length of the trip or indulgence budget for the trip.
  3. Health epidemics – swine flu and Asian flu were two of the latest scares which made travellers reluctant to get on planes.

Factors affecting the specific reason to travel with your agency

  1. General affects that are specific to your niche. A terrorist attack, civil unrest or health scare in your specialist niche will impact you severely although there is a PR issue since threats can be magnified in the popular media. Movements in exchange rates can also make your territory much less attractive. Greece outside the Euro would be a cheap destination for UK travellers but the weakness of sterling makes the entire Euro zone expensive.
  2. A new competitor who either does what you do but does it cheaper or one who offers a more attractive value proposition/offer to customers.
  3. Damage to the reputation of your own agency or an important travel operator partner.

The Internet & Its Impact On Travel Agents

The development of the Internet has made many travel agents who were selling standard tours from the big agencies irrelevant because they weren’t adding enough customer value.

There’s no need to go into an High Street agent, wait for attention and then sit down and go through the booking process when you’ve already made up your mind where you want to go and when.

Instead you can do it direct by going to the tour operator’s website, filling in your details and entering your credit card number to pay. It’s usually easy, simple and quick. I did it myself a few weeks ago when I booked a Thomson trip to Italy.

Even worse the Internet with sites like TripAdvisor and the low cost airlines has made it much easier to put your own trips together. It’s what we used to do before my health got messed up but at the moment an “easy holiday” is a big plus.

The success of the Internet has reinforced two forces which threaten independent travel agents:

  1. Suppliers believe they don’t need intermediary travel agents since they can market direct to the public
  2. The public believe they don’t need intermediary travel agencies because they have direct access to the travel operators, airlines and hotels and a plentiful supply of information.

While the Internet favours the consolidators and the big name tour operators, it also gives the opportunity for specialist travel agents to flourish since it makes them available outside of the local community.

The Big Opportunity For Travel Agents

It’s easy to get gloomy about the travel agency industry and the number of high street travel agent stores that have closed in recent years.

But there is still one big plus factor.

People love to go on holiday and as probably their biggest annual expenditure outside of eating and a place to live, it’s important that they get to make the right decisions on their holidays – where to go, when to go, how to get there, what to do when they are there…

The financial collapse of various elements in the travel industry chain of supply and other emergencies help to highlight the benefit of working with a travel agency. As a traveller, it’s not your problem to get you back because that responsibility lies with the travel agent.

I was due to fly out to Majorca in 2010 just after the Icelandic volcano erupted and closed down air travel across Northern Europe. Fortunately the ban was lifted a couple of days before we flew but we went out with some trepidation as there was talk of an even bigger eruption.

Online bookings has grown fast in recent years but it’s not necessarily a great experience for customers.

“Satisfaction with online bookings is decreasing as only 49% of online bookers feel it’s enjoyable to book a trip online, down from 53% last year. 24% of people feel it’s more convenient to research travel offline, versus 20% last year”. survey

The role of travel agents is changing. As a customer it used to feel that it was very much the big operators pushing package tours out at consumers but the opportunity for agencies now lie in advising and helping customers to get the best holidays they can by using their expert knowledge, contacts and information sources.

What Value Can A Travel Agent Create For Customers Who Can Book Online?

Before really getting into the issue of how to differentiate your travel agency, lets take a good hard look at the business from the customer’s perspective.

This is essential because it’s the customer who will make the choice of going to a travel agent, of putting the holiday together entirely on their own or by buying a package holiday directly from a tour operator.

First there is a huge amount of information online for holiday makers but the sheer volume carries its own costs for the consumer:

  1. It can take a lot of time – and for information addicts, there is always more that can be researched. Planning a holiday and getting the fine details can start to feel like hard work.
  2. It can be confusing – there can be a lot of contradictory information. You can see that if you read the TripAdvisor reviews of even well known and well established hotels.
  3. You don’t know who to believe. I love TripAdvisor as an information source and have found it fairly reliable but we know that independent reviews get rigged, just like they do on Amazon. The difference is that a book which is duplicitly marketed may waste £20 pounds and a few hours before it’s discarded, a bad choice of hotel can waste thousands and use up precious weeks of annual holiday entitlement. Booking a holiday is a big decision and you want to get it right.

Searching for a holiday online is frustrating. I haven’t yet found a flight website that gives me the flexibility I want to make it easy to find my options and that’s before trying to link it to my preferred accommodation.

Holiday bookings often suffer from the precise problem – just like an accountant who tells you that you made a profit of £97,276.17 last year when £97k or even, “just under £100k” are the numbers your mind can deal with.

When I’m booking a holiday I know approximately where I want to fly to – but often the region rather than a specific airport in the region – approximately where I want to fly from – think of expanding circles going out from my home in terms of travel time – where I want to stay or visit – but if it’s a tour, not necessarily in what order – and approximately when I want to go.

That’s a lot of vagueness and uncertainty which falls flat with Internet websites but works OK when I can brief a travel agent with something along the lines of “I want to tour the Garden Route in South Africa for two weeks-ish starting in the second of third week of September, flying from a Midlands airport, Manchester or Heathrow with a couple of nights at Boulders Beach and at least four nights game watching for a budget of about £2,500 per person and I don’t want to go back to Shamwari.”

That brief makes perfect sense to me and explains why I’ve used to same specialist travel agent for six trips to Southern Africa in the last ten years. Sometimes my briefings have been even vaguer  along the lines of “I don’t mind when or where we go except we can’t travel the first week of the month but we want to have a great chance to see cheetah, bat eared foxes and plenty of elephants and it’s always nice to see more leopards.”

Back comes a proposal and I may quibble about the occasional suggestion but overall the holidays have been FABULOUS.

A good travel agent helps you out if you get into trouble.

Staying on the theme of my Southern Africa holidays, the first time we went, my back went into spasms and I could barely move and this was coming up to the game watching section – the big reason why we wanted to go to South Africa. With one phone call we were able to change our itinerary, stay at the one place longer until I was able to travel and then extend the next place which was near and  ditch the more onerous travel including a flight to a wilderness safari.

Another time our flight from Heathrow was cancelled and we didn’t get to our first destination until 24 hours later than expected. While we couldn’t get our time back, the hassle of letting everyone know and keeping the hire car rental etc was done for us.

A third time, floods caused the Crocodile River to overflow and closed one of the entrances to Kruger and we were able to switch accommodation around so we didn’t have to waste hours travelling.

A good travel agent puts specialist knowledge to work for the benefit of clients.

A bad travel agent can mislead you by providing false information (to make sales) either deliberately or by accident or can add as little value to the holiday as the shop assistant who scans your purchases and takes the money.

Customers Get The Travel Agents They Deserve – Travel Agents Get The Customers They Deserve

I haven’t delved deep in Zen philosophies but I do believe that what goes around, comes around.

If you as the travel agent treat your customers as commodities – as fodder with the cash to give you some money then don’t be surprised if those same customers don’t appreciate the services you provide and treat you as just another travel agent.

In contrast a client who involves you deeply in the planning of their precious holiday and values your advice deserves the best you can give. Your expertise adds value to the client and they appreciate it.

How To Differentiate Your Travel Agency

I use the 7 big questions of business success to help create business differentiation and they apply to all kinds of companies.

These questions are who, what, where, when, how, why and how many.

Let’s take a look at how they apply to differentiating one travel agent from another although I won’t be able to go into the full complexities of the process.

Differentiating Your Travel Agent By Who

Who can apply to the travel agent owner, the staff of the agency or the type of customer you want to attract. It can also refer to any exclusive arrangements you might have with particular tour operators.

The first who to focus on is the who of your customer.

Are you appealing to a particular type of customer or a customer with a particular interest?

The rich and affluent are always a good market to target because they’ve got the money to spend. One parent families or families with disabled members will have special needs which make it much more difficult to get the right help, advice and support from normal travel agents.

Are you acknowledged as an expert or a campaigner in a particular field? People are attracted to celebrities – Neil Armstrong trips to the moon would resonate with me because I know he’s been there.

Are your staff specialists and passionate about what you sell? If you specialise in skiing and mountaineering holidays then if your staff are experienced mountaineers and skiers, they will quickly build rapport with your target customers, pass on tips and be very credible.

An important element of differentiating by who is based on building up trusted relationships so it’s important that there is consistency. A high staff turnover will destroy this trust factor or concentrate client attention on you, the owner.

Differentiating Your Travel Agency By What

Closely related to differentiation by who is differentiation by what in terms of specialist positioning.

You have four combinations:

  • general who and general what – all types of holidays for anybody who has the money to buy
  • general who and specialised what – mountain adventure holidays for all types of customers
  • specialised who and general what – trips for the affluent all around the world
  • specialised who and specialised what – holidays for patients on kidney dialysis – I found myself investigating these organisations in 2010 when I had acute kidney failure and was on dialysis three times each week. Fortunately, my kidneys have recovered enough to come off dialysis but it looked like I needed a very specialist travel agency service.

Some times it pays to have an incredibly tight niche, other times it pays to concentrate on the who or the what. Ideally you want to design your travel agency so that it a) has repeat clients and b) generates referrals to take the pressure off having to find new customers all the time.

In helping you differentiate your travel agency business, I’m speaking from the position of an expert in differentiation with an interest in travel agents. A competitor may be an expert in the travel agency marketing with an interest in differentiation.

A really specialist combination would be a differentiation expert who specialises in travel agents although that is often a contradiction since it can lead to industry recipe solutions.

The appeal of a specialist is very high so what can you specialise your agency on?

What also refers to what you do?

For examples do you sell package tours, put together customised itineraries or even act as a tour operator and create packages for clients?

Using Where To Differentiate Your Travel Agents

In my differentiation process, where usually relates to where you are, where the customers are, where you can find customers and whether customers come to you, or you go to customers or whether data can be communicated digitally.

With travel agents, where can also relate to where you customers want to travel to.

Location is a very obvious way to niche and in many ways belongs as another factor in the who and what combinations.

You can specialise in all type of holidays for all types of people going to one destination e.g. Australia

Or a very tight definition – safari holidays for disabled travellers in South Africa – if there are enough people looking for holidays in the niche.

Differentiating Your Travel Agency By How

How refers to the processes you use and what you require clients to do.

You could have a highly customisable website that spits out options or you could offer a very tailored solution.

Because people are focused on their own self interest, clients and customers don’t care about how you do something until you make it relevant and meaningful to them.  Saying you use the XYZ booking system is irrelevant until you say that you’re the only travel agent authorised to use the XYZ in your area and it guarantees that your clients will pay the lowest price or we’ll give you back three times the difference.

Differentiation of Your Travel Agency By When

One of the big attractions in booking holidays by the Internet is that it is open 24/7 while a high street travel agent may only be open from 10:00 am to 5:00 pm which isn’t very convenient for the holiday makers who have to go to work.

When can apply to extended opening hours – from noon to 8:00 pm may be much more convenient for many employees.

When can also refer to the time between booking and the holiday. Your travel agents could specialise in late bookings for the urgent needs and for those who can’t plan ahead with any certainty.

Have A Strong Why To Differentiate Your Agency

Why do you own and manage a travel agency and why does it do what it does?

People are attracted to businesses with a strong purpose e.g. The Body Shop which had very different views on the way beauty products should be tested and sold.

This sense of mission or crusade can create excitement and passion that moves from you to your staff and then to your customers.

Your purpose can be to promote the good (the wonders of nature) or to stop the bad (tourism may save the tiger and the orangutan from extinction in the wild by bringing in much needed tourist money.)

Or you could link your business to a wider charitable cause e.g. holidays for orphaned children.

Differentiating By How Many

The purpose of differentiating is to shift focus away from the lowest price and towards better value for money.

That can often be interpreted as a better product or something unique but it can also be more quantity. The example I often give is the bottomless cup of coffee.

There is an economics issue with this “how many” concept which you need to be careful of. One positioning could be “the agency that gives you eight nights away on holiday for the price of seven.” If you carry the cost of the extra night’s accommodation, it will be expensive but what if you can talk your preferred hotels into supporting the promotion because their occupancy rates are low on the eight night. I realise the idea does work for the package tour operator which needs to work like clockwork – same things each week at the same time – but it could work for more personalised markets.

The 7 Big Questions Of Differentiating Your Travel Agency

I’ve given you a few ideas based on the 7 big questions – how, what, where, when, why, how, how many – and you can see that there are plenty of ways to differentiate your travel agent from your competitors.

Your Differentiation Can Be Shallow Or Deep

This is an important concept because some see differentiating and finding your USP (unique selling proposition) as a marketing issue.

I think it’s much more important than that. Unless you’re very lucky, your differentiation strategy needs to run through everything you do.

It’s the difference between having your agency differentiation shallow or deep. Shallow differentiation is based on a marketing promise that sounds good and different and creates buyer preference but…

and it’s a BIG but…

it’s not backed up by the underlying business. While clients may be attracted to the idea of a specialist travel agency, it doesn’t mean that they’ll stay happy if they don’t benefit from the expert knowledge you and your staff should have.

What Makes A Travel Agent Special To You?

It would be great if you could share your thoughts on what differentiates travel agents from each other.

Do you have a really close relationship with one travel agent like I do with my South Africa agency – thanks Ginny and all at Cedarberg. They are not perfect but they have found some amazing holidays for me that will live in my memory forever.

in 3 – Your Strategic Positioning