Developing an effective distribution strategy requires you to continually attract more agents to book your tours and activities. While agents love to find tour and activity operators who will provide their customers with excellent experiences and memorable adventures, they also are very interested in working with tour and activity operators who will pay them a fair commission. Price setting is a pivotal step in creating and implementing your distribution strategy. Agents are going to want the best price for their customers that also offers them the highest return. You need to know what your minimum price is, and you also need to learn what to account for when setting your prices.
In order to sell more tours or activities through agents you need to create the right environment. Different agents, have different needs. In a 12 article series we’ll discuss the steps you need to be aware of to improve your distribution strategy.
What are the Industry Best Practices for Price Setting?
- Look to other tour and activity operators in your area for guidance. Knowing what is going on with your competition allows you to have an edge in the market. Remember that large agents will sell not only your tours, but also the tours available through competing companies in your destination. Evaluate what their prices are and what they offer their customers, and create a structure that allows you to look more enticing than your competition.
- Incorporate commission into your price structure. You need to decide whether you are going to offer a net rate or a percentage commission rate for your tours and activities. Regardless of the decision that you make, you need to make sure that it is incorporated into your pricing structure so that it does not cut into your bottom line.
- Note that you save on marketing costs when you work with agents. When price setting your tours and activities, you will want to include the marketing and promotion costs that are a part of your business. When you receive a booking through an agent, you will have to pay a commission, but you also save on marketing costs. The agent has used their own marketing products and promotional materials in order to secure that customer for you. While commission fees may seem like an added expense that comes along with increasing your distribution network, it’s important to remember that there are cost savings associated with agent partnerships as well.
- Calculate your return on investment (ROI) prior to setting your final price. You need to be aware of your ROI prior to price setting and promoting your rates. You would not want to mistakenly publish prices, and find out after the fact that you are not generating a high enough ROI in order to keep your business moving forward. You need to make sure that your price is competitive while also taking into account commission rates and marketing costs that are necessary in order to increase your overall bookings.
Do you want to know how many bookings you need to receive in order to justify the cost of your marketing strategy and advertising campaigns? Then download the Rezdy Calculator today. It provides you with a simple and clear answer that will help you continue to develop your distribution strategy.