Cyndie Bender, CEO of Meridian Travel, fattens her bottom line by showing her customers how to buy her services more efficiently
No doubt about it, most business owners are still skittish about open-book-management techniques. Telling employees how a company earns a profit in the hope they will help generate more of it has many risks: competitors may find out proprietary information; customers could discover profit margins; employees might demand more money. Those risks are too great for all but the most confident CEOs.
At Cleveland-based Meridian Travel, founder and CEO Cyndie Bender took what some would consider an even bigger leap of faith when she decided to apply open-book-management techniques to manage her customer relationships. Instead of educating her employees about how to earn a profit, she decided to educate her customers about how to earn savings. As a result Bender now gets the kind of customer cooperation, loyalty, and referrals -- not to mention profit margins -- most CEOs only dream about.
What gave Bender the idea? Well, the success of Meridian Travel depends heavily on how well its major corporate customers follow their travel policies. When a customer doesn't follow policy, not only do the big savings Meridian had promised evaporate, but so do Meridian's own profit margins, souring the agency's relationship with airlines in the process.
Bender conducted in-house profitability studies on her biggest accounts and decided to share them with those customers to get them more involved in managing their travel expenses and enforcing travel policy. That was the origin of the quarterly travel analysis, which spells out exactly how the travel policy can save the client money and how closely the client is following it. "Before we developed this form, customers didn't take travel policy that seriously. It would be the end of the year before they'd realize nobody had paid attention to it and they hadn't saved any money," says Bender.
Compared with the thick reports customers formerly received and ignored, the analysis is a user-friendly document that makes enforcing travel policy a cinch by breaking out critical data such as frequently used routes, average ticket price, and types of fares booked.
"When people see these graphs, it makes them view travel expenditures with the same eye for the bottom line they use when purchasing raw materials," says Bender, who gives the report free of charge to her top 25 accounts and charges others $35. "That kind of information makes it easier for me to persuade prospective clients to go with us."
Clients' purchasing agents are expected to generate that kind of tally of their companies' travel-and-entertainment expenses for the year. But since Meridian can quickly and easily generate graphs conveying that information, why not provide a customer service to purchasing agents, Meridian's real customers? "It helps them keep on top of this with very little effort and makes them look smart with their bosses," says Bender.
A less courageous salesperson might cringe to see a report spelling out how a client could spend less with her company, but not Bender. For example, after receiving a few reports, one Cleveland client noticed that its employees were taking 70 trips a month to Louisville and decided teleconferencing would be cheaper. Although Meridian lost the air travel to Louisville, it gained the trust -- and the business -- of that client's entire corporation. Bender's open-book approach to customer service has contributed to Meridian's 30% annual growth rate in an extremely price-sensitive market. The agency Bender founded in 1984 topped $25 million in 1991 revenues.
Bender illustrates here the kind of customer service that her open-book analysis provides. As a bonus, you'll get a few tips on how to control your own travel costs.
Special Requests/Frequent-Flier Conflict
"We can negotiate a low rate using a group travel fare, but that requires clients to fly with the carrier we negotiated with. That can cut into travelers' frequent-flier plans -- a touchy topic. But savings are obtained by using the carrier that provides the best discounts for the traveler's company. Frequent-flier perks shouldn't be a priority when deciding how to book a ticket."
Savings Require Planning
"Booking late happens frequently, but the more careful people are about planning trips and managing their schedules, the more money is saved. Meridian defines savings as the difference between the cost of a Meridian ticket and one bought three to five days before departure. The biggest single source of savings is booking excursion fares. Excursion fares involve 21-to 7-day advance purchase with a Saturday-night stay, often with day and time restrictions. Nine out of 10 business travelers don't want to stay the night. But sometimes the savings can be dramatic. For instance, fares from Chicago to Cleveland range from $78 for the excursion fare to $646 for a three-day advance ticket. A pie chart can show a travel manager if the company's travel budget is being met, where the savings are coming from, and what he or she can do to increase them."
Dollars, Coins, and Airplanes
"There is an average ticket price that Runzheimer, an air-travel market analyst, lists -- currently it's around $514. We always try to get below that. At an average ticket price of $390.01, this client is well below the average. This is the real bottom line for the customer, a way for us to demonstrate that we are keeping our original sales promise. If the savings aren't on target, clients can look at the fare-code analysis and see where they might not be keeping up their end of the bargain."
"Fare-code analysis tells clients what types of tickets their travelers booked. Did a traveler book too late, after our lowest fare was sold out [Code B]? Did someone request a special airline instead of the one we had designated for a specific route [Code A]? Did someone travel first-class unnecessarily [Code F]? Some expenditures are unavoidable. For instance, business travelers at times need their routes changed because something comes up [Code C]. But often it's simply poor planning that incurs the expense."
Your Business Is My Business
"This is how a travel agent sees a customer's business. Take the category "group travel." If we promise an airline a certain amount of traffic on a route and then our customer doesn't make everyone take that airline, the customer won't be saving money, and we won't be meeting our volume targets with the airline. Those departures from a company's travel policy eat away at the profitability of an account for us. By sharing this information, we insulate ourselves somewhat from another agency coming in to bid on the business."
Top 10 City Pairs'Cost Per Mile
"Many of our larger clients have frequent meetings at the same destinations. An agency can negotiate a discounted fare based on heavy traffic to the specific destination. Those typically range up to 50% off coach. A chart of the cost-per-mile to various common destinations is a very useful tool because it shows companies where it's most expensive to conduct business and makes it easier for them to allocate their other resources most efficiently."
Nonprofit Centers Can Make Money for You
"If a company is traveling a lot to certain destinations because it has an office or a branch there, we comparison shop and pick the three hotels that meet the client's standards and have the best rates. We'll negotiate a rate for each, but the one with the best rate becomes the primary vendor at that destination. Also, as a service to our clients, we research car-rental companies and show the client the rates offered. Sometimes this business is commissionable for us, and sometimes it's not, depending on the contract a company signs. That's just part of being in this industry. Booking hotel rooms and car rentals is not a profit center for us. We do it as a customer service. If our clients see an overall T&E savings, they're more likely to stay with us or recommend us. Our overall goal is to get new customers and consolidate the accounts of current customers. We might start with a branch and eventually get an entire corporation on board. Then we really make our money through booking air travel."
Anyone Can Do This
This type of report can be adapted for many other kinds of businesses. Think about how your company buys its raw materials and prices finished products or services to customers. What kinds of terms do you get from vendors? What kinds of terms do you offer customers? What's the cost of rush orders? What are the required amounts to purchase every month? What are the charges for customization? The point is, figure out how your customers can purchase from you in the most efficient manner, allowing you to negotiate the best possible rates on their behalf and provide them with the maximum savings. In the process, you'll protect your own company's profitability. It's a way to leverage existing invoices and purchasing data to provide a customer service to your clients that will make their job easier and make your customer relationship hassle-free.