Do You Know Your Conversion Rate and Cost of Sale?
At Tourwriter, we talk with tour operators and DMC’s spending large parts of every day crafting tailor-made quotes. We are constantly surprised by how many business owners do not have a good understanding of their cost of sale and conversion rate. Do you know yours?
For any business which operates by quoting (such as tour operators and DMC’s), your conversion rate is the percentage of quotes that convert into sales. It’s calculated like this:
Divide the number of conversions by the number of quotes to get a percentage
e.g. 75 sales / 250 quotes = 30% conversion rate
All travel businesses should be trying to increase their conversion rate, thereby minimizing the cost of unconverted quotes. The more expensive a quote is to produce, the higher your conversion percentage needs to be.
The Cost of Unconverted Quotes for Tour Operators
Every quote that doesn’t convert into a sale costs your business money. To calculate how much your business spends on quoting, take the average time your reservations team takes to create a quote, along with their hourly wage – for example, 2.5 hours at a wage of $20/hour means $50 per quote.
Using the example above, if each quote cost $50 the cost of sale is $167 when your conversion rate is 30%.
(($50 X 250 quotes per year = $12,500) / 75 Sales = $167)
Increasing your conversion rate by 10% reduces the cost of sale 25% to $125.
(($50 X 250= $12,500) / 100 = $125)
Conversion rates are incredibly important to the bottom line of a business. A high conversion rate indicates that your sales team is doing something right and a lower cost of sale ensures profit margins will be easier to achieve.
Tips for Tour Operators to Increase Conversion Rates and Lower your Cost of Sale
1. Quote Quickly
Many people in the travel industry think the cheapest priced itinerary wins the sale when more often it is the quickest response. Of course your quote still needs to be accurate, nicely presented, and meet the needs of the client, however we live in a word where Google provides the answer to every question in seconds. To compete in today’s environment Tour Operators need top be exceeding consumer expectations. We know a lot of things need to fall into place when crafting a tailor-made itinerary but the consumer is often blissfully unaware of such intricacies.
Get your quotes out within minutes or the consumer will most likely move on.
2. Produce Quality Quotes
Personalize content to your niche market. Use quality images and pay attention to presentation. Consider your competition. If your quotes compare on price and inclusions, but your competition’s quote looks better, whose quote will convert?
I recommend asking for independent advice on your quote presentation. Many times we are presented with “luxury style quotes” that are poorly constructed, do not flow, are overly complicated and aren’t optimized to convert into sales. In my book having a simple, yet elegant style is far more important than spending hours trying to minimize white space on a page.
3. Follow Up
80% of sales are made after 8 or more follow-ups. How many times do you follow up? Successful sales focused companies hire sales teams that pick up the phone and talk to their prospects. You don’t need to be hard selling you just need to actually follow up. Rank your prospects for ‘hotness’ and call the hottest first to ensure you are maximizing your conversion for time invested.
4. Accuracy is Essential
If you quote right the first time your prospect is more likely to convert and you will be getting the optimum commission. Pricing errors erode confidence, so use any opportunity to minimize mistakes and pricing errors.
5. Nurture Repeat Clients and Referrals
Even if your clients may not visit your destination and travel with you again, they can still be useful. The obvious referral is a client talking to a friend. More often a mention on Facebook or a retweet could be all it takes to generate a new sale so make sure you invest time utilizing all your available networks.
6. Work on the Business
It’s hard for a business manager to step back and spend some time working on the business rather than in it, but if you can prioritize some time to setting up your business so you can quote quicker, smarter and more accurately, prioritize follow-ups and facilitate client referrals, you will reap the benefits in the long run.