Improving Profit Potential

Increasing Sales

Depending on your business type and target market a number of initiatives could be reviewed to increase sales. If you do make changes or introduce new initiatives, remember to track the success of these initiatives so that you can properly evaluate the impact on your business.

• Research what aspects other operators are doing well, and implement similar strategies into your business as appropriate.
• Value add to products to improve the customers perception of good value for money.
• Continually train staff and management to improve customer service and information provision.
• Target the most profitable market segment at different times of the year (e.g. local residents during off-season, interstate visitors during peak season).
• Implement customer feedback tracking and act on suggestions or criticisms.
• Plan promotional activities and other activities for low demand periods.
• Improve the quality of the visitor experience through reviewing your policies, procedures, staff training and equipment.

Understanding Yield

Yield Management is about maximising your profit from each visitor to your business. It centres on increasing profitability rather than focusing exclusively on increasing visitor numbers.

Improving yield means increasing your income per customer, without needing to increase your number of customers. This is especially important where you are limited in your capacity to cater for more customers.

In order to calculate your business’s yield, you should look at both your average revenue yield and your average profit yield. It is useful to calculate this both by month, and by year, to plot seasonal and annual trends and fluctuations.

• For average revenue yield, calculate the amount of ordinary income your business makes, divided by the number of visitors for the period.
• For average profit yield, calculate the amount of profit your business makes, divided by the number of visitors (your profit is the amount of money your business makes after all your costs have been deducted).

Some factors that influence yield include:

• The pricing strategy (the best prices to charge in different situations - different times of the year, different customer segments);
• The marketing strategy (targeted specifically at different customer segments);
• The booking strategy (e.g. cheaper price for advance bookings of large groups);
• Business costs;
• Added value services (tours, retail shops, cafeterias, sale of publications);
• Visitor numbers; and
• Seasonal demand.

Marketing Review

Is it time to review your marketing activities? Are the activities targeting the right people?

Review the demographics, characteristics and motivation for your target customer base to determine if these have changed. Are visitors staying fewer nights? What activities do they like to participate in?

Find information about international and domestic visitors by visiting the Tourism Queensland Research area or visit Tourism Australia.

Consider how you currently address these five P’s

• Product (or services) - eg tours, accommodation, camping, souvenirs, restaurant, bush tucker etc.
• Packaging - how do you 'wrap up' your tourism product to market it?
• Place - where will you promote yourself, and how will you achieve this eg in Europe through inbound travel agents, in my nearest town through tour desks etc.
• Price.
• Promotion.

Are there ways in which you could do these activities more effectively or efficiently?

Review your expenses

You might be able to find more efficient ways of achieving your business goals by reviewing your expenses. Attention to accurate record keeping is important to keeping track of your expenses and provides a good start to your review.

Determine the essential expenses of the business in delivering the product or service and consider whether they could be done more effectively or efficiently. For non essential expenses consider the effect of removing these expenses. You don’t want to affect the safety of your customers, the customer’s perceptions of the product or service, or how it impacts the staff or business policies.

Some suggested initiatives:

• Review your purchasing methods - you may be better off to negotiate a bulk discount with one wholesale supplier than purchasing frequent small amounts from retail stores.
• Make sure your cancellation policy is enforceable.
• Word of mouth and repeat visitation are free marketing, and by giving great service, you can use word of mouth recommendations to deliver you customers and save on your advertising costs.
• Pool resources to lower costs (marketing, etc) in conjunction with other operators.
• Minimise bank fees by monitoring cash flow and talking to your bank about how to avoid transaction fees.

Review all sources of income and check that the costs of providing the product or service are less than the income generated. If your costs are higher than your income you may need to consider if it is worthwhile continuing to offer that particular product or service.

Diversification

Diversifying your product or service may assist in deriving income from sources other than your core product or service. You could diversify your product or service by introducing additional items that complement what you already offer.

Research and understand what will be required to diversify including pricing, demand, customer feedback, legal and regulatory requirements.