Well umm, “Yes,” you DO need a website. But that is only part of the correct answer. In fact it is not just the tip of the iceberg but the tip-of-the-tip-of-the-tip of the iceberg!

There are many things a website can do to improve your business – but it is only a piece (albeit a very important piece) of what clients should think of as an integrated digital marketing program (that in fact should be further integrated to a full 360 online/offline Strategic Marketing Plan or what we call “SMP”)

At the risk of trivializing what we do, at the highest level your website only needs to do two things.

First your website should be supporting the objective of increasing near term revenues from bookings. The reasons are obvious, and that’s the focus of this article.

Second your website should be supporting the building and extending of your Brand Value  that will help “de-commoditze” the Brand, the importance of which is illustrated here: Brand Value. But let’s talk about why search is so important.

Your site visitors may visit your site by many different means; they may click a link on another site (for example a travel agent site), they may know the url, they may be referred to the site by a friend, and so on. “Search” just means the traffic and results that accrue on the basis of traffic that visits your site via search on any search engine. Google “luxury golf resort, las vegas,” click a link – and you are now a “search visitor.”

HeBS recently published an article about the results a few of their clients were seeing from a strong search marketing program. All clients were in hospitality and were described as:

Franchise Hotel in California

Resort and Casino in Nevada

Boutique Hotel Brand in CA

Brand Hotel in Florida

Brand Hotel in PA

Luxury Beach Resort in the FL Keys

Independent Property in HI

Here are the results they reported:

Now, in case you didn’t notice – those are some PRETTY IMPRESSIVE numbers!

With and average of 51% of site traffic coming from search we can tell right away that they have a good SEO strategy very likely featuring careful keyword research, a strong content program and a strong and active back-linking program and very likely have a healthy Search Engine Marketing (SEM) advertising budget. (SEM are the textual “sponsored” pay-per-click [PPC] ads that you see at the top or in the sidebar of any search results you find.)

With an average 47% of bookings and traffic coming from search we can also tell they are doing a very good job with their websites. Their websites seem clearly to be designed to support the classic Sales Funnel that is: Awareness, Interest, Evaluation, Desire, Relationship, Trust, Decision, Loyalty.

The sites are probably beautiful and striking, supporting the first steps of Awareness and Interest. They are (in our imagination) intriguing, enticing the user to click in deeper and deeper. They likely have great UI/UX (user interface/user experience) making the Evaluation step interesting and informative. Their content is probably well organized and rich in appropriate level of detail, easy to access, with navigation mistakes easy and quick to correct. They probably feature beautiful images composed by professional photographers fully briefed on the site objectives of creating Desire.

They may also feature Relationship and Trust elements such as various ways to interact directly with staff – email, 24 hour telephone line, voice over IP chat, text over IP chat, important policies easily accessible and written in plain language, and so on.

They certainly feature an easy to use, extremely efficient state of the art bookings system that is simple and direct and that has great graphical interfaces for selection of rooms and dates to support the Decision step.

Lastly they will of course have Loyalty elements – customer service functions such as checking member points and rewards, preferred room or room upgrades availability, and lots of helpful information about the surrounding area.

In essence, they will be doing this:

Now…

Let’s compare these seven smart operators with an operator with NO digital marketing program at all – just to set the boundary conditions. Let’s assume a company has a website but has no SEO and that the website – even if found is not terribly effective at conversions (converting a visitor into a paying customer). In fact, because we work with a lot of SME independent companies – most of our clients initially fall into this category and also in fact have no idea of the gains possible nor even where to begin.

So, to keep the math simple, – let’s just assume a company is seeing zero (or very nearly zero)  revenue deriving from search and compare this result to those obtained by the seven clients noted above.

The low case company above is now producing about 24% of revenue from search while the high case company is producing about 59% of revenue from search. When compared to a company that is producing zero revenue from search the math is:

Low case: 24%/(100%-24%) = 32% improvement!!

High case: 59%/(100%-59%) = 144% improvement!!!!

Finally, make no mistake – this is not about SEO. SEO is important but SEO only creates traffic that in and of itself for a hotel property is nearly worthless. This is about traffic AND conversions!

To achieve these goals you must first have a website that can be effective at supporting the classic Sales Cycle by creating conversions, then must have traffic visiting your site!

Tracy Crawford

CEO | Rain8 Group LLC

Managing Partner | CHC Couture Hospitality Concept

Email: tracy@raineight.com

Commoditization has two main effects:

• Reduction in bookings volume and price
• Erosion of brand value resulting in significantly lower property sales prices by developers

Commoditization can be avoided through full ownership of marketing and treating your distributors as just what they are, “distributors,” not “marketers.”

Starting with the Obvious

Let’s face it, most hospitality brand sites are pretty horrible. Most look exactly the same and many look like weekend afterthoughts. Only a very few are really good – and these are to be greatly commended. Many, however, seem to have spent very little time or thought at all, leading us to almost wonder why they chose to have a website in the first place.

In most cases comparing the online footprint of most 5 star properties to the extraordinary experiences available on the property itself, the website is actually eroding brand value in our opinion. We feel in fact that a lot of properties may be better off having no website at all compared to what they do presently have.

This is point one. The second key point is that it seems quite clear that most properties are spending very little on SEO. Usually a keyword search (even long tail, regionally specific keyword phrases) result in SERPS (search engine results pages) full of commodity distributors (called travel agents) with very few principal companies listed directly.

So the first step for most brands is to get a website that communicates the differentiated offer available at the property, adds some value to clients and that is not digitally invisible…Digital Marketing 101.

Buyer Motive

Motive is the set of experiences (be they business or tourism) available at the destination. The single reason the traveler chooses a destination is to fulfill motive. It’s pretty simple.

In the case of an expansive resort, the resort itself can be a big part of the motive (but certainly not all). In the case of business travel, the hotel becomes usually a quite small element of the motive (near zero, in fact, in many cases).

For most travelers the majority of motive is fulfilled outside the hotel property. Property owners and managers need to first catch this key structural point.

In most cases travelers visiting your property are not visiting the property because of you or the property. (Sorry to break the bad news.) Normally it is for a broader set of reasons.

Search

For most travelers planning a trip to a new destination – the starting point is, of course, online search. Normally the user will find a mish-mash of travel agency sites, tourism board sites and so on – very few of which are satisfying. The user comes away from this experience (often after hours of effort) with shallow and incomplete information and with only a rough idea that he may have found a suitable destination. They are left with the responsibility to make an important decision on a limited set of poor quality and often confusing information.

One of the last steps normally taken by the traveler is to book the hotel that he often does in an extremely commoditized environment of a travel agency site. Room booking, being one of the last things the traveler thinks about, further commoditizes the offer as the property gains little mindshare.

The search process looks something like this:

Destination Marketing

Hotels can leverage this insight to become the center or home-base of activity and act as the local “concierge.”

Being a superb, complete, expert local concierge is an excellent value-add service that can quickly enhance the hotel brand value. The hotel becomes the trusted assistant who can solve all problems and fulfill or help fulfill all trip motives.

Now…this process does not have to start after check-in (in the rare case that any particular traveler has in fact even selected the hotel in question).

It can start at the beginning of search. Instead of becoming the afterthought and last step in the process, the hotel can be the introduction and steady guide throughout the entire process.

Hotels could create a superb online resource that becomes the “go to” site for information about a particular local community in which they reside. Think of this as the online “local hub” featuring all the “grassroots” experience opportunities in the community that serve to fulfill all motives, a deep and rich pool of trusted, thorough and complete information.

The remarkable thing is that hotels already have most of the critical information needed – they just have it locked and extremely under-leveraged behind the concierge desk.

Becoming the local informational hub places the hotel in the high-visibility and high-value position in the overall trip purchase process. They become not only the starting point in the planning process – they become the planning process itself!

A hotel’s existing on-site concierge staffs could be a superb source of the grassroots information available. This information could be extracted, professionally prepared and organized for presentation on the hotel’s go-to local hub site.

Over time, local grassroots establishments will clamor to be on the site further enhancing the depth of information available.

Now, search looks like this:

Now, Amp the Game Up a Bit!

At this stage, leveraging your new “go to” motive oriented online resource becomes pretty simple. The key is to take advantage of all the site visitors planning a trip to your region by building relationship.

The best way to do this, of course, is with the human touch.

By setting up 24-hour toll-free telephone access, voice over IP (VOIP), text chat and email support, you create opportunities for interaction and building relationship.  By creating person-to-person opportunities to share extraordinarily valuable (to the non-local person, keep in mind) trusted local knowledge and insights, you build very strong relationships.

Adding comments and replies to your content gives users a voice and allows them to speak their mind.

Allow them to make suggestions. then respond to them – letting them know their opinion is valuable.

And let them create new listings or recommendations and write reviews – this just adds to your site content increasing value and alerting you to new possible additions to your professional databases, articles and recommendations.

“But what if someone complains about me online?”

Excellent!! There is no better or higher visibility opportunity for you to demonstrate your concern, attitude toward continuous improvement, openness to criticism, and professional concern for a client than a complaint!

Complaints should be brought immediately up the managerial chain of command to the appropriate level so management can take advantage of the great and highly public opportunity presented by a complaint.

An online complaint puts you on center stage for a virtuoso performance!

In Other Words…

Think like a traveler – not a hotel. Only with this approach can properties maximize value to their clients!

Benefits

The benefits to the General Manager of any given property are more bookings at higher prices, increased client loyalty and repeat business.

The benefits to a property developer are potentially even much higher. A developer who can show to an investor that they are fully in control of their marketing and daily enhancing brand value can clearly command higher prices than competitors that more heavily rely on commoditized distribution channels.

The price premium is potentially worth hundreds of times the cost – because investors also generally do not understand how to successfully manage marketing, and it will often be a more simple emotional reaction – peace of mind.

Showing a gorgeous well developed and managed property along with a superbly differentiated professional and world class cutting-edge, state-of-the-art marketing program with demonstrable results becomes much more powerful.

In the worst case it offers extreme ROI. In a better case it becomes “the straw that closes the deal.”

Maybe they are just asleep (but they usually look sort of awake to me).

We have worked with a range of high-brand-value clients. Apple, Lufthansa, Johnnie Walker are a few that come to mind who spend a bit of time on brand value.

Why do these clients spend time and money on building their brand value?

It’s called ROI.

ROI on brand value is, I would never argue, difficult for the inexperienced marketer to measure and report. There has only recently been an ISO standard developed to measure brand value. And this analytical approach is based mostly on leading (or in some cases what we might refer to as “middling”) indicators.

Now, the last time I checked, it was NOT the official responsibility of the laws of nature to reveal themselves in simple terms to unwitting passers-by. But the fact that wandering wanderers have trouble grasping what is actually happening does not mean that actual phenomena is any less real.

It just means that some people don’t understand.

Any stump in the woods can build a brilliant analysis on trailing indicators, while most of the entrepreneurs I have met can likewise build BRILLIANT analyses on utter sheer nonsense. Thus, many in business look askance at “vision” and at analysis based on leading indicators or other similarly “ghostly” factors.

To help these jaded souls, I’d offer a simple supporting approach…Why don’ we look at a few who have walked the path of building brand value to see if they survived in better condition or were, alternatively, eaten as an appetizer by a grizzly.

Here are a few almost entirely random cases that come to mind for me:

• Lufthansa regularly sells flights from Shanghai (where I live) to Frankfurt for 2 or 3x the local supplier price
• Apple products sell for 4x the price of knock-off equivalents
• Johnnie Walker sells the vast majority of their whiskey (the really cheap stuff) at over 25 times the price of our local rice-based “bai jiu” here in China
• Tag Heuer just introduced the Racer Android phone at about 30 times the price of a basic Android phone
• Ferragamo sells open toe shoes here for RMB2,500 – RMB5,000 while I can buy a pair of copy Crocs for about RMB20 with a bit of negotiation. That’s around 125x – 250x the street price for basic open toe shoes, and my copy Crocs are quite a bit more functional and look a bit more comfortable that anything from Ferragamo.

Let’s summarize the revenue/unit sold numbers shall we?

Lufthansa:             2-3x

Apple:                     4x

Johnnie Walker:   25x

Tag Heuer:             30x

Ferragamo:            125-250x

Now, (sigh…) Is there a finance in the world who is still unconvinced?

If so, please do leave me a detailed comment!

Basically, social currency is people talking to one another about your brand.

Social currency is increased or decreased online through social media that consists of all the various tools people use to communicate and socialize online. Social currency is developed (or destroyed!) through word-of-mouth, and word-of-mouth, is, as we all know, the most powerful form of marketing!

Social currency is influenced by people having conversations…online. Are you listening?…participating?…engaging?…influencing?

Academics have been studying social currency and have developed relatively scientific methods to measure a company or brand’s social currency. The six main measures of social currency are Affiliation, Identity, Utility, Conversation, Advocacy, and Information.

Let’s explain each of the measures of social currency. The measure of social currency can taken from the answers to the following questions.

Affiliation: “What share of your users has a sense of community oriented around your brand with other users?”

Identity: “How many of your users can identify with other users?”

Utility:  “How many derive value from interacting with other users?”

Conversation: “What share of your brand users recognize or create buzz?”

Information: “How many people feel they trade information about your brand with other users?”

Advocacy: “How many of your users are advocates for your brand and to what degree?”

Social currency is of course a powerful element in any strategy to build brand value and is at the top of the pyramid.

These social currency factors are normally measured via sophisticated polling by professional polling companies. Results of these polls allow companies to compare their social currency factors to those of competitors and then to adjust their social currency plans to make improvements.

Products with nearly identical look, feel and function as Apple iPhone and iPad may be purchased in China from other “copy” manufacturers. But these products must be sold by their producers at prices far less than ½ the price of an Apple product.

The more than 2X price premium commanded by Apple is what we call Brand Value.

Imagine a scenario in which two truly-identical products are sold by two different companies – say a branded famous luxury goods manufacturer and his competitor across the street founded by departed employees using identical equipment, materials, craftsmanship and so on. Manufacturing costs are the same.

Backing out the costs associated with maintaining and communicating the Brand, the top line price premium commanded by the branded provider flows heavily to the bottom line. Having high Brand Value converts a much higher percentage of revenue into net income!

Using our simplified scenario of two identical products above, we can construct a simplified income statement.

In the un-branded case the price is $100, while in the branded case the price is 2x at $200.

Cost of Goods Sold (COGS) in both cases is $50 producing a Gross Margin (or Gross Profit) of $50 un-branded and $150 branded.

We must assume that Sales, General and Administrative (SG&A) expenses are higher for a branded product to cover marketing, staff training, policy development and other expenses associated with maintaining the Brand value for a branded offer. The SG&A assumed for the branded Offer is 2x the cost of the un-branded Offer.

GOP (Gross Operating Profit) produced by the un-branded offer is $25 while GOP produced by the branded offer is $100!

Keep in mind this simplified model is based on a price difference of only 2x. For reference the Hermès Birkin ladies handbag sells for EUR5,500 or about USD7,500 – surely much more than 2x of an equivalent un-branded version!

Building Brand Value is good business!

Let me share my favorite “strategy vs. idea” story that continues today to be the source of lackluster corporate performance.

Let’s look at the recent history of manufacturing quality that you may be familiar with from your own business that no doubt practices some of these approaches (otherwise you probably would not be in business today).

In the mid 1700′s Great Britain’s industries started using inspection to ensure quality. This crude concept finally gave way in the 1940′s to Walther Shewharts SPC (Statistical Process Control). Later came the work of Juran and Edward Demming related to “total quality.”

Demming famously determined the root causes of American bombers crashing over Germany during WWII. How do you determine the causes (beyond the simple explanation of the effectiveness of excellent German fighters and anti-aircraft bullets) for the crash of a bomber now reduced to a crumpled heap of aluminum resting in a (at the time, slightly) difficult to reach enemy cornfield?

To a statistician like Demming this was (in hindsight) remarkably easy. He simply spatially mapped bullet holes in safely-returning bombers, creating normal-distributional mapped zones to rule out areas of weakness. The remaining “non-bullet-hole” areas were deemed by him to be potential areas of weakness.

Using “reverse” statistical methods he could even predict with increasing probablity the exact “non-bullet-hole” areas most likely to be weak.

He didn’t even need to know that many of these areas contained fuel lines, control cables, engines and so on or to even have any concept of how an airplane actually flies. A bit of further analysis by aeronautical engineers led to selective armoring of certain areas and a dramatically improved “safe-return-rate.”

The power of new statistical quality assurance methods was being clearly proven.

Demming did not find the warmest welcome in euphoric and “apparently” indomitable and infallible American corporations (who, despite being infallible, remarkably failed to learn from some of their greatest individual contributors and even more remarkably failed to learn that they had indeed failed to learn or even, for decades, what they had failed to learn). Demming, after WWII, spent time developing many of these concepts in the “re-born” Japanese manufacturing sector who in contrast to American firms (who by this time clearly knew everything worth knowing) welcomed any help they could get. This evolved into what was referred to as Total Quality Management (TQM) that was a systematic adaptation of quality methods across an entire company – not just manufacturing.

Then came Taguchi-san who developed concepts of Design of Experiments (DOE) that purposefully introduced variation into manufacturing processes and used statistical analysis to analyze the effects of this introduced variability in order to rigorously uncover previously unknown causes of production variation. Taguchi was later involved in the roots of what later became known as Design for Manufacturing (DFM) – essentially designing products that are “inherently immune” to certain known and common sources of variability in the manufacturing process.

Finally relentless focus of American corporate energy on quality was fast becoming a cult. Many new terms emerged (with smaller ideas behind them) including “Cpk” (a statistical reference)  and “Zero Defects” (per million articles produced).

In the mid-1980′s TQM finally gave way to Six Sigma, pioneered by Motorola under the superb leadership of then Chairman Bob Galvin. Galvin felt that Motorola needed “cultural change” relative to focus on quality and wanted to have a system that provided granular detail across most corporate functions and processes with a focus on Continuous Improvement (CI).

Six Sigma became widely popular, with Larry Bossidy of Allied Signal and Jack Welch of GE jumping on board. Welch even purportedly once challenged Bossidy, over a game of golf, about which company could most rapidly and effectively implement Six Sigma.

Many of these concepts have become so ingrained in manufacturing and corporations in general that the excited talk about them, and indeed many of the fancy names and acronyms, have to some extent disappeared.

Just In time (JIT) manufacturing was another cult that emerged some few decades ago (from Japan) that was heavily focused on inventory reduction in efforts to improve cash management. It was quite humorous to me on one of my frequent visits to Japan to pull into a rest stop for a coffee and to suddenly notice the large number of delivery trucks parked with sleeping drivers behind the wheel. In fact, JIT, during its early days of implementation had simply displaced ownership of (and thus payment for) urgently needed inventory to the producers who were storing it in trucks parked in rest stops within a one-hour delivery radius of factories, accompanied (of course and quite efficiently) by well-paid and very professional drivers sleeping for hours behind the wheel!

The Toyota Production System (TPS) soon followed, along with the more Westernized version called LEAN, focused on waste reduction across corporate processes. Indeed many companies today have well paid, highly trained specialist leaders of the LEAN cult tasked with recruiting new members from various departments and ensuring these new members faithfully practice LEAN techniques and recruit new members.

Are these bad things?

Of course not! They promote tremendous efficiency and improved quality that all consumers, businesses, organizations and governments benefit from.

Then with this dramatically increased efficiency and improved quality must surely come remarkable competitive advantage, right?

Don’t be ridiculous!

Our fourth rule of differentiation is “Unique – Not currently offered; Not easily copied.”

LEAN and other waste reduction/quality improvement approaches are so easy to duplicate that esteemed CEO’s will bet one another on golf courses about who can implement them most rapidly!

There is body of LEAN knowledge presently on the web that must rival the sum total of all data available on Yahoo’s original search engine!

LEAN (while being, when well executed, extremely sophisticated) is remarkably easy to duplicate with a bit of investment and patience. There are literally battalions of consultants who will visit your company, teach your cult leaders the basics, get you started, help you manage implementation and even ongoing execution.

But as in any teaching consulting exercise, great learning also accrues to the teacher consultant.

Where do you think these consultants are when they are not sitting in your offices earning twice the pay of your regular people?

They are of course (at least collectively, as an industry that shares best practices) sitting in the training rooms of your competitor around the corner teaching them what they already knew and what they have just recently learned from their efforts with you and your people.

None of these truly brilliant, carefully studied and relentlessly developed ideas are strategy.

Building Brand Value starts on a foundation of differentiation.

Good ideas are rarely good strategy.

Wait!

You want me to what…?

OK…why exactly?

A couple of years ago your could hear everywhere in online marketing circles the mantra, “Content is king.” But a quick glance around the web (a few destinations come to mind such as Yahoo Answers, eHow, About, to name a few) will make the point of how wrong this mantra is.

People seek value – not content. This has nothing to do with the web; It is basic human nature and just “plain common sense.”

Long live value!

Let’s take Sales as an example to simplify the discussion. Sales have an important role to play – selling!

But if you are an outside sales-person or sales manager you know that outside Sales spend precious little time actually selling. They attend internal meetings, read and write long emails, create and update reports, update online data, create forecasts, and occasionally visit clients.

And much of what a sales-person is actually doing during all this time is moving information from your internal “value-creators” to the client and back again.

Let’s say a customer has a problem. Usually they will sit on it awhile (if it’s not too urgent) and maybe a solution will develop or come along and problem is solved. If not they will (usually reluctantly) pick up the phone or send an email to the only person in your company they know – the sales-person.

The sales-person will book a flight, book a hotel, travel to the airport, wait for the flight, fly, wait for a taxi, travel to a hotel, unpack, have dinner and the next morning visit the client. When he returns home he will write a long email describing the problem to some internal person he may happen to know whom he thinks can help.

Then meetings get scheduled (and possibly rescheduled), and the problem is explained. The internal knows of some obscure product in your portfolio that will solve the technical problem or crafts a new set of terms and conditions to solve the business problem. In any case some sort of solution is developed and the sales-person then works to arrange a second meeting or call with the client to communicate the solution.

Did the sales-person add any value in this case? Not really – in fact he may have reduced the quality of the solution due to the natural “lost-in-translation” effect inherent in repeating information.

If your internal people are online and are known to your clients, have online relationships with your clients – then the client will naturally turn to the knowledgeable person he knows for his solution – your internal person.

No flights needed, no meetings needed – just simple direct online communication – directly with the best source of information available.

So has social media killed the middleman? Not quite yet – but the middleman role is dramatically diminishing in importance.

RONI is a lighthearted attempt at expressing a serious concept – Return on Negative Investment. Social media actually substantially reduces current investment while creating exciting and positive return – thus the term RONI!

For now and for simplicity we will stick to the old term ROI. ROI has two components – return and investment. The equation is pretty simple.

ROI = Return/Investment

Most ROI proposals involve increasing investment in exchange for an even higher proportional return.

Most proposals involve you agreeing to spend more in return for even greater gains. As an A-level executive you probably discuss these proposals every week. And as most execs do, you probably rightly look at these proposals through squinted eyes.  “Hmm…”

But Social Media decreases both your short and long-term current investment for marketing and sales while increasing your return.

Do I have your attention now?

Almost any change that decreases short-term expense has – at least in the short term – positive results. Personally anything that reduces my expense is generally already in the “consideration” zone. And anything that credibly promises a positive income with a reduced expense – if we believe it – is a no-brainer.

Here is how social media does this for you. Let’s talk about expense first – expenses that fall into three categories: middleman, internal-people travel/time, and traditional marketing expense.

Your outside sales people and their bosses spend a lot of time collecting, reinterpreting, sifting and forwarding client information to your internal value-creators and decision-makers. For the information that can be gleaned from social media – this is a complete waste of time and results in inaccurate communications.

In the long-run you can reduce your middleman expense structure – or in the short run you can allow your outside sales team to spend more time actually selling.

Second is the time and expense your internal people spend traveling to a client for a face-to-face meeting. This is more than you think! It includes the time to think about, plan, book the trip, packing, traveling to the airport, flying, blah, blah, blah – you get it. Also you have all the time and wasted emails setting up the meeting, agreeing the time with client and internal people, changing it several times, rebooking flights etc. When your people arrive at hotels (now at great expense) they have to unpack, get settled, drag out computer equipment etc. When the meeting is over they repeat this process in reverse and arrive home exhausted.

What an incredible waste for the equivalent of a few minutes of information exchange! Stop doing this! Talk to your clients online at exactly the moment in time when they need information or when you do. Text over IP or voice over IP is very inexpensive and being instantly available is a great way to increase your Brand Value – it shows you care and adds a nice special touch.

Lastly is your traditional marketing spend. Outbound, one-way, interruptive traditional marketing is not working so well these days. This includes things like advertising, trade-shows, email marketing. Simply put, users are becoming steadily more accustomed to on-demand, self-serve information and are becoming much less likely to pay attention to these old ways of doing things.

Cut down on your middleman expense, reduce travel expense and stop wasting some of your traditional marketing spend and shift it into social media instead.

And that is the “NI” part of RONI!

In Part1 of this ROI series we introduced the concept of RONI, “Return on Negative Investment” and talked about expense reduction by reducing the need the need for travel of your internal people. So now let’s look at what are some of those costs.

Let’s say trip requires two people – the sales guy and the internal expert – and to keep the math simple they both cost, fully loaded $US100k per year or about $US50 per hour. Assuming you make a bit of money for their efforts lets say the opportunity cost is 2x the expense or $100 per hour. We will do this calculation per person then double it.

A domestic 3-day trip will cover 2 cities, 5 clients, 3 hotel nights, 11 meals and will require a total of 4 days per person including preparation and travel to and from the airport and will have an airfare budget of $US1000 per person. Meals will average $20 per person and include 11 meals. Travelers will squeeze in 2 hours of email time at night reducing opportunity cost for the trip by 25% per day. Hotels will cost $100 per night.

Here’s the math:

Airfare: 1 x $1000 = $1000

Meals: 11 x $20 = $220

Hotels: 3 x $100 = $300

Opportunity Cost: (8 hours – 2 hours) x $100/hour x 4 days = $2400

Total cost: $3920 x 2 people = $7840

We said 5 clients, right? $7840/5 =  $1578 per client-hour

That’s a lot of money to sit in front of a guarded client for an hour of cat-and-mouse exercises on both sides designed to get more than they give!

Furthermore, imagine that your internal guy could have learned as much (or quite probably more!) in one-on-one online interactions with the client and by listening to the client conversing in frank interactions with other online users. And imagine how much more productive the sales guy would have been in water-cooler one-on-one conversations with the client of while sharing a beer after work.

Lastly let’s look at how many “traveling” events you are paying for per month. Fill in your own number – 20?

20 x $7840 = $US156,800/month.

With a well designed Social media program you should be able to reduce this amount by at least 50% – so let’s say you can save $US78,400 per month.

Consider that a great Social Media program will cost you around $US4,000 per month, and this nets out at $US74,400/month or annual net income improvement of $US940,800.

Plug in what ever numbers you like. The math is as solid as Yosemite’s granite Half-Dome north-facing wall. And this is just travel expense for heaven’s sake – we have not even begun to talk about the benefits of higher quality information, new relationships, your wasted outbound marketing tradition expense or sales-people spending time selling instead of being travel guides!