Only suppliers can protect travel brands

By Charlie Funk
Charlie FunkHow many of you remember the Yugo? Hailed in the mid- to late-'80s as the answer to high automobile costs, an "everyman's car" that would sell brand new for less than $4,000, it turned out to be a vehicle of extremely poor quality with a tendency to break down.

The brand became synonymous with a reputation so damaged as never to be salvaged. And there is a lesson in that for all of us in the travel industry.

Brand integrity and protection are a major concern for any business, whatever the size and whatever the brand. The best companies go to great lengths to protect their brands.

Witness, for example, the skilled artist/engraver at Waterford Crystal smashing a piece that would have been worth hundreds, even thousands of dollars because of a tiny flaw, rather than sell it as a second.

Each business, indeed each person, has a brand, whether or not it is recognized. A person's "brand" is often referred to as "character" or "reputation," a trait that takes years to develop and minutes to destroy.

Companies cannot afford to have their brand sullied. In many companies, entire departments with dozens, even scores of diligent staffers monitor hundreds, perhaps thousands of printed documents, periodicals, broadcasts and websites to ensure that intellectual property, designs and more are used properly and that ownership is acknowledged and properly attributed.

For years, manufacturers commonly set the selling price of their products, in great part to help small businesses compete with much larger businesses. But a series of court decisions from the late '40s to the mid '70s led to abolition of the practice of manufacturers setting prices.

Then, a 2007 Supreme Court ruling established that manufacturers indeed could legally set minimum advertised prices (MAP) and take steps to ensure compliance. Within a year, most cruise lines had introduced policies designed to address consumer confusion while at the same time ensuring a higher degree of brand identity and integrity through control of advertised pricing.

At the same time, a number of manufacturers implemented similar policies for a wide-ranging number of their products.

That led to a head-on collision between two models of brand integrity and protection, each with its passionate advocates: brands built on quality vs. brands built on offering the lowest prices.

For example, Costco dropped all Apple products at the end of 2010. Costco's brand integrity is built on a maximum profit margin of 14% on name-brand products it sells. My inference is that this would have had Costco selling Apple's iPad at a price substantially lower than others at a time when every unit was shipping as fast as it could be manufactured, sometimes at prices higher than the MAP.

Apple's brand is built on leading-edge technology, exceptional quality and service that does not need to be discounted.

Given that clash in missions and objectives, it was not surprising that the two companies parted ways.

Similarly in the travel world, suppliers strive to maintain brand integrity built on the experience, value and the quality of the product. Some retailers, however, seek to maintain their own brand integrity by selling travel at the lowest possible markup. At the same time, other retailers tend to maintain price discipline and reflect the brands of the suppliers.

All retailers are independent and must find their way along the path to success that best suits them.

Every major cruise line has policies in place regarding MAP. Some, such as the American Queen Steamboat Co., are emphatic about the whole brand- and price-integrity issue.

"Our brand and our commitment to agents is sacrosanct," said Tim Rubacky, the company's senior vice president of marketing. "Therefore, if we have to pass up business by big-box travel retailers, we will. We do not allow anyone, even our largest producers, to discount or rebate. If we catch someone doing so, we will put them on a stop-sell."

Rubacky believes that failing to maintain pricing discipline will ultimately prove to be a self-inflicted wound.

"So many blue-water lines that had all the ability to be wildly successful and build first-class brands only went off to shoot themselves in the foot by discounting and rebating," he said. "You not only kill your pricing integrity, you kill the brand. Can you name one person you know who wants to do business with an unworthy brand? Neither can we, and we always want to be the brand that consumers and agents trust."

Recently, Prestige Cruise Holdings and Crystal Cruises took steps to stop an absolutely shameful process whereby travel agent rebaters poached business, often from other retailers, by offering substantial discounts if a booking already made were transferred to their agency.

Often, the activity was taking place onboard ships just after the passenger left the future cruise booking office. Such reprehensible conduct paints all travel retailers with a broad brush in the minds of passengers.

No wonder that the "travel agent" appellation has fallen into disrepute and disdain, to the point that when attendees at the Travel Weekly CruiseWorld and Home Based Agent Show in Seattle recently were asked how many of them were travel agents, almost no hands went up.

One of the reasons cited for the paucity of young people entering this business is its shabby reputation. The poachers' behavior only reinforces the negative image that too many have of an honorable profession.

A common thread that winds its way though all these pricing-discipline policies is the need for integrity on both sides of the equation. As long as those who perpetrate scurrilous sales activities are allowed to represent travel suppliers, the negative public perceptions will not change.

Retailers are too fractionalized and widespread to act in a way to improve the reputation of the entire industry. As Van Anderson, co-president at Avoya/American Express, observed: "It's time for [the suppliers] to step in and raise the bar of the industry as a whole and take steps to stop behavior that affects integrity, even if it means walking away from a sizable amount of business."

Charlie and Sherrie Funk own Just Cruisin' Plus in Brentwood, Tenn., and have provided agent and agency-owner training throughout North America on every facet of travel agency operations. They are the authors of several books, including "A Recipe for Travel Agency Success," "Creating a Blueprint for Growing Your Agency" and "You're Invited," a complete guide to hosting consumer travel events.
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