Travel Industry Marketing Conversations

by the folks at ITI Marketing, Inc.

  • Find us!

  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 10 other followers

  • Subscribe

  • Newest Twitter updates

    Error: Twitter did not respond. Please wait a few minutes and refresh this page.




  • Add Blog to the Marketing Blog Directory
    List your blog on the Internet's biggest and best Marketing Blog. The Marketing Blog is the premier source for the finding and posting marketing related blogs. Join for FREE!



  • TopOfBlogs

Why Discounting Won’t Work to Survive this Recession

Posted by TeamITI on June 10, 2009

recessionThe tourism industry has often boasted of its resilience and ability to rebound after drops in demand caused by such negative factors as 9/11, SARS or natural disasters. The adaptive response most frequently deployed is generic discounting. But does this serve the individual business or the tourism community well and will it work this time?  I believe the answer is NO and for the following reasons:

  1. We’re not looking at a temporary blip in demand. Life and business, as experienced between 2003 and Q3 2008 will not return to normal. The growth in demand for discretionary services was fuelled by cheap credit, cheap energy (until 2007), and asset inflation – all unsustainable illusions based on a denial of environmental realities. Expansion in capacity (airline seats, condominiums and ocean view apartments, whether sold in wholes or fractional units, hotels and restaurants) was all based on an over estimation of demand by suppliers and consumers alike. Now only the airlines have the option to remove excess capacity from circulation by parking their vehicles in the desert. As identified by Time Magazine in February 2009 , consumers shop very differently today. As indicated by McKinsey as far back as 2007[i], boomers won’t be spending as freely after seeing their assets (first homes, second homes, pensions and equities) plummet in value; and the kids, who were supposed to be filling a major labor shortage due to retirement of the boomer workforce, will face tough competition from people old enough to be their grandparents.
  2. We are looking at fundamental changes in the nature of demand; the way consumers make decisions and respond to brand messages and the way suppliers gain their attention. Not only do consumers regularly turn their backs on advertising, they worry more about the opinions of peers or society. Sean Gregory’s article in Time identified three kinds of consumer in terms of their willingness to spend right now. In short:
  • Those that can’t (they’ve lost their job or income)
  • Those that might but won’t (they fear they might lose their job or income or are simply being prudent/cautious)
  • Those that could but still won’t (because they don’t want to send the wrong signal to peers).

Click here to read more about:

  • We are also looking at fundamental shifts in the way consumers spend their free time (internet usage now exceeds TV watching for many) and the way customers are reached and influenced.
  • It sends a very dismissive signal to past loyal customers.
  • It reinforces the notion that if the seller doesn’t value their own product, why should the buyer?
  • It further commodifies the industry and, by necessity, downgrades service levels.
  • It will make it very difficult to raise prices and capture back customers when interest rates, taxes and the price of energy, carbon and other key inputs rise

Read the rest here.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: