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Cutting In the Middleman Boosts Profits

Digital Library > Defining and Serving a Market > Distributors “Cutting In the Middleman Boosts Profits”

Backroads uses Web site to enhance all sales channels, travel agents pump up sales 15% – 19%.

Many companies have turned to the Internet as a direct-selling tool, alienating their distributors. Yet Backroads Inc. uses the Web to empower its middlemen — and boost sales.

Backroads Inc., a leading provider of vacation packages for biking, hiking and kayaking enthusiasts, mushroomed from a startup in CEO Tom Hale’s garage into a $35 million business with 110 employees. Developing strong relationships with both customers and partners (travel agents who help sell the trips) has been key to its growth.

When Backroads introduced its Web site, it was aware that travel agents might view the site as one more way to circumvent them. Agents were already suffering from reduced airline fees and consumers’ propensity to search for their own fares. To avoid alienating travel agents, Backroads created a special password-protected spot on its site exclusively for these middlemen.

“We want to keep them happy and make them better at what they do,” says Weiss. That means using the Web site to give travel agents the same sales tools that Backroads’ salespeople use.

“We know that if customers use our Web site and then call us, they are six times more likely to book a trip,” says Weiss. “There’s so much more on the Web site to look at — itineraries, journals, photos.” Backroads shows travel agents how they can take their customers on a tour of the Web site, which increases the prospect of booking a trip — and getting a commission.

For years, Backroads has sold the majority — as much as 85% — of its trips through direct mail, reports Richard Weiss, Backroads’ chief operating officer. Customers expected lots of personal contact with Backroads agents because, as Weiss puts it, “We’re complicated.” It’s an important part of business to place people on the right trips. Customers need to understand the level of challenge and difficulty of the trip. “It’s just not possible to do a nonpersonal booking,” says Weiss.

Besides Backroads’ internal salesforce, travel agents also have provided a certain level of personal service, and they account for close to 20% of the company’s sales.

Backroads also invests time in educating travel agents — taking them on familiarization tours of its trips — so that they better understand what they’re selling.

Still, Weiss says travel agents and other middlemen aren’t likely to survive the Internet revolution without changing the way they do business. They’ll have to improve their customer service and add value.

“A venture capitalist told me the other day [that] you can calculate the cost to acquire a customer. Say it’s 15% to 20% of the trip price. You’re going to look at the price of a Web site to acquire a customer, and if it reduces your cost, you’ll use it. We’ll have to measure that against what it costs us to use travel agents.”

There is some evidence that travel agents are getting Backroads’ message. Weiss reports that bookings originating from outside agents have increased a substantial 15%-19% in the past year.

Lesson: Rather than viewing the Web as a way to avoid the middleman, think of it as a way to help your middleman add value.

Maybe he’ll even use your Web site to help you grow.

Writer: Kathy Watson

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