Is it time to think about your category goals for 2018? Yep.
Are you hoping to somehow increase the size of your savings next year? Of course. Are you optimistic about meeting that goal? Probably not.
Would you like to show senior management that you’re adding significant strategic value to the travel category? That your approach is fundamentally aligned with the needs of the business? Therein lies my challenge.
For the last 20 years, travel procurement has measured its success by the size of its savings. Travel procurement takes the path of least resistance, happy to measure what’s easiest – ticket prices, room rates, TMC transaction fees, and the all-important discount.
This traditional cost-focused goal is no longer sufficient. It’s not strategic, and it isn’t sustainable. Travel procurement needs a bigger, bolder goal.
Step 1: Understand The Cost of Traveler Friction
Procurement professionals have long recognized the value of sourcing suppliers that offer the lowest total cost. In travel, the challenge is a lot harder. Why? Because it means selecting not only the right suppliers, but also setting the right travel polices and travel culture.
Research shows the very real cost of traveler friction. Road warriors managed by overly cost-focused travel programs have twice as much wear and tear as their counterparts in traveler-friendly programs, report more interest in new job offers, and are less willing to travel. None of that is good for a business.
And here’s the kicker – those road warriors report 22% fewer effective trips.
What procurement professional would ever endorse a category strategy that yields a 22% higher scrap rate?
If you’re focused on minimizing traditional travel costs, you’re missing the bigger picture.
Step 2: Ask The Strategic Questions
Travel procurement pros can easily upgrade their approach by putting the right questions to the right people. The right people are the travel budget owners, e.g., the SVP of Sales; or whoever has P&L responsibility and manages a lot of road warriors.
The right questions focus on the bigger picture. Try these:
- Do you want more or fewer effective trips?
- Do you want better recruiting and longer retention of your road warriors, or not?
- Do you want higher or lower productivity among your road warriors?
- Do you want healthier travelers, or not?
- Should we increase the safety of your travelers, or not?
- How much more are you willing to spend in order to get these better results?
These are really good questions to put to senior management. They’ll show that you’re looking at the broader impact of travel on the business, and that you can craft a category strategy to achieve the desired goals.
But of course you need to be prepared for senior management’s inevitable question, some variation of “Well, how do we compare to others on that issue?”
Step 3: Benchmark Your Program’s Trip Friction®
Fortunately, for those buyers that have a dedicated ARC ID, you can answer that question quickly and clearly. It starts by understanding the Traveler’s Hierarchy of Needs.
Travelers need to have three basic needs met in order to generate good impacts from their trips over the long run. So it makes sense to benchmark a travel program on metrics that reveal the friction, and the business impact risks, for each of these levels.
My firm, tClara, in partnership with ARC, has developed a groundbreaking method of benchmarking the business impact risks found in any of ARC’s ~2,000 corporate travel programs. Here’s what one page of our benchmark report looks like:
This example makes it really clear that while ticket costs are low (good, grade B), there is a lot of friction in the program (grades D and E), and therefore a lot of risk to achieving the bigger business goals.
Step 4: Minimize The Total Cost of Travel
The right goal, as far as cost goes, is to minimize the total cost of travel. That means finding the balance between traditional supplier costs and the negative impacts of too much traveler friction.
What are the dials you can twist to reduce traveler friction? The two most obvious ways are to reduce the amount of travel done on personal time, and to improve the quality of the trip, meaning a better cabin, fewer connections, and a better hotel.
Will this mean that costs go up? No. While the traditional cost of travel may go up, the total cost of travel will go down, travelers will be more productive and road warriors will have greater business impact.
Minimizing the total cost of travel is a far better goal than maximizing savings. It’s far more strategically valuable and much more sustainable. That makes it a much better goal for all my travel procurement friends…and their stakeholders.
Learn more about how your travel program can be benchmarked here.
I love reading your articles and really think you are on point. I would like to say after reading this, that the goal you are arguing for is not really reduction of the Total Cost of Travel, but to INCREASE the total value of travel to the company objectives.
Thank you, Erik. You are right, this really is about increasing the total value of travel. The problem with pursuing that goal is the degree of difficulty in measuring its success. For now, I’d be really happy if our industry evolves to measuring and minimizing all the relevant costs, especially road warrior attrition and the trip scrap rate. Here’s hoping that you and your team can figure out the revenue side in the near future. Keep up your good work at Grasp!