An increasing number of carriers are turning to third parties to conduct sales and marketing outside their home territories
Discover the World Marketing, a fast-growing Arizona company, has just signed a significant contract with Virgin Atlantic Airways to handle its sales and marketing throughout much of Europe, bringing to over 30 the number of airlines it represents around the world.
The new deal is just the latest in what appears to be a growing outsourcing trend as cost-conscious airlines look for smarter ways to handle sales outside their home markets. An increasing number of carriers, both international and regional, are deciding they cannot adequately, or financially, represent themselves all around the world.
Discover the World Marketing, a private company created 23 years ago, is one of the main players. It expects to generate more than $800 million in revenues this year for its clients, which include Aeromexico, Alitalia, All Nippon Airways (ANA), America West Airlines, bmi, Cathay Pacific Airways and others.
Discover has 75 offices in 52 countries, including a small European regional centre outside London. The company has 80 employees, including five in the UK, but all other offices are independent licensees doing business as Discover the World Marketing. They are backed financially by the US company but have their own staff.
Discover is not alone. Its main competitor is Germany's 10-year-old Aviareps, which has some 40 offices worldwide, primarily in Europe and Latin America and operates as a general sales agent (GSA) for more than 40 carriers, including many smaller national airlines. The company says that, among other work, it generated revenues of just over c150 million ($180 million) for clients in 2002-3.
Jerry-Max Theophile, director marketing services and IT manager for Aviareps in Miami, says the company expects more carriers to outsource sales in off-line markets and for existing clients to expand their representation. "Even larger carriers are looking into this because it is just not economically feasible to maintain a presence everywhere," he says.
The representation varies by carrier. Some, like Qantas Airways and Singapore Airlines, have signed Discover to represent them in a single country, but many have ceded broader responsibility to such representatives. For instance, Aeromexico is represented by Discover in 20 countries and ANA in 12 Latin American nations.
Bmi, which appointed Discover as its GSA for some off-line markets in 1993, has systematically moved the majority of its international sales representation to the company. Adrian Parkes, bmi commercial director, says that the key test of the success of its relationship was for Discover to increase bmi's local revenues and presence. "We can measure their success quite clearly by the growth in our revenues," he says.
Discover now represents bmi in 43 countries, including the USA, where it also operates a bmi call centre to handle US and Canadian calls. "They are probably responsible now for 90% of our off-line markets and also represent us in some on-line markets," Parkes says. "They have grown from a traditional GSA to becoming a partner within bmi - an extension of our sales and marketing and distribution activities."
Jenny Adams, Discover's chief executive and its owner, says outsourcing allows an airline to focus on its key revenue streams while Discover develops other market opportunities with minimal risk on the airline's part. The carrier gains local knowledge of a market and contacts without having to worry about the country's business or labour laws, banking, currency fluctuations, ticket sales and remittance problems.
Discover is paid a percentage of the additional revenues its activities generate for the carrier, using as a baseline existing revenues in the market when representation starts, which provides plenty of incentive to perform.
Besides sales and marketing, which account for the largest proportion of its activities, Discover provides a wide range of other services including advertising design and translation and extensive financial services. Earnings of individual offices are based on how they perform in their particular country for Discover clients, with additional cash awards and other prizes as sales incentives. "Most were working for airlines before but had a cap on their earnings potential," says Adams, who spent eight years at Frontier Airlines in reservations and marketing. "We wanted to create a motivational sales force, using tools they couldn't create in an airline."
Discover has also tackled cargo. Retained by United Cargo, a United Airlines division, about 18 months ago, Discover took a fresh look at how cargo was being marketed and decided to apply passenger ideas, Adams says. It created Club Cargo, a loyalty programme in which customers would get mileage for their business. As a result of its success, United has signed Discover to handle certain US travel agencies and come up with new marketing on the passenger side.
report by carole shifrin in scottsdale, arizona
Source: Airline Business