Let’s imagine a classic example of a perfectly competitive market: the supply is standardized, there are no barriers to entering or exiting the market, demand is stable, and there is virtually an infinite number of suppliers. A typical example of such a market is a line of beggars sitting in front of a church.
Well, no, not typical. The beggars at the church steps are more like an example of oligopoly, and there may even be elements of cartel collusion. They distance themselves from competitors by their appearance of disability, fighting for the best spot in the group, and so on. But importantly, even the beggars don’t think to attract their “clients” with shouts like “You can pay me less” or “I have discounts.”
Let’s set this example aside for now and take a look at the real market, say, of tourist services. In this market, “spine” agents have evolved, who call several travel agencies in a row until they get tired, only to find out that the prices are the same everywhere. They will either stop at the last agency they called, at one that they happened to like, or at one that, surprise, decided to forgo its commission and offered the client a discount.
In this case, the “backbone” first makes the initial agent work to find a tour, and then it calls other agencies, already knowing all the details of the tour, to negotiate a lower price. Essentially, the “backbone” is taking advantage of the first agent who actually provided the service and did the work.
Agencies, in their pursuit of an ideal competitive market, start to lower their prices, leaving themselves with almost no commission—just to attract clients. What is often forgotten, however, is that it has long been clear that paying for travel services through an agent (or specifically this agent), rather than directly online, is a voluntary choice for the tourist. For their money, they receive something intangible, some kind of “service,” rather than a trip that can easily be arranged without intermediaries. Essentially, the client voluntarily sacrifices 5-10% of the tour cost to the agent. This is akin to a tip, a form of charity. It brings to mind the image of beggars with signs saying, “We have Christmas discounts!”
How to get more donations? Make them empathize, of course. Build a relationship, make a good impression on the client, but definitely don’t mention that you’ll be free as soon as they pay, and yes, for less than your competitors.
That’s why in markets like tourism, it’s not worth offering discounts at all. You shouldn’t try to book a tour over the phone. Don’t rely on the “backbone” to choose you. Don’t be afraid to refuse a “backbone” a phone consultation; instead, invite them to your office and ask them to leave a deposit. Rude? No. I’ll show you a conversation script below. Effective? Yes. In a meeting, after getting to know each other and looking the person in the eye, you can explain what exactly is being purchased and how the agent spends their time finding a tour based on the client’s whims. In such an environment, it’s also easy to explain that $100 on a $2,500 tour is not an amount worth regretting for a normal service. Don’t be afraid to show your commission, and perhaps it would be worth calling a few other agencies together with the client. Let the client feel free to make calls. It’s better for them to call from your office than from their home. This is the approach, not “We have bigger discounts.” And don’t be afraid of “discount hunters.” They won’t earn anything anyway. Don’t be afraid of phone calls when a client refuses to come in—let them keep calling. Your client is the one who comes to the office. You can look them in the eye and ask, “Did you like how we worked together?” “Do I deserve to receive a commission from the sale?” “A discount? Fine. How much are you willing to take from my pocket?”
And now, what could the conversation script look like: — Good afternoon, I want to go to Austria for New Year’s, how much does it cost?
— Wonderful! When will you be able to come to our office so we can help you choose a tour?
— Well, I’m not ready yet; I would like to know the prices.
“Well, you know, the prices are the same everywhere. But we can take our time with you in a more relaxed setting. Plus, we’ll help you see for yourself that others offer about the same or nearly the same. So, when can we expect you? Would it be convenient for you to come by after work today?”
— Yes…
“Then please bring your passport and take about 300 dollars in case we make a decision and you can book the trip and pay the deposit right away, without having to visit our office again. There are such traffic jams right now. Do you know where we are located?”
— Yes…
— Would 7:00 to 7:30 PM work for you?
— Yes…
— Please don’t be late. I will set aside this time just for you and won’t serve other tourists. Agreed?
— Yes!
— Then, see you! All the best. Call if anything’s wrong.
— Agreed! Goodbye!
Remember the porch and the beggars with discounts? Now the entire market is becoming so flat that you can’t make money with discounts anymore.