By Paul Moore
While the media is abuzz with stories on how to leverage online video and Internet conferencing apps to hold down expenses, some businesses are adding to the bottom line by winning new customers the old fashioned way: they are visiting them, in person.
An industry study (PDF) shows that there’s a direct connection between how much a company invests in business travel and its overall profitability. Okay, full disclosure time—the report was funded by the U.S. Travel Association. However, the group hired the respected Oxford Economics, an adjunct to Oxford University’s business college, to do the research.
Faceoff: In-Person vs. Online Meetings
The study included both econometric analysis and surveys of business executives. One of the more interesting things the execs had to say was that they believe in-person meetings are crucial to turning prospects into new customers. Apparently, face-to-face meetings convert prospects to customers at about a 40 percent clip. Without a “real” meeting, that rate falls to just 16 percent, the executives estimated. In other words, prospect conversion more than doubles when business is conducted live and in person.
Of course, the substitutes for actual meetings are many, including the old standby telephone call along with emails, online video conferences and more. In any case, the real deal seems to trump all the other options for bringing prospects onboard.
Taken from the prospective of a company’s travel budget, the Oxford Economics study says that there’s a $12.50 return for every dollar invested in business travel. Further, it concludes that on average a company’s profits drop by 17 percent the year it decides to eliminate business travel and that it takes more than three years for profits to bounce back.
Despite the business travel payoff, just over half—51 percent to be exact—of the businesses surveyed for the study said they had recently cut back their travel budgets. The reductions averaged 35 percent.
Another survey done by Northwestern University’s Kellogg School of Management, and cited in the Oxford Economics report, shows that in-person meetings are also critical to customer retention rates. Failing to meet personally with existing customers would result in a loss of up to 25 percent of those customers. Revenue lost would come in at about 28 percent. Competitors willing to show up in person would make significant inroads.
The biggest risk here seems to be among manufacturers who estimate a revenue drop of 38 percent if they decide to keep their road warriors at home in the stable and fail to maintain personal contact with their existing customer base.
Not long ago the public was treated to almost unending reports about federal agency conferences gone bad. Media accounts of a General Services Administration’s convention in Las Vegas looked more like a college coed Spring break video than the work of a public agency charged with the mission to help minimize taxpayer costs.
In fact, among the various sectors of the U.S. economy, government is the third biggest spender when it comes to business travel. If we can get the image of Congressional junkets to tropical islands out of our minds for a moment, the Oxford Economics study suggests that an increase of $1 million dollars in federal government travel expenses would result in an increased worker productivity payoff of as much as $4.6 to $6.3 million. Yes, we did use the words “government” and “increased productivity” in the same sentence. According to the study, it can happen.
We’ve seen airlines tighten up on their reward travel programs over the years, but the study indicates that within a company, dolling out travel awards as incentives is one of the most powerful ways it can motivate employees. While the airlines may not be rewarding you so much today, don’t stop rewarding your workers.
People tend to view travel as a luxury and psychologically it can have a bigger impact—when measured dollar-for-dollar—than other ways companies devise to reward job performance.
TIP: If you’re the decision maker, be sure to pop for any baggage fees when you’re bestowing travel awards on your high performers.
Finally, as much as we’re in love with technology like Skype, GoToMeeting and Scriblink, it looks like they’re not a complete replacement for the personal touch. We still need to amass those frequent flier miles.