In an industry where the seldom-loyal consumer is king and success depends on innovation as much as excellent service, it's easy for travel companies' initiatives to fail to achieve their anticipated return on investment. This is an especially difficult arena for small companies. But LoveMySeat.com and American Historic Inns, Inc. found that outsourcing allowed them to quickly capitalize on market opportunities, enabling them to move beyond the constraints of their in-house resources.
The founder of LoveMySeat.com, an online portal and consumer guide to airplane seat comfort reports, relied on an outsourcing strategy to successfully and cost-effectively speed up the launch of his new business at a time when competitors already had a five-year head start on the company. American Historic Inns, Inc., a key marketer for the bed-and-breakfast industry, turned to outsourcing to achieve lower costs and, in the process, gained a new revenue stream.
Whether the goal or direction is getting new consumer products to market faster or conducting business more cost-effectively, outsourcing smoothes the road for small companies in the highly competitive travel industry. Here's a look at the steps these two companies took.
LoveMySeat.com's Offshore Success
A recent Gallup Poll revealed that 60 percent of air travelers say they've experienced at least minor problems with their airline seat comfort, and 19 percent cited major problems.
At LoveMySeat.com, consumers can instantly locate the best- and worst-rated of 50,000 seat locations from 100 major American and international airlines. Seat width, legroom, data ports, audio, meals, best locations for infants and disabled people, whether a seat reclines, and whether the seat is located near a bulkhead, galley, or lavatory, are just some of the factors rated. The simple-to-use site offers information not found elsewhere and also eliminates the need to shuffle back and forth among different airline sites.
When Steven Brice, founder and CEO, wanted to capitalize on his proprietary Seat Comfort ScorecardTM methodology to create a consumer-friendly Internet portal, he recognized that time to market would be crucial but that keeping costs down was equally crucial. The Boston, Massachusetts firm decided to outsource the Web site development offshore.
"Twenty teams in eight countries did the work," states Brice. "It was truly a global effort, with developers in such locations as India, China, Ukraine, Argentina, and Europe. They had to create the graphics of the airplane interiors and seats by hand, and outsourcing was the only way we could do this cost-effectively."
The offshore outsourcing strategy allowed LoveMySeat.com to send each unique module of the product development to a different supplier for simultaneous development, thus speeding up time to market. "By using multiple suppliers, we also were not exposing ourselves to the risk of a single supplier that might have held up our timeline goals," adds Brice.
The project development was completed successfully in 4,200 hours (approximately four months), including the initial analysis on how to build the site. "By going offshore, we saved costs in the range of $100,000-$200,000 and completed it in half the time anticipated," Brice declares.
It did, however, require a significant amount of project management and coordination with development happening in eight countries simultaneously. This often adds significant costs to such a project. Brice, whose background includes developing content for informational sites for the online financial services industry, managed to avoid increased management costs through online communication services.
Having originally selected the offshore suppliers through competitive bids on the online auction marketplace, eLance.com, Brice could also take advantage of other eLance.com features. "They host posting of developed work in a common, collaborative workspace on their site, so we could view the work together with our suppliers and communicate in real time," says Brice. "We also used Yahoo Instant Messenger to communicate in real time, and that really helped cut down on long distance costs."
The site updates seat comfort and airplane interior research, which was conducted initially by more than 20 independent research firms, continually including a unique feature of travelers' tips on seat locations. The company also outsources the hosting of LoveMySeat.com to IntegrityHost.com, which maintains the site 24x7.
American Historic Inns' Publishing Strategy
US travelers driving the highways for their vacations and romantic getaways this spring and summer can offset high gasoline prices by taking advantage of a Buy-One-Night-Get-One-Night-Free program offered by 1,500 American innkeepers. The free-night coupon can be found in the annual "Bed & Breakfasts and Country Inns" guidebook published by American Historic Inns (AHI). The California-based firm also runs iLoveInns.com, an online directory for bed-and-breakfast and country inns, listing 19,500 properties; and it provides targeted direct-mail campaigns for the inns.
"We're a key marketer for bed and breakfasts to consumers and also a marketer assisting consumer-goods manufacturers wanting their product samples and promotional programs placed in bed and breakfasts," states Jennifer Engevik, Communications Manager at AHI.
Knowing what information needs to be in the guidebook and direct-mail campaigns is AHI's expertise, but the company turns to outsourcing for printing these items.
CDS Publications in Medford, Oregon not only prints the guidebooks--10,000-20,000 of them each year--but also handles the fulfillment process. AHI ships the print files electronically to CDS. CDS manufactures the guidebooks and stores them. When orders come through, they process the order, add the guidebook inserts, and then mail the books to consumers.
Todd Hobbs, AHI's Account Manager at CDS, says, "We bring value and good solutions to make our clients more effective." For example, they make suggestions to AHI for print cost savings at a pre-production meeting. In addition, they provide cost-savings options for shipping the guidebooks, depending on whether clients want tracking functionality or other features.
Three years ago, capitalizing on its printing expertise, CDS suggested a significant change--targeted short production runs--for the guidebooks. "Our suggestion was that they sell a particular number of guidebooks to innkeepers who want a high-quality photo of their bed-and-breakfast or inn as the feature on the cover of that number of guidebooks," explained Hobbs. This is now a big hit with various innkeepers seeking a marketing edge and generated a new revenue stream for AHI.
For the past five years, DBR Enterprises, Inc. in Sioux Falls, South Dakota, has printed the target direct-mail pieces for AHI. Engevik says, "Years ago, we did this in-house, but we realized our time and effort would be better spent on our business and letting someone else handle this process." The design work is still handled in-house; DBR prints, addresses, and mails the items.
"Last year we did over 10 million pieces of mail," says Anna Fregon, DBR's owner. "Our volume enables us to get mailers printed and mailed at lower costs, which we pass on to our clients." In addition, DBR's automated equipment and software results in lower pre-sorted postage rates.
AHI targets mailers primarily to people who buy the guidebooks. "It may be a postcard, letter, or holiday card that we send out. We also have the resources to hand assemble a mailer that can't be assembled by machine or stuff an envelope with multiple inserts," Fregon says. She adds: "AHI expects us to determine the best way to do a high-quality job at the lowest cost."
For AHI, outsourcing not only eliminates the cost of investing in equipment, space, and expertise for an in-house printing process, but Engevik points out that it also allows AHI to take advantage of significantly lower costs available outside California.
Lessons from Outsourcing Journal:
- Outsourcing is an ideal operational strategy for small companies, as it enables them to move beyond the constraints of their in-house resources so they can quickly capitalize on market opportunities.
- Outsourcing a development project to multiple offshore suppliers is sometimes an effective strategy; however, costs can increase with managing, coordinating, and communicating the offshore resources.
- An outsourced printing and fulfillment process will result in lower costs because of the supplier passing on savings from its volume for other customers. It also eliminates the need to invest in expensive printing and mailing equipment or storage space.
- Choose a supplier whose goal is to provide good solutions and added value that makes their clients' businesses more effective.