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Mice Net : October 2009
66 mice.net news When corporate America killed what it deemed to be unnecessary business travel in late 2008 they probably didn't realise that they were potentially cutting their profitability. Which is exactly what a new study by Oxford Economics has determined. The Return on Investment of U.S. Business Travel study, commissioned in part by the US Travel Association, is based on a combination of two separate surveys of corporate executives and business travellers in the United States, a review of related research, and an econometric analysis of the effects of business travel on corporate performance. It found that business executives indicate that the average return of business travel on revenue was between $10 and $14.99 per dollar invested across four types of trips. These include customer meetings, conferences, trade shows, and incentive travel. Customer meetings were cited as having the greatest returns, in the range of $15- $19.99 per dollar invested while returns for conferences and trade shows were in the range of $4-$5.99 for each dollar spent. Incentive travel investments yield an ROI of more than $4:$1. The study found that curbing business travel can reduce a company's profits for years. The average business in the US would forfeit 17 per cent of its profits in the first year of eliminating business travel, and it would take more than three years for profits to recover. Other findings were: • Both executives and business travellers estimate that 28 per cent of their current business would be lost without in-person meetings; • Both executives and business travellers estimate that roughly 40 per cent of their prospective customers are converted to new customers with an in-person meeting compared to 16 per cent without such a meeting. • More than half of business travellers stated that five to 20 per cent of their company's new customers were the result of trade show participation. • Executives stated that in order to achieve the same effect of incentive travel, an employee's total base compensation would need to be increased by 8.5 per cent. • An increase in government travel spending of $1 million will increase government worker productivity and therefore output by between $4.6 million and $6.3 million. Keeping customers Additional results have concluded that: • More than 75 per cent of customers either require or prefer in-person meetings. And an overwhelming majority of corporate executives (81 per cent) believe a slow economy calls for more contact with clients, not less. • According to business travellers across all industries, 25 per cent of existing customers and 28 per cent of revenue could be lost to competitors if customers were not met in-person. "This risk appears to be most acute within the manufacturing sector, where 36 per cent of customers and 38 per cent of revenue could be lost to competitors," the report says. These losses do not relate only to client-specific travel. One-third of business travellers indicated external conferences to have a significant impact on customer retention. Converting prospects The report determined that travel and sales are inextricably linked with prospects more than twice as likely to become new customers with an in-person meeting. “Separate surveys asked the same question of corporate executives and rank-and-file business travellersand the results were nearly identical," the study says. "Both executives and business travellers estimate that roughly 40 per cent of their prospective customers are converted to new customers with an in-person meeting compared to 16 per cent without such a meeting. "From a competitive standpoint, this has significant implications. Three-quarters of businesses believe that increasing travel, while competitors are reducing it, can build market share and customer relationships. Half (53 per cent) say reducing business travel will give their competition an advantage." The study also found that the relationship between business sales and tradeshow participation was particularly strong. “More than half of business travellers stated that five to 20 per cent of their company's new customers were the result of trade show participation." Building relationships The study reports that cooperative relationships are integral to company performance, and both executives and travellers confirm travel to be a catalyst to the development of relationships on every level. "For example, networking with vendors (48 per cent) and prospects (43 per cent) were among the top cited purposes of attending trade shows," the study said. A NEW STUDY OUT of the US has determined that business travel including meetings, exhibitions and incentives, increases a company's profitability. IMPERATIVETO PROFITABILITY u.s. survey finds business travel STORY BY BRAD FOSTER