Creating a Roadmap for

Growing Your

Home Based Agency

Part 3 —Market Analysis

By Sherrie Funk

Hopefully, you are in the throes of writing your home based agency business plan. In this article, we’re going to discuss your Market Analysis. The Market Analysis section of your business plan provides the evidence that there is a need in the market that your agency can exploit. It consists of:
• An industry analysis, which assesses the general travel industry environment in which you compete;
• A target market analysis, which identifies and quantifies the customers you will be targeting for sales;
• A competitive analysis, which identifies your competitors and analyzes their strengths and weaknesses.

A Strengths and Weaknesses, Opportunities and Threats (SWOT) and/or needs analysis may be included to further describe the “Strengths and Weaknesses” of your business and the market “Opportunities and Threats” you face, or the met and unmet needs that you perceive in the marketplace.
It’s also important to realize that as you go about planning an agency startup or expansion, you should be doing a lot of research and learning an enormous amount about your marketing environment. Your business plan is not intended to include everything you’ve learned. It will just summarize the highlights, in a way that shows that you understand the travel industry, your market and your individual agency.

The Travel Industry
Use this section of your business plan to demonstrate your knowledge of the general characteristics of the industry we are in. Who are the major travel industry participants? While you might not compete directly against these companies (they are likely to be large national corporations), it’s important that you can identify them and why they are or aren’t successful (i.e. Orbitz, Vacationstogo.com, etc). You should also be able to discuss the important trends that may affect the travel industry — for example, significant changes in the commission structures of suppliers, in technology, or in other industries that may affect the market’s perception of your agency and your profitability.

Your Target Market
You need to know precisely who your customers are. If your agency has been in business for a while, you may know many of them by name, but do you really know what type of people, clubs, organizations, or businesses they are? What do their clones look like? For example, if you sell to individuals, do you have demographic information (e.g., their average income ranges, education, typical occupations, geographic location, family makeup, etc.) that identifies your target buyers? What about lifestyle information (e.g., hobbies, interests, recreational/entertainment activities, political beliefs, cultural practices, etc.) on your target buyers?

You may very well sell to several types of customers — for example, you may sell to individuals (FITs), corporate accounts, groups (including affinity, meetings and incentives), and you may have some government or nonprofit customers, as well. If so, you’ll want to describe the most important characteristics of each group separately. Once obtained, this type of information can help you in two very important ways. It can help you develop or make changes to your supplier mix, to better match what your customers are likely to want. It can also tell you how to reach your customers through advertising, promotions, etc.

It is also important to be able to estimate the size of your target market, particularly if you’re thinking about opening a new agency, so that you can tell whether the customer base is large enough to support your agency. For example, CLIA studies show that only 16% of the total population of the U.S. has ever cruised. That leaves 84% of the population as untapped potential cruisers, right? Wrong. Some portion of that 94% will never cruise — they are on the welfare rolls, they are in prison, they are children, they are in nursing homes, etc. So it’s up to your research to determine whether the market can meet the demands of having another travel agency that specializes in cruises.

Niche Marketing
Most travel agency marketers know that 20% of their clients book 80% of their total volume each year. If you could identify that key 20% and find others like them (clones), you could sell much more with much less effort. So, in your target market analysis, you’ll want to identify your ideal customer niche as narrowly as possible, keeping in mind that your niche must be large enough to profitably support your agency.

Influences on Travel Consumer Behavior
If your customers are primarily the ultimate consumers of your particular travel niche (leisure or corporate; cruises or land packages, or a combination of both), identification of your target market is generally done in terms of demographic and lifestyle factors. Demographics are tangible, measurable facts that distinguish one group of people from another, whereas lifestyle analysis is more concerned with the intangibles.

Your Competition
Once you’ve identified what’s unique about your agency and who your target buyers are, you need to take a good, long look at your competition. In the travel industry overview section of your business plan, you may have identified the largest players in our industry. Not all of these agencies will be directly competing with you, however. So, in your competition analysis, you’ll focus on those others that directly compete with you for sales.

SWOT Analysis
One useful way to organize information about your agency and its marketing environment is to do a SWOT analysis. While this section is not mandatory for all business plans, it can help you to think more creatively about the factors that will affect your agency.

Strength and weakness analysis is an internal agency exercise to gauge your ability to compete effectively. Opportunity and threat analysis is an external exercise centered on competitors and the external environment that affect your agency’s ability to compete. Almost every agency can come up with a list of at least five or six items, for each of these four categories.

NOTE: It is possible that a strength can also be a weakness and an opportunity a threat, or vice versa.

MARKET ANALYSIS WORKSHEET
The Travel Industry
Some key questions are:
What is the general travel industry environment in which you compete today?
Who are the major travel industry participants who vie for your clients?
What are some of the important trends that may affect the travel industry (commission structures, technology, perception of the general public, terrorism, etc.)?

Your Target Market
Who are your customers?
What type of people, clubs, organizations, or businesses are they?
What are the most important characteristics of each group?

Niche Market
Describe your ideal customer niche market, keeping in mind that your niche must be large enough to profitably support your agency.

Your Competition
Level One — List any competitors who offer the same services and suppliers that your agency does in the eyes of the consumer on a local or regional basis.
Level Two — List any competitors who offer similar services and suppliers in a different level of growth in their agency or who are more geographically remote or suppliers who take direct bookings that would have come to your agency.
Level Three — List any competitors who compete for the same incremental dollars as your agency, including car dealerships, jewelry stores, etc.
Which do you consider your greatest competitor and why?
How can you overcome this competitor?

Sherrie Funk and husband Charlie own Just Cruisin! Plus, Nashville. They founded the Travel Agent Management Academy to educate owners and managers about the techniques that have been instrumental to their agency’s success.