The Dangerous Gamble of Marketing Dependency
The common phrase “don’t put all your eggs in one basket” originated in 1605 in Don Quixote when author Miguel de Cervantes wrote, “It is the part of a wise man to keep himself today for tomorrow, and not venture all his eggs in one basket.”
419 years later, this phrase survives because it still rings true. It has been used for more than four centuries to clearly illustrate the dangers of single-option dependency. We don’t love dependency, but we do love the ease it often creates, so we unintentionally become dependent.
As more and more tech companies pop up, promising to be the shiniest, most innovative, AI-infused, all-in-one solutions to every business bottleneck or roadblock you’ve ever encountered, it’s hard to resist the urge to sign a contract, lean back, and let another business take the burden of results.
The Danger of Depending on OTAs
Dependency
Addicted to Online Travel Agents (OTAs) to supply the majority of their rental bookings.
Ease
You build the listing, send it live, and let the bookings come in. They give you a nice interface to manage everything from your reviews to accounting and local resources to help you stay informed about rate fluctuations and market conditions—all of this compelling the human psyche to gravitate toward this straightforward, efficient system that will save time and is proven to generate bookings.
Problems: So many!
1. Branding Issues
Consumers don’t understand that they are staying at property XYZ, but if they booked on Expedia, they are actually Expedia’s customers. Need to cancel? Call Expedia. Want a refund? Call Expedia. If you’re a boutique hotel with quaint charm, telling your incoming guests to go sit on hold for 20 minutes via Expedia’s 1-800 number doesn’t convey that quaint branding well.
Related: Making Marketing Happen
2. Data Ownership
OTA owns the customer data, making it harder to legally market to them, something that will continue to get harder as states tighten data privacy laws. So if your marketing strategy is emailing them discounts post-checkout, you could be in violation depending on if you got their direct consent outside of their OTA-provided check-in details.
3. Commission Costs
This should be #1, but I saved the biggest and best reason for last. It’s not economically savvy to set your marketing on a set % commission that has no option to improve with time and effort. Here’s what I mean—if I continue to depend on OTAs and they charge me 20% and I write that off as a marketing fee, my fee will always be 20%. However, if I simultaneously start investing in direct booking tactics, your costs stand a chance of decreasing as your direct booking customer base, email list, social following, web traffic, and direct interest grow, giving you the opportunity to eventually lower per booking marketing costs significantly below the OTA commission.
Solution
Use OTAs as a search engine, ensuring your property gets found by consumers. Once most consumers find a property on an OTA, they Google, Facebook, Instagram, and Pinterest search the places that interest them, scoping out the profiles and online reputation of each option they’ve narrowed down to. If you’ve made it onto that list, they have identified themselves as your ideal customer. Depending on the search options they put in, you must fit the location, sleeping capacity, availability, and amenities that they are seeking. Now their decision comes down to the details. After they have raised their hand at you by visiting your website or social profiles, this is where you have an opportunity to make them your customer, not the OTAs. There are limitless marketing strategies to capture these shoppers and turn them into direct bookers.
The Danger of One Channel
Dependency
Using one marketing channel (i.e., Google Ads is working for us, so we don’t want to break it or add anything new).
Ease
Set it up; if it gets results you can depend on, then there’s no reason to touch it, just the occasional update.
Problems
The actual problem here is that the ease is false. False narratives have been pitched that online ads are this miracle where you can put $500 in and get returns for low effort. That’s just not true. Professional management of ads requires ongoing efforts such as reviewing lead quality and ROI, creative testing and change-outs, conversion optimization, and most importantly, staying on top of the changes these platforms make and knowing how to pivot when they make them. In an instant, Meta may remove a targeting parameter or change a policy that shuts all your previously running ads down—what would you do?
Another problem is that consumers are distracted and their attention is in a million places when they are online. You have seconds or less to get their attention. By only using one channel, you miss opportunities for multi-touch points that can have an immense impact on where a consumer chooses to book thanks to the law of familiarity.
Solutions
Most marketing efforts are directly impacted by other efforts. For example, your costs on Google Ads can be affected by your organic ranking score, which you can consistently improve with an SEO strategy. Craft multi-channel strategies customized to fit your resources, operations, availability, budget, and market while meeting your short and long-term goals.
Related: How to Prioritize Your Marketing
Lots of Choices, Lots of Failure
There are customized solutions for every problem, industry, budget, and company. “There’s a Software for That” should be the business landscape’s version of Apple’s trademarked “There’s an App for That.” You can’t go on LinkedIn without getting served some type of software ad—no matter your industry, department, or seniority level. “Streamline This. Optimize That. AI is Everything and We Have It Figured Out.” “We Will Handle Task X For You.”
But with so many new companies, there are also many companies going out of business. A Failory study found that the tech startup industry has the highest startup business failure rate at 63%.
In September of 2016, channel manager LeisureLink shut down overnight. Anyone in the industry at that time likely remembers the domino-effect nightmare that occurred post-failure. Customer deposits lost in limbo. Property-to-incoming guest communication issues. It was whose functionality (and therefore ceasing of functionality) affected accounting, owners, operations, marketing, customer service, management, and more.
LeisureLink had been in business for 10 years, it had raised more than $34 million from investors, top industry professionals were involved with the product, and it had connections to industry-leading booking engines. There was no reason not to trust them as a tech partner. But as Frank Putnam, CFO at channel manager NextPax, said in an article about lessons from LeisureLink, “The fact that companies raise millions in funding and have top industry professionals on their boards, ultimately guarantees neither the survival of their businesses nor their guest bookings.”
Other Hidden Risks
There are less severe dangers in marketing dependency outside of companies completely going dark.
Dependency on any third party that is paid based on percentages or sliding scales can have major impacts on your profitability. The best example of this is online travel agents (OTAs). If you depend on them for your rentals and don’t invest in any direct booking initiatives, you will always be stuck paying their hefty commission. Alternatively, if you use OTAs to generate bookings while simultaneously growing your direct booking initiatives, your dependency on them and profits shared with them will diminish.
Just like the nuts and bolts of your onsite appliances may break from time to time, leaving you with downtime and needed expert fixing, so can the software and connected devices that your business may depend on. There’s chaos when a credit card machine or elevator goes down—the same can be said for a website, booking channel, data connector, and more.
Changes and Challenges
No matter what your preferred marketing platform or industry, changes can (and will) happen. You don’t control Facebook, Instagram, Google, web browser developers, email providers, consumer trends, economic fluctuations, news coverage, etc. Anything from a stock market downturn to Google updating its algorithm can have an impact on your marketing efforts. Being overly reliant on Google Ads and never caring about organic search could cost you in the long run if Google makes changes to its paid ads algorithm or more competitors enter the landscape and your results decrease without having another lead stream in place to supplement downturns in another place.
The Dangers of Multichannel
Seems like a contradiction, right? I just spent all those words telling you why you shouldn’t depend on something just to turn around and tell you that there are also dangers lurking in the segregation of too many platforms, partners, and tech tools.
I recently reviewed a quote for a company to get customized website hosting from a provider within their niche home services industry. The quote was incredibly high for website hosting. Upon further review, it included services like a CRM and review management—two functionalities they already had with their existing CRM. Choosing this solution would have either left them overpaying to have duplicate CRMs, one of which they wouldn’t be using, or they may use the CRM or an employee may accidentally use the CRM, and data may get lost or muddied. Reviewing for overlap is essential to not overpaying or choosing providers that aren’t a good fit for your current tech stack.
Instead of choosing that solution, they went with one that was strictly web hosting for a much lower price. That doesn’t mean the all-in-one solution wasn’t a good deal for a new company that didn’t have an established CRM, but for this company, it wasn’t the best choice.
Not every software is a fit for every company.
There’s also potential competitiveness that can occur when using too many solutions or vendors. For example, if you’re running Facebook ads and you also hire a company to do some remarketing for you—their remarketing efforts may also include Facebook ads. By segmenting these efforts, not only are you competing for the same ad space with yourself, but you’re adding costs and decreasing reporting, optimization, and creative efficiencies.
Insuring Your Efforts
Sadly, there’s no 100% definitive way to select tech vendors—from advertising platforms like Google to software like Salesforce—and ensure they are the perfect fit. I hope you never encounter a major outage, vendors going out of business, or traffic-altering algorithm updates, but if you do, here are some tips to be prepared.
● Own your data:
Ensure you always own your data and aren’t handing it over to any platforms, or understand what data privacy and security protocols they have in place for any shared data.
● Insurance
Cyber security, data breaches, and software outages all have the ability to be added to business insurance policies.
● Own your platforms
If your marketing strategy involves anything like Google Analytics, Google Ads, Meta Ads, etc., make sure you choose an agency, consultant, or partner that helps you set them up but ultimately the company owns the account. This protects the company from losing an ad account and all the historic data if they choose to switch agencies, providers, or bring the ads in-house.
● Have a backup plan
Know what you will do if any system has a catastrophic failure.
Dependency in marketing is a dangerous gamble. If your business depends on paying its bills with income from new customers, keeping up with marketing in a world where both consumer behavior and technology change rapidly is infinitely important for survival and growth. Spreading your eggs out across a few carefully selected, well-maintained, and continuously optimized marketing strategy baskets will give you a peaceful reliability that isn’t associated with gambling.
