BY LEW ALFLALO
Affiliate work continues to be one of our industry’s greatest strengths. Having one company—your company—manage a traveling executive’s transportation in his home city as well as in his destination city is just smart business. The opportunities to gain corporate travel revenue are there—if you have an affiliate network in place, and the companies you partner with have the same standards and service level as your own.
There are many aspects of affiliate work: Some companies only farm out, others receive inbound work from large networks, while others may not have tapped into an affiliate relationship outside of local work at all. Regardless of where you are on that spectrum, it’s imperative that you vet your potential affiliate’s service and safety record. Have you met with them? Have you received W-9s and certificates of insurance listing your business as additionally insured on their policy? Do they have a workers’ compensation policy, if required in their state? What is the age and condition of their fleet? Are they properly permitted for the airports and jurisdictions that they service? Is their customer service or dispatch available 24/7? My experience is that most owners will locate a company in the needed market, get the affiliate rate, and send the job if it sounds good. Risky? You bet. It might work just fine... but then again, it might not. You should put the same effort into selecting the right affiliates that you do in gaining your customers’ loyalty.
Best Practices for Selecting Affiliates
Finding an affiliate can be hard work, and fortunately there are a number of resources that can help you to connect with the right partners. I find that industry trade shows are ideal opportunities for operators to meet and form mutually beneficial partnerships. The trade shows that offer affiliate forums specifically design them for networking. Obviously, you can’t sit down with 500+ operators during a multi-day show, but what you do once you get back home is crucial even if you’re only able to making a brief introduction. Identify the markets where you lack an affiliate presence, and follow up with the affiliate managers.
While it is true that many companies have established affiliates that they regularly use and might not be looking to change in your market, you will be surprised at how many will listen and genuinely consider using your company. It comes down to how well you present your business and your ability to deliver on the service levels promised and the rates originally quoted. However, don’t try to break up relationships or force an affiliate manager to use your company—respect is key here. Even if you aren’t an affiliate, the connection could be valuable to both of you in the long run.
Shows and association meetings are great places to initiate contact and maintain friendships, but sometimes you need an affiliate on the fly or in a new market. In those cases, directories like Affiliate Central in this publication or the annual National Limousine Association Directory of Members will include companies from all over the world. Of course, industry peers who can make a warm introduction are an even better option. Members of the various industry Facebook groups consistently swap suggestions for good companies in specific cities.
International Affiliates
To have a complete global network of providers, you will need international affiliates as well. You might not get a lot of inbound work for these markets, but if you do, you want to be prepared. Take note, always remember to get the quote from your affiliate and convert it into American dollars before you quote your client on the price. Then, when billing your customer, use the currency exchange conversion for the actual day of the job. These exchange rates fluctuate, and you don’t want to commit to a price for a reservation that might be made a month in advance.
Working with Local Competitors
Your local affiliate is generally going to be called upon for one of two reasons: first, when you are overextended; and second, if your fleet doesn’t have a certain type of vehicle (e.g., shuttle or party bus) or yours is unexpectedly out of commission. Selecting these partners is a little different because, let’s face it: These companies are vying for the same business you are. Being in the same market means they are fishing from the same pond. While this has the potential to be problematic, it doesn’t have to be. Obviously, the same service standards need to be met.
There are two schools of thought on choosing local affiliates. One is to pick a larger company, so there is a greater likelihood that they can cover your jobs when you need them to. The other is to consider smaller companies (or even independent operators) who might not have a lot of work but can complete the job for a potentially more competitive price while still providing the service level you require. Remember, I previously mentioned that cost should not the determining factor, but when all other things are equal, it still plays a role.
You never want to lose money when farming out a job to a local affiliate, but, unfortunately, this is sometimes the reality. Conversely, when farming out to another market, you will always generate revenue as you give your client the rate after you have secured the all-inclusive affiliate rate. The business is cyclical; when you’re busy, usually your local competitors are, too. This means that sometimes they cannot accept the work you want to give them. It forces you to choose other companies whose rates may be higher than what you are charging your customer. Obviously, this is not an ideal situation, but you have to cover your work. This being said, I try to form relationships with several local companies that will work with me and vice versa. It is mutual understanding that allows the company receiving the work to be somewhat flexible on what they charge you, because the job you give to them is something they didn’t have, and they want you to keep dialing their number when the need arises. This works well when the management of both companies have come to a mutual understanding, because we all have days when we need help covering our trips.
Revenue Potential from Major Companies
For small to midsize limousine companies, there are ways to build your daily trip count and increase your revenue. For instance, Dav El/BostonCoach, EmpireCLS, and Savoya are all global ground transportation companies that maintain a huge affiliate network of providers to do work in the markets where they do not utilize their own assets (or for when they might be overextended themselves). If they are interested, they will send a representative to your company, inspect your fleet, examine the necessary documents required, and so on. They will provide you with company signage for you to use when you are doing trips they send to you. Respect the affiliate manager if he says no the first time around because they already have affiliates in your market; they receive numerous requests from operators just like you all the time. There’s a fine line between being persistent and being annoying.
Money Talk
While price is always important, it is no longer the prevailing factor. Delivering excellent service on par with your affiliate, however, is critical. If you were to do a cost analysis for the same trip, between an industry Goliath and another company in the same market, you will invariably find the big company is more expensive. There are myriad reasons for this, the first being that you often get what you pay for; impeccable service levels, a new fleet, attentive customer service, and state-of-the-art dispatch centers and maintenance facilities come with a price tag. That’s not meant to disparage smaller operators—who comprise the majority of the industry—because most run a professional service and will treat your clients extremely well. My experience is this: I would rather pay a little more and know my customer is in capable hands with my affiliate than make slightly more money and have constant stress. When you choose an affiliate, there are many factors to consider—but peace of mind is invaluable.
The easiest way to get rates is to be proactive and request the company’s affiliate rate sheet. Companies with a lot of affiliate work have rate sheets to the major airports in their market from the cities and towns they serve in their immediate area. This can be downloaded into your reservations system, although you should call to check availability first and, when doing so, confirm the affiliate rate that you have. Having these rates in your system will make it easier for your reservations department when receiving the ride request from a client so that the lag time between a request and quote is limited.
Whether to discount rates or not usually generates a lot of questions. In my experience, the affiliate discount provided to the company sending you the work is usually 10 percent off your base rate for that trip, although there are companies that offer up to 15 percent, depending upon volume and relationship. This is a negotiating tool you can use.
Goals for Growing
There are industry parameters that are widely accepted when discussing the percentage of farm-outs to out-of-market affiliates your company should be aiming to achieve. Basically, if you are farming out 30 percent of your total daily trips to destination affiliates, you are doing quite well. At this level, you are not only providing your clients the service of continuation of travel, but you are generating revenue that has minimal overhead cost. Keep in mind: Every time your client chooses to get picked up in their destination city, they will need a ride back to that airport. That’s two trips for your company, and two farm-outs. Ideally, you will find partners who will give you their work in your market as well, but don’t let it be a deal breaker. Top-tier markets and destination cities are going to be busier than smaller cities.
Monetary rewards are a good way to encourage your reservations staff to remind clients of your global affiliate network when taking inbound calls. A dollar or two for each out-of-market farm-out booked is an incentive that adds up quickly. While is it part of their job description, sometimes a little bonus goes a long way in helping them remember to offer services as soon as they type in the airport our client will be landing in. The program has worked well in companies I have administered this in, and has increased our destination affiliate work by nearly 30 percent.
At times, the corporate office staff who books travel are not aware of the “one-stop shopping” option. They will book with you for one leg of the trip and then with another company directly for the pickup in the destination city. Make sure you tell your corporate clients that this is possible. Ranking Your Affiliate Partners
Today’s transportation software is multi-dimensional and allows you to rank your affiliate partners in a specific city. When creating your network, it is best to choose at least three affiliates in the same market area. In big cities, selecting three is no problem; for smaller markets, you might have just two. They should be ranked using the metrics cited previously: Age of fleet, safety record, service levels, cost, insurance, proper licensing, and whether live people answer their phones 24 hours a day. This ranking helps your reservationists choose the company that best suits the needs for the job you want to farm out. It is a good idea to put notes in their company profile, such as a list of specialty vehicles they might own. This minimizes the time needed by your employees to properly make that reservation. They will be equipped with the tools to succeed.
Finally, it is important to remember that we are in the hospitality business: We sell a service, not a tangible good. Your client is paying you to get from Point A to Point D and then back on their return trip home, even though the affiliate you choose will get your customer from Point C to Point D. Our clients trust that we can transport them to their destinations safely and on time. We do not get many chances to fail at this objective before it has a negative impact on our businesses, our reputations, and our bottom lines. [CD12115]
At the 2015 Chauffeur Driven Show, Sami Elotmani of Destination MCO in Orlando and Jorge Sanchez of Hermes Worldwide in Denver served as panelists for one of our most popular seminar topics, affiliate networks. It’s one of the reasons why people attend trade shows and lets operators build bonds with other operators all over the globe. This is some of their best advice from that session. The audio of this seminar is also available at chauffeurdrivenshow.com.
Think of building an outbound affiliate network as profit-driven. It’s essentially the same process in every city. On the other hand, inbound affiliate work is relationship-driven. You are building connections with your peers and getting them to place their trust in you with their clients.
Tips for Inbound Work:
- Compile a presentation packet that includes your fleet information, insurance, rates for key markets, and a concise affiliate agreement that you can bring to meetings and industry events where you are looking to connect with like-minded operators. Back at the office, you can also email it to the potential affiliates you met, which shows that you are organized, professional, and efficient.
- Don’t forget that you are your company’s best selling tool, and people prefer to do business with people they like. Don’t just drop the presentation packet at an affiliate event and walk away. Also, don’t be the drunken guy at the bar at industry events. Find a balance between your “fun” self and your “work” self.
- Train reservations staff on how to handle calls from potential affiliates, especially your weekend and overnight crew. Having a step-by-step process on run-of-the-mill requests with clear rate sheets will help to simplify things; providing a speedy quote can make the difference between someone giving your company the job or fielding it with another affiliate. It also saves your staff from having to call your affiliate or sales manager at 11 p.m. on a Sunday.
- Staff attitude matters: “Many times I’ve spoken to a late-night staff member at an affiliate’s company who doesn’t regard the call as important because I'm an affiliate and not a ‘regular’ client,” says Sanchez. “Make sure your staff is treating everyone the same. Your reputation precedes you, particularly if you do an extremely good job, and we all know that this is a relationship-based business. If you’re doing a really good job for them and you’re treating their staff with respect, you’ll likely be the first company they think of when referring work.”
- Understand your company’s limitations: A majority of operators own 10 cars or fewer and aren’t equipped to handle all types of jobs. Don’t overcommit yourself or overpromise only to under-deliver. If your company excels at meetings and events work but not at weddings and bachelor parties, stick with what you do best. On the flip side, if you can only handle a percentage of a large group move, speak up and let them know that you can tackle only part of the job. Splitting the job might be easier for the affiliate company to book.
- Have patience: Building a network is done a little at a time, and through managing relationships. “When I attended my first trade show in 2010—when I was younger and stupider—I thought I would leave the show with an additional $150,000 in revenue. Let’s just say that it didn’t happen,” says Elotmani. “Don't try and charm your way into affiliate work; you have to earn your stripes and build the trust, both of which take time. Start with more realistic expectations, like meeting your peers, learning as much as you can from others, and then applying that to your company to position it in the best possible way that is attractive to affiliates.”
- Be different, in a good way: One way to make your company palatable to others is to have something that your local competitors can’t or won’t offer, such as a specialty vehicle, expertise in group work, or a connection with a large event. Become their go-to company. Use your strengths without exaggerating your capabilities.
Dos and Don’ts of Building Affiliate Networks
Do:
- Consider smaller companies: There are literally hundreds of them, compared to a handful of large networks. Those owners who are hungry will be eager to do a great job to earn your business.
- Handle incidents and disputes in a timely manner, preferably within 24 hours. A quick resolution is best for everyone involved.
- Establish and maintain open communication at all times between your affiliates and your staff. Play matchmaker and connect your peers with other trusted peers, which is beneficial to all parties.
- Ask your potential affiliates how they would handle an incident. If they have trouble with an answer, they may not have a system in place to handle affiliate issues.
- Ask before you farm out a farm-out: Some affiliates trust your judgment, but don’t assume this is OK. Get permission.
- Site visits when you can, but always ask for references/suggestions from trusted peers.
- Be a good partner!
Don't:
- Break trust, which is crucial in an affiliate relationship: Once it’s broken, it’s impossible to recover.
- Bash your local competitors: Let your reputation and work speak for themselves.
- Become dependent on revenue from a single affiliate partner: Inbound affiliate work is still a third-party business and is the first to go if your affiliate isn’t doing well financially.
- Blast blind emails to peers with lengthy introductions: Try to call instead and form that personal connection.
- Collect business cards at shows and events: Instead, collect relationships and build genuine friendships without any preconceived expectations.
- Demand reciprocal work: Some markets simply don’t have the amount of business that others have.