Lessons From The YuMi Alotau Accelerator - Part Two
We’ve had another fantastic week with the YuMi Tourism Partners Program in Alotau, Papua New Guinea.
This week saw the teams working on their pitches, conducting customer interviews on board a cruise ship, and redesigning their businesses based on these findings.
Here are some of the interesting lessons that stood out to me…
Travellers vs Tourists
Our tour operators are selling to two very different groups of people: travellers and tourists.
Travellers want to see the world, experience new cultures, meet interesting people and hear their stories.
Tourists on the other hand, want Disneyland.
If they aren’t in America, they want the local equivalent – in our case they want a Papua New Guinea theme park.
That sounds ridiculous, but it’s true.
They want western toilets, western food, short lines, air conditioned buses, shows every 10 minutes, paved roads…just drop the local culture into a western shell.
This was of great amusement to our participants, who instantly recognised these archetypes in their customers.
There are good aspects to both groups, but you have to know who you’re dealing with.
Most of our teams want to sell to travellers, and are happy to accommodate tourists.
Stepping into a new city can be intimidating
While waiting to board the ship, we watched a long stream of passengers stepping into Alotau for the first time, instantly overcome with confusion and fear.
One family found this quite overwhelming, and in their struggle they turned to me for help, essentially because I was a tall white guy wearing an ID Pass.
Faced with a mess of local tour operators (who had awful signage, confusing prices and no clear branding), this lady went straight to “I’ll go with whatever the other Aussie does”.
We tried to help the family out, but when asked about safety, pricing and activities, we genuinely couldn’t work out what we’d do in their position.
We saw their complete lack of clarity dampen their spirits, to the point where they were about to turn around and get back on the ship.
Eventually they picked a local resort, and ended up having a great day.
I’m sure that most of the options would have been fine, but without a clear pitch customers won’t feel safe, and without feeling safe they won’t make any financial commitment.
Crowds are cold, people are warm
Passengers (as a whole) don’t have a lot of love for tour operators (as a whole).
But put a couple of passengers in conversation with a couple of tour operators, and suddenly you have four empathetic people finding common ground.
You get a different level of honesty from talking over a table than you would from an online survey.
Don’t get me wrong, the cold reality of the online survey is useful too, but the warm of a face to face conversation brings a new understanding of customers and their preferences.
We used a “Speed Dating” format, in which each customer spends 6-10 minutes with a tour operator, then a bell rings and a new tour operator takes their place.
This gives our tour operators a good sense of the customer and the personality behind the ticket – a name and face instead of just a number.
I am a fan of a writing technique called Dear Charlie.
This is where you write a letter/advertisement/tour description for your friend Charlie, creating something much warmer than a generic pitch.
When you’re done, delete the words “Dear Charlie” from the top, and you have your ad.
In our case, each participant picked their favourite person they met in the customer interviews, and wrote them a letter explaining what they could expect if they came on the tour.
The results were phenomenal – the clearest, most persuasive descriptions we’ve heard from the last two months.
Wholesale vs Retail Tradeoffs
The maths of selling experiences on cruise ships is a weird game.
The price paid by the customer is very different to the price received by the operator.
You probably knew that.
Where it gets interesting is the pros and cons of running tours with non-cruise customers.
Selling to ship passengers is essentially wholesaling – you sell a busload at a time, but receive 40% less money from each person.
Selling to people off the street is essentially retailing – you have to lure them in yourself, but you get to keep a lot more money per person.
It’s important to acknowledge which game you’re playing: wholesale, retail or a bit of both.
If it’s wholesale, don’t muck around with small group numbers, write a compelling description and let the ship sell all of the seats.
If it’s retail, structure your products to have lower breakeven points and invest in your own sales channels (like a basic website and some social media presence).
If it’s a bit of both, don’t mix up your approaches.
Don’t sell boutique tours to the ship, you won’t make any margin.
Don’t rely on huge volumes of retail customers, you won’t make any margin.
You’re designing two different products, and that’s ok.
Creativity Is Subtraction
A lot of new entrepreneurs are very nervous when designing their businesses, and you can understand why.
In that nervousness, their tendency is to add more and more to what they offer, reducing the chances of a customer making a complaint or saying “no”.
The result is a business that makes too many promises, which either costs a lot to fulfil or which are only half completed.
In Steal Like An Artist, Austin Kleon argues that “creativity is subtraction” – knowing what can afford to be removed.
As an example, some tech companies have a policy of removing an old feature whenever they add a new one, keeping only what is essential.
This is valuable for most new businesses – having the confidence to scale back their promises in exchange for doing 1-2 things really well.
Is it a costing issue, or a design issue?
I often get people asking me for help with their “costings”.
At first this sounds like “I need to know how much things cost”, but it’s actually “I know what things costs, they cost a lot, how do I…fix that?”
This is a design issue rather than a cost issue.
By spending time removing the non-essential elements of the product/service, the costs reduce on their own, and you don’t have to switch to single-ply toilet paper.
Is it a pricing issue, or a confidence issue?
One of the best ways to make more money is to challenge a faulty assumption that you’re currently carrying.
We were talking about Strategyzer Test Cards, and using them to test our prices.
One team started theirs with:
“We believe that we can make more money if we increase passengers numbers”
So I said “I can tell you right now, yes you can. What’s the real question?”
“We believe that we can drop prices and increase the number of passengers”
“Why do you need to drop the price, why not just try and sell more tickets?”
“Why not make the test around selling more seats, and if you can’t, then look at reducing prices? I feel like these are two separate tests.”
In this case, it’s not a pricing issue, but rather a confidence issue.
Everyone who runs their own business knows this feeling – it takes serious nerves to raise your prices and quote them to a customer with confidence.
If they say no, then you can quickly offer a discount.
If they say yes, it’s the fastest pay raise you’ll ever receive.
An easy start to financial modelling
The best way to start your financials is with two things on one spreadsheet: an assumptions table, which records all of your key numbers and guesses, and some basic calculations that use + - x and ÷
I’d build the assumptions table first, making the list comprehensive.
Then I’d start working out how the numbers fit together, basically creating the formulas that reflect how your money moves through the business.
Wiring the spreadsheet is tricky at first, then boring, so I’d suggest starting with a coffee and finishing it while watching a movie or sitcom – a lot of the work is clicking and dragging.
There are two great things about this approach.
Firstly, you can show the assumptions table to knowledgeable people and ask for assistance in improving your guesses.
Secondly, it forces you to become clear about the business, and the equations that determine if you make or lose money.
For this reason, I can’t and won’t build it for you.
That’s like me offering to go to the gym for you.
I’ll go to the gym WITH you and make sure your form is good, but the benefits only arise from you doing the hard work.
You can find out more about this process in more detail here.
In the spirit of “Going First”, I wrote an example letter for Charlie coming on Ship Day, which I’ve included here.
I only had 15 minutes, and wanted to prove it was possible to write one in under 30.
It was great to meet you yesterday, your tour sounds fantastic.
We’re looking forward to having you join us on Ship day, it could be one of the highlights of the YuMi program.
On Tuesday morning we’ll meet at the port, where we’ll arrange your visitors pass and get you through security – the bus trip will bring back the nostalgia of your old school excursions.
The port gets a lot of sunshine, so make sure you bring your hat.
Stepping on to the ship is like stepping into another world, and you’ll be taken through to the elegant Salt Grill where we’ll be hosting our interviews.
Lunch is a real treat, a full buffet and a private dining room just for us.
You have the choice of six different cuisines, I think you’ll enjoy the famous fish and chips and the enormous chocolate vanilla cake.
You’ll have a guided tour of the ship, seeing how the guests actually live, and there will be plenty of photo opportunities in the ballroom, casino, pool deck and spa.
There will be preparation time for your questions, so you’ll feel confident as you meet our lovely passengers.
The six minute speed dates will fly by, as you get caught up in conversation with new friends.
Their insights will help refine your pitch and prompt new ideas, giving you a great view into the mind of your customer.
You’ll also get a chance to talk with the crew and the tour aggregator, a golden opportunity to improve your processes and see how their systems work.
This could save you a lot of headaches and stress, and give you a great introduction to the who’s who of Carnival and Bob Wood.
Finally we’ll arrive back at the port, with a full camera and an overflowing collection of exciting ideas to try.
You can book at yumipartners.org, spots are limited and we’re keen to ensure you can come aboard.
Looking forward to seeing you there Charlie, let us know if you have any questions.
Isaac and Shannon