‘I don’t think things can ever get that bad again’

‘I don’t think things can ever get that bad again’

By its own admission, Cosmos had an awful start to the year. Sales went through the floor, staff departed in a painful restructure and morale was low. But the operator is determined to learn from the experience. Steve Jones reports

THE start of 2001 should have been a cause for celebration as Cosmos entered its 40th year in business.

Yet the milestone year could not have started on a worse note.

A disastrous peak-booking campaign saw sales slump 25% and the operator underwent a restructure that saw the departure of two directors.

A controversial marketing campaign with Travelcare which riled other agents did not help its cause as it lurched from one problem to another. Never before had its lack of distribution been felt so acutely.

But managing director Nigel Wright has insisted that the worst is over with a recovery plan under way to turn its fortunes around.

Peak campaign

Unlike most of its rivals, Cosmos decided not to drive discounts by putting them on system, thinking agents might feel they were losing commission by not having control. It was a move that backfired.

“It was a mistake,” said Wright. “Even on December 28 I could see a pattern emerging, although at that point I did not really know why.

“Frustratingly, the management of our retail partners could not put their finger on why sales were so poor.

“It was only when we spoke to counter staff that reasons became clear. They said it was easier to have the discounts on system and when you have 40 discount messages in the market, they will sell the easiest. We have to say we got it wrong.”

Commercial director Stuart Jackson added: “We were offering 50% discounts but did not communicate the message clearly enough. In mid-January we changed camps and put discounts on system but it seemed to confuse people even more. Retailers did not know what to expect from us. There was a lack of clarity and we suffered as a result of it.”

The policy of producing a dedicated Travelcare brochure with lower prices and no discount also hit the operator. But Wright claims many in the industry praised the idea.

“It upset some more than others but the competition would love to have done it,” he said. “But it would have to be across the board. Unfortunately, we are not of the size where we are able to lead these things.”

Recovery plan

In light of the January campaign – which Wright estimated cost Cosmos 10,000 holidays – he instigated a number of measures to halt the decline.

It included the reduction of prices in its fourth-edition brochure by 25% in low season and 10% in peak. “We tried to switch to on-system discounts in January but it was only when we launched our fourth-edition brochures that we saw an upturn. But cutting prices did not reduce our margins. The net price was the same as the discount campaign altered,” said Wright.

He denied Cosmos was desperate to claw back lost sales as it had already cut capacity by 30,000 to 370,000.

“If we’d sat back and done nothing it would have been a disaster. We cut back in line with our reduction in sales so it is not a case of regaining lost ground. It could make all the difference between a good and bad summer,” said Wright.

Ties with multiples

Part of the recovery plan involves improving its fractious relationship with multiples.

In a candid outburst in February, Wright attacked them for failing to engage in open and honest commercial dialogue, accusing them of promising sales but not delivering.

Since then Wright, Jackson and sales and UK operations director Andy Claridge have set about securing a better understanding. Wright admittedhis criticisms were largely unjustified.

“I blamed the multiples, but having spoken to them, I have to hold my hands up and say we too have to be prepared to do some work,” he said.

The absence of a national sales manager for the past nine months has not helped, with only minimal contact between Cosmos and retailers.

Claridge is close to appointing someone to fill the role which, he hopes, will improve the situation.

“At other companies, senior people are on the phone to agents on a daily basis. We haven’t done that so we can’t expect much support. If you get on the phone, the likelihood is people will start selling you.”

Wright added: “Being independent, we can’t tell anyone what to do. The multiples have plenty of choice so we have to go out of our way to be sold by them. You get out what you put in.”

Observers believe Cosmos has lost out as the multiples have forged closer ties, but this does not worry Wright.

“It’s not a very trusting industry. If they have an agreement it won’t last long. They aren’t good bedfellows – they can’t be.”

He added that all multiples have pledged to try to increase sales and denied Cosmos had resorted to paying exorbitant levels of commission to get that commitment.

Jackson said: “The ideal position is to be number two for everyone. That is the aim.”

Other distribution

Wright said Cosmos will start working closely with the independent sector after claiming consortium members are now more disciplined.

“The central offices can influence members more than previously,”he said. “Multiples have good information systems and can get messages out to their shops quickly. Until recently, consortia have not been able to do that.

“The majority of members appreciate the deals and will therefore support their preferred operators.”

Wright said he is also more realistic after previously believing that independent agents should sell more than Cosmos’ market share.

He denied Cosmos is being squeezed by the likes of Worldchoice and Advantage and that levels of commission are below that of multiples.

Observers say Cosmos should exploit its strong brand recognition and target more direct sales in light of its continual struggle for distribution.

However, Wright has ruled out such a move as being too anti-agent and too expensive.

“You would need to spend at least £1 million on a consumer campaign and that is too much. I’d rather spend that amount on a joint advertising campaign to drive more people into retailers and ask for a Cosmos holiday.

“Unless sales through agents drastically fall away we won’t go down the direct route.”

He also reckoned Cosmos had reached its peak with TV Travel Shop, which now accounts for around 13% of its sales. “We’ve taken that deal as far as we can go,” he admitted.

Brochures

Cosmos faces a staggering annual bill of £4 million for the production and distribution of brochures. Not surprisingly, a cost-cutting drive is under way after research revealed that half a million brochures sent to multiples did not generate onesingle sale.

“It was startling information,” said Claridge.

He is now working with retailers on a more targeted approach, with agents only sent brochures in relation to their sales and customer profile.

“We are making sure we are getting the right brochure to the right shops at the right time,” he said.

“Retailers are helping us grade shops and we will split the savings generated from this approach.

“Half will comes back to us and the other 50% will be reinvested in the agency for marketing.

“We want to eliminate all the wastage and stop clogging up agents’ store rooms with brochures they don’t need.”

Wright estimated the initiative will save at least £400,000, half of which will be reinvested with retailers.

“We need to become more efficient and cut costs. Everyone is doing it and we are no different.”

On the road to recovery: from left, Wright, Claridge and Jackson are confident the company is getting back on track through the improvement

of communication channels with retailers and agents pledging to increase sales

The future

After a difficult start to the year, managing director Nigel Wright is convinced Cosmos is back on track having received anundertaking by agents to try to improve sales.

Its three-year plan is to cut costs and increase the business by around 10%.

To compete with the giant pan-European companies, Wright said it would continue forming alliances with other mid-sized European independent operators for buying strength. But he admitted it hasn’t been the runaway success he hoped it would be.

“The aim was jointly to contract properties that may have been too large for us on our own but it’s not really worked that well. We’ve done one or two deals but it takes upmanagement time. It’s also difficult to cross theculture gaps.”

The overriding aim, he said, is to concentrate solely on selling charter packages rather than immersing itself in complex European deals.

“There’s been a lot of hype with Cosmos in the past two years and while that hype remains, the contact with retailers has disappeared. You can’t expect support if you don’t have contact.”

Referring to Cosmos’ recent promotional strategy, he continued: “There has to be more to it than sunflowers and we’ll be working on that.”

“The buck stops with me and there is pressure all the time – it’s not an easy industry. But if you don’t feel the pressure, you aren’t doing your job. We had 18 months of fast growth and there was a time when we could do no wrong. We’ve had a slap in the face which may be no bad thing. It was a low point at Cosmos and I don’t think things can ever get that bad again.”