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Developing a Better Business Model for Destination Management Companies

March 29, 2016 MICE No Comments Email Email

A new study published by the Incentive Research Foundation (IRF), a non-profit research foundation focused on motivation in business, analyzes the current state of destination management companies (DMCs) and offers specific guidelines to help them reposition themselves to better meet new market challenges—by developing and redesigning their value propositions and relationships with U.S. meeting planners.

The study, Developing a New Business Model for DMCs by Redesigning Their Value Propositions, is authored by Dr. Haemoon Oh, Ph.D., Dean of the College of Hospitality, Retail and Sport Management at the University of South Carolina and was conducted using a mixture of multiple focus groups along with an online survey, which garnered more than 200 responses.

With support from the Incentive Research Foundation, the study explored the current strengths and weakness in the DMC-meeting planner relationship, assessing the nature of competition, the impact of technology development, the variance in business models, and the understanding of existing marketing efforts.

“The valuable information acquired from this research allows us to examine how similarly or differently DMC and meeting planner organizations react to the external business conditions and how well they’re prepared to take advantage of future opportunities,” says IRF President Melissa Van Dyke.

Research comparing the views of DMCs and U.S. meeting planners revealed important areas where viewpoints differed or sometimes aligned:

*DMCs Are More Positive: DMCs rate their strengths, opportunities, and outlook more favorably than U.S. meeting planners.
*Views on Strengths Differ: DMCs viewed their own strengths as high quality events, handling unexpected requests, and crisis management. U.S. meeting planners, however, viewed DMCs top strengths as their local knowledge and ability to save planners’ time.
*Views on Weaknesses Differ: DMCs believed their greatest weaknesses were misunderstood value and lack of collaboration amongst DMCs. U.S. meeting planners however believed DMCs’ biggest weaknesses were a lack of creativity over time and replaceable services.
*Agreement on Threats: Both DMCs and U.S. meeting planners agreed internet search engines and hotels’ in-house DMCs were key threats. Social media, however, was viewed as both a threat and an enabler, offering opportunities for promotion and education.

Overall, trust emerged as a key concept. “The research showed us how building a long-term commitment between a DMC and a meeting planner radiated around trust,” said Van Dyke. “Each party’s opportunistic behavior, their engagement in communications, and their mutual financial dependence were key determinants of that trust.”

Based on this data, the study offers a number of important suggestions to help DMCs better position themselves with U.S. meeting planners. Suggestions to DMCs include:

*Continue building strong, dynamic networks of local expertise and vendors.
*Proactively use new social media technologies to provide more convenient services.
*Provide a “satisfaction guarantee” for DMC services.
*Build stronger international site inspections to highlight language and local cultural/legal differences.
*Develop and better promote DMCs’ risk management services.
*Work with larger DMC consortiums to create regional, national or global partnerships, but do not lose the unique, customizable programs for which local DMCs are known.
*Develop informational programs and demos that both raise the visibility and clarify the value of DMC services.

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