Leadership Q&A: Michele McKenzie, President and CEO, Canadian Tourism Commission

The head of the Canadian Tourism Commission on advertising ROI, the end of the American traveller and leveraging a competitive (research) advantage called the Explorer Quotient.

Since joining the national tourism marketing body in 2004, the former deputy tourism minister from Nova Scotia has overseen the federal agency’s move from Ottawa to Vancouver, successful efforts to stimulate domestic tourism during the recession and Canada’s showcase at the Vancouver Olympics in 2010. Over that time, Canada’s star has risen internationally. On consulting firm FutureBrand’s annual “Country Brand Index,” derived from the responses of 3,400 international travellers, Canada rose to first in 2010 from 12th in 2006. And there was no post-Olympic letdown this year as Canada maintained its leading position. Marketing Magazine named the CTC Canada’s Marketer of the Year for 2009, mostly for its cutting-edge social media strategy. With an industry-leading “campaign ROI” of $82 in sales for every dollar it spent, the CTC inspired 3.1 million travelers to visit Canada in 2010, generating $1.9 billion in incremental sales for the $73-billion industry and creating or maintaining 16,500 jobs.

Canadian Business: Actual visitor numbers and revenues have been going in the wrong direction since the 1990s. Why isn’t Canada’s great brand position translating into dollars?
Michele McKenzie: We have been seeing really strong growth out of our emerging markets. Where we’ve struggled is primarily the U.S. market, and because it’s been our largest market by far, we feel that. And we feel it most in the parts of Canada most dependent on the U.S. market. We feel it more in B.C. than they do in Alberta or the other Prairie provinces. They feel it very much in Ontario, Quebec and the Maritimes, but not so much in Newfoundland. So it depends very much on where you live in Canada. Primarily it’s that we’ve lost a lot of our drive traffic from the U.S.

Now we’re starting to look at the U.S. differently than we have in the past. We’ve started looking at it specifically as a drive market, specifically as a mid market and specifically as a long-haul market. We’ve started to treat the long-haul market just as we would any long-haul market where we’re competing for international visitors.

There are two major trends that are happening in Canada. One is that domestic travel is booming. The percentage of domestic travel as part of our overall travel has been increasing quite rapidly. The industry has been doing fairly well on the back of a strong domestic market. The emerging markets, that bump has been focused mainly on areas closest to the gateway airports. So we need to work hard to spread that visitation throughout the country, to try and gain back some of that visitation that was lost from the U.S. But some of that we won’t regain.

CB: That’s gone, is it? The rubber-tire traffic from the U.S. is not coming back?
MM: A portion of that’s gone for good.

CB: Why is that?
MM: There’s a portion of the American marketplace that will not get a passport to travel to Canada. They’re not international travelers and it was their only international destination. They saw it more as an extension of their domestic destinations. So they’re replacing their visits to Canada with other U.S. visitation. That’s a market that we won’t be able to win back, but there’s new markets that are opening up in the U.S. The challenge for us is that there’s lots and lots of competition seeking those markets, including great competition within the U.S.

So, back to your question, how can you have all this great brand success and you’re not able to translate that into visitation? The answer is we see this as a continuum. We can’t compete effectively unless we have a higher awareness of Canada as a travel destination. The work that we’ve done on the brand is really about growing awareness of the types of experiences you can have in Canada that the world doesn’t really know about. The world understands that Canada is a big, green, beautiful country—a country that they’d love to visit someday. What we need to do is to make that idea a lot more compelling.

We’ve been working on the top of that funnel, but now we need to drive people more aggressively down that funnel. We know that they’re more aware of Canada and they’re more positively inclined in thinking about Canada as a travel destination. Now we have to convert them into visitors.

CB: The CTC was recognized two years ago as a social marketing pioneer. Where are you at now?
MM: We’ve been pretty early adopters of social media channels. I should say I don’t see social media as a channel so much as a fully integrated part of what we’re doing. I think from a competitive point of view we saw that earlier than others. We didn’t see this as a thing we had to populate with content. We saw it as a fully integrated channel but an area that required unique content. So we weren’t taking our print ads and slapping them onto social media executions.

It took us a long time to understand how social media would work in the travel space and what we benefited from is the fact that travelers and travel has been an early-adopter use of the Internet. Other than buying books, the top thing that people were buying when they got hold of the Internet was shopping for airfares and shopping for travel. So our customers became very accustomed to using the Internet for shopping and then they became accustomed to using the Internet for recommendation.

What we saw through that process was the influence of a destination marketer was plummeting and the influence of travelers was skyrocketing. So we knew we had to tap into the influence of travelers. Much of the work that we did in the refreshing of the Canada brand was really adopting a traveler-to-traveler point of view and leveraging what travelers were already saying about Canada, and using social media platforms to do that. One of the things we also did—and we were one of the first tourism marketing organizations to do this—was start to use user-generated content in our advertising. We were no longer going out and shooting ads to a storyboard. We were picking up content that real travelers were posting on the Internet, gaining the rights to that, and then recommunicating that through as many channels as we could. At that time [2009] adapting user generated content was unique. You see a lot more of it now.

Where we’re trying to stay ahead of the curve is understanding that social media is all about recommendation. That is the key way people want to make travel decisions, based on recommendation. And understanding, too, that not everyone’s voice is equal. There are key influencers in this space that are very different from the influencers we’ve seen in the past. Trying to unlock that what that’s all about has been really important to us.

CB: Give me a run-down of what you’re doing in the social media space now.
MM: We’re doing everything. We are trying to integrate a social media component into all of our campaigns. One of the unique things we’ve just launched is a website called Explore Canada Like a Local. It is being populated by content from travelers. It gets away from a destination saying, “Here’s my website. Here’s everything I want to tell you about myself, written by us and edited by us to look as perfect as it can possibly look.” This is going out there and saying, “This isn’t going to look perfect. It’s going to be exactly how travelers see Canada.” We’re giving them the power to communicate Canada through this very robust website that is being launched in a number of countries and ultimately in a number of languages.

We were inspired to do this by the work that we did with our “Locals Know” campaign, which was a campaign we ran with federal stimulus money in 2009 and ’10. It was a domestic campaign and we don’t usually run domestic campaigns, but we had additional money in those years for a campaign targeted at Canadians specifically with the goal of trying to inspire Canadians with the idea of a trip in Canada as opposed to an international trip. We weren’t trying to worry about the person in B.C., whether they were going to go to Alberta or Ontario this year. We were looking at the person in B.C. who was looking at a trip to Africa or a trip to the U.S. or a trip to Europe and saying, “This might be the year that I’m going to explore Canada more.” Very specifically, we were trying to inspire Canadians with the idea that there are as exciting and exotic experiences in Canada than you’re going to have anywhere else in the world.

It was a huge success. One of the things that was so successful about it is we were exposing parts of Canada and experiences in Canada that Canadians otherwise didn’t really know about. Kind of, “Here’s my secret spot in Canada and I want to share it with you.” Canadians really responded to that, so we had all this content as a result of that campaign and we didn’t want it just to sit there. We thought it would be great content to repurpose. So it was the inspiration behind Explore Canada Like a Local. So what will happen with Explore Canada Like a Local is we’ll leverage not just the travel media and experts but the concierge community in Canada, the average traveler in Canada who wants to put up, “where’s my favourite place in Canada for mac and cheese” and “where’s the place for a great Montreal smoked meat sandwich”—that’s the dialogue that’s going on at that site.

I think the biggest shift that we’re seeing is that the travelers don’t just have the voice in terms of recommendation, but they’re gaining a voice in terms of content. And great content is what drives great social media. Most of our work is developing platforms for that great content to get out to the world.

What are now becoming traditional channels of YouTube and Facebook and those things, we were out very early on those channels as well, especially YouTube, where we were out developing content for that with Canadians who had great stories to tell. And also being alert to listening to what was going on in the social media space and engaging in conversations that would connect to Canada, whether it’s a forum on flyfishing or people talking about the greatest food lists—food lists are really of great interest—or whether it’s a forum about great design. We have a lot to say about a lot of different subjects, so it was a matter of getting our content farmed out into all those different areas, so we’ve been aggressive there as well.

CB: Tell me about your research capacity. I understand the Explorer Quotient that you developed is being used by other organizations.
MM: We are very heavy users of research. We probably make double the investment in research as do our competitor NTOs [national tourism organizations] on a relative basis. We all use the same segmentation tools, and they’re all really about demographics—how old are these people, where do they live, what’s their family income, when are they going to retire, when are they going to spend their travel money, blah blah blah. And we were all waiting for the baby boomers to retire, they were going to populate the world in terms of the next travel generation. This is what demographics was teaching us.

But we knew that there had to be a better way to understand the motivation of our travelers because not every baby boomer had the same travel motivation and they were not all our target customer. We were looking for more meaningful insights into our potential customers, something that would give us competitive advantage. And we were intrigued with the work [market research firm] Environics was doing around social values. At the time [Environics president] Michael Adams had written a couple of books very specifically, Sex in the Snow and Fire and Ice, which were talking about the diverging values of Canadians and Americans.

This was at a time when in the Canadian media we were all really quite fussed, reading a lot about how Canada was being absorbed by American culture. And along comes this piece of research which says, you know, from a social values point of view you’re heading further apart. One of the things he said in one of his presentations, which struck us, was that with all the work they’d done on social values, there were three visible ways you could determine a person’s social values, just by looking at them or getting to know them a little bit. One was what music they listened to, one was how they dressed and the third one was how they traveled.

And we thought, “That’s interesting.” Let’s find out some more around what this is about because we think there’s a meaningful connection between that and where we need to go in terms of meaningful segmentation. We worked with Environics. We layered a number of our own questions into their international surveys on travel, and from that we had a number of real “Aha” moments.

One of the things that we found was that it was easy from that research to segment customers or travelers into about nine segments. We called them ultimately “explorer types” when we took it to the consumer level. We found that if you were fitting one of these explorer types, whether you were a “free spirit” or a “cultural explorer,” if you were in the U.S., you had a lot more in common with a free spirit in Japan or Germany or Brazil than you did with your fellow countrymen. So what we were finding was that there’s a way to look at our potential customers more as tribes than as geo-demographic hotspots.

That’s the work that we did to get the Explorer Quotient up and running, and then we layer that over the traditional demographics. We haven’t thrown demographics out. We still use what we know about demographics, we layer over what we understand about travel motivation and how it relates to social values and we’ve developed a better understanding of our customer than, we think, anybody else. So we can talk to them more effectively and we can convert them ultimately more effectively.

So when we’ve sold the Explorer Quotient to partners we’re not really selling the core of the idea and trying to make money back on the core of the idea. What we’re doing is providing access to all of the code behind the idea so that our partners can do a very deep dive about their particular destination and how they can be more effective at targeting. So it basically gives them access to the research tools and they’re using that to develop their own segmentation as well.

So what does this look like? Let me give you an example. Parks Canada came on pretty early. They recognized that their traveler was really changing. They didn’t have the same connection to the idea of the national parks as those of us who grew up here. They didn’t attach the same value to a national park experience. They needed to find a way to speak to their customers more individually and more effectively. In the beta testing, they had customers coming into parks and sites doing Explorer Quotient test, a quick little quiz to show what type of explorer you are, basically what segment you’re in. What motivates you is really what’s behind that. And then they were able to give those customers a menu of how to explore the site based on that explorer type. What they found is that the satisfaction levels went up, the length of stay went up and the expenditure went up.

CB: You’re essentially a marketing organization. You have a market research company and a marketing agency too. How do you divide the labour?
MM: We’re a marketing company. We don’t own or control anything that we’re marketing. So already that’s a challenge. And you have a lot of marketing at other levels, individual businesses, individual destinations. And in fact that’s what the world looked like before the CTC was created. There was a lot of investment but it was very disjointed. In New York in the mid-1990s there were over 30 representatives of Canadian destinations, all competing with each other for business. If you’re a tour operator, one day Ontario comes to you and says, “Visit us. We’re the best.” The next day Quebec comes by and says, “Visit us. We’re the best.” Montreal comes by and says, “If you visit Quebec, just come to Montreal.”

It wasn’t an effective way to compete, because the tour operator didn’t want to think of Canada as a collection of parts. They really needed to inspire people to come to a country. And that was happening all over the world. We needed to be better at inspiring people around the world to choose Canada over other countries just as you would choose, say, Italy or New Zealand or Australia. You’re thinking about the country before you’re thinking about exactly where you’re going to go. Having all those representatives competing in our key markets was not very effective.

What was needed was a strong Canada brand, to provide an umbrella under which all that marketing can happen. That’s the role of our agency, to lead the Canada brand and to provide a competitive platform for all of our partners to invest on. So we’re kind of the brains behind that.

We’re a very small company. We have 120 people, and we’re global. We operate in 11 countries. Our company is mostly about doing the research, setting the strategy, setting the direction, and providing the lead guidance, and evaluating how we’re doing so that we can continue to improve. We don’t in-house all of the busy work in order to get there. We work with partners and with contractors on a lot of the busy work.

CB: How do your sources of revenue break down and to whom are you accountable?
MM: We’re an appropriation-based Crown corporation, so we work from an annual appropriation from the federal government, which as a base appropriation is right now between $70 million and $75 million. In addition to that we attract some one-time investments from the federal government for various initiatives, so for instance when the Olympics were here we had an incremental investment to leverage that opportunity, stimulus, etc. But if you look at the core appropriation, we are then accountable to get the best return on investment that we can get for that, and that’s measured by how many visitor dollars can we exactly attribute to our activity.

One of the other measures that we put against our success is to what extent we can attract partner dollars. We set ratios for ourselves and targets for ourselves which are anywhere between 0.6-to-one to one-to-one, depending on where our strategy is focused. It’s not about getting partners, but it’s a great measure, I believe, of relevance. If you’re in a marketing role and you don’t own or control what you’re marketing you want to make sure you’re aligned, and one of the ways to measure that is partnership.

CB: So it comes from general government revenues, not a hotel tax or anything.
MM: It comes from a direct appropriation from general government revenue, what we call in government A-based funding. There are different ways our equivalent organizations are funded throughout the world. Some of them are funded on formulas. The new U.S. organization is going to be funded with a levy of $10 coming from citizens coming from visa-waived countries. They get assessed every two years a US$10 charge. They actually get assessed $14, but $10 of that goes directly to fund the Corporation for Travel Promotion.

CB: How does your spending break down between digital and traditional media?
MM: We’re spending more and more on digital, but because it’s so integrated, it would be hard for me to pull out those numbers. Suffice to say we’ve crossed the 50-50 line. We do very little traditional advertising any more. We do a lot of promotions. We have a huge investment in PR, media relations—investment of time and effort as well as money. We work with tour operators. We do things like train travel agents around the world to become Canada specialists. We get out in various ways to educate people about what Canada has to offer.

CB: That doesn’t fall into the category of traditional advertising.
MM: No, but it’s traditional activity for us. But we’re certainly doing more work online. For instance all of the work for Canada specialists is now done online.

CB: What is the quality that you value the most in an employee and what do you value the least—or think is overrated?
MM: My views of this are shifting as I see the workplace changing. I always value hard work. And we have some great hard workers at CTC. But I think what I’m coming to value more is an ability of a person to work in an ambiguous work environment. I think it’s becoming a characteristic that’s going to be more valued in the workplace.

CB: You mean not having a specific job title and description?
MM: Yeah. Someone who is great at connecting the dots, being a great collaborator, who’s comfortable with ambiguity, so they’re not just coming in and saying, “This is my box. This is my job. That’s what I do.” In my career that’s been a very practical approach but more and more we have job descriptions getting out of date as soon as they are written. We need talent that see growth and learning as opportunity. They’re really comfortable with change. A bit of a strategic mind is something I value as well.

What’s overrated is people who are very highly technically trained who want to rely only on their technical skills. Those skills will evolve, and we’ll need them to develop leadership skills that weren’t part of their technical training. I think what gets in the way of employees in these kinds of environments is ego. When you work in a highly collaborative environment, people have to bring a certain humility to the table. Understand that everyone around the table has a lot to contribute, not rely on the letters behind their name and be very open-minded. And the thing I see compete with open-mindedness is ego. I gets in the way of people’s success, I would say, at every level.

CB: In your career, what mistake taught you the most?
MM: The mistake that taught me the most is not dealing with tough issues quickly enough. The thing I found the hardest to do growing up in the working world is having to do difficult conversations. Understand that even though it’s hard to make some tough people decisions, they almost always work out best for everyone involved—including the person you’re having the difficult conversation with—[if you deal with them early]. If you let those things go too long, it never goes well.

CB: What book have you read most recently?
MM: I’ve got a few books on the go. The novel I just finished is called Cutting for Stone, by Abraham Verghese. It’s a great novel set in Ethiopia, fabulous. I read a non-fiction [book], or am just finishing it now, called The Immortal Life of Henrietta Lacks, who is the HeLa cell that is so predominant in research. That interests me because it’s a true story and it’s a very interesting story. I’ve become very interested in genetics and where all of this science is going. And I just picked up a book on the work front about effective boards. We’ve gone through some big governance changes, really trying to modernize our governance structure. When I first came I saw the board as a support structure, not necessarily a leadership structure. That really changed how I see this. I try to have a work book on the go as well as a really great novel all the time.

CB: So you report to the board, not to a minister?
MM: I report to the board. I’m appointed by government. I have a kind of dual life that way. The board is accountable to government, and we have a relationship with the minister of industry, and he has delegated most of that responsibility to the minister of state for tourism and small business. My direct reporting is to the board but I have to be very aware of government priorities and government needs, as any Crown corporation would be.

CB: What’s the biggest challenge facing your business today?
MM: One of the advantages I have at the CTC is a really passionate group of employees who get to market Canada full time. It is the coolest gig, I think, on the planet. We have this great country. We get to spend our days thinking about how to market this country. So we attract very passionate people, very creative people. Great creative talent is always a different kind of leadership challenge but it’s a great challenge to have. Passion has become, in my world, a big part of success. Being able to communicate a very simple but inspiring vision.

But when I first came to the CTC and I asked people what business we’re in, there was no consensus. The research people thought we were in the research business. The marketing people thought we were in the marketing business. The sales people thought we were in the sales business. And the accounting people thought they were the glue that held it together. The first thing I said was we’re all in the marketing business, whether you’re in marketing or sales or research or accounting, we’re all in the marketing business. We’re in one business. And we’re going to set our vision against that business, we’re going to set our measures against that business and we’re going to be really clear about that.

And I think that helped build a team that has a clear understanding of what we’re trying to accomplish. They understand our strategy, they can communicate our strategy in terms of specifically how they are contributing to it and I think that is what any organization needs to do if they want to be successful, making sure your entire team knows what business they’re in and how they contribute to accomplishing that.

CB: What’s the most important skill for a leader to have?
MM: A leadership trait that I’ve come to value in boards, in leaders, is courage. I think we need more courage in how we approach our worlds, maybe at all levels but certainly at the leadership level. We all operate now in a heavy-duty environment of compliance. Some people’s reaction to compliance has just been to play safe. I think there’s an importance to be compliant, but just to play safe is not compliance. You still have to have the courage to try new things, to take risks, to make the right decisions sometimes when they are not popular, and keep going toward that go. I just see it as a really important leadership trait.