Mr. Morse

Sales & Marketing

The New Take on 21st Century Customer Loyalty Programs

By Steve Morse, General Manager, Travel & Hospitality, ClickSquared

"Do what you do so well that they will want to see it again and bring their friends." - Walt Disney

With more options for consumers to choose from than ever, it's grown increasingly challenging for travel and hospitality organizations to stand out. Though many have extensive customer loyalty programs, they just aren't effective anymore. For too many companies the response levels are largely unimpressive.

Rather than tired old tactics, travel and hospitality organizations must develop and execute customer loyalty programs that surprise their guests in new and unexpected ways. These programs must illustrate a personal knowledge and understanding of the individual traveler to be successful.

Innovative customer loyalty programs aren't just "nice to haves" anymore, they're imperative for success, particularly when you pair today's economic situation with growing customer expectations. Every dollar a consumer spends is more carefully considered than ever. What is your strategy? Are your offers living up to customers' expectations? Do you track their travel history, loyalty, preferences? Are you acting on this knowledge in a choreographed fashion? Before you even begin your customer loyalty program have you defined your goals; repeat business, cross-selling or up-selling, etc.?

Customer Loyalty Begins on Day One

"You don't earn loyalty in a day. You earn loyalty day-by-day." - Jeffrey Gitomer

You've done it. The customer is sold. Now all you have to do is keep that customer happy and move on to finding the next new customer, right? It sounds simple, but why then do so many companies battle with attrition? They no sooner have signed on the customer than they've lost her to a competitor. How can companies do a better job of creating life-long customers instead of struggling to hold on to them after the first six months? Therein lies part of the answer.There's an old saying: "As the honeymoon goes, so goes the marriage." One could look at customer relationships the same way. The "honeymoon," or first six months of the relationship, is when a company has its best shot at establishing a foundation with its customer, one strong enough to build and expand upon year after year. But to win your customer from the start, it takes a more personalized and better choreographed approach than traditional efforts.The first six months represent a crucial time to "make or break" your customer relationship. Travel organizations have learned the hard way that it's easy for customers to book a trip with hotel vs. another. Fed up with spending twice as many dollars to attract customers than what it takes to up sell existing ones, travel organizations need to focus heavily on early cross-sell opportunities to increase retention rates.

On-BoardingOn-Boarding programs, (the process of successfully bringing a new customer on board), have been around for many years, but results have been mixed at best. Why? Anyone who's been a new customer of a bank, phone or cable company will tell you that in those first months they're inundated with offers. Every product line manager wants to secure the best customers. What results is the "dump truck" effect, where multiple offers are pushed out indiscriminately to these customers along a set timeline. Tier-two customers often are ignored. In either case, customers inevitably tune out all of the company correspondence because most of what they get isn't relevant.

Fortunately, travel and hospitality marketers have learned from mistakes other industries have made. They are creating nightly-run programs that combine customer behavior, life cycle and preference data to deliver unique communication that speaks to the customer's needs and wants. Assisted by new, on-demand technologies that enable triggered, versioned communications, companies can deliver a different message to each customer. What's more, the messages can be delivered over various channels based on customer preference and time sensitivity. These programs tell the customer, "Hey, we know you, and here's how we can specifically help you."

Smart marketers let customers identify their particular areas of interest, their preferred channels for contact and- even their preferred frequency of contact. Customers who take the time to input and update their preferences have an enhanced sense of satisfaction and loyalty.

Which Customers to Focus on?

Each customer represents equity to a travel and hospitality organization. The challenge is determining how much equity each customer has and targeting the most valuable ones. Some customers are better investments than others, depending on the primary objective of your program.

Two pieces of customer-level information are keys:

1) Current customer value - how much do your customers currently spend at your property?

2) Opportunity value - how much do your customers currently spend at competitive properties?

Now consider the primary objective of your loyalty program:

• Retain customer value over time, or
• Grow customer value

If your objective is:

• Rretention, design the loyalty program for your current, high-value customers. Use rewards and recognition to retain them.
• Growth, then design the program for customers who are high in opportunity value.

What Shape Should Your Loyalty Program Take?

Now that you know the goal of your program, what customers you want to focus on and how to bring them on board, how does this program play out? What is your strategy for execution?

In one case, it took the form of a cross-selling and up-selling focus. A tour operator with more than 25 years of experience creating travel programs targeted to Americans over the age of 50 and a direct marketing leader with 500,000 previous customers, had an extensive database containing detailed information on past travelers, but challenges in leveraging it.

They were able to keep costs down and create more timely and relevant communications by:

• Establishing an automated daily data feed on customer reservation information to drive automated, triggered, relevant communications
• Developing business rules that determined which messages/promotions /offers customers received throughout their lifecycle based on data from that specific individual or reservation
• Creating email templates that leveraged dynamic content to customize messages and images, determined by the business rules developed
• Reducing the number of customer service calls by predicting the customers' needs/questions and emailing personalized information to them at the right time

The result is a 68% increase in revenue from additional post-booking products in just two months, and a 1412% increase in email opens and 671% increase in click-throughs per month.

Measuring Success

"The measure of success is not whether you have a tough problem to deal with, but whether it is the same problem you had last year." - John Foster Dulles

As I mentioned earlier, the challenge is not only bringing the new customer on, but keeping them. If you have clear goals for your loyalty program, it will be fairly simple to measure the progress or success of the program.

Tomorrow's Customer Loyalty Programs

Surprise with 'stealth rewards'- these are the keys to an innovative customer loyalty program. For instance, the traveler (who also happens to love wine) stays at a hotel for the fifth time in six months might get a hand-written note from the manager with a bottle of wine. It's an unexpected surprise showing how well you know your loyal customers that keeps them loyal.

In one case, an incentive program to help increase usage and engagement from the travel agency constituency for resort properties resulted is an overwhelmingly positive response.

Recently one of the largest privately held leisure lodging and hospitality companies in the Asia Pacific and Oceania regions revamped their hospitality specialist program for travel agents, providing a secure site that is only accessible to them. The program allows agents to earn points based on the number of completed room nights they booked for their clients. Based on the number of nights booked for each guest, each property also provides an in-room arrival gift to the guest on behalf of the agent, helping to build loyalty from both guests and travel agents. Weekly reports are generated and sent to each participating property to identify the guests entitled to receive the special amenity keeping the process automated.

The loyalty system tracks how many points travel agents accumulate based on their total actualized room nights. All information is available to the agents via the password-protected web site. The new system allows them to redeem their points online, for cash or amazon.com gift cards.

Agent participation in the program has increased nearly 50% in the first half of 2009. The growth rate for certification of new agents in the first six months of 2009 is double the growth rate for the full year of 2008.

In Closing

Travel destinations, distributors and resorts that employ cutting-edge interactive relationship marketing programs can reap rewards with remarkable results. And those results bode well for an organization's success both today and tomorrow. The goal is not only to win new customers, but to keep the ones you've got coming back.

Steve Morse is the General Manager of the Travel and Hospitality vertical at ClickSquared. With more than twelve years of experience in entrepreneurial environments, Steve has a proven track record of helping companies position and grow their solutions increasing retention while decreasing overall costs. In this role, Morse counsels clients on the strategic direction, design and implementation of marketing and communication programs to build long-term relationships with customers. He works closely with ClickSquared’s travel and hospitality clients throughout North America and Europe. Mr. Morse can be contacted at 781-487-7569 or smorse@clicksquared.com Extended Bio...

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