Loyalty and retention in digital travel
At a recent breakfast roundtable, we were joined by a host of brands including Hilton, Expedia, Contiki and TripAdvisor, to discuss the challenge of loyalty within the travel sector.
It’s fair to say that it’s been a slightly bumpy ride for those in the travel industry over the last few years. Faced with a level of unprecedented change, it’s been hard for brands to stay afloat - let alone deliver profitable growth, with Thomas Cook being the latest longstanding brand to hit the headlines as a result of its financial woes.
One of the key ways for brands to have a chance of survival (and dare I say growth) in such a challenging environment is through the retention and development of a loyal customer base.
The impact on the bottom line is long proven – with an estimated 25% - 95% increase in profits based on an increased retention rate of only 5%. In addition, those customers are less likely to be sensitive to price change, more likely to forgive any issues and go to bat for you publicly, as well as providing quality feedback to allow you to develop as a brand.
Historically the go-to solution for brands looking to build a long-term relationship with customers has been to focus attention on developing a loyalty programme. Indeed, they were considered the marketing golden bullet in the late 80s/90s with the arrival of iconic programmes such as the British Airways Executive Club and Tesco Clubcard.
Whilst much has been made about the pros and cons of loyalty programmes, since their mass adoption they have been great at delivering against three fundamental business needs:
1) Providing a level of insight into user behavior that was never previously accessible
2) Providing opportunity for an ongoing conversation
3) Encouraging further purchase at a reduced cost of sale
But perhaps most importantly they highlighted the very real need to make customers feel valued when they actively chose to continue their relationship with you. To somehow recognise that you appreciate their ongoing custom, even if it doesn’t stretch to the depth of ‘loyalty’.
However, there’s plenty to suggest their impact is starting to wane. Research undertaken by Google (August 2018) specifically into loyalty in the travel sector suggested loyalty programmes don’t even make it into the top three factors when considering who to book with, instead coming 4th place after customer service, easy to use websites and online reviews.
So, whilst they will undoubtably continue to the be the bedrock of an organisation’s loyalty efforts, how long will that continue to be the case if they stay in their current format?
There is now a growing recognition that loyalty needs to fulfil a much broader remit, moving from ‘programmes’ to ‘experiences’ of loyalty, ensuring brands consider how every part of the customer journey can be used to gain and reward loyalty. Whereas traditional loyalty programmes focus on transaction post purchase, technology has opened up new channels and therefore data streams, allowing retention tactics to be much more sophisticated and considered earlier in the user journey. This ensures that the whole experience drives brand engagement rather than the promise of far off rewards or discounts.
One brand outside the travel sector that has managed this transition successfully is Starbucks. They’ve worked hard over the last few years to develop a digital experience that puts their standard points programme at the heart, surrounded by a wider experience that generates and rewards loyalty – including their mobile order and pay, spotify playlists, personalised content, promotions and crowdsourcing.
They’re clearly doing something right by approaching loyalty is such a broad way. You still have to spend roughly $75 to get a free drink, and yet 48% of the all people who have downloaded the app still regularly interact – which equates to an active base of over 16 million people.
Two forms of loyalty
To deliver this type of successful appeal, brands need to ensure they consider developing their offering to appeal to two distinct types of loyalty - Attitudinal loyalty and Behavioural loyalty (as referenced in Google’s research).
- Attitudinal loyalty - focuses on how appealing your brand is to people considering a purchase in your subsector. If asked would they say that they would book with you over others.
- Behavioural loyalty - focuses on what people actually do. Fundamentally how easy do you make it for people to book with you.
Attitudinal and behavioural loyalty both need to be given considerable focus by brands and one does not necessarily lead to another.
To give this some context, here’s a practical example of why both elements are key:
I have a child free weekend coming up and I plan on going somewhere where I’d never consider taking my children. I fully intend to book a gorgeous, wildly expensive boutique city break, fitting for such a rare occasion from Mr and Mrs Smith. I have ‘attitudinal loyalty’ to them as a brand. I really want to buy what they offer.
In reality, what happens is that I leave it later than I should to book something. Booking.com see that I’ve booked flights to Lisbon, and as a result send me a timely email with an amazing 5 star hotel offer in just the right location. It may not be the unique/boutique hotel I originally had in mind, but it’s a great deal on a beautiful, well reviewed hotel. I’ve previously booked with them dozens of times, so the process is simple with the added reassurance that I can cancel if I need to with no penalty (clearly fully intending to search out that boutique hotel in the meantime but never quite finding the time). In this example, I have ‘behavioural loyalty’ to booking.com.
The loyalty continuum
There are plenty of brands are getting a lot of things right in both spaces, but it’s questionable whether this is a as a direct result of trying to generate loyalty, or as a by-product of acquisition. And that’s an important point, the brands that are really making huge strides forward in creating a loyalty ‘experience’ are those that consider acquisition, retention and loyalty as one simple continuum. This can often be more about breaking down the organisational silo’s that ‘chunk’ the customer relationship into ‘before’ and ‘after’ sale, to align them under a single Chief Digital or Experience officer, rather than delivering something bleeding edge to your customers.
One thing is for sure, as Generate Z and A start coming of age, demanding substantially different behaviour from the organisations they choose to interact with, brands will need to up their game beyond ‘cookie cutter’ points and discount schemes to earn their loyalty.