Business Strategy

The decline of customer loyalty—and what the travel industry can do about it

The decline of customer loyalty—and what the travel industry can do about it

In an effort to keep up with changing customer behavior, the premium hotel chain Marriott is beefing up its rewards program. As reported by USA TODAY, members of the company’s rewards programs will soon be able to use points toward a new “experiences marketplace,” which includes perks like tickets to a Broadway show or exclusive cooking classes.

“Points are not the point anymore,” Thom Kozik, vice president of loyalty at Marriott, told USA TODAY. “We weren’t keeping track of how consumers were changing their behavior.”

The goal of this move: offer more flexibility to travel customers, who, as it turns out, don’t always want to use their points to get a free hotel stay.

Marriott is just one example of how many companies in the tourism and travel industry today are scrambling to update their customer loyalty programs to keep up with customers. In recent months, Virgin America, United Airlines and Hard Rock International have announced upgrades to their reward programs.

While many travel companies are desperate to make improvements, studies show that these programs are becoming overused in the business world. According to a 2016 study, the typical American household holds memberships in 29 loyalty programs but is only active in 12.

Because of their ubiquity, loyalty programs have become commoditized. And because consumers see loyalty programs as a commodity, these programs are becoming less effective. One estimate suggests that up to 77 percent of these programs fail within the first two years.

What’s driving the decline of customer loyalty in travel?

In general, businesses don’t have a loyalty program problem—they have a customer loyalty problem. Loyalty is in decline as consumers are switching brands more frequently than ever before.

RELATED RESOURCE: Download the Keeping Customers Happy report to learn how the world’s leading brands have increased customer loyalty and reduced churn

Reward programs aren’t helping reverse the trend. As far back as 2012, there was evidence that companies that spend more on loyalty perform slightly worse than those that don’t. A McKinsey & Company study suggests that a having a rewards program isn’t a surefire way of building loyalty and driving sales.

To remain relevant to today’s customers, the travel industry needs to step back and look beyond loyalty programs. So what’s the solution?

Here are three starting points for travel companies to consider.

  1. Show customer gratitude.

Many travel brands claim to be customer centric but often fall short. The occasional seat or room upgrades offers a degree of satisfaction for guests, but these perks aren’t enough to win long-term loyalty.

In the Harvard Business Review, Mark Bonchek, founder and CEO of the consultancy Shift Thinking, shows why sweepstakes, coupons and points aren’t the right way to cultivate loyalty.

“Go for gratitude and loyalty will follow,” argues Bonchek. “Gratitude can serve as the basis of a relationship beyond the transaction.”

Showing gratitude is not just about showing appreciation for the business the consumer has given the brand, according to Bonchek. Gratitude isn’t just an increase in their reward point balance and a pummeling of marketing add-on offers.

“The strategy for generating sustained gratitude is to discover and foster a shared purpose with your customers, and to help them share that purpose with others,” explains Bonchek. “Shared purpose is not something you do for your customer, but rather with your customer.”

In the travel business, companies like Westjet have embraced “giftvertising”—surprising customers with presents. But as Bonchek argues, sending gifts to customers isn’t enough if it doesn’t create a shared purpose.

Collaborating with customers is the best way of creating a shared purpose with your customers. By listening to them and acting on their feedback, travel companies can show true customer appreciation. One example comes from Cathay Pacific, an international airline company based in Hong Kong. The company regularly engages with thousands of customers, and as a result, it has enhanced the guest experience and improved loyalty.

  1. Improve the guest experience.

While consumers generally love to travel for pleasure, many hate the travel industry for its surprise charges. The industry has a bad reputation for hidden fees and for charging “hypothetical damages.” Airlines have some of the worst reputations in customer service.

Improving the end-to-end guest experience is a critical step to attracting new customers and keeping the ones they already have. A 2016 report by digital marketing agency Qubit shows that improving the customer experience is the future of the travel industry.

Companies have their work cut out for them. For one, despite all the data available, many brands in the travel industry don’t have a single, holistic view of their customers.

“Having a single customer view allows you to merge your digital experience with an offline experience and make it feel like a human touch,” says Sergio Iacobucci, senior associate strategist at Qubit, about the firm’s report.

According to Qubit, one great example of a travel brand succeeding at CX is ghl, London’s largest owner-operator hotel company.  By “fusing technology and people,” the company has launched innovative products and services that enhance the experience of its guests. Among other things, the company has hired “value center managers”—staff members who are responsible for everything related to a guest’s experience. This approached has helped ghl decrease labor costs while also focusing on the experience of its guests.

  1. Enable two-way conversation with customers.

Many of the problems dogging the travel industry come down to a lack of understanding of customers. When it comes to loyalty programs, for instance, there’s a huge disconnect between how brands perceive these initiatives from how consumers see them. A 2014 study by customer engagement company Kitewheel shows that 73 percent of consumers “believe that loyalty programs should be a way for brands to show consumers how loyal they are to them as a customer.” In contrast, 66 percent of marketers see the reverse: the loyalty program is a way for consumers to show their loyalty to a brand. 

To bridge the customer loyalty gap, travel brands must first bridge the customer intelligence gap. The first step is to engage with customers—and act on what you hear.


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That’s what Delta Airlines, which made $4.5 billion in profit in 2014, did when it made the commitment to reinventing air travel. As reported by Adweek, the key to Delta’s reinvention was a commitment to listen to what flyers wanted “with the intent to act.” The company improved many aspects of the guest experience, including the onboarding process, the entertainment options and in-flight meal selection. As a result of these changes, Delta made Fortune’s 2015 list of 50 most admired companies and topped Business Travel News’ airline survey.

Final thought

There’s a growing body of evidence showing that customers care less and less about the loyalty programs of individual brands. Many companies in the tourism and travel industry need to re-evaluate their programs.

But the industry needs to do more than that. As the industry modernizes its approach to customer loyalty, companies can’t afford to ignore the very same people they’re trying to attract: their customers. Ultimately, the travel companies that have the deepest understanding of their customers are in the best position to fly high and create real loyalty and advocacy among its customers.

How to keep customers from cheating on you - customer loyalty e-book



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