Loyalty Programs and Leisure Travelers: How Can Loyalty Close the Engagement Gap in Leisure Travelers?
Spend-based travel programs are inherently, and effectively, focused on high-value business travel customers who tend to be less price-sensitive than their leisure counterpart. However, a significant portion of guests/passengers in the travel and hospitality industry fall outside of the business segment—with 3 out of 4 domestic trips taken for leisure purposes. Because of the sheer size of this untapped segment, your loyalty program could contribute more to the bottom-line by effectively engaging these overlooked customers.
TRAVEL LOYALTY’S FOCUS TODAY: THE BUSINESS TRAVELER
The U.S. travel industry was worth a whopping $947 billion in 2015 (according to the U.S. Travel Organization), with high-frequency and high-spend business travelers accounting for about 30% of total travel expenditures. Spend-based loyalty programs are rewarding the high-spenders with perks such as waived baggage fees, greater seat selection options, and upgrades. That coupled with the commoditization of travel, are travel companies inadvertently eroding customer loyalty? Additionally, how do we increase a lagging sense of loyalty among those leisure travelers who often feel at the bottom of the barrel compared to their seemingly elite travel brethren?
Co-branded credit cards are often leveraged within travel to drive brand engagement year-round and more importantly, enable infrequent travelers to accumulate miles/points on non-travel purchases for redemption on flights, hotel stays, and other travel perks. The benefits to cardholders can be significant when card spend is high (i.e. first in wallet), however with an ever growing and competitive credit card landscape, this is becoming more difficult for credit cards to accomplish. For instance, common tactics such as a rich sign-up offer can help drive a temporary spike in acquisition, but also entice some travelers to simply churn through several cards.
The silver-lining? The travel industry can borrow from other sectors to enhance and personalize the consumer experience, thus creating an opportunity to engage the other 70% of travelers, the leisure traveler—a segment that is currently worth about $650 billion.
LOYALTY’S UNTAPPED OPPORTUNITY:THE LEISURE TRAVELER
So, how can travel brands overcome challenges—such as a lack of repeat purchases, immense brand competition and high-price sensitivity—all of which are driving fickle brand loyalty from leisure travelers?
- Address the gaps and inequities that exist in your rewards structure today:
What’s in it today for someone who travels only a few times a year? If the traveler does not see attainability of rewards or benefits in the current structure, they do not feel any incentivization to engage or repeat their business. Airlines, for example, have been increasingly moving toward spend-based models (vs. miles traveled), and leisure travelers are earning fewer miles than they did in the past. Without mile-attainability driving their loyalty, travelers start focusing more on price, convenience, service, and other factors to choose their carrier. These should be incorporated more in the program structure to ensure leisure travelers are perceiving adequate value.
- Think about continuous earn and engagement beyond the transaction:
Because the leisure audience travels less often than business travelers, they therefore have more time between their flights. Leisure travelers also typically take longer trips or participate in more tourist activities during the trip. Both of these provide more time that can be capitalized on to increase engagement. Determine where meaningful participation exists beyond travel spend and put value against it. By implementing small surprise and delight moments such as seat upgrades or discounts, waived extra charges, and personalized communications post-travel can have a lasting impact on the leisure travel. Delta has increased brand affinity by adopting customer journey mapping to understand opportunities for improvement thus enhancing the overall customer experience.
- Leverage and integrate your partners:
Partnerships are more prevalent in travel loyalty than almost any other industry. Travel loyalty goes much further than just the flight or hotel stay—the experience spans from the moment the traveler leaves their home to when they reach the door at their destination to when they return home. Every step of the way needs to add value. Create additional engagement opportunities, optimize your rewards/benefit costs, and improve your brand relevance. Our VP of Loyalty Strategy, Zach Woith, provides us with the following example of the partnership between United Airlines’ MileagePlus and Uber. When you use Uber when you travel, there’s an opportunity to earn points. It’s not only a strong value prop, but it’s also a recognition of what’s meaningful to customers and their experience with the brand.
- Incorporate rewards and benefits that directly drive incremental spend and margin:
This type of rewards and benefits effectively pay for themselves in the process of motivating and engaging your customers. Leisure travelers are often more price-sensitive, so try offering rewards and benefits that motivate them to continue spending money while returning perceived value to them. Examples may be discounts to be used towards their next trip, or access to a lounge or affiliate services. If they book another flight, added free transportation may help persuade them to commit to the price difference of the new flight.
- Supplement rewards/benefits with a program design that creates great customer experience:
This can be equally meaningful in creating differentiation and driving preference. An engaging mobile app that provides convenience organizing the trip logistics and information about their destination and its attractions helps travelers optimize their trip experience. For example, the Hilton HHonors enables members to check-in and unlock their suite with a digital key all through their mobile app—effectively streamlining and elevating the member experience in meaningful way. The traveler’s loyalty data that is gleaned through the program can also be leveraged towards all communications to deliver personalized messages at relevant times pre-, during, and post-travel. These personalized communication for the leisure traveler can take on different channels, such as Facebook messenger.
Needless to say, before rolling out program changes or a complete program launch, it is imperative that it is supported by a solid business case. Furthermore, the business case should account for the sensitivities associated with 1) varying levels of participation, 2) anticipated impact to points liability, and 3) considerations tied to operation and execution, anchored against the identified and meaningful threshold required for corporate significance (i.e. break-even, ROI). Assessing the financial impact in tandem with program design ensures the program will drive compelling value for both your customers and your stakeholders as well.
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