NB: This is a viewpoint from Riley Gibson, CEO and co-founder of Napkin Labs.
A smarter use of information could help travel brands differentiate themselves more effectively, boosting their margins.
Loyalty programs are broken
As the market has become more price-driven, loyalty to brands has decreased. The travel and tourism industry must figure out how to reintroduce loyalty back into their relationship with guests.
Most people would instinctively think the way to do this is to use loyalty programs.
Yet Deloitte recently published a loyalty study that found that only 8% of survey respondents say they always stay at the same brand of hotel, while just 14% of survey respondents say they always fly on the same airline.
The same Deloitte study found 'best-case scenario' is that hotel loyalty programs (as they are constituted today) have either little or no impact on travelers purchase decisions, or, worst case, these programs drive undesirable "brand-switching behavior."
Earn brand loyalty by effectively using information
Many industry insiders and experts have underestimated how the amount of information newly available to consumers has changed the marketing game.
Travelers are demanding and consuming more information than ever before. This demand has led to a reshaping of many industries -- especially travel and hospitality.
The information demand is also leading to a change in how brands try to attract consumers.
Take a look at the airline industry. An entirely new business model -- the low-cost airline carrier -- has arisen to meet the demand for price transparency.
Many people draw the wrong lesson about the success of low-cost airlines. They think the lesson is that one should "price-cut" one's way to popularity.
So they slash prices and strip services and other unique factors that truly differentiated their brands in the first place. This is often a mistake.
The success of low-cost airlines is as about something else. These airlines responded more effectively than traditional airlines to the information problem of the digital era.
Traditional carriers didn't communicate prices in a transparent way, and low-cost carriers stepped into the breach and stole customers by being transparent with the information consumers wanted (price signaling).
Information is becoming a vital factor in the shaping of branding messages for many products and services. As more information is available to travelers, brands will have to fight to differentiate themselves within the marketplace by using information more effectively.
Why aren’t loyalty programs working?
Loyalty is more complex and driven by emotions and behavior. To reintroduce loyalty into the consumer relationship, brands needs to play on these emotions and behaviors.
With the rise of social media and networking, travel and hospitality brands have an opportunity to gain more intimate knowledge of who their guests are and what they desire. Brands need to establish a platform for communication giving their guests the opportunity to tell them what they want, hope for and wish for and then act on it.
British Airways began acting on this strategy with its "Know Me" program in 2012.
Joe Boswell, the head of British Airways' customer analysis, said on the VIP customer service improvement program:
"We are basically trying to recreate the feeling of recognition you can get at your favorite restaurant."
By researching and tracking their guests they are able to provide a better experience to travelers that will keep them coming back because the brand knows their preferences.
Loyalty becomes less about offering afree hotel stay for every ten visits a customer makes and becomes something else, something more powerful -- namely, an appeal to a customer's emotions through personalization.
Use information to improve your branding
Travel brands need to take an extra step to pursue a new path to loyalty.
A classic example: Ritz-Carlton surpassed a guest's expectations with a little gift of red pepper flakes.
A repeat guest ordered room-service pizza while on a business trip, but he forgot to ask for red pepper flakes. Unbeknownst to him, Ritz-Carlton had made a note in their system from the one other time he had ordered room-service pizza that he liked red pepper flakes.
The man was delighted with the thoughtfulness of the hotel and will remember their actions next time he is booking travel. These preferences were learned by tracking guests and by training employees to review those guest profiles systematically and to act on the information obtained.
Travel and tourism brands can begin the ‘getting-to-know-you’ phase at earlier stages, including during research and booking, by establishing an open line of communication for their guests.
Social networks and communities are a natural fit for this. But, the first step is always asking. It may seem like a cliche, but now more than ever, information is power.
NB: This is a viewpoint from Riley Gibson, CEO and co-founder of Napkin Labs.
Portraits of people image via Shutterstock.