A Comprehensive Guide to Customer Loyalty for Travel Agency

According to the study report by Bain & Company, repeat customers spend 67 percent more in purchasing your product in 3 years than in the first 6 months.

This study signifies that loyal customers are valuable assets for a company.

With this article, you get insights into why customer loyalty is essential and how to build loyalty programs for your customers. In this guide, you’ll find the ways to measure customer loyalty.

With the help of tips and success stories, you can implement customer loyalty in your travel business to increase your revenue.

Why is Customer Loyalty Important in the Travel Industry?

Why is Customer Loyalty Important

Increased Revenue and Sales

Loyal customers have a higher probability of making a repeat purchase. They tend to buy more over time. On top of that, they inadvertently become advocates for your brand, thereby referring new customers.

Reduced Marketing Costs

According to Forbes, acquiring new customers can be up to five times more expensive than retaining existing ones. Marketing costs decrease as there is less need for aggressive marketing strategies for loyal customers. 

Competitive Advantage

Customer loyalty also helps you in a competitive market. A strong base of loyal customers ensures a steady flow of revenue and provides a competitive edge. In most cases, customers choose familiarity and reliability over new products.

Valuable Feedback and Suggestions

Loyal customers are likely to provide valuable feedback. After using your services over time, they can offer genuine insights on what works and needs improvements. Feedback and suggestions help your business improve its service according to customer needs.

Resilience During Market Fluctuations

During hard times, such as economic recession or pandemics, loyal customers remain the most reliable source of revenue. Their commitment helps businesses come out of those difficult situations compared to businesses that heavily rely on acquiring new customers.

Enhanced Brand Image and Reputation

A loyal customer base helps the brand image to become strong. Positive word-of-mouth and reviews from repeat customers build a reputation that attracts new customers. As a result, your brand’s position in the market becomes solid.

How to Build Customer Loyalty?

How to Build Customer Loyalty

Offer Exceptional Customer Service

Offering personalized interaction with your customer enhances their experience. In addition to personalization, you can address their inquiries and complaints as quickly as possible. Also, try to exceed customer expectations to create a memorable experience with your brand.

Develop a Quality Product or Service

Ensure your travel products and services are reliable and meet high standards consistently. Regularly update and improve your offerings by considering customer feedback and market trends.

Create a Loyalty Program

Loyalty programs reward customers for their repeated business. Those rewards may be points, discounts, or exclusive offers. A tiered reward system gives higher rewards to the customer who purchases more.

Engage with Customers Regularly

Engaging with customers is a significant method of building customer loyalty. Use various channels like email, social media, and blogs to maintain communication. Sharing the content that is relevant and valuable to your customer base, not just promotional material.

Seek and Act on Customer Feedback

You can not only engage with customers but also take regular customer feedback. For this, you can conduct surveys. The next thing to do after gathering feedback is to implement it visibly.

Utilize Technology for Personalized Experience

You can send personalized recommendations and offers based on past purchases and customer interactions. For this, you can use Customer Relationship Management (CRM) systems to track customer preferences and history to tailor interactions.

How to Measure Customer Loyalty?

Measuring Customer Loyalty

You are unable to see the effectiveness of customer loyalty without measuring it. There are various ways you can measure your customer loyalty. Consider the following methods to measure:

1. Net Promoter Score (NPS)

The net promoter score (NPS) is a metric that assesses the likelihood of your customer recommending your travel product or service to others. NPS uses one question, “On a scale of 0-10, how likely do you recommend our product to your friend or colleague?”

In this method, you categorize your customers into three groups: Promoters (9-10), Passives (7-8), and Detractors (0-6). Then, you calculate your NPS by subtracting the percentage of Detractors from the percentage of Promoters.

The preferred value of NPS is positive. It is ideal to aim for 100, but the study conducted by XM Institute with data from 37,000 consumers shows the reality of the market. It shows an NPS score of 30 for groceries and 29 for streaming media, whereas it shows a -6 value for consumer payment services.

2. Customer Retention Rate (CRR)

The customer retention rate (CRR) measures how many customers have used your travel product and services over a period. 

You divide the total number of customers at the end of a period minus the number of new customers acquired by the number of customers at the beginning multiplied by 100.

For instance, if your travel agency had 500 customers at the start of November, you gained 100 new customers in the month. You had 450 customers at the end of November. Then your customer retention rate will be ((450-100)/500)x100%, which is 70%.

A high retention rate indicates strong customer loyalty and satisfaction.

3. Repeat Purchase Ratio (RPR)

Repeat purchase ratio (RPR) is the metric used to measure the percentage of customers that buy your product repeatedly. With this ratio, you can find how many customers buy your product and services over a specific period.

You calculate the repeat purchase ratio by dividing the number of repeat customers by the total number of unique customers in a specific period of time multiplied by 100. This calculation gives the value in percentage.

For example, let’s assume the total number of unique consumers in November is 400 and the number of repeat customers in November is 120. Then, RPR equals (120/400)X100%, which is 30%. This value indicates that 30% of all customers are repeat customers.

4. Customer Lifetime Value (CLV)

Customer lifetime value (CLV) is the metric that represents the total revenue that your travel business can reasonably expect from a single customer throughout the business relationship. The longer a customer buys products from your service, the greater the value becomes.

This metric lets you understand how much your agency should invest in maintaining and acquiring customers.

You can calculate CLV by multiplying customer value with the average customer lifespan.

First, we need to find the value of a CV. For this, you need to calculate it as the Average purchase value APV times the Average Purchase frequency rate (APFR). Then, you calculate the CLV. 

For example, the average amount spent, APV by a customer, is $1,200 per trip, with an APFR of 1.5 trips per year, and the average customer stays with the agency for 5 years (ACL). Then, the Customer Value (CV) is $1,200 x 1.5, which is $1,800, and the Customer Lifetime Value (CLV) is $1,800 x 5, which is $9,000.

This metric helps you understand how much you can afford to spend on acquiring new customers and retaining existing ones.

5. Customer Engagement Level

The customer engagement level metric represents the customer’s connection and interaction with your brand. It measures how actively customers interact with your business around various channels, such as social media, email, customer support, etc.

High engagement indicates a deep relationship between the customer and the brand, thereby increasing loyalty.

For instance, in social media, you can measure it with the number of comments and likes. For email campaigns, you use open rate and click-through rate. Similarly, for a website, you can use the monthly visitors and repeat visit rate to track.

6. Customer Surveys

The main purpose of customer surveys is to gather feedback, opinions, and suggestions directly from your customers. You can conduct surveys to cover various aspects of the customer experience, from product quality to customer service.

Customer surveys ensure an understanding of customer needs and enhance travel services.

You can create different surveys, such as satisfaction surveys, NPS surveys, product feedback surveys, customer service feedback, market research surveys, and many more.

7. Churn Rate

Churn rate, also known as customer attrition rate, is a metric that measures the percentage of customers who stopped using your travel product and services. This rate helps to understand the reason why they stop using your services. So that you can develop strategies to improve customer loyalty.

You can calculate the churn rate by dividing the total number of customers lost during a specific period by the total number of customers at the start of that period multiplied by 100%.

For instance, your travel agency had 5,000 unique customers at the beginning of the year. Throughout the year, 400 customers who previously booked with you did not return. 

So, your churn rate will be (400/5,000) x 100%, which is 8%. That means 8% of your customer base from the beginning of the year did not book any trips with you over that year.

Success Stories of Loyalty Programs

Success Stories

Marriott International Loyalty Program

Marriott International Loyalty Program, also known as Marriott Bonvoy program, is an award-winning loyalty program. It includes 30 brands with 8,300 hotels in 138 countries.

Members earn points for the hotel and resort stays as well as from the purchase. 

Members can redeem their experience points, including luxury products and future stays.

Singapore Airlines’s KrisFlyer

Singapore Airlines’s KrisFlyer loyalty program focuses on offering exclusive experiences and personalized rewards. They provide premium members with perks like priority boarding, lounge access, and even “Book the Cook” service on select flights.

With those perks, KrisFlyer has created a sense of exclusivity and luxury, encouraging frequent flyers to remain loyal to Singapore Airlines for its high-end experiences.

Airbnb’s Loyalty Program

Airbnb’s Superhost Program rewards top-rated hosts, impacting customer loyalty by ensuring high-quality stays. It also provides personalized stay and experience recommendations by leveraging the data. It also organizes community events and experiences, encouraging a sense of belonging among users.

The outcome of this program compelled users to book with Airbnb repeatedly due to consistent positive experiences. The trust and reliability factors also increased, which is essential for good word-of-mouth marketing.

Final Thoughts

Customer loyalty is a significant aspect of your travel business for success. Studies show that repeat customers spend more money than new users. Moreover, acquiring new customers is more expensive than retaining the old ones.

You can build an effective customer loyalty program by understanding why customer loyalty is important and how you can build customer loyalty. Also, the metrics listed in this comprehensive guide will help you measure your brand loyalty. 

Refer to the successful examples of travel-related businesses, and you can build a strong customer base.

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