BUILDING LIFETIME VALUE IN TRAVEL THROUGH PERSONAL RECOMMENDATIONS

PhocusWire White Paper

September 2019

Written by

Marisa Garcia at PhocusWire

In partnership with

Building lifetime value in travel through personal recommendations

ImpressumBuilding lifetime value in travel through personal recommendations

A PhocusWire Report sponsored by Mention Me Author: Marisa Garcia at PhocusWire

Published in 2019 by PhocusWire. We are a brand of Phocuswright, a wholly owned subsidiary of Northstar Travel Media, LLC.

© 2019 PhocusWire All Rights Reserved. PhocusWire.com

2

©2019 PhocusWire. All Rights Reserved.

ContentsIntroduction 4

The limited shelf-life of advertising 5

Push vs pull marketing in travel 6

From experience to NPS to LTV 8

Friends in hospitality 9

Connections on wheels 10

The Faberge effect 11

3

Building lifetime value in travel through personal recommendations

Introduction

You may or may not be what you eat, but it’s fair to say that you are how you holiday. Travel is an inherently personal experience full of choices, each one reflecting our values, identity and ambitions. Bad decisions can taint an entire trip; good decisions make us excited to tell others about our unforgettable experiences.

Consequently, consumers spend a lot of time researching their choices, visiting review sites and gathering

comments on social media. But there’s one factor that will almost always have the biggest influence: the word of a friend with similar interests and values.

This paper explores the power of personal recommendations in the travel sector, as well as the best way to convert travellers to brand advocates and how to best use tools like NPS to drive new customer acquisition.

4

©2019 PhocusWire. All Rights Reserved.

The limited shelf-life of advertising Advertising is an essential element of marketing, but it’s not a standalone solution. It expands the reach of a brand but, as reach grows, advertising requires great investment and offers diminishing returns. As Mary Meeker notes in the introduction to the Bond Internet Trends 2019 report, “while Internet advertising growth is solid and innovation is healthy, there are areas where customer acquisition costs may be rising to unsustainable levels.”

Not only is advertising increasingly expensive; it’s also trusted less than ever before by consumers. Data from the Advertising Association shows public favourability towards advertising has decreased from around 50% in the early 1990s to 25% in 2018. Bombarding consumers with marketing messages of little relevance has eroded their trust in traditional media.Then there’s striking the balance of rising Customer Acquisition Costs (CAC) against the Lifetime Value (LTV) of target customers.

Alex Funk, VP of strategic development at 3Q Digital suggests that this requires companies to change how they evaluate their digital advertising performance. “For many years, digital has been judged on either a cost-per-lead or a return-on-ad-spend basis. We’re seeing these metrics be deprioritized in favor of customer acquisition costs and lifetime value calculations of those customers. This speaks to the maturity of the market and the need to go beyond standard, siloed channel KPIs.”

The Mary Meeker report identifies four key drivers that can improve the gains from online advertising: better targeting, new creative, commerce and high relevance. Examples of these drivers include customised ad preferences on Facebook, time-edited clips automatically generated by machine learning algorithms on YouTube, and promoted tweets on Twitter.

These examples all strive to create two key success factors: trust and recognition. But nothing surpasses how much we trust people we know who have something to say and nothing to sell. Content pushed out by brands, no matter how clever or strategic, cannot replicate the effectiveness of personal recommendations.

Referral marketing offers a welcome solution to the growing challenge of getting your brand in front of the right audience in a cost-effective manner.

5

Building lifetime value in travel through personal recommendations

Push vs pull marketing in travel Every business strategy comprises push and pull marketing; the former actively promoting products or services to consumers, while the latter draws them in.

But with push marketing being viewed with increasing cynicism, pull marketing is becoming more and more effective for travel brands, as highlighted by the following statistics:

• 71% of consumers prefer making informed choices through recommendations, reviews, social media and online search

• Online search is the most popular form of new product discovery in the travel sector

• Review sites and friend recommendations are three times more trusted by consumers than endorsements from bloggers and YouTubers. [Source: @mentionmeshare]

Mention Me found that review sites, social media and friends’ recommendations all outperform “push” marketing, including paid advertising and mail campaigns. For all the attention given to influencers, bloggers and vloggers in travel, these are the least effective trust builders by a broad margin, performing even lower than Newspaper/PR campaigns.

Furthermore, push marketing can have the opposite of the desired effect if pushed too hard. Mention Me discovered 31% of consumers find retargeting advertising creepy and 54% of UK consumers object to being targeted based on their past online activity [source: Kantar]. This further heightens the value of word of mouth recommendations; something the travel industry is well positioned to capture as people enjoy personal and memorable experiences.

6

©2019 PhocusWire. All Rights Reserved.

“Trust has been a recurrent theme in the results, reflecting it’s rising importance in culture and media over the past 24 months. The data highlights that consumers don’t want to be sold to by influencer marketing, or by celebrities, but instead value and trust a personal recommendation. 33% of those questioned would trust a friend’s referral the most, which is twice as much as the next most trusted source of referrals: a spouse or partner.”

Mention Me Customer Advocacy report 2019.

Mention Me helps brands harness the power of word-of-mouth by integrating referral technology into their websites that incentivises customers to refer their friends. Underpinned by cutting-edge technology and sophisticated AB testing, this method is proven to drive new customer acquisition by as much as 30% and significantly extend customers’ lifetime value.

7

Building lifetime value in travel through personal recommendations

From experience to NPS to LTVExperiences are the most referable products or services, and are closely tied to our personal identities. As social media (and the popularity of postcards long before that) proves, people love to share where they’ve been and what they’ve done.

Many travel providers offer a cross-section of experiences that could earn even greater recommendations. 57% of consumers are likely to recommend a travel brand, while 65% are likely to recommend a food and drink brand; airlines, for example, can tap into both these categories by partnering with popular brands for cross-promotion.

Think of the popularity of United’s Stroopwafels, Delta’s Biscoff cookies, JetBlue’s TERRA chips, or Japan Airlines’ Air MOS burger. Having a high-profile chef design the in-flight menu not only could increase NPS, but also has the potential to boost brand-name recognition that’ll help capitalize on the referral benefits of both consumer categories.

The same cross-promotion opportunities exist in entertainment and activities. The 55% of consumers likely to recommend a leisure/entertainment company are also likely to notice and mention when that brand is available or associated with a travel brand.This also ties-in to the consumer’s values, identity, and aspirations. A travel brand’s recognition of connected experiential elements like food and transport can make customers feel “seen and appreciated” – a feeling which builds a desire to return and, in turn, lifetime value.

It’s key that companies understand customers’ social values too and target their messaging accordingly. By encouraging recommendations at memorable points in the customer journey, travel brands can tap into opportunities to earn positive word of mouth, boost NPS and build a healthy base of Lifetime Value return customers.

“On the one hand customers want brands to get the basics of great customer service, fair pricing and quality right. These are table stakes for brands wishing to activate customer advocacy. This is important because at the heart of referral and word of mouth there is a human interaction which carries some psychological baggage. Shoppers won’t risk their social standing with friends by sharing something that doesn’t align with how they want to be seen.”

Courtney Wylie, VP Product & Marketing at Mention Me.

Back when sending postcards were an essential part of going on holiday, it wouldn’t be unusual for friends to suggest mentioning their name in a particular shop; “Amy sent me” could spark a friendly conversation with the shop-keeper that results in a discount. Mention Me’s unique name sharing function taps into the conversational nature of sharing experiences, letting new customers enter their friend’s name at the online checkout to secure an exclusive deal.

8

©2019 PhocusWire. All Rights Reserved.

Friends in hospitality The Hoxton hotel chain has designed its brand around a sense of the familiar, creating cozy open house spaces that help create a sense of community in its properties. It wanted to convert its loyal customer base into brand advocates, so reached out to Mention Me to develop a referral campaign that would extend globally to help get the word out about this ‘home away from home.’

The Mention Me platform’s flexibility and frictionless “name share” functionality were particularly attractive to The Hoxton. It wanted to segment referral campaigns by hotel location as well as by language, and to offer sharing methods that might best suit a target market—all features that Mention Me could customize to suit their strategy.

The Hoxton first launched a Mention Me referral program in 2017 for three locations and has expanded that to cover six locations in two languages.

“Mention Me is super easy to manage and it’s great being able to customize all the elements of our campaigns by demographic and location.”

Ellen Pickett, Digital Manager at The Hoxton

The Hoxton’s “tell your mates” campaigns — which offered mutually beneficial discounts to the referrer and the referred — have yielded strong results and also some interesting insights on customer preferences for communications.

• A word from a friend saves ten: 24% of friends referred become Hoxton customers

• Once at home at the Hoxton, always at home: 18% of revenue from referred customers is from their second or subsequent stay

• Amy sent me: 16-23% of referral orders at Hoxton are frictionless sharing by name.

The Hoxton has also learned that WhatsApp referrals are currently more successful drivers of new customer acquisition for the brand’s UK campaign than for its French campaign.

This type of insight into familiar interfaces can be applied to refining other elements of a travel brand’s social marketing strategy, as the Bond report suggests.

9

Building lifetime value in travel through personal recommendations

Connections on wheelsZipcar’s car sharing service offers customers a clever alternative to rentals and ownership. The company has built up a strong network of members; to take their connections further, Zipcar launched a referral program with Mention Me.

The company relied on Mention Me’s technology, reporting tools and customer support to design a campaign that would yield the best results. With AB testing to target individual and business clients, language support and referral by name, the company has seen dramatic growth.

“Mention Me has a fantastic USP that really delivers. Easy integration, ease of use for the customer, flexible test-able and just generally a great product.”

Member Marketing Manager, EMEA at Zipcar.

• Life on the highway: in the past year, the volume of referred friends becoming customers has more than doubled

• Drive my car: over 40% of friends referred go on to become Zipcar customers.

• Mustang Sally: over 30% of referrals use Mention Me’s unique “name share” option.

WhatsApp also goes far for Zipcar, getting 15% of referrals behind the wheel.

10

©2019 PhocusWire. All Rights Reserved.

The Faberge effect Brands have long known that word-of-mouth is a winning strategy for building loyal customers.

In the 80s, U.S. shampoo brand Faberge Organics tapped into this dynamic with a unique television ad featuring Heather Locklear who praised the qualities of their shampoo and said: “I told two friends, and they told two friends, and so on and so on and so on.” The ad was so popular it went on to become a cultural icon.

This principle endures and is medium agnostic. We see it in the rapid spread of messaging on social media, but it

happens meaningfully in real life, too. Mention Me bridges the gap between digital and the real world by encouraging real people to tell their friends about their experiences, using whichever platform works best for them.

Travel brands invest heavily in developing experiences that are shareable and tap into consumer identity and values. The best way to capitalize on that investment is by encouraging customers to tell a friend, or two—or more.

Learn MoreIt’s good to have friends in all places, and even better to have friends who know friends. Get in touch with Mention Me to learn more about the long-term value of referrals and discover how your travel brand could forge more meaningful connections with your customers to drive new customer acquisition, extend lifetime value and boost your brand profile.

11

About Mention MeMention Me helps brands worldwide boost customer acquisition via referral marketing. Consumer trust in many advertising channels has declined, so the successful brands of the future are those that build on the advocacy of their brand fans.

Our SaaS platform enables brands increase new customers by 10-30% and these referred customers exhibit stronger brand loyalty and higher lifetime value. Travel and entertainment are particularly referable and we work with brands such as Avis, Virgin Experience Days, Zipcar, SEA LIFE and Hoxton Hotels to turn refer-a-friend into a valuable marketing channel.

www.mention-me.com

About PhocusWirePhocusWire is a comprehensive daily news companion for the industry, powered by Phocuswright, the most respected travel research authority and events brand in the world.

With an existing arsenal of deep, research-driven assets at its disposal, only PhocusWire provides daily exposure to sought-after research, valuable industry data and expert analysis.

Technology and distribution form the backbone of travel, tourism and hospitality, the planet's largest industry.

At PhocusWire we cover, analyze and debate the most important industry developments.

www.PhocusWire.com