Creating Effective Loyalty Schemes

within Travel and Leisure

Your guide to starting a loyalty

programme that improves customer
retention rates in the travel and
leisure industry.
Retaining your existing customers is an important part of any
business but it can sometimes be easier said than done due
to constant shifts in customer expectations and competitor
offerings. These shifts not only affect your ability to keep your
customers loyal but can make planning for the future difficult.
M&S for Business has researched the customer loyalty landscape
and has compiled some statistics to help you justify your
business case for implementing a loyalty scheme within travel
and leisure, and show how you could launch your own business
loyalty scheme and enjoy the effect of loyal customers.
Our statistics are related to the travel and leisure industry, one
of the most popular industries for loyalty schemes, however this
information can be applied to other sectors and industries too.
For further information about launching your own loyalty
scheme visit M&S for Business loyalty solutions hub.

Chapter 1:
Why is Customer
Loyalty Important?

Chapter 2:
Do Loyalty
Schemes Work?

Chapter 3:
How to Create a
Loyalty Scheme

Chapter 4:
Our Loyalty
Programme Top Tips

Your Next Step

Why is Customer Loyalty Important?

Chapter 1:

Why is Customer Loyalty

Important?

80% of your business

future revenue comes from
just 20% of your existing
customers

The Financial Times defines customer loyalty to have occurred if people

choose to use a particular shop or buy one particular product, rather
than use other shops or buy products made by other companies.
Customers exhibit customer loyalty when they consistently purchase
a certain product or brand over an extended period of time. As an
example, many customers stick to a certain travel operator due to the
positive experiences they have had with their products and services.

(Gartner)

Essentially, if a customer is happy with their experience of your business

and would repurchase or recommend you, congratulations! Youve just
acquired a loyal customer.

Why is it Beneficial to Have a Loyal

Customer Base?

In a world abundant with choices, retaining customers isnt easy. In the

past, simply offering a strong product or service would suffice, now its
harder than ever to even gain consideration. Youve invested much of
your time and effort into acquiring customers; why should further time
and effort be spent on keeping them?

Acquisition Budgets can be Lowered and

Reallocated

It costs five times more to get a brand new customer to convert than it
does an existing one, yet marketers continue to spend the majority of
their advertising budgets on media focused on both audiences.
While the prospect of acquiring a new customer varies from 5% to 20%,
repeat customers have a 60% to 70% chance of converting. With an
increased chance of conversion and lower cost per conversion, it makes
sense to reallocate more of your budget into marketing to your existing
customers.
With 80% of your business revenue stored in 20% of your existing
customers, loyalty schemes are a great way to turn fans into followers
and tap into this potential.

Chapter 1:
Why is Customer
Loyalty Important?

Chapter 2:
Do Loyalty
Schemes Work?

Chapter 3:
How to Create a
Loyalty Scheme

Chapter 4:
Our Loyalty
Programme Top Tips

Your Next Step

Why is Customer Loyalty Important?

Chapter 1:

Why is Customer Loyalty

Important?

It costs 5x more to acquire

new customers
(Forrest Research)

Loyal customers that frequently buy your products or services are much
more profitable than your average customer. Adobe found that customers
who have converted twice in the past are 9 times more likely to buy again
than a first time customer.
With each purchase after that, the likelihood of an additional purchase
increases. The top 10% of your loyal customers have an average order
value worth three times more than the lower 90%, with the top 1% of
customers worth 18 times more than the average customer (RJMetrics).
There is also a direct correlation between the amount of time a customer
has shopped with you and the amount they spend per visit (Bain &
Company), therefore retaining customers for as long as possible is a
beneficial business strategy.
The struggle is getting customers to come back for repeat business.
Initially, most customers arent interested in a relationship; RJMetrics
found a 68% drop off rate from one purchase to two. With each purchase
after the second, the probability of buying again increases. Anything you
can do to help convert a one-off customer into a repeat customer will in
turn help your business.

Loyal Customers are a Catalyst for Sales

through Recommendations

Loyal customers dont just bring in the benefit of increased direct sales, as
recommendations from friends and family remain the most credible form
of advertising (Nielsen). Utilising these positive recommendations allows
your loyal customers to help market your brand for you.
Incentives to encourage loyal customers to spread the word about your
business can greatly benefit your business. While you provide useful
products and services, there will be faithful followers sharing their stories
about how youve helped them. This effect can snowball; what youre
left with is an engaged customer base who is marketing for you. These
customers want to hear from you and are more likely to respond to offers
and share your business with others.

Chapter 1:
Why is Customer
Loyalty Important?

Chapter 2:
Do Loyalty
Schemes Work?

Chapter 3:
How to Create a
Loyalty Scheme

Chapter 4:
Our Loyalty
Programme Top Tips

Your Next Step

Why is Customer Loyalty Important?

Chapter 1:

Why is Customer Loyalty

Important?
How to Transform a Customer into a Loyal
Customer

Successful customer loyalty and retention strategies drive revenue and

referrals, creating thriving businesses and happy bosses.

With so much business revenue stored in existing customers, it makes

sense to keep customers satisfied. Several strategies and tactics are
used to improve customer loyalty, but finding one that is effective and
delivers the most value can be a challenge. While customer experience
and customer engagement tactics are used frequently, the top strategy
is a loyalty programme (Loyalty360).

The probability of selling

to an existing customer is
60% - 70%; a new prospect
is 5-20%
(Marketing Metrics)

Chapter 1:
Why is Customer
Loyalty Important?

Chapter 2:
Do Loyalty
Schemes Work?

Currently, 87% of customers want a loyalty programme (Talech), yet only

a quarter of companies reward any form of engagement (Cap Gemini).
A customer loyalty scheme could be the edge you need to gain a
competitive advantage in your industry.

Chapter 3:
How to Create a
Loyalty Scheme

Chapter 4:
Our Loyalty
Programme Top Tips

Your Next Step

Do Loyalty Schemes Work?

Chapter 2:

Do Loyalty Schemes Work? Loyalty

Statistics within the Travel and
Leisure Industry
The UKs travel and tourism industry is growing and forecast to reach
a value of over 257 billion by 2025 just under 10% of UK GDP
and supporting around 3.8 million jobs - approximately 11% of UK
employment.
The leisure industry too is experiencing growth and is currently worth
over 200 billion, supporting 2.6 million jobs - accounting for 9% of
UK employment (cabi.org). The sector also supports 66% of SMEs and
fosters a strong business start-up rate, 20% higher than the UK average
(Oliver Wyman).
These industries are enjoying periods of growth; one way to continue
this growth is by keeping customers experiences positive.

96% of the UK population belong to a loyalty scheme

64% belong to three or more loyalty schemes

Loyalty Scheme Statistics

Chapter 1:
Why is Customer
Loyalty Important?

Chapter 2:
Do Loyalty
Schemes Work?

Applications of rewards in Loyalty Programmes: purchases (97%)

[Transaction-based]; activities (16%), participation in gamification
campaigns (14%), mobile app downloads (6%), social media
engagement (4%), in-store check-ins (2%) [Engagement-based]

83% of individuals agree that loyalty programmes make them more

likely to remain a customer

Over 80% of individuals agree that loyalty programmes are worth

the effort and actively collect every possible mile/point

34% of customers say they would not be loyal if it werent for the
brands loyalty program

Chapter 3:
How to Create a
Loyalty Scheme

Chapter 4:
Our Loyalty
Programme Top Tips

Your Next Step

Do Loyalty Schemes Work?

Chapter 2:

Do Loyalty Schemes Work? Loyalty

Statistics within the Travel and
Leisure Industry
Loyalty Schemes Change Buying Behaviour

Loyalty Schemes By Gender

Business Loyalty Schemes

Chapter 1:
Why is Customer
Loyalty Important?

Chapter 2:
Do Loyalty
Schemes Work?

69% of consumers said rewards make them more likely to shop

with a brand

70% of members agree that theyd modify when and where they
make purchases in order to maximise the benefits received

64% of members agree that theyd modify what brands they

purchase in order to maximise the benefits received

49% of members agree they spend more with brand now vs.
pre-membership

72% of women said rewards make them spend more vs. only 56%
of men

Rewards entice 75% of women to trial a brand for the first time
vs. 62% of men

68% of women said that getting rewards from a brand makes them
stay longer, and not switch to other brands, versus 53% of men

68% of businesses report they are allocating less than 20% of their
marketing budgets to loyalty strategies, yet 58% of companies say
that more than 20% of total sales or revenue is attributed to their
programs.

Brands that allocate 20% or more of their budgets toward customer

loyalty have a better understanding of their customers

Chapter 3:
How to Create a
Loyalty Scheme

Chapter 4:
Our Loyalty
Programme Top Tips

Your Next Step

Do Loyalty Schemes Work?

Chapter 2:

Do Loyalty Schemes Work? Loyalty

Statistics within the Travel and
Leisure Industry
Loyalty Within The Travel Industry

Airlines

Hotels

Chapter 1:
Why is Customer
Loyalty Important?

Chapter 2:
Do Loyalty
Schemes Work?

41% of travellers prefer to receive products and services from

a travel brands own offering

82% want more input in shaping with own loyalty scheme experience

Airlines have 355.9 million loyalty Programme members

Hotels have 288.7 million loyalty Programme members

Car Rental & Cruise industries have 44.9 million loyalty

Programme members

57% of airlines reward customers for at least one form of

engagement

88% define a redemption goal immediately following activation

Reward choices is the most important benefit for frequent flyers

32% believe flexibility of how to redeem points is the most

important factor, followed by the ease of the process (24%)

41% of hotel chains reward customers for at least one form

of engagement

On average travellers fly or stay in hotels 2-3 times a year, like to

book travel online and are more often than not swayed by reward
programs on offer when choosing where to buy travel

Chapter 3:
How to Create a
Loyalty Scheme

Chapter 4:
Our Loyalty
Programme Top Tips

Your Next Step

Do Loyalty Schemes Work?

Chapter 2:

Do Loyalty Schemes Work? Loyalty

Statistics within the Travel and
Leisure Industry
Hotels

Reach Affluent Customers

Chapter 1:
Why is Customer
Loyalty Important?

Chapter 2:
Do Loyalty
Schemes Work?

33% of Travel Managers say they actively inform travellers about

hotel loyalty programmes

86% of Corporate Travel Managers agree hotel loyalty programmes

play an important role in their negotiations with hotels

77% of Travel Managers are interested in a corporate loyalty

programme that rewards companies through discounts and perks

More than 71% of those making 70,000+ per annum are enrolled
in a loyalty scheme

66% of travellers making 140,000+ per annum are likely to

spend money when they think they have found a good deal,
such as those offered to loyalty Programme members

Chapter 3:
How to Create a
Loyalty Scheme

Chapter 4:
Our Loyalty
Programme Top Tips

Your Next Step

How to Create a Loyalty Scheme

Chapter 3:

How to Create a Loyalty Scheme

Creating your own loyalty scheme can be a lengthy process, but if
you know where to start and segment each part of the process into
easily manageable pieces, you will start to understand how a loyalty
programme can work for your business.
We have broken down the process into 5 simple stages to
get you started.

Stage 1: Research and Development

The first step is to ensure that your strategy is built off the back of in depth
research. You need to understand your audience and their needs, trends
within your market and the types of loyalty scheme available to you.
Performing primary research will give you an insight into your audiences
current needs. Surveys, questionnaires, interviews and focus groups
will give you information directly from the people you want to target.
You can also look at your existing customer data to analyse their
buyer behaviour and customer journey in order to pinpoint the most
appropriate time to target them.
Your secondary research will give you an idea of what has worked for
your competitors, what is available within the market currently and will
provide you with a benchmark to measure your success against. Use
as many resources as possible, web searches, books and even paid
market research if you have the budget. This research will provide the
justification for your decisions going forward.

Stage 2: Designing the Loyalty Scheme

Armed with the results of your research, you can now start to design
your loyalty scheme. This part of the process will involve a lot of
planning and should not be rushed. This is your opportunity to get your
ideas onto paper and decide a plan of action.
The first step is to make the important decisions:

Chapter 1:
Why is Customer
Loyalty Important?

Chapter 2:
Do Loyalty
Schemes Work?

What are the key performance indicators of your loyalty

programme?

Chapter 3:
How to Create a
Loyalty Scheme

Chapter 4:
Our Loyalty
Programme Top Tips

Your Next Step

How to Create a Loyalty Scheme

Chapter 3:

How to Create a Loyalty Scheme

Stage 2: Designing the Loyalty Scheme

What are the qualifying factors for your customers?

What will the rewards be?

Which channels will the reward scheme be available through?

Once you know the answers to these questions, you can start mapping
out the process and deciding on the functionality that you need within
your loyalty scheme.
Once you have mapped out the process, you need to start thinking about
visual designs too. Your loyalty programme will need to be on brand and
all related materials will need to be clear and consistent. Youll need to
think about exactly who needs to be involved within your company and
come up with a release schedule to keep everyone on track.

Stage 3: Creating the Loyalty Scheme

With a solid design in place, the next step is to actually create your
loyalty scheme. This stage may take the most amount of time as you
coordinate your team and tackle any potential difficulties that appear,
so make sure you schedule in extra time for any setbacks you may face.
You will need to create a way of communicating your new loyalty
scheme to your existing and potential customers. This will involve
constructing promotional materials, both on and offline as well as
training staff on how to verbally communicate the scheme to customers.
Your website can provide an excellent way for your audience to access
the loyalty scheme and will also make the results of the scheme
easier to measure.
Finally, you will need to create a database to store customer information
and track their involvement in your loyalty scheme. This stage is very
important when it comes to the analysis of the scheme later on.

Stage 4: Releasing the Loyalty Scheme

Chapter 1:
Why is Customer
Loyalty Important?

Chapter 2:
Do Loyalty
Schemes Work?

Before releasing the scheme, you should complete vigorous testing to

ensure that the process flows smoothly and to identify any problem
areas. This will be especially important with any online areas of the
process as the simplest of errors can be detrimental to the campaign.

Chapter 3:
How to Create a
Loyalty Scheme

Chapter 4:
Our Loyalty
Programme Top Tips

Your Next Step

How to Create a Loyalty Scheme

Chapter 3:

How to Create a Loyalty Scheme

Stage 4: Releasing the Loyalty Scheme

You should reach out to your customers prior to releasing the loyalty
scheme, whether that be via post, email or telephone, to let them know
what is happening and to gauge their interest in participating in the
scheme.
You will then need a plan of action when it comes to promoting your
loyalty schemes release. Think about release events, online advertising
and traditional methods of advertising. Awareness is key to the success
of your loyalty scheme, and with recent studies indicating that around
6 billion worth of loyalty points remain unclaimed in Britain (Telegraph),
promoting your scheme in a clear and concise way will be the key to its
success.

Stage 5: Measuring the Results

Once the loyalty scheme has been released, you need to keep your eye
on the ball and constantly measure the results. This will be particularly
important during the initial release as the results will show you whether
there are any instant areas of improvement needed.
This part of the process is where your database will be so vital and
maintaining that database will allow you to measure the development
over time. Think about the key performance indicators you set at the
beginning of the process, are they being met? Is there anything you can
do to improve this?
Your loyalty Programme should be constantly adapting to the
requirements of your audience. Analysing the results will give you an
insight into what works and what doesnt so that you can make the
necessary changes to boost its success.

Chapter 1:
Why is Customer
Loyalty Important?

Chapter 2:
Do Loyalty
Schemes Work?

Chapter 3:
How to Create a
Loyalty Scheme

Chapter 4:
Our Loyalty
Programme Top Tips

Your Next Step

Our Loyalty Programme Top Tips

Chapter 4:

Our Loyalty Programme Top Tips

Overall, only 25% of businesses reward any form of engagement. With
87% of customers wanting a loyalty programme, these schemes are a
great way of keeping customers happy and engaged with your brand.
Here are our top tips for producing a successful loyalty scheme.

Be Flexible In Your Offering and

Personalise Rewards

While making a purchase is the most popular form of earning rewards,

there are still many non-purchase interactions that can be beneficial.
Consider online surveys, rating and reviewing products and services,
social media engagement or referring friends to the programme.
Reports have found a mix of preferences for redemption. Some
customers prefer to redeem rewards in store, whereas others prefer
online or via a mobile device. At present, only 9% of businesses support
reward redemption across all channels; planning a loyalty scheme thats
easy to use and can be redeemed in different ways will set your scheme
apart from competitors and gain your customers satisfaction.
82% of consumers said loyalty programmes would be better if they
offered more choice and would let them choose the categories of
reward they wanted (79%) (Collinson Latitude). This indicates that many
schemes fail due to companies not listening to their customers.

Test Your Schemes

Non-purchase incentives such as surveys can be beneficial to your

scheme as gaining customer feedback will provide an insight into what
customers think of it and how to improve it. If this isnt something that
can be done in your scheme, try testing several different channels. This
offers you the chance to gain data on what your customers respond to.
Salesforce found 86% of marketers ranked mobile loyalty campaigns as
an effective channel, so you could start with this one and expand.
It may also be beneficial to test the offer itself. Are your customers
more responsive to discounts or a loyalty points scheme? Would loyalty
cards or frequent flyer miles be a more attractive offer? Once you know
exactly what your customers want from you, you are likely to have a
higher success rate when offering the loyalty scheme.

Chapter 1:
Why is Customer
Loyalty Important?

Chapter 2:
Do Loyalty
Schemes Work?

Chapter 3:
How to Create a
Loyalty Scheme

Chapter 4:
Our Loyalty
Programme Top Tips

Your Next Step

Our Loyalty Programme Top Tips

Chapter 4:

Our Loyalty Programme Top Tips

Consider Coalition Programmes

You may find that you can get a wider reach with your loyalty scheme
if you join a coalition programme. With over 2 billion people being
members of coalition loyalty programmes worldwide (Finaccord) (over
a quarter of the worlds population), it is clear to see the popularity of
these schemes is massive. Coalition loyalty programmes offer incentives
to customers across multiple businesses. The customer earns points or
rewards by shopping at each participating business. This type of loyalty
programme is ideal for small to medium sized businesses as it enables
them to offer benefits to their customers with the support of other
businesses, making it more financially viable.
A coalition loyalty scheme also gives businesses the chance to align
themselves with brands which have similar values to them and offers the
opportunity to attract a whole new customer base. Customer data such
as lifestyle, preferences and demographics can be shared between each
business within the scheme and the financial risks are split between
several businesses, making it a safer investment.

Consider A Fee-Based Programme, But Be

Prepared To Give Better Rewards

Fee based loyalty programmes are another surprisingly popular option

with consumers looking for special treatment from their favourite
brands, and with 62% of consumers stating that they would join a feebased rewards programme if their favourite brand offered one (Loyalty
One), its something that should really be considered.
The fee-based loyalty programme is an acknowledgement of your most
regular customers and gives them the opportunity to benefit from
extra perks in exchange for a small fee. There are several ways in which
the customer can benefit from a fee-based programme, with 69% of
consumers saying they are attracted by the prospect of free shipping
and 67% by special discounts (Loyalty One).
If you are going to offer a fee-based loyalty programme, then you need
to be prepared to offer rewards of higher value than you would with a
regular loyalty programme. For example, subscribers to Amazon Prime
receive free one-day delivery and access to Amazon Prime Instant Video
and the Amazon Prime Kindle eBook Library. However, the incentive for
businesses is that they will create a partnership with their customer who
will be more likely to make repeat purchases in order to benefit from the
fee-based programme they have joined.

Chapter 1:
Why is Customer
Loyalty Important?

Chapter 2:
Do Loyalty
Schemes Work?

Chapter 3:
How to Create a
Loyalty Scheme

Chapter 4:
Our Loyalty
Programme Top Tips

Your Next Step

Your Next Step

Your Next Step

A loyalty scheme is not something to be rushed into. You want to be sure that it is going to be appropriate for your
audience and that it offers real value to them. The travel and leisure industry is one of many which can offer something
extra to their customers in order to keep them loyal, from frequent flyer programmes to third party voucher incentives.
If nothing else, be relevant and flexible, create a multi-channel experience, have a fantastic customer service to match
and test and listen to the feedback that you are being given.
No matter what industry your business is in, youre sure to know the value of a loyal customer and at M&S for Business
we understand that better than anyone. If youre looking for business loyalty scheme ideas, we are happy to help you
discover a strategy that works for you.
Contact our helpful team or take a look at the loyalty scheme products and services we provide for some inspiration.

Chapter 1:
Why is Customer
Loyalty Important?

Chapter 2:
Do Loyalty
Schemes Work?

Chapter 3:
How to Create a
Loyalty Scheme

Chapter 4:
Our Loyalty
Programme Top Tips

Your Next Step