When I talk to students in our Airline Digital Academy, I often ask them about the biggest challenge in airline or travel marketing. Customer retention in travel is rarely the first thing that comes to mind.
But when we start talking about the challenges of uniqueness (how unique your solution is, whether it’s solving any unique problem), relevancy, and frequency (how often your product or service is used), my students always start agreeing that these are difficult nuts to crack. In particular, frequency is much lower in the airline and travel industry (especially now because of the pandemic) compared to retail, for example.
I try to teach my Academy students that these three challenges (uniqueness, relevancy, frequency) define everything you do in travel marketing. Your customer acquisition strategy, how you do conversion optimization (how you communicate your uniqueness), your direct channel growth (for example, organic traffic), your mobile app adoption, etc. – all these things together are what customer retention in travel is all about.
In the middle of a discussion about these challenges with our students, I realized something: here on our Diggintravel website and Diggintravel Podcast, we don’t have all that much content about customer retention in travel. So far, we’ve mostly talked about conversion optimization, UX, and other digital topics.
I decided to change that and talk to a travel digital expert who works on customer retention in travel. Emre Güney first worked in airline ecommerce as Head of Digital Product & Growth Marketing at Pegasus Airlines. This is when I first met him, during my airline conversion optimization research. Emre was one of the more enthusiastic airline digital people I knew. When I saw that he’d moved to Skyscanner, where he now works on customer retention, I knew he would be the perfect guest for our next podcast talk. Emre has also started working on his own startup and digital marketing newsletter called Think Better, so he has tons of useful insights.
Listen to the new episode of the Diggintravel Podcast to learn about travel customer retention, or read on for key highlights from our talk with Emre:
And don’t forget to subscribe to the Diggintravel Podcast in your preferred podcast app to stay on top of the latest airline digital and retailing trends!
Thinking of my discussion with our Academy students, the first thing I wanted to ask Emre was about our three challenges. The frequency and relevancy in travel, even before COVID, for the leisure segment wasn’t that high. People mostly travel three to four times a year. If you compare this to retail, it’s much more difficult to stay top-of-mind for customers, to communicate frequently, and to stay relevant. How does Emre look at that challenge? I asked him to reflect back on his airline days and even now; how does he see customer retention in travel?
Very good question, and a million dollar question to solve in the travel industry. Like you said, there is no doubt that retention is key for business growth. If you don’t fix your retention, you’ll have a leaky pool or leaky bucket. You keep bringing in visitors, either paid or organic, or whatever it is, but if you don’t retain them, you have a really big problem. That’s the number one prerequisite for a successful product and business growth. And it’s maybe 10 times harder in travel because it’s not a product that you use on a daily basis, on a weekly basis. I think on average, globally, the statistic is potential travelers, before COVID obviously, were traveling maybe twice a year for leisure purposes. So every six months.
So, how do we tackle these challenges?
For example, you could inspire them to read your articles on your blog. This is micro-engagement in their journey every six months. It’s a really long shopping window for them. You could leverage more high-level editorial assets to inspire them, and then maybe a little bit more functional tips about their potential destinations or potential dates. As they move towards the steps in the journey before they book their travel, then maybe you can change it.
It’s not only using let’s say WhatsApp. For any other messaging platform or social platform, you use it on a daily basis and there is an organic look. You get a message, you send a message. It’s by the nature of the product and the business model. But in travel, it starts from dreaming to the travel itself, and it’s a vicious cycle. It’s an infinite loop. The moment you’re in your last day in travel, you immediately start dreaming about your next travel. When you’re lying on the beach, you say, ‘Where should I go next?’ It’s a big loop that we need to inject some moments to have some kind of soft retention.
But when the time is right for the potential customer, because you will be as a brand and as a product in their mind, when the time is right, they will automatically also be retained in your record system and purchase whatever you are offering and still continue to be your customer. I think this is a different mindset to the approach.
Emre talked about the interesting concepts of micro-moments. We know that typical engagement with your brand starts way before people actually buy (convert), but how can you measure the impact of your prior digital marketing activities? What are the challenges compared to typical growth or acquisition marketing? How do you put this all together?
It’s really hard. Like you said, there’s different data sources, different touchpoints. The journey is fragmented. Users are using multiple platforms and websites. They were engaging with multiple touchpoints, social ads, searching, organically coming, clicking your emails. Blending everything together in a unified way is extremely hard, and you need a really, really sophisticated engineering investment to do that. And there are no one-size-fits-all plug-and-play tools to do this as well.
I think it needs to be done step by step, layer by layer. Like you described, measuring campaigns is an existing state. The ultimate desired customer lifetime value is the desired state. There’s a massive gap between these two states. I think it should be step by step and maybe uncovering another layer.
The first thing could be measuring two platforms, like web plus app. Then maybe measuring all channels with a sophisticated attribution model. And then maybe unifying all touchpoints into one datapoint per customer, like online data for the customer. Not the user, but you know what Emre is using, like he mostly visits the app, he mostly visits these campaigns, mostly searches for these destinations. You start building some kind of data infrastructure within your ecosystem, and then you connect those dots one by one.
Ultimately, obviously, you need to measure the longer time window. It’s not like one shopping monetary value, but how they provide more revenue or more value to your company over time, and how frequently they are using it. Are they expanding their average basket size? Are you offering some big upsell or ancillary products? Are you doing some cross-selling? Multilayered problem. Hard problem. Really hard in travel. But I think we should be approaching it step by step and really bring it one at a time, because this is not a problem that can be solved at the same time.
For example, in the early days of online marketing, you embedded a Google Analytics script and you started using Google Analytics as your digital analytics tool. But it’s not the case anymore. Like I said, it’s a sophisticated, multilayered user journey. That’s how I see it. It’s a really tough one, I would say.
One thing that always comes to mind when we talk about measuring and analytics is the right metric. So, I asked Emre about the best metric to measure customer retention in travel. Are there different metrics you would look at for retention marketing compared to typical growth or acquisition metrics?
I think one of the key metrics I would be focusing on would be customer lifetime value, because it’s a blended output metric. In order to move customer lifetime value higher, you need to devise some input mechanisms. Customer lifetime value has a duration, like if this customer was with us one month, two months, three months, six months, and it has the revenue aspect as well, like how much money we made from the customer. That’s why I think I would be leaning a little bit more towards the customer lifetime value.
But I think businesses are like Rubik’s cubes. There is no point in saying ‘We’ll be following just this metric and ignoring the rest.’ Obviously you need to monitor some of this stuff to understand different layers of your business. For example, overall revenue is important for your sustainable growth, but I think customer lifetime value with revenue as the top two drivers, it’s blended. How healthy is your growth? Are you increasing the value that you get from your customers? And how healthy is your monetization and business model? Are you growing your revenue and in return your profits?
In his airline days, Emre mostly worked on growth marketing, conversion optimization, and digital products. In typical companies, most of the focus in marketing is on customer acquisition. So, I asked Emre about the main difference he saw in moving from the first part of marketing (customer acquisition and conversion optimization) to retention. What are the differences or learnings for him as a marketer?
From a more marketing perspective or in an airline, your aim or focus is acquiring users. But the users that you acquire might be the ones that you already acquired before. You keep bidding for the same users in the market.
If you think from a market perspective, like the reachable market that I can target, you keep targeting the same people in different mediums. What I mean by retaining them is designing a proper flow for them. Obviously, you need to acquire them in the first place. You need to create your relation between them. But after you acquire them, whatever you define as that activation moment, you need a way to keep them in your ecosystem and keep them relevant to your product and brand without using external mediums or an advertising environment.
That’s the main difference. Yes, in five minutes you can create a campaign in Facebook and you start targeting people and you see some numbers in Facebook Business Management or whatever you are using. But from a unique human perspective, they might be the same person today, tomorrow, other days. If you think of it as a physical store, you keep paying money to get the same customer out of the street to your shop. That’s the main difference.
But retention is really dependent on the product and business model as well. It’s a hard thing. I think it requires more psychology and more depends on the business model and product, I would say.
One thing I see when it comes to retention is that, for example, airlines and the travel world are copying the concept of subscriptions from other industries. A subscription by itself should be great for retention. You pay for customer acquisition or acquire a new customer once, you have a customer acquisition cost once, and then they commit to your subscription. Basically, you’re not doing what Emre was explaining before – going for each of the transactions, going on the market, targeting the same people, and competing with others – but you’re trying to get the buy-in. I wanted to hear how Emre looks at subscriptions in relation to customer retention in travel.
I have seen many examples in travel brands, like Amazon Prime. Subscribe once, pay once, get several tickets or trips. I think that’s something more travel brands will explore in the future. But my startup is also a subscription business. It’s like a book summary podcast and audiobooks, so you subscribe either monthly or yearly.
Subscription I think is one of the hardest business models because, again, it’s very psychology-driven. When I say psychology-driven, rational customer behavior is disappearing. For example, when you see a cost for a monthly subscription, what modern economists expect for modern consumers is they would see two prices and they would compare, and then they would make the right choice, the rational choice. But at the purchasing moment, let’s say in the mobile app, users are not valuing the prices based on this stuff.
Like signing up for a gym, for example. When signing up for a gym, one month is $10, six months is $40. Obviously it’s much more savings, but it’s a commitment problem. It’s not a monetary problem. So subscription itself is super hard. Establishing a sustainable and profitable subscription within travel is also extremely hard, because the monetary revenue is really high, the frequency is low. It’s not like Amazon Prime or things like that. But it’s relevant. I believe there are untapped opportunities there, or out-of-the-box solutions that will disrupt the way we purchase travel again.
But travel is not only flights itself. There are many, many different verticals in travel and how we plan our trips. So yeah, I think there will be more to come in that space. But it’s extremely hard, I would say. Those are my experiences so far.
AirAsia has introduced a new ASEAN Unlimited pass which lets you travel as many times as you want within Malaysia and ASEAN countries (Source: soyacincau.com)
Customer retention was just one of the topics I discussed with Emre. These are the other topics we discussed:
If you want to learn about all of these topics, listen to the full podcast interview.
If you want to learn from leaders like Emre and about airline digital marketing, please:
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