4 Ways Travel Companies Can Cut Down Customer Churn
Customer churn rate is one of the key indicators to assess the performance of most B2C enterprises. Travel and tour companies also belong to the B2C group of commercial enterprises and therefore must be mindful of their churn rates. Churn or iteration rate is the figure that you get by dividing the number of customers you lose by the number of customers you get in a particular time window. So, the higher the churn rate, the more customers you are losing.
Lower Churn Rate = Higher Retention Rate
Losing more customers means your travel business is failing to retain its consumer base. Many experts agree that customer retention is more important for the profitability of a business than new customer acquisition. According to a Harvard Business School’s research for business leaders, even a 5% uptick in customer retention helps a business to improve its profit by at least 25%.
Travel and tour companies operate in a very competitive environment. They need to be proactive about reducing their customer churn to record better profits and stay ahead of competitors. In this post, we will discuss some tips on how travel companies can reduce their churn rate and improve their business outlook.
Why Travel Companies Experience a Higher Churn Rate
Before you move to address the issue of a higher churn rate for your travel company, you need to identify the root cause behind it. By observing the business models and operations of various travel and tour companies, we have identified the three issues being the biggest reasons behind a higher churn rate in the industry.
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Uncompetitive Prices
A travel company loses out the majority of its existing customers to other tour operators that offer cost-effective alternatives. For travellers and tourists, it is an easy decision to forsake their relation with their existing travel company when they come to know that the other company is offering the same-class travelling to same destinations with the same star accommodation at a lower price. Even if your onboarding process and overall users experience is better than your competitors, most customers will still pick them if there is a significant difference between your prices.
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Poor User and Travel Experience
After price, it is the customer experience that determines if they stay or move to another tour operator for their next trip. For a travel business, customer experience divides into two phases. The first phase is when the customer gets in touch with your business, obtains the information, and books their trip. The second phase starts with the trip when they fly to their destination. If a customer faces poor experience in either of the phases (particularly the second one), they are less likely to come back.
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Acquiring a Large Number of Customers that Might Not Be a Perfect Fit
Many travel companies overlook this important aspect while investigating the causes of higher customer churn. If you haven’t targeted the right group of customers with your successful sales drive, you are bound to experience a higher churn rate. For instance, if your strong niche is family holiday trips, you must focus on families. You might succeed in acquiring solo travellers, but they are less likely to turn into repeat customers.
If you can identify and resolve the three issues mentioned above, you will eventually experience a significant drop in your churn rate.
4 Ways to Reduce Customer Churn
Besides addressing the causes behind higher churn, you need to take these measures to ensure fewer customers leave you for other travel businesses.
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Invest in Travellers that Have the Potential of a Repeat Customer
Customer churn is a part and parcel of any business. No matter how well-managed your operations and good your prices are, your business will see some customers exiting. While you can’t completely stamp out customer churn, you can surely increase the number of your repeat customers. Therefore, whenever you onboard a new customer, make their profile to assess if they have the potential to be a repeat customer. Their travel history and income bracket are two main pointers to identify if they are meant to be recurring clients.
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Be Active in Communication and Frequently Ask for Feedback
You shouldn’t wait for your customers to message you with any question and query. Be proactive and reach out to your customers frequently with all sorts of relevant valuable information. Similarly, ask for customer’s feedback time and again to get to know about the grievances of customers who might be on the verge of churn.
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Offer Incentives More Often
Offering incentives works like a catalyst for the sales of any business and travel business is no exception. By offering seasonal and surprise discounts, complimentary services on a trip, a lucky draw, etc. a travel company can succeed in keeping its existing consumer base intact. However, don’t try to “fool” customers through incentives. Customers can see through the discounts and complimentary services you offer and tell if they add real value to the complete deal.
For instance, offering a discount immediately after increasing the price of the tour package won’t help you to make the departing customers stay.
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Continuously Improve Your Operations and Stay Updated with Travel Technologies
The travel industry is an extremely competitive landscape. Especially after extensive digitisation, a travel business needs to be very diligent in improving its operations. The arrival of travel technology, particularly travel management system software and applications, have enabled tour operators to improve their daily operations and offer a better user experience to clients.
Updating your travel management system, integrating travel CRM, and marketing automation and upkeep of other digital resources is essential to stand out among your competitors. When you make the most of available travel technologies, you make it easy for your team to provide the best customer service, which is a strong deterrent for higher churn rates.
TravnetTech can help you with all sorts of backend logistics you need to run your travel and tour company successfully. From a travel management system to travel back office and marketing automation, we can help you with all the digital resources your travel business needs.