COVID-19 has led to compromises, closures, and losses across the economy. The travel industry has been hit particularly hard, facing revenue losses of up to $820 billion from business travel alone.
British Airways has labelled this an “unprecedented crisis”. Companies like Sage Cruises have even taken the step of offering customers refunds that look set to cost them between £10m-£15m in pre-tax profits. With 5 million jobs on the line, travel brands need to take swift action.
This isn’t the first travel industry crisis. From 9/11, H1N1, the ‘Great Recession’ and more, travel brands that took the right steps in the face of danger were able to rebound better aligned with the needs and interests of customers. But you need to keep your existing customers happy to have that chance.
While refunds are certainly a straight-forward way to stay in good-standing with customers, they may not be the best strategy for companies looking to weather this storm. You need to retain cash-flows and customer loyalty.
Planning for the recovery starts now. What we are going to look at here are some very specific alternatives to direct refunds that will prevent revenue loss and keep your customers happy.
What is the alternative to refunds?
This is pretty simple — offer your customers credit.
Travel vouchers, which allow customers to use their existing purchase against future travel costs, allow you to retain existing revenue and ensure that you’re the first provider they turn to when lockdown ends. You keep customers happy, guarantee short-term loyalty and maximise the resources at your disposal to weather the current storm. Everyone wins.
How to successfully roll out a travel vouchers programme
Travel vouchers do benefit everyone involved. But things obviously aren’t that simple. First, not all of your customers will be happy with a credit-based refund. Second, you need a system for providing credit-based refunds that is not open to fraud, and does not create significant administrative costs. Third, you have to be financially prepared to honour the reclaiming of those vouchers. Let’s look at these one at a time.1. Accommodating customers who want a refund: Fundamentally, you should provide customers with a cash refund who demand one. Customer loyalty and brand reputation are huge in the travel industry — particularly for business travellers — but tourists as well. Don’t tarnish your reputation over refunds. Accommodating those customers will help you in the long-run.
What we suggest is making travel credits the default option. On its own, this should capture a large segment of your customer-base who will simply be happy to not have lost out entirely. For customers that persist, we recommend giving them an option — a cash refund or travel voucher accompanied by a promotion. For example, this might include a 10% increase in value, or free feature upgrade.
You also need to make your voucher offer as simple, transparent and useful as possible — more on that in a second.
2. Use automated promotional marketing platforms: There is an entire industry built around promotional marketing. Tools used to generate, distribute and validate coupons and vouchers can be repurposed for the immediate needs of travel brands. It’s possible that your marketing team already has one of these solutions on-hand.
By generating unique, single-use codes, you can distribute travel vouchers to individuals via email, maintain a digital record of those offerings, and be confident that they can only be reclaimed once, by the person you gave it to. This system is cost effective and secure. It’s simple for both you and your customers.
3. Plan for what you offer: Keep track of the promotions you provide. The simplicity of doing this will depend on the system you build. But unique promo code generators that integrate with your CRM make that about simple as possible.
It’s worth noting that about 25% of Americans let frequent flyer miles expire. This isn’t exactly the same as travel vouchers. However, if you plan around every single person redeeming the offer you make today, you will likely end up with a pleasant surprise in your balance sheet in the future.
With that said, it might be prudent to put an expiration date on the vouchers you supply. However, make sure that date is lenient enough (and flexible enough) that it doesn’t cause concern among customers who aren’t sure when flights will return to normal.
Make it simple and make it easy
By at least putting a voucher-based offer on the table, you may find that it’s a far preferred solution for those who have spent the last few weeks consoling themselves about that lost holiday. But you do need to make sure that the entire system is simple — particularly if you want to incentivise customers to use it, rather than demanding a cash refund.
Make sure the application process for your voucher refunds is online, on a straight-forward website that keeps form-fills to a minimum. Provide telephone options for customers who would prefer that. Send out emails (or even text messages) to update customers on their options and to provide straightforward instructions on what to do and the information they will need to apply.
Lastly, make sure that the redemption process is clearly stated, broad and generous — with straightforward guarantees. Ambiguity around when, where and how travel vouchers can be reclaimed will spark fear in customers and encourage them to look for cash refunds. Make sure that people can use their vouchers across everything you offer, split that value across multiple purchases or top up the value with additional payments.
The better service that you can provide, the more immediate goodwill you’ll generate.
Plan now for the future you want
Short-term planning should never fully replace long-term goals. Market downturns are actually a good opportunity to reassess operations and re-align with market trends. One positive thing to note is that personalisation of brand communication is an important mega-trend across the economy. The ability to provide single-use promotions on-demand to customers will help you flexibly engage with customers on a personalised level.
If you haven’t already augmented your promotional marketing capabilities with promotional software, it’s an upgrade that will help you meet your current needs to minimise revenue loss and align with long-term marketing trends.
It’s easy to let the news and our ever-changing circumstances get you down, but remember, it will pass. And, when it does, you need to be prepared to jump back into action.