Vacation Romance

With a new customer database system and highly personalized communications, Thomson Holidays is aiming to make its customer relationships last a lot longer than a week

Today, everyone can be a jetsetter. The cost of vacations has dropped dramatically over the past two decades, making tourists smile and operators frown as their margins continue to be eroded. As the United Kingdom’s largest holiday supplier, Thomson Holidays has more reason than most to be concerned.

With a trusted brand and a large share of the market, Thomson was considering introducing a loyalty scheme back in 1995 when Tesco, a U.K. supermarket chain, was starting to make a real success of its own loyalty program. But Thomson decided its most important objective was to gain knowledge in order to better understand and market to its existing customer base, rather than encouraging customers to stay loyal through discount schemes. With this clear goal in mind, the company was able to overcome numerous technology and process-change challenges to build a true relationship marketing program.

STARTING FROM SCRATCH

The main obstacle to gathering information and contacting customers directly was the existing method of selling holidays.

Although the company sold around 12% of its travel packages directly through a wholly owned subsidiary, Portland Holidays, and its own Thomson Direct division, the direct channel had never been properly explored due to fears that travel agents would revolt at the threat of being bypassed.

Unfortunately, as agents collect the vital customer name and address at the time of booking, Thomson was simply unaware of who and where its new bookings were coming from. It was also unable to link the new bookings to previous holidays (on which it held a large amount of information gathered through post-holiday surveys) prior to the customers’ return. Until the customer had taken the holiday and hopefully filled in a survey, the company couldn’t even make contact to thank them for their business.

“It was the travel agents who owned that relationship,” says Tim Spooner, managing director of Knowledgebase, a consultancy brought in to help with the marketing systems integration work required. “Business processes and politics are the biggest obstacle to this kind of project.”

For a relationship marketing program to even get off the ground, it was imperative to get the customer name and address data from the agents as soon as the booking had been made and link it to the other data held on in-house systems. Since the agents were sensitive to threats to their business, a careful approach was needed.

This came in the form of the Preferred Agents Scheme (PAS), which offers agents who sign up access to special discounts, central marketing support, merchandising support and earlier notification of new packages; in return, Thomson gets customer contact details much sooner. Marketing director Shaun Powell (now deputy managing director) brought in Deborah Merrifield as head of relationship marketing to drive the transition to targeted direct customer communications and to develop the marketing side of PAS.

“We needed to promote agent buy-in by gaining their trust,” says Merrifield. “Now, with the vast majority of holidays, data is forwarded online in real time.”

But to enable Merrifield’s goal of multiple overlapping campaigns, inter-campaign suppression, and simultaneous multichannel integrated campaigns via mail, telephone, the Internet and TV, a sophisticated marketing system was needed.

WORKING TOGETHER

While the maneuvering to get the booking data stream in place was going on, Knowledgebase worked with the IT and marketing departments to develop a system. No product selection was needed – Portland Holidays had been using CCA’s MarketPulse system successfully for a number of years for direct telephone selling and was more than happy with it. Retaining the CCA solution also meant that the existing database and skill set could be used immediately.

At Portland Holidays, call centers had direct online access to the MarketPulse system. This was very desirable from the perspective of accurate customer sales and service, but not so good for efficiency.

A sophisticated ROI module is also due to come online in the next few months, on target with the industrywide move to measure much more than straight percentage campaign response.

When the vacation is booked, the level of discount, the time of year and the number in the party are only three of the many factors that affect the profit on each sale. Previously, profit was calculated on the price paid to the travel agents, but now base costs and margins are pulled from the financial management system to get an accurate booking profit. Using a sophisticated algorithm developed by Knowledgebase and Thomson, individual customer and household profits can be derived from this.

Allowing different views of the marketplace was one of the basic aims of the system; users can swap between an individual-level and a household-level view. There are also a number of different segmentations available via a system designed by Knowledgebase. A maximum of nine variables drive each segmentation, while the number of possible segmentations is virtually unlimited.

The system was designed in March 1997 and went live in April 1998. By the end of 1998, it was populated with data. Customer data from the agents was added in early 1999. With a vast majority of bookings quickly making their way to the database by mid-1999, much more became possible. By getting in touch shortly after booking, Thomson has a much greater window to sell lucrative add-ons, like car rentals or excursions, and to start a dialogue with customers before they go off to their destination. The system allows the use of trigger points like departure and return date to set off relevant and timely communications.

The period right after a customer returns from a trip is a crucial one for retention, and this is where a sophisticated campaign conducted through JDA has just finished a successful test phase and is ready to go live. A selection of the 12 most appropriate holidays for each customer is selected using five variables, and a mailer is individually printed on a digital press at Leeds-based Top Copy. As Thomson has more than 3,000 units in over 400 destinations, the number of possible letters is close to 4.9 million.

As part of the central marketing support agreed to under the PAS, each letter is custom printed with the details of the preferred travel agent that customer has booked through before; in fact, it appears to the customer that the letter comes directly from the agent. Through customized printing options, there are 127 fields on each letter that can contain different text or images.

During the six-month trial period, 250,000 customers were contacted with favorable results.

BUILDING ON SUCCESS

Although the past two years have seen Thomson taking huge steps forward in its database marketing program, much more remains to be done – and Merrifield has plenty of ideas.

Moving to the online channel is next on the agenda, and the existing project is well suited for that purpose. The customized letters could easily be translated to dynamically generated Web pages, with links to them or the pages themselves sent via outbound e-mail – with greatly reduced cost as a major attraction.