How Travelocity Increased Online Customer Loyalty

January 26, 2006

Apologies to readers who are more interested in analytics than in conversion practices (or in this case, conversion and retention), but I really want to finish up on the conference.

Jeff Glueck, Chief Marketing Officer of Travelocity, spoke at FirstLook/ about online customer loyalty. His first rhetorical question was a great one, what loyalty? Online customers are notoriously fickle, especially in the travel industry, where they shop around for the best deal. (After all, what difference does it make if you purchase your Delta ticket on Orbitz or Travelocity?) As important as loyalty may be to the average e-tailer, it’s way more important to Jeff. The online travel industry is already maturing, so increased sales come from a) stealing customers from your competition and b) keeping your competition from stealing from you, i.e. loyalty.

With the help of their analytics and an overpriced consulting firm, Travelocity learned that 15% of their customers drove 65% of their variable profit. But they were doing a lousy job of holding onto them.

First, the team learned that they had to earn customer loyalty. Visitors believed that travel sites are just software — they aren’t companies with real people who care about customers. So Travelocity created a little humanoid character as part of their branding. More importantly, they created a Travelocity Customer Bill of Rights, which guarantees you have a good experience with them, according to their site. Jeff gave a great example of how the Bill of Rights works: soon after it was launched, Travelocity accidentally sold $2M of tickets to Fiji at $7.50/ticket. It wasn’t clear whether the site or the airline was to blame for tickets which should have cost $2000.00 or so, but Travelocity quickly decided to honor them. The cost to a thin-margin travel site was overwhelming, but it was soon made up for by the amazing publicity Travelocity got on blogs and in the traditional press. Apparently, it was the internal publicity that really meant the most to them — employees wrote the CEO and said, “I’m really proud to work for this company now.”

Finally, he talked about retention via experience. After you book your trip, they come back to you with all sorts of ideas, some of them free. There’s the standard, “Do you need a hotel?” but they also have “Get your free Las Vegas survival kit” courtesy of Travelocity and When you come home you can print a limited number of your digital or chemical pictures on Snapfish for free. And so on.

At lunch, I complained to Jeff about one of their services — they keep shopping for you. “Look,” I said to him, “I surfed your site for tickets to DC but bought them on Orbitz, the same day. For two weeks, you kept coming back to me with email about fares to DC.” He pointed out that, while I found it irritating to get email for a flight they couldn’t know I’d already booked, that kind of personal email converts better than almost anything else his team does. His comment is very much in line with what other retailers are finding about conversion and email: batch and blast converts really poorly compared to “You left this in your shopping cart” (which is what I had pretty much done.)

Travelocity came from behind (they were really hurting earlier in the decade) to post seven quarters of revenue growth in excess of 25% and an operating margin of 15%.