Customer retention is crucial for any business to succeed. As you build your new customer base, you also need to make sure your relationship with past and current customers improves and encourages them to return. If you want to find out more, read our post about customer retention. There is a number of ways you could implement in your business to improve the retention and one of them is creating loyalty & referral programmes. As Oracle Hospitality stated in their recent research: ‘Loyalty programs are a critical driver of repeat business for both the food and beverage and hotel industries with their ability to identify consumer habits, demographics and personalisation opportunities’.

What is a customer loyalty programme?

It is a programme introduced by brand or a number of brands that rewards customers for their repeated purchases and loyalty to the brand. It offers customer a variety of perks including upgrades, free merchandise, rewards, coupons or exclusive offers.

Why do you need a customer loyalty programmes?

• It helps you strengthen brand position among your customer-base by reminding them of your existence.
• Loyalty programmes provide you with further information about your customers and let you segment the data based on the information provided to better tailor your offers to customers’ needs.
• It enables you to create and strengthen relationship with your customers. 83% of loyalty program members say that rewards programs make them more likely to continue doing business with a certain brand.
•  If your program members think highly of your offering, it increases the potential of them recommending your hotel to their peers.
• Improve your brand perception and positive reviews online.

Loyalty programmes must-haves

1. Make it easy to access and use. Joining a loyalty programme should be a positive experience, so cut the obstacles and difficulties to minimum by making it easy to join (online or at front desk), collect only information necessary (customers are reluctant to join programmes that require too much of their personal data),
2. If possible, create tiers and segments to make rewards more relevant to the segment (i.e business traveller will  appreciate different perks to family of 4) and drive more bookings (by rewarding frequent visitors more).
3. If you offer a non-monetary rewards, structure them around customer values. Your rewards should also build an emotional bond with the customers, so think of rewards that your visitors can’t buy but would benefit them greatly.
4. Ensure the offering is relevant to your customers.
5. If your offering is not strong enough to attract or retain members, look into partnering with other companies. There’s a number of hotel-specific membership bodies you could look into joining. You could also look into joining forces with local businesses and offering an all-inclusive experience.
6. It should have personalised approach to customers. According to a study, 41% of consumers say they purchase more from  personalised emails based on past behaviour. Some perks worth including in your loyalty programme:
   1. Preferential treatment (i.e. birthday offers, offers based on users booking patterns),
   2. Discounted or complementary upgrades (i.e. early check-ins, complementary services),
   3. Priority access to special events,
   4. Third party offers.

Measuring success

• Customer retention rate. This very important metric is your first warning sign something is going wrong and you need to address it to improve your business’ performance.
• Net Promoter Score (NSP) is a simply evaluation form, where customer has to pick a number between 1 and 10 to evaluate business overall performance.
• Improvements in customer churn.  Good loyalty programme will have a positive impact on the number of customers leaving it.

What is a referral programme?

Customer referral programmes are a powerful selling and marketing tool and a great addition to your distribution channels. It encourages current customers to spread the word about a service among their peers and reward them for bringing new people to the business.

Why do you need a referral programme?

1. To improve your customer acquisition. Number of studies proved that people buy from people, not businesses. Recommendations coming from friends and peers are the greatest sales driver, therefore a referral programme is necessary to encourage and facilitate that.
2. Increasing a number of leads and contacts in your database. Even if a referral doesn’t turn into a customer immediately, it is your opportunity to start building a relationship and raise brand awareness of your hotel/service for when the customer is ready to book.
3. If you are introducing rewards for referrers you are indirectly encouraging them to book with you again. Having additional money or exclusive discount encourages people to use it because they wouldn’t want to waste it. 
4. It helps you increase customer value. Referred customers can be a great asset as not only are they more likely to refer more people, they also tend to spend more than new customers that came through other channels.

  Referral programme must-haves

1. Exceptional customer service experience as only happy customers will be willing to share your programme with others.
2. Make it easy to access, understand and share.
3. Offer attractive rewards. Make sure they are relevant and attractive to your audience. These could include:
   1. Free products, services or upgrades.
   2. Money off or extra money to spend.
   3. Discounts for future purchases.
   4. Points if there’s a whole point system set up. These could be used against bookings, on upgrades or other rewards.
   5. Mutual rewards.

Loyalty and referral programmes are great for businesses to attract, retain and reengage customers. They work great for businesses which score high in NPS and have positive reviews. If your reviews are on the negative end of the stick, work in improving your customer experience first.