Online travel sites need to address the problem of retaining customers – offering loyalty programmes is one solution they are trying
At Rs 5,500 crore in 2006-07, online travel is the largest contributor to e-commerce in India, and it is expected to grow by 30 per cent over the current fiscal. eMarketer predicts that online travel will grow at an average of 46 per cent annually from 2007 to 2011. There is a tremendous momentum in the online travel space in India as more and more people are travelling, so customer acquisition is not a problem. The problem is customer retention. Whether it is the two-year-old MakeMyTrip or the soon to be launched Travelspice, everybody seems to be counting on their loyalty or reward programmes to retain customers.
Ramu Kallepalli, CEO, TravelSpice.in, agrees, “It takes five times more money to get business from new customers and it is difficult to retain customers online.”
TravelSpice.in, which should be live by January 2008, will woo customers with its loyalty driven programmes. Kallepalli has worked closely with Ctrip, the leading Chinese online travel agency, which has a points accumulating system. Travelspice will follow a similar model.
Ram Badrinathan, analyst, PhoCusWright Inc., thinks that loyalty programmes are just an element of the customer strategy and not the strategy itself. He says, “I don’t think loyalty programmes will retain customers. In two-three years, it might happen as one needs to understand the details of these loyalty programmes and thereby assess how much value they are actually adding.”
So far, travel sites have largely concentrated on heavy discounts to attract customers. But this strategy can only work up to a point. As the market develops, the sites will have to think of more ways to entice customers – and keep them.