The Impact of Loyalty Programs on Business Performance

Welcome to Travel Buddy

In episode 26 of the Travel Buddy podcast, James Houchin and Rachel Satow explore the crucial role loyalty programs play in enhancing business performance. They discuss the dynamics of loyalty ecosystems, personalized marketing, and the benefits of integrating travel experiences into loyalty offers. This episode offers insightful strategies for leveraging loyalty programs to boost customer engagement and optimize business outcomes.

Key Highlights

• Overview of different types of loyalty programs, from transactional to aspirational.
• The influence of loyalty programs on customer lifetime value (CLV) and acquisition costs.
• Insights into using customer data for personalized marketing within loyalty ecosystems.
• The role of experiential travel rewards in increasing conversion and redemption rates. 
• Discussion on the impact of removing friction in the customer journey to enhance user experience. 

Quotes

• "Loyalty is a flywheel; one person's brand loyalty inspires others to engage." – Rachel Satow
• "Removing friction in the booking process leads to smoother transactions and repeat purchases." – Rachel Satow

Transcript

Brandon Giella (00:01.361)
Hello and welcome back to another episode of the Travel Buddy Podcast. I have with me today as ever Rachel Satow. Thank you for joining us and James Houchin. Welcome back to the show. James, you have a, I don't know what you call it, but a funny little sound machine. Can you play, can you play a sound for us? Yeah. This is so fun.

James Houchin (00:19.994)
Yeah, I mean...

Brandon Giella (00:27.069)
Thank you. I'm so excited to incorporate more media into this podcast if we can. Okay, so thank you for joining me today again. So we are talking about the impact of loyalty programs on business performance. So we have talked a lot about loyalty programs and personalization and things like that in previous episodes. And so today we're going to be digging into a little bit more on how that affects.

the actual business results, KPIs, ROIs, and all those acronyms that you learn in business school. So, but before we get there, I'm gonna turn it over to you guys. James, I'll start with you. Can you give us a little bit of the foundation or lay of the land when it comes to loyalty programs? And again, this is something that we've talked about before, so we don't need to belabor the point, but give us like a broad understanding of when we're talking about customer loyalty, what are we talking about?

James Houchin (01:23.795)
Um, Hey, we're going to have to cut that just a little bit because it farted out for a second. Um, I heard, where did it start? Sorry to already start with an audit. Um, and I heard kind of what was the Genesis of loyalty programs as a concept, but was the follow-up or the add-on.

Brandon Giella (01:30.118)
Okay.

Brandon Giella (01:43.74)
Yeah, so the question is, can you give us a little bit of a lay of the land in terms of loyalty? When we talk about loyalty programs or customer loyalty, especially as Switchfly sees it, what would you say? How would you describe that? What are the different tiers or mechanics when it comes to loyalty from your perspective?

James Houchin (02:03.366)
For sure. So, you know, there's a couple of different flavors. if we want to kind of have ice cream analogies, it, it's a little after breakfast while we're filming and I'm hungry. but if you have your more of vanilla or the more transactional where really a lot of this started out, it was just, you know, the more you partner with a brand in terms of, you know, me going to Chick-fil-A once a week, you accrue points. It gets me to come back for, know,

Brandon Giella (02:13.711)
I do love ice cream.

James Houchin (02:30.0)
that free coffee or whatever that, you know, more transactional based reward is. And it, it's a great relationship, you know, it helps me, increase my usage of their products. They get higher sales. obviously, you know, you, you get all these micro conversions, whether it's even just getting me to download an app and they're able to, in a very cost effective way, improve sales.

from there you have, move up the value ladder to a more aspirational type relationships where, know, my Uber point and partnerships were like by Uber points, or sorry, my Uber spend when I go to an airport, can accrue my sky miles account, et cetera, where you get some of these brand crossovers and there's, synergies, but it's still a more transactional relationship. And then from there you get into much more, kind of

I'd call it a walled garden, kind of like using iOS where there's a ton you can do within an ecosystem thinking of like your credit card reward points, right? Where I may not directly spend money with my bank and the actual, you know, credit card swipes, but through the transactional value.

they're generating a ton of revenue off their user install base. And that's really where we can start to explore what else can we do? Does that mean status accruals and access to an airport lounge? Does that mean, you know, these more aspirational rewards where a switch fly would come in and we're able to power, you know, travel getaways based on points accrual. And that's really where the more progressive and the more innovative brands

are kind of doing a bit of all of the above where, you know, you're going to have that transactional point accrual based on, know, how much you spend with a brand. But then there's all these other options with, you know, cross promotion with adjacent logos, as well as, you know, things that are just there to delight the customer where, you know, you get a bag tag based on status and you get to, you know, kind of flex that you're a brand loyalist in a way that, you know, everyone gets that win.

James Houchin (04:37.052)
But definitely goes above and beyond just that basic, you hey, Brandon, I sell coffee every time you spend five dollars. I'll punch your card.

Brandon Giella (04:47.099)
Yeah, I, I think everybody understands the, the Chick-fil-A or Starbucks kind of like points are cruel, but I like what you said about the ecosystem or walled garden idea, because I guess what, where I go is I'm thinking of American express platinum. I'm a card holder, big fan because I get all these benefits. Like I get $200 a year on, like entertainment credit. So I get like free audible books and things like that. And it makes me feel like I'm connected as like a member and I'm, I'm like glad.

to be a card holder because I get all this great stuff. But then to your point, you get all these added benefits of being like a, I'm a gold member with like a bunch of different rental car companies and hotels. And so I get free upgrades or I get, I'm going to London in a couple of weeks and I get a hundred dollars worth of breakfast at this hotel that I'm staying at because I'm a card holder. And it makes me feel like I should be very loyal to American Express because they are helping me so much enjoy the luxurious life. So anyway.

Anyway, so that's where my mind goes. So Rachel, I want to bring you in. Can you give any other color on how you see loyalty as well or any kind of personal examples that you might have, the way you use it?

Rachel Satow (05:59.328)
No, I think your example of Amex is great. The way I really see loyalty is it is a flywheel. it will, you you have one person who becomes loyal to your brand. And as you just did, that person is now telling somebody else about it. And it when we think about the idea of business performance and how it can actually affect your bottom line, that's where the bread and butter is, because that loyalty spreads not just with that individual, but all of the individual's connections.

Brandon Giella (06:14.279)
Yes.

Rachel Satow (06:29.411)
because they want to brag about it. They want to say, this is my experience that I've had, I've loved it. And then all of a sudden you're getting all of that referral information. So that's how I view loyalty. It's much softer than the transactional or like the actual mechanics of the loyalty program. But I see it as more of a relationship.

Brandon Giella (06:31.324)
Yep.

Brandon Giella (06:52.241)
I like that. Yeah. It makes me feel like a celebrity and I want other people to feel like a celebrity as well. You know, and I want to tell them I'm important in the eyes of American Express. I love that.

Rachel Satow (07:01.299)
Exactly.

James Houchin (07:02.8)
Well, and really that's what's so cool about loyalty is just a concept overall is you get both right and really where switch fly tries to help our partners get even more.

juice out of that squeeze is the aspirational side where, Hey, I got this amazing trip. So whether it's a honeymoon or just a weekend getaway, you know, the brand is also able to be part of that story in a way that I'm not bragging about like my pants. Like, Hey, Brandon, I got a 1.5 X point return on gas stations this quarter. No, no one cared. Like, don't post that. But, you know, hey, I was able to get a free flight to Paris.

through my credit card program, that's really the aspirational plus the transactional plus just that tiered loyalty status accrual as well, right? Where you're getting a ton of value for a bunch of brands and a bunch of different avenues and in a way that doesn't cost them an arm and a leg to get you to come back. We're talking about pennies on the dollar versus all the effort and work that these brands have to do to get that first time, you in the door the first time.

Brandon Giella (07:45.309)
Mm-hmm.

James Houchin (08:14.564)
Right. You already got James, Brandon or Rachel through the door. How do you keep me coming back? You know, usually it starts with the transactional and then quickly moves up the value ladder. The more someone's willing to engage with the

Brandon Giella (08:15.335)
Yeah, that's right.

Brandon Giella (08:27.453)
That's right, that's right. Yeah, so to bring back the business performance acronyms, it increases customer lifetime value, CLV over time, and then it also reduces your CAC, your customer acquisition costs over time, because you're able to retain those people and reduce your churn and things like that. That's the goal. There's a lot of data to support that, which we'll get into in a second, because you guys have a great infographic on this topic. But before we get there, so another...

component of what is very helpful about all these loyalty programs in this kind of ecosystem or world that we've been describing here is that it produces a lot of data that you have on your customers. so because of that, thanks to a lot more advanced technology, even a lot of AI tools that are coming out and have been out for the last 20 years, but you know, are still getting refined is that you can create a lot more personal offerings, feeling like you actually do know your customers because you have

this data on them. So it's a win for the business because they can create better market segmentation, understand the customer a lot better and provide a lot more value to them. But then also the customer feels like, wow, they really know me. They're offering things to me that I actually do want because they know me. And there's a lot of privacy things all in there. There's a lot of topics that you can cover. how do you guys see, and James, I'll start with you again.

How do you guys see personalization in the midst of this ecosystem of loyalty? How do you view that? have you seen businesses use that data to create really personalized offers or refine the way that they're doing their marketing? Yeah, so I'll let you speak to that a little bit.

James Houchin (10:18.362)
I think keep it simple stupid is what comes to mind where, you know, elegantly relevant or timely offers are amazing. but it can quickly cross the threshold of being creepy or annoying. if not, you know, and, it, really is rel, heavily upon the brand to intelligently implement kind of that balancing act where

Brandon Giella (10:22.599)
Okay, yeah.

James Houchin (10:46.224)
You know, Hey, James flies out of the Southeast. There's a specific number of airports, that he's going to look at that impacts routes that impacts, you know, whatever. same with my Amazon recommendations, right? And the signal, the noise ratio is really what the brands need to focus on where you're delivering based on past experiences. And you can apply an AI model or just, you know, simple, you know, kind of detective work.

to be able to say, know, hey, James James bought a 3D printer. He's probably gonna buy filament or if you're a normal human being, James bought a bunch of cooking to like a new pots and pats that maybe needs some utensils or Tupperware. And that's really where, you know, it can be intelligently implemented versus, you know, hey, you went to this hotel once in London.

haven't been back in five years, here's an offer. which is kind of where it's like, yeah, you're just spraying and praying. And end of the day, short answer is you really just need to balance relevant and timely, with some just good, you know, level of gut check or data to balance, to balance the two, cause there's two extremes and both can be, a bit unpleasant for the user.

Brandon Giella (11:47.878)
Mm-hmm.

Brandon Giella (12:10.333)
Rachel, any, any other thoughts on, on, uh, how you're seeing personalization? Do you have an example of, of maybe something that is, that has, uh, you, got this kind of offer this ad or a newsletter or something and you're like, actually that is very helpful. Thank you.

Rachel Satow (12:27.341)
Personally, yeah, I mean you're talking to two marketers. So we live in the first party, third party data world all the time. And from a loyalty program perspective, there's so many different ways that individuals are providing you with loyalty and providing you with that data. So you've got your customer profiles. When they're filling it out, they're providing you with some demographic data. then you move into the purchase history.

them to set some preferences. Like there's all of that data that they're already providing you just as a part of your program. But then when they go into it further, there's transactional data. So like I personally am an REI member. I love REI and they their program I love when they send out their emails because my significant other is also a member of their REI of the REI program and we get two different emails, completely different emails. And it's because the way they are tailoring it based on my personal

Brandon Giella (13:22.653)
Huh, interesting.

Rachel Satow (13:27.315)
purchase history versus his purchase history and even just how frequently both of us go into the store. We live across town from our REI and he works right next to it so he's there all the time and so he'll get more of that communication whereas I'll get it more specifically when there's like deals that are happening or something along those lines. So I think just timely communication from a marketing perspective that that's always going to be how you can tap into your loyalty program data.

But I also look at it from the perspective of

non-members versus members, how much data are you getting? And, you know, we talked about our infographic. That's one of the things that we discovered was, you know, 34 % of businesses are saying that their loyalty program members are providing them with more insights than non-members and just individuals who are going to their store and purchasing or, you know, making those flight purchases, et cetera. When they're actually making those transactions, more data is coming from their loyalty program members. And I think that's

Brandon Giella (14:22.941)
you

Rachel Satow (14:31.823)
When we think about the grand scheme of business value and learnings that you can take away, that's an invaluable asset from your loyalty program.

Brandon Giella (14:43.335)
That's right. That's right. So I love the way that you brought up REI and that there are two, you're getting two different experiences from a marketing perspective related to that brand based on all that different behavior. Now to pull that off is very difficult, you know, in a lot of ways, you've got to know the timing, the frequency, you've got to know the kind of offers that they want. It takes a lot of work. And I know you guys have spent a lot of work on that at Switchfly doing that in a travel perspective. But what I love is you brought up the

Rachel Satow (14:54.881)
Mm-hmm.

Brandon Giella (15:13.279)
Infographic in this infographic which will include in the show notes There is just a lot of survey data to say that people will you know be frequenting these Businesses more often but also that there is actually like hard data in the terms of they spend more So here's just a few little nuggets from this infographic This is on a one section that says what loyalty program members are saying. This is from the bond

loyalty report and it says that 85 % of these members say that the programs make me more likely to continue doing business with brands. So they feel much more affinity toward the brands that they are marketed to with, with good data and, and these relevant timely offerings. And another 79 % say I am more likely to recommend brands with good loyalty programs, which you just did with REI, I did with American express and James was talking about, you know, the kind of Chick-fil-A perspective, things like that. But then.

Also, there is a 56 % higher repeat purchase rate from members to nonmembers.

And there's also six out of 10 consumers involved in loyalty programs have more positive experiences with these brands because they believe their connection transcends the transactional. Like what you're saying, act like you're significant other actually gets different emails and they feel like they have a closer relationship to that brand. So there's the soft data like polling and survey data. And then there's really hard data that says that these people are actually spending more. Turn goes down, customer acquisition costs go down, spend goes up.

So it's really amazing if you can tap into these programs and the power of them.

Brandon Giella (16:57.849)
So I guess my question is, what kind of benefits or impact or ROI or KPIs, all of the business lingo that you guys are seeing on the Switchfly side of things when it's related to travel, what can you tell us about the way that this is impacting either your clients or just the kind of programs that you guys are building out? So I want to talk more specifically about Switchfly, but tell me a little bit about what you guys have going on and what you're seeing on your end.

James Houchin (17:27.066)
Yeah, do you to take a first swing, Rachel?

Rachel Satow (17:31.18)
I mean, I think one of the things that we've over time and we've talked a lot about internally is just for companies that don't offer travel right now, when they implement it, their conversion rates and the redemption rates go up because this new offering, this experiential rewards, it provides them with something that's just different than, you know.

a gift card. And it is when we go back to the psychology of it all, people are wanting those experiences. You brought up Amex and that was a really great example. You are loving the experience that you're having with this brand and offering travel rewards like you can through Switchfly is boosting the conversion rates and those redemption rates because people are looking for that type of reward.

Brandon Giella (18:21.787)
And it's not just so there's like gift cards and there's, there's other ways that people, provide the loyalty to their, or kind of these benefits to their customers or employees and that sort of thing. But, you guys have a very specific, offering on experiences and travel. And as related to that, when they build up, when employees or customers build up these kinds of points, they can redeem them through your platform toward travel and not just toward a gift card or a marketplace or something like that.

you find a lot of, your clients find a lot of benefit out of that and their clients and their employees find a lot of benefit out of that as well.

James Houchin (18:59.164)
Well, and that kind of goes two ways too, just to kind of pick on the direct to book versus gift cards. Travel is uniquely fraught with sticks and carrots in that when you have an awesome travel experience, it's the first thing you'll talk about and the last thing you'll shut up about. But inversely, when you have a bad experience, which travel is simpler, more simple and more complex in 25 than it was in 2015.

You know, because the way it does the same thing, right? Like, we all could share our terrible travel experiences forever branded into our mind.

and that's really where, you know, it's a huge opportunity for brands that are willing to step out and be different to land on a really amazing user experience by having a simple direct book travel offering. really, you know, the switch fly sales pitch of, know, I think it was Expedia a couple of years ago, published a report that there's over 30 site visits to make a single trip booking. Right. When we think about all the complexity and the research.

You know, not only do we try to offer, you know, all the inventory types you'd want to book.

but I was just talking to some of our product team last night about how they continue to use gen AI, as well as just simple little product enhancements of like what neighborhoods do I want to stay in bare land? What activities might I want to partner with when I'm looking at a safari, you know, like all these small little transactional lifts where, know, it's just a search away, but it's so much more pleasant to be able to just go bang, bang, boom.

James Houchin (20:37.942)
kind of like the difference between an all inclusive versus an a la carte, stay experience. Again, we want to be as flexible, to the traveler and their diverse set of needs as possible, but really the brands that take the lift off the customer and try to make it a more tailored experience really are the ones that win because all the data that says you're more likely to increase your lifetime value. You're more likely to come back frequently based on.

appropriate usage of rewards and loyalty. The same data also says that, you know, anyone on this podcast is going to hop the moment they have one, definitely two bad experiences where there's certain airlines, I just will not get on their plane because, you know, again, we're back to that, you know, it's kind of the old, you know, one bad experience makes up for three good ones.

Like, you know, it just evolutionarily work wired a certain way and customer loyalty is not immune to that pattern either.

Brandon Giella (21:36.509)
Yep.

Yeah.

That's right. That's right. Yeah. It's, I love how you were talking about the, the kind of recommendation engine, cause that is so key when you're planning travel, and, creating that kind of good, experience that produces that kind of loyalty that we've been talking about. is those little call them micro interactions. You know, I'm searching for a trip in Berlin or actually right now I'm searching for a London trip. So London and Oxford is where we're going. And we've got different family members. We're meeting different people.

I've got a toddler and trying to plan this trip, even with, know, chat to BT and all these great tools that are out there and Google search and Reddit and all this, it is really hard to make sure that I've got all those details lined up thinking about jet lag and when I'm going to be at this place and do I need private transport or do I need to get a bus or tickets to this and that? And there's just so much to explore. It's a huge world. And then you get into paying for it. Do I do points cash both?

just a lot to think about. And Rachel, I your example last episode where you talked about there's this bike trail that you wouldn't have found otherwise if it weren't for this recommendation engine to help you understand where this was. And I just think that kind of stuff is so powerful.

Brandon Giella (22:56.879)
And so it does create that kind of loyalty, even through good experiences that have nothing to do quote unquote with a loyalty, you know, kind of points or cash or gift cards, but creating that good experience is a part of creating that kind of loyalty.

Rachel Satow (23:10.625)
Yeah.

you know, tying it all back to business performance. And when you remove some of those friction points, like you just mentioned, you have so many different outlets for being able to gather that research. When we remove some of that friction point by bringing it into the platform and making it housed in the same places that they would want to conduct their booking, you're removing not only their time and helping with, you know, their investment of planning this trip, but you're also, you know, making it a smoother process.

and more likely to book instead of abandon. So definitely, definitely see the benefits from just a user perspective, but all of that effort also enhances your bottom line.

Brandon Giella (23:55.518)
That's right, absolutely. Yeah, because it does bring back more cart purchases, if you will, and repeat purchases over time. So in the middle, that one transaction, you get a lot more bang for your buck. And then over time, that customer lifetime value, that's the argument that you get a lot more repeat purchases over time as well. So yeah, really amazing.

Rachel Satow (24:01.633)
Mm-hmm.

Rachel Satow (24:08.365)
Mm-hmm.

Brandon Giella (24:18.183)
Well, I have to ask, do you guys have any trips coming up?

Rachel Satow (24:26.093)
I'm taking a very, very small weekend getaway to Covington, Georgia, which, you know, last week we talked about just, you know, going off the beaten path as part of a trend that we're seeing in 2025. This is definitely not a destination like a big name destination. It's not New York City. It is Covington, Georgia. And, you know, when we talked about last week as well, there's this surge in individuals

wanting to do media based, whether it's scenes from the book or the movie that they're going for, we're going because Covington is a really big filming location and we wanted to see some of our favorite spots.

Brandon Giella (25:06.877)
interesting. OK, cool. I didn't know that. I love that.

James Houchin (25:14.78)
Honestly, some of the times those small out of the way cities that are some of the coolest places you ever take a trip to like, um, I'm not too far from where they filmed the walking dead in Sanoy. You ask five people how to say that town name and you'll get five answers, but like it's right around the corner and it always is mind blowing when you're walking through town, like where people are coming in from. It was also super creepy to walk through town back when they still had like the steel walls up because it did legitimately look like something was going on, but, um,

Brandon Giella (25:25.021)
James Houchin (25:44.252)
You know, sometimes like the out of the way spots are really the gems of your travel experience.

Brandon Giella (25:44.307)
interesting, yeah.

Brandon Giella (26:02.023)
He's back. No worries, no worries. So anything else that you guys wanna cover on before we wrap up? I'll cut this part out, but just wanted to check in.

James Houchin (26:02.202)
Hey, sorry, the wifi has gone in and out just with the data demands.

Rachel Satow (26:19.147)
I think metrics was the one thing we haven't done.

James Houchin (26:19.344)
Thank you for, yeah.

Brandon Giella (26:22.781)
Okay, yeah, let's talk about it. Okay, so I want to dig in more to the actual metrics of loyalty and kind of, again, the impact on business performance. So Rachel, I'll start with you. What are you seeing in kind of the metrics that you're seeing for measuring this well and making sure that your programs are performing well in a business perspective?

Rachel Satow (26:45.153)
Yeah, so there's definitely the obvious ones, know, customer retention rate, repeat purchase rate. Are you seeing any upticks there? You've mentioned CLV quite a bit. Is your customer lifetime value going up? But there are also a few others that you can track along the way. know, certain platforms, can use heat mapping to showcase like, people clicking on this button versus this button? Is this color performing versus this color performing? So just tapping into

to when we go back to the data that they're providing, there is definitely the opportunity for you to just dive a little bit deeper from that perspective and all the while making sure you're keeping a pulse on those typical loyalty program rates. But you can also dive into those even further. Are people, is the average order value for flights going up versus when you have packaging and dynamic packaging, are you increasing your

your additional revenue streams from that perspective, those are all things you should be keeping a pulse on for sure.

Brandon Giella (27:52.094)
like that.

One other one I will mention as you were talking, I was thinking about, we had lunch with somebody a few weeks ago and they have been a very, very successful entrepreneur. And they said that don't forget to surprise and delight. And so even though you've got your, your KPIs and the things that you're trying to get more efficient on and growing this and that there's one part of loyalty that's really important. It's just these little, these little, you know, poops like surprise and delight. And one that comes to mind is last year I was in London and

Rachel Satow (28:06.957)
Mm.

Brandon Giella (28:23.167)
Had a hotel person give my little daughter She was a year old at the time give her a little stuffed dinosaur And I was like I wasn't expecting that and I know it cost him two dollars to get this thing But it's this thing that I remember that it was a nice little nice little delight

James Houchin (28:39.184)
For sure. Even something as simple as like a note card sitting on your seat when you're getting on a flight or, you know, like the free whatever on your birthday, like those little moments can be incredibly impactful. And the ROI is probably the high, you're going to have the highest return on spend, whether that's time, money, something else from those micro interactions. oftentimes.

Brandon Giella (28:44.529)
Yeah.

Brandon Giella (28:49.041)
Yeah.

Brandon Giella (29:04.477)
That's right. That's right. It's actually a great book about that. it's called moments that matter. If I remember.

correctly and there's like a lightning in a bottle I think is on the cover by Heath last name of Heath I'll have to look it up you know I'll it to the show notes anyway it's a great book talks a lot about this kind of stuff I listened to it on the flight one time anyways okay well Rachel James thank you so much for joining me on this episode again for the travel buddy where we talk about loyalty we talked about travel we talked about so many different things and this is such a key component to get more performance off of your

your loyalty programs by surprising and delighting, measuring what matters and creating these really great moments for great experiences for traveling. And so I think it's so important that you guys are doing this work. And I know it's a big world, but I really appreciate the way that you guys are approaching it and even building products to serve your customers in this way. So we will hopefully see you guys again in the future and.

We'll call this a wrap on episode 26. Thank you. See you guys.

James Houchin (30:09.958)
Thank you.

Rachel Satow (30:10.455)
Thank you.