Applications of Database Marketing
in the Tourism Industry
 
Prepared by Clive B. Jones 
 
At the 1992 PATA Hong Kong conference, the Government Council directed the Secretariat to undertake a program of research and education in the area of destination databases. Subsequently, a discussion paper was prepared by Gilbert Archdale, Robert Stanton, and Clive Jones. A conference was then held in Singapore in December 1992. One of the principal conclusions of the conference was that there is relatively little use or experience in database marketing by NTO’s and many private sector travel suppliers in Asia-Pacific. It was also recognized, however, that this expertise has been highly developed in North America and that some of PATA’s airline and industry members are pioneers and experts. 

The conference felt it was important to broaden the base of knowledge among PATA members and develop education programs and seminars on the applications of database marketing in the travel industry. This paper was commissioned as the first step in that direction.

The New Marketing Environment for Leisure & Tourism 
Difficulties in Adjusting to the New Marketing Environment 
How the Computer is Changing Marketing 
Emergencies Create Database Marketers 
Applications of Database Marketing in Transportation 
in Accommodations 
for Attractions 
by Destinations 
for Travel Agencies 
General Applications of Database Marketing 
Summary  
Does It Pay Off? 
A Comparison of Tourism Marketing Approaches
 
 
The New Marketing Environment  
for Leisure & Tourism
Means Turning Away From: 
========>
And Turning Towards:
Mass Marketing Direct Customer Communications
Socio-economic Groups  Customer Databases 
Media Placement  
 
Telemarketing/Targeted Messages 
One-way Communication  Building Customer Relationships 
The conventional ways of looking at consumer behavior - especially in tourism and leisure - are becoming outdated. No longer (if they ever were) are the purchasing habits of the leisure customer predictable by labeling a group as a segment of the market and describing it with average characteristics. More and more, marketers are turning to tailored and targeted marketing to individuals. This is now possible through new technology with sophisticated database management systems and immense amounts of historical and purchased information (lists) on individual preferences and purchase behavior. This trend is particularly appropriate for tourism marketing since there is a world of paradoxes in leisure behavior. Sameness and diversity and security and risk taking seem side by side. Some accountants sky dive; people eat at McDonalds for lunch and a four-star restaurant for dinner; take luxury BMW’s to the self service petrol pump; trade a large investment portfolio through a discount broker; visit Hawaii and never go in the ocean. Leisure lifestyles, in particular, are inconsistent, contradictory, and individual. 
 
This multi-profile customer is difficult to motivate by traditional institutional means. The 1990s and beyond belong to the individual. Destination marketing and leisure product development must adjust to this new environment. 

Difficulties in Adjusting to the New Marketing Environment 

Back in the Middle Ages, scholars debated the number of whiskers on a hedgehog. No one bothered to look at a hedgehog and count. Zoology has come a long way from then, but marketing has not. Conventional mass marketing and tourism advertising are based on the following assumptions: 

  • The right kind of awareness leads to positive attitudes; 
  • Attitudes lead to behavior; 
  • People do what they say they will do. 
There is a problem, though: None of these is true. 

If these things are untrue, why do so many marketers believe them? Two reasons: The formula sounds logical.  And, until very recently, it just did not matter what marketing assumptions you used. In the effervescent tourism environment of the 1980’s, as long as you came up with a saleable product, let enough people know about it, and had an adequate distribution system, things worked out just fine. 

That is hardly the case now. The difficulties of the nineties have exposed the impoverishment of yesterday’s beliefs; the sheer futility and astonishing waste of conventional tourism advertising is clear to anyone with eyes to see. The news is out, and there is no going back. 
But that does not mean everyone is jumping on the bandwagon - far from it, in fact. 

The challenge of database marketing for tourism is strategic. A market of individuals, individually addressable and open to interactive communication, threatens the very existence of established marketing techniques and trade relationships. The economics of large scale production favors large firms with strong brand identities. The economics of customer information favors a generation of smaller, flexible firms with healthy firm-to-customer relationships. JTB has recognized this and departed from a centralized organization structure to form literally hundreds of individual “companies.” Investment in big brands with broad appeal is yesterday’s solution, useful in the shallow communications environment of broadcasting. The future lies with firms who can use the new two-way channels of communication to create customer based relationships, reaching across a whole range of travel, leisure, and financial services products and resting on honest and intelligent dialogue. 

If database marketing can at least theoretically cure so many of conventional marketing’s ills, why is it not being practiced more universally? One big reason: Database marketing is profoundly unsettling. It is unsettling because it replaces the abstraction of consumer attitudes with the concrete reality of purchasing behavior. It is a prospect immensely threatening to traditional marketers. As Professor Schultz of Northwestern points out: “People need to realize that they have to give up the things they have been doing for the past 40 years.” They are not going to give up without a fight. 

That is why the metaphorical “database marketing” is so dangerous: It leads to unfulfilled promises and crash-and-burn programs, giving the people Schultz talks about more than ample ammunition for their negative position. Whenever database marketing has been done correctly, though, its belief system has been validated. 

Here are the major tenets: 

  • Past consumer behavior is the best predictor of future behavior. 
  • A purchase is simply one event in a customer’s life. To figure a customer’s true worth, you have to calculate lifetime value. 
  • Customers are more important than non-customers. 
  • Certain customers are more important than other customers. 
  • Customers are likely to share certain characteristics. 
To illustrate the changing nature of travel marketing and the need to adjust, the Asian Wall Street Journal reports on February 22, 1993: “Hong Kong - Cathay Pacific Airways’ decision to invite Hong Kong’s largest advertising agencies to bid for its HK250 million ($32.3 million) account reflects the coming to Asia of a worldwide phenomenon. Increasingly, advertising agencies are being asked to do more than create advertising. Direct marketing, the management of database operations and other so called below-the-line media have emerged alongside ad campaigns as key components of global marketing strategies. 

Reflecting in part the difficulties many agencies are having in profitably meeting their clients’ expanding needs.  Leo Burnett Ltd., Cathay’s agency for 10 years, decided not to take part in the review. Burnett’s regional manager for Asia confirmed that the company was unable to deliver the depth and range of services Cathay required. 

“Our new positioning stresses 100% customer satisfaction,” said Alistair Blount, Cathay’s manager of marketing communications. “We need a better mix of communication media. We need an agency that understands database management and understands direct marketing. The company is less interested in signing an advertising agency than in locating a marketing consultancy. We want an agency that will change and offer all kinds of services. I like the idea of calling upon outside consultants for different ideas.” 

How the Computer is Changing Marketing 
 
Essentially the computer has brought to marketing three awesome powers: the power to record, the power to find, and the power to compare. 

As computer storage rapidly became faster and more economical, it became possible to build up a customer record with a staggering amount of detail. 

The computer’s power to find means that selections can be made from the prospect or customer file by any field definitions or combination of field definitions. 

The computer’s power to compare means that information about an individual recorded in two or more databases can be combined. For instance, the computer can compare a list of older people and a list of golfers. Whenever the comparison reveals the same name on both lists, it is possible to identify and record that person as an older golfer. 

“The days of mass markets in America are history,” says John Wyek, director of strategic services at Levi, Strauss & Co. “In today’s and, more important, tomorrow’s market, you’re going to need to market to the individual. Our objective is to be as absolutely personal as we can.” 

Emergencies Create Database Marketers 
 
Most businesses will not change unless something truly life-threatening occurs. That is the reason the most successful database marketers thus far have been businesses with emergencies: airlines, tobacco manufacturers, and financial services firms. Everyone knows about the frequent flyer programs and their impact on behavior. An example: Back in 1980, before the programs started in earnest, the average business traveler had a half-hour tolerance for delay before changing airlines. Booked on American from O’Hare to LaGuardia, you would walk next door to United if your plane was more than 30 minutes late. By the late eighties, this tolerance had increased to 3 ½ hours. 

The frequent flyer programs have succeeded where more than a billion dollars in conventional advertising did not: in building brand loyalty. The free trips are the superstructure, not the foundation. Brand loyalty results from the kid-glove treatment frequent flyers get: upgrades, special 800 numbers, etc. A superb technical infrastructure makes database elements available at customer contact points throughout the world. When you call in Milan or Sydney, the airline knows immediately if you are a heavy user, and treats you accordingly. 

Applications of Database Marketing in Transportation 
 
The Trail Blazed by American Airlines 

One of the trail-blazing pioneers in identifying and contacting individual customers was American Airlines. Back in the 70’s, airlines began to realize that 80% of their business came from 20% of their customers, the frequent-flying business traveler. But the airlines did not know who these people were and what to do about it.  They had a name on an airline ticket but no address. They kept no permanent record of the customer’s destination or how frequently he or she traveled. Furthermore, government regulations forbade giving away to passengers anything of value which would upset the mandated standard pricing. 

But as airline deregulation approached, American realized the opportunity they had to identify their best customers and cultivate them with special rewards. The airline began in secret to plan the AAdvantage program, the first frequent-flyer plan with bonuses recorded and administered by means of a membership database.  Introduced in 1981, it was an instant success, and it took most other airlines years to catch up.{An exception was United which had their Mileage Plus program “operational” within 10 days and effectively neutralized American’s early advantage by offering a 5,000 mile enrollment bonus. Their catch-up efforts were so effective that the Wall Street Journal, in a later story, credited United with launching the first frequent flyer plan.} 

American Airlines management has repeatedly described their Frequent Flyer program as the single greatest marketing achievement of the 80’s. 

In the 70’s, the airline advertising budgets were devoted almost entirely to image-making in television, magazine, and newspaper advertising. Now the ability of each airline to talk directly to their best customers has resulted in a complete turnaround in marketing thinking. The image advertising remains, but a significant amount of each year’s budget has been shifted to communicating directly with and cultivating their best customers. 

Of course, no marketing advantage lasts forever. Soon all the airlines with frequent-flyer programs were embroiled in a free mileage and price-cutting war, with each airline offering more free bonus miles than the next. Today, the major carriers have between 4% (Delta) and 7% (United) of their passengers flying free and the number of outstanding rewards range from 2.3 million (Continental) to 7.1 million (United). Even with these costs, however, frequent-flyer programs reinforce an extremely sound business philosophy: inducing frequent or repeat customers to maintain a long-term relationship with a carrier is a lot more profitable and less expensive than trying to build traffic and profits by selling airline seats one ticket at a time to new customers. 

To most business people, this is a blinding flash of the obvious. But even today many businesses do not realize the lifetime value of the customer standing before them is as much as 100 times the value of the single transaction conducted that day. A frequent-flyer program addresses an airline’s need to build long-term relationships by offering a combination of special services, benefits, and customer recognition. 

AMTRAK 

Amtrak has built a multi-million name database over the past four years through its own reservations and toll-free information systems. The data is being used to deliver specific travel opportunities to Amtrak’s most potentially lucrative niche markets. “Database marketing plays a key role in our marketing efforts and that role is growing as we learn more about it,” says Joan Wheatley, Amtrak’s director of advertising and sales promotion. In fact, direct mail now accounts for approximately 15% of Amtrak’s total annual marketing budget of $45 million. 
Ridership on Amtrak reached 22 million in 1991, accounting for $1.36 billion in ticket sales. Development of the database, which now includes more than 4 million names, was prompted by the realization that traditional media advertising was not the most effective way to reach each of the potential target audiences. 

The database is managed by Boston-based Epsilon (subsidiary of American Express), which uses reverse matches to capture names and addresses from incoming callers to the Amtrak toll-free information number and from customers who buy tickets from the Amtrak reservations system. According to Epsilon, demographic overlays are used extensively to segment the database into target markets. Amtrak then targets specific travel products to each of these defined markets using direct mail. For example, the Autotrain, running from Virginia to Florida, transports passengers with their cars. Amtrak is targeting this service to “snowbirds” - those senior citizens who head south in the winter. Epsilon has on file both the summer and winter addresses for these retirees who receive targeted promotional material about one month prior to when they normally migrate. The Autotrain direct marketing effort to the snowbird market has paid off in a 5-to-1 return on investment. 

Applications of Database Marketing in Accommodations 

In the mid 80’s, hotel chains such as Marriott, Holiday Inn, Radisson, and Hyatt jumped on the airline bandwagon with their own frequent-traveler programs. 

Marriott’s 5-million-member Honored Guest program now requires the efforts and attentions of around 200 full-time staff—ranging from systems designers to customer service personnel—to maintain it. And while there is widespread skepticism whether these programs directly generate either the brand loyalty or the incremental business necessary to justify their costs, their importance as a database marketing tool is growing rapidly as hotels rely increasingly on selective niche marketing to help maintain their competitive edge in a crowded market.  Marriott’s vice president-database marketing Lynn Roach has no doubts the money is well spent. “We regard our program as an asset which enables superior customer understanding.” “We can carve out market segments of several hundred thousand at a time. It also allows us to test-market initiatives and be more responsive. Evaluated behavior before and after enrollment shows that post-enrollment business increases by 60 percent,” Roach maintained. By way of agreement, Ralph Garcia of Ramada added: “We track the program very carefully, so we know very specifically the return on investment. All indications are that the program generates incremental business”. 

Radisson research showed that 70% of all travelers surveyed said that frequent guest programs influenced their selection of hotels. The Radisson KEY Rewards Program was said to generate $75 million in revenue in just its first 18 months. 

While most programs are similar in principle, they vary in design according to the marketing objectives and market position of the particular properties. “Our members are primarily interested in additional hotel service features during their stay rather than price factors. So our program tends toward room upgrades and benefits such as late check-outs,” states Sheraton’s Edward Stahl, vice president of advertising and marketing. Westin’s program follows much the same theory. Their documentation states “guests are interested in immediate tangible benefits during their hotel stays.” 

On the other hand, Ramada has identified that its guests primarily check into Ramada properties for price reasons.  Consequently, the rewards of the program revolve around escalating discounts. “People in the middle market are primarily looking for rate factors. The program is designed to let people accumulate awards as fast as possible.” 

The Days Inns organization, however, gears itself to a wider marketing base. The system has organized a range of offerings which, in addition to business travelers also specifically targets senior citizens, sports teams, teachers and U.S. government or military employees. September Days, the club for seniors, offers senior-oriented features (primarily discounts on a range of other travel-related products, such as auto rental or insurance). Days Inns’ School Days is targeted entirely to teachers. “It’s the only one of its kind. Teachers, like everybody else, feel they don’t get enough recognition, so they appreciate the fact the we do (recognize them),” noted Bill Weld, vice president-relational marketing. 

With frequent guest program databases running into the millions, hotels are able to run numerous different offers, or send out whatever specialized messages they choose. Days Inns, for example, recently mailed out an offer to 400,000 September Days club members. This drew a response rate of around 4 percent - far higher than general mailing could expect. 

The growing sophistication and responsiveness of database marketing allows chains to roll out continuously evolving programs. If business in resort properties is down, then the immediate impact of offering double points or special discounts can quickly be assessed. In order to boost sales at city properties, a particular section of the membership might be enticed with a special offer of free theater tickets or special hotel services. 

An example is related by Bob Cotter, Senior Vice President of marketing for ITT Sheraton: “We have invested, as a company, $70 million in a new reservation system that gives us market information and improves our ability to understand our customer base. We can also do database marketing. In February, for example, our 10 properties in Hawaii identified some softness for April, May and June. The traditional approach to that probably would have been to increase our advertising in Sunday travel sections. Instead, we mailed a targeted offer to 650,000 people who travel to Hawaii and we gained $3 million in revenues for those hotels in April, May and June. 

The mailing cost about $200,000. The interesting thing is, we looked at the buyers again and are convinced now that we could do it again, but instead of mailing 650,000 pieces, we could mail between 200,000 and 300,000 with 90% results. The new property reservation system and the central reservation system are in synch so we can do more with database marketing.” 

Applications of Database Marketing for Attractions 
 
One of the most surprising yet logical places for sophisticated database marketing to niche markets is in the $7 billion casino industry. Faced with fierce competition in a crowded industry, the smartest casinos have been leaders in building a database and using it for direct marketing. 
 
Harrah’s 
Harrah’s core marketing strategy is to foster and then cater to a relatively small group of dedicated gamblers by building brand loyalty. The company uses various strategies including a proprietary database marketing system and casino hosts whose sole responsibility is to develop relationships with regular gamblers. 

The key to building a database is Harrah’s Gold Card. When presented at a gaming table or inserted into gambling machines, the Gold Card records how much an individual spends in the casino. To encourage use of the card, gamblers earn bonus points toward non-gambling amenities and find it easier to cash checks in the casino. 

Harrah’s uses Gold Card information to develop customer profiles for marketing pitches and complementary services. Each card holder’s gaming patterns are statistically analyzed to determine the expected house win from each customer. The customer is then “graded” as to the type and value of complementaries he is offered. 

Casinos want to know everything - your age, birthdate, and anniversary, how often you come to gamble, what you play, where you like to stay, how you travel to the casino, what your budget is. They even want to know about your cars, pets, and favorite sports. 

With this information, the casino can devise specific promotions for different customer segments and individual customers within the database. For example, if you are a slot-machine or blackjack player, you will receive an invitation to a slot or blackjack tournament. If you are a fan of boxing or of Frank Sinatra, you will be notified when there is going to be an event that you will love. If you are a big spender, you may receive a birthday card and your favorite chocolates(just so you will know they really care). 

The databases also tell the casinos where their customers come from and how they travel. By analyzing which zip zones have the most customers, the casino can get a better fix on where advertising should be concentrated and where charter bus service can be most productive. 
Now casinos are working on using their databases to reach beyond the 10% of their customers who are the high rollers and to identify, cultivate, and build casino-specific loyalty in a much larger market niche, the middle-market recreational gambler. 

Disney 
One of the most remarkable third-party database marketing database marketing programs in the U.S. is Walt Disney’s Magic Kingdom Club. It was originated in 1959, two years after the original Disneyland had opened in Anaheim, California, and, hard to believe, was faltering. 
Walt Disney came up with the idea of going to nearby companies and offering to enroll their employees in Walt Disney’s Magic Kingdom Club. Members could obtain ticket books at a single price which presented a substantial discount off buying the tickets separately. 

In 1971, Walt Disney World opened in Orlando, Florida, and the program went nationwide with dramatically increased benefits, including group travel packages, discounts on car rentals, special hotel rates, a newsletter, and much more. 

Today club membership is free, and the Club has enrolled as members some six million employees of 30,000 companies. Disney’s communication is primarily with the companies and only secondarily with the members themselves. A very sophisticated computer program permits them to select and track the most promising companies for each park location. The companies do not pay for participation (unless they are very small, and then only a small administration fee). Disney provides each company with a variety of collateral materials - newsletters, membership guides, brochures, posters, etc. 

Other parts of the Disney empire are involved through giving Club members in the database the Disney mail-order catalog, a 10% discount at Disney stores, special offers on Disney videos, and so on. It is a prime example of synergistic interaction among many different divisions of the same enterprise. Every Disney division is directed by corporate headquarters to work in concert with all the others to maximize the benefits of dealing directly with identified individual customers. 

Now the Disney formula for relationship marketing is being transported to Europe for use at the Euro Disney theme park outside Paris. Millions of employees among the 350 million people in the Common Market will be enrolled in the Magic Kingdom Club of Europe and will help build the expected attendance of 11 million visitors. 

Bob Baldwin, the national director, states that the Club operation “is not a major part of the marketing group budget, but the effectiveness and revenues are huge.” 

Applications of Database Marketing by Destinations 
 
Alaska 
An effective model of database-driven advertising is the direct-response advertising of the Alaska Division of Tourism. The advertisements include just enough attractive photography to kindle your interest in Alaska and remind you that you have always wanted to vacation there. 
But the headlines - “100 PAGES OF FREE ADVICE FOR ANYONE READY TO DISCOVER ALASKA.” - and the text are devoted to the main purpose of the ad, which is to obtain your name, address, and vacation-travel profile for their database and their follow-up promotions. 
In the booklet mailed out to inquirers, there are all the opportunities for creative design any art director could wish for, and much more creative text than a page ad in a magazine could ever include. (And this is only the beginning. Alaska Tourism makes the names and addresses of inquirers available to Alaska cruise lines and vacation resorts who also mail out their own voluminous material.) 

But all this follow-up advertising is sharply focused on prime prospects who have been attracted and identified by the direct-response inquiry advertising, not squandered on prospects and non-prospects alike. 

Fleet Bank and Ski New England 
Attitash, Waterville Valley, Bolton Valley, Smugglers’ Notch, and Sunday River may not mean much to you, but to Fleet Bank, headquartered in Providence, R.I., they mean business. 
They are among the resorts in New England that are part of the Ski New England network offering discounts to Fleet Bank credit card holders. Those benefits include savings on ski-lift tickets, lessons, and equipment; access to a special toll-free reservations network; transportation discounts; and lodging and dining discounts. The bank’s goal in this premier co-marketing venture was to generate 10,000 new credit card holders out of the Ski New England patron database. The patrons have just the kind of demographics the bank likes. 

Ski New England helped in the co-marketing venture by providing its database of past skiers - a database providing low-cost distribution for the acquisition system of the bank. Fleet Bank, in return, helped promote skiing and resort attendance in New England, specifically highlighting Ski New England in its ad and promotional materials. 

Destination Loyalty and Joint Promotion Programs 
Destinations should favorably consider the establishment of a loose but structured association with its repeat visitors and key travel intermediaries. As frequent flyer clubs, hotel clubs, and the like have shown, such an association can offer a number of marketing opportunities. Clubs generate a sense of loyalty in many of their members. At the same time, they act as a defense against others who may be trying to persuade your visitors to go elsewhere. 

The benefits of membership can be as simple as a membership certificate and a club newsletter giving advance information on new attractions, prices and events. With the cooperation of the private sector, they can go all the way to price discounts, preferred reservations, etc. One example of such a destination area club is “Club France”.  This is considered by the French Government Tourist Office to be a great marketing asset. It is now at the stage where, with the help of the private sector, the benefits are substantial and the members are prepared to pay $65 per year for the privilege of belonging. A recent joint promotion between Club France and the United Airlines frequent flyer program was targeted to United travelers known to be frequent European visitors. Visa International has also launched a series of cooperative database marketing applications with destinations. An example is their “Royal Britain Welcomes Visa” program with the British Tourist Authority. 

Delta Airlines supplied its database as part of the California Fun Spots campaign. Sponsored by the California Department of Commerce, this successful promotion included air travel on Delta, admission to 9 of the state’s most popular attractions, accommodations at Holiday Inns around the state, and an Alamo rental car. Delta reports a doubling of leisure traffic to California due to this program. Additionally, they saw the market expand from the traditional western states to east coast markets. Economic benefits to California are that tourists are staying longer and visiting more attractions. 

Applications of Database Marketing for Travel Agencies 
 
“There is no better proof that direct marketing works than a peek in today’s mailbox,” said John Groman, Senior Vice President of Epsilon and a specialist in database marketing. In fact, Groman told an audience at the ASTA World Congress, agents may want to closely study direct mail pieces they might otherwise throw away without opening. Direct marketing is an appropriate strategy for any travel agency, and it is particularly important to maintain repeat customers. Those loyal clients may make up a small percentage of an agency’s total customers, but they make up most of the average agency’s revenues. “The repeaters are what drive profitability,” he added.  “People are always looking for new lists of potential customers, but it’s your own customer list that offers the most potential.” 

In order to start the process of direct mail, either through a newsletter or promotional pieces, an agency must build a database. Groman suggested developing a questionnaire for current and new customers that can be filled out quickly and that includes an offer that will spur a response. A wealth of information about clients can be stored. At minimum, keep detailed information on when and where clients like to travel (Asia, Caribbean, New England), their favorite activities (cultural, theater, bicycling) and their budgetary preferences. Then when a tour company announces a biking tour of Beijing or an Italian art tour, you can quickly call up names for a selective mailing. In addition, the database can separate out corporate and individual clients and break them down further by frequent flyer or other club memberships. Then watch for specials. Let your clients know when vendors are offering discounts and specials and you can attract their leisure business. 

Groman recommends that direct mail always include a letter that personalizes the promotion. Feature a reply device and capture information on customer lifestyles, noting such things as marriage, birth of children, retirement and other changes. From this information, the agency can develop targeted offers, such as retirement trips or anniversary vacations, among others. 

General Applications of Database Marketing 
 
Develop Private Media 
Quick, name one of the fastest-growing magazines in the country and one of the fastest-growing databases. Was the word Nintendo in your answer? Yes, Nintendo. For the Redmond, Washington-based marketing arm of the Japanese electronic games market giant (in 30% of U.S. homes), the magazine Nintendo Power, gathers information on customers just as well as it distributes information to them. For Nintendo, it means a leg up on being able to give its customers - especially its best customers - exactly what they want, The full-color monthly magazine, which began as a newsletter for members of Nintendo’s Fun Club (people who sent back warranty cards), has yielded a 2 million circulation and a 6 million-name database, according to Gail Tilden, director of publications. 

Private media help companies avoid the clutter of mass media and make their communications more targeted and response-oriented. Among the many strategic programs you can build on a good database backbone, private media are one of the most powerful. 
 
An effective database-driven private medium is: 

  1. Owned and managed exclusively by the database owner; 
  2. Considered of great interest and value by the people who tune into it; 
  3. Interactive, meaning that those same people have a way to respond to the database owner directly through the channel; and 
  4. Affordable, which usually means it is printed and distributed via the mail. In addition to informing or educating, it must also get a response. 
 ITT Sheraton is one of the new breed of marketers creating such vehicles. The 600,000 members of the Sheraton Club International (SCI) frequent-stay program, receive a 5-1/2 by 8-1/2 inch publication every month called Update. This ad letter notifies them of the month’s specials, encouraging them to call the program’s dedicated 800 number to make a reservation. What sets ITT Sheraton’s letter apart from many others is that it is customized messages as well as member account information. If the member has accumulated enough points to earn a bonus discount, they may see a related message. If it is their birthday month, it wishes them a happy birthday. Special deals in locations known to be of interest to a member are offered. 
Dierdre Sullivan, Director of SCI, explains the company’s goal: “Many other frequent-traveler programs, the airlines’ in particular, only talk to you if you traveled that month. We think that’s marketing after the fact. Our goal is to keep sending you news and offers for ITT Sheraton, even if you did not stay with us this month. If we can get more history on you, we will target you with specific offers that interest you. We are going to work for that second, third, and fourth buy.” 

Every firm can benefit from creating its own private medium, but only by making sensible use of direct response as part of its private communications. Companies that have been building databases and are wondering what to do with them, would do well to start here. 

Support Complementary Travel Distribution Channels  
In the conventional travel distribution environment, travel agents and tour operators control access to customer information. The travel supplies (destination, hotel, attraction) probably knows a portion of the customer’s transaction history but does not have any detailed information on the travelers priorities and characteristics. The agent, not the supplier, owns the relationship with the customer. In this environment, the supplier is vulnerable to changes in the travel agency sales force, and the agency does not get any targeted customer support from the suppliers. The challenge is to persuade the agency to provide customer information to the supplier database in exchange for the supplier’s help in managing the account and targeting specific sales messages. 

The Caribbean cruise business is typical of many in which independent agents jealously block the supplier’s access to the customer. Traditionally, therefore, advertising and PR have been the only direct communication channels between cruise lines and their customers. Recently cruise lines have begun to build database systems that offer such value to travel agents that they are willing to provide the names and addresses of frequent cruise takers in exchange for centrally managed direct promotion of the agency. 

An example outside the travel industry where this issue has been successfully addressed is Mary Kay Cosmetics.  This is a multi-million dollar business selling to women through a network of beauty consultants. Turnover of beauty consultants was disturbingly high, as high as 80 percent in some years, and when each consultant left, customers went with her. In 1986 Mary Kay began to build a database of its customers to lessen its vulnerability to consultant-managed relationships. If the consultant supplied customer names and addresses, each of her clients received a Personalized Beauty Analysis. This consisted of a questionnaire with 12 questions about skin type and color, hair color, facial shape, and makeup preference that was completed by customers. The data was analyzed, and a diagram of the customer’s face was generated and sent to the consultant to illustrate the recommendations. The consultant then followed up with this strong marketing tool. 

Today Mary Kay Cosmetics’ database has 9.5 million names, and since 1989 its party plan selling system has been complemented by five catalog mailings a year. The direct channel works in harmony with the consultant channel. It collects routine orders, and it preserves the relationship if the consultant should resign. Travel suppliers need to consider similar creative approaches to support their retail distributors. 

Improve Marketing Productivity 
Marketing is a notoriously inefficient activity, mainly because it is difficult to account for results. Database marketing improves marketing’s productivity in three ways. 

First, we can link expenditures to results. We can know whether an individual received a communication and whether he or she responded and purchased our product. We can measure room-nights won not just ad impressions counted. Marketing programs can be refined by a process of test and retest at the individual level, until something approaching optimality emerges. Second, database marketing can identify and reach profitable market niches too small to be served by mass-marketing methods. This is particularly useful for tourism marketing. Specific high spending activity participants (ecotourists, diners,etc.) also travel internationally can be targeted for direct individualized promotion. 

Finally, database marketing makes possible a shift in product development strategy: from producing generic tourism products and services to tailoring market driven products for particular customers. The travel suppliers’ offerings need make fewer compromises among heterogeneous consumer tastes in pursuit of scale economies.  The customer receives an individualized offering from a menu of tailored tourism products. 

Summary 
 An increase in targeted marketing requires an increase in customer data. In the future, those who have not taken advantage of what computer technology can offer to reach individual customers, will be at a competitive disadvantage. 

Who Are the Customers? 
 
1.The Visitors Themselves  

  • Those on existing databases and those added when they contact a tourism organization. 
  • Past visitors on whom data can be obtained. 
  • Non-visitors whose travel habits and characteristics indicate they could be future visitors. 
2. Those Who Influence the Visitors  
  • Travel agents and tour operators. The Australian Tourism Commission’s Tourtrax database is an excellent example of this for North America. 
  • Association meeting planners, clubs, corporations, and specialized tour operators. ERA has developed an extensive database of North America, European and Asian meeting planners as part of its METROPOLL and INTERPOLL surveys. 
  • Transportation suppliers, including airlines, train operators, cruise lines, and automobile associations. 
  • Hotel chains, car rental companies and other travel industry services. 
Leaders in our industry speak about the customer as king. So it is particularly important to view database marketing through the eyes of each of these customers—providing them what they want, when and where they want it. 

In understanding existing visitors, certain traditional visitor information is provided for in the customer record.  This includes customer demographics, travel patterns and activity profile, expenditure data, triggering cues and information sources, post trip evaluation and satisfaction, and transaction history. This record is kept current and accurate through frequent updating and customer contact. This traditional information is valuable but only the first step in using customer databases. What is also needed is information to reach new visitors through database technology. Here, database technology can be used to reach individual customers in each of four priorities: 
 
Priority 1: Existing Market Segments 
This comprises existing visitors or customers. Concentrating on these segments is the first priority because they are the types of customers who have already expressed the highest interest in our destination by their purchase behavior. Other members of these segments are more likely to visit than members of other segments. 
 
Priority 2: Proximate Potential Market Segments 
These include visitors to nearby destinations or competitors with similar characteristics. These customers have indicated they purchase similar products to what we offer. It is not necessary to persuade them to visit an unknown region, but only to travel to our destination. 
 
Priority 3: Expanded Potential Market Segments 
This comprises travelers who seek similar products to what we offer but do not now visit the region. They do not need to be persuaded to seek new satisfactions but to satisfy them in our region and destination. 
 
Priority 4: Potential Market Segments for Additional/Enhanced Products 
These market segments are potential visitors if additional or enhanced products are offered. These might be a new type of resort, convention/conference facilities, opening of new recreation resources, or infrastructure improvements. These segments need to be convinced to try out new products we are not known for. 
 
To reach these potential new customers, we need to look at databases that identify customers like our existing visitors, people who visit nearby areas, and visitors who are looking for products we might want to develop. To find people like our existing visitors, we need to gather information about existing visitors that leads us to databases of persons with similar characteristics. For example, we need to get information on their product ownership and brand loyalties, affinity group and club membership, readership patterns, business and occupation profile, etc. This information allows us to identify likely databases that will contain new, high prospect customers. 
 
As a practical example, ERA recently analyzed the market for a new resort in Hawaii. We were asked to examine how to reach new customers in what is generally agreed to be a weak market. As part of this study, we conducted an extensive survey of all resort property owners in Hawaii to determine if there were common database characteristics. The analysis showed a surprising amount of commonality. However, this commonality was not in the traditional measures of demographics, or travel, and activity characteristics. Rather, it was in how and when they accumulated their wealth, level of entrepreneurship, membership in interest groups and industry associations, and preferred media. These results led to entirely new prospect lists and marketing channels for reaching like customers. 

Does It Pay Off? 

AT&T was a late arrival in the credit-card business when it introduced its Universal Card in the spring of 1990.  But it burst on the scene with a significant advantage - a proprietary database marketing system gleaned from its telephone customers covering tens of millions of prospective cardholders. Using these data, AT&T was able to fine-tune both the credit line it offered each applicant and the incentives it presented each one to encourage use of the card. 
AT&T’s high-tech marketing paid off big time. Within three months, more than a million new cardholders had already charged more than $500 million on their new Universal cards. By the end of the year, charges were totaling $1 billion per month, according to an AT&T spokesperson. That was an unprecedented head start in a highly saturated market and gratifying proof that the effort to build and maintain a marketing database can be absolutely worthwhile. 

Tom Peters, the noted co-author of In Search of Excellence, adds his voice to the rising chorus with a nationally syndicated column headlined, “MASS MARKETING IS OUT, DATABASES ARE IN.” 
 

A Comparison of Tourism Marketing Approaches
Marketing Identification
Mass Marketing 
Database Marketing 
Segmentation marketers measure the demographic and psychographic profiles of current customers or likely converts. They group together individuals with similar profiles given them New Age names (such as “Attainers” and “New Builders”) and treat them as if they were identical.  Interactive Marketers Use actual behavior to identify customers and prospects and statistical models to assess their value. Each customer can receive a customized offering. 
 
Advertising communications are designed for the mean, if not the lowest common denominator of the target group.  Advertising uses information on the individual customer. Computer - driven magazine bidding allows selective insertion of print advertising. In-line inject printing can add lines of copy to individual ads. Cable television promises to transmit commercials to specific homes. Private media reinforces customer loyalty. 
Promotion
Focus on image advertising through television (a key source of agency profits) and magazines. Promotional 
offers are broadcast, using tools such as free-standing newspaper inserts, or mailed indiscriminately to homes 
defined by geo-demographics. 
 
Direct marketing is integrated into the advertising program. Promotions are tailored to an individual’s past behavior, are based on the payout anticipated from promoting to that consumer, and are selectively delivered to that consumer. 
Pricing
Promotional discrimination has to depend on customer self-selection.  Price discrimination exploits knowledge of the individual’s price sensitivity and is delivered to that individual alone. 
Sales Management
Customer data tends to reside with the travel agent and tour operator who use it at their discretion to achieve their own goals. 
 
Sales management has access to customer files. It can implement targeting programs of prospect databases to improve sales force effectiveness. 
Distribution Channels
The tourism supplier depends on intermediaries and direct selling from travel agents to reach customers. The 
 customer tends to be owned by the intermediary or sales force. 
The firm has direct link to the customer. When it uses 
intermediaries, it can jointly manage leads and customer relationships. Other elements of the marketing mix (promotion, advertising) are timed to help move the customer toward purchase. 
New Products
Tourism product development is driven by the supplier's existing technology and production systems. Research and development is supply driven.  New tourism products and services are market driven on the basis of customer needs. Marketers may serve their loyal customer base by selling products on behalf of third parties. 
Monitoring
Market share, sales and profit are the indirect monitoring tools. Audience surveys measure a hoped for level of awareness but not purchase behavior. 
Reviews tend to be periodic, usually annual. 
Traditional measures are supplemented by tracking purchase behavior, measures of success in retaining customers and margin over cost of acquiring new customers. The value of the customer base is monitored with lifetime value calculations. Monitoring tends to be continuous, rather than periodic. 
© 1998 Economics Research Associates - All rights reserved
 
 
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