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For eBusiness & Channel Strategy Professionals

December 15, 2008

eBusiness Role In Regaining Traveler Loyalty


an introduction by Henry H. Harteveldt

ExECUT I v E S U M MA Ry
The number of US online leisure travelers has fallen from 31% in 2006 to 25% in 2008. Travel eBusiness contributes to this loss by not making online travelers feel welcome, not letting them control the information they want to see on the home page, and failing to create an adequate level of confidence that the firms are taking the necessary steps to protect and respect travelers personal information. A recent Forrester report identifies why online travelers are worth winning back and illustrates several steps travel eBusiness professionals can take to achieve this objective. Travel Web siTes conTribuTe To losT Traveler loyalTy buT can Help Win iT back Forrester recently published a report that identifies a 19% decline in brand-loyal US online leisure travelers between 2006 and 2008. There are many contributors to that loss, including travel eBusiness failure to make online travelers:

Feel welcome. Many travel Web sites, including major airlines like United Airlines and Delta Air

Lines, online travel agencies such as Travelocity.com, and global hotel chains like Hyatt, dont do much to reflect customer location or value. Forty-seven percent of travelers have created profiles on travel Web sites, but most 54% say they dont derive enough benefit from doing so. Why? Most travel companies dont adequately mine data from online travelers profiles, or they fail to even include relevant questions in their traveler profiles. The result: the inability to push relevant offers or content that reflect travelers buying behaviors or interests whether on the home page or within key eBusiness portions of the site such as availability search, booking, or purchase confirmation pages.

See what they want on the home page. Travel companies insist on showing travelers what the

company, rather than the traveler, wants on home pages, rather than allowing travelers to customize the content available to everyone and make it meaningful to them. Rich Internet applications like Ajax have been used successfully by online portals such as iGoogle and My Yahoo! that allow online consumers to tailor the home page to match their interests. This has a positive impact: Forresters North American Technographics Retail Online Survey, Q3 2008, shows that of the 73% of US online consumers who use a portal site as their home page, 30% cite the ability to customize its content as an important reason for doing so.

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eBusiness Role In Regaining Traveler Loyalty


For eBusiness & Channel Strategy Professionals

Feel secure. Thirty-one percent of US online leisure travelers express some concern about

sharing personally identifiable information (PII) online with travel companies. Of 84 travel Web site reviews completed by Forrester through June 2008, 62 failed to provide adequate privacy or data security information when requesting users PII.

We believe this report about regaining traveler loyalty has extensive relevance to eBusiness and channel strategy professionals, since many of you manage a crucial gateway used to establish and sustain traveler loyalty: your firms Web site. I encourage you to read the full report below. Henry H. Harteveldt, Vice President & Principal Analyst, eBusiness & Channel Strategy Professionals

Forrester Research, Inc. (Nasdaq: FORR) is an independent research company that provides pragmatic and forward-thinking advice to global leaders in business and technology. Forrester works with professionals in 19 key roles at major companies providing proprietary research, consumer insight, consulting, events, and peer-to-peer executive programs. For more than 25 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. For more information, visit www.forrester.com. 2008, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, RoleView, Technographics, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each figure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. To purchase reprints of this document, please email clientsupport@forrester.com. 47960

December 3, 2008

How To Regain Travelers Loyalty


by Henry H. Harteveldt and Elizabeth Stark for Marketing Leadership Professionals

Making Leaders Successful Every Day

For Marketing Leadership Professionals


Includes data from Consumer Technographics December 3, 2008

How To Regain Travelers Loyalty


by Henry H. Harteveldt and elizabeth stark with Lisa Bradner and Kate van Geldern

ExECUT I v E S U M MA Ry
Forrester data reveals that travel brand loyalty has decreased by 19% since 2006. Leisure travelers in 2008 have every reason to be disloyal. Why? More travel products and options for travelers to choose from, virtually no incentives for travelers to remain loyal, and increased transparency from travel-focused social media sites like TripAdvisor. Nevertheless, brand-loyal leisure travelers are still an attractive audience for travel marketers and brand strategists to pursue. Brand-loyal leisure travelers are smart and successful, belong to multiple travel loyalty programs, and enjoy planning and booking travel online. Marketing leadership professionals should focus on retaining current loyal travelers, winning back past loyalists, and creating strong relationships with new travelers by following the six steps outlined in this report.

TABL E o F Co nTE nTS


2 There are 19% Fewer brand-loyal us leisure Travelers in 2008 Than in 2006 Brand-Loyal Leisure Travelers Are Worth Marketers Time
RECoMMEndATIonS

n oT E S & RE S o U RCE S
Forrester analyzed data from the north American Technographics Retail, Travel, Customer Experience, And Financial Services Benchmark Survey, Q3 2008, as well as the North American Technographics Travel online Survey, Q1 2008, in the development of this report.

9 look beyond loyalty programs To create loyal Travelers

related research Documents US Travelers And The Recession: A Glance Ahead To 2009 November 6, 2008
Social Loyalty June 25, 2008 Eight Marketing Technologies That Enable Customer Centricity June 5, 2007

2008, Forrester Research, Inc. All rights reserved. Forrester, Forrester Wave, RoleView, Technographics, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. Forrester clients may make one attributed copy or slide of each figure contained herein. Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. To purchase reprints of this document, please email clientsupport@forrester.com

How To Regain Travelers Loyalty


For Marketing Leadership Professionals

THere are 19% FeWer branD-loyal us leisure Travelers in 2008 THan in 2006 Travel brand loyalty has evaporated among leisure travelers during the past three years. According to data from Forresters North American Technographics Retail, Travel, Customer Experience, And Financial Services Benchmark Survey, Q3 2008, the percentage of US online leisure travelers who consider themselves to be brand-loyal when buying leisure travel has plunged by 19%, from 31% in 2006 to 25% in 2008 (see Figure 1).1 Forrester believes there are four contributors to this dwindling of loyalty:

Generic products or experiences. Only a few travel suppliers, such as Starwood Hotels &

Resorts Worldwide and JetBlue Airways, have distinguished their products or experiences enough to help them earn revenue premiums. Most travel suppliers products are drearily alike a situation aggravated by uninspired online planning, as well as shopping and booking experiences that fail to highlight even small but meaningful product benefits. The end result: Half of all US online leisure travelers say that the travel company they use doesnt matter as much as getting the lowest possible price.2

An abundance of travel product and booking options. Think you own the traveler? Think

again. Theres more capacity than there are travelers. A passenger planning to fly between the Dallas/Fort Worth area and Fort Lauderdale, Fla., for the February 2009 Presidents Day long weekend can choose from eight airlines offering nonstop, same-plane, and connecting flights.3 Nearly 80,000 hotels and motels can be booked on Expedia and if the traveler doesnt like any of those options, VacationRoost has more than 100,000 professionally managed homes, condos, and villas available to book. Should the Webs travel offerings not be enough or if the traveler is still not able to make up her mind about what to book the agents working at any of the 17,887 retail travel agency locations accredited by the Airlines Reporting Corporation (ARC) will gladly help her.4

Low number of incentives to become loyal. The primary vehicles used to instill customer

loyalty are programs based on purchase frequency. The programs appeal is vast American Airlines, for example, has more than 60 million AAdvantage program members but it is not universal. Among all US online airline passengers, 58% belong to an airline loyalty program.5 Among US online hotel guests, just 38% belong to a hotel loyalty program.6 Why? Travelers who arent frequent travelers dont view the programs as relevant its not uncommon for loyalty programs to use some variation on frequent as a descriptor. On top of this, 31% of US online leisure travelers express concern about sharing personally identifiable information with travel firms, which poses a challenge in convincing some travelers to sign up.7 The end result: Suppliers (mostly) and intermediaries (to a degree) miss the opportunity to create relationships with more of their customers.

A wealth of user-generated content. Travelers dont need to rely solely on suppliers or travel

agents for advice or to guide them through the travel planning process anymore. Why? Travelrelated social media sites abound, and the user-generated information and advice found on

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How To Regain Travelers Loyalty


For Marketing Leadership Professionals

these sites is almost all that travelers need to make informed travel decisions. Social Computing travel sites like TripAdvisor and IgoUgo empower travelers to learn about new options and destinations and make it easy for them to research and plan trips by reading reviews and getting recommendations from other travelers. There are also Social Computing sites for specific travel products, such as VibeAgent and HotelChatter for hotel reviews and ratings, FlyerTalk for air travel forums and air loyalty program information, and Cruise Critic for cruise advice and tips.
Figure 1 Travel Brand Loyalty Is disappearing
When buying leisure/personal travel, do you consider yourself to be brand-loyal (that is, do you prefer to use certain travel companies)? (4 or 5 on a scale of 1 [disagree completely] to 5 [agree completely]) 35% 30% 25% 20% 15% 10% 5% 2007 2008 Base: US online leisure travelers Source: North American Technographics Retail, Travel, Customer Experience, And Financial Services Benchmark Survey, Q3 2008; North American Technographics Finance, Retail, And Travel Benchmark Survey, Q3 2007; Forresters NACTAS Q3 2006 Survey *Note: A categorical measure was used for 2006.
47560 Source: Forrester Research, Inc.

0%

2006*

brand-loyal leisure Travelers are Worth Marketers Time Brand-loyal travelers are a precious asset. So as you ponder the decline in brand-loyal customers, understand that you are losing a group of people with stellar demographics and travel planning and buying behavior. Forrester data reveals that US online brand-loyal leisure travelers are an appealing audience for marketers to retain and pursue because they:

Are smart, upscale, and more likely to be Bookers. More than half of US online brand-loyal

leisure travelers are college-educated, compared with 43% of all leisure travelers (see Figure 2). Seven in 10 brand-loyal leisure travelers are married, and one in three has children at home, meaning you dont just get the brand-loyal travelers; you also get the brood they travel with. Brand-loyal leisure travelers are also successful: 47% have an annual household income of more than $100,000. And 65% of brand-loyal travelers are Bookers 15 more than all US online leisure travelers.

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How To Regain Travelers Loyalty


For Marketing Leadership Professionals

Belong to multiple travel loyalty programs. Its intuitive that people who view themselves

as brand-loyal are more likely to join loyalty programs just dont think theyre taking a pledge of fidelity to your company because they carry a card with your logo on it. Brand-loyal travelers will join your program if they feel your products or service are relevant, if you provide acceptable value (which goes beyond price), and if they believe you can help them save money or stretch their budgets. Airline loyalty programs are the most popular among brand-loyal travelers: 72% belong to at least one airline loyalty program, and 13% belong to four or more (see Figure 3). Sixty-four percent of brand-loyal travelers belong to at least one hotel loyalty program, compared with 45% of the general leisure traveler population. Their interest in loyalty programs isnt limited to travel-specific programs: 63% belong to multipurpose loyalty programs such as American Express Membership Rewards.

Value the benefits of booking travel online. Seven in 10 brand-loyal leisure travelers feel that

its easy to use the Internet to plan and buy travel, 16% more than all leisure travelers (see Figure 4). More than half enjoy planning and buying travel on the Internet and find it is easier to keep records and receipts when they book travel online. And 45% of brand-loyal travelers also think that travel Web sites help them save money. If youre a travel supplier, the brand-loyal Booker is more likely to buy directly from you: 77% of brand-loyal Bookers use a travel suppliers site to book their trips, compared with 72% of all leisure travel Bookers.

Participate in social media just as much as the next leisure traveler. To understand travelers

social media adoption, Forrester uses the Social Technographics ladder of Social Computing participation (see Figure 5).8 Nineteen percent of brand-loyal leisure travelers are Critics, meaning they post ratings/reviews, comment on blogs, contribute to online forums, or contribute to wikis, and they are 41% more likely to be Critics than the online leisure traveler population (see Figure 6). Brand-loyal travelers may be good for travel marketers to help spread worth-of-mouth, but at the same time, they can be lethal if a company makes a decision they dont like. Delta Air Lines backed off charging its SkyMiles Medallion members for Coach Choice seats due to their public outrage on both Delta Air Lines blog, Under The Wing, and on FlyerTalk, where the thread about Deltas decision to charge more for these seats generated more than 450 posts. 9

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Figure 2 demographics of Brand-Loyal Leisure Travelers


Brand-loyal leisure travelers Female Mean age Gen Y (18-28) Gen X (29-42) Younger Boomers (43-52) Older Boomers (53-63) Seniors (64+) Married or partnered College degree Have kids living in household HH income <$59K (US$) HH income $60K-$99K HH income $100K+ Technology Own a smartphone Have in-home broadband access Technology optimist Travel Air passenger* Hotel guest* Car rental traveler* Booker Looker Sideliner 74% 84% 49% 65% 15% 21% 62% 82% 41% 55% 16% 29% 14% 79% 67% 10% 73% 62% 50% 47 15% 29% 21% 22% 13% 72% 54% 33% 25% 28% 47% All US online leisure travelers 51% 45 17% 31% 20% 20% 12% 73% 43% 40% 36% 29% 35% The average household income of a brand-loyal leisure traveler is $100,352, compared with $86,682 for all US online leisure travelers.

Demographics

Base: US online leisure travelers Source: North American Technographics Retail, Travel, Customer Experience, And Financial Services Benchmark Survey, Q3 2008 *In the past year
47560 Source: Forrester Research, Inc.

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December 3, 2008

How To Regain Travelers Loyalty


For Marketing Leadership Professionals

Figure 3 Seventy-Two Percent of Brand-Loyal Travelers Belong To An Airline Loyalty Program


How many of the following types of loyalty or frequency programs do you belong to? Airline Brand-loyal leisure travelers 13% 11% 25% 22% 50% 28% Brand-loyal leisure travelers 15% 11% 19% 20% 55% 36% All US online leisure travelers 8% 6% 12% 18% All US online leisure travelers 9% 7% 15% 19%

4 or more 3 2 1 0

The average number of airline loyalty programs a brand-loyal leisure traveler belongs to is 1.6, compared with 1.1 for all US online leisure travelers.

Hotel

4 or more 3 2 1 0

The average number of hotel loyalty programs a brand-loyal leisure traveler belongs to is 1.5, compared with 0.9 for all US online leisure travelers.

Multipurpose (e.g., American Express Membership Rewards) Brand-loyal All US online leisure travelers leisure travelers 4% 5% 9% 5% 16% 20% 4 or more 3 27% 2 29% 1 0 37% 48%

Base: US online leisure travelers (percentages may not total 100 because of rounding) Source: North American Technographics Retail, Travel, Customer Experience, And Financial Services Benchmark Survey, Q3 2008
47560 Source: Forrester Research, Inc.

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Figure 4 Brand-Loyal Travelers Like Booking Travel online


To what extent do you agree or disagree with each of the following statements? (4 or 5 on a scale of 1 [disagree completely] to 5 [agree completely]) Brand-loyal leisure travelers All US online leisure travelers Its easy to use the Internet to plan and buy travel I enjoy planning and buying travel on the Internet It is easier to keep records and receipts when I book travel online Travel Web sites help me save money Travel Web sites clearly present my choices and tradeos 43% 52% 40% 45% 38% 33% 27% 68% 57% 53%

Base: US online leisure travelers Source: North American Technographics Retail, Travel, Customer Experience, And Financial Services Benchmark Survey, Q3 2008
47560 Source: Forrester Research, Inc.

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How To Regain Travelers Loyalty


For Marketing Leadership Professionals

Figure 5 The Social Technographics Ladder

Creators

Publish a blog Publish your own Web pages Upload video you created Upload audio/music you created Write articles or stories and post them Post ratings/reviews of products or services Comment on someone elses blog Contribute to online forums Contribute to/edit articles in a wiki Use RSS feeds Vote for Web sites online Add tags to Web pages or photos Maintain prole on a social networking site Visit social networking sites

Critics

Collectors

Joiners

Spectators

Read blogs Listen to podcasts Watch video from other users Read online forums Read customer ratings/reviews None of the above

Inactives

Base: US adult online consumers Source: North American Social Technographics Online Survey, Q2 2007 Note: Groups include people participating in at least one of the activities monthly.
47560 Source: Forrester Research, Inc.

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Figure 6 Two In 10 Brand-Loyal Leisure Travelers Are Critics


Index (all US online leisure travelers = 100) 135 141 109 22% 45% 45% Base: US online leisure travelers Note: Among all US online adults, 13% are Creators, 14% are Critics, 10% are Collectors, 20% are Joiners, 41% are Spectators, and 52% are Inactives. Source: North American Technographics Retail, Travel, Customer Experience, And Financial Services Benchmark Survey, Q3 2008
47560 Source: Forrester Research, Inc.

All US online leisure travelers Creators Critics Collectors Joiners Spectators Inactives 11% 17% 19%

113 107 91

R E C o M M E n d AT I o n S

look beyonD loyalTy prograMs To creaTe loyal Travelers


Even in good times, its not easy to be a travel industry marketing leader. Its substantially more difficult now. not only must you strive to keep your current base of loyal travelers and keep them buying your profitable products but you also need to find ways to win back travelers whose loyalty has been lost and find new travelers whose loyalty you can, and want to, earn. So how do you do this? By following the steps outlined here:

use customer data to model your loyal customers beyond your loyalty program. Along
with what the traveler actually buys, travel marketers have access to copious customer data, such as the amount spent, the form of payment used, the items presented during the availability search process, the channels a traveler uses to book a trip or for tasks such as check-in, the trip history, and the nature of any customer service interactions. The challenge is that this data may be contained in multiple systems, posing a challenge to aggregating whats needed to create a useful view of the traveler. The other problem is that some of your loyal customers may not belong to your loyalty program. visionary travel marketing leaders will task their colleagues to use customer data integration (CdI) software to model customers whose loyalty may be worth cultivating, independently of the travelers participation in your loyalty program.10 The outcome: modeling profitable customers so you can keep those you

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have and attract more like them. Technology partners such as DWL, Oracle, Acxiom, and vistrio can help you with this.

Make better use of customer profiles. nearly a year ago, Forrester pointed out that 47% of
US online leisure travelers create profiles on travel Web sites, although 54% of the travelers who have created profiles have a neutral or negative perception of the value they get from their profiles.11 A year of opportunity to use your customers profiles to mutually enrich the relationship between your business and your customer has gone by, with almost no progress made shame on you! dont make the same mistake in 2009. Use your customer profiles to learn more about your customers needs. Among the topics you can ask them about are their travel interests, product preferences, and attitudes such as how they feel about travel or their willingness to pay affordably higher prices for better products even the type of mobile device they own.

let customers create their own home page. Control matters to travelers. Give control
to the traveler at the very point where you want to create loyalty on your home page. Deploying a technology such as Ajax will allow travelers to personalize your sites home page to their interests and needs by specifying the content that interests them and positioning various modules or functionality precisely where they want them to appear on the page, similar to offerings such as My yahoo! and iGoogle.

create loyalty now, not tomorrow. Eight years ago, Forrester urged travel marketers to
embrace the practice of doorstep love providing customers with unadvertised, and thus unexpected, courtesies that can help create loyalty.12 Travel marketers can go a long way to earn loyalty by offering benefits that improve the travelers experience at that moment, rather than tacking on bonus points that the customer may or may not be able to redeem for a later award. Fairmont Hotels & Resorts, for example, gives Wi-Fi access to its Presidents Club members and also lends out complimentary Adidas athletic apparel. Continental Airlines offers inconvenienced passengers meal credits or lounge passes based on their value to the airline, regardless of whether the passenger belongs to the airlines onePass loyalty program.

if you have to choose between costs and the customer, choose the customer. your
budget just got slashed, demand has fallen through the floor, and top-line revenue is shrinking yet your CEO, board, and stockholders expect profit improvement next year. nice. Its easy in downward economic cycles to justify slashing costs because it creates immediate and impressive savings. But this has to be done with a careful eye on the impact to the customer experience, because your customer experience is what you use to cumulatively build loyalty. Even as fuel costs soared in the summer of 2008, startup airline virgin America continued to stock a convenience-store-sized chiller within its Economy-class galley full of bottled water and continued to offer the water to its passengers for free. To win business from important Japanese firms like Toyota, northwest Airlines built up a corps of 300 Japanese-speaking in-flight service representatives who interact with the airlines Japanese passengers, providing cultural sensitivity at 35,000 feet.

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let travelers create their own awards. It isnt enough to give loyalty program members the
flexibility to earn credits from your program or those of trusted partners or to choose from a more restricted, but less expensive, saver level and a less restricted, but more expensive, standard award level. Take this opportunity to develop a flexible framework that allows your travelers to create their own awards. InterContinental Hotels Groups Priority Club, for example, allows members to redeem Priority Club points for retail, dining, and gasoline gift cards; online auctions; and unique experiences, as well as free hotel accommodations. The Starwood Preferred Guest (SPG) program recently introduced the ability for its members to redeem points for free airline tickets almost anywhere in the world and in premium cabins, not just economy. And since these tickets are actually purchased, the SPG member can earn airline loyalty program credits, as well.

enDnoTes
1

Forrester asked consumers to use a five-point scale to respond to this question: When buying leisure/ personal travel, I consider myself to be brand-loyal (that is, I prefer to do business with certain travel companies). Respondents who answered either 4 or 5 to this question are considered to be brand-loyal travelers. Source: North American Technographics Retail, Travel, Customer Experience, And Financial Services Benchmark Survey, Q3 2008 Flight search between Dallas, Texas, and Fort Lauderdale, Fla., departing February 12, 2009, and returning February 16, 2009, using the OAG Travel Planner Pro. Source: http://www.oag.com. Source: Sales & Document Statistics, Airlines Reporting Corporation, October 2008 (http://www.arccorp. com/forms/stat/index.html). Source: North American Technographics Travel Online Survey, Q1 2008. Source: North American Technographics Travel Online Survey, Q1 2008. Source: North American Technographics Retail, Travel, Customer Experience, And Financial Services Benchmark Survey, Q3 2008. Forresters Social Technographics tracks consumers social activities into six levels of increasing interactions in social media activities: Creators, Critics, Collectors, Joiners, Spectators, and Inactives. See the April 19, 2007, Social Technographics report. Delta announced on its blog on November 17, 2008, that the companys Coach Choice Seats program would be deactivated for Delta SkyMiles Medallion members due to the public dissatisfaction and feedback from Medallion members on Deltas blog and FlyerTalk. See http://flyertalk.com/forum/showthread. php?t=834472. Deltas Coach Choice Seats program negatively affected Medallion access to preferred seats, so Delta decided to revert back to the original preferred seating program offering Medallions unrestricted access

5 6 7

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to preferred seats. Source: Medallions and Choice Seats, Under The Wing, November 6. 2008 (http://blog. delta.com/2008/11/06/medallions-and-choice-seats/).
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Customer data integration (CDI) rationalizes disparate information. CDI is a class of software that collects, cleanses, aggregates, and manages customer data. By combining operational data, streamlining customer data management processes, and presenting a single view of the customer, CDI allows marketers to manage compliance, improve customer service efficiencies, and focus on customer experience management. Vendors of CDI software include Oracle and DWL. See the June 5, 2007, Eight Marketing Technologies That Enable Customer Centricity report. Most customer profiles collect little more than the travelers name, address, contact information and a form of payment. This misses an opportunity to drive both brand and channel preference among a tech-savvy customer base. See the December 5, 2007, Who Creates Travel Web Site Profiles Online? report. Customer-focused travel firms treat their valuable customers like gold whenever they contact the company. Hilton Hotels, for example, is able to call up a guests stay history to determine if any problems have previously occurred so that it can enhance the quality of the guests current visit. See the December 29, 2003, Best Practices In Travel CRM report.

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Forrester Research, Inc. (Nasdaq: FORR) is an independent research company that provides pragmatic and forwardthinking advice to global leaders in business and technology. Forrester works with professionals in 19 key roles at major companies providing proprietary research, consumer insight, consulting, events, and peer-to-peer executive programs. For more than 25 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. For more information, visit www.forrester.com.

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