There is a Better Option than Mass Marketing for Our Industry

"When customers are spending £400 or more on one of our products, they have a right to expect our company to know something about them and to create products and services to suit," says Ray Hazeldene, of Knowledgebase, who are commissioned by Thomson Holidays to provide strategic advice on the development of customer database. Ray was project manager at Thomson Holidays at the start of the project and has been involved ever since.

When, however, you have four million holiday makers travelling with you every year it is not easy to sustain individual communications. Because, traditionally, Thomson has been dependent on travel agents to sell the majority of its products, it has little or no direct communication with its customers before they travel with them. The main exception to this is its direct-sell brand, Portland Direct, which accounts for approximately 10% of holidays provided. As a result, whilst Thomson knows anecdotally that it enjoys a high repeat business year on year from loyal customers, it has a limited amount of knowledge about these people. This is a pity as Thomson Holidays has been found by an independent survey to have the highest level of repeat bookers of the leading three UK air-inclusive holiday operators. Historically, Thomson Holidays has not had an integrated system for identifying the customers it attracts. So, every year, the majority of Thomson's four million travelling customers are invariably treated as newcomers regardless of their history with the company.

Thomson is the leading operator of UK inclusive holidays, providing 40% more holidays than its nearest competitor, and in a volatile and highly competitive market, it cannot afford to be complacent. It is the best recognised holiday brand in Britain, but it has been focussing in the main on mass marketing and not fully gaining the huge potential benefits of cross-selling or up-selling to its vast customer base.

"In today's market mass marketing is not the only solution for our industry", argues Ray Hazeldene. "In the past we could spend large sums on over 30 million brochures in one year, for the various divisions and product lines within Thomson Holidays."

Whilst the conversion rate from core beach holidays in the 'Summer Sun' brochures can be high, the more niche brands, such as the upmarket four and five star holidays of 'Thomson à la Carte', or the more personal, family-run establishments in 'Thomson Small and Friendly', may demand considerably more brochures to generate one booking. As nearly half of Thomson's holidays are sold from one of the many niche brands, a more targeted approach was clearly called for.

In line with Thomson Holiday's reputation for pioneering new customer initiatives to help build and maintain consumer confidence in the quality of its holidays, the directors committed to a new, more directly customer-focused marketing strategy. "The first step for us," says Hazeldene, "was to find out more about our customers. Until we could identify them and understand their needs and purchasing habits, we knew we could not begin to treat them differently, or develop even more successful holiday programmes tailored to meeting their expectations. How could we hope to maximise sales of "Young at Heart" holidays to those aged 55-plus, if we treated them the same as families with young children who would derive greater enjoyment and better value from our "Superfamily" options? We were also not fully maximising the opportunity to pre-sell them additional profitable extras, such as late check-out rooms, extra leg room on flights, or car hire services. It's all very well branding our brochures with a strap line like 'À la Carte - for those who appreciate the best' but, until we can ensure they are seen by an upmarket audience, we may be in danger of misdirecting a lot of time and money."

A fundamental business strategy was agreed; namely to develop a Customer Integrated Management System (CIMS) that would hold dynamic data on every customer travelling on a Thomson Holiday. A database marketing initiative five years earlier with Portland Holidays, provided the basis for Thomson Holidays' move towards customer focused marketing. The Portland database was run on a unique system called MarketPulse. This is a high performance database marketing package that allows instant analysis and access to vast amounts of marketing data. Tried and tested with blue-chip users such as Marks & Spencer, Next, Littlewoods, Sears, Air Miles and Freemans, MarketPulse can respond immediately with detailed information on individual customers, process complex database profiling, and give precise answers to intricate marketing questions.

"It made sense," said Hazeldene, "to migrate the MarketPulse system across to Thomson Holidays. It was a system that had satisfied us as a customer information management tool at both Portland Holidays and one of our sister companies, the Holiday Cottages Group, which is the leading arranger of holiday cottage lettings in the UK. Although we were migrating MarketPulse from single product operations into a multi-division, multi-product environment, we knew it had the capacity to perform at that scale. We also knew MarketPulse could offer us the campaign planning, multiple tests, and volume data analysis that we intend to develop."

The bulk of customer information held on the Portland and Holiday Cottages databases came from their direct booking systems. As 90% of bookings for all other Thomson Holidays companies go through travel agents, this could not automatically be relied upon as a source of information for the new CIMS. An alternative method of acquiring customer information would need to be found. The answer lay in combining data from Customer Satisfaction Questionnaires (CSQs) and bookings.

CSQs were first pioneered by Thomson Holidays in 1972, to measure holiday-makers' satisfaction and identify areas for improvement. Thomson Holidays receive 1.5 million CSQs a year from their travelling public. Historically the data from these questionnaires would have been disposed of, once it had been assimilated for operational purposes, such as monitoring and improving the performance of hotels, representatives, airline and coach transfer services. Now Thomson Holidays is loading data collected over the last two years from two million CSQs and almost as many customer booking records. In addition the records of over 2 million Portland Holidays' customers have been migrated into the new system. Once the remaining historic data is loaded, the expectation from Thomson Holidays is that this database, currently standing at 5 million customers, will grow rapidly over the next 12 months, then by 10% a year after that. This will bring it to 10 million very quickly. That is a significant proportion of the total universe of the British travelling public of 16 million.

Already Thomson Holidays' marketing department is actively devouring and analysing the information coming off the MarketPulse system. When all the data is on-line and the system is separated from the operational function the analysis will move into a higher gear.

As the information on the database grows MarketPulse analysis will reveal what products and activities interested customers last year. For example did they hire a car, what kind of excursions did they enjoy, did they book airport accommodation? Using this information, which is kept at household and individual customer level, Thomson Holidays can then promote relevant products and services that are supplementary to the core holiday. "This is not part of a strategy to move all our customers to book direct. Many targeted communications to customers will direct the customer to go to the travel agent to buy these products. This is a direct communications, but not a direct sell strategy," stresses Hazeldene. "Our aim is to build stronger relationships between Thomson customers, Thomson Holidays and our most supportive travel agents."

Preferred travel agents are a top tier of best performing sellers. They represent part of a radical restructure of Thomson's agency business. Top performers will be able to earn increased commission from Thomson, over the industry standard. In return, they will deliver higher than average sales and, amongst other things, share with us names and addresses of clients with their booking details.

Through this closer relationship with preferred agents, Thomson Holidays will learn more about its customers at their actual time of booking, rather than up to 18 months later when the CSQs are returned.

The data generated from these new relationships will feed into the new customer-focused database. "We expect to gain enormously from our MarketPulse customer database," says Hazeldene. "As the analysis of records grows, we will apply more lifestyle, demographic and socio-demographic overlays to increase our knowledge about our customers. Gradually we will be able to produce customer profiles to drive our marketing and business strategy. We will be able to target customer preferences outside the current direct sell domain; we will be able to track enquirers who didn't convert; reactivate lapsed customers; up-sell to aspiring customers and cross-sell to others. We will find out which data triggers convert a customer to booking and we will discover the best timings to make communications successful." By concentrating sales on a smaller number of agents and by developing a more focused approach to its customers, Thomson will also be able to benefit from immediate savings on brochure costs.

Thomson Holidays will run hundreds of tests over the next few years. Subsequent analysis, using MarketPulse, will lead to intelligent and profitable communications with customers. Already the MarketPulse database is on-line to the selling system of the direct booking operators. When a customer calls in they are identified immediately and, as a result, given an infinitely sharper and more personal service.

Longer term, other technological developments, such as digital print, will enable Thomson Holidays to mail customised responses to individuals, promoting other products received by holiday makers. These could include preferential hire terms of a favourite car, special sun screen products, travellers' cheques, telephone cards for their destination country, theme park passes, airport parking, or a repeat of accommodation enjoyed in a previous year.

Call centres servicing Thomson Holidays' enquirers will be linked direct to the CIMS. Callers' details will appear instantly on screen, enabling the operator to enter immediately into a helpful dialogue. Preferred travel agents will gain from an increase in the number of customers entering their outlet, as a result of communications generated direct from Thomson Holidays. Eventually these travel agents will have their own direct access to a localised customer base of travellers in their catchment area.

Over the next few years the balance will swing away from mass market advertising towards niche direct marketing. The days of the mid-1990s when Thomson Holidays spent 20 times more on acquisition marketing than on retention are over. The future is targeted marketing.