Theory: CRM

A customer relationship management (CRM) programme that increases customer loyalty is valuable to your tourism business because it reduces marketing costs and increases yield. An effective CRM programme is not only a potential source of competitive advantage, but is also an intangible asset on the balance sheet that adds to the financial value of the brand. Loyalty programmes offering economic incentives can have a positive effect on customer satisfaction, customer retention and market share The ultimate aim of any promotion is to generate customers (sales). The greater the amount of sales that are in the form of repeat purchases, the greater the benefits for the business.  Small tourism businesses put in a lot of effort to attract new customers, who should then be regarded as a resource for the firm to capitalise on for mutual benefit.  

Customer loyalty should not be confused with customer satisfaction - Loyalty is built on satisfaction, but satisfaction does not always lead to loyalty.Satisfaction is a perception about how needs were met during a past service transaction, whereas loyalty is future behavioural intention/action. A customer could be very satisfied with a service, and yet quite easily switch to another brand offering a cheaper deal, or not be in a position to visit the business again.   

CRM is therefore ideal for  tourism businesses operating in markets where there is potential for repeat visitation. It can be more efficient use of scarce promotional resources to stay in touch with previous customers, than only attempt to attract the attention of consumers with costly mass media advertising. The starting point is to set up a customer database. 

It makes sense then to supplement the promotional plan objectives to increase new customers, with a customer relationship management (CRM) programme to foster increased loyalty. The key aims of CRM are to increase customer retention and stimulate repeat purchases. CRM can be used boost capacity, increase the contribution towards fixed costs of the business, and save on marketing costs. It can be at least five times more cost-effective to retain existing customers, rather than continually acquiring new ones.