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When things start returning to normal, do you want customers knocking down your door to book?
I’m going to share a proven method, referral programs, to improve your chances.
Welcome to another edition of Hospitality Property School.
I am your instructor, Gerry MacPherson.
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Introduction to customer referral programs
As a hospitality property owner or manager, you have to keep coming come up with imaginative ways to entice new guests, but as you know, this type of marketing can be expensive.
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It is less expensive to market to your existing guests than to find new ones.
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Getting a new customer is six to seven times more expensive than maintaining a current guest, but this business model isn’t sustainable forever.
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Your business can’t grow if you don’t expand your customer base. At some point, you’ll need to run marketing campaigns to attract new customers.
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This is why you need a customer acquisition strategy that won’t deplete your marketing budget.
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A customer referral program can do this. You leverage your existing guests to bring in new business.
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What are the most significant factors of hospitality property revenue?
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According to studies, retention and acquisition are first and second on the list.
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By merging both of these factors into one marketing campaign can be very beneficial for your property.
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If you can properly employ a customer referral program into your marketing strategy, you’ll get new customers without a lot of extra work. You set up the program and the rest will take care of itself.
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Don’t get me wrong, it will take some thought.
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The secret here is coming up with the right referral program that gets your current guests excited enough to participate.
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Whether you’re creating your first guest referral program or trying to improve the one you currently have in place, I will share ideas in this episode that will help you create a referral program that drives bookings.
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Books with Tips & Strategies for Your Hotel, Resort, Inn, Bed and Breakfast
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Make your guests experience a priority
Before you start worrying about the logistics of your referral program, you need to make sure your existing guests are properly taken care of. It doesn’t matter how great your program is, this strategy won’t work if your guests are unhappy.
Research has shown that 89% of properties named their guest’s experience as a key factor for retention and loyalty.
With all the choices consumers have, more guests have said that they care about the customer service more than the quality of the property they are staying.
Research suggests 86% of guests are willing to pay more money for an enriched guest experience.
This type of service starts at the top of your organization and works its way down. As the owner or manager, you need to set the tone and make sure all your employees know how important customer service is to your success.
Unhappy customers are bad for business. Only a small percentage of dissatisfied guests will complain. The rest leave without saying a word.
You have to let your guests know how much you care.
Happy customers are much more valuable, with more than 80% saying they are willing to make referrals.
Regrettably, only a small percentage do. That’s why your referral program will need to provide some extra incentives.
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Offer incentives for referrals
If your guests are happy, you will get some organic referrals even without applying for a program, but you can’t rely on such referrals alone when it comes to increasing bookings and getting new guests. It’s not scalable.
You have to give your guests a reason to refer their family, friends and associates. The most actionable are discounts and other monetary benefits.
Thinks about it.
If you like another property, a restaurant or a specific store are you going to spend a lot of time trying to bring them, new customers?
Sure, if it comes up in a conversation, you might make a recommendation but I presume you’re not actively going out of your way to promote them.
I am willing to guess that if that property, restaurant or specific store offered you a credit, discount, or reward for these efforts, it might change your approach.
It is probably fair to say that if someone referred you to a new property, restaurant or specific store, you might try them out but an incentive would definitely boost your motivation to do that.
The best guest referral program offers incentives to both currents as well as new customers.
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It’s a simple concept.
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When one guest refers a family member, friend or associate, the new guest gets 20% off their booking. Once that purchase is made, the original guest gets a $20 gift card.
Your original guest knows they’ll get a $100 credit if they can convince just five people to make a booking, thus giving a reason to spread the word even more. That adds up fast.
You have to make sure your incentives are worth it to both parties and relative to your regular prices.
Take a look at your rates or services, and decide what would be a good offer.
You don’t want to offer something too high that’s going to lose you money, but it also can’t be so low that it doesn’t motivate customers.
You need to find the sweet spot in between and set your incentives accordingly.
Like any other marketing campaign, you want to make sure your referral program makes sense from a financial standpoint.
If you’re spending money without getting a return on your investment, you won’t be profitable. But the nice thing about referral programs, unlike traditional marketing campaigns, normally they cost less.
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It is important to find incentives that will encourage bookings without robbing you of your profits.
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Customer referral programs can be a driving force behind your expansion strategy. Great customer service will encourage your guests to become loyal and increase your repeat business
Start off with high incentives to spread the word fast, but make sure you get a return on your investment.
After that, you can always make adjustments that translate to higher profits for your property.
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Are these making sense? Let me know by leaving a comment.
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Set yourself up for reoccurring growth
92% of consumers trust a recommendation if it comes from someone they know. Your new guests already have a positive impression of your property so now, you have to apply this concept to these new guests.
Once they make that first booking because of the incentive you offered, what’s next? Leverage their loyalty and offer them another incentive.
Don’t waste any time. This is your chance to secure them for the long haul.
Get them on your email list and during your marketing strategy encourage these customers to book again in the future and show them how they can benefit from your referral program.
This should be much easier for you because referred guests are more likely to refer more new customers.
Profit margins from referred customers are roughly 25% higher than from non-referred customers.
Think about how successful you would be if each new guest referred just one new customer booking. Your guest referral program can set you up for reoccurring growth.
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Keep an eye on quality control
Once you have your guest referral program in place you have to make sure that you prioritize your guest’s experience and have all the checks and balances in place.
For example, if a guest refers a friend, but due to some hiccup in your system, they don’t receive their incentive, that’s a problem for you.
You now went from a happy guest, who wants to refer their friends, to a dissatisfied customer, who thinks you’re trying to take advantage of them.
Instead of getting an additional booking, you may have lost future bookings.
It’s important you thoroughly check all the technology associated with your referrals. How will you send the incentives? Text. Email. Social media. Promo code. Make sure each distribution methods work.
Also, if you spend time and crunch the numbers to come up with the perfect incentives for your guest referral program, you have to keep an eye out for customers who may try to rip you off. There will be times when people will try to take advantage of your system.
An example might be a customer creating multiple accounts and refer themselves to get the incentive on both accounts. You’ll end up losing money without getting a new guest. Make sure you have some safety nets in place to catch and/or prevent this type of occurrence. It doesn’t happen often but it does happen.
In order for you to profit, your margins can’t be tampered with.
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In conclusion
Your property needs new customers.
With the high cost of acquiring a new guest, you need to focus on cost-effective marketing campaigns. Leveraging your current guests is the best way to do this.
- You need to provide excellent customer service.
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- Come up with an incentive that encourages your current guests and prospective customers to book.
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- Make sure your program works from a technical perspective and that nobody takes advantage of any loopholes.
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- Then set yourself up for reoccurring growth and a fast R.O.I.
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If you implement referral programs as a strategy, you will see an increase in bookings from both current guests and new customers.
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Do you currently use a customer referral program?
Let me know in the comments.
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You will have access to this episode for the next six weeks and then it will get locked in the vault for Hospitality Property School Group members only.
When you see that we have something new, don’t mark it “Unread” or file it away in the belief you’ll read it later because you might miss your chance.
To see all the other valuable material you’d have access to as a member of the Hospitality Property School Group, check out the short video in the episode post-show notes.
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In the next episode, I will talk about customer referral programs.
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That’s it for today’s episode,
Until next time, have a fun day.
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⇒ TO READ OR LISTEN TO THIS EPISODE ON KEYSTONE HOSPITALITY PROPERTY DEVELOPMENT:
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