Welcome to customer acquisition in the age of AI. We're excited to have you join us today and share a little bit of the research that we've recently completed between Adobe and Publisys Sapient. I'm Julie Hoffman. I lead our travel practice globally for Adobe and I've been in travel a little over 25 years. Previously led digital and e-commerce for Fortune 500 brands like MGM Resorts International and Caesars Entertainment. And we've got a few folks who are joining me today. I'm going to go ahead and pass it over to Melanie.
Hi, thanks Julie. I'm Melanie Harris. I've been with Adobe about seven and a half years. I've been in the travel and hospitality space just about 20. So I've spent quite a bit of time with airlines, hotels, and our dining brands really thinking about their forward strategies and how they engage with the market. And so I'm super excited to help present our content today.
Awesome. I'm Gaurav. I'm the chief insights officer at Incisive. A student of the industry who gets to just learn and never graduate, which is always fun. Excited to kind of bring this research to life with partners with Adobe and Publisys. Excited to do that. And I think there's some fun nuggets here. Would love to dive into that.
Yeah, just as excited here as well. Jagdish Ganshani. I run the travel and hospitality business for Publisys Sapient. I've been with them for roughly 23 years and counting and have been in and out of the travel and hospitality industry, but also the privilege of servicing other industries across Insights for Publisys Sapient. Travel and hospitality also includes dining and QSR. Before I actually kick it over to Gaurav, I just want to talk a little bit around, you know. Okay, before we begin and I pass it over to Gaurav, I want to basically table set with the folks who are joining me today to talk about the transformation that we've been within the travel and hospitality industry. You know, five years ago, the pandemic really created an acceleration in terms of digital maturity. It started with online travel agents in particular, like Expedia, because this was very much out of necessity. There was a lot of operational costs that they were suffering because they were not an end supplier. And so they were in the middle of that. And so they had quite a bit of transformation in terms of how do they actually provide better service. Now, during the recovery period, additional subverticals within travel really up-leveled their technology. And part of that was new rising customer expectations. It was pretty significant in terms of what customers were expecting because during COVID, we learned a lot more could happen. So what was created was a bit of a groundswell moment in the travel and hospitality space where many brands were starting to actually steal share from each other because as they started to level up, we'd always hear that, you know, they were either brands were either a net recipient or a net loser. They were basically shifting share at a whole new rate. As we kind of move forward between 2023 and 2024, some brands began to actually lean into AI to support service and personalization and taking it to a whole new level, really ratcheting up a notch. And of course, this has really accelerated a lot more of the churn and the loyalty shifting that we've been seeing for quite some time. So as brands have improved the experience, we saw a lot of churn and a significant rise in acquisition costs. We actually expected this. So over the last three years, on average, it's increased about 35%. And with that, unfortunately, customer lifetime value has been limited in terms of its overall growth. It's only been around 4.5%. So it's not growing at an exponential rate, you know, to align with those costs. And then, you know, due to this high rate of churn, what we've seen is that there's even been a challenge around having repeat customers. They've started to decline overall. So this is looking at kind of like the last five years, where we've been. And before we get started and talk about the white paper and what we learned and our research, I want to pass it over to Melanie and Jagdish and Gaurav to share with us what they've been seeing. So, Melanie, what are your thoughts?
I think the very first thing that comes top of mind for me is that while we're seeing brands continue to evolve, we're also seeing the customer and the customer expectation evolve. And so I think what's been really exciting as we partner with brands on their journey is understanding that shift in customer and understanding that their customer is changing right alongside with them and how do we stay on top of their customer needs so that we can meet them where they are. What are your thoughts, Jagdish?
Yeah, I agree. I think that's for sure. But, you know, working for Publis' group as one of the largest advertising companies, we see significant increase in media spend, which is great, which also means that media impressions are going up and they're exponentially growing. But if you kind of, again, you know, going to the same graph, if you look at the real business growth, the business growth is, you know, barely there for most of our clients. So I think it's a genuine problem that the industry needs to solve for. I think AI is fantastic and I think there are some interesting innovative experiments that are happening, both, you know, AI, how AI applies in marketing, how AI applies in servicing or for that matter, customer experience more broadly to some of the stuff that we did with Marriott or with Delta and so on and so forth. And even OTA is launched with some interesting AI experiments. So I think we're seeing some interesting trends in that area and hopefully, how do we get the most value for the amount of marketing dollars that are getting spent? And that's what the goal should be for most of the brands.
Yeah, from a related perspective, I look at this chart in two ways. I think it's a great way to kind of visualize what's been happening. I think the big thing is the economics that we knew around the industry, I think, are changing fundamentally and a bit part of it is that we are prioritizing, you know, short-term relationships and essentially buying revenue at unprofitable rates. That can't continue forever because it just can't. And you can talk to the implications of that. The second thing which I think is critical and I think we slightly more predictive, I think AI is going to bring in a whole different way of doing everything across the board. I think it's going to be the biggest inflection point of the industry than perhaps even online booking. And it's going to change things dramatically and I'm sure we get into that. So those kind of, you know, two elements here. If I may just add one tiny more element to that chart. I think one of the interesting things is that, and Julie mentioned this as part of the introduction, that companies started to make significant amount of investments in modernizing their technologies. And that just shows that the technology was so legacy, so backward for most of the travel brands, for sure, that the extent of investment to just, you know, bring it on par to be able to take advantage of where the market's right now was critical. But they haven't gone through that transformation yet. Most companies are still doing that. And whilst we are talking about AI, one of the important things is, and which is what we will probably go in a little bit more detail, is that at the end of the day, AI is only going to work great for you if your data is great. And I think the data ecosystem still remains relatively immature. And I know that brands are investing quite a bit in enriching their data sets, but it's not at the level where they're going to reap significant benefits out of AI. So there's just so much work that each business has to put in from modernizing their technology, maturing their data ecosystem to take advantage of where we are today.
You know, and I love that. Actually, Melanie, I'm curious your thoughts. You know where dining was at the start of COVID. They're completely transformative. Is there a, you know, I feel like, you know, in terms of legacy tech, that's been super transformative for QSR.
Absolutely. I think from the pandemic and recovery, it really was an opportunity of supercharge for QSRs. And they really leaned into reducing that tech debt to create the capabilities they need for two reasons, right? One, we weren't in person and customers absolutely relied on that digital connection. And so we had to quick, fast deliver that capability. But even more, there was an impact to their operations. And so by investing in both back-end technology as well as the front-end and reducing that tech debt, they've really seen the benefit of that maturity. And I think as we get to the upcoming slides, we'll see where QSR stands above. Yeah. I'm very proud of QSR and how far they've come. I'm thrilled. Gaurav, go ahead and kick us off here.
I'll do that. So all these great insights and more are in this fantastic white paper we collaborated about. It's a passion project with sweat, tears, and lots of Zoom calls and Microsoft Teams calls. So please download this asset, give us your feedback, reach out to the Adobe previous team. We're excited to share these findings with you. And to make sure you kind of at least get a voiceover in terms of what we discovered, let's go to the survey. So Julie can move to the next page. So this is the survey that kind of grounds a lot of this, you know, these pieces, these insights. I'm going to go through this fairly quickly, but the main thing is our intent was to basically look at a diversity of formats in the travel industry because, you know, they're vastly different. We just talked about how dining is different and restaurants have made significant upgrades. ButActually get to the level of sophistication that you have from a segmentation perspective and getting to targeting. Because this 15% gap between those that are leveraging all these techniques talk to a few different things, which is most of us, and it's just how things have evolved, are still stuck in this mass media way of segmentation by demographic and all of the written elements that where we are moving to a world of more intent-based dynamic segmentation personalization, which of course can be enabled like things like, like you said, with better data, with AI. And that is the real difference. And I'll go to the OT and we have the little icons there, you know, of course, kind of dig a bit deeper and I'll get both, you know, Julie, you and me to comment on it. But the element here on OTA, which I find really interesting is for a lot of them, if you look at their sophistication, they're basically doing an extremely great arbitrage as it relates to digital traffic. They're buying traffic at the same level as anybody else, as a hotel, but they're putting customers on journeys and orchestrating them to parts based on two clicks and getting to an intent, whether they're a high value shopper, what are they focused on? Is it a business trip? Which is an extremely smart way of where you take segmentation or those conversion rates, where your conversion rates are high, but you're actually getting a more profitable deal at the end of it. And I think that's where the segmentation is a huge part of it. It isn't just the whole traditional way of looking at it. It's actually getting into intent, which I think makes a huge difference. And I know, Melanie, you can get to the details of the dining and details. I would love to get your and Julie's perspective on both of these stages.
Yeah, I think one of the things you call out that's super important is that when staying in that broad demographic, it's really a waste of that budget and not really driving the efficiency. And so in that dining space, I think with the frequency of purchase and the availability of data, we really have the opportunity to hone in on deeper segmentation that will yield better personalization and really allow brands to show up for customers in the moment with the right opportunity or with the right offer. I think it really points to being able to leverage detailed loyalty insights and first party data and understanding those psychographics in a way that allows them to get greater benefit of the relationship and really show up for that customer in a way that matters. Julie, what are you thinking?
So the OTA, of course, stood out for me right away because that's significant differentiation from the group. One of the things that they obviously had that service transformation five years ago that not only helped with the service, that cross-channel analysis they were doing across web, mobile, and chat, and basically creating the connectivity to understand what's happening between those channels so that each channel could be informed, really was an unlock not just for the service, but I think also for where they are with personalization. I know today there's a brand that is using actively 2,900 attributes to drive their personalization framework, which is phenomenal. But I think you don't get there overnight. You have to build that by having, again, the right foundation in place, get rid of some of that legacy tech debt, and invest in those connectivities. I think cross-channel connectivity is huge. Even from an airline perspective, we know that over 60% will come and start on mobile, but then they'll switch to a desktop in order to actually complete the transaction. If you don't have cross-channel interlock between those motions and those touch points, you're losing the conversation. So I think that OTAs are doing a fantastic job in terms of really transforming the personalization baseline, which is being reflected here. And I think there's a lot of opportunities for all the rest of the subverticals.
Yeah, and I think, Julie, the next thing that you said is kind of what you get to hear. I think the next page kind of talks to what you both of you referenced, which is around the fundamentals around it, which is you can't really do that level of segmentation focus without figuring out identity. If I don't know who the customer is, the shopper is, how do I actually do that? But I look at this in a few different ways. The first is, even though, and this is very interesting, you're a platinum, you're a valued customer, but I just target you again and again through paid media. So you're valuable to me, but really you're not, right? I mean, but even though I jest, I don't think it's just a retargeting problem. I think at the heart of it, I think there's a fundamental disconnect between acquisition, retention, operations, relationship management, because we can look at it from a pure data perspective, IT resolution, but there's also an organization underpinning behind why this is happening. And I know, Jagdish, you're passionate about both the data side of it and the organization part of it. So we'd love to get your perspective in early and let the passion flow.
Yeah, I think the interesting thing, you guys were talking about segmentation, right? And that actually makes it, you know, it almost boils my blood because here's what I think, right? And you know, you guys picked a fantastic chart on OTAs, why are they doing great? A, OTAs are largely a technology company compared to all others that are there, right? And that makes a massive amount of difference, that amount of maturity that they have on data and hence identity makes a massive difference on OTAs. Unlike many of the other traditional enterprises, they spend millions of dollars doing PowerPoint decks, doing basic primary, secondary research, coming up with segmentations, giving cool names to those segments. And then what does happen? Those sit on shelf. Whereas the companies which are more advanced, such as tech companies, they're actually doing something smart. They're picking up on their data, making the data even more robust so that identity can actually work. At the end of the day, it's all down to personalization and that's what matters, right? It's important to be exclusive. When you are living in a world of infinite choices, I think the most important thing that a brand can say that this particular thing was made just for you. And I think it's easy said, and I know every company has been talking about that for decades and have struggled with it. And again, it goes back to how strong the data ecosystem is. I think when it comes to roughly one third of your marketing dollars, I want to say probably are going waste because the identity is not that well-resolved. And I think there needs to be a lot more effort put into figuring out how you're going to enrich your first-party data. There's one thing, building first-party data. Travel brands take a lot of pride in saying, well, we have loyalty programs and hence we have first-party data. But how much amount of attributes do you really have that says that your first-party data is rich enough? How have you even enriched it further with thousands of additional attributes that are available on the same customers? And it's important that brands invest in that if they have any chance of being able to take that level of market share from OTAs as opposed to keep giving market share away to OTAs. And hence, I think investing in identity resolution technologies, which are available, so many big companies are providing those identity resolution services, including Adobe and including Epsilon. And they have an extremely rich ecosystem. And that will power your ecosystem. I think that's where the investments need to be. Awesome. Anybody else want to weigh in here?
I had like three quick follow-ups to what Jagdish said. All right, so we'll get to this. And I know this is the more exciting page. It's called Gen Z, and I'm sure, Melanie, you can kind of lead us there a bit as well. Someone who could talk to it with a bit more authority. Yeah, sorry to interrupt, but if we just one additional point, and I think we were talking about it, but even though we're a little bit faster around paid and owned, right? And we also saw that, of course, owned is cheaper than paid, right? Why spend money on paid when you can acquire through owned? Again, when we're talking about identity resolution, how well connected is your ecosystem will tell you whether you want to acquire that customer through paid or whether you want to actually, your dollars are better spent acquiring it through owned. I think QSRs are doing better job at this. Melanie, I don't know if you agree with me or not. I think QSRs do a far better job of figuring out, given the extent of app ecosystem, which is so beautifully activated in QSR, I think they do a better job of acquiring those customers that they've been able to identify as known customers to acquire them through app as opposed to having to throw paid media dollars at those customers, which I think travel brands are genuinely struggling with.
I mostly agree with you. I'd say when we speak about QSRs and dining in the digital realm, I think you are absolutely hitting the nail on the head. I would say from a dining perspective, where they still have an opportunity is when we think about cross-channel and connecting that digital environment to the physical environment. There's still some work to be done to bridge that. As long as that customer stays in that digital space, I think QSR brands do an excellent job. Oftentimes, when we go from digital to physical, we have a bit of a disconnect and brands are really thinking about the strategies to bring that view of the customer in alignment.
Awesome. I think this kind of lends itself to the big question that kind of comes later, which is we build, but growth is not just today, but obviously where it needs to come in the future. There's a lot of data on this slide, so I'm going to break it down into a few thingshospitality around research, inspiration, and planning and discovery. And I think that, you know, Jenny, I, you know, chat GPT, perplexity, they've come in and actually provide a place and a space for consumers to use and leverage so they can do that discovery. And I'll be honest, my new upcoming vacation was very much tied to, you know, chat GPT telling me that I can avoid some hurricanes if I go to these destinations. And then also, like, what's the flight time going to be? And so giving it complex things around, you know, water temperatures, weather temperatures, distance, and that really helped to, you know, fine tune my planning. But we see most consumers are using chat GPT and perplexity to help with that research and planning. It's like over half, 50%. And it's growing, especially with Gen Z and millennials. So I think it's an opportunity for brands to build content that is large language model friendly so that they can be a part of the conversation. So let's go to the next page and I'll pause there. And I'll get Jagdish, you know, you to kind of go first and then maybe Julie, you can weigh in as well, which is, so I know we talked about AI, we've talked about these, you know, fantastical growth numbers, you know, 1,700, 3,400, 3,200%, which just takes time to visualize because it's such an exponential growth chart. But when it comes to the reality, we're kind of seeing, you know, of course, very different world. And I know it's still early days, people are still implementing and executing it. And the focus has been on kind of chatbots and then search and others and offers, which are, of course, doing well. How do you read the reality versus, you know, these growth numbers? I would love for you to kind of give your perspective on, here's where I think people are focusing on investing, even if the growth numbers are where they are. So Jagdish, your perspective?
So I think it depends upon subsectors, you know, across the industry. I think OTAs are doing fantastic. And again, you know, I'm going back to what I already said, you've got, AI is going to only work great for you as a brand, so long as your data is rich. And that's what's working for OTAs. OTAs have the best data compared to others. And I think that's what's working good for them. The second is QSR. I believe they've invested significant, at least the big players have invested quite a bit in AI, in modernizing the restaurant technology, and so on and so forth. So they are, and they're going to be reaping benefits of it. If you see the announcements that each of those big, large companies are making, they are in fact branding their AI initiatives and figuring out how exactly the investments that they're making in AI can be monetizable as well. So I think that's the second from a maturity standpoint. And again, the challenge that travel brands have is precisely data. They have good first party data, but that's traditional first party data. We talked about that. The more we enrich it, the better it is going to turn into how you're going to go about leveraging it to personalize your experiences, leveraging those identity resolution in order to superpower AI led acquisition. That's where I believe the focus would be. So it's the basics. The AI is relatively easy. If you fix the basics, AI is going to be a very quick jump for everyone.
Awesome. Anybody else want to weigh in?
Awesome. So here's, and I'll do again, we do a couple of pages and then pause here. This is probably one of the most interesting thing that we had. And I'll talk to these two pages that we have. So the fundamental thing we looked at here is service disruption. We know it happens across the board, but at least, and I'll go on the limb, I can say this, which is service disruptions can potentially lead to stronger loyalty than even having a seamless experience. And the reason for that is if you fix things in the moment, help customers do better, especially in the fact that these will continuously happen. Julie just mentioned the hurricane piece. It's a huge chance for you to actually play offense and win customers back if you're on the fence and of course get customers away. I think it's a big, big focus that we need to kind of look at. And of course, there's a whole difference with respect to strategies and focus. Let's go to the next page because I want to get to more the how, and I'll get all of you to kind of comment on both these things together, which is the service disruption piece is it happens across the travel continuum on a regular basis. But the more critical factor for us is when do we find that out and what do we do about it? The way I lead this is we're still a very reactive strategy with respect to service recovery. We do something when things are bad. If things are bad, I have a bad time, I give feedback, and then you maybe get some feedback. So the customer feedback is kind of the last bullwhip in that sense that you get with respect to feedback. The element of reactiveness or actually looking at where things are at social sentiment analysis, predictive modeling is where we need to be because the two things that are critical here, which is A, we're not doing things proactively. The second thing, which I think is worse for me as a customer is you're putting the burden on the customer in the relationship to tell you that they're unhappy. You should be in a place where you should be able to at least glean that from predictive analytics, social media, so the whole element that you have from a tool perspective, I shouldn't tell you I'm unhappy. You should figure some of that on your own. So we'd love to get your guys' perspective on this service disruption happens every time. We can gain loyalty back. We've seen actually, it can actually do. What do you guys think of it? And more critically, how should we kind of rejig our tools to make that happen?
I want to go back to this slide for one second. This 63% is very impactful in terms of thinking through why does service matter? I worked for a hospitality brand who at one point had quite a significant service failure. At one point, they even closed their social media channels because it was very bad. And they did a massive overhaul in terms of improving their service. And it had two effects. One, obviously, the customers were significantly happier, but they were also able to raise their average daily rate. So there's a very strong connectivity between service and the value of what you're offering. And I think service is key because it actually builds trust. It's sad to say that if you actually fail a customer and you are able to recover them because you do a good job of the recovery process, you'll actually have a stronger retention rate with that customer. And the reason why is that if something goes wrong and somebody fixes it, it builds that neural pathway that I'm safe and I'm going to be OK and I'm going to be taken care of. And I feel like right now we are in a place where you can actually provide one-to-one service through technology. It is phenomenal. And so there's really no reason not to lean in and try to figure out how to make this effective. And it's not the resolution that matters. What we learned from our other research is that on the first day that the service issue happens, all you need to do is acknowledge it. That's it. Just let them know you're working on it, you got it, and it just instantly calms them down and makes them significantly happier. So I think we're in a great space for this. Again, 63% uplift I think is very relevant and a huge opportunity for brands to improve their overall performance. Anything you want to add to the service disruption piece from a loyalty perspective?
I have nothing more to add. I 100% agree with everything that Julie talked about in this area.
Awesome. Then Julie, can you move to the... Yeah, awesome. And I think this is a good setup for you, which is help us dig deeper, right? From a dining perspective, I know you're a dining expert, so we've talked about from a churn perspective and you've seen dining do well. So talk to us about how we see the maturity kind of be different across the different segments.
I think a minute ago, Julie mentioned the need to really be proactive in that ability to express empathy. And I think from a dining perspective, because customers engage with dining brands far more frequently and it's a continuous purchase cycle, that they really are in a unique position to not only acknowledge the mistake, but actually recover quickly and bring that customer back. And when dining brands invest in being proactive, making it right, and ultimately encouraging the customer back into that experience, they're seeing great benefit and also increased customer lifetime value. And so it is definitely a place of investment that should not be overlooked. Julie?
Yeah, so I would probably just summarize, right? I think recognizing who your customers are, understanding that your customers have changed, they are of a different generation, and having a mechanism to capture that through a robust passions ecosystem, something that appeals to them is critical. Invest in data, continue to invest in data, build a very robust identity to ensure that you're able to orchestrate your paid and owned, and that has solved for your acquisition. And we all talked about retention. It's all about doing basic stuff. Fix the experiences, acknowledge the challenges that you have through those CX challenges that you run into with your customers. And I think you've got a good repeatability established. So yeah, those are my sort of few notes from a summary standpoint. And just to close out, AI is impacting customer acquisition. I mentioned it earlier, but one of the things that I think is important to just notate is that there's three areas