VIDEO TRANSCRIPT:

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 Publicis 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.

I'm

Yeah.

Bharat. 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 Progress is 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 Jogdish Ganshani, I run the travel and hospitality business for Publicis Sapien 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 at the privilege of servicing other industries across inside For Publicis Sapien 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 that 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. really up-leveled their technology and part of that was through 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. about 35 percent and with that unfortunately customer lifetime value has been limited in terms of its overall growth it's only been around four and a half percent 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 peak 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 in 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 customers change 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, Stacey?

Yeah, I agree. I think that's for sure. But, you know, working for Publis's group as one of the largest advertising companies, we see significant... again increase in media spend which is great which Also means

Yeah.

that the impressions are going up and they're exponentially growing. But if you kind of, again, you know, going through 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. AI applies in marketing or 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 so forth and even OTE has launched with some interesting AI experiments so I think we've seen 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, related respect to that, at least 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. this kind of option and a big 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 this implication of that the second thing which I think is critical and I think be slightly more predictive I think AI is going to bring in a whole different way of doing everything across the board I guess it'll be the biggest inflection point of industry than perhaps even online booking and it's going to change dramatically and I'm sure we'll get into that so those kind of you know two two elements here

If I may just add one tiny more element to that. that do that job I think I'm interesting into that and Julie mentioned this as part of the introduction that companies start to make significant amount of investments in modernizing their technology and that just shows that the the the technology was so legacy so backward for most of the travel brands assure that the extent of investment to just you know bring it on par to be able to take advantage of where the markets right now was critical but they haven't gone through that transition yet most companies Most companies are still doing that and we once 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 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 want to 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, 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 Blue Assist team. We're going 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 Julius can move to the next page so this is the survey that kind of grounds a lot of this you know these these theses these insights I want 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. But how do we compare with, let's say, people who are slightly ahead with, you know, let's say OTAs. So getting a diversity of how different segments are looking at this was a huge part of how we constructed it. The second thing is we wanted to have. People who are actually doing things from a director level in the hub of the people who are looking at strategy But also in the we try to get some of these things to happen So we think it's a pretty nice balance of perspective across, you know industries of formats But also more doers so we actually get a sense of where the problems lie and how do you solve for things if you go to next page Julie gotta kick off the findings So we kick things off with the notion of loyalty. It's hard to win, easy to lose, as you kind of say. But from a couple of key elements here that I want to kind of get to, which is if you look at this, and I'll go back to the point that I had earlier. So from a loyalty perspective, you want to lead with this finding because it kind of links very well with the first point that you had, and it looks at a fundamental kind of... you know failed in terms of how acquisition costs have gone up how it's been really really difficult to get customers back and that what basically that gets to and that's the second point that I have the 27% in the 4.5 of the second purchase is instead of owning and building relationships with customers we're effectively just renting them because if only 27% of them are coming back they're actually losing a ton of them to that thing what that means and I want to get to this really quickly because it's not just a just a failure of funnel optimization strategies if you look at it that way it doesn't work they aren't coming back because we need to fundamentally look at the experiences especially in travel if the product experience isn't at that level to personalization to impact this is just going to happen so it's a different funnel it's a leaky funnel and you have to own the customers a certain time i'll go to the next page i'd love to get your guys feedback as well so the second one and is you know and i know you've been this well at the beginning is the comparison that we have across industries and kind of thinking about where that may be what I want to kind of get to is a couple of things which is the first is now this shows kind of the diversity in performance that we have across costs have gone up has lifetime value gone up now the question here and goes to the tech debt question and the branding question is Do we have fundamental misalignment as it relates to investments? So we're getting already paying down a tech debt, but are we investing in capabilities for the future that are actually serving a new demographic of customers and what comes later? And I think that kind of talks to the fact of where you invested and where you actually got the impact from dollar perspective, especially as it relates to AI and what may come later. So let me pause here with respect to the boat about the loyalty, the difference in sub verticals as it relates to. acquisition cost, lifetime value kind of bleeding money that way, what do you guys think? Would love to get a perspective from each of you.

Yeah, so one, I'm going to steal that, Gaurav, and I'm going to start calling it that we're in a subscription service with our customers right now, which we all want to cut our subscriptions down. I love that, you know, capturing customers in a fragmented world is very challenging. I actually started my career in media working for Coca-Cola and the current landscape, you know, and Jagdish was talking about this earlier, is really beyond what I could have imagined years ago. You know, and not just from the perspective of like the influx of all the different media channels, but also, you know, the opportunity for brands to reach a new level of global reach. I mean, you couldn't have the same global reach, you know, now compared to the future, the past. I mean, it's like polar opposite. Now you can reach people all over the globe in a matter of seconds, especially if you have something that is very viral. So it's both a curse and an opportunity. It also means that the stakes are higher if something goes wrong. And I'll give an airlines example. So they very much have been challenged in terms of customer service and care during this time. And I think that when I look at these numbers, they very much reflect, you know, where we've seen those kind of service issues. And from our recent study that we did, we also learned that. The number one thing that customers really wanted was better customer service and care. They wanted a dedicated line, especially if they were a loyalty member. So I think that in many times, you know, airlines are in this process of trying to recover from some of the issues they had, not just during COVID, but even some of the winter storms and other service issues. And I'm actually quite proud of hospitality. They've been less mature, you know, over the course of time, but they've also come a long way in terms of. The discovery stage of trip planning, which I think is very challenging, and I think this is reflected in their customer lifetime value. They've done a great job of starting to help with that inspiration planning and research. You know, again, you know, OTAs, they're very much challenged by a fragmented landscape, but their customer lifetime value reflects that five years of really overhauling their tech debt and closing the gap on those channels. Melanie, what are your thoughts on dining? and some of the others.

Yeah, when I look at this slide, I do think looking at the variability is really interesting, and I think it really pulls out the nuance of the sub-verticals. We talked a little bit about just the investment that dining made and how it's made their digital maturity better. However, you can see there's still opportunity for improvement as it relates to increased cost of acquisition and lifetime value. So I think at this point. Yeah, I think dining is pretty unique in this space. We previously talked about the benefit of their technical investment and what it's done for them as far as digital maturity and the ability to respond to the market. marketplace. However, I think there's still seen some challenges that we see in this number, right? And so in a moment where customers are consolidating their spend and low switching costs, when we start thinking about disruption and service failures, I think that's why we're still seeing a lead to larger costs in customer acquisition and the need to continue to find customers. So as we think about forward looking in not only acquiring customers, but how we continue to service them in dining, it will be important. be important to leverage tools and especially AI to both be predictive about the customer experience and also to think about how we recover in those moments of disruption.

Yeah, I think if I were to add a couple things there, I think dining and in particular QSR, that's a high frequency. vertical compared to let's say an airline or a hotel and certainly cruise and I think the relativity of dynamism that is required in that vertical specifically given the boom that that vertical has gone through in you know post COVID during COVID and post COVID I think the vertical generally across every big player and every medium-sized player are figuring out how to naturally grab that customer and the amount of money and hence they are spending in order to ensure that you know whether that's through offers dynamic offers real-time offers through app and you know giving giving reasons to the customer to download their app which is their primary way of re-engaging the customer is terrific that the dynamism that's available in that vertical is just phenomenal but if you compare that on the other hand with an airline or hotel which which again frequent but not as frequent of course you know you're not buying up you probably eat a burger every day you're certainly not traveling every day although some may I think that is a different challenge and the complexity of legacy technology in both those verticals they still sit on mainframes most of them still sit on mainframe so the the the transition that that sub-sector has to make in order to get on just par with the basics is still quite heavy and in the meantime they cannot necessarily stop their growth so one can see why the acquisition costs are significantly high whilst they are still playing a catch-up game and as I was saying earlier Yeah, I think it's all about data after all, right? What's great about dining is the extent of data capture that's happening. We're just feeding back into that engine and helping them drive better and get better and better at customer acquisition, which for airlines and hotels, I think they're in significant catch up mode on how do we really sit on great data that's going to power our. our AI ecosystem they take a lot of pride in massive loyalty programs that go back decades and and that's the data that they have but the reality of the situation also is that how much percentage of that you know member base that they have in their loyalty programs is actually active and hence I think it's a slightly different complex ecosystem that exists in each of these sub verticals and of course cruise is an entirely different story

Yeah, I love the way you phrase that. And I think what it immediately brings up, and in addition to having so much data, it's do they understand the data that they need and can they access it? So when we speak about legacy technology and data being in various places, that need and ability to really hone in on the data in a timely manner to make it actionable and really drive that customer relationship. And I think we'll cover it a little bit more in upcoming slides.

Yeah, and I think it's a good transition to what you guys just referenced earlier, which is around, you know, the digital maturity piece also leads in well with respect to conversion. And I'm going to talk to it in a couple of ways. So overall, the way you read the chart of this shows the overall conversion rate that we can observe from the survey. A couple of things here are interesting, and I think to be sure point about the high frequency purchase of having a burger every day, even though it's extremely unhealthy, it lends itself to the higher conversion rates overall. But there's something else that I think we need to look at this data in the context of, and I'll go to the other one to kind of make sure that this, because this leads to the conversion leads to segmentation, which is These numbers have been relatively flat, but the big challenge has been that numbers are flat with our costs going up. So at a per conversion level, you're actually generating less economic value than you were before. So if you kind of think about what these conversions are worth, yes, it's 2.8 went to 3.1, but you've actually lost a lot of money in getting to that. And that gets to the next page. And Judy, thanks for the transition again, which is the heart of making sure your conversion happens isn't just like I said, building a better mousetrap and building that funnel.

Actually get a level of sophistication that you have from a segmentation perspective and getting to targeting because there's 15% gap between those that kind of are leveraging all these techniques, talk to a few different things, which is most of us, and again, it's just how things have evolved, are still stuck in this mass media way of segmentation by demographic and all of the different elements that where we are moving to a world of more intent-based dynamic segmentation personalization. which of course can be labeled like things like like like we said with better data with AI and that is the real difference and I'll go to the OT and we have those little icons that 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 the element here on OT 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 bind 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 getting to an intent where they're a high value shopper. What are they focused on? Is it the 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. benefit and I think that's where the segmentation is a huge part of it is 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 Meliora you can get to the details of the dining and details 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, you know, differentiation from the group. You know, one of the things that, you know, they obviously had that service transformation five years ago that not only helped with the service, you know, that cross-channel analysis they were doing across web, mobile and chat and, you know, 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 has you know is using actively 2,900 attributes. to drive their personalization

Wow

framework which is 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 is 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 have cross-channel you know interlock between those those 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 for which is being reflected here and I think there's a lot of opportunities for all the rest of the sub verticals

Yeah,

No, and we think

I'm

about it.

good. Yeah, and I think really the next thing that you said is kind of the. But you get to here, I think the next page kind of talks to what you both of you reference, which is around the fundamentals around it, which is you can't really do that level of segmentation and focus without figuring out ideas. 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 you know and this is very interesting you know I'm a 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 just 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 you know, acquisition, retention, operations, relationship management, because it's, we can look at it from a pure data perspective, IT resolution, but there's also an organizational underpinning behind why this is happening. And I know, Jagdish, you're passionate about both the data side of it and the organizational part of it. So we'd love to get your perspective and early and let the passion flow.

Yeah, I

I like the fashion flow.

think the interesting thing you guys were talking about segmentation, right? And that actually makes it, you know, it almost boils our 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. It 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. 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 I've struggled with it. And again, it goes back to how strong the data ecosystem is. 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, you know, 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 you know you're available so many big companies are providing those identity resolution services including Adobe and including Epsilon and they have 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 so that we can talk to it with a bit more authority. Uh,

Yeah,

sorry.

sorry to interrupt, but if we

Oh,

just

go for it. Go for it.

one additional point and I think we were talking about it, but even though they're a little bit faster on paid and owned, right? And we also saw that, you know, 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, 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 QS. 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 in dining in the digital realm, I think you were 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. And 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 difference. But disconnect and brands are really thinking about the strategies to bring that view of the customer in alignment.

Awesome. And 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 to the future. And there's a lot of data on this slide. So I'm going to break it down into a few things that I think are interesting to me. And I'll get everybody to comment because I think this is a fun slide. And I particularly love the picture that Julie, you picked up of the gentleman holding the suitcase. I think it's very cool. But the way I look at it is first and foremost. of the 82 percent it's it's not just poor targeting and we chatted about that to me that 82 percent lack of strategy it's an existential threat because if you don't have it you're not going to have a business because you're running out of the the customers are loyalty based and that's the second point it's only 14 percent so if you're not moving and acquiring those customers with a clear intent for strategy and getting that into levels from a habit forming perspective which we know as loyalty as the IT programs you know we fly a connection if I need to get points in airline because we have to get that level of both acquisition at the same time and that's something already clear about which is generationally How you treat and how you build for this generation is also going to be different. So it may not be the same thing. So that's kind of the second thing. And mobile first, you guys referenced a few times, especially in the context of dining, is a critical part of it. The third thing I want to mention that goes to a reference that was, I think, the page before this is. The risk here, and I'm not going to talk to that, which is the risk is nobody says, oh, you're a fintech firm, you can't have travel adjacent services. You can't be a platform that does travel discovery. you will have all the different players which we don't think as travel firms also bleeding into this because it's an experience as a generational catcher so you'd figure out whether things work which is a function of both how data ecosystems work and how we think players will work in the future so to me this is a huge risk and the fact that we need to have a very strong strategy behind it is is absolutely kind of critical i mean it's going to be a big differentiator in the future i know melanie you and jagdish is the panel on this at summit We'd love to get your perspectives and get Julie kind of in the end.

So do you still want to kick us off or do

Sure.

you want me to?

So if I look at the market, and I think this is part of the reason why, you know, even on that previous slide, we saw that OTAs were doing better is because I think they just generally understand their customers better. They understand what are the kind of customers that are shopping and hence how to go service those needs. Not suggesting they're perfect, but, you know, clearly that's the case. They understand that generational gap. I mean while you're talking about Gen Z over here millennials and Gen Z make up 70% of the market and and I don't necessarily think we are we are appealing to that audience those are that audience doesn't buy saying hey come shop with me I'm gonna give you ten points for you shopping with me and that you can redeem for whatever that's not what cared that's not what matters to them all research regardless of who's conducted it suggests that that the way to convert that audience is to appeal to their passions they live for their passions they purchase for their passions they travel for their passions and if you're investing in creating a passion ecosystem that's what's going to help convert that audience better I think OTs do a better job of it compared to some of the others I think QSR also do better job of it certainly travel companies means need to step up quite materially in able to acquire this generation having that strategy which is specific to this generation that requires them to think about loyalty differently loyalty is not a program loyalty is advocacy of your customers and if your customers have changed your traditional loyalty programs are not going to work

I could not agree with you more. And I know we have the fun of doing the panel in Vegas. And you know, my favorite line is that loyalty isn't a program, it's a relationship. And it's the way you continue to manage that relationship. I recently read that next year, the majority of all of our customers and buyers will be born into a digital first environment. And on top of that, their expectations with digital vary across those cohorts. To Jagdish's point, when we look at Gen Z, they prioritize connection, convenience, social engagement, responsibility. We look at Gen, we go back and we look at our Gen Z or Millennials. Millennials value convenience many times and they want, you know, they want predictability. And so they're all going to have very different expectations, not only in the way you bring offers to them, but also in the way you service them and communicate and ultimately own the relationship with them. And by not thinking about that generational strategy, you really hamstring yourself in not showing up for your customers in ways that your competitors will. And so what I think is super important right now is to start thinking about those cohorts, what they need from you and how do you deliver on those cohorts expectations.

Awesome. Let's move to next page, Julie. And I know we chatted about this earlier as well, so this fundamentally is the fact that here's how we kind of build experience for the future. Janish, you want to get any follow-up commentary related to meeting expectations for the future?

Yeah, I think and I think there are some like while I kept criticizing travel brands quite a bit the good part is I think they are recognizing what the future looks like and they're taking the steps I mean most of what we talked about today we are we are preaching to the converted it's the activation which is a challenge right nobody is going to disagree with hey we need to do this we need to do this that's what the future looks like but I think it's the question of how to go activate that the executional challenges which which they need to overcome I think that's the case but I also think some of the interesting observations I've seen particularly in travel is if you see they are moving more to become you know typically you'll reserve a hotel And now if you see your actually buying experiences from hotels, you're moving into a mechanism like how a retailer operates where you can order stuff. The hotels are specifically investing and ensuring that they are not just focused on heads and beds, just as airlines are no longer just focused on, yeah, I need to put bum in seats. I think they are genuinely figuring out how to enable the total travel ecosystem. system of the customers and I think that's where they are that's where they are investing in their technology and building that sort of richer ecosystem so I believe that's where the future is and and and and there are good signs of progress happening in that direction

Awesome. So let's get to the next one, which is gone to how do you make these, how do you manifest this future? And I'll do this very quickly and get Julie for your quick comments, which is. So this kind of talks to the importance of data and we chatted about it a lot. The way I read it is companies are still focusing on prioritizing and investing in data consolidation, data activation versus looking at data networks, which I think is a huge element of where do we grow. So data clean groups are lower, CDPs and others, of course, have a higher investment overall. The second thing, and I think that's the underlying factor here, it is we can do all this great targeting and focus all those elements which we have. We have to give or motivate customers to actually identify themselves. It's a prerequisite to any personalization strategy. So how do you build those ramps in? A. And the second, like I said, we're still in the wave of consolidation of data versus getting in data networks. Julie, your perspective here, and I'll just kind of go to

Yeah,

the next one

sure.

in terms of fundamentals.

So real time, you know, CDP is one of the things that we really focus in on. And I think the real time piece is key for travel and hospitality. But one of the areas that I'm very excited about is that we actually now are. offer a data clean room solution called real-time CDP collaboration that actually really extends our existing CDP so that now brands can facilitate you know privacy safe interaction with their data sharing between brands so those partnerships can become a much bigger part of their experience you know and I think this is this is huge because we had a lot of conversations with brands and said you know I have my existing fiefdom that I'm managing but I really want to want to grow it and extend it. And now there's some distinct capabilities we have that make that a lot easier and simpler so that brands can have that data exchange so that they can, you know, build a bigger brand story.

Awesome. And let's move to what everybody is waiting for, which is AI. We finally came to the chart, people, and we have a lot of those going around. Two quick points here and I'll get you to comment and others if you want to jump in, which is. So I mentioned what this is, is it's, and I mentioned this earlier, which is building from the world of mass media to actually get into these micro moments and things that matter. And we're seeing very clearly here like, you know, the 300% growth in AI utilization from an LLM search perspective. Research we actually just conducted at Adobe believes that we're going to have 20% of search volume going to move to LLM based models in the future. And we've seen perplexity and others come up with LLM based browsers. So it's not a function of if, it's more a function of when. The other thing I want to say here, because it's important, is it's moving so fast. So surveys we did six months back versus, you know, three months back, very, very fast. So these numbers may actually be underestimated. And I think it's actually going to be very high. It's going to be like a rocket ship that we have to be, you know, not just track, but not critically. What does this mean for us, which is. Some SEO to GEO looking at E80 signals kind of rewinding how what it means from a discovery perspective I know we can talk about this perhaps for 45 minutes at all, but Julie quick comments any any thoughts

We actually just released our June study around this particular topic. So Gen AI has been exploding. Retail was up 3,500% in July. Since July, travel was up 3,200%. So the last metric we had was a 1,700% growth. So it's It's really building on top of each other. You know, one of the things that I find interesting, and I think this is why it's changing and transforming the travel space is that the fastest growing category is in the tech and software and consumer electronic space. And what we're seeing is that consumers are very much using large language models to basically help them research nuanced information before they actually make that purchase. And so there's a gap within travel.

hospitality around research inspiration and planning and discovery and I think that you know Jenny I you know chat GPT perplexity they've they've come in and they 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 percent and it's growing especially with 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 look at the next page and I'll pause there and I'll get Japanese, 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, 1700, 3400, 3200%, which just takes time to visualize because it's such an exponential growth chart. But when it comes to the reality, we kind of seeing, you know, of course, very different world. And I know it's still early days, we were just implementing and executing it. And the focus has been on kind of chatbots and then search and others and offers. first which are 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 the growth numbers are where they are so tradish your perspective

So I think it depends upon subsectors across the industry. I think OTs are doing fantastic. And again, you know, I'm going back to what I already said. said you've got your AI is going to only work great for you as a brand so long as your data is rich and and that's what's working for OTAs OTAs are the best data compared to others and and I think that's what that that'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 so forth so we are that they are and they're going to be reaping benefit benefits of it if you see the announcements that each of those big large companies are making uh they they in fact branding their ai initiatives and figuring out how exactly the investments that they're making in ai can be monetizable as well uh so i i think that's the second from a maturity standpoint and again the challenge that travel brands have is precisely data uh they have good first party data but that's traditional first party data you 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. Fix 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 the one of the most interesting thing that we had. And I'll and I'll talk to these two pages that we have. So the fundamental thing we looked at here is server disruption. We know it happens across the board, but. at least and I'll go on the limb and 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 they were on the fence and, of course, get customers loyal. 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. strategy is in focus let's go to the next page because i want to 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 self-disruption piece is it happens across 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 need this and is we still a very reactive you know 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 percentage and then you maybe get something. 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 critically 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 you know your guys perspective on this service disruption happens every time you know 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 the 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. rate. So there's a very strong connectivity between service and the value of what you're offering. And I think service you know, is key because it actually builds trust. It's sad to say that, you know, if you actually fail a customer and you are able to recover them because you do a good job of, you know, 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 okay 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. purpose 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.

Did you spend anything you want to add to the service destruction 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 the 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 joint perspective and you've seen dining do well. So talk to us about. How do we think the maturity can 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. 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

Awesome. Let's go to kind of what works. And I know many of you guys said that well for us. So just be sure I think it'd be good to get your perspective in terms of what works. The only thing I can lead in here is the difference between or at least how low the price matching was. Because the way I look at it is it's not a price sensitivity issue. It's still an experience issue because that's not really making the difference. But I'd love to get how you guys look at how these offers seem to kind of work with respect to retention.

Right. See, if you see there's personalized offers at 75% rate and that speaks to it and it's not just offers, it's not just about discounting, it's not just giving a bunch of coupons or whatever, right? It's personalized offer that's making a difference. We already talked about the change in the generational, the customers changing from a generational standpoint and their buying behavior is changing and hence personalization becomes important. So all of these are, of course, critical, right? I don't think people need to worry about, most brands are not necessarily worried about I need to discount my prices and match prices. I don't think they're necessarily investing in that and that seems to be the right strategy. The more they focus on personalization, the more they focus on data-led acquisition strategies, they're going to see a better way of retaining those customers through the life cycle as well. I think the chart is beautifully laid out from that standpoint. standpoint Julie

Right. Retention is an interesting thing. I mean, if you if you look at price matching at the very end, I can't remember how many conversations I've had in my career around, you know, price and, you know, what is the impact of price? And and so there is this whole perspective around, you know, what do we price our product at? And, you know, I always would say, you know, if we're doing the right things, you know, the right price. is going to not be a problem for a customer and so the whole aspect around price matching or you know that aspect around discounting which comes up a lot in conversation I don't think you need to discount I think that if you provide the right services and your offerings you don't have any concerns customers again it's a trust thing if you're you're providing a you know quality product and you're also servicing it those two come together to be a lot more effective.

yeah i agree with you it's not it's not about reflexes reflexive discounting it's it's the value perception that you need to have and kind of bundle that up and we know that you know the rates kind of what works kind of changes across industries and you know from a and it is this chart is interesting but it's kind of it lends itself to a few things one is How much the particular business model of a particular sub-industry kind of dictate what works for them? So QSRs, you know, you can leverage personalized offers, you know, you have unit economics, you have transaction frequency, you can experiment because those are things you can do pretty well. Anytime you have longer booking cycles, higher fixed costs, those things become slightly more difficult to do. From an airline perspective, you're doing service recovery because, you know, it's not just a strategic preference, it's because it's a reality of the business, you know, disruption. disruption closed business you have to make that happen so to me the two things is I think these line up well with what the nuances are of the industry but the thing that I think interesting if I go to OTAs and others is what can you learn from these different industries and apply to yours because everybody's doing the same thing in their industry what is something that's slightly differentiated or different that can actually get you a leg up I think the element for us to kind of learn across industries is kind of my takeaway from this around what could drive your attention perhaps a few percentage points higher higher and kind of make us slightly better so with that we'll kind of get to the sorry the next page and this is the one and i know julie's gonna love this because this is a piece of research we did we did a while back and we absolutely love it because what we found is uh from a customer perspective relationship perspective whatever you think of it which is you have less than three strikes with a customer that cares for you you screw up especially in the world of travel where stakes are high you don't get another chance and it takes us you know more than six times or six good experiences with us kind of get them back or kind of capture their wallet now these may seem simple numbers but let me put it in perspective one is you know it's a significant ratio right it's a it's a it's a one is to three ratio but what it also means that even if you're operating let's say at a at a 90 percent service quality level it still means that you're in a relationship deficit with your customers Even if at 90%, you're leaking customers every time because it's so much harder to win them back. If you put that in the context of the economics that we had around acquisition costs, around changing wallet, if you put that in the context of winning new generation like Gen Z millennials, realize how hard it is to make this equation work given the fact that the odds are stacked against this. And I think this is a great setup with respect to... how we need to kind of reimagine our business models how we need to reimagine experiences because it's not just about optimization of funnel and getting those things through so that's kind of the the big kind of point that I kind of want to make here and I know Jadwish might need any feedback that you have here or we'll get to quick wrap up Okay, so quick wrap up. And as we do that, we'd love to get your three takeaways on this or your perspective that I have. I'll make this fairly simple and kind of reference some of the conversation that we've had overall. The first thing that I want to say is I think the economics of the travel industry are changing, especially as we can think about the customer acquisition piece. Any of the elements, you look at that, which is it's harder for us to acquire, the cost of conversion is going up and it's not as valuable. And for the worst part, we're not acquiring the customers that will drive our business in the future. To me, that's a huge challenge you're going to overcome, which is something that we need to focus on and fix. The second is investment in change, and I break it down into two parts, which is paying down our tech debt is just getting current. The big element that is how do you align investment with greater priorities? Of course, if you upgrade and make sure things work as they have in the past, but invest in the future and I think it will actually come at a way more with a higher ROI than it has in the past and getting to this maturity on those skills that matter is a huge part of added investment. The other underpinning here, I know we can chat about it. The investment here is not just going to be in tech and data. The organizational element behind is the fabric of what makes things. things happen is also going to be a huge part of this change investing in a different operating model or structure and the fine thing around AI is is is like a superpower it's going to give you a chance to personalize at scale personalize for moments that kind of matter service recovery whatever that may be and I think it just unlocks different dimension of economics and scale that we have not seen so I think it's an absolute must wherever we are in the cycle and I think it's actually going to be transformative for for those that leverage it project one so that I'm going to move it to Julie Fait kind of talk to how do we make all these good things happen

I'm going to be very quick in terms of just saying that, you know, travel is very meaningful. I think we all learned that during COVID. It is impactful part of life. It's also one of the most challenging if you think about the actual process of, you know, discovery research and trying to identify, you know, what are you going to have for an experience? So, you know, as I shared a few different places, I'm excited that everything is becoming a lot easier for that part of it. So I think that that the access to better experiences is really becoming a huge unlock with AI. I also always say that, you know, I'd rather have my teams working on strategy than figuring out plumbing or how to get data from point A to point B. So all the offload of work today that actually allows and supports and facilitates teams working smarter, I think, is a huge win. So I'm excited about where we're at in terms of improving these numbers and this performance through a variety of. Variety of means. Melanie?

I think on the back of that, I'd say, Julia, essentially when we tackle getting the nuts and bolts of technology out of the way and we can think about our strategy, it allows us to be both or I should say it allows us to be. proactive, precise, and personal. And that really is what it means as we put our customer at the center. So I'm so excited about the ability to deliver on those technology capabilities that allow brands to really think about how to get into the customer-centric relationship. And it's going to be critical. Adish?

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. trust identity to ensure that you're able to orchestrate your paid and own and that has solved for your acquisition and we all talked about retention it's all about you know doing basic stuff fix the experiences acknowledge the challenges that you have through those CX's CX challenges that you run into with your customers and I think you've got a good repeatability established so yeah those are mine my sort of you know 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 where AI is coming in to help modernize this process. One in the planning cycle, as well as the reach and the measurement. So teams are now able to dynamically anticipate how they can be a lot more effective in reach. and trying to find the right customer through those media plans they can also connect with other partners and actually share and exchange data in a new way so they can actually broaden out their distribution and then measurement can actually be dynamic in that moment it you can actually measure what you're doing in in that campaign versus waiting for it to be post and being able to make changes on the fly. I think those things really create a, you know, a dynamic environment for us. So I just wanted to share that there's a few things that have really evolved in terms of that landscape that we're excited about. And then again, you know, thank you for joining us today for this study on customer acquisition and retention in an imperfect world. Again, we will be sending out the white paper for the folks joining us. and and we're very excited and I hope to see you again soon on another webinar thank you and thank you to everyone who joined me today Melanie Gaurav Jagdish it's been a pleasure sharing these insights thank you

Thank you.

Relevant Links

• Customer Acquisition in the Age of AI: Rethinking Loyalty, Data and Growth in Travel
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