University of Applied Sciences Stralsund
Faculty of Economics and Business Administration

Bachelor Thesis to achieve the Degree
"Bachelor (Hons) of Business Administration
in Leisure and Tourism Management"
about the Subject

Customer Loyalty Program
- Tourist Destination and Bonus Card System

Presented on September 13th 2004

by Timo Kühnle

Table of Contents

Table of Contents ... I
Table of Figures ... V
List of Abbreviations ... VII

1. Introduction ... 1
1.1. Subject and Objective ... 1
1.2. Approach ... 3

2. Fundamentals ... 5
2.1. The Customer ... 5
2.1.1. The Status of the Customer ... 5
2.1.2. Customer Value ... 6
2.1.3. The Customer as Prosumer ... 9
2.2. Customer Retention ... 11
2.2.1. The Importance of Loyal Customers ... 11
2.2.2. Basics for the Loyalty ... 12
2.2.2.1. Customer Satisfaction ... 12
2.2.2.2. Added Value ... 13
2.2.2.3. Proximity to the Customer ... 14
2.2.3. Instruments ... 14
2.3. Card-Systems as Marketing Instrument ... 16
2.3.1. A General Overview ... 16
2.3.2. The Customer Card ... 17
2.3.2.1. The Position of the Customer Card ... 17
2.3.2.2. Objectives of Card Emissions ... 18
2.3.2.3. Functions of Cards ... 19
2.3.3. Cards in Tourism ... 21
2.3.3.1. The Difference of Tourist Cards ... 21
2.3.3.2. The Function of Tourist Cards ... 21
2.3.3.3. Tourist Cards versus Citizen Cards ... 22
2.3.4. Provision of Cards ... 24
2.4. The Tourist Destination and the Darss Peninsula ... 26
2.4.1. The Tourist Destination ... 26
2.4.2. Destination MV ... 28
2.4.2.1. Facts about MV ... 28
2.4.2.2. The Darss Peninsula ... 29
2.5. The Visitor′s Tax ... 32
2.5.1. The Visitor′s Tax in Germany ... 32
2.5.2. Ahrenshoop′s Ordinance as Example ... 33
2.5.3. Comprehension Difficulties for the Tourists ... 34
2.6. Benchmarking ... 37
2.6.1. Definition ... 37
2.6.2. Types of Benchmarking ... 38
2.6.2.1. Internal Benchmarking ... 39
2.6.2.2. External Benchmarking ... 40
2.6.3. The Use of Benchmarking in this Essay ... 41

3. Benchmark-Study and Market Analysis ... 42
3.1. Tourist Cards ... 42
3.1.1. German Tourist Cards ... 42
3.1.2. The Rügen Card as Competitor ... 45
3.1.3. The Engadin Card as Best Practice Example ... 47
3.1.4. The Stralsund Card as Negative Example ... 49
3.2. Card Systems in other Sectors ... 51
3.2.1. An Overview ... 51
3.2.2. The Miles-and-More Program of Lufthansa ... 52
3.2.3. The Payback Card as Market Leader ... 53
3.2.4. The Soltau Card as City Card Example ... 55
3.3. Sample Companies for the Implementation ... 57
3.3.1. Smart Loyalty AG ... 57
3.3.2. Smart Approach GmbH ... 58
3.3.3. The Basic Functions of the Systems ... 59

4. Data Interpretation ... 60
4.1. Data of the Destination Darss ... 60
4.1.1. Number of Visitors ... 60
4.1.2. Calculation of the Target Group ... 62
4.2. The Questionnaire ... 63
4.2.1. Fundamentals of the Survey ... 63
4.2.2. The Survey as Snapshot ... 63
4.2.3. Interview Rules ... 65
4.2.4. About the Questions ... 65
4.2.5. Scale ... 66
4.2.6. ServQual ... 67
4.2.7. Further Surveys about this Subject ... 67
4.2.8. About the Analysis ... 68
4.3. Analysis of the Survey Results ... 69
4.3.1. Single Question Frequencies ... 69
4.3.1.1. Satisfaction with the Visitor′s Tax ... 69
4.3.1.2. Interests in a Bonus-System ... 70
4.3.1.3. Effects on the Off and Low Season ... 71
4.3.2. Cross Tabulation ... 72
4.3.2.1. Interests in Bonus System vs. Federal State of Origin ... 72
4.3.2.2. Interests in a Bonus System vs. other Bonus Programs ... 74
4.4. Interpretation Summary ... 76

5. Implementing a Destination Bonus Card System ... 77
5.1. Procedure ... 77
5.2. Stage 1: Preparing Research ... 78
5.2.1. Competitors and Comparable Products ... 78
5.2.2. Card Systems on the Local Market ... 78
5.2.3. Interests of Potential Partners ... 79
5.2.4. Interests of Potential Customers ... 79
5.3. Stage 2: Setting the Objectives ... 80
5.3.1. Functions of the Card ... 80
5.3.2. Partner Companies ... 81
5.3.3. Target Groups ... 82
5.3.4. The Award System ... 82
5.3.5. System Providers ... 83
5.4. Stage 3: The Implementation ... 84
5.4.1. Project Group ... 84
5.4.2. Project Structure ... 84
5.4.3. Card Name and Design ... 85
5.4.4. Emission Price of the Card ... 86
5.4.5. Integration of Partner Companies ... 87
5.5. Stage 4: Controlling ... 88

6. Conclusion ... 89

Appendix ... 91

References ... 105

1. Introduction

1.1. Subject and Objective

Customer loyalty programs can be found all over the economical market today and there is a reason why companies do this. People like collecting miles, digits or points, so on the example of gas stations many drivers rather wait for the next Shell than to buy their petrol at the No-Name station around the corner, only to have the chance to earn enough points for a walkman or a sports bag, and many other customers are acting the same way without realizing it.

In the tourism market there is an additional participant to companies like the big tour operators or the small privately owned hotels, which is the tourist destination as a whole. It has to be competitive against other destinations, nationals and internationals. The question is now, if it is possible to apply a customer loyalty program, like they are widely used by companies, to a tourist destination and if it makes sense.

The origin of this topic are the city bonus cards¹, that were implemented especially by mid-size cities to resist the trend of customers to leave their home-towns towards shopping centers, which are located outside the city borders, and towards the big cities. With this behavior a lot of the spending capacity of the inhabitants was carried away. These cities, which can according to their basic structure be compared to a tourist destination as opposition to companies, already successfully adapted bonus systems to keep the people in town.

Throughout this essay the example of the tourist destination Darss² will be used to explain the system. Most of the shops and hotels of this area are small or mid-sized and privately owned, so such a card program can also be seen and used as marketing association of separate companies. So far there is only existing a visitor′s card with no additional function, which is a document for the tourist that he has paid the visitor′s tax, but neither a tourist card nor a bonus card are distributed. Comparable to a feasibility study, the chances for the implementation of a customer loyalty program are observed and analyzed on this real case.

The questions this thesis is trying to answer are

• Can a bonus card system help to make the tourists loyal to a destination and turn one-time visitors into frequent repeaters?
• What is the difference to the already existing tourist cards offered by many destinations already?
• Can such a system be combined with the visitor′s tax tourists have to pay in many resorts and help to improve its image and acceptance?
• How can such a system be implemented?

This thesis is one of the first essays about the combination bonus card and destination. Yet there is no specific literature existing about this subject and therefore also descriptions of other areas will be used and adapted. One of the basic objectives of this essay is, to give arguments for a tourist destination to convince possible partner companies to enter such a program and not to be afraid of the investment, and to deliver a guide for the implementation of a destination bonus card system.

1.2. Approach

The essay is self-contained and structured consecutively to finally understand the chances, the possibilities and the advantages of a bonus card system for a tourist destination and even to be able to implement it.

The fundamentals in chapter 2 are giving a background to understand the coherences. Initially the position of the customer is explained in general and focused on tourism, which is mainly a service industry. How important loyal customers are and which basic terms and conditions are leading to customer retention will be described, before the different card systems and their use as marketing instrument are specified. To built a connection of customer loyalty, bonus card and destination, this is defined afterwards with a more detailed look on the Darss Peninsula in the federal state MV³. The resorts of this destination are allowed to claim visitor′s tax because of their status, which is explained before the description of benchmarking as basis for the following chapter.

In chapter 3 a basic benchmark-study and market analysis helps to learn from other systems, that are already existing. At first cards used in tourism are examined, to see what the competitors are doing. Afterwards a look on card systems independent of the tourism sector figures out the benchmarks of other systems and what could be adopted, before then two system providers and their products are described to get an idea of the technical equipment and the costs that occur.

To analyze the chances for the implementation of a bonus card system in the destination Darss, a snapshot survey was accomplished in that area and the results are interpreted in chapter 4, in addition to the secondary data of the last years, that was provided by the tourism association of the Fischland-Darss-Zingst area, the "Tourismusverband FDZ". The questionnaire and the researched subjects can be seen as example and used for other destinations as well.

The procedure described in chapter 5 was developed based on the collected information and consists out of four stages, that explain the necessary steps towards a successful implementation of a destination bonus program. It is a guide for destination managers to understand the requirements for it.

[...]

1 City bonus cards stand for local citizen cards with bonus function as opposition to city tourist cards, which will be explained in chapter 2.3.

2 The author prefers to use the term Darss for the whole peninsula of Fischland-Darss-Zingst. Though geographically not correct, because of marketing reasons it is combined to the tourist destination Darss, which will be explained more precisely in chapter 2.4.2.2.

3 The English appellation for Mecklenburg-Vorpommern is Mecklenburg-Western Pomerania. Nevertheless in the following chapters the commonly known German abbreviation MV will be used most of the times.