By Billy Kolber
Loyalty programs have been around since the 19th century, when copper tokens, certificates, and ultimately trading stamps were given to consumers to encourage repeat purchases. But it was the introduction of American Airlines’ AAdvantage program 30 years ago that changed the course of travel marketing. The ubiquity of frequent traveler programs may define points as the currency of loyalty, but the re-launching of programs from Carlson, Lowes and Intercontinental Hotels illustrates the increasing incidence of point fatigue, and frequent travelers’ growing demand for flexible and personalized recognition.
Whether your property has a points-based program or not, it is worth re-examining guest loyalty: what defines it, why it’s valuable, and how to grow and profit from it in a changing marketplace.
True To You
Loyalty is simply defined as an unwavering allegiance or fidelity, and guest loyalty is defined by actions that are indisputably valuable to a hotel’s bottom line: repeat bookings, a preference for your property when it is more expensive or less convenient than your comp set, and positive word-of-mouth. Frequent guest points are a powerful and measurable way to drive loyalty, but in many ways they are a poor substitute for the meaningful guest experiences that create the most passionate and valuable loyalty. For years, Ritz Carlton eschewed points, holding to the tenet that guests pay for quality, not for points. Their recent adoption of a rewards program doesn’t refute that truth. Today’s frequent travelers may expect points, but you don’t have to look far to see that point-based loyalty is often hollow: The ubiquity of elite status match and challenge programs, the road warriors with multiple elite status, and the frustration of elite-level travelers who complain of being treated like ordinary guests.
Loyalty Beyond Reason
In her book Building High-Performance People and Organizations: Volume 1, The New Employer-Employee Relationship, Martha Finney details Starwood Hotels’ emphasis on guest service interactions as the key to producing “Loyalty Beyond Reason.” It is telling that Starwood, so tightly branded by its loyalty points program, places such emphasis on service interactions as the first component of guest loyalty.
In 2004, McKinsey&Company’s Paul Brown identified multiple opportunities for hotel loyalty programs: paying greater attention to travelers at the far ends of the frequency spectrum, offering easier redemption and more innovative, flexible and personalized rewards. These recommendations have been well realized in the past 7 years, but even more important was McKinsey’s advice for how to create and achieve these improvements: “A hotel can learn a good deal by conducting a better dialogue with its guests and by giving frontline staff members an incentive to note their observations.”
True loyalty – passionate, evangelical loyalty – demands guest service moments that consistently recognize, surprise and delight guests. And it is that passionate loyalty, Starwood’s “Loyalty Beyond Reason” that inspires guests to share their experiences, recommend properties to their friends, and rebook. In an increasingly socially-networked world, the importance and bottom-line value of listening to your guests, meeting and exceeding their expectations, and making it easy for them to express their delight is clear.
Pointing Towards the Future
Mark Johnson, CEO of Loyalty 360 reviewed 11 trends that will drive customer loyalty in 2011. Eight of his key concepts are directly applicable to the lodging industry. They provide an excellent framework for evaluating rewards programs, and all aspects of the guest experience that can create passionate loyalty among guests.
1. Loyalty initiatives will focus on engagement and building long-term relationship.
Is your loyalty program engaging guests, or just passively rewarding them? Opportunities for recognizing guest loyalty don’t have to be elaborate. Marriott’s use of elite-branded room keys for upper tier members of their rewards program is simple, yet reminds the guest of their status every time they open their door.
2. The emotional side of decision making will create passionate, engaged consumers.
Kids programs and pet programs are great examples of appealing to guests’ emotional decision points. Tapping into your guests’ dreams and desires, professional and personal, will always drive decisions and revenue more than reason.
3. Companies will look at how customer engagement and employee engagement work together to drive bottom line results
Johnson cites a 2009 Gallup study showing that companies that score in the upper half on both customer and employee engagement get a 240% boost to their bottom line, versus a 70% boost for scoring in the upper half of just one or the other. It’s a virtuous circle, engaging and rewarding employees for engaging and rewarding your loyal customers.
4. Voice of the customer programs will see greater focus
Johnson cites an IBM study of 1,500 CEOs, 88% of whom said that “getting closer to the customer” was a key area of focus for the next 5 years. Everyone wants to be heard. Are you opening multiple channels to listen to your guests’ feedback, and are you proactively responding to it?
5. Loyalty programs will become more individual, relevant and meaningful.
More than anything, guests want to be recognized as individuals. The re-launch of “Loews First” as “Loews YouFirst” with its “Pick a Perk” benefit is a great demonstration of how a rewards program can address guests in ways that are relevant and meaningful to them. Every interaction, from booking through departure is an opportunity to learn about your guests, and respond to them as individuals.
6. Customer engagement goals will be gain importance over customer spend and transaction number.
Technology has empowered hotels to learn and track much more than guest visits and revenue. Measuring and finding ways to encourage actions like guest referrals or online reviews offer an opportunity to focus on behaviors that really drive the bottom line.
7. Cause-related and social responsibility marketing will drive loyalty.
Social “cred” is particularly important among millennials, If their demographic isn’t important to your business, it will be soon. Social causes and responsibility need to be increasingly integrated in all aspects of your marketing and operations.
8. Loyalty strategies will incorporate in-the-moment and location-based marketing
In-the-moment rewards like in-room movies, minibar items, and parking credits are already gaining traction in loyalty programs, and also serve to address the growing desire for flexible, achievable, individual and relevant rewards. The fast-growing user base of Android and iPhones will enable a new age of location-based marketing opportunities for hotels.
Checking Into Loyalty Innovation
The future of hotel loyalty programs is already rolling out. This brief survey highlights some of the innovative new member benefits and rewards programs targeting guests at all ends of the frequency spectrum:
Reward options include digital music downloads
An online booking bonus encourages frequent guests to bypass more expensive booking channels, and Roll Over Nights allows unused elite-qualifying nights to count again toward elite status in the following year.
Global Hotel Alliance
GHA Discovery offers access to a large selection of adventures that are not easily available or accessible to the general public, awarded at various milestones (first visit to a member brand, upgrade or retention of status level). Includes activities from wine tastings to glider acrobatics with a member of the German National team.
MyWay On Property Benefits allow elite guests to choose from room upgrades, food and beverage amenities, sightseeing excursions or bonus points.
Hyatt Gold Passport
Additional Awards after every third stay (bonus points, airline miles, room upgrades, Starbucks gift cards), Four confirmed suite upgrades annually for Diamond Elites
Loews Hotels You First
Pick-a-Perk choice of value-added benefits, including free internet, movie, pet fee or parking credit.
Instant Redemption offers on-site application of points to folio charges.
Priority Club Rewards
Hotels Anywhere allows members to redeem points for stays at any hotel, including rival properties.
Starwood Preferred Guest
Moments by Starwood Preferred Guest offers VIP concert ticket purchase with points through a partnership with Live Nation and point auctions for once-in-a-lifetime experiences at movie premiers as well as cultural, dining, and championship sporting events
The Final Point
Points-based loyalty programs aren’t going away anytime soon. They continue to be powerful marketing tools, and have become entrenched in the frequent traveler’s value equation. Programs like Stash Rewards and Voila Hotels have brought turn-key reward programs to independent properties, and further increase the pressure for independent hotels to offer reward points. But true loyalty will not be won with points alone. It will be earned by engaging, recognizing and rewarding customers in a personalized way, by addressing their passions and emotions, and by listening for and then exceeding their expectations. Guests may love their free nights and upgrades. But hotels that find ways to engender true loyalty and then leverage social media and modern technology to amplify it will surely reap the rewards.
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