Loyalty marketing: a dynamic process

Customer loyalty in the digital era often seems like an oxymoron given the unprecedentedly high level of control customers wield in a high-supply-low-demand economy. Evidence of the tenuous nature of loyalty found its way into print in this article in the Wall Street Journal which notes that "some large hotel chains, including Marriott International Inc. and InterContinental Hotels Group
PLC, are finding that more members of their customer-loyalty programs
are redeeming points not for overnight stays but for merchandise, like
jewelry and electronics, apparently to use as holiday presents." Both chains noted a 14-15% increase in customer utilization of points for purchasing gifts instead of free room nights. Hilton topped that with an astounding 23% increase for "redemptions for merchandise in the first week of this month from a year earlier."  Of course much of the spike in redemptions for gift merchandise is due to the economic downturn tightening purse strings. This has a significant knock-on effect for hotel owners in terms of the direct cost of loyalty programs that is unaided by the deluge of point freebies from the hotel majors.

However, the foregoing, if anything, underscores the need for hoteliers to realize that loyalty marketing is a process whose dynamic nature is sometimes blindingly swift and yet, paradoxically, relies on some "old world" precepts such as operational savvy, design innovation and, most importantly, CRM. 

Operational savvy overlaps and includes many CRM issues but but at its core represents process efficiency all the way from reservations to check-out and beyond. The ideal for hotels is for customers to not know, and yet admire, what results in a seamless stay; the analog to a perfect dining experience in a restaurant.

Design innovation is what sets apart one hostelry from another. This could be seemingly mundane yet easy to do features like free early check-ins (a much appreciated touch in gateway cities with international flights) to the avant-garde RFID locks. While refreshing structural features as part of a design overhaul in an economic downturn may be a tall order to most owners and operators it can be achieved by recasting high visibility and high traffic locations in the hotel such as the elevators and fitness centers.

CRM, exemplified by getting close to the customer, potential and current is much written about and often addressed by hotels.  Its implementation includes getting up-close-and-personal (not quite literally) with guests and doing more than offering a free third night or a weekend stay for every three nights. Most, if not all, CRM initiatives are nowadays technology driven and include, at a minimum, comprehensive (customer) data capture and analysis by "recognizing" the guest and to have a conversation, virtual or real, with them. Knowing the most profitable among those is also an integral part of that process.  Metrics, both for customer loyalty and programs are also essential components.

In the end, customer growth is also driven by nimble responses to crises that befall other businesses regardless of the state of the economy. Ryanair, notorious for its parsimony in terms of offerings for customers nevertheless, (frequently) garners both publicity and (new) customers via its initiatives such as the most recent one in response to the loss-plagued Eurostar's latest customer relation disaster. The airline called its fare offered in response to the Eurostar's service failure a "rescue fair". Tongue-in-cheek no doubt but it is fair to say that the low-cost airline does have more than its share of loyal customers despite not having any loyalty program.

Published by

Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.

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