Loyalty Programmes: The Need For Better Loyalty Programmes

New research from the Cornell Center for Hospitality Research (CHR) contains a stark warning for UK hoteliers: managers must revisit their guest loyalty programmes or run the risk of damaging their value proposition to customers.

In recent years it has become apparent that many guest loyalty programmes are failing to keep up with the fast-changing attitudes of today’s consumers. As the hotel industry continues to proliferate, the traditional drivers behind guest loyalty have changed – guests are presented with more destinations, a dizzying array of accommodation options and new dynamic ways to search, compare and review their choices online.

Hoteliers have come to realise that their loyalty programmes are key to business success, but can no longer rely on repeat purchase models. Guests are looking for experiences more than ever before, and no longer attach the same level of value to discount vouchers – in fact, the CHR suggests that such schemes will actually diminish the value proposition.

“Repeated purchases don’t necessarily equate to loyalty,” explained Michigan State University’s Voorhees. “What we observed is that once customers hit a reward tier, they consider whether they can make it to the next tier or whether it’s easier to get rewards from a competitor.”

Therefore loyalty programme designers need to find ways to keep customers active, but what cane they do to rescue their programmes?

Loyalty Programmes: Get Emotional

Hoteliers must put in place strategies to encourage an emotional connection with their guests and therefore generate a higher level of customer involvement. Hotels operating under a strong brand name are already halfway to achieving this. If a brand speaks strongly to a particular clientele, then the hotel’s loyalty programme can naturally tap into and exploit this emotional relationship between the business and the customer.

For example, guests could be allowed access into brand communities and rewarded appropriately. A brand catering for budget travel might reward through local tourism activities, whilst a strong lifestyle brand might reward its community with access to an exclusive themed event.

If structured and priced sensibly, it is possible to foster an emotional connection and increase the value for guests.

“Virtually all hospitality firms have some form of customer loyalty program, but so far there’s not much evidence that these programs actually create customer loyalty,” explained McCall, CHR research fellow. “So, we looked at the basic concepts of customer psychology to focus on ways that these programs can actually build loyalty.”

“One key point is to be careful with price-oriented rewards, which can turn the potentially loyal frequent guest into a discount-focused customer.”

Loyalty Programmes: Know your Customers

They key is to reward your customers with something that they truly value. Therefore, it is essential that any loyalty programme capitalises upon your guest data because not all guests will attach the same value to offers, services and experiences.

The guest loyalty programmes of today require agility – they must be able to offer the right proposition to the right customer in order to maximise value, whilst also allowing the guest an element of choice.

The rigid structure that characterised guest loyalty programmes of old has had its day. Instead, managers must forge fluid programmes that cater for a number of dynamic factors. These include:

  • Individual guest preferences
  • Allowing guests to choose from a broad set of reward options
  • Flexible redemption intervals
  • Maintain a point of differentiation from the competition

A complex programme as described above of course requires hotels to capture their guests’ preferences and have a system in place capable of leveraging the information in a cost-effective way.

Perhaps only one thing is certain: hotels able to change with the times and adapt their guest loyalty programmes are more likely to stay ahead of the competition.

By Lee Jamieson

Note: If you would like to read CHR’s report on building customer loyalty, it can be downloaded free of charge from here.


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