Send a summary and link to this article To Email Your Name Your Email

Printable Version

Survey Says Loyalty Programs Must Get Personal Sure your guests are in your loyalty program, but are you communicating with them in the most effective way? Friday, February 19, 2010 Glenn Haussman

bookmark this On Twitter @hotelinteractiv

Everybody loves a reward. But as consumers become more sophisticated, just getting tossed what they perceive as generic offers, savings and incentives simply won’t cut it. Their demands and tastes are changing and hoteliers looking to create genuine loyalty need to rethink the way they approach their programs.

According to a new survey from the Chief Marketing Officer (CMO) Council, customers are craving the notion that hotel operators understand them and their needs. More and more customers are expecting highly personalized content with offers that feel as if they were designed specifically for them. And this revelation means that the days of mass blasts with general offers are no longer acceptable.

We’ve entered a world where customers demand the right offer at the right time for the right price. And unless you’re Nostradamus, this is a formidable challenge.

According to Liz Miller, VP of Programs and Operations with CMO Council, customers like the perks and inducements, but it’s a double-edged sword. “We have trained consumers to want more for less and they are demanding some real value to be delivered from these programs. Now there is a bit of backlash. Consumers complain most that the value they get from loyalty programs is not worth the huge amount of spam they are sent,” said Miller.

Spam, in this instance, are messages from hotel companies that are not relevant to the consumer’s specific needs at the time…for example, a continual onslaught of ski-related offers for a family that has never expressed interest in hitting the slopes.

Miller said that marketers see loyalty program as critical to further customer engagement, yet also perceive their participation in programs as an “open door to people’s inboxes.” Truth is, it’s irritating customers and may create a wedge in the relationship between a hotel brand and its most loyal guests. In all, 44 percent said there is too much spam and junk email associated with loyalty and rewards program membership, followed by too many conditions and restrictions (38 percent), and rewards that lacked real value (37 percent). Other prevalent beefs included members having a hard time redeeming points or rewards, program membership lacking value, and communications and services not being personalized or targeted specifically for members.

Additionally, according to the survey, 52 percent of respondents reported they want more compelling personal deals and offers as a reward for steering their business to loyalty program operators. Also, 58 percent say they want more compelling personal benefits and services, as well as more relevant offers or individualized deals.

"Relevant profiling data continues to be a limiting factor in customer engagement," said Donovan Neale-May, executive director of the CMO Council, "Without a deeper customer insight, marketers will be limited in their ability to do meaningful predictive modeling, market segmentation and revenue forecasting. Better understanding of customer behaviors, predispositions, intentions and preferences enables more effective and relevant messaging. It is also an essential part of customer revenue optimization and lifetime value building."

Interestingly Miller said the survey revealed an assumption by marketers that email is the most welcomed form of communication and therefore the only relevant form of communication. But she warned that this one-size-fits-all approach creates a din of irrelevant messaging to the customer which they will eventually start to ignore.

“Emails may cost little to send but [loyalty programs] lose the lifetime value of the customer. We are losing sight of the customer’s need and [marketers] need to create a multichannel strategy for points of engagement,” Miller said.

The survey also noted that most marketers (61 percent) believe that loyalty program participants are the best and most profitable customers, while 65 percent view customer loyalty program investments as a very essential, or a quite valuable, part of the marketing mix. Only 13 percent of respondents believe they have been highly effective in leveraging loyalty and brand preference among club members, and nearly 20 percent don't even have a strategy for this. Another 25 percent admit they have not mobilized brand loyalists to become active advocacy agents, either.

The study also reveals that marketers are mostly inducing loyalty with discounts or free products and premiums rather than quicker, better service or improved customer handling. Some 39 percent of respondents view discounts and savings as the key member benefits, 34 percent view free products and premiums as essential incentives, and 33 percent are committed to offering points for merchandise redemption as a further motivator.

When asked to outline typical customer complaints about loyalty programs, nearly 30 percent of marketers report that some customers see little or no added value to becoming a loyalty member; 24 percent indicate rewards lack substance; a similar percentage feel they don't get enough personalized attention; and 21 percent have problems with receiving too much spam email and junk mail. Customer complaints also touch on a lack of individualized communication (23 percent) and issues with redeeming points and miles (18 percent).

Surprisingly, soft economic conditions are not necessarily inducing consumers to sign up for loyalty and rewards programs. Only 22 percent said the economic climate had raised their interest in these programs, compared to 41 percent who indicated it had no impact at all.

"It is notable that the economy is not a big driver of program participation, indicating that - as marketers look to recovery - fully leveraging these programs must be a strategic priority," notes Neale-May. "Figuring out ways to deliver added value to those willing to repeatedly purchase your products and services, advocate your brand on a viral level, or more actively respond to offers and incentives, is critical to marketing effectiveness."

More than 700 respondents participated in the online research initiative conducted in Q3 and Q4 of 2009. Over 50 percent had household incomes of over $100,000 and were fairly evenly split across gender and age groups. Nearly 75 percent reported enrollment in supermarket loyalty programs, 69 percent in airline frequent flier clubs, and 58 percent in credit card incentive programs. Hotels and motels, drug stores, warehouse price clubs, specialty retailers, rental cars, and restaurants are other leading beneficiaries of loyalty and rewards enrollment.