Loyalty or rewards schemes are great revenue-driving and customer satisfaction solutions that encourage guests to spend more time and money at your property.
It’s no wonder then that customer loyalty is a primary goal of smart hospitality industry operators. Consider the evidence; acquiring a new customer is five to 25 times more expensive than retaining an existing one, according to the Harvard Business Review, while a report by Bain & Company shows that a 5% increase in customer retention can increase business profits by 25% to 95%.
As a result, loyalty schemes proliferate. In Mastercard's APAC loyalty study, the average number of loyalty program memberships per Australian adult is 6.1, with 70% of total responders stating that programs that deliver strong levels of digitisation, personalisation and communication are most likely to influence their consumer behaviour.
Loyalty is big business
The power of travel loyalty programs to surprise, delight and disappoint was brought into sharp focus when Marriott bought Starwood in 2016. The US$13 billion transaction created a hospitality behemoth, with 29 brands across 6,700 hotels in 130 countries. There was much to discuss but all everyone wanted to talk about was their loyalty points. It’s human nature - what about me?
Those questions were answered when the Marriott, Starwood and Ritz-Carlton programs merged under the Marriott Rewards banner to become Marriott Bonvoy. The outcome was a larger, simpler program with more than 110 million members earning rewards faster with more redemption options. At the very least there was no outcry, and for Marriott, that was a victory.
Loyalty programs have become a crucial marketing tool for major travel companies over the past 20 years. They are also a big business. Qantas, for example, had total revenue of US$1.144 billion from its frequent flyer program in 2018, generating more revenue per passenger than any other airline loyalty program. They believed 35% of credit card spending in Australia was on Qantas co-branded credit cards, resulting in their healthy profit.
Are loyalty programs still a hit?
There is a feeling among some that loyalty isn’t what it used to be and that Australian consumers are becoming jaded and a little disillusioned with the concept of loyalty programs, especially as the value of points in some schemes declines.
But industry expert, Adam Posner, CEO of The Point of Loyalty, disagrees.
“We define loyalty as both behaviour and belief. Behaviour is a transactional connection identified by purchasing more and more often over the longer term where similar competitive forces are in play. Belief is an emotional connection where trust is inherent and recommendation results,” he says.
“Programs are one strategy in which to motivate the outcomes based on this definition, so I don’t believe the proliferation of programs devalue the concept of loyalty as there are many factors that contribute towards loyalty to a brand.”
Posner says while there is “no one best way” to engender customer loyalty, “every business has to be brilliant at the basics: deliver on what they promise, price versus quality, and make the experience of purchasing and interaction seamless, easy, convenient.
“Once you deliver on your promise and the customer experience, then you need to acknowledge, appreciate and reward your customers.”
Three key ingredients
He says loyalty programs can work for businesses both large and small – from a standalone hotel or holiday park to a multi-property network – and that there are three critical ingredients to a successful program structure, known as SPV:
Simple: easy to join, earn rewards and interact with
Personal: relevant and personalised with communications and rewards, recognise your members, treat your members in a unique and special way
Valuable: provide benefits that are worth earning and rewards based on interaction as well as transactions
Keep customers coming back
In-line with the key ingredients, here are just a handful of ways you can deliver a successful loyalty scheme:
- Create a points-based system that is easy to use and understand
- Send tailored marketing campaigns to your loyal customers with exclusive member-only deals that encourage them to take action
- Keep it relevant and give guests meaningful rewards; if you don't know what's meaningful to them, ask and build your strategy around their responses
- Integrate with your other PMS tools for a seamless experience - for example, use triggered correspondence to send an email to your guest on their birthday with a special offer
- Create an emotional connection to your guests by understanding them, making them feel special and caring about their needs
- Ensure guests can effectively access via their mobile or other digital device for easy and seamless connectivity
Use your loyalty wisely
Loyalty is a word that’s been around since the 15th century and essentially means a feeling of strong support or allegiance that Darren Peisley, chief commercial officer at Discovery Parks Group, believes suffers from misuse.
“I don’t like the word loyalty because I think it is often used by businesses in the wrong way – ‘you should be loyal to me’,” says Peisley, who for many years was managing director loyalty at Etihad Airways.
His view is that loyalty must be earned not bought. “It’s about making an effort and understanding the needs of your customers.”
An ideal solution for those in competitive industries
Peisley says loyalty programs are a useful tool for some companies, especially those in highly competitive markets.
“In cases where companies are less successful in being able to differentiate themselves from the competition, loyalty programs can be a powerful tool in getting customers to commit.”
The holiday park sector features a very competitive loyalty landscape. BIG4 Holiday Parks relaunched its loyalty scheme, major park owner NRMA offers discounts to its members and Reflections Holiday Parks has a free scheme where new members receive $25 in guest credit when they join.
The key is getting guests to “The Golden Moment” – their first reward – as quickly as possible so they develop a sense of allegiance.
After all, loyalty works both ways.
