Why Guest Programs Don't Work... And How to Make them Better
By Mark Johnson President, Loyalty 360 - The Loyalty Marketer's Association | November 11, 2012
Membership in hotel loyalty programs reached 176.8 million, making up one-third of total loyalty program membership. With most programs having a zero entry fee, this number may well reflect the fact that many travelers join multiple programs just to have the basic membership benefits. Their allegiance to a program is, however, often trumped by the price-sensitivity ---- not caring if they stay at a Hyatt, Marriott, or Sheraton as long as they get a fair price. And, this lack of commitment plays out in low levels of active participation.
While program membership is growing - increasing 37% from 2006 - The Loyalty Traveler blog states that active membership is still only about 20% to 40% of the total membership cited for most programs. And, travel industry loyalty rewards programs have seen a reported 31% decline in active participation since 2007.
What's more, customers are leaving a lot of unused points on the table. Increasingly, customers seem to view points-based loyalty points as a commodity that isn't worth taking advantage. According to 2011 Forecast of U.S. Consumer Loyalty Program Points Value, the perceived value (i.e. fair market value) of points earned in the U.S. as of 2011 was an astonishing $48 billion per year. Yet, one-third ($16 billion) of those rewards earned in a given year will go unused. Said another way, the average active U.S. household earns $622 in rewards per year, yet does not cash in on one-third of it, or about $205.
Clearly, simply having a loyalty program does not ensure its success. So, what's the issue? How do you make it better?
In exploring possible answers to these questions it's important to note that in the travel industry, hotel and airlines loyalty programs have become a revenue stream. Most marketers (61%) believe that loyalty programs participants are the best and most profitable customers, according to the CMO Council ("Leaders n Loyalty: Feeling the Love from the Loyalty Club"). It's not surprising, then, that 65% of respondents believe that loyalty programs are an essential and valuable part of the marketing mix.
Because of this focus on revenue, however, many have lost focus of the real purpose of loyalty programs: creating a meaningful, interactive dialogue that helps build and maintain strong brand/customer relationships.
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