The Lie of Loyalty Marketing

By Steve McKee President, McKee Wallwork Cleveland | May 19, 2010

Loyalty programs work. There's no question they affect buying behavior, drive transactions, raise margins and generate valuable data. Total U.S. consumer membership in loyalty marketing programs is over one billion-an average of more than four programs per adult. Maritz says that nearly 90% of Americans participate in some type of rewards program, and most are enrolled in more than one. The sophistication of today's loyalty programs is mind-boggling, and impressive.

But as I look at loyalty marketing there are some nagging questions that I just can't shake: What happens to the loyalty when the loyalty program stops? Do loyalty programs really generate true loyalty, or just behavior that looks like loyalty? Could it be that our loyalty programs are deceiving us?

Capital One asks "What's in your wallet?" It's kind of frightening, but in one sense it's fair to describe consumers in those terms. Let me share with you some of the contents of my wallet and you'll see what I mean.

The first thing is my Southwest Airlines Rapid Rewards card. Southwest is a company for which I feel genuine loyalty because of their convenient flights, low prices, friendly service and on-time performance. In fact, Southwest is the reason I also carry a Hilton Honors card. Hilton grants me Rapid Rewards credits when I stay at their properties so I signed up for their loyalty program as well.

Another piece of plastic I carry is my Hertz Gold Club card. I know with Hertz I pay more, but I'm happy to do so because having my car set up and ready to go without a stop at the counter is of such great value to me. In fact, I recently received an email from Hertz recapping my points balance and I basically ignored it. Points don't matter to me with Hertz, because they're not why I'm a member.

I also carry a Citibank card, which dates back to the mid-eighties when they were the first to extend credit to me as a college student. A few years later they began offering me rebates for automobile purchases, which I thought was great. As a young person starting out I didn't buy cars very often, but when I did I could sure use that cash. I felt real loyalty to both Citibank and Visa.

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The hotel industry has undertaken a long-term effort to build more responsible and socially conscious businesses. What began with small efforts to reduce waste - such as paperless checkouts and refillable soap dispensers - has evolved into an international movement toward implementing sustainable development practices. In addition to establishing themselves as good corporate citizens, adopting eco-friendly practices is sound business for hotels. According to a recent report from Deloitte, 95% of business travelers believe the hotel industry should be undertaking “green” initiatives, and Millennials are twice as likely to support brands with strong management of environmental and social issues. Given these conclusions, hotels are continuing to innovate in the areas of environmental sustainability. For example, one leading hotel chain has designed special elevators that collect kinetic energy from the moving lift and in the process, they have reduced their energy consumption by 50%  over conventional elevators. Also, they installed an advanced air conditioning system which employs a magnetic mechanical system that makes them more energy efficient. Other hotels are installing Intelligent Building Systems which monitor and control temperatures in rooms, common areas and swimming pools, as well as ventilation and cold water systems. Some hotels are installing Electric Vehicle charging stations, planting rooftop gardens, implementing stringent recycling programs, and insisting on the use of biodegradable materials. Another trend is the creation of Green Teams within a hotel's operation that are tasked to implement earth-friendly practices and manage budgets for green projects. Some hotels have even gone so far as to curtail or eliminate room service, believing that keeping the kitchen open 24/7 isn't terribly sustainable. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.