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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Human Resources: An Era of Transition

Traditionally, the human resource department administers five key areas within a hotel operation - compliance, compensation and benefits, organizational dynamics, selection and retention, and training and development. However, HR professionals are also presently involved in culture-building activities, as well as implementing new employee on-boarding practices and engagement initiatives. As a result, HR professionals have been elevated to senior leadership status, creating value and profit within their organization. Still, they continue to face some intractable issues, including a shrinking talent pool and the need to recruit top-notch employees who are empowered to provide outstanding customer service. In order to attract top-tier talent, one option is to take advantage of recruitment opportunities offered through colleges and universities, especially if they have a hospitality major. This pool of prospective employees is likely to be better educated and more enthusiastic than walk-in hires. Also, once hired, there could be additional training and development opportunities that stem from an association with a college or university. Continuing education courses, business conferences, seminars and online instruction - all can be a valuable source of employee development opportunities. In addition to meeting recruitment demands in the present, HR professionals must also be forward-thinking, anticipating the skills that will be needed in the future to meet guest expectations. One such skill that is becoming increasingly valued is “resilience”, the ability to “go with the flow” and not become overwhelmed by the disruptive influences  of change and reinvention. In an era of transition—new technologies, expanding markets, consolidation of brands and businesses, and modifications in people's values and lifestyles - the capacity to remain flexible, nimble and resilient is a valuable skill to possess. The March Hotel Business Review will examine some of the strategies that HR professionals are employing to ensure that their hotel operations continue to thrive.