Chapter 3 explores how the “traditional” loyalty model is flawed, and looks at examples of how you can overcome those flaws with advocacy and creative thinking.
Chapter 3
Breaking the boundaries of the loyalty model
Overcoming tradition with advocacy and creative thinking
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Today’s loyalty model
A desperate case for a makeover
So far in this course we’ve defined the differences between loyalty and advocacy, looking at a practical example of how the two work in tandem to help you better engage with your guests. If you’ve missed either, check out the links below to catch up.
Chapter 3 explores how the “traditional” loyalty model is flawed, and looks at examples of how you can overcome those flaws with advocacy and creative thinking.
Why traditional loyalty is dated
Depending on which study you cite, the average US household has 20-30 loyalty club memberships. Of these, only about 44% get used on a regular basis, and more than half of these people abandon at least one per year.
This means that about 56% of loyalty memberships go unused yearly. It could be worse, but it’s been getting worse. According to a 2015 study by Colloquy, there’s been a steady decline in loyalty club usage over the last 5 years. Without some sort of disruption to the model this will continue until the members’ standards become so low that membership becomes a commodity. Not good for an industry like ours that already competes so heavily on price.
Add to that, according to a Capgemini study, roughly 90% of the sentiment on social media regarding loyalty programs was unhappy. So how is it that something that made so much sense 30 years ago is now in such a state of decline?
Engaged user
There are various reasons loyalty programs have failed keeping guests engaged.
The answer is really simple: loyalty programs lack meaningful member engagement.
Going deeper, it can be condensed to 4 core issues:
  1. Lack of reward relevance - it’s become more about the company and less about the customer
  2. Rigid program structure - though necessary at first, technology should have lessened restrictions
  3. Challenging online channels - there’s a lack of interaction or, even worse, interaction is frustrating to the member.
  4. Poor customer service - come on, we’re the hospitality industry!
Let’s look at each and how we can solve them.
Lack of reward relevance
Today, approximately 97% of loyalty programs reward primarily on purchases. Only 16% of those reward members for other activities. And only 4% offer any sort of reward for social media engagement.
To the consumer this says you’re only worth something if you’re buying something. In a hyper-connected world, that sort of mentality won’t work. It’s much more about building a long-term relationship with the member first, with value soon to follow.
Consider for your program that there is inherent value in leveraging your members as vocal advocates for your brand.
Consider for your program that there is inherent value in leveraging your members as vocal advocates for your brand. Virtually every member that books a stay at your hotel is connected to some number of people via social networks. At Flip.to, that number is somewhere between 220–230 people on average. (We see big influencers in there as well, but that’s another topic entirely.)
Similiar Friends
Your guests have influence on a huge combined network of like-minded friends and family.
Your guest/member shares something in common with those people to whom she’s connected. If she’s selected your brand, there’s a good chance others within her social network may be good candidates for your hotel as well. Why not reward the member with additional points for social engagement? To your members, loyalty points function as equity in your brand. They should be earned, but not always bought.
Social engagement is also an excellent way to measure how connected to your brand the member might be. Over time, you can develop a social “net worth” for your members. What value does the member bring to my brand beyond just room nights and incidental spend?
Taking this a step further, you can incorporate preferential pricing for those members that have a high propensity to be brand advocates, knowing the discounted room rate will come full circle in terms of word-of-mouth promotion from a highly satisfied advocate.
According to Capgemini, a fully engaged member will deliver a 23% premium over the average customer in share of wallet, profitability, and revenue.
Rigid program structure
Rigid program structure is dependent upon the individual program, but there are certain trends which are fairly consistent. Two of the biggest have to do with the enroll-to-redeem time horizon, and restrictions on when and how rewards can be used.
An Accenture study on customer loyalty concluded that program adoption is largely being driven by the new member’s desire to secure the best deals. If we learned anything from Groupon, it’s that short-term deal-chasing does not equal long-term customer commitment.
Think for a minute about what it means to start from zero in a loyalty program. At first it’s not so bad because they’ve just joined. But follow the member through the process of earning enough currency to be eligible to redeem… and now wipe it all out and start over. It can be downright discouraging to the member. They may do it once and never again.
Instead of this traditional approach, consider along the way what you can do to propel the member further and get her closer to a redemption. As we just mentioned, incorporating rewards for behavior could be one approach. Gamification is another way to award the member for a desired behavior and it has the added benefit of injecting some fun into the program.
Only about 14% of loyalty programs on the market today offer any sort of rewards through gamification. Consider pairing gamification with advocacy to give the member a way to bring additional value to your brand while also earning something for herself along the way.
Engaged user
Motivating your guests' friends and family to take part could boost engagement.
For example, you could set a threshold for engagement (i.e. get 5 of your friends to sign up for a special offer) and tie loyalty points to those thresholds. If your members are motivated by program status offer ways for them to elevate their status (e.g. silver → gold) by sharing their feedback about a great stay at your property over Facebook, where they may have upwards of 200+ like-minded connections.
Ultimately, if your approach is thoughtful, they will appreciate it and you will see membership grow in kind.
With gamification you have the opportunity to get creative with your program and how you engage with your members. Ultimately, if your approach is thoughtful, they will appreciate it and you will see membership grow in kind.
Stash Hotel Rewards set out to challenge rigid chain loyalty programs head-on. Their program never allowed for blackout dates and the points you earn are yours to keep until you use them. This way, you’re free to aspire to visit amazing destinations and earn points along the way, getting you there faster.
Challenging online channels
Technology should make program interaction easier, but in reality members are saying that it isn’t. Earning points, redeeming points, and interacting with the brand should be an intuitive and seamless process. If it isn’t, you’ll gradually lose your engaged audience and the opportunities for them to advocate for you will vanish.
The Guestbook has tackled this issue with an innovative, yet simple approach. They offer an email sync integration whereby they’re able to detect and read a hotel booking in your email inbox via the confirmation. It pulls the info it needs and your currency is applied towards a reward.
To further simplify, you can book directly with the hotel or with The Guestbook and the rewards will be the same. There’s no redirect, no moving between sites to ensure you’ve got it right. Book where you’re comfortable and you earn.
They’ve also made redemptions simple. The program is clearly communicated and easy to understand for the guest. I shouldn’t have to decipher terms and conditions to be rewarded for loyalty to your brand.
The benefits of a loyalty program should be limited to the program members and not available elsewhere. Competing offers on your website will diminish your program adoption rate and will ultimately lead to abandonment. Be sure that when communicating the perks of being a member, it’s clear there is no other way to get them.
Engaged user
"Stop Clicking Around" by Hilton via Youtube.
Hilton’s newly launched “Stop Clicking Around” campaign embodies this concept. As an HHonors member you’re able to secure a rate at their hotels unavailable anywhere else. Price matters, but going deeper, this influences HHonors members to check with Hilton first before looking elsewhere for accommodations. There’s huge benefit to being first in the travel planning process!
Poor customer service
I’m going to be frank here. This should not be an issue in our business. True, you can’t please everyone all the time but in general this shouldn’t even be a factor. That being said, things can be done to ensure it doesn’t become an issue for your loyalty program.
It starts with simply inviting feedback from your members to see what they want from the program. Taking everything into consideration that I’ve mentioned already, how will those changes affect your members? We love post-stay feedback from our guests, but it doesn’t need to be limited to a transaction.
The goal here is to ensure your program doesn’t become a commodity.
The goal here is to ensure your program doesn’t become a commodity. To put it simply, a commoditized program is very easy to abandon because there is no meaningful connection. Be sure to inject a personal element back into the program so the member knows you value their membership, and not just their share of wallet.
As hoteliers you’re stewards of the guest experience. Inviting your guests to share their experiences at your property with their friends and family is a fantastic way to make loyalty more personal while fostering stronger brand affinity.
Using advocacy in such a way creates meaningful interactions with members and guests which, by building stronger connections, drives program growth and creates earning opportunities for members. Don’t lose focus on the greater mission by only chasing program growth. Develop the experience and the engagement, and member growth will naturally follow.
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Action items
  • Thoroughly evaluate your loyalty program and identify potential points of frustration for your members. Document those and focus on the top 3-4 for the following steps.
  • Outline the path from enrolling to earning the first reward. Based on what you know about your guests, how long does it take the average guest to get there? The focus here is on accessibility first, and catering to the highest earners second.
  • Evaluate each interaction point (enrolling, earning, redeeming, etc.) How intuitive is the process for engaging with your brand? Is it clear how to go about the desired activity? Is there more than one way for a member to do it? Should there be? Try it yourself and see.
  • Look at the interactions you have with your members and develop 2-3 ways to improve those with personalization and meaningful engagement. You may find there are very few interactions so your strategy may be to develop new ways to reach out to your members and encourage action on their part to drive engagement and advocacy for your brand.
 
What's next?
  • Put your content to work for you
  • Improving, personalizing, and extending interactions with guests
 
A look back
Feeling like you missed something?
 
Sources
  1. The Guestbook
  2. Stash Hotel Rewards
  3. Hilton Launches Its Largest Campaign Ever with Exclusive Room Rates Not Found Anywhere Else
  4. Trouble in Paradise? How to Reignite Customers' Interest in Loyalty Programs.
  5. How Rewards Are Running Loyalty Programs Into the Ground
  6. Customer 2020: Are You Future-Ready or Reliving the Past?
  7. Fixing the Cracks: Reinventing Loyalty Programs for the Digital Age
  8. U.S. Customer Loyalty Program Memberships Top 3 Billion for First Time, 2015 Colluquy Census Shows
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Richard Dunbar
Director of Partnerships

Hi [firstname,fallback=there]—Richard here from Flip.to. I’ve been in the hospitality space for over 15 years, including many at one of the largest providers of independent loyalty reward programs worldwide. After picking up my fair share on loyalty, I’ve been able to put it all together with revenue management, e-commerce, and now advocacy. Have thoughts about the e-course? Let me know!
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