Comment: Can loyalty programmes be redesigned

Loyalty programmes have been in effect since companies came up with the idea of giving customers incentives for their repeat business. It is built on the basis that the increased revenue from the return of their clients will result in a form of a benefit that the consumer will realise in the foreseeable future.

The basis of loyalty programmes is “delayed gratification” for both parties, and the main reason for a company to introduce loyalty programmes to their clients is to influence behaviour.

Hotels are no different to other service sector businesses. They utilise alternative elements to increase the participation of their guests, such as promoting status levels from silver to gold to platinum, with each level having its own perks, but the basis of their programmes are the same.

However, clients tend to be more interested in reward programmes; those where the satisfaction of their use of service is instant rather than postponed with rewards such as discounts, upgrade promotions, savings and the like.

Perhaps it’s time traditional loyalty programmes considered implementing initiatives with instant savings for the property rather than initiatives that have delayed increases in revenue.

Starwood‘s green choice
A very good example of this is what Starwood properties in North America have been offering their guests. A current offer running under environmental campaign, “Make a Green Choice” (www.starwoodpromos.com/sheratongreenchoice/) offers guests a choice of either a $5 voucher at participating food and beverage outlets or 500 Starwood Preferred Guest Starpoints awarded at check out, for each night the guest declines housekeeping services (except the day of departure).

The advertised environmental savings that this offer would equate to are one person drinking two cups of water per day for a year, running a laptop for 10 hours, heating a 400ft² room for four hours and ultimately, less toxicity in the environment — a benefit that, like charity contributions, would resonate well with many clients.

On the other hand, the benefits that guests are awarded are either the addition of 500 guest points to their profile or a $5 voucher redeemable at selected food outlets, in return for tolerating a messy room or having to tidy up themselves. For a frequent traveller who is part of a hotel loyalty programme, 500 guest points can be very encouraging since accepting this offer for 20 days will accumulate enough points for a free night.

But, the main advantage in this offer is for the property itself. A dollar value estimated on the environmental factors from a cost saving perspective would be approximately $2, but a more important one worth mentioning is the saving hotels would make on their employee overheads where the wage of a housekeeping employee is around $10.50 an hour (source: http://www.bls.gov/oes/current/oes372012.htm).

Do the math
This equation results in the instant gratification to the hotel relating to their guest’s visit. On one hand hotels have the marketing benefit of their ethical responsibility towards the environment and on the other, this initiative would encourage guests to enroll in the loyalty programme since it is run across all of North American Starwood properties.

For the guest who selects the $5 voucher, the actual cost of goods is less than $5 which is another saving for the hotel.

Additionally, this deal can also give their food outlets more exposure, which can result in more repeat business — an effective marketing strategy on its own. Lastly, redemption is never 100% whether on the voucher or the loyalty points, which is another added advantage for the hotel of running a promotional campaign like this.

In essence, anything that a chain of properties can do to save on their variable costs — such as reducing amenities, laundry, wages paid on housekeeping — is beneficial to their bottom line. The challenge is to design their programmes in such a way that maintains brand equity and offers guests options that they value.

About the Author
Wissam El Cheikh Hassan is the managing partner of Al Dar Sweets, and the GM of Dar Al Zakhrafa Décor. His past experiences include being a purchasing manager at Procter & Gamble in Dubai.