Four powerful myths of modern customer loyalty

Hilton HHonors

Hotels have a loyalty problem. Programs of days gone past presented strong value propositions for signing on to a hotel's rewards program, but since then the industry has dialed back on the "reward" side of their offerings while still expecting loyalty to remain strong. A recent webinar held by Maritz Motivation Solutions, a designer of employee recognition, channel loyalty, rewards and sales force incentive programs, explored four of the biggest myths behind customer loyalty, as well as one unfortunate truth. The hosts of the webinar were Barry Kirk, VP of loyalty solutions, and Cheryle Frenzel, director of loyalty strategy, both at Maritz.
Myth 1: Loyalty members are against paying fees for benefits.
This sounds like an obvious fact, and for the majority of loyalty program members it is. Data from a survey of more than 2,000 loyalty program members (a mix of gen x, baby boomers and millennials) found that 52 percent of respondents were not willing to pay for a loyalty program, but 48 percent were willing. What's more, 26 percent of those willing to pay were open to paying $20 for a membership, while 18.5 percent said they would be willing to pay more than $50.
What do these guests consider worth paying for? Money-saving rewards down the line (40 percent of respondents) and rewards that are exclusive or exceptional (22 percent of respondents).
"Just looking at the data, if you don't have a fee structure it's worth considering one," Kirk said. "A well-designed fee structure can offset some of the costs for loyalty."

Myth 2: Customers enrolled in loyalty programs are committed to engaging with them.
Of those surveyed, 20.6 percent said they had enrolled in loyalty programs in the past and never enjoyed the benefits. Of those, 21 percent said rewards were too difficult to earn, 19 percent said the program was boring.
How can hotels turn this around? Engagement is a complicated concept that requires constant attention, but the most effective way to increase engagement is to make sure a program's rules are easy to understand, and to recognize membership milestones. Sixty percent of people who drop loyalty programs do so in the first year of joining, meaning companies have a long-term commitment to engaging them, while 20 percent drop programs in the first 90 days, often due to boredom with what is on offer.
"Don't allow your members to disappear before you have a chance to engage with them," Kirk said. "Get at them early."

Myth 3: Loyalty memberships are all about points redemption.
Only 8.3 percent of respondents said they like to spend their loyalty points immediately after getting them, while 56 percent save for a specific reward. More importantly, 28 percent save their points without a specific goal in mind.
"It's possible these customers are more focused on point hoarding," Kirk said. "Stored equity in the program encourages them, and it might be deflating for them to redeem."
The takeaway is that not every member has a goal in mind for their points. Instead of focusing on the end goal of cashing their points in, hotels should balance their redemption messages with those point-earning opportunities.
Myth 4: Long-time members are loyal forever.
Taking long-time members for granted is one of the biggest mistakes a loyalty program can make. There is a high degree of competition today for loyalty programs, especially for customers who earn a high number of points.
"It's critical not to assume high-value members are safe," Kirk said, going on to say that in many cases, losing one high-value member requires earning three to five new members to match them. He recommends instituting a "surprise and delight" strategy for these members, who want to be treated differently from when they first joined the program.

Unfortunate reality: The primary motivation for loyalty is the expectation of a financial payoff.
It's no secret that the main reason for guests to join a loyalty program is to eventually earn free rewards, and Maritz has the data to prove it. Of those surveyed, only 17 percent said they join programs out of true loyalty, while 46 percent qualify as "mercenary" members who choose programs based on how beneficial they are to them.
But is this bad news? Sixty percent of those surveyed said they viewed loyalty programs as a "mercenary" tactic from companies, meaning they are aware of the strategy and are matching it with their own.
"It's not so much that people have a predilection to a certain type of loyalty," Kirk said. "They are giving us the loyalty that we are asking for."