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Why hotel loyalty schemes don’t work

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23 October 2014 at 10:00, by

Programas de fidelizacion

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A recent study confirmed that most hotel loyalty schemes are not achieving their purpose. Not only do the schemes, as they are presently used, have a minimal effect or even no effect at all when it comes to retaining guests, in some cases they can even have the opposite effect. 50% of guests belong to a “not really loyal” program, in other words they have no problems choosing another hotel if they are offered better conditions.

It is estimated that among all the reasons for choosing a hotel, the loyalty scheme only comes into play in less than 4% of cases. But, why don’t they work? Some would say it is because the sector has low repetition ratio and brand loyalty, however they can work, and some chains are proof of this.

Current loyalty schemes have three main problems.

1) They are mainly focused on the wrong loyalty leverage: the price. Apart from hotels that stand out because of their price, the rate or discount can’t be a differential value in the scheme. This is because the segment of the market that most value prices, are less loyal and will change company depending on the conditions offered. After location and price the most recurring reason for choosing a hotel is past experience (12%), so why not award clients with experiences and not discounts. When I say an experience I mean, for example, give a football ticket to a client who is a football fan.

2) The points and prizes awarded are inadequate. Often only transactional aspects are awarded, like how much money a client spends or how often they visits a hotel. However there are a whole load of behaviours and attitudes that aren’t taken into account. If a client comes less often it doesn’t mean they are less profitable (for incentive or service costs) or that they are less loyal (they may only come a few times but always choose our hotel). Therefore, a more precise calculator is needed when assessing the customer’s value, using more complex indicators (customer lifetime value, net promoter score, etc.).

3) Most schemes are aimed at the mass market and if they differentiate between groups of clients they tend to be inappropriately discriminate. The benefits of a loyalty scheme must be distributed in a personalized way, based on the client’s profile, and strategically, that is to say to make the client act as we want them to act. What’s important is to always have both perspectives clear in mind, on one side the value an award gives to the client and on the other the value the award gives the hotel.

A well configured loyalty scheme can give the first  hotel to implement it an important competitive advantage, it is hard to replicate by those who adapt it afterwards as the first company will have already secured a large part of the market offering unique and exclusive experiences.

If you want your loyalty scheme to obtain better results don’t hesitate, visit the Innwise page, your clients deserve it!

 

Innwise

Innwise

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