Innovations in loyalty

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Innovations in loyalty
Innovations in loyalty

Loyalty programs remain an important component in marketer's customer retention programs, but marketers today are apt to deliver perks that are far more personalized, flexible and skewed toward experiences. They are also more egalitarian in nature, even if it means allowing customers to use earned points with a competitor. As the adage goes — and studies have proven — loyal customers spend more often in both the short and long term, meaning that organizations have become more willing to listen to their requests. 

Marriott International hopes its customers see value in the new tweaks it has made to build customer loyalty. The hotel group beefed up its loyalty program over the last year to be more customer-friendly and to offer more flexibility. Marriott Rewards members now have additional ways to earn points, more potential kinds of awards to earn and no longer have to worry about blackout dates — once a hallmark of most travel loyalty programs. 

In March, Marriott launched an instant redemption program, where members can redeem points for anything that appears on their hotel bill. “So you can pay for drinks in the bar, play golf, use the spa or pay for meals in restaurants and get rewards points for the money spent,” says Laurie Goldstein, senior manager of PR at Marriott International.

Another such program, launched last year and extended through 2010, is the Elite Rollover Nights program. As part of this benefit, each night above the 50 nights needed to maintain Marriott gold level status rolls over to the next year, preventing another common customer gripe about loyalty programs – expired points. The goal is to provide members an incentive to stay with Marriott once they have earned gold status, while also preventing them from trying to earn points in competing loyalty programs once they hit the 50-point maximum.

“It used to be that if you stayed 60 nights in a year, you would earn 50 to get to gold and the other 10 would be lost. Members would get to gold but knew they wouldn't get to platinum, so they might start staying at the Hilton to build up points there, figuring that those 10 nights might not count for anything at Marriott,” says Goldstein. “This flexibility really helps us get members to stay loyal to us.”

The recession has been hard on many loyalty marketers, particularly in the travel industry, an area where loyalty programs are ubiquitous. Travelers across the board are looking for the cheapest prices, making loyalty less important. In 2002, 42% of travelers were loyal to one travel company but by 2010 only 30% of travelers remained loyal to one company, according to a Forrester Research study. 

“Loyalty programs have evolved to have a greater emphasis on personalization, as marketers are looking to build a more customer-centric experience and avoid churn,” says Henry Harteveldt, analyst and VP at Forrester Research.  “Loyalty marketers are also focusing on the special benefits of having status in their program, trying to encourage consumers to want to earn status.”

Last year, Delta merged with Northwest Airlines and in doing so also merged Northwest's loyalty program into its Delta SkyMiles, creating what it says is the world's largest loyalty program. The SkyMiles program now has more than 81 million members. 

This year, Delta added a new elite status level called Diamond to enhance its program and make it more enticing to members. In addition, Delta ditched its award ticket redemption fees for flights booked within 20 days of departure and added a perk in which Delta SkyMiles credit card holders get their first bag checked for free on every Delta flight. Delta also introduced “Rollover Medallion Qualification Miles” this year, in which SkyMiles members could roll over their miles to keep up their status.

Four ways to measure loyalty

Loyalty programs can help businesses retain customers, but they can also be expensive. In order to justify the spend, marketers must constantly assess these programs.

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“We're constantly evaluating our program and offering new benefits and promotions to ensure we're recognizing and rewarding customers' loyalty,” says Beatriz Sims, manager, Delta SkyMiles program. “One program benefit that we're particularly proud of — maybe because we're the only airline that offers it — is the ability for our highest-value customers to enjoy unlimited complimentary upgrades on all domestic tickets.”

Elsewhere in the travel industry, InterContinental Hotels Group (IHG) introduced a bold new loyalty
feature this past spring to help drive customer retention by allowing Priority Club Rewards (PCR) members to use their point rewards to book competitor hotels. IHG created the “Hotels Anywhere” program to encourage Priority Club members to continue to use its program even when it does not have a hotel in the region. For example, IHG does not have any hotels in Hawaii, so if  a customer has enough points built up for a free stay on their IHG card, the company will pick up the bill at a competitor. That way, it won't risk losing a customer to rival hotels in order to earn points for a free stay in Hawaii.

“We seized the market opportunity to drive IHG's loyal business and leisure travelers to PCR to book stays and redeem points that otherwise would have gone to competitor hotel companies or online booking sites,” says Lincoln Barrett, VP, guest marketing and alliances, IHG.

“I thought it was a little risky at first, but based on the feedback that they got from their customers who really appreciated the flexibility, it turned out to work quite well,” says Kelly Hlavinka, partner at Colloquy, a loyalty marketing consulting company.

Personalized perks

Added flexibility in loyalty programs is a growing theme in a variety of industries. Northwest Airlines loyalty card partner, US Bank, rethought its loyalty strategy when the airline merged with Delta. Northwest's WorldPerks miles converted into Delta SkyMiles, but US Bank still had a large portfolio of customers who carried its cards. In order to keep this business alive, the financial institution decided to introduce a new rewards program of its own called FlexPerks, which members could use to earn points that are redeemable across more than 150 airlines. 

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