Loyalty programs: what’s the point?
There are many points of view on whether a loyalty program is a valuable and viable strategy for travel and accommodation providers.
The proof of their success is hidden in the financial reports of each business that has one, and the various media stories (just search ‘hotel loyalty program mergers’) that share how many members the various programs have and the power of their merged reach.
The benefits of a program are numerous, including perhaps the most talked about one in the hotel and accommodation industry, which is the ‘direct to guest’ relationship to drive bookings vs. OTA bookings (just think commissions to OTA vs. direct bookings).
Whatever your reasons for a program (whether you are considering the value of developing a loyalty program for your accommodation business or even if you already have one), each of these nine steps to a valuable loyalty program may help you.
A program must start with the view that there is a sensitive balance between it being:
Profitable to your business
Meaningful to your members
Our nine-step process helps to get that balance, so let’s go through them briefly:
Step one: Why?
The first ‘why’ is to create a vision for your program. The second ‘why’ involves your objectives; incremental revenue growth and increased frequency of stay are the most common. There are many others, including developing a direct relationship with travel guests (if you don’t currently), increasing retention rate and building referrals.
Step two: Commitment.
Is this a marketing initiative or business growth strategy? Whatever form or function your program takes, it is there to grow the business profitably and strengthen the interaction you have with your guests, so commitment is critical.
Step three: Who is the program for?
Knowing who your guests are based on demography, psychographics and travel behavior is the basis for segmentation. Which segment is the program for – leisure and or business? Your team is critical and their input and commitment to a program is a key ingredient to success. Partners and suppliers are also part of the program’s success, so their involvement should be considered.
Step four: Program structure.
There are many kinds of program structures (points are the most popular in this sector); however, there are others and with a little research you can craft a meaningful program. Developing the right kind of program for your business and customer is where the secret of success comes from.
Step five: Member experience – from onboarding to ongoing.
This is linked to the technology (step six) and is about mapping the member’s engagement with your program across all channel interactions. The kind of program that is formulated in step four, will impact on the experience across all channels.
Step six: Technology requirements, CRM and marketing automation.
This is impacted by the type loyalty program structure. Data scoping and insights reporting requirements are also part of this step as technology must enable simple data extraction, analysis and insight reporting – a key success factor.
Step seven: Communication plans.
All loyalty programs require a mapped-out communications plan (mandatory, marketing planned and member behaviour triggered) which again links into the technology platform. This takes into account a pre-launch, launch and post-launch program, plus ongoing communications.
Step eight: Return on loyalty = return on investment.
Determine the financial return to the investment you make in the program. This is critical for justifying the value and long-term viability of the program.
Step nine: Keep it alive.
Once the program is launched, keeping it alive for the long-term requires ongoing maintenance, measurement & reporting and motivation all audiences.
Exit strategy.
What will you do if you decide to close the program? Strange yet true, as we are finding more and more often that brands are either changing or closing their programs with impact on their brands. Discussing an exit strategy is very important.
Adam is the CEO of Directivity.
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