When Red Lion Hotels Corporation transitioned its loyalty program last year from a points-based model (R&R Club) to a recognition-based model (Hello Rewards), Bill Linehan, RLHC’s Chief Marketing Officer, said the company only received 24 complaints from 750,000 members.
Linehan told attendees during a session titled, “Guests Are Forced to Earn Our Loyalty: What’s Wrong with This Picture?,” during the 8th annual Loyalty Expo presented by Loyalty360 – The Loyalty Marketers’ Association, which was held April 27-29, 2015, at the Loews Royal Pacific Resort at Universal Orlando in Orlando, Florida, that the message from that was clear: The company’s previous loyalty program didn’t matter to its members.
Linehan believes that the Hello Rewards loyalty program, which recognizes and rewards members for doing things they already love to do, offers a competitive differentiation in the marketplace. By having a recognition-based program in lieu of a points-based program, as well as non-published tiers, Linehan said RLHC is taking a retail approach toward its rewards and recognition program.
The R&R Club loyalty program was ineffective, was impersonal, and didn’t retain customers at a desired level.
Red Lion Hotels officials realized that loyal customers are easier to sell to, spend more, and make a business more successful. As a result, surprise and delight has moved to the forefront of RLHC’s service promise.
Linehan outlined some key trends in the loyalty space today:
Membership doesn’t equal loyalty
Consumers enroll in a multitude of programs, yet only a rare few are faithful or devoted to any brand
Past customer experience trumps loyalty program
No true personalization or differentiation
Expectations changed
Loyal customers are easier to sell to
It costs a business about 5-10 times more to acquire a new customer than it does to sell to an existing one
The first interaction is key (48% of consumers say beginning of service is the most critical time to gain their loyalty)
A first-time customer has a 30% chance of becoming a long-term profitable customer
Returning customers spend on average 67% more than first-time customers
Up to 15% of a business’s most loyal customers account for 55%-70% of the company’s total sales
Customers love personalization and will gladly pay more for it
Customers value “good” service more than “fast service”
Away from home travelers value personal connection and want to feel that they matter.
Surprise and delight goes a long way
94% of loyalty program members want communications from the programs they participate in
Hotels have a unique opportunity to build brand loyalty through the customer experience and to develop an emotional bond
RLHC’s approach to loyalty:
Refocus on priority customers
Determine what behavior constitutes loyalty
Reinvent programs and experiences
Re-engineer systemwide
Hard-wire pursuit of building an emotional bond into operations
Continually reward members with delightful surprises
Determine what behavior constitutes loyalty
- Emotional loyalty referrals, social media reviews, constructive customer feedback forms
- Transactional loyalty, frequency of stays, $$ spent at the hotel
- Preference loyalty, meeting planners and event organizers
2. Refocus on priority customers
- Determine which customer’s brand loyalty is critical to build and maintain
- Promising target groups:
- High frequency traveler (HFT)
- Newbie traveler (Millennials)
- Occasional Travelers
Our How-to Approach
Reinvent programs and experiences
- Make rewards personally meaningful, customized to travelers’ unique tastes and preferences.
- Be unexpected
- Analyze data to determine travelers with children and offer complimentary programming or babysitting (benefit to parents and other guests).
- Reward from first interaction
Small token rewards during stay (e.g. song download)
- Keep your loyalty program on-brand, stay true to your values
- Communicate with members regularly
- Grow and evolve with your audience
- Recognize when they do something unexpected guests (“I’ve got a great idea for you...”; Self-initiated Facebook post)
- associates (way for guests to reward associates for exceptional service)
4. Reengineer system-wide
- Enable cooperation on all levels – customer service, marketing, operations, IT
- Reinvest into capabilities and infrastructure – RevPak technology, talent, training
- Empower front-line employees
5. Hard-wire pursuit of building an emotional bond into operations
- Invest in company culture
- Treat your associates well and they will treat your customers better
- Encourage employees to live the brand values (exploration, curiosity, pioneering spirit, self-reliance, nurturing spirit, etc.)
- Encourage guests to recognize when employees provided exceptional service (develop a token of appreciation system)
Hello Rewards focuses less on tiers and more on recognition, Linehan said.
“How can we surprise and delight them and fuel their passions with unparalleled benefits?” he said. “We married our CRM to our property management system, which resulted in keen customer insights.”
Objectives:
Modify consumer behavior
- Hello Rewards will be a competitive differentiator and accentuate our brand positioning, where consumers will relate to the brand on a personal level, rather than as a commodity.
- Hello Rewards will increase bookings while reducing cost of sales
- Hello Reward will grow Hotel market share and drive system-wide contribution
Strategy:
Unpublished tiers
Channel agnostic benefits
Entice direct booking through lowest rates
CRM and benefit capture loyalty through ongoing 1-to-1 relationship marketing and member experiences
Knowingly recognize (Use CRM for 1-to-1 and 1-to many communications); Surprise and Delight (personalized members benefits and guest experiences); Fuel passions (Build strategic partnerships); and Published benefits (Standard members services).
Surprise and delight occurs at least one time during every single member stay.
“We need to turn transaction-based, deal-seeking loyalty into emotional loyalty,” Linehan said.
Benefits of emotional loyalty:
- Repeat purchase with little or no consideration of competitive offers
- Less price sensitivity
- Lower rate of switching to competitive brands
- Enthusiastic brand advocates
- Forgiveness of minor service issues without loss of loyalty
- Hello Rewards, on average, is one third the cost of other hotel loyalty programs
“We rebuilt our ecosystem in five months for 5% of the cost of the competition,” Linehan said. “We questioned ourselves about the (previous) model (R&R Club) and whether that really worked for us. The points systems have now become entitlements. Most costly, least rewarding. We decided to change that model. We recognized that people don’t want to be controlled.”
STATE OF LOYALTY: Membership doesn’t equal loyalty.
HOW-TO APPROACH: Determine what behaviors constitute loyalty, refocus on customers, reinvent, reengineer, build emotional bond into operations.
HELLO REWARDS looks at holistic guest journey and incorporates elements of surprise & delight, fueling member passions and knowingly recognizing each and every member.
GUEST JOURNEY: Uses guiding principles to transform expected member experiences into unexpected ones every step of the way.
PARTNER MARKETING: Accentuates brand positioning, enables new member perks and communications and introduces revenue streams with limited financial exposure.
WHAT’S NEXT? More perks, expanded partnership portfolio, member acquisition campaigns, rebranded properties.