13 Replies Latest reply: Jun 27, 2013 9:26 PM by lone6star RSS

Correlates of Loyalty, Entitlement and the Special Guest Conundrum

Alumni Steward Platinum 8 Reviews
Currently Being Moderated

A few years back I posted (under my former  name, Stepping Stones) the following parable:

 

Here we are, ushered into the board room of a major hotel/lodging company as flies on the wall. At the highly polished table sit a number of folks, the boss at the head. 


     The CEO speaks.  "What exactly does this loyalty program do for us?  Just wondering."

 

     An earnest staffer replies, "Well sir, it does gain us recognition and keeps people coming back."

 

     CFO now speaks positioning his glasses up from his eyes to his forehead.  "Yes boss, but it is not free, it costs a lot of cash to maintain the program.  And the rewards, the points that people earn, are carried on our balance sheet as a liability."

 

     Another earnest staffer, sitting not very patiently, interjects, "Yes but it does bring folks back and back and back, and that helps the bottom line."

 

     CEO raises his hand.  "Wait, can anyone here tell me the net effect of this program?  Are we in fact spending money needlessly to prove that people will stay with us, regardless of the presence or lack of this program?  Has anyone heard how our competitors are doing with their loyalty programs?  CFO you first."  He points to the person sitting next to him.

 

     "I assume that every chain is experiencing angst over the creation of these programs.  First, they are not free to us or our partners.  We have tried to bake the costs into the room charges but it is hard to escalate rates in a slowly recovering economy.  Our franchisees are not happy with the reduced revenue they get from points-based stays.  I would argue, as CFO, that the net effect of this program is negative--that the costs of building and maintaining it outweigh the benefits we derive from having it.  In fact, I have an analysis that demonstrates this." 


     He refers to a chart on an easel.  "As you can see the average guest pays this amount, and the average loyalty guest pays this amount.  He points to a chart that shows each pays the same fees.  "The person who is not a member of our program actually donates  quite a bit of money to us, since we have factored in the cost of the program to which he or she does not belong.  I need to add that in our analysis, we have no control group: that is no reference to what a group entirely composed of non-members would see as being negative if we canceled the program. Thus I can only speculate that there exists a large group of potential customers who would always stay with us regardless of having or not having a program." He sits back but he is not finished.


     "Oh yes, I forgot to mention that we have a steady stream of new arrivals who continue to choose us over the competition. Most do not seem to care that there is a program to reward loyalty, based on what I have heard." 

 

     The CFO takes a deep breath.  "Now as for our competition, I suppose in the heart of hearts of every CFO out there there is a desire to trim waste and cut costs.  We have looked at cost cutting--elimination of little guest amenities, shortening hours at specialty lounges, abruptly ending most weekend meal vouchers, and of course not allowing suite upgrades, even though some properties from time to time violate that edict."


     Earnest staffer is looking downtrodden.  "I feel we can never end the program, even though the terms and conditions say we can.  It would be a disaster for us.  People would leave in droves, we would have to close properties."


     Someone at the table whispered, "Looks like a stand-off."


     The CEO closes his leather-bound notebook, the signal that the meeting is ending.  "OK folks, here is what I have decided.  Let's continue to push the level of benefits lower, regardless of what the guests think.  Let's keep the program for now.  See if we can have a meeting of other like-minded companies and agree to end these programs down the road, but not just us, all of us would do it."


     The meeting ends.


OK:  Fast forward to now, Father's Day in fact.


I am pondering the correlates of loyalty, and specifically loyalty programs, in 2013 and beyond, but first a dip into history.


Henry Ford first decided that airplane travel should resemble ship travel, with a Captain, Stewards, Ship Captain uniforms and the like for his Ford Tri-Motor airplanes.  Ship travel had always had classes of service, first, second third and steerage (which might have been considered third class.)


Airplanes picked this up, in the prop days first class was in the rear, away from the vibration caused by the engines and props.  Jets brought it to the front, Pan Am decided to call their Business Class something else as a mid-way place between FC and C (Coach).


Hotels until the advent of loyalty programs, never had this distinction.  What you paid was what you got.  Want a suite? If so then pay for it.  Simple math, fill the rooms, charge all the same and by inference treat everyone the same. I had two elderly aunts who lived in hotel suites for years after their husbands died, and there were many other folks who did the same in the 40's and 50's.


Now, in my view, hotels the balance had shifted, and they have decided to reward the most loyal and at the same time create a system that engenders both a feeling of entitlement on the part of the most loyal, and a reciprocal (at times) feeling on the part of the hotels that the most loyal are deserving of the best deals.


Almost three decades later, the loyalty business model seems to be shaken to the core--recent studies have shown that loyalty is often trumped by price, that personalization rather than points makes for a happy stay and stayer, and that declining benefits (a reality in any point earning system) are a thorn in the traveler's side.


Like First Class on an airplane, where very few travelers have actually paid full fare, the best rooms are often filled by those program members with the most points and status.


In my view, hotel programs have created a false sense of entitlement among the most elite members, and naturally we (they) expect to be treated that way at a hotel. It does not always happen. Many of us (even me at times)m are more demanding than we should be, asking for things that put an associate in a awkward position. But we are Entitled!


When I flew a lot I adopted the "IAIFCAYN" (I am in First Class and You're Not) attitude, at first refusing to make eye contact with the tourist class passengers threading the narrow aisles en route to their cramped quarters in the back of the plane.  Someone, a person with whom I flew a lot, told me that being smug worked better, but I never went to that second step.  It's not nice and serves little purpose.


So, as far as rants go, that's mine.  Maybe it's time to reconsider what and why there is a loyalty program, what we get and what the companies get, and (gasp) go back to a simpler time, one where you pay and you get what you pay for.

(For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

  • Re: Correlates of Loyalty, Entitlement and the Special Guest Conundrum
    erc Platinum
    Currently Being Moderated

    As we've seen in the past 12-18 months observing a steady decline of rewards benefits, it's going to be what it's going to be, in spite of our desires or efforts. That's why to me, the best use of this forum continues to be the sharing of ideas that maximize our travel experience. Yes, express disappointment in downgrades, not as a departure threat, but as marketing feedback in hopes that it at least slows the decline (who knows, without it Marriott might have just gone to an entire continental breakfast program as a formal policy), besides, I for one, have grown to enjoy our 'band of brothers' as we go down with the ship. We've all learned to deal arms length with our travel partners, so may the best value (as defined by the individual traveler) win.

     

    Insiders like pounding their head against the wall

                         

      because it feels so good when we stop.

           Keep on keepin on friends.

    (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

    • Re: Correlates of Loyalty, Entitlement and the Special Guest Conundrum
      Alumni Steward Platinum 8 Reviews
      Currently Being Moderated

      Well ERC, we have that travel experience to think and post about--once the contests have died down.

       

      And yea verily, we are as Shakespeare have have said if he lived in an era of texting: WeR A Bnd o BRTHERS

      (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

    • Re: Correlates of Loyalty, Entitlement and the Special Guest Conundrum
      arkwright Platinum 2 Reviews
      Currently Being Moderated

      Erc,

       

      I've been having discussions of this type with A (ex S-S) over the last few years. The conclusions I've come to now are as follows:

       

      1. One consequence of the growing influence (on both client thinking and behaviour) of loyalty programmes, particularly at the higher levels, has been the extent to which a growing sense of "entitlement" has been reflected - in hotels and on sites like MRI - in a set of largely unrealistic expectations.

       

      2. There may well have been an element of altruism in Marriott's decision to establish MRI, but no more than that! The more persuasive factors were, and remain,  (a) sales/marketing benefits and (b) the extent to which Insiders might act as a proxy for Customer Services in handling client complaints. This latter consideration - which has assumed greater significance recently as discontent about rewards issues has increased - has led to Insiders becoming at its worst little more than a "moaning and wingeing" site.

       

      Its future is hard to predict - though the current preoccupation with bland, incentivised competitions seems a million miles from my original understanding of the purposes of the site.

       

      A

      (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

      • Re: Correlates of Loyalty, Entitlement and the Special Guest Conundrum
        Alumni Steward Platinum 8 Reviews
        Currently Being Moderated

        Arkwright, so spot on! (as always).

         

        We have moved (to misquote Alexander McCall Smith) from the Hotels of Reduced Expectations to the Hotels of Vanishing or Vanished Expectations.  Like any scheme in which we participate, once a person has committed to the scheme it is very hard to abandon it.  So, altruistic or not, the creation of a points for staying program/scheme guarantees some degree of staying power (pun intended) for the guest, and not much from the Hoteliers.  Like the price of petrol, we grumble, we moan but we buy it no matter what.  So, advantage Marriott in this match.

         

        And so it goes...

         

        Plus ça change, plus c'est la même chose

        (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

      • Re: Correlates of Loyalty, Entitlement and the Special Guest Conundrum
        erc Platinum
        Currently Being Moderated

        Whereas it's always hard, like you say, to predict the future, this Our Innovations and Ideas - Marriott Travel Brilliantly  gives us some good insight into where it's headed.

        Marriott has often been the industry leader both in service and innovation and appears to be maintaining that status. Reading through all of this, it's easy to understand why Rewards programs for previous customers is not all that material to the organization.  We can either be run out of town or jump in front and lead the parade. Just give me my waffles and I'm ready to adapt!

         

        Here's the overview release where the travel brilliantly web site came from    Marriott Hotels Boldly Envisions the Future of Travel - Marriott News Center

        (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

        • Re: Correlates of Loyalty, Entitlement and the Special Guest Conundrum
          arkwright Platinum 2 Reviews
          Currently Being Moderated

          Thank you, erc:  interesting material.

           

          I agree totally that change is ubiquitous, inevitable and very often desirable. My reservations relate largely to what seem to be the often unquestioned assumptions brought to our attempts to understand it.

           

          A

          (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

  • Re: Correlates of Loyalty, Entitlement and the Special Guest Conundrum
    jamesdean Platinum 1 Reviews
    Currently Being Moderated

    some excellent thoughts anadyr!!!

     

    JD

    (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

  • Re: Correlates of Loyalty, Entitlement and the Special Guest Conundrum
    iahflyr Platinum 26 Reviews
    Currently Being Moderated

    All excellent points to ponder as we start the week of "Continental Breakfast" coming to life!

    (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

  • Re: Correlates of Loyalty, Entitlement and the Special Guest Conundrum
    ravnwyng Platinum 2 Reviews
    Currently Being Moderated

    I found this to be a very interesting and enjoyable read, but there was one part of it that presented as a fact, that I think needs to be revisited:

      "Oh yes, I forgot to mention that we have a steady stream of new arrivals who continue to choose us over the competition. Most do not seem to care that there is a program to reward loyalty, based on what I have heard." 


    I think, that though this may have been true, at one time, now, with ALL hotel chains having rewards programs, and most hotel chains setting up shop near each other, people have a choice of where to stay, and that choice IS made because of the rewards programs.

     

    Your parable sets the rewards program out as some sort of "loss leader".  This is not true.  At least, not today.

     

    Again, very enjoyable.  Thank you for taking the time to to pen it.

    (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

    • Re: Correlates of Loyalty, Entitlement and the Special Guest Conundrum
      Alumni Steward Platinum 8 Reviews
      Currently Being Moderated

      Loss leader no, but liability yes, carried on the balance sheet as such.  According to the 2012 Annual Report of the Corporation, the liability is estimated to be $593,000,000. Inertia being a fact of life and law of physics, the chance that the program will be canceled anytime soon is problematic, but the decline in value to the consumer, all 42 million of us in Marriott Rewards should be considered a slam dunk.

      (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

      • Re: Correlates of Loyalty, Entitlement and the Special Guest Conundrum
        lone6star Platinum 3 Reviews
        Currently Being Moderated

        i don't imagine that the Loyalty programs will ever cease.  Most businesses have some type of marketing ploy to bring back the customers.  In coffee, ice cream shops, etc, you get a card (buy 10 get, get one free).  In a sandwich shop near me, buy 20 sandwiches, receive a free nostalgic lunch box!  If Marriott were to cancel the program, you can expect a large migration over to Hilton, Starwood etc.; though some percentage of us are already in multiple programs.

         

        Any way i enjoyed reading your story...and WELCOME BACK!

        (For each location tag, you will be guided through a 3-step process to add (1) a city and a state or a city and a country, (2) a Marriott brand, and (3) a Marriott hotel.)

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