The fictional parable begins in a hypothetical space and time.
Any similarity to any corporation, loyalty program, or persons is purely coincidental.
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 adjusting 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."
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 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 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.
sounds like a fairy tale to me...... the kind that takes ideas and spouts them as facts. Like the unicorn, or snow white.
just my opinion, but Loyalty programs are here to stay and the real value of these programs are much more complicated than presented. The ceo needed me in the meeting, not that good-for-nothing cfo........
I believe you have captured what is currently happening at Marriott now that Bill Marriott is less involved. I have a great concern that the new CEO comes from a financial background, and doesn't appreciate the inherent value of loyalty. As a marketing researcher, we have proven the value of loyalty as a 'premium' a customer is willing to pay for one product over another. I am confident that most of us have been willing to pay a premium to stay in a Marriott property. With the recent changes in the program, I now make my hotel selections based on cost and location. These financially focused executives don't recognize that higher margins don't make up for losing loyal customers, and sooner or later the stream of 'new' customers runs out.
Superchief, you have hit the nail of the head!!! I believe a lot of the "lack of interest" in taking care of Marriott's most loyal customers is for reducing costs without taking into consideration that loss of customers will more than offset these cost savings and unfortunately the change in management appears to have "cost reduction" as a major theme of the new leadership. Very Sad!!!
Whereas I'm traveling as much as I used to, since I'm winding down to a modest 25-30 nights per year Marriott, (staying more and more at friends/children's homes, VRBO, and swapping time shares), I don't feel like I should beat up on Marriott as much as I used to, since definitely I'm not their target audience anymore, nor their profit margin contributors. Fair enough, I'll just battle in the trenches at the property level for associates maintaining service standards.
What puzzles me though is how often I read about professionals like yourself, Shoeman, Jasper, tef, SS, and the other high impact perception influencing road warriors who not only should represent the core of Marriott's customer loyalty strategies, but also have demonstrated an expertise in profit margin optimization (as least talented enough to be in market research and ceo positions long enough to earn platinum status) whose opinions and insights apparently fall upon deaf ears. I'm concerned Marriott at times pushes us perilously close to goal divergence rather than goal congruence when it comes to Marriott's operating strength and stock price. I certainly don't want to hope for a Marriott operating hiccup, so that they finally listen to their core customers, but man, they are banging that button.
Yes. And the halting of the stream of new customers is hastened at a greater rate when a loss of reputation happens. Concerned about profits as you stated by not having any concern about reputation and without regard to anyone but himself.
Look at all of the good restaurants that go bad and then last for years on reputation, but once lost, it's so hard to get it back.
Look at AA. They bragged about all the money they saved by reducing the number of olives in a cocktail from 2 to 1. Then the peanuts got lost and then the meals. Look at them now. Why pay more to fly when the cheaper airlines would get you there and didn't offer any less? They'll blame it on the economy and on 9/11 and Homeland Security, all of which take part of the blame, but it was reducing service.
That is just fabulous!!!! But you are a writer, and a good one from this.
Every business should look at it and know it applies to them, too.
Giving back, quality, and service were what made this brand grow to what it is. Others understood that and followed suit.
The loyalty belongs only where it is given. Everything is a two way street, or a give and take.
The parable could aptly be called Death by a Thousand Cuts. I agree with Shoeman that the loyalty program remains, my concern is what Jared Diamond (I can't imagine he's anyone's hero, insightful as he may be, he actually hurts my brain to read) calls creeping normalcy, where little declines are not noticed as obviously as a major one and therefore a negative change is tolerated over time (boiling the frog). Us Insiders need to remain Sy Syms' (R.I.P.) best customer - an educated consumer, we are competing with a formidable opponent, as Jasper says, The Bean Counter and its way of thinking.
Stockholders expect profits...customers expect service....
True but in the big picture....customers drive profits and profits drive the shareholder price. So, who should win? I say the customer and the 'bean' counters that are calling the shots (especially in the timeshare division) need to get a better understanding of what the customer means to the process. When the driver of revenue becomes the loyal follower re: increased pricing and reduction of service...the loyal follower develops a 'non-loyal' mindset. Reason: Nobody likes to be taken advantage of and when they get that feeling.....loyalty is lost.
SS; In the game of stockholders vs. customers, stockholders often need to beware of what's going on to achieve the bottom line.
It often looks good on paper just before the ones at the top grab their golden parachutes and sell their stocks, leaving behind worthless shares when the bottom drops. That game is played so much. Enron was just one of the few that was found out.
There are so many companies that are going to bottom up when the products they're getting done overseas for less money aren't going to measure up to expectations.
Yes very true and there are unexpected issues that pop up such as the recent terrible hailstorms in Dallas that can potentially have bery costly maintenance costs, and planes out of service. I assume that stockholders know that what you are saying is true, that companies need to strike a balance between customer satisfaction (as a whole not just the elites) but that every decision must be seen by them and the company as cost-effective. If there is no demonstrated link between reducing loyalty privileges and demand for rooms as a whole that is a victory for the company and in turn its shareholders.
SS, One would think that would be true, and for the true investor, of which I'm not, it would be.
But one would also think that it would be common knowledge by now that nobody should respond to any e-mails from banks or phone companies that ask for any info, and that any treasurer's representative of a foreign country trying to give you millions of dollars is a scam.
That last sentence of the demonstrated link just went right over my head. I didn't understand what was meant there.
I think all of us have been saying the same thing, though. Customer appreciation is more important than what Marriott HQ now seems to think it is and if it's not rethought in a timely manner, it might be a hard lesson learned, to the detriment of a lot of employees and stockholders.
Okay, the Insider won't let me add a post any other way I tried, to I'm trying to reply to SS here.
I meant that any program has to be seen as valuable to a company or another program will replace it: if there is no correlation between loyalty and demand (meaning that folks show up to rent rooms no matter how much the program is degraded) then more scrutiny into the cost/benefit ratio of loyalty programs will be done. Bottom line, as long as remand and RevPar (revenue per room) continue to rise, the inverse might happen with benefits, even to the most loyal customers.
This is true, but it has to be a level playing field price wise, also. Even on the prices at the lower end, you come across all the other hotel chains that are good and offer free breakfasts, points for nights, free long distance phone calls, evening dinner and/ or refreshments, etc. with the chains Holiday Inn and Holiday Inn Express, Windham, Drury, and so on.
I meant that any program has to be seen as valuable to a company or another program will replace it: if there is no correlation between loyalty and demand (meaning that folks show up to rent rooms no matter how much the program is degraded) then more scrutiny into th cost/benefit ratio of loyalty programs will be done. Bottom line, as long as remand and RevPar (revenue per room) continue to rise, the inverse might happen with benefits, even to the most loyal customers.
I was going to pose a question regarding what would happen if all 117 pages of discussions (what I consider the most prudent discussions involving erosion of benefits), were printed and sent out to a few of the top shareholders of Marriott International.
May not do much immediately, but maybe it would promote some further discussions regarding the inaction.
My loyalty to Marriott was waning last year, and the icing on the cake, or straw that broke the camels back (whichever you prefer) for me was the all inclusive Carribean/Mexico on points demise.
When I moved my loyalty elsewhere, I took 22 others with me. It may not matter in the grand scheme of the current Marriott Department brass, but they appear to devote their resources more towards social media and titration of rhetoric to those that will drink the koolaid. I ponder the effects of future defections.
Like I said, I was going to pose a question, but decided to forget the question and do it.
Of course, the names were removed, and all other identifying information to protect the innocent.
Did not want to violate the ever elusive TOS commandments, just get the ball rolling..........
Thank goodness they do not have a picture of me to post at every Marriott in case I show up at one in the future, I can already feel the pitchforks.
I have noticed that many level 4 hotels have been elevated to level 5 this spring so the level 4 certificates are more limited.
I do hope that the rewards program stays untouched. I and many others have shown great loyalty for 30 plus years and at
platium level I always enjoy the service I receive. Many facilities and the associates are family in a home away from home.