CRM in Travel USA 2008 Special
Published: 25 Feb 2008
Earn vs. burn financial metric in the hospitality industry is far more rational
CRM in Travel USA 2008 Special. What is critical in managing a loyalty programme when different segments of customers deliver value at different rates over the short and long term?
According to Namrata A Patel, Director of Marketing, Red Lion Hotels the criticality is in knowing the difference.
"Knowing and understanding how your customers are interacting with your brand and at what levels. It is not enough to understand their stays and spend but their experiences and connection with you. It is important to expand the definition of high value to advocates and brand friends (not just the $$s they spend with you), especially considering the pervasiveness of the various social media that allow instantaneous advocates or detractors. Once you've identified them then you can find out what makes each segment tick and message accordingly," she said.
Patel, who was one of the speakers during the recently held CRM in Travel USA 2008 conference in New Orleans, spoke to EyeforTravel.com's Ritesh Gupta about loyalty programmes and much more. Excerpts:
Ritesh Gupta: An analyst talking customers perspective told me: Consumers have developed very sharp value-detectors while playing the loyalty game, and they recognise that the value equation has tilted toward hotel programmes. Do you agree that perception towards hotel programmes is better today as compared to frequent flyer programmes?
Namrata Patel: The 'what's in it for me' consumer culture is fully in place. Consumers are smarter in every facet of their buying behaviour and marketers have done a lot to ensure that this culture is thriving by offering something for everything; from getting your 11th manicure for free to points for having the oil changed on your car. Loyalty programme schemes are prolific and the hotel programmes are beneficiaries of that.
However, the value equation still leans towards airline miles vs. hotel points for merchandise or stays. As with everything else in travel, it depends on the segment; frequent stayers/prolific stayers lean towards points within the hotel programmes and infrequent stayers are happy just getting their 500 miles and being done with it.
Ritesh Gupta: It is being felt that airline programmes are a victim of their own success; they became so adapt at selling miles through their credit card and retail partners that they flooded the marketplace with currency. What are the learnings for hoteliers even as hotel programmes are said to be becoming the equal of frequent-flyer programmes in the marketplace?
Namrata Patel: Points and miles translate in to real currency at the time of redemption. 110K of Continental OnePass miles translates into a $10K business class ticket on Qantas from the US to Australia. That's a ridiculously low conversion rate but it's the position the airlines placed themselves in when frequency programmes were first established.
To mitigate the financial impact of this wacky conversion rate, award seats are incredibly limited. So, the airlines have flooded the market with miles that can't be redeemed resulting in consumer backlash and frustration. The earn vs. burn financial metric in the hospitality industry is far more rational so we're much more liberal in accommodation consumers who want to cash in points they've earned by staying/pending with us. This also applies to redemptions made with our third party partners.
Ritesh Gupta: Suppliers acknowledge that guests are more sophisticated plus beds and points are not as important as guests want more, making their own decisions. In your opinion what is the biggest challenge when it comes to executing CRM effectively?
Namrata Patel: In many spaces CRM is really Customer Revenue Management vs. Relationship. Relationships are built over time with a sense of continuity and require that parties like each other (at least in healthy ones). Relationships also require understanding and anticipating needs and they are two way not one. Most importantly a relationship is about having a connection, an emotional involvement with a brand. The biggest challenge in CRM is the relationship bit. How much do we need to know about the customer without becoming a stalker? What types of messaging to engage in without becoming imposing or invasive? How many touch-points? How many contact points? We have to look at having relationships with our customers not transactions and we need to figure out the line and try not to cross it. And never forget that the customer has a say and a stake in it. Take the relationship down the wrong path and your advocate can become a detractor in a hurry and they'll tell 5,000 people about it on their blog.
Ritesh Gupta: Do you think hotel loyalty programmes are user-friendly with loosened restrictions, removed blackout dates and increased earning options?
Namrata Patel: Not really. Loosened restrictions are one thing, complexity is another. Many hotel programs, due to profitability from partnerships have become aggregators of partners under the guise of giving more to their members thus creating very complex programs that only those already vested or those that really want to take advantage of the value equation will engage in. Many complex programs leave a big segment behind. In this day of information ultra-overload consumers do not have the time or the patience to dig through and figure out how to use a particular program. They'll leave or they'll take their miles and be done with it and ultimately the brand sacrifices an opportunity to build a relationship in this very transient and fleeting paradigm.
Ritesh Gupta: Do you agree with this opinion that the key for hotels lies in delivering a consistently excellent customer experience at the individual property level, and that's something that hotels have to recommit themselves to even before they begin capturing and delivering customer data points at the front desk, the kiosk and online?
Namrata Patel: Yes. At the end of the day we are in the business of hospitality and it really is about the experience during the stay regardless of the number of points/miles being earned. There is a longing for service in this world of automation. That's one reason the luxury brands don't have a need for loyalty programs to the extent that other tiers do. However it is service the way a guest wants it and it is about options and anticipation. When do guests what a kiosk to check-in and when do they want to chat about their day with a Front Desk agent? Oh and it's the same person at different points in time. That is the nature of the travel space and specifically the hotel space. Service is complex and for many an operational challenge but as with any product you can only paint the exteriors for so long before someone walks inside the house and falls through the floor.
Ritesh Gupta: How do you think loyalty marketers are leveraging the Internet's ability to build virtual communities to create niche networks of customers who interact with each other through a platform facilitated by the brand. For example, we have already seen some path-breaking initiatives from Starwood such as SPG.com?
Namrata Patel: Why? I laud hotel brands for staying on top of technologies and paradigm shifts but it is important to consider what we do. Virtual communities are really about where that brand is in that customer's life at any given point. For example, how often are consumers thinking about hotels when they are not traveling or have no travel scheduled? And how willing are they then to engage with others or with the brand when they are not traveling? On the other hand and to speak from both sides of my mouth for a moment it could be good for highly active program members. However, communities online tend to build themselves based on like interests and don't necessarily like to form if it is imposed or managed by the brand.
Ritesh Gupta: Companies can now get a handle on actually scoring customers by profitability and delivering offers that build relevence and value to those segments. Do you think the next challenge will be leveraging this data to fundamentally change the way customers perceive their experience with the brand?
Namrata Patel: At the crux of all of this are the brand and the relationship a customer has with a brand. The key is to connect/establish a relationship with the consumer and your brand and manage/maintain that relationship so at the points in time they have need for your product your brand is top of mind. If they like you and you don't do anything to screw it up they will continue to like you and more importantly be loyal to you. I'll give you a personal example.
I have a strong emotional connection with Barnes & Noble. It is the only place I go to for books. They have an excellent loyalty programme and a highly mechanised CRM programme. Of all of the mail I get, if it is from Barnes & Noble, I'll open it. I sit in their café and order online. I have the credit card along with the membership card and charge quite a bit on it for the $25 gift card I get when I spend $2500 dollars. I have never sat down to figure out the value equation. It is about the brand and what the brand gives me. I even forgive them when they send me a 10% off e-coupon the day AFTER I buy something, but I open their e-mails. This is all because of my strong relationship with this brand and where this brand fits in my life. That is what brands need to strive for. Build a connection and relationship and then execute strategies to manage that.
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simson said on 25 Feb 08:
Patel is very bright. He shows not only a deep understanding of the hotel business, but also what is happening now online and where the web is likely to go in the future.
So, when Patel says he has a "strong emotional connection with Barnes & Noble," I had to ask myself why I prefer Amazon over B&N. I don't know the answer to my own question, but my own buying habits probably reflect much about customer loyalty -- whether it's the book business or travel.
I might be wrong, but I seem to recall that Barnes & Noble wanted me to pay $25 to join its customer loyalty program. On the other hand, Amazon just assumed that I was a loyal customer with my first online purchase. Maybe I should give Barnes & Noble another chance.
In the book buying habits that Patel and I have, there is a lesson in there somewhere about loyalty programs and customer retention that could be of interest in travel and tourism.