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3 Tactics for Leveraging Loyalty Programs to Improve Retention


In years past there were not many loyalty programs within the lodging and restaurant industries. Loyalty programs used to be able to stand out simply by existing and providing a reasonable return in the form of free rooms or meals. They were created as ways to increase brand retention and acquire new customers due to the benefits offered. However, within lodging and restaurants, loyalty programs became commonplace among large hotel chains and even the smaller regional groups. And the benefits offered by all of these companies were typically the same, so it was difficult for the consumers to differentiate amongst the loyalty plans and pick one for the longer term. It was simply an occasional free room or meal, but was not likely enough to keep the traveler/diner loyal to only that particular brand.

Given the vast number of loyalty programs, hoteliers and restaurant owners must adjust their tactics to stand out from the crowd and improve customer retention. This article from SailPlay will discuss how the hospitality industry can do just that.


1. Developing Multi-Channel Connections

Consider Chipotle’s tactic of offering an in-store program for loyalty and an online system. These two are not interconnected, so Chipotle is essentially in competition with itself. Lodging and restaurant brands should instead take the omni-channel approach to loyalty, where the customer’s desired actions (transactions, shares, etc.) are aggregated together so they can be properly rewarded. Linking two systems helps cover the flaws inherent with a physical card-based loyalty program. Using a “punch card” system without linking it to an online solution means customers will be upset when they lose the card, especially if they were one purchase away from their freebie.

The better approach is to tag the physical cards to some sort of customer ID, whether it’s their email or phone number, so the customer’s data can be tracked over time. A more coordinated approach eliminates headaches for the customer, and provides workers with a simplified way to check potential rewards.


2. Personalizing the Experience

The long-term fortunes of a restaurant or hotel business can be improved through personalized experiences for the guests. Are diners treated as individuals, and given personal care throughout their meal? Do the front desk staff remember the names of repeat guests, and do their best to accommodate non-standard requests. There’s considerable opportunity for introducing more personalization within loyalty programs as a method of boosting retention and satisfaction.

Based on our data, we know that the right notifications could improve involvement in the loyalty program from the regular 10-20% up to 80% of the active customers.

Personalized messages could give you up to 40% more clicks to the loyalty program actions (rewards redemptions, friends invitations, etc.), if you use the information about the customer's current amount of bonus points within a promo email.

Some hotel chains such as Arbor are personalizing the loyalty program to the point where room rates are directly affected by a loyalty member's status. So “John,” who reached a certain status within the loyalty program, will see discounted rates compared to “Mary,” who has not joined the program. In order to offer such a discount, the hotel would first need to tie a value to each type of reward member (usually based on how frequently and/or recently they visited) and then offer a corresponding discount. Ideally, the hotel could adjust the discount percentage based on room demand.

If a loyalty program is integrated with the POS or website, then it has access to a trove of data that is ideally suited for personalized rewards. The system could, for example, recognize if a traveler orders room service during every visit, and then present a steep discount for future in-room meals. Perhaps a family likes to frequent the same restaurant every Sunday and order dessert. Personalized loyalty would mean offering them a free dessert coupon on Saturday in order to anticipate and encourage their upcoming actions. It’s the relevance piece that is essential, where the rewards are tied to the guest’s actual actions. The right notifications can improve engagement in the loyalty program from the typical 10-20 percent up to 80 percent of active customers.

Personalized messages are another key component for loyalty. SMS and email systems should be integrated with loyalty data, so if someone is one meal away from earning their “free burrito,” the system could send a text saying “You’re almost there!” or similar messaging. Customer referrals can also be personalized in such a way that when the number of referrals are tied to certain rewards. Personalized messages could give you up to 40 percent more clicks on loyalty program actions like rewards redemptions and friends invitations.


3. Making it a Game

Adding a layer of gamification to the loyalty program can boost retention metrics among guests for dining establishments and hotels. There’s myriad tasks the guest can perform that could increase their loyalty points/rating. They could publish online reviews, for example on TripAdvisor or Yelp or refer customers to the loyalty program, and earn additional points. Taking these actions into a video game-style format can create a “mission-based” loyalty program, where the guests can complete various tasks in order to get further and further into the rewards levels.

Adding a “leaderboard” to this gamification can also add a layer of competition to the loyalty rewards. Build a one-week or one-month leaderboard that shows the position of various rewards members based on their actions, and provide enticing prizes for the eventual winners. Combined with rewards that are tangible and meaningful, such gamification can further increase retention and loyalty as the consumers become more invested in their interactions with the brand.

Companies that are conducting loyalty programs effectively are able to present unified multi-channel rewards that are relevantly personalized to each individual. The payoffs for these businesses can be immense, as the goodwill generated through the loyalty efforts is discussed on social media and amongst the loyalty members’ friends, helping to drive revenue growth.

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