Is customer loyalty dead?

Q: I read last month’s column about introducing a loyalty scheme, but then I’ve also read a recent independent study saying customer loyalty is dead. Now I am confused – should I have a loyalty scheme or not?

For the purposes of my readers, the question refers to the independent study by FKC, which took a look at UK consumers and asked them about loyalty. Statistical highlights included 51% of consumers being unable to identify a favourite brand and 74% feeling confused by brand advertising and messaging.

The survey was not specific to any particular sector, but does highlight how modern media and brand accessibility has impacted loyalty. There’s a further study which also offers an interesting insight; one by Salesforce which highlights that 54% of consumers don’t believe that companies have their best interests in mind; that 84% like to be treated as a person and not a number; and 95% saying they are more likely to be loyal to a brand if they trust them. Of course, neither of these surveys are specific to hospitality businesses or hotels, but they do offer a good broad stroke assessment of the current state of business loyalty.

Last month’s question specifically advised introducing a loyalty scheme, in direct response to the hotel’s own customer feedback. If your customers want it, it doesn’t matter whether the global trend is non-loyalty, you are directly responding to what your guests want. Of course, if you have never asked what your guests want, it might be adding to the confusion, so if you can, I’d make your first port of call a guest engagement process to see what you can do better and whether there would be interest in a loyalty scheme.

Generally speaking, hotels can follow and make decisions based on global and national buying trends, but I would always advise some caution too. You are not selling a product – at least not in the sense of a tangible item; instead, you are selling an experience and this means there is more scope for guest loyalty when you are delivering a consistent, personal service. Add to this the fact that my previous advice advocated designing a scheme that adds to the bottom line and frankly, you’re not losing anything by having one, even if it isn’t that well-used. The other thing to remember is that customer loyalty is a Holy Grail for marketing, and there are other quick-win strategies to deliver sales and occupancy too, so make sure all of your marketing is consistent and regular.

The other challenge with surveys like this, and your own decision-making process, is how you define ‘loyalty’. For example, I recently read an article which purported that Coca-Cola considers a customer ‘loyal’ as long as they purchase at least one Coke product per year; yet 74% of Coke purchasers also purchase Pepsi products – a direct competitor. So too will your loyalty be the same. A business traveller who stays every single week can be considered ‘loyal’, but is this personal loyalty (they select your hotel themselves), or Corporate loyalty based on the RFP process and a good business deal? Similarly, if you’re guests are typified by week-long stays, it could be a full year before they demonstrate any type of ‘loyalty’. For me personally, I tend to ignore the phrase ‘loyalty’ and as I encouraged in my previous article, view it as a process through which to enhance, encourage or change specific guest behaviours. The most successful schemes will deliver new or improved guest behaviours, such as more frequent stays, higher expenditure while staying, or extended periods of stay. Yes, you do want each customer to opt for your brand instead of another, but you also want them to make other positive changes too.

Hotels have an advantage over other brands that comes from delivering an experience. Whereas other sectors need to constantly and consistently deliver their brand to a potential consumer to encourage initial and repeat purchase, the longevity of each stay with you makes it easier to etch your brand into their brains for future visits. That makes it easier to build loyalty once they have made the initial purchase. Interestingly, trust is a core part of brand loyalty – with or without a loyalty scheme – so clarifying guest expectations and then delivering on those expectations is essential.

Finally, consider what you know about ‘loyalty schemes’ and then throw this out the window. 90% of the time, when I ask someone to describe a loyalty programme, they default to a points-based system like a Nectar Card or a coffee shop stamp card. Your loyalty scheme does not need to look like this or be this complex. It can be as simple as identifying a current guest’s behaviour, defining a realistic and relevant target response that you want e.g. a repeat visit and then giving the guest a voucher, or actually booking them back in at the point of departure. No costly cards or technology, just simple customer service with a defined objective!

By Angie Petkovic. This article first appeared in the October 2018 issue of Hotel Owner