Many years back, I wrote this piece about how loyalty programs are often disloyal to customers. This article by View from the Wing got me thinking back again to the days early on in my career, learning the nuts and bolts of marketing theory. Funny how many of the principles still stand. So what’s really going on here? Similar to credit card devaluations, are we also see hotel loyalty program devaluations? Let’s have a look.
Devaluing Loyalty Programs
How do you define the world devaluation? In my opinion, a loyalty program devalues when a large majority of its members see a plunge in the perceived quality or quantity of rewards that they might have earned for their existing level of participation with a loyalty program.
I refer to this article published in Harvard Business Review. Joseph Nunes and Xavier Dreze, back in 2006, wrote about how loyalty programs can help customers ‘keep the faith’. One of the bullet points in that article still stands true. If you refer back to the article from View from the Wing that I cited at the outset, you’ll see what I’m talking about. The HBR article by Nunes and Dreze talks about the same: “Don’t promise what you can’t deliver.” In short, loyal customers will struggle to ‘keep the faith’ or be loyal if you cannot deliver what you promise.
When a loyalty program pledges to reward customers with preferential treatment (shorter lines, expedited delivery, special toll-free numbers), it must ensure that the services provided through these special arrangements are better than the services available to regular customers. This is particularly true when customers can easily compare the two levels of service.
Now, compare this with what Gary wrote for View from the Wing and you’ll see why ‘Bonvoyed’ has become a popular term off late.
An Autograph Collection hotel in Detroit – the Hotel David Whitney – is playing an interesting game with denying elite breakfast benefits to guests, and it underscores just how confusing and messy the Marriott Bonvoy program has become.
- Autograph Hotels in the U.S. have to offer a Welcome Gift of points or breakfast if they’re a resort.
- If they’re not a resort, they can offer points or a $10 food and beverage amenity.
This hotel is not a resort. They offer points or a $10 food and beverage amenity for use at their market.
U.S. Autograph Hotels generally have club lounges where Platinum members and above can have breakfast. If they do not or the lounge is closed – and they’re not resort – then they have to offer points or restaurant breakfast.
Complexity v/s Simplicity
The biggest problem in this instance is the complexity. The fact that a property has enough wiggle room to simply not provide a benefit to an elite level guest. The worst part is that loyalty programs are well aware of this. Is the complexity by design or by accident? If you refer back to Nunes and Dreze, you’ll exactly see why Marriott elites aren’t a very happy bunch off late.
To make matters worse, customers do not compare averages with averages; they compare extremes with extremes. That is, they notice the speed of service only when they are not being served promptly.
Silent Devaluations
I hope we’re not entering into an era of silent devaluations. The crystal clear devaluations are the ones when a loyalty program simply does away with award charts or ‘simplifies’ or ‘enhances’ a program, which is simply Marketing jargon for announcing a devaluation.
The new era of silent devaluations, if it’s upon us, would be one of multiple if then statements, bullet points and asterisks. Yes, you can have free breakfast, but …… you may get upgraded, but…… Yes, you can get lounge access, subject to ….. You get the drift.
Now, why does this matter? Let’s say a customer signs up for the Marriott Bonvoy Brilliant card, paying a $650 annual fee, thinking that Platinum elite status would give him/her complimentary breakfast. Marriott Bonvoy says, “not so easy“!
Despite all its shortcomings, there’s one reason I’m still loyal to the Hilton Honors program. As a Gold and then Diamond elite member, I’ve largely received benefits as expected and for 10+ years I’ve only run into minor issues here and there. Also, I’ve never run into a property that has denied the complimentary breakfast benefit (only outside the US after changes to the program in 2020).
The Pundit’s Mantra
One can understand that hotel chains and airlines are businesses looking to deliver value to their customers and shareholders. There’s always a tussle between internal teams. Marketing is always looking to deliver more value to customers while finance is looking to measure the perceived value that is being delivered. The push and pull of this tug of war often determines the quality of the loyalty program. If there’s a fine balance, then it’s a win-win for both customers and the business.
However, I still don’t think it’s too much to ask for simplicity and clarity when it comes to who gets what as an elite member. As paying customers, complexity benefits the business, simplicity benefits us.
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