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Questions On Guest Loyalty

Written by: Jeffrey Summers

Article Overview: A readers question about guest loyalty. Is it really an effort to encourage guest loyalty or just a frequency scheme disguised as a loyalty program?

Questions On Guest Loyalty

Question: Since most loyalty programs involve some sort of comp (discount) what do you propose instead as the incentive?

Answer: Whatever they want - except my money!

If you want to be successful long term, you have got to have an ongoing conversation with your guests in order to understand:

1. who they are (segmentation) and
2. what they want from their relationship with you - period!

Loyal guests (read raving fans) will tell you that they are not looking for discounts. They are looking for things from their relationship with you that mean/bring more value to the relationship - not their wallet. Things like members only events, information, acknowledgment of their contribution to your relationship, first offerings, input into the process, to be a part of things going on, etc. This is about relationships, not money! If you continue to play in the price/money mud pit, you will never get out without some major pain.

Marty Neumeier wrote a book late last year called "Zag"� (must read!) and in it, he uses the same six reasons why loyalty programs don’t work, as I have used to denounce the use of discounts in general.

1) Most Loyalty programs are based on discounts, which ‘train’ existing customers to expect lower prices and wait out normal pricing,
2) They attract loyal customers who would happily pay a premium,
3) They discourage new customers by making them feel punished or excluded,
4) They encourage competitors to retaliate with me-too programs,
5) They reduce profit margins, which
6) Reduces the company’s ability to serve customers at formerly higher levels.

Three more of my own...

7) They dilute your Brand.
8) You become a commodity due to your use of the same discount strategy everyone else uses and this destroys your attempts to differentiate yourself.
9) They drive your guests to your competition because now guests are shopping your price to see whether or not they can beat it.

The truth is, loyalty can’t be programmed.

Two more of the biggest factors why discounts are not a long term strategy that we have yet to cover are the lost opportunity cost, and loading up on the "low return"� guest versus the "higher return"� guest, in terms of their long term profit contribution to your operation.

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Article Tags: acknowledgment, attempts, commodity, existing customers, loyal customers, loyal guests, loyalty programs, marty neumeier, mud pit, offerings, price money, profit margins, raving fans, relationship, relationships, segmentation, truth, wallet



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