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Case Study on Loyalty Programs
Question #1
The potential costs are referred to as the costs of goods sold as it is supposed. This means the cost of the approved procedure of the sold products. However, upon implementation of a Loyalty Program, several metrics are involved that helps in measuring the effectiveness of the Loyalty Program. These procedures include:
Redemption Rate
This involves the total number of people who are redeeming rewards that are being offered by a company. For instance, Intercontinental Hotels has over 3600 reward properties for customers with higher rates of redemption. The IHG group further provides various options for hotels, in which members are allowed to trade their points for staying at hotels that are outside the chain (CATHY,2020). However, the company believes that the flexibility of group redemption points will help in making customers more royal to the brand.
Additionally, some airline hospitality companies have increased their level of redemption by providing multiple ways of rewarding their customers, such as free air travel. The American Express Co. has been a travel industry that has been rewarding customers based on their points to buy travel through the American Express Travel website. This provides members the option of purchasing air tickets directly and book some hotel stays using their points.
Active Engagement Rate
This is another way of measuring the effectiveness of a Loyalty Program. Active Engagement can be calculated by dividing actively engaged people’s numbers in the Loyalty Program by the total number of customers. Active Engagement technique is used in showing the number of actively engaged people through the specific points that are redeemed. For example, Hilton Hotel has encouraged the participation of its customers through the HHonors Loyalty Program Technology. This program enables real-time updates and accessing the profile of customers at all 2200 hotel companies through websites, reservation centers, and customer services. This technological evolution has allowed Hilton to offer customized incentives to the customers based on their level of engagement through the HHonors Program.
Participation Rate
The participation rate can be used to indicate the total number of members that are taking part in the Loyalty Program. This can be calculated by dividing the number of program members by the total number of customers. Knowing the total number of participants helps in strengthening the relation with customers. It further inspires customers’ loyalty and boosts the growth, sales, and reputation of a company.
Moreover, Loyalty Programs are directly linked with the competencies in an effort to create a sustainable competitive advantage for companies. In this case, Loyalty programs allow companies to subdivide customers, thus assists in discovering profitable and unbeneficial customers. The program drops unproductive customers and further retains productive customers. The organizations further use various incentives to reward active members, which also helps in improving the reputation of a company, and growth. Conversely, a sustainable competitive advantage is attained when an organization develops a high-quality service and maintaining customer loyalty through their methods of rewards, compared to other companies that offer similar services. For instance, unlike the Hilton hotel that rewards customers based on their levels of redemption of points, the Las Vegas Casino provides a range of rewards to its customers that are often beyond merchandise, which includes more than 50 vacation packages. In this case, the Loyalty program of Las Vegas Casino provides higher customer competencies compared to the Hilton hotel, which offers limited incentives to the customers based on customers’ points.
Question#2
Several key competencies should be developed within a firm to execute the Loyalty Program Successfully. Core Competencies are used in differentiating an organization from its competitors, further allows the creation of competitive advantages of a specific company in a market place. Core Competencies are described as a particular set of skills, which are attained by a company. These competencies are part of some physical resources, such as financial assets. The key competencies that are required to be executed in the loyalty Program involve superior internet access, exceptional customer services, innovative cutting edge services, and quality and reliability.
Superior Internet Access
The act of having an advanced technological program will help the company to know the number of active members. For example, HHonors Loyalty Program is used by the Hilton hotel, which allows the company in targeting high-value and lower maintenance customers. The HHonors Program further provides an opportunity for active customers to be customized their rewards based on their points.
Exceptional Customer Services
Some hospitality industries should provide various customer services, which differ and are unique from other organizations. For instance, unlike airlines and hotels, casinos have highly excelled in the loyalty Program. This is because, Casinos offer a wide range of rewards to their active customers, which ranges beyond merchandise, compared to hotels and airline that provides limited rewards to their customers, which involves access to various hotel rooms and free travel.
Quality and Reliability
High-quality services and reliability are the concepts that are used by many hospitality organizations to obtain the long-term loyalty goal of a customer. This is because providing quality services and products will make customers recommend the company to friends and family, which further in attaining a remarkable reputation of the company. For example, Intercontinental Hotels have various leading brands compared to other local hotels, which also makes the intercontinental hotels gain their market-leading position of offering quality food and lodgings, which are needed by the customers. This has helped in building the industry’s reputation that enables higher prices to demand, thus, enjoying customer loyalty.
Innovative Cutting Edge Products
Companies that are considered innovative often have a competitive edge in the market place. For instance, Intercontinental Hotels have the concept of rewarding their customers based on some redemption points. In this case, the intercontinental Hotels trade their points with the customer’s stay at specific hotels. Also, airline hospitality industries have acquired a cutting edge by providing free air travel to their customers based on the number of points earned by the customers. Besides, Hilton Hotel has offered an HHonors Loyalty Program, which encourages the participation of customers by withdrawing non-active members within the program. The cutting edge concept is used in providing a competitive advantage within some hospitality industries.
Question #3
There are various ways of adding value to an organization. This involves providing better quality services and products, increasing convenience, improving customer services, and offering planned discounts to the customers.
Provision of Better Quality
A company should ensure that it has offered better quality services and at the same price compared to its competitors (Core Competencies and Resource Allocation, 2020). Quality management can be defined as the action of finding out and giving out what is needed by customers at a faster rate than other competitors. However, quality is characterized by a specific need of a customer and the ability of satisfaction attained compared to other competitors. Providing better quality helps in building a company’s reputation since most of the customers are attracted to the unique brand that it offers.
Increase Convenience
Building a brand helps to ensure a quality reputation, which further prepares customers to pay for the catered services or products. The act of providing convenience often adds value to the organization since it makes customers pay an extra amount to the products that they have attained in a faster way, thus has saved their time.
Improving Customer Services
Organizations can increase customer services by handling the complaints properly from dissatisfied customers and also increasing customer returns. Improved customer services will help in building trust between the company and the customers. Customer services further assist in enhancing brand awareness, thus gaining the loyalty of customers, which drives more sales and attract new customers through valuable recommendations. An organization should ensure that the customers’ satisfaction has been delivered effectively in both online and offline platforms. This will assist in adding value to some organizations such as hospitality industries.
Offering Planned Discounts
Companies can cater to discounts of various services and products by finding ways of selling at a higher rate and high volumes of products to many customers at a lower price rate. For instance, intercontinental hotels offer their discounts to customers based on the redemption points, which are further equated to the number of stay in the hotel of their choice. Also, airline companies provide free air travel to customers based on the acquired points by some customers. Such discounts help in adding value in an organization, which further attracts more customers, thus building the reputation of an organization.
Moreover, a company needs to create appealing referral programs in order to expand the pool of customers, thus ensuring that the organization has successful customer loyalty. It is easier to strengthen the companies to strengthen the bond with new customers since reliability and trust are established. It is essential for an organization to diverse programs, which will offer intangible benefits to the referrer. This will help to ensure that customer loyalty is thriving in an organization.
Additionally, a company needs to create responsive sites. The company should invest in creating sites that are rich content-wise and pleasant to view, assist customers in navigating the site. This further assists in making customer loyalty successful.
Nevertheless, the company needs to formulate a well-strategized communication system. This will help in building a relationship between customers and the company (Canina,2006). Strategized communication should occur through specific apps, e-mail campaigns, and social media. Social media assist companies in monitoring competitor behaviors, which further helps in evaluating active customers through the reward programs, thus making customers feel valued within the organization. Regular communication will assist in modifying loyalty programs in an organization.
Nonetheless, rewards and discount programs should be implemented by a company. The awards and discounts programs help in branding a company. Thus, such programs are used as a measure of giving customers more reasons for going back to a specific company. Rewards assists in building the loyalty of customers. Hence, making customers become overtime business builders through the act of paying premium prices, purchasing more products, and bringing new customers to the company.
References
CATHY, A. (2020). Hospitality Strategic Management Concept and Cases [Ebook] (2nd ed., pp. 1-582). New Jersey: John Wiley & Sons, Inc., Hoboken .
Core Competencies and Resource Allocation. (2020). [Ebook] (Chapter 9, pp.284-290).
- Canina, C. Enz, and K. Walsh (2006). “ Intellectual Capital: A Key Driver of Hotel Performance ” Center for Hospitality Research Report.