Ring in 2013 With Loyalty Marketing

B GradeI am writing this as the first in a series of posts under the title ‘This is Good Loyalty’ as a means to recognize companies who do a good or great job of practicing loyalty.

This inaugural post will go to a loyalty fav of mine – the Starwood Preferred Hotel program (SPG). The program includes Sheraton, Weston, Aloft, the W Hotels and Regis properties (https://www.starwoodhotels.com/preferredguest/index.html).

The reason for my note concerns issue resolution – a component of even the best loyalty programs where customers are let down. As Dennis Armbuster put it in the most recent issue of Colloquy (Volume 20 Issue 4/2012 pp2), ‘The single largest factor in driving customer loyalty may be the quality of your employees”. Further Maritz suggests in thier recent white paper Critical Factors To Ensure a Positive Customer Experience that  “A customer’s experience is the most critical factor in building or destroying true loyalty”. Some statistics they provide to back thier point up are:

  • 60% of Canadians reported customer service is the most important factor
  • We will spend an average of 7% more if we believe servcie is excellent
  • 85% are willing to pay more to ensure superior customer service

Employees are an ever more important asset in a comapny’s efforts to build stroner customer loyalty.

I stayed one night at a Sheraton property in Buffalo over the holidays (New Year’s Eve). We dropped our bags off before dinner and left for the evening. Upon our return we had a great deal of trouble getting any sleep because of the noise of the fan in the room’s wall unit heater. If we turned it off it completely it became too cold and even if we kept it on at the lowest level it was too loud for me to sleep. Needless to say I did not get a good night’s sleep. I was exhausted and angry but didn’t say anything to the staff at the counter at checkout.

But a few days later I received a survey from SPG about my stay. There were enough open ended questions that allowed me to describe my issue. I have only just recently acquired my SPG Platinum status so I can’t say how they would have responded to my note without this program designation but the response was lightening quick. I got a reply from the actual hotel manager within a few hours. He apologized for the problem and credited me with 5,000 SPG points (a free nights stay at the same hotel would cost 7,000 points). And he let me know that they are renovating the hotel in February and hoped that I would come back. Here are four things they did to make this right for me:

  1. The response was timely – it was very fast given I only used a survey to communicate my displeasure
  2. The response came from the person in charge. I think we all feel better when the person responsible for the department/building/company replies directly. It just feels more deeply heard if that person is the contact.
  3. The resolution was fair value. An ‘okay’ response might have been to credit me 1,000 points. It’s a nice round number and a thousand sounds ‘fair’. But if the ‘credit’ is too low, it runs the risk of being construed as insulting and make the situation worse. But SPG gave me value something closer to what I would have thought as fair compensation for a poorly delivered service experience. The 5,000 SPG is almost a full free night (A ‘A’ score of course would have been to credfit me the full night’s cost or 7,000 points) .
  4. They are resolving the problem. I know they aren’t renovating the hotel because of my complaint but when the problem I faced is being fixed, it makes me feel as thought they get it.

Can You Make A Good Loyalty Program Better?

I was shopping a few weeks ago at Chapters book store and my Rewards card was up for renewal. The program called irewards has a $35 annual fee that provides discounts on purchases throughout the year as a member (40% off bestsellers instore; 10% of books instore; 5% off virtually everything else in the store; and up to 5% of books online). With enough spend members can receive enough discounts to cover the cost of the card fee.

Chapters also has a second loyalty program – plumb® rewards. This is a free points based program where members earn 10 points for every dollar spent that can be redeemed towards instore purchases (2,500 points = $5; 4,500 points = $10 … up to 35,000 points = $100). You can’t be a member of both programs so choosing which is better can be confusing for customers and store staff.

I buy lots of books from Chapters each year. During the renewal discussion at the pay point the store associate looked at her computer screen and said the rewards program was better for me. She didn’t explain why so I asked how much I ‘saved’ over the past 12 months. She took a bit of time to toggle to another screen to tell me it was around $90 in discounts received. So for me, the fee based rewards program was the better deal – $35 card fee, earned $90 in discounts = $65 in the black.

I paid my new annual fee but left wondering why did I have to ask how much I had saved? Why was that information on a different screen? Wouldn’t if have been more powerful if the discount total was on that initial screen and the associate’s script went something like this: “Mr Thompson, you received $90 in discounts last year with the irewards program. Would you like to renew again this year?”  

So two things could change at Chapters – programming to bring that information to the first screen and scripts to position the renewal discussion around the amount of discounts received…when it makes sense to do so (more on this later). Once they have that in place here’s what else Chapters could do to get more people to earn back the cost of the program fee:

  • Tell me how I am doing. Let me know when I am at key stages – i.e. the halfway point or the 90% mark of earning back my fee
  • Celebrate. Congratulate me when I reach the point of covering the card fee cost – especially if I do so with lots of time left before renewal
    • And remind me going forward that everything from here on in means I am in the money
  • And if the path I am on looks as though I will be just shy of the mark, let me know early enough so I can possibly do something to get there

Of course this is easier when the customer is on track to hit the target or has already done so. What do you do if it’s clear they won’t? Leave them alone and hope they renew next year anyway? No. Not reaching that goal – earn program fee back in savings/discounts (or retaining some special customer status for other types of loyalty programs), can not only mean they won’t renew, it can leave customers with a bad taste so you lose all of their business going forward (how disappointed would you be to learn you no longer qualify for ‘Platinum’ status and the perks you enjoyed are gone).

Chapters has already done a great job to address this issue. Their plum®rewards program allows customers to get something extra (points) for their spend and it comes with no fee. A great defence is a great offense.

What else could they do for lower spending irewards members?

  • Help them get to the target. If you can tell early on a customer won’t make it to the target, look for ways to help them. Offer this segment a sale or double points on their next purchase. Something to make these customers feel the goal is within reach. Even if they don’t get there, they will appreciate your efforts
    • Send a survey to or contact directly higher value long term customers. Is there a reason they are down this year that you can resolve? Or is it a structural change in their behaviour that you cannot fix – i.e. did I have a set of triplets and have no time to read anymore? If you do put added effort to help this segment of customers, you probably don’t want to spend time/$ on the structural change group
  • For longstanding high value customers who fell behind this year, you could discount/waive the fee or let them retain their status for one year. Perhaps last year was an aberration and a year’s grace will motivate them to get back on track…in your program and not someone else’s.

So what lessons can we all learn from this? Here are a few suggestions:

  1. Make customer value clear. Don’t leave it up to the customer to do the value math. Help them see what they get if they are paying a fee or joining your free program. If the customer isn’t clear on the value they receive, educating them at renewal time is probably too late.
  2. If the value picture isn’t rosy, fix it. If the net benefit for members isn’t going to be positive or if they aren’t going to qualify for their preferred status level, try and help them find more value in your program. And if they can’t reach the target within that structure, be mindful about how they exit – this is a critical time to do something so you don’t lose them for good.  
  3. Treat your customers better. I say better instead of well because I think most companies believe they already treat their customers well. I don’t want to argue the point but rather suggest we can all do a better job. A ball dropped here or an opportunity to assist not taken and customers feel under appreciated. Find easy ways to change that.  
  4. Surprise and delight.This phrase is so overused in the CRM/loyalty community that it’s lost most of its power. Here are two examples of companies using this strategy correctly:
    1. mypanera rewards program rewards customers at irregular times instead of structured intervals.  
    2. Best Buy offers some of their best customers a surprise screening to a big movie release (and yes, BB is not doing well right now but that’s my point – few obvious examples of good S&D)
  5. Do More for your Loyal Customers. Ask your (best?) customers what more could you do? You will surely get answers back that you simply cannot implement or are too costly, but I am confident you will find a few little gems that you can that are affordable. Even if you can only do so for your best customers.