Last Friday IHG Rewards Club hosted a ‘loyalty summit’ in New York at the Kimpton Eventi that I attended.
It was a small group, in an intimate space, although super cool — directly outside the window they control a bright screen where their program logo was displayed.
There was a great conversation around loyalty with some very thoughtful people — although I’m not sure why they held the event (and indeed it was their second, after an earlier one in London).
They certainly looked to be trying to position themselves at the forefront of loyalty although with such a small group I’m not sure they made much progress there and more fundamentally while they seemed to have the ideas right IHG Rewards Club itself seems to suffer a cognitive dissonance – a belief that they’re executing on these ideas when they do so less than most of their competitors.
IHG produced a booklet given out to participants: Meaningful Membership: Transforming Membership in “The Age of I”. Here’s what I thought was the real money quote:
Meaningful membership makes money because members who are truly loyal buy more often, become more committed to the brand, become less price sensitive while becoming more resistant to competitive offers, are more willing to recommend, and are more profitable… Enthusiasm is an individual choosing your brand even if their second choice brand costs less. Brand enthusiasts perceive the brand as having trustworthy brand value. The higher the trustworthy brand value, the greater the brand contribution to the organization’s Trust Capital.
Back in March Marriott CEO Arne Sorenson was quoted as saying that loyalty comes down to quality and value. I told him why I disagree, and I basically heard my arguments being repeated back to me here.
Some of my takeaways from the conversation:
- IHG Rewards Club says they have 98 million members. That’s a lot more than I expected, so I’m a bit skeptical of the number. It would place them as the second largest program behind American AAdvantage.
- Readers of the Wall Street Journal are about ambition or success so that’s how they position ancillary products.
- There are ‘attitudinally loyal’ customers who do not buy frequently. The Porsche Owners Club has members who do not own and will not ever own a Porsche. But they are tremendously brand loyal. Communities offer meaningful membership. I wonder what this says about the 25 stay Hyatt Diamonds who are being discarded next year.
- It was interesting that American Express was on the panel — but not Chase or MasterCard, who are IHG’s current credit card partners in the U.S. American Express reports 10 million members in the U.S., which I took to mean Membership Rewards customers.
- There was certainly discussion of customers that are ‘margin negative’ — about anticipating those customers, and narrowing offerings to appeal to target customers.
- David Sanabria from Ford emphasized that they view themselves have having “responsibility to be relevant and loyal to those who we talk about being loyal to us.”
- Delta was noted for thanking customers not only for being loyal SkyMiles members — but offering onboard thank you’s for corporate customers (“thank you for being a Coca-Cola employee with Delta.”)
- When a customer complains, recognize their issue and address it. Loyal customers usually aren’t looking for ‘distributive justice’ compensation. They want to be heard and to make sure the issue doesn’t repeat. So address the issue and fix it. At a hotel, if they had an air conditioning issue on their last stay, welcome them on their next stay noting the problem they had and assuring that their room has been checked and the air conditioning works. When a customer is dealing with a problem over the phone, keep the first person who answers on the phone with them so they don’t have to explain their issue over and over when getting transferred.
Ultimately I think the basics of loyalty are the same today (and in the future) as they have been in the past, no matter how many consultants tell brands they need to change to be relevant to millennials. Loyalty marketing is about recognition (elite program) and reward (earn and burn).
Customers are increasingly cynical of institutions and brands, and that is the fault of brands – devaluations without notice, enhancements that are really devaluations. Too many consultants are telling programs they need to offer low value rewards that are easy to claim. That’s a cop out. It’s important to demonstrate value from the program quickly to earn credibility with customers. But low value rewards demonstrate low value. The key is to offer real value and do so authentically.