Initiated in 1981, loyalty programs were introduced by American Airlines in response to competitive pressure following the deregulation of the air transport industry. By and large, the intricacy as well as the competitiveness of the contemporary world means that consumers are offered with an amazing range of options for just every business deal. Apparently, the number of first-rate competitors even in alcove sectors is astounding. As a result of this kind of competition, the consumers are left with too much choice, considering the total size, variety and myriads of opportunities that present themselves.
In most cases, loyalty programs are simply viewed as mechanisms to mine data. This means that the main purposes of the programs tend to be masked by the regular hunt for more comprehensive information (Deighton & Shoemaker, 2005). As a result, a number of the programs are placed in great dilemmas. Usually, the hotels involved in loyalty wars require clients’ details. This goes a long way in assisting them to provide personal pertinent reward programs that the guests anticipate. However, this quest for more information is likely to be miscomprehended.
In this regard, the solution lies in the fact that the Hilton Honors program ought to remain in the background as part of a large experience of a client’s stay at a Hilton Hotel. Moreover, research has constantly indicated that customer satisfaction does not quite have the effect on customer loyalty as it was thought previously.
As a matter of fact, the top customer segment, business travelers, depicts the least amount of loyalty of all travelers. This is a clear indication that a customer does not simply come back because of being satisfied with the service. As a matter of fact, it was noted that the leading factor that engages the loyalty of clients is the amenities provided as well as the designs of the hotel.
The loyalty programs provided by the competing hotels are somewhat different in one way or the other. For instance, in the membership offering for the major business class hotel chains in 1998, the offers were varied (Deighton & Shoemaker, 2005). For instance, Starwood gave membership restrictions of one stay per year to remain active. This was the basic offer, which would earn a guest two Star points equivalent to $1. On the other hand ten stays or twenty five room nights annually earned a guest a medium stay (Deighton & Shoemaker, 2005).
The Hilton programs furthermore offers a guest one stay per year to stay active-Blue (Deighton & Shoemaker, 2005). Four stays in a year would earn a medium, resulting in 50% bonus points earned. In addition to earning the points, a guest was entitled to 500 qualifying stay in addition to earning the points (Deighton & Shoemaker, 2005).
Hilton Hotel Program Justifies Its Costs
The Hilton Hotel program seeks to differentiate its loyalty program by ensuring that it is an element of larger rational value design. It is first projected to the customer before it is expected to return in the form of repeated visits. By and large, it is displayed to the member of the HHonors as exceptional relations with the clients (Deighton & Shoemaker, 2005).
Additionally, Hilton Hotel product is differentiated from other products by the fact that it provides the personal service that drives loyalty. In many ways, it is competitive with offerings of other hotels. However, it is worth noting that large amounts of resources that are needed to compete on points alone can be directed to the development of other client databases as well as the training of staff.
This would be instrumental in providing customer service that will be the value proposition that drives member loyalty (Deighton & Shoemaker, 2005). Eventually, with the increase in customer knowledge, the Hilton Hotel chain will be in a better position of offering rewards that are tailored to the desires of the clients. This goes a long way in reducing unnecessary dilemmas.
What Starwood is Trying to Do, and How Jeff Diskin Should Respond
The frequent-guest proposal which was declared by Starwood Hotels basically increased the stakes in the loyalty program arena. This resulted in increased costs for all the players in the industry. This is mainly because of the struggle by hotel chains to match or beat their programs. In many ways, this places Hilton Hotel in a major dilemma.
All in all, the best thing that Jeff Diskin should do is to make wider the incentive offerings that can appeal to a bigger segment of the population. Otherwise, the hotel chain stands to lose any product differentiation that it benefits from, in comparison with other hotels (Deighton & Shoemaker, 2005). Additionally, Jeff Diskin should avoid competing in the point for point rewards war, and instead focus on positioning the hotel chain as the best when it comes to the provision of a great experience to the loyalty members. This will go a long way in setting Hilton HHonors apart from Starwood, as well as other competitors.
Additionally, the hotel chain ought to take a fundamental responsibility in coming up with sustained loyalty from each and every member of the reward program. This will go a long way in making the hotel the best choice in the hotel industry.
To sum up, human beings are very multifarious emotional creatures. In this regard, the more intricate, complicated and confusing the variety of alternatives on offer, the more enthusiastic people are to offer their liking and allegiance to particular businesses. Therefore, it is of great importance for business organizations to maximize customer loyalty, since it is a fundamental dynamic effect on business operations. Since if well implemented, it creates a remarkable competitive advantage, improves the morale of personnel and lessens the capital costs.