1 Trends Assessment “Virtual Rewards” November 16, 2012HT-344 Hospitality and Tourism Marketing and Sales By: Jordan Flasch, Ian Ross, and Patrick Tierney
2 History of Loyalty Rewards Maurice R. Franks once said “Loyalty cannot be blueprinted. It cannot be produced onan assembly line. In fact, it cannot be manufactured at all, for its origin is the human heart-thecenter of self-respect and human dignity. It is a force which leaps into being only whenconditions are exactly right for it-and it is a force very sensitive to betrayal.” For decades nowcompanies within the Hospitality industry have been focusing their efforts on creating moreloyalty with their customers. The trend of loyalty programs can go as far back as the stone- agewhen the trade was conducted through the barter system. However, as globalization emergesand as the world economy begins to evolve,so will the loyalty program trend. In 1896 “S &H Green Stamps” was formed by Shelly Hutchinson and Thomas Sperry withthe idea to sell stamps to retail organizations. S &H Green Stamps gained great popularity in the1930’s and 1940’s.Retailers purchased the stamps from the operating company, and then theydistributed the stamps and gave them away as bonuses to shoppers based on the amount acustomer would purchase. As the trend caught on S&H provided the customers with collectionbooks, with each book contained 24 pages and each page was worth 50 points. Shoppers couldthen exchange filled books for premiums either by the S&H catalog or general store. Everypremium was assigned a value expressed by how many filled stamp books it took to get thatitem. The public would not see a drastic change of the loyalty programs until the late 20 thcentury. American Airlines introduced the first frequent-flyer program in 1981. Taken from thefrequent flyer website http://www.frequentflier.com/programs/history-of-loyalty-programs/“The goal: Retain AA’s most frequent customers by rewarding them for their loyalty. (It issignificant that FFPs were originated by AA, then and still an industry leader in both marketingand computer systems.)The tactic, specifically, called for tracking members’ flown miles (as ameasure of their revenue contribution to the company), and awarding members free tickets &upgrades (the rewards).” In order to meet customer’s needs American Airlines formed apartnership with different hotels and car rental companies such as Hyatt and Hertz, and not tosoon hotels began to accumulate their own reward programs. The first hotel to begin its own reward program was the Holiday Inn in 1983. HolidayInn’s Priority Club program stated after 75 stays, a member could expect the following: twoairline tickets to Europe, one week’s hotel stay in Paris, and one week’s free car rental. Allthough hotels and airlines have different reward/loyalty programs both industry depends oneach other. Taken from the previous website frequentflier.com “While all of the major hotelstoday have their own frequent-stay programs, most hotels feel that the greatest marketingbenefit derives from their participation in airline FFPs. Conclusion: air transportation is theprimary attraction of the programs.” Hotels were not the only industry to join the frequent flyerprogram and eventually establish their own rewards program. Hertz was the first car rental company to join the frequent flyer program as a partner in1981. As a result Hertz formed many other partnerships with other airlines besides American
3Airlines. In 1990 Hertz discovered the costs were too high and terminated all frequent flyerprograms with different airlines. Today they are now partners with 20 different airlines becauseHertz realized their market share. Loyalty programs then further developed with the pointreward system and the cash back system. Credit Card companies essentially took what theairline companies were doing and further developed it. As stated from creditcard.com “In 1986, the popular "cash back" program from Discover Financial Services, a division ofMorgan Stanley, appeared. Discover introduced the concept of dolling out cash to thecardholder at the end of every year based on the total amount of charges placed on the creditcard. At present, more than 60 percent of all credit cards issued in the United States are linkedto a rewards program, based on industry estimates. Versions of rewards credit cards stillprovide both airline miles and cash back.”. After watching the success of loyalty programs many companies in a variety ofindustries have adopted this trend. In 2007 Avis car Rental Company launched a new customerloyalty program for frequent renters called the Corporate Awards Program. In this programwith every rental day earns one rental point. Earning 15 rental points will get a customer aReward Day Certificate and rental discount coupons. This loyalty program took the trend ofloyalty program, and instead of targeting individuals on vacation Avis targeted corporations.Research has shown that Avis has seen a significant growth because of this reward program, bythe corporations enforcing their employees to rent from Avis. The restraint industry looked atthe concept of loyalty programs and further developed the trend. In 2008 Starbucks introduced their reward program by offering a reloadable plastic card.This concept is not necessary a new one. Retail companies and convenience stores have beenoffering their customers reloadable cards for quite some time now. The only adaption thatStarbucks has made is that they actually offer reward points just by using the reward system. Byencouraging their customer to use their loyalty program customers are getting even morerewarded. With the emergence of social media and new technology Loyalty programs onceagain progressed. Mooyah Burgers and Fries in 2011 powered by Reward me rewards their customers byentering their mobile number on an ipad screen to join the rewards program and earn points. Ashift has begun with companies slowly shifting away from offering plastic cards and coupons tooffering discounts, points, and rewards through their own company websites and social mediasites. Social media sites provide a direct communication with consumers on what they wantand what concepts attracts them. Sites such as Twitter, Facebook, and Foursquare givecompanies not only a way of marketing to their customers, but rewarding them as well. Socialmedia is further improving customer loyalty programs a by discovering problems from whatpeople are saying about their brands. They also can join the conversation to show that they arelistening, to clear up miscommunications, or to add clarifications.
4 Loyalty Rewards Integrated with Social Media MGM Resorts International has recently integrated loyalty reward points with socialmedia. They now have a program that enables casino patrons or even new customers to accesstheir loyalty account and earn points through posting about the resort via social media. Playerscan also use social media by playing replicas of slot machines, which would be found inside thecasino, and earn reward points to win such prizes as free hotel rooms and show tickets. Bysimply making an instagram photo of any MGM Resort can result in earning up to five-hundredpoints, which would be worth about twenty dollars to use on a non-gaming amenity. This is a very smart strategic marketing strategy that MGM Resorts International hasembarked upon the gaming industry. Winning a prize such as a free hotel room or a free ticketto a show that is playing will almost always bring in more revenue for the hotel and casino. Thestrategy is that the person who wins a free hotel room will not only bring more people but willmost likely be doing some gambling. The more people to gamble at a casino is instantly morerevenue, unless it happens to be a group of card counters. Bill Hornbuckle, CMO for MGMResorts, said “Through these strategic marketing relationships, we’ve enabled M life to identifyand reward engaged members, whether they are at one of our resorts or interacting with us ontheir mobile phones and social networks. These new relationships enhance members’ travelexperiences, recognize their loyalty and reward them for it.” As a gaming minor I see this marketing approach as pure genius. More than half thestruggle for a casino to gain money is to get people actually inside the casino. More often thannot giving a free room is not going to have a big impact financially and the casino is bankingthat the reward member will lose even more money gambling. Another organization jumping on the rewards through social media band wagon is TheJones Group. They are a leader in global designing and marketing for many brands consisting ofapparel, footwear, jewelry, and handbags. They have begun to reward their members forengaging a brand through social media. They are shifting from rewarding transactions torewarding engagement. Instead of getting a deal through making x amount of purchases, acustomer can get rewards just by simply engaging with the brand via social media. The trend of accumulating loyalty rewards points through social media is a trend that Ibelieve is worth jumping on but I think many companies like The Jones Group should be a littlemore strategic about it. Instead of just giving rewards points through engaging with the brandthrough social media how about set up something like a punch card system. Instead of justgiving the discount right off the bat how about the customer must make at least tenengagements through social media on ten different days. Implementing a strategy like that willat least have the customer coming back to make more engagements then a one and done. Thiswill put the “loyal” in loyalty rewards program rather than a customer who is not loyal and justwants to engage for a short period of time to receive a discount on one single purchase.
5 Interview Facebook and social medias have become part of peoples everyday lives. For manypeople going on social media networks have become as routine as brushing their teeth in themorning. Business’ have realized this and have started utilizing social media networks formarketing. According to Syncapse, a measuring firm, Facebook followers are forty one percentmore likely to recommend a business over non followers. Social media is a great way tomarket, however many business’ struggle because they are unable to get people to join or likepages. Companies have to build a relationship with the consumer before the consumer willallow them to be part of their everyday social media time. Building a relationship can be very difficult to do over social networking, but ifcompanies know who to do so it is a free way to market. Like any relationship both partiesneed to be benefiting to establish and maintain the relationship. Interviewing Jeff TreslleyJr,who has his BBA in Marketing from the University of Wisconsin-Madison, and now is the salesmanager at Centiv. He stressed that consumers need to benefit in order to keep a socialnetworking relationship, “In any friendship it is a give and take relationship, so it would be nodifferent for business and consumers.” Companies can do this by giving out rewards orcoupons for being active on the company’s page. Walmart has achieved this by creating anapplication called CrowdSaver. This application gives consumers deals on products throughstatus updates but doesn’t activate the deal until a certain amount of people like the status.This gives customers incentive to like the page and to also tell other people to like the page.This can create more traffic on your Facebook page. Other companies are taking advantage ofthe check in feature. Giving deals to people who check on your establishment can be especiallybeneficial to bars. For example a bar could give one free drink if you check in at the bar.Friends will see this on their newsfeed and may even feel like stopping by to see their friendsfor a while. These kinds of things give consumers incentives to be actively involved withcompanies on social Medias. This trend is not going to fade away; it is going to stick for thosecompanies who can “Diver a solid ROI model” by using this trend effetely. After initially establishing a follower on social media networks it is important tomaintain the relationship. Jeff emphasized this during a large part of our interview. Consumersneed to continually have incentives to be active on your page. Having little activity on yourpage will create less interest and will lessen your followers. When your actively rewardingcustomers your page will gain loyal followers and will also gain new followers. This means thattimes and resources are needed to effectively market on social networks. This could meandesignating a whole day for this, or may even require hiring a person specifically for socialmedia networking depending on the company. To be competitive with other companies youneed to have continuous traffic on your page so that it will keep building. This process can taketime so if initially starting you may have to be patient. It takes time to build relationships.Actively rewarding and interacting with customers allows business to have a relationship withconsumers.
6 After actively building and maintaining relationships with consumers through rewards itis crucial to adapt to changes being made to social networks, this is how companies will standapart. Networks are continuously changing landscapes and how they operate. This can greatlyaffect how users navigate and use the networks. When changes are made it is important to seehow people are using the networks. Reacting to these changes quickly and effectively can putyou ahead of the curve on other businesses. People keep getting the ability to personalize theirsocial network. This can mean blocking certain pages off newsfeeds and get notifications totheir phones for others. Again this makes it very important to build a solid relationship withcustomers. If consumers are gaining a reward they will allow you to be more a part of theirsocial networking. Facebook and twitter seem to be the most popular social media networksbut in the long term that could change. This makes it important to know about upcoming socialmedia networks. This can be challenging because it seems that new social networking canappear and then fade away. However the past has shown us that the popularity of a certainsocial media network can change rapidly. It doesn’t seem to long ago that the main socialmedia network site was Myspace. This changed quickly with the emergence of Facebook.Knowing about new social media networks will allow you to adapt your marketing strategy in atimelier manner and again will allow you to be ahead of the curve on other businesses. Havingrelationships with people on currently popular social media networks will allow you to do thisthrough communicating with your customers. Social Media Networks are a great way for businesses to market to their customers. Theway people communicate is changing with the development of technology. Companies need toknow and understand how to communicate with new generations of customers. Socialnetworks are currently one of the main ways people are communicating in a fast movinglifestyle. Instead of going home and watching an hour of television after work people arelogging into Facebook and other social media networks. Companies need to recognize this andstay current with the times. It is important to remember that you’re not just marketing on yoursocial networking page you’re but building relationships. In order to do so customers need tobenefit. Giving reward or coupons can be an effective way to achieve this. Being effectivemarketing on social media networks can be very difficult. However, the benefits companies cangain on social media networks outweigh the difficulties. When effective your business willshow up on news feeds, personal statuses and can even be suggested pages to other users.Not only do you get people thinking about your business but they help you do so by checking inand being active on your page. It is necessary for business to market through social medianetworking.
7 Works Cited "Avis Corporate Awards ProgramÂ®." Avis Rent A Car: Avis Business Rentals &Corporate Awards Program Enrollment. N.p., n.d. Web. 16 Nov. 2012.<http://www.avis.com/car-rental/content/small-medium-business.ac?navId=T4M04S01>. WebsiteLinkTagsEditDelete "Customer Loyalty Programs That Work â€” HBS Working Knowledge." CustomerLoyalty Programs That Work â€” HBS Working Knowledge. N.p., n.d. Web. 16 Nov. 2012.<http://hbswk.hbs.edu/item/6733.html>. WebsiteLinkTagsEditDelete "History of Loyalty Programs."FrequentFliercom.N.p., n.d. Web. 16 Nov. 2012.<http://www.frequentflier.com/programs/history-of-loyalty-programs/>. WebsiteLinkTagsEditDelete "How Social Media Is Changing Customer Loyalty Programs." Customer LoyaltyRetention RSS.N.p., n.d. Web. 16 Nov. 2012. <http://www.customerloyalty.org/how-social-media-is-changing-customer-loyalty-programs/>. WebsiteLinkTagsEditDelete "Infographic: The Evolution of Loyalty Programs." RewardMe Blog RSS.N.p., n.d.Web. 16 Nov. 2012. <http://blog.rewardme.com/infographics/infographic-the-evolution-of-loyalty-programs/>. Sylvester, Ron. “MGM lets Loyalty Card Holders Earn Points via Social Media.” LasVegas Sun. Online. 16 November 2012. “Wal-Marts CrowdSaver utilizes Facebook” Samuelson Kristin, Chicago Tribune. Web.27 October, 2010.