Getting it right: mixing social and economic rewards in hotel loyalty programmes
Managers should deploy economic benefits as a defensive relational strategy and social rewards as an offensive relational strategy to ensure customers become long-term patrons of their facilities
Hong Kong’s tourism industry has contributed to about 5 per cent of its gross domestic product in recent years. Despite continuous drop in visitor arrivals over the past two years, a 87 per cent hotel room occupancy rate last year marked a slight 1 percentage point rise over 2015.
Now more than ever, individual hotels must work out effective and innovative marketing strategies, not only to ride out the current storm, but become more competitive in local and regional markets.
The concept of relationship marketing is prevalent in the local hotel industry, giving rise to numerous loyalty or reward programmes that offer preferential rewards for members in proportion to how often they patronise an establishment. The rewards offered – usually in the form of economic or social benefits – make members feel special, important, and appreciated. Common examples of economic benefits include free room, room upgrade and discounts. Social benefits, on the other hand, are more diverse and include any preferential treatment or personalised recognition and attention given to individual customers.
Yet, when so many hotels are offering loyalty programmes, how to make yours stand out in the market? What kinds of rewards are more effective in building up relationships with valued customers? How to balance effectiveness versus cost and operational impact on the operators?
The effectiveness of a loyalty programme is contingent upon the customer recognising its benefits. Customers tend to keep subscribing to loyalty programmes because of economic benefits they gain. Economic rewards are also particularly effective in establishing initial relationship with new customers. However, monetary incentives alone are not sufficient for retaining customer commitment.