Guest Loyalty. There isn’t an APP for that.

Posted on 11. Jan, 2010 by Jeffrey Summers in Marketing

Frequency schemes are popular with guests and popular, at least in theory, with businesses large and small.

Guests like them if the rewards are generous, easy to understand, and accumulate quickly.

Restaurants, cafes, clubs and hotels like them because they can attract new guests, increase the spend of existing customers, help prevent guest defection and enable you to build a database.

1. Rewards: Award points for purchases. Points can be exchanged for rewards, unrelated to the brand. Use this type of program when you want your program to also serve as a new guest acquisition program and to differentiate your brand from the competition. This is especially useful if you have a limited product line and don’t have unlimited options of products and services.

Restaurants and service companies use this system where their product lines are limited. Administration can be complex – it needs special equipment, cards and database systems to optimize the benefits of a program. Members will also expect to be able to track and redeem their points online.

Examples: American Express card users accumulate points they can then use for gifts, travel, or transfer to an airline Frequent Flyer program. A restaurant program would allow points to be used for rewards with others eg the Chicago-based Lettuce Entertain You restaurant group offers a wide range of travel, wine and spa packages as rewards for members of their Frequent Diner program.

2. Rebate: Awards a gift certificate redeemable for the next purchase, when the guest reaches a certain spending level. When you have a wide selection of products, this reward program can be used to motivate new incremental purchases. It can also be used to increased store traffic. Department stores use this method to build additional sales from existing guests.

Examples: a simple form of this are the popular Coffee Cards — your card is stamped every time you buy a daily coffee: once you have 7 (or 10 or stamps, you receive one free. Very simple to administer. Clubs and casinos use this method where members and card-holders have a swipe card, and can accumulate points from their gambling expenditure and apply them to food and beverage purchases.

3. Appreciation: When guests are asked whether they would rather have cash or a reward, they will always take the cash. But in giving away cash, you diminish the value of your brand. So offer a rebate when the result will be incremental visits and sales. Offer an appreciation reward of your own company’s products and services in exchange for accumulated points.

The goal here is to increase guest LTV (lifetime value), not to acquire new guests. It can also be used as a device to get good guests to sample more of your other products and services. Airlines, hotels, phone companies use this to accumulate points for additional services within their own brand. Seat upgrades, free tickets, hotel stays at different locations, etc.

Examples: At Cafe Troppo, we had a Frequent Diner’s Club that offered a free Dinner for 4 voucher once a certain level of spending was reached. This encouraged customers to spend up, and kept the rewards in-house – they could only be redeemed Monday to Thursday. They were also likely to bring guests who had not visited before.

4. Partnership: Rewards a guest’s accumulated purchases with a partner’s products or services. Your primary goal is to acquire new guests where you have a partnership arrangement to use the partner’s extensive guest database. Airlines use this frequently when they give you points for renting cars and sleeping in hotels.

Examples: A restaurant could offer rewards to the clients of a Realtor, hairdresser or other local business, in return for that business promoting you to their customer list.

5. Affinity: Once a guest climbs the loyalty ladder and reaches advocate status, your brand is firmly planted in their minds. An affinity program offers special communications, value added benefits and bonuses and recognition as a valued guest. This is used where rewards are no longer needed to cultivate a long term relationship, just as a reminder to learn more about your other products and services.

Examples: airline frequent flyers earn Silver or Gold status once they have earned a certain number of air miles. Night clubs have access to special rooms and benefits for members who have reached a special level of spending or are regarded as VIP customers.