Holiday travel provides ample time for podcasting, and McKinsey's recent episode on the consumer decision journey (CDJ) caught my eyes and ears. McKinsey has been researching and tracking the fascinating evolution of the CDJ for almost 10 years. Their latest installment has some mixed findings for marketers:
First of all, your brand is highly vulnerable. You're up against competitors, OTAs, and increasingly Google and Airbnb. Consumers basically have endless options when booking a trip. Second, travelers can be fickle as they move through their research, adding and subtracting brands as they go.
Therefore, it's critical for hotels to focus on initial consideration, meaning you're top of mind when travelers have an upcoming trip or purchase occasion. And even if you're in the initial consideration as a brand, you have to stay there. Let's dive further into these concepts.
All too often, I hear hoteliers fall into the trap of paying for initial consideration, pouring money into paid search and loyalty programs. For example, I spoke with a hotel marketer last week who said her usual PPC budget is $20K/month and the ROI is only 3 to 1. Ouch!
Same goes for costly loyalty programs. In the McKinsey research cited above, they also found that while loyalty membership is increasing, engagement is decreasing. According to McKinsey Partner Bo Finneman, "[Loyalty programs] are not necessarily something that we've seen be quite successful driving initial consideration and, ultimately, growth." This means that many companies, including some hotel brands, are falling into what I'll call 'the loyalty trap,' launching or maintaining costly loyalty programs because they think the industry demands it. I'm oversimplifying of course, but I can't tell you how many meetings I've had with mid-size brands launching or considering new loyalty programs to model themselves after Kimpton Karma Rewards and others.
Before you think I'm anti-loyalty program, let's take a step back. Why do consumers and travelers join a loyalty program in the first place? Primarily for unique benefits. For example, Kimpton benefits include free wine hour, pets stay free, bikes available to borrow, and complimentary WiFi. And that's great, guests love and look forward to these perks. However, offering these 'surprise and delight' experiences can be done with or without a program; if anything, the surprise factor will be greater without a program. The challenge is, to pull off the latter, you'll need a strong understanding of your guest data.
Unlocking your guest data isn't rocket science, but it's still science. Not sure where to start? Step 1 is asking the question, what's in your property management system? Who are your repeat guests? Top feeder markets? Average length of stay versus your market? Once you have a handle on your data, step 2 is then focusing on segmenting and targeting your most loyal and active guests with personally relevant offers. As cited by Skift in January 2018, Chinmai Sharma, Chief Revenue Officer of Taj Hotels Resorts Palaces and Safaris, asserts, "Customization is the next big innovation in luxury travel. Companies that differentiate themselves will treat each customer as his or her own segment." This approach is more likely to foster loyalty and a personal, direct connection with guests.
While loyalty programs tend to be the domain of the largest brands, programs can make sense for some medium-sized brands. If you have a loyalty program in place, one piece of advice is to ignore vanity metrics, like number of members, and focus on engagement, like lifetime revenue and cross-property stays. Attribution challenges can actually mask an unprofitable loyalty program. Instead, loyalty (program or not) should be focused on your most profitable customers. For example, Southwest offers rewards based on the amount of money the flier spends, versus just miles flown. In other words, membership alone isn't sufficient.
Ultimately, loyalty is not the same as a loyalty program. At the end of the day, hotel loyalty is all about identifying and incentivizing your best customers to come back, and to come back through a direct booking. Of course, it's not that easy. But by personalizing marketing to your best customers, you can start to win guest loyalty over your compset and high cost 3rd party channels.
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Kelly is the Sr. Director of Marketing and Growth at Revinate. Headquartered in San Francisco, Revinate's user-friendly software platform, custom-designed for the unique needs of the hospitality industry, helps hotels dramatically improve their guest marketing efforts. Kelly began her career at global management consulting firm McKinsey & Company for 6 years. Prior to joining Revinate, Kelly was a corporate strategy and business leader at eBay Inc.
VP of Marketing & Growth - Revinate