Comment: Travel companies pay a price for loyalty schemes

Comment: Travel companies pay a price for loyalty schemes

Consumers become reluctant to give up perks and try new brands, says Steve Dunne, managing director of Digital Drums

As a marketing man, I must own up to a weakness – I’m a sucker for loyalty clubs.

In every aspect of my life, from grocery shopping, coffee shops and restaurants through to hotels, airlines and cruise lines, I’m an active follower of brands that reward me for my loyalty. I just can’t help myself.

Be it a free hotel night or flight, a discount on a cruise, a free breakfast or a specially designated check-in desk, I play the game for the rewards.

The loyalty game controls my purchases, it makes me blind to other players’ marketing efforts and it makes me a keen advocate of certain brands.

And my engagement has made me a senior-level loyalty club member with travel brands including British Airways, Royal Caribbean and Hilton.

Marketing threat

But a recent experience made me realise that the loyalty game has a downside for me, the consumer, and presents a real marketing threat for the long-term health of travel brands.

Over the past five years, my wife and I have cruised a dozen or so times with one cruse line. In doing so, we have risen to a senior level in its loyalty club, giving us access to discounts on staterooms, priority queueing and invitations to special onboard events.

However, recently we were keen to try another cruise brand to compare the product offerings and see if there was anything we were missing.

Not being a member of its loyalty club, we didn’t get a discount on our cabin. At check-in we were in a long line rather than our familiar speedy embarkation. And we received no invitations to special functions.

This was an obvious side effect of being first-time customers – and we didn’t like it. After just 24 hours we made the decision to go back to our original brand for future cruises.

It wasn’t the new brand’s fault – it was just that we were used to certain perks.

Ticking time bomb

You might say “that’s what loyalty clubs are all about”. But here’s the problem: loyalty clubs lock customers into the brand. This is not an issue if there are few loyalty clubs about. The trouble is, every major brand has one and consumers love the benefits, so they don’t have a problem getting locked in.

But for travel brands, there is a marketing time bomb ticking here.

Hilton Honors has several million members and Royal Caribbean’s Crown & Anchor Society isn’t far behind. Many of the industry’s biggest brands have, in terms of members, sizeable schemes. Recruitment to these clubs is aggressive and management active.

This will eventually lead to one thing: huge chunks of consumers will stop moving between brands because they are locked in. No amount of advertising will persuade people to try a new brand that doesn’t match their current perks.

The obvious solution – and we are starting to see it in some sectors – is for brands to honour the perks of rival loyalty club schemes. If they don’t, they will struggle to recruit new customers.

So, for the consumer unwilling to ‘trade down’ and for the company unable to entice a customer of another brand, the picture is clear: there is a price to loyalty and it affects everyone in a way we may not all realise.

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