Tackle operational challenges with your loyalty program

SAN FRANCISCO—Retaining customers has always been of the utmost importance to brand companies in the hotel industry. The primary operation of loyalty programs are to provide offerings—whether they be points for free stays or free WiFi—in order to keep guests coming back. According to Hilton, there are around 68 million Hilton Honors members, while Marriott International’s Bonvoy loyalty program has about 120 million members.

A 2017 survey from Oracle Hospitality, “Hotel Loyalty Programs: What Guests Really Want,” polled 8,000 consumers from eight countries (including the U.S.) to identify the programs and benefits that members most value.

One striking figure in the survey was 58.7% reported that they did not belong to any hotel program, while only 3.2% said they were members of five or more. Of those that did belong to a loyalty program, 61.6% would like to earn more rewards per hotel stay, and 52.2% would like more options to redeem rewards.

Formation, an AI-powered marketing software company based here, believes that hotels can tackle operational challenges through their loyalty programs.

“While loyalty programs are typically utilized for more commercial-centric activities (e.g., purchases), there are numerous opportunities to leverage the loyalty program to activate and reinforce experiences that improve the guest experience and assist in operations,” said Christian Selchau-Hansen, co-founder and CEO of Formation. “For example, if a hotel is looking to cut down on water usage, an offer to customers around sustainable water usage is a great step. The hotel brand could provide these guests an offer to reduce towel usage throughout their stay—effectively giving them points for positive environmental as well as business objectives. This win-win offer addresses both operational challenges and addresses customer motivations.” 

According to the company, Formation was founded in 2015, and its first assignment was a pilot test for a Fortune 100 company that had the goal of becoming the most personalized brand in the world.

“Formation’s software uses AI and machine learning to create offers that are personalized and actually relevant to individuals,” noted Selchau-Hansen. “Rather than give out a one-size-fits-all discount, Formation sees that companies can create a win-win situation by delivering 1:1 personalization that effectively makes customers happy and builds brand loyalty. Our platform allows our customers to understand what motivates their customers. This boosts engagement and makes promotional offers more effective.”

He cited Marriott as an example of how a loyalty program can be used to take on operational issues.

“Marriott and a number of other hotels have given loyalty members a ‘green choice’ on check-in, which leverages their loyalty currency. This is a great example of aligning incentives for guests, the environment and the business,”  Selchau-Hansen pointed out. “That said, there are likely guests who have not yet tried the green choice. This is an opportunity to introduce them to it with a targeted and individualized offer to activate the behavior.”

He continued, “Moreover, there are many other opportunities for operational impact. The challenge is typically customer adoption of the new program. Overcoming the adoption challenge is where targeted and individualized offers, which are far more relevant and engaging, can materially help.”

These offers can also be done for loyalty programs in the travel, retail and F&B spaces.

One example is the H&M clothing chain. After facing pressure to operate more sustainably, the company is rolling out clothing rental in Sweden through its loyalty program.

Selchau-Hansen noted that brand companies can take away data metrics from these offerings that can help them in the future. Formation can help with devising the most effective experience for the customer.

“Loyalty programs give hotel companies access to first-party data that can help them better understand who their customers are and create more relevant experiences based on this information,” he said. “The challenge often is not the data or the lack of insight; it is in bringing the insight into a customer-facing experience. Automating the assembly, deployment, tracking and measurement of these insight-driven experiences and offers is a main benefit of the Formation platform.”