“Loyalty programmes are built on the key assumption that they build loyalty and I am not so sure that is still the case.” (1/22/2007)
This statement came from Cameron Davies, senior manager, Customer Centric Revenue Management, Walt Disney Hotels and Resorts, who was recently interviewed by EyeforTravel.com’s Ritesh Gupta ahead of CRM in Travel USA conference to be held in San Francisco on 23-24 January.
When queried how integration of loyalty programs with PMS and RM models can boost sales, Davies said, “Providing a great customer experience builds loyalty, loyalty programmes tend to create even more “discount” or “reward” shoppers. Then, when we try to control availability from an RM perspective in order to save room for our “paying” customers, we can end up creating dissatisfaction instead.”
“The strong integration of loyalty programme data with PMS systems can help create guest experiences that should in turn produce repeat demand. If we are in a business where the revenue from unconstrained sources (gaming revenue, food and beverage, theme park tickets, merchandise, recreation, etc.) is a fairly large portion of the overall profitability of the company (in tandem with the revenue from the constrained resource, rooms or seats), then the opportunity grows at an exponential rate. Harrah’s has put itself out there as the quintessential poster child for this approach but there are other, less aggressive ways to handle this as well,” added Davies.
On his assessment of viewpoint – if CRM is to secure a lasting place for itself in the corporate vision, it must use customer information to generate revenue, Davies said, “I think that it may be more appropriate to say that the only way companies are going to be willing to continue to invest thousands/millions of dollars in CRM systems, is if they can generate significant and measurable improvements in profitability. These improvements need to come through a combination of cost reductions (efficient marketing and sales processes) and revenue improvements (through volume, pricing and product mix).”
“Many of the initial CRM implementations assumed the realisation of a large incremental benefit in marketing spend efficiency (e.g., response rates and customer loyalty). In my opinion that can only happen if two things are true:
1. The company is willing to commit to a reduced marketing budget as a direct result of the CRM implementation. This almost never happens.
2. Customers really do become “loyal”. To the later, I would ask: How many frequent flyer programme cards do you have in your wallet?”