Customer Relationship Marketing Assignment - I

Hilton HHonors Worldwide: Loyalty Wars

Why do you think the modern form of FMPs is more sustainable than the earlier forms like trading stamps and coupons?
Stamps were pasted into books & later redeemed for merchandise. Coupons were handed over to customer to retain it safe and later redeemed for merchandise / services. In either case, the practice has become very old, as the passion from the consumer side for collecting abated. With several such programs, consumers will have to maintain paper based coupons safe, until its redemption. It was very easy to be copied by the other programs, making it confusing for the consumers Modern forms of Frequent flyer Programs (FFPs) gets rid of paper based redemptions mostly, by using the information technology to interact within the partners to access the database With the IT being an enabler, the reach to much wider customers, quick response times, quick service delivered at the customer location itself It has helped in bringing a wide range of partners/alliances to come together, not necessarily within the same industry (airlines), but also to hotel, car rental, retail shopping, etc.

What are the benefits of HHonors Program to Hilton?

Hilton offers four tiers of membership Blue, silver, gold, Diamond. Each level has a different % of folio credited into Loyalty program account on the guest name. Diamond tier membership has highly customized redemptions & services, as they re treated as their best customers Double dipping: Allows the consumers to gain both air miles and loyalty points for stay at Hilton hotel Hilton also has a wide range of partners & alliances across the industries. They have partnered with 25 airlines, 3 car rental firms, and many other non-hotel industry related retail partners (such as florist, cookies, etc)

What is the decision problem of Jeff Diskin? What alternatives are left with him for HHonors program with announcement of competitive rewards program by Starwood?
Starwood Announced their loyalty program as Starwood Preferred Guest program, covering about 550 participating properties worldwide. Particularly 4 of the features such as No blackout dates, No capacity control, Paperless rewards, Hotel reimbursement were of the main concerns to Jeff Dikin from Hilton perspective Hilton has a decision problem of whether these features need to be matched by their products or not.

Alternatives they have is, maintain status Quo, as the starwood program is more aimed at their Individual business traveler and aimed at giving life to their ineffective programs run by their participating networks in Sheraton & Westin. Other Alternative is to take different positioning and create differentiation from Starwood and also from other competitors

What should he do? Why

No Blackout dates are certainly going to affect the yield management formulas. By extending during the peak demand, the hotel would loose revenue from high paying customers. No capacity control features can be applicable incase of empty rooms available. Paperless rewards could be a good option to adapt, but provided the cost of rolling out this feature & associated IT costs should not undermine the benefits. Hotel reimbursement may push the participating hotel to pay20% - 100% more that the current levels. Already competitive market, this is add further burden on the participating hotel. Only based on the incremental sales such feature would bring in or extended loyalty it would bring (in other words, the impact on the metrics for customer acquisition & retention cost should be under control) Hence it is not necessary to match all the features under concern. Even by matching these are not going to help much to the members in the upper tier ranks of the program. He will have to create a differentiating feature/product. The objective should be to increase the % of Hilton honors members staying in the competition properties.