On the face of it, a multi-brand loyalty program seems like a win-win situation. The companies involved benefit from a bigger base of potential customers. And, from an analytics standpoint, any loyalty program is a mine of information about customers’ preferences and past behavior.
But are multi-brand loyalty programs an automatic success for every industry? Or are there some disadvantages?
For airlines and hotels, the way a multi-brand rewards network functions may not be ideal for their business. The reasons why lie in how these programs work – which is often at odds with how these brands retain their customers.
The Rise of Multi-Brand Loyalty Programs
Loyalty programs are already well established parts of our repertoire. Why not extend them among many businesses? In the U.S, the advent of Plenti – which partnered American Express with Macy’s, ExxonMobil, AT&T, Rite Aid, and Hulu, among others – showed that cross-brand loyalty networks could be beneficial and widely accepted. In other countries, loyalty networks like Payback and Nectar are experiencing the same thing.
Why Multi-Brand Loyalty Programs Are Attractive…
Why wouldn’t airlines and hotels want to get involved in this kind of loyalty coalition? Think of the possible perks:
- A bigger base of potential customers
- Better, faster marketing across more channels
- Less financial outlay, as the costs are shared among member companies
- A more comprehensive understanding of the customer
- Rewards that keep customers happy and engaged
- Motivation for customers to try new in-program brands
All of these outcomes make marketers very happy. So what’s the problem with using multi-company loyalty programs in certain areas of the hospitality and travel industry?
…And Why They Aren’t Ideal for Airlines and Hotels
In hospitality – and particularly in air travel and lodging segments – customer relationships are not usually of the quick-start variety. These companies offer an experience as much as they do a service. And this experience is built up over time. So, in some ways, this is an adverse setup for a multi-brand rewards system. Why?
- A reward that’s based purely on monetary drivers misses the essence of what hospitality brands are offering: unique and personalized experiences.
- Instead of focusing on quick and indiscriminate growth, airlines and hotels need to build a strong, loyal following. This takes time.
There are a couple of other potential problems in multi-brand loyalty programs that can strike any industry. One is that customers may transfer their loyalties to the network rather than the member brands. Should any company leave the network, they stand in a very real danger of losing their rewards-program base to any rival company that joins.
Another problem is financial; if a company pulls out of their loyalty coalition, they lose their marketing investment. They also lose much of the cross-brand and cross-channel activity described in the preceding section.
A Better Option
Instead of partnering with a vast network of unrelated companies, partner programs are often a better bet for hotels and airlines. This way, each can get an integrated view of their customers’ travel-related spending and behavior.
Travel brands could also partner with a smaller company – for example, an airline with another business that uses airline miles as customer rewards. The small business would get access to a great many customers from the airline, and the airline would get additional insight into the people travelling with them.
As attractive as a massive multi-brand loyalty program may be, it’s not an ideal fit for everyone. In the travel and hospitality industry, where customer relationships grow slower and last longer, a more targeted partnership will help both parties reap rewards.
Authored by Deepesh Kothari, Hospitality Consultant at Absolutdata