The Most Responsive Guests will NOT deliver the Highest Payoff
As marketers, we love our most responsive and loyal guests. The problem is – love is blind! We believe that there is a direct correlation between Responsiveness and Payoff.
Let’s put this belief through a series of 4 tests.
First, let’s test the theory. Consider the intent behind almost any marketing action – It is almost always to influence the guests booking decisions. So, if a guest is extremely responsive, chances are he would book even without the marketing action. Where is the payoff if we are not changing the buying decision?
Second, let’s look at some data. We put this theory to the test many times by measuring Payoff at a customer level using Uplift Models (more on that later). A couple of examples are shown below. As you can see, the relationship is anything but direct.
In the case of the “Come Back” promotion, the intent was to bring back first timers and incentive was a discount for any booking made within 30 days of check out. The problem however was that two kinds of guests responded – first were the ones who were undecided and the promotion served its purpose. However, there were also some guests who would have come back anyway and in that case, the discount was tantamount to leaving money on the table.
Third, we asked the customer. In the case of the “Loyalty” promotion, the desire was to maximize wallet share and the incentive was triple points for all bookings made in the next quarter. In this case, we found multiple positive and negative response patterns. So a survey was done to gain a deeper understanding. There were two positive impacts. Some fence sitters were convinced (first peak) and others either booked more than once or increased their length of stay (second peak)! The problem was these only constituted 60% of the response. The other 40% were Sure Fires who would have turned up anyway and were just gaming the system.
Fourth, let’s look outside of hospitality. A couple of hours on google are enough to show that various campaigns across banking, telecom and politics have been enhanced by challenging this theory.
The true measure of effectiveness in a marketing promotion is influence or persuasion. We constantly worry about how well we know our Responsive and loyal guests. We must of course take care to not lose them. The incremental revenue is however to be found with Persuadable Guests.
There are Proven Analytical Methodologies to predict influence and identify Persuadable Guests – e.g. Uplift Modeling
Responsive Guests: Book when given an Offer
i) PR(Offer) is high
ii) Where PR is the Probability of Response
Persuadable Guests: Book Only when given an Offer
i) PR(Offer) >> PR(No_Offer)
Going back to the example of the “Loyalty” promotion, in the next quarter, we helped them save $2MM by not targeting the Sure Fires. More importantly, understanding the profile of the Persuadable Guests helped tailor the offer to their preferences and this delivered another $4MM in incremental revenue. All this with no increase in budgets. Now, that’s Marketing Effectiveness!