Marketers Put Emphasis on Loyalty

Budgets Shift to Programs to Keep Core Audience as Economy Tightens

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NEW YORK (AdAge.com) -- As a 15-year employee of Hilton Hotels, Adam Burke, senior VP-customer loyalty, has had to contend with the problems caused by economic slowdowns and recessions. From those battles have come a variety of lessons, one of which Mr. Burke and the hotel chain are putting to use during this current economic climate -- focusing on pushing the 21-year-old Hilton Honors Loyalty program, which just enrolled its 25 millionth member.
Bryan Kennedy, chief operating officer and president of Epsilon, which manages Hilton's loyalty program, has started seeing more interest and activity in loyalty programs from the banking and specialty retail industries as of late.
Bryan Kennedy, chief operating officer and president of Epsilon, which manages Hilton's loyalty program, has started seeing more interest and activity in loyalty programs from the banking and specialty retail industries as of late.

"Like a lot of people in the [hospitality] industry, we're starting to see some slowing," Mr. Burke said. "Our Honors members tend to be the group that buoys us through a downturn. They are the core audience and tend to stay loyal and sustain the business especially through those downturns."

Hilton is just one example of many marketers that, while trying to maintain a profitable level of business during this recession, are putting an emphasis on loyalty programs.

Resurgence of interest
Bryan Kennedy, chief operating officer and president of Epsilon, which manages Hilton's loyalty program, said he has definitely seen a resurgence of interest in loyalty programs due in part to the economy.

"We have a belief that when the economic times get tough, loyalty and retention marketing becomes one of the most measurable disciplines from an ROI perspective," he said. "So you tend to start seeing [marketing] budgets shift into those types of programs because retention becomes so important."

Mr. Kennedy, who has started seeing more interest and activity in loyalty programs from the banking and specialty retail industries as of late, said the old adage of "it's cheaper to keep an old customer than bring in a new one" holds even more water when marketing dollars are limited. "We don't necessarily see clients stopping customer-acquisition efforts," he said. "But when the wallet tightens up, focusing on loyalty and retention marketing simply makes sense from an economic standpoint." And loyalty programs allow a company to influence consumer behavior in "very discreet time buckets," Mr. Kennedy added.

Dawn Marie, head of retail practice at Rapp Collins, said her customers not only include marketers looking to establish royalty programs for the first time, but others who have had long-established programs and want to re-invent them. "It's important for us to help our clients understand that loyalty is not a plastic card. It's about creating experiences and recognition with programs versus just making it a plastic card inside a wallet. That's what is next for loyalty."

Need to show value
She cites the Best Buy Reward Zone and Police reunion concerts as examples of a program that creates experiences and recognition. "Loyalty is not admirable when it's being lazy," she said. "Consumers can go anywhere but unless marketers show them that recognition and show them value, they'll keep going down the street."

Hilton's Mr. Burke said that's why the company focuses on customizing its offers. "We're in an environment where we have, at any given time, as many as 100 offers in market being personalized on individual customer preferences. It's become a very cost-effective way to run the business and generated a ton of business for the hotels."
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