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Ritz Carlton “Bows” to Loyalty

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Ritz Carlton “Bows” to Loyalty
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A not-so mythical conversation between Ritz Carlton executives:

Sr. Exec: You’ve got to be kidding me, we’re launching a points program?

Marketing Exec: Yes sir, it’s really going to help our business.

Sr. Exec: But we’re Ritz Carlton, our service speaks for itself, we don’t need a fussy points program to drive business like the lower-end chains.

Marketing Exec: With occupancy and average daily room rates declining  steadily over the past 3 years, we have to do something and besides, our guests like them.

Sr. Exec: Our guests aren’t interested in anything as pedestrian as points. You’ve got to have a better idea if you want to keep your job.

Marketing Exec: Pardon me sir, but if our guests don’t like rewards programs, then why do they continually check in with rewards cards. Our guests may be affluent, but they know value when they see it.

Sr. Exec: What do the folks at Marriott have to say about this?

Marketing Exec: Actually, they told me that Marriott Rewards is one of the key drivers of their brand value and has helped them weather this economic storm.

Sr. Exec: I’m still not excited about this, give me one good reason to launch this loyalty program.

Marketing Exec: One word Sir:  our CUSTOMERS …. our business IS about serving the customer, isn’t it?

Whether a conversation like the one above ever took place, noone will know, but Ritz Carlton’s decision to launch The Ritz Carlton Rewards this week is a good one and illustrates some fundamental lessons about the value of loyalty programs:

1. Well executed Loyalty Programs increase business value:

As mentioned in a Wall Street Journal article about half of all stays across all Marriott brands are attributed to loyalty-program members. According to Laurence Geller, CEO of Strategic Hotels & Resorts, (owners of Ritz Carlton, Four Seasons & Fairmont properties) “major brands with loyalty programs outperformed” others during the past economic slump. As the WSJ reported, he went on to say:  “We have been encouraging brands to have them.”

2. A Loyalty currency with established market value is a strategic weapon:

Any sponsor who has invested smartly enough to build recognizable value for its loyalty brand (delivered in points, miles, or other measurable units) has a loaded weapon that can pulled from the shelf for strategic reasons or just to support shorter term business objectives.

Even though Ritz has positioned its program as distinct from Marriott Rewards, it seems obvious that they have in fact re-skinned the core program with appropriate creative elements, partners (Abercrombie & Kent, Neiman Marcus, Vera Wang, National Geographic Expeditions) and rewards to meet their customer demand.

Considering that there are in excess of 30 million MR members, borrowing from a strong program base significantly reduces risk in launching a “new” program.

3. Listening to your Customers is good business:

Ritz Carlton’s launch constitutes is a big “yes” to its customer base asking for rewards and the luxury chain can continue to add value with personal service and other things core to its brand. Just because Subway, Best Buy and now Ritz Carlton each has a points program doesn’t mean that they have to be anywhere close in appearance or perceived customer value.

Worrying about who else has a points program is evidence of too much naval-gazing and not enough customer-centricity. It also leads down the wrong strategic path. A better plan is to look at the marketing mix of direct competitors. In this case,  Four Seasons does not have a program and apparently has no plans to launch one anytime soon.

Should Four Seasons decide to jump into the game at a later point, they will have to do more than copy Ritz and the challenge will be palpable.



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