Marriott/Starwood: Hidden loyalty dangers during market consolidation
By David Andreadakis, Chief Strategy Officer, Kobie Marketing, Inc.
The biggest news in hotel loyalty is the official joining of Marriott Rewards and Starwood SPG. This weekend, customers received news of the merger and the enhanced benefits they'd receive because of it. What's not to love, right? Marriott, Starwood and Ritz-Carlton customers have more perks, can link statuses, combine earnings and obtain a status match. Sounds too good to be true. But is it?
Here are a few things that may be running through Marriott/Starwood customers' psyches right now and that loyalty managers across industries should proactively address in case of a merger:
What does my status mean now?
Whenever news like this hits, current program members wonder what this means for them and non-members wonder what they are missing out on. For the most part, it's the perfect opportunity for the company (and competitors alike) to reaffirm their customer appreciation. Be careful, though. Because large numbers of customers overestimate the benefits of their programs, they may believe it is more rewarding than it really is. Taking this into consideration, be aware of your messaging and how it will be received by each segment of your customer base. Are you touting "new" benefits they may have believed they already had? Are you changing the construct of status tiers and would these new constructs make anyone feel downgraded?
Is my pool of alternatives smaller?
Consumers (especially in the U.S.) value choice. Consolidation means the removal of options. You don't want the loyal fans of one brand to feel slighted that their exclusivity is being shared with fans of another brand. Additionally, members of both programs may have the impression that they're losing the differentiators that made them join both in the first place. While you may be giving customers more benefits across brands, don't underestimate the value they place on arriving at that choice themselves. Shining a light of flexibility and providing wide program choices can help to keep that perceived worth.
Will I be receiving the same value?
Since a merger like this reduces the comparison set, programs that may seem better than Starwood or Marriott just got a boost in their relative status. But have no fear – industry insiders will be quick to point out that SPG is regularly recognized as the best hotel loyalty program in the industry, much of which can be attributed to the value of the Starwood properties themselves. Because of the reward-richness for SPG, this consolidation could dilute the perceived value of their program if customers can't keep the Marriott brand separated in their minds. Now is the time to double down on a strong communications strategy reinforcing program benefits.
Should I expect more for my membership?
By sheer mass, this consolidation is the largest improvement in hospitality program benefits in recent history. The bar for a top program has been raised. Customers will expect more from all hospitality programs across the board and may be less satisfied with existing programs as a result. To stay competitive, other programs should consider providing the same level of utility, flexibility, financial benefits or emotional appeal – or simply run a campaign to remind their members why they joined their brand's program in the first place. It may be about convenience or brand affinity, location or legacy. There are a number of reasons customers join programs, and now is the time to reinforce those reasons. Overall, a major consolidation like this could hurt smaller competitive programs, but it also means Marriott Rewards and SPG have to work hard to maintain the new level they just set.
In summary, we see an airline industry parallel in this story to that of the Virgin America/Alaska merger. Those brands are currently in process of deciding whether to keep both brands or to lose the highly-recognized Virgin America identity completely. Whatever their final decision, Alaska will trump Virgin America and could overshadow it completely. Could this happen to one of these two hotel giants? We welcome the news as both industry insiders and travelers alike and look forward to how the industry will react. Companies of all sizes, however, should proactively address these questions whenever there's a major shakeup at a company that may affect a loyalty program – and loyalty itself.
Senior Media Relations Specialist - Walker Sands Communications