The concept of staying in touch with customers is not exactly new. In 1896, retailers began using Sperry & Hutchinson Co.’s Green Stamps to reward loyal customers. American Airlines revolutionized the concept of loyalty marketing in 1981 by launching its AAdvantage frequent flier program. Now, more than 70 million Americans are members of frequent flier programs, according to a report by The Colloquy Group.
Loyalty initiatives have become indispensable to the airline industry, hotels, rental car agencies, credit card companies and retailers. In fact, 40 percent of major credit card issuers are operating loyalty programs, Colloquy reports.
As the first airline with a frequent flier program, American didn’t have to differentiate itself from competitors when AAdvantage debuted almost 25 years ago. But Cendant Hotel Group, a New York City-based multibrand provider of travel, hospitality and real estate services, had to face that challenge.
The launch of TripRewards® came several years behind the competition. The late start could have been a setback for Cendant, which owns Amerihost Inn, Days Inn, Howard Johnson, Knights Inn, Ramada, Super 8, Travelodge and Wingate Inn. But instead of rushing out with a me-too loyalty program, Cendant took the time to do its own customer research to differentiate itself from competitors and created a program that targets its core clientele: leisure travelers and road warriors.
“We spent several years in research and design and development, so TripRewards was not a quick-to-market initiative,” says Jill Noblett, Cendant Hotel Group vice president of loyalty and direct marketing.
Cendant had six different hotel loyalty programs before launching TripRewards in late 2003. Because each of those programs operated independently, they did not provide the kind of combined marketing punch Cendant needed to stand out.
“As we grew the company, we were acquiring different hotel brands that were all in the mid-market to economy sector and we had all sorts of unique programs that weren’t cross-pollinating our customer base,” Noblett says. “So we saw a huge opportunity to leverage the scale.”
By wrapping its separate loyalty programs into one multibrand program, Cendant gained a marketing advantage by giving customers new opportunities to earn points because they could now access the company’s full network of 6,300 hotels.
Cendant created a unique, easy-to-use points system. Members can earn points for free nights not just by staying at Cendant’s hotels, but also by purchasing goods and services from the company’s participants.
This “open earn, open burn” network was far different from other hotel loyalty programs where consumers earn their points by staying at a hotel and then “burn” their points on a variety of awards. While many airline frequent flier programs allow consumers to earn points by making all kinds of purchases – usually with credit cards – and use those points for miles with the airline, Cendant combined the best of both by allowing members to earn and redeem with a wide variety of program participants. Earning participants include aftermarket specialist Pep Boys; and Cendant companies, such as tax preparer Jackson Hewitt and car rental agency Avis. Points are redeemed for resort vacations, car rentals and airline miles, as well as for gift certificates at retailers that include bookstores and fast-food restaurants.
“They have free nights so families and business travelers can redeem and stay at some locations that they’d like to stay for business or for pleasure,” says Rick Ferguson, editorial director at The Colloquy Group. “With its gift certificates for merchandise and entertainment, the program’s rewards appeal very specifically to two core audiences.”
