The Hilton Hhonors Loyalty Scheme Marketing Essay

The Hilton Hhonors Loyalty Scheme Marketing EssayThis is an analytical study assessing guest Relationship Management by dint of the Hilton Hotels Loyalty project Hilton HHonors. This paper will give a thorough literature review on relationship selling, a case study on Hilton Hotel verity scheme and within this, a framework of the brands role position in the organization and the market will be discussed. Winer, (2001) guest relationship steering framework will be used to analyze the Hilton HHonors scheme to which the nature of the difficulties and effectiveness will be covered as well. This paper will oddment with possible suggestions regarding the effectiveness of the Loyalty scheme.LITERATURE REVIEWThere atomic number 18 some(prenominal) scholarly definitions of relationship marketing and (Shani and Chalasani, 1992) define it as a have effort to maintain, identify and build up a contactage with separate customers and to continue to fortify the linkage for the common ben efit of both(prenominal) sides, via interactive, cardinal to one and value added contacts over a stretched out period of time. While (Gronroos,1990) described relationship marketing to be the establishing , maintaining, enhancing and commercializing of customer relationship so that the distinct plan of the parties concerned are met which is done by a common exchange and fulfilment of agreements. This definition tries to encompass both the relational and transactional qualities of marketing. These two descriptions differ some slipway but they both signify that relationship marketing centres on the individual customer and seller relationship and states that they both benefit. Plus the nature of the relationship is longitudinal. Moreover, they both indicate that the core of relationship marketing is on customer retention.On the other hand (Morgan and break away,1994), argue that relationship marketing represents all marketing activates fate towards launching, improving and preser ving successful relational give and take or exchange. Taking into record that relational exchanges and transactional exchanges differ. From this definition relationship marketing is marketing plus Morgan and Hunt have as a result re described marketing and extended a paradigm shift.It is key for organisations to assess customer relationship stages ( manikin 1.0) in gild to evaluate the need for investment to make these customers move up the relationship ladder (Dwyer, Shurr and Oh, 1987, Kotler and Dubois, 2000) and turn out to be more profitable, or divulge implicit for cross-selling and offer them with personalized services establishing higher bond and switching cost.Suspects Prospects First-time Repeat Client Advocate Member PartnerCustomers Customers Traditional Marketing- Relationship Marketing-Figure 1.0.The relationship ladder (Egan, 2001 p.59)However, marketing relationship is a give and take relationship parallel to intimate relationship (Clark 1984 Clark and Mills 1979 Kollock, Blumstein and Schwartz 1994). Each party multiform in an exchange relationship provide value measurable to those received.Relationship Marketing and Customer LoyaltyRelationship marketing recognises that a steady customer base is essential in business. The crux and feature of relationships and their business vale is summarized in the notion of customer consignment and its correlated literature. The advantage of customer homage to a provider of either which ever product or services, consist of enhanced organisational productivity or effectiveness, moderate expenditure on bringing in concert new customers and decreased customer price vulnerability.(Rowley, 2005)Although customers whitethorn show their committal in numerous ways they may decide to remain with a supplier or provider, if this prolongation is described as relationship or not, or customers may intensify the amount of gets or the unshakableity of their purchases or possibly both. Customers may become advocat es of the brand or organization involved by performing an influential role in the decisions of others. (Hallowell, 1996 Reicheld et al, 2000).Even though there is substantial get ahead in the allegiance scheme. There has been an extensive argument about the benefit of loyalty schemes, to either customers or businesses. Certainly many have affirmed that such(prenominal) schemes have been unsuccessful (Divett et al, 2003 Worthington, 2000). Byrom, (2001) debated that with many organisations cancelling their scheme those schemes were at somewhat of a crossroads. Critique of schemes fall down to three groups which are those that declare that the relationship among or between such schemes and the promotion of loyalty is vague those that debate that organisations are not cr ingest correct or proper use of data and those that debate that the inducement structure in loyalty schemes are unsuitable.However gibe to (Jenkinson,1995) real brand loyalty is as a result of the emotional bond ef fected by dialogue, trust , sense of value and ease of use, added satisfaction and frequence. Loyalty is the mirror image of the customers psychological and subconscious emotional necessity to trace a frequent source of satisfaction, identity and value. Samuelson and Sandvik, (1997) states that customer loyalty has been theorized as a collaboration of attitude and behaviour. There is a lot as to what makes up loyalty, this starts from quote purchase to extended relationship (Dick and Basu, 1994). Furthermore (Hallowell, 1996) states that loyalty behaviours consist of relationship extension, enlarged scale or range of relationship, and suggestions. Although there is a controlling link between customer loyalty and satisfaction (Soderlund, 1998).Moving on, the rewards or incentives are the basic structure or mechanism for motivating customers to indulge in the scheme. OBrien and Jones(1995) angiotensin converting enzyme out the following elements that add to the value of a loyalty scheme choice of reclamation option( the list of incentives provided), cash value( How greatly the incentive stand for, as a part of spend), aspirational value ( how greatly the customer the incentive) relevance( the degree to which incentives are achievable) and convenience( simplicity of participation in the scheme). Parker and Worthington, (2000) debate that customer loyalty to an incentive scheme or reward scheme is most likely to be influenced by social factor, relative attitude and situational factors. Firstly customer loyalty is possibly influenced by satisfaction that a customer experiences regarding the level of return that they are accepting. Secondly, customer loyalty could be influenced by what is obtainable from other schemes and thirdly behaviour could be affected by other customers, social norms and the media. They continue to debate that the loyalty card that they examined did not pay its customers rightfully, as it was providing lower incentive values on products pr obably to be saved for. OMalley (1998) expatiates on the level to which many schemes have established customers who have come to anticipate an incentive as part of the regular shopping experience and assign a low value on rewards or incentives.Why Consumers enter into Relationship MarketingAccording (Sheth and Parvatiyar 1995), the basic saying of relationship marketing should be or is that consumers like to cut back selection or choices by participating in a current loyalty relationship with marketers. This is a very fascinating and exciting argument and one that has intense suggestions for both the theory and marketing practice if correct. Moreover consumers sometimes go into relationships because it elevates the number of choices open to them. For each purchase decision, numerous options exist.CASE STUDY HILTON HHONORSHistoryHowever Hilton Hotels and Resort from its name is into providing hotel accommodations and Hospitality to its customers which makes it a very right example, it is a cosmopolitan company that has expanded vastly in every sector including its relationship marketing in order to retain customers through with(predicate) its Hilton HHonors loyalty scheme. Moreover this Hotel was founded by Conrad N. Hilton who opened the first Hilton hotel in Texas in 1925. Presently Hilton is one of the reputable hotel brands in the world. The hotel today is owned by Hilton Worldwide they are managed, franchised or owned by several independent operators by Hilton Worldwide. Currently there are over 500 Hilton hotels brands in the world (Hilton Worldwide, 2012).Over the eld Hilton has created brands today they have about ten brands in over 78 countries in the world. In 2009 Hilton was formerly known as Hilton Hotel Corporations but changed its name and logo to Hilton World then moved their headquarters in Beverly Hills to Mc Virginia. (Hilton Worldwide, 2012).Hilton HHonorsMarketing is grown from a centre point on the single transaction to growing or bec oming increasingly apprehensive with the growth and support of equally satisfying long term relationships with customers. The success story of charity organizations, Tesco, banks, Hotels and others exploiting loyalty schemes is campaign companies to take careful note. The most productive relationship marketing campaign makes room for viable benefits and promotes long term relationship with customers which are difficult to re-create (Gilbert, 1996).However, looking at the value proposition of the Hilton organisation, they try to establish loyalty among their customers by striving to delight them and expecting their changing aspiration while making received that team members, who are important contributors to attaining this objective, are satisfied as well (Huckestein and Duboff, 1999). From this proposition it is obvious that the essential elements of product leadership and customer relationship moldiness be attained. For the Hilton organisation the value and importance of the cus tomer relationship has been elevated via its Hilton HHonors Loyalty planme.Hilton HHonors BenefitsIt allows customers to earn both miles and points for a holiday at about 3,750 Hilton hotel brands worldwide and airline miles with partners of over 50 airlines. They provide numerous exclusive ways to accumulate points. Firstly a customer can earn them through hotel stay or with participatory credit cards or a customer can deliberate on purchasing them if he or she feels shy of the depend on to the Caribbean. One can excessively transfer them to their family who happens to be a member as well. The hotel also provides room to donate extra points to numerous charitable organizations. This loyalty program allows a customer to join free by registering online or offline to get a list of services and benefits that assist with poseing a customers run and rewarding the customers for their loyalty and offering customers with the undivided attention they deserve (Hilton HHonors, 2012).Loya lty Programme ClassificationHilton HHonor can be classified under the type 3 programs, it awards points to members according to their previous purchase or past purchases. This type 3 program needs a complete database that can trace a members purchase history and points. Some type 3 program persuades customers to escalate their purchases or reward substantial purchasers by creating program tiers. Hilton HHonors program provides tiers where substantial or lumbering users can without difficulty build up free hotel rooms or can reserve a room on a basis that is unrestricted (Berma,2006).There are other organizations that use the type 3 program and they include Hotels like (Hyatt, Marriott rewards,) Airlines like (American Advantage) Credit card companies like (Discover card The land mile Card, Citibank Premier Pass Elite,). Lots of type 3 programs include the partnerships of complimentary marketers like airline, car rental and hotel chains etc to enable a members gathering of points and to escalate the category of rewards options (Berma, 2006). HiltonHHonors are in partnership with airline and car rental services to facilitate the gathering of points. (Hilton HHonors, 2012)However, the company has four membership levels which include the Blue, property VIP, fortunate VIP and Diamond VIP. Its calculated according to the number of stays in a 12 month period. It starts from no smallest amount for the Blue membership to 60 nights in a calendar year for the Diamond VIP membership. Moreover each category of membership has its own exclusive benefit which is the Silver, Gold and Diamond VIP members are qualified for health club access while the Gold and diamond VIP members are qualified for accommodation upgrades and scarcely the Diamond VIP members can be assured reservations with their points with no collapsed or blackout dates. (Berma, 2006),Hilton HHonors Credit cardHilton is known to also have co brand cards and the term co branding may simply mean the use of two or more brand names in marketing activates. This happens with the juxtaposition of brand names by labelling them side by side on a product (Blackett, 1999). Moreover Hilton has a number of co mark cards with financial companies in specific locations like Hilton HHonors cards from American Express, Citibank in the U.S, Platinum Visa card in the UK, Credit card in Germany, Visa card from Sunitomo Mitsui card co. Ltd in Japan etc.However this co branded cards allows customers earn bonus points from everyday purchases like groceries, gas, eating out etc. Customers can claim or redeem these points for flights, free hotel nights or merchandise. (Hilton HHonors, 2012).In further light, According to (McCleary and Weaver, 1991) they claim that Hotel and restaurant loyalty program were inspired by the success of airlines that give customers benefit for repeat purchase. However, these Programs look to improve the customers membership in an exclusive club with rewards from this membership such as gifts, free hotel accommodations etc. For the organisation or company the main aim is to compliment customers for their patronage and make it obvious that the company is very much evoke in establishing and sustaining long term relationship with them.Hilton HHonors E- presenceHilton HHonors has an e-presence (www.HHonors.com). The value of customer relationship has also been escalated through its loyalty program website. Via this website customers can sign up or register for rewards, hotel reservations, room preferences and so on. The characteristics of the Hilton Honors web site portray product leadership (Hilton HHonors, 2012).This site creates opportunity for interactivity between its members and the scheme in order to encourage brand and customer relationships plus customer data is also being collected and stored for future purposes for enjoin marketing via emails, Customized emails are sent base on a customers preferences. From the perspective of relationship, it lets customers retrieve their info and statements on the scheme. From the perspective of the brand, the brand web is duplicated and improves in the virtual world (Rowley, 2005).ANALYSIS EMPLOYING (WINER, 2001) CUSTOMER descent MODELWiner, Russell (2001) elaborated on the Customer Relationship Management process Model belowFigure 1.1 (Winer, 2001)Create a Database Involves construction of customer information file which is the bedrock of customer relationship management. The database ideally should contain Customer transactions (Hotel Reservations), Contacts, explanatory information and rely to marketing incentives over time. However according to (Winer, 2001) Customer interaction quadrant, Hilton should be classified under the High-indirect recession (Figure 1.2)Figure 1.2 (Winer, 2001) Customer InteractionsDirect IndirectBanksTelecomRetailAirlinesPackaged GoodsHotelsDrugsPersonal computers cyberspaceInfrastructureFurnitureAutosHighInteraction FrequencyLowMeaning they have to work ha rder to establish an Information file unlike the High -direct box which has quick and easy access to customer database E.g. Tesco. Hilton Database is also collected online up registration for the HHonors program.Analysis Involves the analysis of established customer data with the aim of segmenting the customers by grouping those with the same behavioural pattern. This is then used to create several product offerings via direct marketing. Hilton does target the most valuable prospects for catalogue mailing and customizes the catalogues to several groups.Customer Selection having established and analyzed the customer database information, the next step is to deliberate on which Customer group to target with marketing programs. The customers with most like segment (Highest purchasing rate) would be chosen first for retention programs followed by other segments. However Hilton applies this before embarking on marketing programs to encourage retention and customer acquisition. This is e vident in their four membership levels.Customer Targeting There are several ways of targeting customers after selection they involve direct marketing techniques including telemarketing, direct mail and direct sales. This enables a company interact with customers rather than talk at them via television or radio. Hilton mainly invests time and money into telemarketing (Customer service) and direct mails in order to reach a desired audience. However today they seek permission from customers before sending mails.Relationship programs these are techniques for executing Customer relationship marketing, the aim of this is to provide a higher level of satisfaction to customers than competing firms do. More over research has proven that there is a clear-cut positive relationship between profits and customer satisfaction (Winer, 2001). Mangers need to weight satisfaction levels by delivering performance ahead of customer expectation. Loyalty programs include frequency/Loyalty programs, Reward s programs, Customer service and Community Building. Hilton has taken the frequency/Loyalty program and Customer service as its Relationship Method which has worked to improve profitability. The Hilton HHonors as stated above provides rewards for repeat purchase.Privacy Issues This extends through the CRM Model (Figure 1.1), Hilton uses database to provide service customers request and as a global brand they share this database with other Hilton worldwide brands to ensure same level of service. Hilton makes sure that personal information are handled according to the law. Usernames and passwords are however created for customers personal use.Metrics This is the traditional ways managers employ in measuring the success of their product and service. Market Metrix uses Loyalty program effectiveness. It identifies the percentage of customers who affirm that their loyalty membership was the primary reason for select the hotel. Market Metrix,( 2012) identified that Hilton hotel in 2009 ha d 34.6%, 2010 had 35.8% and in 2011 had 39.2% showing an increase in profitability.DRAW BACKSThere are potential draw back in loyalty schemes, they are expensive, difficult to correct mistakes as the company may be seen by customers as taking away. Benefits however there is the question whether the scheme very works to escalate loyalty or spending behaviour plus it is also kind of difficult to have competitive advantage. (Winer, 2001)RECOMMENDATIONSThese Loyalty schemes can be successful by elevating customers switching cost and building entry barriers. For the Hotel industry it has become a competitive necessity to create loyalty programs so incentives could also be encouraged for repeat visits to websites even though this has not been greatly successful.CONCLUSIONThis paper has reviewed some past literature on loyalty schemes along with some scepticism from a few scholars. The idea of the loyalty scheme is growing and becoming more refined each day. Hilton Hotel has created brand web through their loyalty scheme which has be expatiated above (Hilton HHonors) plus they have an E-presence. From the consumer relationship, those that the hotel refers to as most valued customers have considerably escalated their spending at the hotel. This increased or escalated spending is no doubt as a result of the customers envisioning an escalated value in their relationship with the hotel.