Case Study - Hilton Hhonors Loyalty War
In 1999, The Starwood Hotels and Resorts Worldwide raised their cost by announcing their new aggressive frequent-guest program that was accompanied by a fifty million dollar advertising campaign - Case Study - Hilton Hhonors Loyalty War introduction. The head of Hilton HHonors program, Jeff Diskin, recognized their competition and realized Hilton would have to raise their costs to keep up with demand. Two entirely unrelated corporations controlled Hilton brand: Hilton Hotels Corporation (HHC) and Hilton International (HIC).
At this point in time, Hilton was very well recognized, but was limited because of a varying product from property. In return, this challenged customer expectations due to such a variety of product offerings. Hilton’s customers needed a standard of what to expect no matter which division of Hilton properties they visited. Starwood represented more than 550 participating properties worldwide, and they were adding program features that might be too expensive for Hilton to match.
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Such as no blackout dates (no matter what day or season, reward points were always able to be redeemed), no capacity control (all unreserved rooms were available), paperless rewards (properties able to accept points for a stay) , and hotel reimbursement (since more dates were available with no blackouts, Starwood charged hotels 20%-100% more than competition. S. W. O. T. Analysis StrengthsWeaknesses Customer LoyaltyOld ideas, strategies ExperienceConcentration mostly on top clients Unexpected rewards to the loyalFranchisee control. ustomers. OpportunitiesThreats Decision: Whether to followThe New ideas of competitors competitor or follow the current strategy. that are raising the bar. Offering something that HH doesn’t. Come up with new ideas and marketing strategies Identification of Problem Franchisees and Partners: In Franchisee case, since franchisees tend to be “smaller hotels” (p. 541), it is difficult to control the quality of actual service and efficiency of staff even though budget-wise everything is fine.
It may be difficult to make franchisees to understand why certain ideas are added to HHonors -program and why some new partners are important addition to the program. Some franchisees may be difficult to motivate/persuade to follow the new strategies and it can affect the overall customer satisfaction %, since promised rewards/services are not properly followed. That could do a serious damage not only to HHonors loyalty program, but to brands name itself. Customer Service: The idea of HHonors –program can be seen a little bit discriminating towards majority of average customers.
The idea is to pay as much attention and recognition to top clients, since the most of the profit comes out of them. And that’s why, when a customer is interacting with a member of a staff, staff members are encouraged to check the system to find the information of that specific customer to find out his/her importance to the chain. And obviously, it can be assumed that the service quality will vary too, as soon as this employee will establish the “level of importance” of this specific customer.
Mission is to make sure that staff recognizes the best customers, shown in HHonors –program database, in order to “make sure that these guests get a personal welcome” (p. 543). It sounds to be very difficult to make sure that staff always recognizes top guest in the database. There is a big chance that the guest whom is highly rated in the system is visiting this specific hotel for the first time, so it is very difficult to make sure all employees know how he looks like. And even the regular customer at this same specific hotel can’t be ALWAYS recognized, since staff changes through years.
Feedbacks that are taking into count are also coming from those top-customers, since they have the most “experience” and “highest expectations” (p. 541). But, they have experiences on VIP –class. However, quantity wise, there is more average customers, with experiences and expectation of an average traveler. Unfortunately HHonors do not pay as much attention to them. 8p’s of service marketing Product & People – Their market was slim with only 74% of Americans who travelled overnight in a year and 41% used a hotel, motel or resort.
Place & Physical Environment – Worldwide. Was convenient to all who applied to the Hilton HHonors Program. Process- Price – Promotion – Hilton HHonors Program is the name Hilton gave to its program that would build loyalty to the Hilton brand worldwide. Productivity & Quality – Jeff Diskin, Head of Hilton HHonors program, ran the limited liability corporation with a staff of 30 that shows you how hard the team worked. There was one vice president overseeing the program’s marketing efforts and once with operational and customer service oversight. 537) Missing Issues Little more information about partner companies would be useful. For example, do their partners have a partnership with more than one company or are they loyal to the original partnership. If they have a partnership with more than one hotel, what are the strategies listed in HHonors -program to make sure the partner suggests their hotel over another. Another good number to know would be a percentage of those customers that have opened HHonors –membership, but in fact have never used it, or more than once.
That would help to calculate wasted time and money. Recommendations Even though Starwood raised the bar buy making many services available to their members that HHonors does not offer. Such as: always accepting points (no blackout dates) (p. 543), Hilton still shouldn’t react immediately and try to keep up with Starwood by making same services available, to NOT show any weakness or struggling. They should maintain their strategy, to show their high reputation and proud of the name.