VIPdesk Blog

by Jamie Comiskey

Vice President, Experiential Marketing

VIPdesk

The article reprinted below was recently featured in Loyalty Management magazine, which is published by Loyalty 360.

Experiential programs—unforgettable, exclusive events, ranging from unique access to once-in-a-lifetime, money-can’t-buy occasions—have been an important part of the customer loyalty landscape for over a decade.  Recently there has been an increasing amount of interest in this topic as major brands including Hilton, MGM Resorts, Leading Hotels of the World, Discover and the Ritz Carlton have revamped their customer loyalty and rewards programs to make experiences a more central focus of their loyalty offering.

Today, 30% of all loyalty programs offer an experiential component and over half of those loyalty marketers that don’t have an experiential component, plan to offer one in the near future.[i] 

More than a decade ago when experiential programs first started gaining traction as a component of loyalty programs, they were designed for affluent consumers.  However, for the past five years, experiences geared towards mass markets have increased in popularity:

• 43% of loyalty programs that include experiential rewards are offered to all program members
• Only 13% limit experiences to a subset of membership[ii].

One early adopter of experiential rewards is Starwood Hotels and Resorts, which added an experiential component, branded “SPG Moments”, to the Starwood Preferred Guest (SPG) program in 2007.  “Moments was created as an exclusive program for members of SPG in which Starpoints can be transformed into unparalleled experiences across member passion points: music, sports and the arts,” said Gretchen Kloke, Starwood’s Vice President of Global Loyalty Marketing.

SPG members are given the opportunity to redeem rewards points, known as “Starpoints”, for SPG Moments via an auction model; yet this is not the only manner in which loyalty programs can incorporate experiences into their overall strategy.  While there are brands that utilize the same strategy as Starwood of offering experiences as an addition to a rewards catalogue, others choose to offer experiences as an “invitation-only” offering to reward their best customers. Employers are also increasingly using experiences as rewards/recognition for high-performing employees.

The types of experiences that resonate with customers cover a wide range of categories, depending on the customer demographic.  Research conducted by VIPdesk reveals that the most sought-after experiences are those in the categories of travel and adventure, dining/culinary, and arts and culture (8%)[iii], a trend which is also reflected in Starwood’s experience: some of the most popular SPG Moments have included meeting world-renowned chef Thomas Keller at French Laundry in Napa Valley, and brushing up on serving skills with tennis pro James Blake on the courts of Arthur Ashe during the US Open.

Why Experiences?

Offering an experiential component to a loyalty program provides a way to ensure that your customers will remember and talk about your brand for years to come.  No matter where they are demographically, the mass affluent to the ultra-affluent, you can incentivize someone with experiences much more so than you can with a piece of merchandise, an appliance or a gift card.

There are five primary benefits of adding experiential offerings to a customer loyalty program:

1-   Customer engagement & loyalty.  In a recent survey, “customer engagement” was reported to be the major benefit realized through inclusion of experiential rewards in a loyalty program[iv]. According to Starwood’s Gretchen Kloke, “travelers want choices, control and personalized service.”

2-   Word-of-mouth advocacy. Rewards program members are 70% more likely to be brand advocates via word-of-mouth, while those who have redeemed for experiential rewards are EVEN 30% MORE likely to advocate for the brand[v].   After their experience, your customer will share their experience with their social network via tools such as Facebook, Twitter, Tumblr or a blog, promoting the positive experience with their social network—giving your brand exposure and credibility in a way that you alone could not.

3-   Brand identification and perception. A relevant experiential offering will influence the perception that consumers have of your brand: both loyalty program members and non-members alike.  One successful example of experiential offerings that drove brand perception is the Barclaycard “NFL Extra Points” Visa card, launched in September 2011.  Cardholders were given the opportunity to redeem points for a once-in-a-lifetime opportunity, such as going on the field during half-time at the Super Bowl.   The NFL Extra Points card appeals to football lovers due to the experiences that they offer their members, as well as drives card spend, due to the desire of cardholders to earn the rewards offered.

4-   Financial benefits.  There are three financial benefits that an experiential offering will provide: increased member acquisition/enrollment, increased point earn by members, and increased points redemption.

5-   Stand out from the competition.  Over 85% of consumers are members of at least one loyalty program[vi]—meaning that it is necessary to stand out from the crowd.  According to Starwood’s Gretchen Kloke, “We want to reward our members for their dedication to Starwood’s nine brands and make the SPG experience so rewarding that it’s impossible for travelers not to choose Starwood.”

Getting Started with the “Three D’s”

VIPdesk has been developing and managing experiential rewards programs since 1999 for companies including Starwood, and in that time has developed and managed thousands of experiences for its clients. This extensive expertise has given us insight into the three phases of developing an experiences program: Discovery, Development and Delivery.

• Phase One: Discovery. The Discovery Phase helps to determine your program goals, budget, redemption platform and frequency and volume of offers.  This is also where you will identify the target audience, demographics and spend trends; as well as determine the overall “feel” of your program: how exclusive will it be and how it will be promoted and communicated consistently, all while incorporating and promoting your overall brand identity.

• Phase Two: Development.  This is where you determine how you will implement your program, and map out program best practices and service delivery.  Considerations at this point include the price-point and access level for packages, the entire redemption process, and establishing sourcing and approval standards.

• Phase Three: Delivery This phase encompasses all aspects of not only the actual experience execution but also day-to-day program management.  Included are key program considerations such as customer communication, agency interaction, on-site staffing and post-event activity such as customer satisfaction surveys, follow-up and program marketing.

Proven Results: Customer Satisfaction

Since including experiences into their overall loyalty program, Starwood has seen an increase in customer loyalty.  Today, one out of every two guests staying in a Starwood hotel anywhere in the world is a member of the Starwood Preferred Guest program, which has increased from 33% just five years ago when the program was launched.

However the real results are proven every day by customers who are engaged with the Starwood brand in a manner they otherwise wouldn’t.  Says one member of the Starwood Preferred Guest program, “Being part of the SPG family opens up a lot of opportunities you wouldn’t otherwise experience or even buy.”