Is ‘Little Data’ the Key to Making Loyalty Programs Work?

Discussion
Mar 25, 2013

Many of us belong to a lot of loyalty programs, but I doubt many give a hoot about loyalty cards or accounts. Ninety-eight percent of us (my guesstimate) prefer to receive special treatment and offers from retailers and other companies we deal with as a matter of course, without having to remember numbers, log-ins, PINs and passwords. The problem is that many companies that consumers interact with are large chains that want to automate as many functions as possible, to return the best ROI to shareholders or owners. With so many employees and customers, it’s not practical for interactions to be on a true one-to-one basis anymore.

Since we can’t go back to the days of "Cheers" where "everybody knows your name," how can large retailers and service companies be as efficient as possible yet deliver personalized service that connects with customers on a human level? At last week’s Loyalty Expo, a presentation by Phil Rubin, CEO of rDialogue and BrainTrust member, and Maggie Lang, director of loyalty & relationship management for Kimpton Hotels & Restaurants, addressed some of those issues.

The presenters spotlighted Kimpton, a chain of luxury boutique hotels that is a regular on Fortune’s list of 100 Best Companies to Work For. The chain has the best customer satisfaction (93+ percent) and emotional attachment scores (89+ percent) of any hotel company operating in the U.S. They do it by marrying their loyalty program with a mission of genuinely caring for guests and employees, allowing associates to get creative and embedding a dash of fun into everything they do.

Kimpton has a free loyalty program called "InTouch" which enables the chain to cater to their guests’ preferences and offer them reward stays. After 15 eligible stays or 45 eligible nights in a calendar year, members can join the "Inner Circle." Additional benefits include a favorite snack upon arrival, complimentary upgrades when available, a free chef’s treat at the restaurant, a VIP reservation line — even "access to the CEO," according to the company’s website. All guests get a free cup of coffee in the morning and can attend a free reception in the evening.

Ms. Lang said Kimpton’s mission is to be the best loved boutique hotel company and focuses on providing care and comfort for guests, rather than viewing them on a transactional basis. Kimpton zeroes in on "little data" and singular experiences, using data to inform strategies, while giving associates the power to get creative in connecting with guests. Associates often surprise guests with small gifts sent to rooms, upgrades, and personal amenities.

The payout for Kimpton comes in terms of true loyalty, positive feedback on social media and "guests for life." The company believes that rather than automating everything to the point that each action by a customer is entered into the system and triggers a reward according to cumulative behaviors, maybe it’s better to mix in a little (or a lot) of "surprise and delight," allow your employees to get creative, and do some things on a one-to-one basis. It may not deliver instant ROI, but provides long-term benefits.

Can mainstream retailers adopt Kimpton’s approach to “surprise and delight” customers? Are there pitfalls in treating each customer uniquely, as opposed to taking a more generalized approach?

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20 Comments on "Is ‘Little Data’ the Key to Making Loyalty Programs Work?"

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Ken Lonyai
BrainTrust

The Kimpton example illustrates how buy-in (or in some cases the lack thereof) at the very top of an organization has reverberations throughout the company hierarchy. When upper management truly empowers the boots on the ground to make decisions that are in the moment and unique for each customer, positive results are the likely result. Small things like a favorite snack upon arrival are an easy way to relax/disarm a tense traveler that has gone through things like airport hell before arriving at the hotel.

Unfortunately, most retail organizations do not operate this way, are too focused on short-term profits, and do not have confidence in their first line staff enough to make this viable. It’s more likely that smaller chains and/or stores that require a small staff with a willing C-level team can embrace “little data” and store level personalization and service.

Adrian Weidmann
BrainTrust

Kimpton understands the importance and value of their associates being brand ambassadors with their guests. Empowering your associates at the point of customer touch is far more powerful than a computer somewhere keeping track of how many trips I make to the store. Make every trip count!

This is not about writing policies but rather creating a culture where your employees become part of the brand and are empowered to protect and further the brand with each and every customer touch. That doesn’t take ‘big data’ but it does take a tremendous amount of investment from the top down to create a culture and atmosphere to trust your employees to ‘do the right thing’. Many companies can’t even get it right even when the training and policies are in place! (Al—as we both know from personal experience!)

Max Goldberg
BrainTrust

It’s not difficult to adopt a “surprise and delight” strategy. It takes a commitment from management and the ability to empower employees.

Loyalty programs do not need to be uniquely applied to each customer, as long as there are some unique perks factored in. Even with Kimpton, many benefits are not accrued until a minimum number of stays has been achieved. Providing small, random perks to a rewards program makes customers feel special, generates positive word of mouth and builds loyalty. Every retailer can do this. It doesn’t require a big budget or big data. It does require a commitment to customers and a sense of fun.

Ralph Jacobson
BrainTrust

I’ve been saying for years that retailers could share a thing or two from both the hospitality and airline industries when it comes to true loyalty, as opposed to the typical mass, untargeted discounts that most retailers call “loyalty.”

Yes, retailers can adopt these and other loyalty efforts, but only if there is real commitment throughout the company to evolve the culture so the efforts seem genuine.

Tom Redd
Guest
Great work by Kimpton’s and thanks to Phil Rubin for attending the Loyalty Conference as a BrainTrust member. Loyalty programs—in my view—have joined the ranks of the ‘Darwin’s Black Box’ phase of science. Those of you who are big on science and retail might immediately feel as I do about loyalty programs—they have reached to point of no return complexity—or to put that in real terms, they are at the the point of “irreducible complexity.” Mike Behe of Lehigh University coined this term and it defines it as: “A single system which is composed of several interacting parts that contribute to the basic function, and where the removal of any one of the parts causes the system to effectively cease functioning. (Darwin’s Black Box p39 in the 2006 edition)” In retail this means ‘giving up’ your loyalty systems and your processes are too complex, perform off target marketing and are ignored (Redd’s Redd Box – 2013). I used to belong to some loyalty programs and as they became too complex to figure out, and kept sending me promotions that did not relate to me, I dropped out. What is the impact of losing shoppers from loyalty programs? What say you… Read more »
Peter Fader
BrainTrust

I’m no fan of being overly reliant on “Big Data,” but I’m also a skeptic of being overly reliant on “surprise and delight.” Yes, it’s cute and fun and memorable to do those things, but it’s merely icing on the cake for a customer management strategy.

The less sexy stuff, e.g., targeting the right message to the right customer at the right time, or leveraging CLV differences across existing customers to allocate spending to acquire new ones, will have a much larger long-run impact than the surprise-and-delight stuff, which becomes gimmicky and inefficient after a while.

In short, there is no replacement for being data-driven. Period.

Kenneth Leung
BrainTrust

I was at the Conference Board Customer Experience Summit last week, and a lot of speakers talked about the importance of delivering an experience to the customer rather than just a transaction. I think personalization can take many different forms; it maybe something subtle done online or mobile. Even for large general merchandise retailers, an occasional “surprise and delight” is still possible on one of the channels.

Ed Dennis
Guest
Ed Dennis
4 years 6 months ago

I really don’t find this unique or really innovative. If retailers and service providers would just place as much effort on doing what they do correctly, none of these gimmicks would be needed. And these loyalty programs are gimmicks, shortcuts that substitute for customer service, employee training, etc.

Should I be surprised and delighted when someone does what they should be doing anyway? If I am “not a member” should I feel cheated when my dollar doesn’t give me as much service as a member? I do!

Retailers and service providers need to take a good look at their business and decide if they want to put in the effort to really run a good business. In this day and time “loyalty programs” are a waste of everyone’s time, effort and money and are detrimental to any business using them.

How much money have Publix and Walmart saved by not falling for any of these get-rich-quick schemes? Every customer should be treated the very best they possibly can be treated. Your current customer is your most valuable asset. Why would anyone employ a program that creates enemies as a byproduct?

Shep Hyken
BrainTrust

Big data gives you trends to make major decisions. “Little Data” gives you information to keep your best customers coming back. It’s that simple. The question is really about whether or not a company is willing to invest in the technology to track and recognize customer preferences that fall within an acceptable range, and then willing to train the people to deliver an experience based on this information.

The pitfalls in treating customers uniquely as opposed to a general approach is zero, provided the uniqueness falls within the range of the system.

By the way, I had a wonderful experience at the Kimpton in Miami South Beach recently and am looking forward to staying at one of their Chicago properties. They get “it”—”it” being customer service and experience. They pay attention to the big picture and adapt to their customers’ individual nuances.

Bill Hanifin
BrainTrust

Kimpton employs an interesting blend of “little data” and associate training to deliver a delightful loyalty program experience to its clients. Someone in the audience asked if this was “loyalty” or just “customer service.”

While the program examples cited at LoyaltyExpo might seem to be customer service oriented on the surface, they are enabled by use of data by Kimpton.

This is the new face of loyalty and I think you’ll see more program execution in this area as brands truly incorporate loyalty into their daily customer experience.

The Kimpton examples will be easier for some brands to execute than others. For instance, in high traffic retail, it will be a greater challenge. Still, the same approach can be applied with an eye to groups rather than individuals and be successful.

Lee Kent
BrainTrust

I’m gonna have to separate hospitality and airlines from other retail here. Yes, both Delta and Marriott ‘bought’ my loyalty in my days of traveling 5 days a week.

They bought me automatic first class tickets and concierge access even if a room on the floor was not available. That came with free breakfast and happy hour every evening.

Did it have anything to do with the brand itself? Was Delta more on-time than other airlines? Was Marriott nicer or better than Sheraton (I had their points too but they didn’t give me as much)? The answer is no. They simply ‘bought’ me and I was loyal.

As for the other retail categories…I hold as many loyalty cards as the places I like to shop. I am truly loyal to the brands that have more of what I want and who offer me a great experience every time I walk in the door.

Do they know before I check out that I am a high points holder? Not necessarily. But the good ones, whose employees are more empowered and love their jobs and their brands, well, they actually recognize me…and that goes a long, long way!

Steve Montgomery
BrainTrust

The real crux of the effort of gaining consumer loyalty is not in a program, but in meeting and or exceeding expectations in the delivery of the product or service you are providing. The need for loyalty programs to be competitive or to beat the competition is based on the commoditization of the products and or services.

Jonathan Marek
Guest

Honestly, in retail (and in most consumer interactions), I don’t even need “surprise and delight.” Just having each person in the store competently, efficiently, and happily do his or her job is rare…and very hard to achieve.

For most retail, the greatest returns won’t come from “surprise and delight” but rather from the one-two punch of outstanding execution and data-driven decision making on high-cost investments in the business.

Vahe Katros
Guest

A Haiku:

Surprise and delight
Sounds like empathy to me
We have Supply Chains

Matt Schmitt
BrainTrust

There are obviously some strong opinions on the relationship (or lack of) between loyalty programs and customer service.

I think the idea of “Little Data” in a loyalty program is compelling, and there can be some real opportunities to surprise and delight customers by offering a little bit of personalized appreciation.

As it relates to customer service in the store, building loyalty through service and personal attention is big, and some retailers are able to do it. I guess you could argue that’s the biggest loyalty program of all.

Matt Lincoln
Guest
Matt Lincoln
4 years 6 months ago

All retailers can learn from Kimpton’s “surprise and delight” approach. Large volume chain retailers can treat customers as individuals and should take advantage of this tremendous opportunity.

Big data can provide insights into whether or not strategic decisions such as the “surprise and delight” approach employed by Kimpton’s is providing the company ROI. The little data that you can provide the customer to improve their overall experience is the real differentiator and helps the retailer sell more than just the product by selling the experience.

Unfortunately, treating customers using the “suprise and delight” approach can be risky. Certain customers may be treated preferentially leaving others to ask themselves why they did not receive the same treatment. At the end of the day, companies have to put the trust in their managers and employees to ensure that the customers receive the best experience.

Kai Clarke
BrainTrust

Yes, yes, and yes. All retailers should be examining Kimpton’s approach here, since it is really about customer service. In this case, they have found a better way to help them identify what their customers want, and how to give it to them. Kimpton has quickly realized certain common “needs” for their customers, and when each of them is paying $100-$200 per night, the cost of a free cup of coffee, enhanced loyalty programs, specialized service for each client, etc. is the right thing to do. Perhaps the overriding question here is why isn’t everyone doing this?

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
4 years 6 months ago

Mainstream retailers mostly sell “stuff.” Kimpton, on the other hand, sells service. There’s a vast difference. To me, then, the question should be, “Can mainstream service sellers (like phone companies and car rental agencies) adopt Kimpton’s approach?”

It depends on the scale to a great extent. AT&T and DirecTV strive mightily to “delight” their customers, but their customers want no “surprises.” Enterprise Rent-A-Car, on the other hand, does a pretty darned good job of providing both. At least the intent is obviously there.

I’ll beat the drum once again for Customer Managed Relationships (CMR) instead of Customer Relationship Management (CRM. Kimpton, intentionally or not, seems to be practicing the former rather than the latter. Kudos.

Bryan Pearson
BrainTrust

“Big Data” may have become the catchword darling of the year, but it’s all too often a case of blind love.

Why is Big Data so difficult to harness? Because companies are not using the basic data they already have in a way that engages consumers. Combining structured data (data warehouses, customer relationship marketing software, databases) with unstructured data (email, social media, consumer commentary) may seem the most logical approach for claiming that shiny prize of Big Data, but extracting the true value of this combined information can remain be a far-off dream.

I like that Kimpton is taking an enterprise approach to loyalty marketing—setting their data free from the marketing department and using it to empower front-line employees (who in turn improve the customer experience.)

I recently wrote an article titled “Do You Really Need Big Data” for Fast Company magazine which includes three tips for harnessing the power of big AND SMALL data. You can read it here.

Leah Kinthaert
Guest
Leah Kinthaert
4 years 6 months ago

I was drawn to the topic and pleasantly surprised that you mentioned the Kimpton rewards program. I am a loyal customer and it is 100% because of their rewards program and their “surprise and delight” mission. Unlike other hotel rewards programs that require a stay or two at the beginning before you can get even the tiniest perk—Kimpton gave perks immediately which saved me both money and time. I would choose Kimpton over any competitor; their marketing worked on this marketer.

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