The Loyalty Whisperers…Hospitality to Retailing

The Loyalty Whisperers

by Marilyn Stewart & Geoffrey Bailey

The loyalty landscape has changed. Transactional loyalty is being replaced by a deeper dynamic of decision-making. Our articles will explore how that deeper dynamic influences every category of customer loyalty.

From hospitality to retailing

Transactional loyalty alone can’t do the job. Emotional loyalty changes everything.

Emotionally loyal customers:

• Stay with brands for 5.1 years compared with 3.4 years for simply satisfied customers.
• Spend an average of 23% more than transactional customers.
• Deliver a 23% premium in terms of share of wallet, profitability and relationship growth – according to Gallup.
• Yield 82% higher customer retention compared to transactional programs.
• Generate 40% more revenue – according to McKinsey.
• Recommend the brand – a whopping 87% of them – to others.

These are just a few of the proof points supporting the measurable incremental value of emotional vs. transactional loyalty.

An audience – for a retail chain, a hotel group, a string of car dealerships – were reducible to easy-to-understand demographic groups.

Those groups were defined by income, education, gender, age and more. They were demographic markers. Using them, customer predispositions, preferences and tastes were relatively easy to analyze and figure out. Not with pin-point accuracy perhaps. But within decent margins of error. Then something happened. Advances in behavioural and cognitive psychology began to challenge traditional ways of thinking about human behaviour and decision-making.

Those advances demonstrated that people – consumers, all of us – are fundamentally much
less rational and more emotional than we think we are.
The evidence confirms that we are influenced by a dizzying range of prejudices, impulses and biases.
The impact of social media has made this reality even more dislocating. As a result, audience analysis got messy. Behavioural interpretation became shifting, uncertain and opaque.

The lens of incoherence
It was suddenly possible to look at audiences through what might be called the lens of incoherence. This is especially true in the hospitality category. Since the pandemic, but even before that, travel loyalty program members were becoming progressively disloyal. They played the field.

They no longer consisted of a coherent combination of consumers acting predictably. Their loyalty was increasingly fragmented and random – driven as much by impulse as reason.

Treating consumers as a group of rational decision-makers, as most loyalty programs do, is a mistake.
Instead, they should be understood as individuals influenced by a wide range of biases, habits,  interconnectedness, adaptability, and emergent behaviour, as savvy wealth advisors treat investors.

Conclusion: Turning transaction tracking into trust
Consider the typical 150 – 200 room hotel property or 1,000 room plus hotel chain. Look below the behavioural surface. You’ll see that interconnectedness, adaptability, and emergent behaviour is everywhere. The various components of a hotel, such as guests, staff, and management, interact with each other and their environment in complex ways. This leads to unpredictable outcomes, both positive and negative. Emotional loyalty is harder to quantify than transactional loyalty. Turning transaction tracking into trust is a complex task. We have found a way to do it.

Marilyn Stewart & Geoffrey Bailey are co-founders of The Loyalty Metric: Understanding the art and science of attraction.