Hilton Hotels regards the frequent guest program because the industry's most significant advertising tool, pointing marketing efforts in the heavy user. What's Hilton to complete then, whenever a competitor ups the ante? This case demonstrates the financial aspects of frequency marketing in industries having a very distinct heavy half for their subscriber base, and allows students debate how to proceed when Sheraton and West in apparently overdo a positive thing.
Hotels are an unusual kind of product. Consumers buy a branded experience, but the experience is delivered far from corporate scrutiny, under various kinds of control – a manager, a franchisee or a property operator. How can a loyalty program help the property operator and brand owner manage customers better?
Can you quantify the value of the HHonors program to Hilton? How does the value generated by the program compare to its cost?
Now look at the program from the perspective of a franchisee. If the franchisee had the choice of putting the Hilton brand or one of the Starwood brands onto its property, how would they assess the value of doing so?
Diskin points out that franchisees cheerfully pay 10% of room rates to travel agents. Imagine that a franchisee paid HHonors 10 cents per dollar instead of the current 4.5 cents. How would you recommend that HHonors should spend the additional revenue? Would the franchisee get value from the expenditure?
What should Hilton do in response to Starwood?
What is your evaluation of loyalty programs such as those used by airlines, stores, hotels etc?