Hilton Hotels regards the frequent guest program as the industry's most significant advertising tool, focussing marketing efforts at the heavy user. What can Hilton do, whenever a competitor ups the ante? This case study demonstrates the financial aspects of frequency marketing in industries having a very distinct "heavy half" to their user base and allows students to discuss how to proceed when Sheraton and Westin apparently overdo a positive thing.
John Deighton, Stowe Shoemaker
Harvard Business School (501010-PDF-ENG)
Oct 12, 2000 (Revision: Nov 8, 2005)
Case questions answered:
- What are the strengths and weaknesses of the Hilton HHonors program? Consider this question from the perspective of each of the various entities involved (Hilton, HHonors’ member properties, guests, and any others).
- Hotel consumers buy a “branded” experience (Hilton, Hyatt, etc). However, the experience is delivered away from corporate scrutiny and under various degrees of control – a local manager, a franchisee, or a property operator. How can a loyalty program help the property operator and brand owner manage customers better..?
- Franchisees have options. Looking at the Hhonors program from the perspective of the franchisee, how would you assess the value of having the Hilton brand on your property as opposed to having one of the Starwood brands..?
- Quantify the value of the Hhonors program to Hilton. How does the value generated by the program compare to the program’s cost..?
- How should Hilton respond to Starwood..?
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Case answers for Hilton HHonors Worldwide: Loyalty Wars
What are the strengths and weaknesses of the Hilton HHonors program?
Consider this question from the perspective of each of the various entities involved (Hilton, HHonors’ member properties, guests, and any others).
A key element to represent in which way a company exists and competes with others and has either auspicious or inauspicious future in the world market is to analyze the company’s strengths and weaknesses deeply. By examining in this particular case the strengths and weaknesses of the Hilton HHonors program created by the Hilton brand, it would be easy to fully understand if this program brings success or not to this corporation and what could any future changes or recommendations be, to satisfy more the world market’s demand.
To begin with, the strengths of this HHonors program will be analyzed further down. First of all, a significant advantage that this program provides to the customers is that it is open to anyone with no charge at all. This gives the opportunity to anyone that would like to join this “Hilton residence” to be welcomed and start his collection of points.
Secondly, a major factor is that Hilton’s brand, with its HHonors program, gives the unique, among hotel chains, the opportunity of the so-called “Double Dipping”. Double Dipping offers a combination of the earned points either from the hotel program or from other affiliated companies without having to choose between points, for example, availing them in the hotel program or miles in an affiliated airline. This is a very positive issue for customers because they can earn the “desirable” points from many activities, such as car rental companies, airlines, or partners like FTD florist and Mrs. Field’s Cookies, etc.
In particular, the Hilton HHonors program has partnered with twenty-five airlines around the world, three car rental companies, and a large number of other companies, where people can earn miles and spend them as they wish. Moreover, members can enjoy free stays by using their points and also they enjoy priorities, for instance, priority-reservation telephone number, faster check-in, late checkout and other services provided, for instance, the silver members can be upgraded to the best room in the hotel after the fifth stay, and gold VIP member can be upgraded to the best room after every fifth stay, which can occur even at the time of check-in. What can also be described as the strength of this program is that the Hilton brand tries to come closer to its clients.
With the use of questionnaires, personal interviews with the members and a database, which give specific information about customer’s preferences and needs, this program attempts to meet everyone’s expectations and make its clients feel that the organization care about them because they strongly believe that “people care about organizations that care about them”. They try to treat their members with the best possible way so that the clients would feel like they deserved that special treatment.
The strengths mentioned above seem to result in having satisfied customers and a fully informed database for future development. However, there is always space for improvement in every sector. Some of the weaknesses of this program are referred to below.
Primarily, most of those reward programs, as well as the HHonors program, have some restrictive conditions, e.g., their members cannot claim benefits such as free stay at high season demand or when local events guarantee 100% hotel occupancy. Also, there are limitations in the number of rooms available for free stays. Moreover, customers must previously exchange points for a certificate and then use them to pay for an authorized stay. This bureaucracy often brings…