Building Customer Loyalty: Ten Principles for Designing an Effective Customer Reward Program

Abstract

Reward programs are incentives designed to create loyalty among customers and to provide the best rewards to the “best” customers. These programs have proliferated in the hospitality industry for nearly three decades, with little direct evidence that they actually build either attitudinal or behavioral loyalty. While program implementation seems to have expanded exponentially, the actual components and structure of any given program appears to be driven more by what the competition is offering rather than demonstrated effectiveness. This report (1) identifies program components that have been shown to be effective, and (2) offers a series of guiding principles that hospitality and marketing managers should find useful in designing and modifying their reward programs. Although there is no universal recipe for reward program success, the ten guiding principles adduced in this report could assist managers in leading the conversation on how to make their programs more effective. Key points include finding genuine ways to rewards guests, differentiating the loyalty program from those of competitors, and continually reevaluating tier requirements to ensure continued guest participation.