Saturday 20 March 2010

Starwood build non-customer relationships

twitter.jpgPeople love a mystery. Authors like Ian Rankin or Lisa Gardner are masters at it - keeping the reader guessing till the end about who did it or how.

In the business world, Apple are undoubtably leaders at the guessing game - managing to build up a huge amount of buzz and pent up interest in it's products simply by not telling anyone about them (or at least controlling exactly what is told and when). Witness the recent hype around the iPad - with speculation months ahead of time and possible names being banded around like the iSlate or iTablet.

It was interesting then to see Starwood Hotels creating a bit of a stir with it's new secret loyalty programme. In a recent article in USA Today, there was a "scoop" discussing a new loyalty initiative they are trialling which appears to be identifying and interacting with customers in a different way.

Mark Vondrasek, Starwood's senior vice president of interactive and loyalty marketing is quoted as saying:-

"We looked at factors beyond just frequency, which is the key measure in traditional hotel loyalty programs. For instance, we evaluated factors including guest's profitability, their lifetime growth potential and their ability to influence travel by others. We even targeted some travelers who were loyal not to Starwood, but to our competitors."

Details are slowly emerging - see Hotel Chatter for latest - but what interests me most here are the last two points - their ability to influence travel by others and the targeting of those not loyal to Starwood.

This is different as it's essentially looking to create a loyalty programme which attracts and retain non-customers.

The obvious issue here is that identifying these customers is notoriously difficult - by their very nature Starwood won't have any internal data for these (potential) customers.

So how are Starwood finding, contacting and attracting these highly valuable - non-customers?

Well we don't know the details of how the Starwood programme is being managed (that's the problem with secrets), but my guess is that a large part of it involves social media.

People give away a wealth of information across their online social networks - whether it's their opinion or general musings on twitter, their job (and likely business travel potential) in LinkedIn or their location in Flickr tags or FourSquare postings.

Increasingly these are being aggregated by services allowing people - and more importantly brands - to track these and pull them together into possible prospect lists. As an example, just search twitter for "Marriott" to see a list of people tweeting that they are staying there right now.

Now imagine tracking and scoring these people over time - building a picture of their activity - de-duping against the ones you know and you have some sense of the power in these random tweets.

There was an interesting article in the blog "Edge of Brooklyn" recently discussing how this opportunity is often missed by many brands.

The article was discussing how the Chicago Cubs were rewarding loyal customers - but how this reward basically just focused on season ticket holders - essentially the audience they knew about and could address. However it failed to address the wider and more difficult to track national fan base, with blog author Dana saying:-

"The Cubs are a national team. For all the season ticket holders every season, there are hundreds of thousands throughout the country who are rabid, loyal Chicago Cubs fans who will never be able to get season tickets - [and] there’s something other than cold, hard cash that many of us fans spend each and every day on the Cubs – social capital."

Going on to say:-

"We generate our love for the #Cubs one tweet at a time – and we even get non-Cubs fans to root for the Cubs sometimes! - Social capital builds more passion, excitement, community and loyalty, which turns into ticket and merchandise sales, even if the team is performing below expectations"

Like I said earlier, we don't know how Starwood are actually building this programme - but I'm betting Social Media is playing a large part.

In a traditional loyalty programme, it is not unusual for 20% of customers to represent 80% of revenue. However you can't know who these 20% are without in some way tracking the larger base. This is what a loyalty programme allows you to do - you track the behaviour of all and then focus benefits and offers increasingly on the more valuable, smaller segment of loyalists.

Social media may however change this model.

What if through a blend of data from social networks, overlaid with other third party data such as card payment data or online ad-tracking data you could begin to build a profile of your "ideal" customer - your "20 percenter".

How much marketing spend would you focus on acquiring and retaining each of these?

We're probably not there yet as the accuracy and available data still makes the view a little blurry - but expect this to become more focussed in the next few years - and if Starwood are playing in this space, expect them to be leading the pack.

Knowing your best customer before they even have a chance to know you has to be the ultimate loyalty programme.

[Image generated using twitter mosaic based on Starwood followers]

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