As lodging industry leaders continue to reevaluate their guest loyalty programs, an analysis published by the Cornell Center for Hospitality Research (CHR) demonstrates the value of marketing research to make loyalty programs more effective.

To demonstrate a data-driven customer segmentation strategy for a loyalty program, the researchers collected customer spending data from a major international hotel chain. Using marketing research techniques, their analysis found seven distinct customer groups, each with a distinct spending pattern.

This segmentation did not match the chain's existing three-tier system, which lumped together customers in market segments that had vastly different spending and stay frequencies.

"We have found that this is typical of lodging loyalty programs," said McCall. "Too often they don't focus on guests' actual spending and stay patterns." The researchers explained that by using the customer data, the chain could create or augment loyalty program tiers that more closely match customers' travel habits. However, Voorhees, McCall, and Calantone caution that creative, flexible rewards should reflect guests' desires, but should not involve price concessions.

The report "Customer Loyalty: A New Look at the Benefits of Improving Segmentation Efforts with Rewards Programs," by Clay Voorhees, Michael McCall, and Roger Calantone, is available from the CHR at no charge at:

www.hotelschool.cornell.edu/research/chr/pubs/reports/2011.html

Voorhees and Calantone are on the faculty at the Eli Broad College of Business at Michigan State University. McCall is in the School of Business at Ithaca College and is a Research Fellow with the Cornell Center for Hospitality Research.

About The Center for Hospitality Research
A unit of the Cornell School of Hotel Administration, The Center for Hospitality Research (CHR) sponsors research designed to improve practices in the hospitality industry. Under the lead of the center's 82 corporate affiliates, experienced scholars work closely with business executives to discover new insights into strategic, managerial and operating practices. The center also publishes the award-winning hospitality journal, the Cornell Hospitality Quarterly. To learn more about the center and its projects, visit www.chr.cornell.edu.