Interview of Lars Meyer Waarden, University Professor - Strasbourg University and School of management: "The main problem is the lack of differentiation"

3 min reading time

Published on 07/04/10 - Updated on 17/03/22

HTR : Your research has led you to study the use of loyalty programs in mass distribution in particu­lar. Can you compare these two sectors? _ LMW :

In mass distribution, efficiency is limited. In my study over a three-year period and involving a million purchases, beha­vior changed very slightly upon membership. Three to six months later consumers resumed their initial behavior. Hotel programs are generally more effective. They go further while remaining hi­ghly segmented with different treatments depending on customer contribution. Unlike mass distribution, the hotel industry has more power to offer products with a higher perceived added-value, and these products are its own and would have expired otherwise.HTR : In the end, does loyalty development justify all the effort being made by professionals?LMW : Loyalty programs do not necessarily have an excellent re­turn on their investment. But while they do not play an important role in the change of customer behavior, they do act as a tool for portfolio management, such as behavior analysis and individual life cycles and the Lifetime Value of clients, and in this respect they are indispensable. The resultant improved marketing targets and lower spending for communications fully justify their presences.HTR : Despite it all, are they faultless? _ LMW : Obviously not. The main problem, which is the same everywhere, is the lack of differentiation. Loyalty programs are doing more imitation than innovation. The difference lies between those that are capable of differentiating their offers and those that do not. In mass distribution, for example, Tesco got ahead of the competition with a very specific program with different cards for high-spending clientele, for young people, for wine amateurs. The only way to get out of this framework is to succeed in establishing close ties with clientele.HTR : What needs to be explored in order to in­crease the efficiency of these programs? _ LMW : Purchase trends and sought-after advantages are not iden­tical. I believe it is necessary to create differentiating and adequate gratifications depending on consumers’ heterogeneous preferences. Thus for the client who is attached to the product’s monetary value, gratifications must be of an economic nature. For those who require functionality, it is necessary to make purchases easier, the trip easier. Customers interested in information will be seduced by regular announcements of new products, good deals. The hedonist expects innovative offers catering to pleasure. Finally some clientele want to establish a close relationship with the brand and expect it to express its consideration through privileges.HTR : Is it easy to use customer information in or­der to go in this direction? _ LMW : CRM databases contains a wealth of information but it is difficult to use it. Two problems present themselves today when it comes to analyzing this volume of information. First of all, the will to attain the required capacity of human power with teams of statis­ticians able to treat this outstanding wealth of information, the way Tesco did. Another problem, technical this time: existing software such as SAP are not ergonomic. Professionals, especially line per­sonnel, have trouble using them at full capacity.

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