Newsletter
| Feature Article - July 2004 | ||
Leveraging Perceived Value in Your Loyalty or Marketing Program |
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| Leveraging perceived value in your loyalty or marketing program
can be a powerful tool. But what is perceived value and how does it differ from actual value?
If you visit the redemption page of your favorite loyalty program, you may find that some awards seem more attractive than others. For example on a frequent flier program site you might see that a free flight anywhere in North America "costs" 25,000 points. One night in a hotel also "costs" 25,000 points. Now wait just a minute - that flight is worth $700 and that hotel night is worth $150. Are you being ripped off if you redeem for the hotel night? Well, if you need both a flight and a hotel night, it is obvious where you should use those points - on the flight, hands down. The key to understanding why the flight seems like such a good deal (and the hotel less of a deal) is to stand in the shoes of the CEO of the airline. To put you in a seat on the airline (that would have otherwise been empty) costs the airline less than $100. The CEO's best marketing team can't get free hotel nights from the hotels so that hotel night is probably costing the airline about the same as the free flight. You are being treated fairly. The airline is simply leveraging the difference between the actual cost of the air ticket and the value you associate with it (the perceived value). That's why airline, hotel, retail, restaurant and other loyalty programs usually offer their own product or service as the base reward in their programs - it simply is the most cost effective way to provide value. Restaurateurs are in exactly the same situation - the cost of providing a meal is probably the lowest expense reward they can provide. It makes it a challenge to create meaningful rewards of similar value that aren't based on the core dining service. Take heart, there are other classic examples of leveraging perceived value. If you can offer something that is difficult to put a price on - priority service, a backstage pass, a ticket on the 50 yard line at the Superbowl - you have an opportunity to create extreme perceived value. There are thousands of marketing programs that generate excitement, entries into draws, and traffic by using exclusive opportunities as their drawing card. Look inside your own business and see what you have to offer - a reservation on a Friday night at your exclusive flagship location, a guided wine tasting by your chief wine steward, tickets to a sports event provided by one of your suppliers, even a gift for children in the dining party. These are all opportunities to create a reward with high perceived value and low cost and your customers will tell you what they value highly if you ask them. If you can find something your customer's prize that you can provide at low or no cost, you will have an effective tool to use inside your loyalty or marketing program. Look hard, it's worth the effort! Malcolm FowlerVice President & General Manager Ernex  Related Articles and Links
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