Case- Loyalty Program Management at Starwood Hotels

Starwood is one of the world's largest hotel and leisure companies. The company's service ranges from exclusive hotels such as the St. Regis and the Luxury Collection, to its key five-star hotels Sheraton and Westin, down to the moderately priced Four Points hotel chain. With a total of approximately 750 properties, Starwood is represented in most major markets around the world.

The company operates a customer loyalty program called Starwood Preferred Guest (SPG), which allows customers to accumulate points for staying and spending with Starwood. The program is somewhat unique in the Industry In that its points never expire and that Starwood does not have so-called black-out dates (i.e., dates when customers cannot use their points for redemption).

Even though the program has these advantages over those of major competitors, the company is struggling to utilize its program to its fullest potential. In particular, the company must address a number of challenges. First, while it collects information on individual customer behavior (movie watching, minibar use, room service use, restaurant use, etc), it is not clear how they can easily use that information. Although some customers like that the company learns about their preferences, many customers are concerned about a possible privacy invasion. They simply want to be left alone, or, at least have more control over the kind of information the company uses. Second, although roughly 7 million Starwood customers are members of the loyalty program, 6 million customers are not. Thus, the company has very little knowledge about a large portion of its customer base. Third, although the company targets existing program members with customized offerings and communications, it yet has to figure out how much customers can be bothered. That is, although Starwood wants to maximize its cross-selling and up-selling opportunities, it recognizes customers will react negatively if they get too many offerings.

(Kumar & Reinartz, CRM: A Database Approach, 2006)

Question 1: The case mentions that, "While it collects information on individual customer behavior (movie watching, minibar use, room service use, restaurant use, etc), it is not clear how, they can easily use that information".

Describe in detail two specific ways in which Starwood can use the individual customer information they collect.

Question 2: How can Starwood attract the loyalty program nonusers into the program and find out more about the behavior and preferences of that large group? Provide two specific suggestions, and describe them in some detail.

Question 3: a. Interview over the phone or in person, a knowledgeable employee at any hotel. You can pick a local hotel In Cedar or a hotel anywhere in the world. Find out if the hotel has a loyalty program. If the hotel does have a loyalty program, find out how they address the issue of exploiting customer data while at the same time safeguarding and respecting customer privacy. If they do not have a loyalty program, find out why they don't have one.

b. How can a company like Starwood address the issues of exploiting customer data while at the same time safeguarding and respecting customer privacy?