Loyal retainers
When the foot-and-mouth outbreak first took hold, Chris Carss, owner of the 25-bedroom Rothay Garden hotel in Grasmere, in England's Lake District, was determined to hold on to his business. He wrote to everyone who had a booking, telling them what was open and that there was still plenty to do in the area.
"March was already 80% booked when the disease hit Cumbria, and we held on to practically all of that business," Carss says. He is no newcomer to direct marketing and sends out four mailings each year, which bring in about £100,000-worth of business. He adds: "Our Christmas newsletter alone, which goes out to all 9,000 people on our database, generates £20,000 of business."
That's pretty impressive for a business with a net annual turnover of £700,000. Carss thought about setting up a loyalty card scheme but chose not to because of his concerns about giving away freebies to already loyal customers.
"We're a personalised product and whatever marketing we do has to reflect that," he says. "We always look after our regulars anyway, so a loyalty card wouldn't really fit into what we do. We've tried to do clever, gimmicky things in the past and they don't work as well as the simple ideas that make people feel valued."
Loyalty schemes may work for the big industry players, helping them to offer a point of difference from their rivals, but for smaller businesses there are other, less expensive ways of keeping hold of loyal customers.
Chris Ogilvie-Taylor, managing director of marketing consultancy Marsden Grant, a specialist in direct marketing, says: "Loyalty schemes are old hat. They are a bribe and they cost a fortune." He believes that small businesses should concentrate more on offering personal attention than wasting time and money giving gifts and incentives to regular customers. Sending a birthday card, a Christmas card or remembering details of a customer's previous visit will get better results than a free meal - and it's cheaper.
"Any restaurateur or hotelier worth his salt endeavours to memorise regular customers and make them feel special," says Ogilvie-Taylor. He calls it "relationship marketing", whereby a hotelier personalises the marketing to each customer. Schemes such as "buy six meals, get the seventh free" or "visit three times and get your fourth visit free" simply reward customers who would have returned anyway and are just taking advantage of a freebie.
Instead, Ogilvie-Taylor advises: "Isolate the customers who are not repeating, ask them about their lifestyle and contact them when it's relevant. If they're into horse racing, tell them about local races."
It's worth remembering that any formal communication with customers is likely to fall within the scope of the 1998 Data Protection Act. This covers any form of data processing, including simple acts such as retrieving, consulting or making minor alterations to data. But that shouldn't put anyone off. Data must be fairly obtained - that means asking rather than assuming that people are happy to be contacted.
Of course, there are plenty of initiatives that don't even require names and addresses. At the 11-bedroom Crab Manor Country House Hotel near Thirsk, North Yorkshire, guests are given a "passport". Each room at the hotel is designed with an international hotel theme and there is an ascending scale of rewards. Once guests have stayed in all the rooms and collected stamps in their passport, they get a free night.
"It's simple to follow and has endless PR possibilities," says proprietor David Barnard. "There are 5,000 passports in circulation, and we know the idea works because people keep coming back." The scheme cost £3,000 to produce and put into action.
But no matter how good the idea, the product has to be right. If the hotel isn't up to scratch, the customer isn't going to come back. An incentive or loyalty scheme will never be a substitute for customer service.
Martin Couchman, deputy chief executive of the British Hospitality Association, agrees. "Small operators tend to do things on a more informal basis," he says. "Being recognised, greeted by name, engenders much more loyalty than a points scheme. These things work best for bigger hotels, where the loyalty scheme may be the only thing a guest has to choose between two corporate hotels."
There are options for small operators who want to offer loyalty rewards with a recognised value without having to set up a complex system. Vineeta Chaterjee, account manager of Air Miles' small businesses programme, has more than 100 small firms on her books offering Air Miles as rewards to loyal customers. Keen to attract more, Chaterjee is in no doubt that they bring in new business. "Air Miles are like cash to collectors," she says. "Offering them is a really effective marketing tool."
Chaterjee adds that the cost of the scheme is tailor-made to each business, based on turnover, so it is as affordable as possible. Businesses can display the familiar Air Miles logo in advertising and at the establishment, although at present there is no directory of places offering Air Miles, so customers will have already sought you out by other means.
Ian McKerracher, chief executive of the Restaurant Association, believes that schemes such as "lunch for a fiver" work better because they are bringing new people through the door rather than rewarding people who already know about you. However, many restaurateurs complain that they fill their restaurant with cheap diners during the promotion, and they are never seen again.
McKerracher has no patience with that point of view. He says: "If it brings in people who would otherwise not have heard of your restaurant, it is a success. If the restaurateur doesn't look after them as well as their regular customers, they have wasted the opportunity."
He says that sophisticated loyalty schemes work best for larger chains of restaurants, such as Conran and Chez Gérard, which don't have the same unique selling point of personal attention that smaller restaurants have. Ogilvie-Taylor agrees, and says: "If you are doing the job well, you are already earning customer loyalty."
All in all, maybe a simple smile is worth a thousand loyalty points.
DATA PROTECTION
The Data Protection Act came into force on 1 March 2000.
Any organisation that started data processing before 24 October 1998 has until October this year to comply.
All organisations that process personal data must register with the Data Protection Registrar. See www.dataprotection.gov.uk.
For more information on the Data Protection Act 1998, visit www.hmso.gov.uk/acts
NATIONAL RESTAURANT WEEK
The Restaurant Association, together with American Express, is running a National Restaurant Week, 11-20 May. For £195, any restaurant can register and take advantage of the event's publicity. Contact Angela Nicholson on 020 7831 8727 or visit www.nationalrestaurantweek.co.uk
CONTACTS
Air Miles
Air Miles are available to any size of business. An annual fee of £300 covers supply of software for any PC and access to a help desk. The cost of each mile is negotiable, based on turnover.
Contact: Vineeta Chaterjee, 01293 515556.
Marsden Grant Marketing Consultancy
Offers advice and training in all aspects of direct marketing.
Contact: Chris Ogilvie-Taylor, 020 7486 4899 or e-mail cot@marsdengrant.com
Source: Caterer & Hotelkeeper magazine, 26 April - 2 May 2001
