|Professor Michael McCall Draws National Attention for Customer Loyalty Research|
|The work of School of Business professor Michael McCall is changing how you can use those reward cards in your wallet.|
The work of School of Business professor Michael McCall is changing how you can use those reward cards in your wallet.
Reward cards exist to increase customer loyalty, says McCall, a consumer psychologist, and the next big change in rewards programs may follow the lead of JetBlue, “where you focus more on rewarding your best (as in most profitable) customers, who may or may not be your heaviest user.”
McCall is drawing national attention for his research on reward programs, which shows that while programs have grown throughout the hospitality industry in the last 30 years, they have accomplished little in building behavioral loyalty. He is the lead author of a recent hospitality paper, “Building Customer Loyalty: Ten Guiding Principles for Designing an Effective Customer Reward Program,” published by The Center for Hospitality Research at the Cornell University School of Hotel Administration.
He explains how to shift the reward card emphasis to the most profitable customer:
“A frequent flier using discount sites may fly more miles, but be far less profitable than an individual who flies one time but pays for first class. Similarly, consider a visitor to a Las Vegas casino who may not gamble at all. But by the time they are done dining, shopping, golfing and visiting the spa, their value may be significant.
“In other words, dollars spent are tied to the rewards an individual might receive.”
In the paper, McCall points out, “while program implementation seems to have expanded exponentially, the actual components and structure of any given program appears to be driven more by what the competition is offering rather than demonstrated effectiveness.” He and co-authors Clay Voorhees and Roger Calantone present 10 guiding principles for customer reward program design and management.
Recent media inquiries have come from the Los Angeles Times and AOL.com. McCall, a professor of marketing and law at Ithaca College and visiting scholar at the Cornell School of Hotel Administration, will give a talk at the Cornell World Summit on Hospitality in October and lead a workshop at the invitation-only SAS Premier Business Leadership Series in Las Vegas in November.
The shift toward emphasizing the best customers may limit rewards to others.
“There is a culture that everyone expects a reward,” McCall says. “Notably it is strongest in the U.S. Logically, there may be reasons not to reward certain people. The goal is loyalty and increased patronage and profitability. A coffee card that provides a free cup after nine purchased cups is not necessarily getting more business, but may instead be giving away 10 percent of their product.”
In McCall’s wallet, you’ll find reward cards from Best Buy, Dick’s Sporting Goods, Marriott, and Hilton. He has signed non-disclosure agreements with the companies with which he consults but says, “They include internationally known firms in and outside of the hospitality industry.”
The hospitality paper identifies three key factors for loyalty program effectiveness:
- The structure of the loyalty program
- The structure of the rewards
- Customers’ fit with the loyalty program.
“Patronage is not necessarily loyalty,” McCall says. “Loyal customers tend to be significantly less price-sensitive while at the same time more likely to market the firm to their friends and others. I may use a particular airline or firm, but truly not like it at all; usage is a function of choice (the only airline that serves my needs), and or because I have built up a large number of points that the switching cost barriers are prohibitive.”
He enjoys bringing his research into the classroom to let students know what is happening in industries inside and outside of hospitality.
Zachary Klinger ’11 has taken McCall’s course on consumer behavior but has not yet been involved in any of his research.
“McCall has a very energetic vibe,” says Klinger. “He usually teaches early morning classes, so he’s already fighting an uphill battle with classroom energy. Once you’re in the swing of the semester, you realize when you go into class you will definitely perk up.
“He likes to crack jokes, tell interesting stories that pertain to the course material, and keep students on their toes. It’s definitely a gust of information on really cool topics. It’s effective because it engages students and makes them want to hear what’s next.”
In further research, McCall says, he’ll have students work with him more directly.
And he points out another IC connection. His co-author Clay Voorhees received his B.S. in business administration and marketing from IC in 2001, earned his Ph.D. at Florida State and is an assistant professor at the Eli Broad School of Business at Michigan State University.