It’s a rare person who enjoys strapping a pair of waxed barrel staves to his feet and schussing down the side of a mountain; only 4% or 5% of the U.S. population ski. An even smaller percentage spends money on overnight ski trips, and the amenities that go with them.
So how does a ski resort create relationships with this tiny group of enthusiasts? Vail Resorts Inc. has done it by stressing ambiance- and by creating an effective loyalty program.
Vail faced some tough challenges when it started its Peaks loyalty program last year with Dallas-based Brierley & Partners. For one thing, it had just acquired two additional resorts, both of which had existing programs.
For another, it had to figure out a way to foster relationships with its customers without giving away the resorts. This is no small matter, for the company already spends approximately half of its advertising and direct marketing budgets on retention.
“It’s really important in direct marketing not to express the benefits of being loyal as a price discount,” said Bruce Mainzer, senior vice president of marketing and sales for Vail Resorts Inc. “Often, your higher-revenue customers are your best customers.”
Vail and Brierley created a program that operates at minimal cost. Most of the premiums focus around lift tickets, which are relatively inexpensive for the operator to provide while having a high perceived value to the customer. However, the firm also tried more complex premiums, which had to be scaled back.
Vail started with a fairly high return rate: more than 70% of its customers will return within a year, and the percentage is even higher when customers are tracked over a two-year period. But, research showed that around 30% of these guests like to sample other resorts.
Therefore, the Peaks program was designed to motivate those deciding whether to return or explore a new resort. If only 3.5% of these fence straddlers are tipped to a Vail Resort, the additional revenue they bring covers the cost of the whole program.
When program participants reach the free lift-ticket threshold, they are mailed certificates indicating their award status. Three days’ worth of free lift tickets represents a substantial cost savings to a family of four.
Direct mail pieces for the program contain text and photography highlighting the amenities of each site-Beaver Creek, Breckenridge, Keystone and Vail Resort.
However, it wasn’t easy incorporating the existing programs of the newly acquired resorts-Keystone and Breckenridge-into Peaks. For example, Keystone customers were awarded 10% of their total purchases in a credit toward t heir next stay. This resulted in the resort giving away all of its amenities, without fostering additional spending during that trip. There was no structural encouragement on the part of the company to have people redeem these points in a way that would have lower costs to the company, but with a higher perceived value.
Vail sent out a letter to these 10% program participants that their dollar credits had been converted to points (100,000 points was equal to 10 free lift tickets). The transition was not as smooth as Vail would have liked.
“Having the program change so dramatically and [having] customers getting this big piece of mail [explaining the new program] was a shock,” Mainzer says. “They wanted the old way of doing things. Maybe we tried to do it too quickly, but it’s done and over.”
Of the 63,000 Keystone customers who received this mailing, 10% returned during the first year and used the revised program. (Others may have returned without using the program.) “You don’t expect all 63,000 to come back, but it was definitely below our expectations,” Mainzer admits.
The company has since simplified Peaks, which initially offered some more complicated rewards, like a stay in a cabin in the mountains, with a personal chef, for 350,000 points.
“We took it for granted that customers would get into the program really quickly, but what we found was that simplicity wins,” says Mainzer. “We might have overwhelmed some people by being overly complex.”
Vail has since changed the direction of the program, making the rewards structure more simple.
Under the current plan, 80% of the redemptions are for lift tickets-as opposed to lodging discounts-and the company maintains actual customer spending levels in areas where its margins are higher.
“I like to separate the issues of pricing and the benefits of being loyal,” Mainzer says. “You do that through good recognition programs and a rewards program.”
Vail has also turned to its employees for input-Keystone employees in particular-asking them to suggest more areas where customers could earn points. Not only did this improve the program, it also made Keystone employees more comfortable selling something that had replaced a popular program.
The new Vail loyalty effort has done exceptionally well in boosting revenue among “Front Range” skiers-the 20% of the resort’s visitors that live within a day’s travel, and who are less likely to book overnight lodging. Families can pool points earned, allowing them to reach the free ski lift-ticket plateau quicker.
They can also earn points for eating in one of the resort’s restaurants. But if they just go to ski, using only the low-margin lifts, the program does not earn them as many points.
For the 1998-1999 ski season, the company plans to make the Internet a larger part of its loyalty program. It has been collecting e-mail addresses (its database currently has 25,000, and Mainzer hopes to increase this to 150,000) from its program participants, and with their permission will send them offers for last-minute discount bookings-offers made on Tuesdays for lodging on the coming weekend.
The e-mail program should be especially effective in increasing overnight stays among the Front Range skiers who, when they do stay overnight, tend to book closer to the weekend.
“We should be able to fill in [rooms] after our out-of-state customers [have booked],” says Mainzer. Getting the Front Range skiers to book rooms for the weekend also encourages them to buy two days of [undiscounted] food and beverages, as opposed to just one if they were coming up for a day trip.
The Peaks program goes beyond points, however. Recognizing that not all four resort spots are created equal, Brierley’s senior VP and creative director Jill Goran has created a series of contact mailings that highlight the different personalities of each site, or share information about new programs-such as World Alpine Speed championship events or new snow machines-or that simply thank them for participating in the program.
“We create an involvement that people that aren’t part of this don’t have,” she says.
“A Keystone mailing [completed recently] was beautiful, emphasizing the nature of the Rockies,” Goran says. “A mailing to past guests had an envelope that had snow flying. My job is to give [Peaks] personality. It is a more emotional approach.”
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