Randy Petersen interviewed Jeff Diskin, Senior Vice President of Customer Marketing at Hilton in the April issue of Inside Flyer.

And Diskin had one of the most interesting spins on their points devaluation I’ve ever read. They were “over-indexed.”

Here’s his answer, and it’s really enlightening.

We were and have been, sort of “over indexed” for some period of time in terms of the value of some reward properties, and frankly we weren’t getting credit for that. Because what the research pointed out is what you do with your points is of great interest to you when you’re looking to shop with them. People are looking to shop with them because they are looking to offset the cash outlay with whatever points they’ve accumulated. So everybody is within the same environment which is very difficult for people within the hotel space. What it does is basically focus on the return on spend that members get. And being over indexed in terms of the base level doesn’t give you enough payback because not enough people can understand or know what it is. We are actually recognizing that it’s much more important to have promotional activity in the marketplace to segment divide and conquer and put different initiatives in place for different groups of travelers. Not just by their tier level but also by the type–if they’re resort stayers or meeting planners–versus just having a core proposition which we over indexed. So, it was surprising to learn that, but when you think about it, you would have thought we would have known anyway.

Diskin believes there’s little benefit in having a better value proposition for redemption than competitors.

So what he says they learned is they need to keep customers on the treadmill. Increase the number of points needed for an award and keep them earning points towards those rewards. Like Lucy, Charlie Brown, and the football.

Diskin does at least see the need to offer redemption for better than a basic room, and to continue to reward their highest value top-end elites.

But what he misses is that his program is the least rewarding for top-end elites now. Diamonds don’t get suites as a benefit of the program (as Starwood, Intercontinental, and Hyatt elites do).

But given Diskin’s thoughts on devaluation, adding a new higher tier makes more sense than increasing benefits, you can’t provide a good value product you have to keep your members on a treadmill constantly striving for more.

I also think Diskin misses the mark on free internet for elites. Randy notes that Starwood and Marriott recently added this as a benefit (though Marriott limits the geographic scope, and Hyatt in fact was first to the table with this benefit). And Diskin responds that Hilton already offered this as a choice to elites, and they don’t choose it. Well, of course they don’t. Hilton says you can have upgrades and breakfast, points, or internet. Internet isn’t the most important benefit and members aren’t willing to give up their upgrades (!) for it. Hilton will be foolish to think that the overall package of benefits they offer to members doesn’t matter.

With this interview, Randy has done us a real service. If you can cut through the spin, there are some very telling comments here.

  1. Fozz M said,

    I’m really glad that I’ve abandoned Hilton.

    I will say, Hyatt has definitely impressed me the most.

  2. Ralf said,

    Very telling indeed. Hilton would be well advised to change course and fire this guy

  3. nsx at flyertalk.com said,

    I read the comments twice, and it still sounds like gibberish to me. Perhaps you could post a sentence by sentence translation into English.

    My impression is that he’s trying to say that loyalty programs should only reward purchases that were actually caused by a loyalty promotion, not purchases that would have occurred anyway. That turns the concept of loyalty on its head, rewarding only inveterate brand-switchers.

    Whatever he’s trying to say, he wants to say it in code so that customers cannot understand it. This is embarrassing to Hilton.

  4. Oliver said,

    Sorry, but that quote alone turned me off enough that (a) I don’t want to read the entire interview as it might cause brain cancer and (b)I likely won’t stay a single night at a Hilton property this year.

  5. don h said,

    He may be brainwashed or pre recorded with the soundtrack playing by Blackstone
    At the end of that day he has to justify the expense of running that massive program.If he does believe what he actually speaks he is out of touch with many of his customers that have been top tier elite for many years.
    I am out with Hilton big with Hyatt and all the rest goes to SPG and Priorty Club.Thank you Priorty Club for the nice bonus points for being one of the big losers with Hilton!Hopefully Hilton will wake up and smell the coffee.Even if they don’t I was tired of their bland semi generic hotels anyway.
    They had a great program Mr.Diskin was a big part of that to his credit and they damaged much of what was once great about HH.Wish them well I am happy and won’t look back

  6. The Challenge of Contuing to Encourage Incremental Business from Elite Members that Have Already Requalified for Next Year’s Status - View from the Wing said,

    [...] program head has suggested the need for a new, higher elite tier as a way to keep members on the treadmill but that only works with more benefits not just status for status sake (I’m even letting my [...]

  7. Anonymous said,

    [...] shouldn't effectively give away aspirational inventory at huge discounts". And it's not like there weren't big fat clues about this. Clearly inflating away people's point values are part of the [...]

  8. Q3 2013 Promotion Now Available - Page 7 - FlyerTalk Forums said,

    [...] http://boardingarea.com/viewfromthew…eir-customers/ Hilton's very much on record that they actively inflate away the value proposition of their points. What happened this spring is not anything other than turning up the treadmill a notch. [...]

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