Hilton Should Have Known “Game Theory” Better


Hilton is often in news these days. This time is not about its Denizen brand; it is about InternationalContinental’ (IHG) reaction to Hilton’s decision on its loyalty program.

While Hilton devalued HHonors members’ points by 20%, IHG announced the “Luckiest Loser” campaign. IHG offers its Priority Club Rewards member who has the highest HHonors points 2 million Priority Club points, which is good for 80 hotel stays. In addition, another 20,000 “lucky” HHonors “losers” will gain a total of 400 million Priority Club points to make up their lost in HHonors points.

Probably, nobody will argue that it takes more money and time to retain existing customers than to “create” new clients. This “Luckiest Loser” campaign not only helps the IHG gain more “loyalty” customers but also “attacks” its major competitor’s loyalty program. What a brilliant strategy!

Under game theory, competitors’ expected reactions will affect the decisions of an organization. Before making the decision of devaluing its HHonor points, Hilton probably failed to consider the reactions of its competitors. Who would imagine IHG will launch the “Luckiest Loser” campaign? Once again, another evidence suggests us to keep an eye on IHG (we discussed the makeovers of Holiday Inns a week ago via http://linchikwok.blogspot.com/2010/01/upgrade-of-holiday-inn-from-logo-to.html).

References:
CNBC.com: http://m.cnbc.com/us_news/35219817/1
Yahoo!Finance: http://finance.yahoo.com/news/IHGS-Priority-ClubR-Rewards-prnews-1743362247.html?x=0&.v=1
Pictures were copied from http://www.hiltonworldwide.com/assets/images/brands/HHonors_mk_logo_colorhhonorslogodwnld.jpg; and https://secure.ichotelsgroup.com/h/d/pc/1/en/login?secure=true.

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