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by Mark Heymann, ISHC - UniFocus Chairman & CEO
Loyal customers yield successful
businesses. In its simplest form, loyalty is
the tendency of a customer to choose one
business or product over another for a
particular need. In the hospitality industry,
we frequently refer to this as customer
retention.
But in today’s highly competitive
environment, this is becoming more and
more difficult. Just look at the problems that
Proctor and Gamble is having with its
products that have, historically, been
brands at lower costs with an indiscernible
reduction in product quality. (NOTE: see the
box on P&G brand loyalty philosophy at the end of
this article) This results in an improvement in
value perception by the buyer. Lower cost;
same basic quality. Sound like some of your
guests? I recently heard that there are about
180 different brands of hotels from which to
choose. Add to that the number of
restaurant concepts and you have a
consumer whose loyalty might well be
suspect, not because of dissatisfaction, just
because of so many choices.
And to compound the situation, we have
some recent studies by the Center for
Hospitality Research at Cornell which draws
into question the use of satisfaction as a
measure of loyalty. Their findings are quite
interesting.
They divide guests into four groups, satisfied
stayers, satisfied switchers, dissatisfied
stayers, and dissatisfied switchers. Two of
the groups (satisfied stayers and dissatisfied
switchers) behave as expected. It is the
other two groups that are more difficult to
leave. This surely challenges our
assumptions about the impact of
satisfaction on loyalty. While the purpose
of travel, in this study, appeared to be a
prime determining factor regarding what
group the guest would fall into, and it
appears that business travelers are less
“loyal,” this is surely something to be
studied more extensively.
Additionally, in the December issue of the
Harvard Business Review there is an
article about ongoing efforts to assess
loyalty. It is suggested that one key
question be asked when gathering
feedback from customers, “Would you
recommend?” This appears to directly
correlate with a company’s profitable
growth, more so than satisfaction.
Although surely, satisfaction is a key driver
to recommendation.
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What this all comes down to for the
hospitality industry is not only to consider
how to measure loyalty, but to re-consider
what factors influence loyalty. Satisfaction
is a key measure of loyalty, but satisfaction
and therefore loyalty, is influenced by a
variety of factors, not the least of which is
rate paid. In all of the studies mentioned,
one factor was consistently missed.
Amount paid for the “service”. Our studies
show that for the same demographic
group, traveling for the same purpose, rate
has a direct impact on Intent to Return and
Intent to Recommend. Further, other key
drivers related to the position of the
property are also influencers as well as
“loyalty” programs. In the end, in order to
understand loyalty and, as critically,
lifetime value of a guest, one needs to
understand the relative impact of each of
the above noted factors on a guest’s
decision making process. As hotel
products become more difficult to
differentiate, service becomes a key driver
as well as perception of value (the
relationship of price to quality).
To fully comprehend these issues,
organizations must produce timely data
that delineates these relationships and
determine appropriate strategies and
tactics to increase their number of stayers
(return guests). This timely data can only
come from properly developed surveys
and other feedback tools that support
CRM efforts and, most critically, ensure
that the guest receives high value for the
price paid. Recognizing that price paid
often differs by guest, personalized
service can be a key differentiator leading
to intent to recommend.
With the number of moving parts that
management must focus on each day,
organizations must be all the more vigilant
in understanding individual guest needs
and targeting service to create high value
perceptions. Today, UniFocus is focusing
its efforts on helping our partners
understand what creates loyalty and how
to ensure that organizations have the
tools to measure and impact these
perceptions, hence the divisional name.
Mark Heymann, ISHC, is Chairman & CEO of UniFocus.
Reprinted from FocusEd, Spring 2004 edition.
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