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With customers focusing on location
and cost in their hotel choice stays1,
and since a property’s location is fixed,
building guest loyalty is crucial. During
difficult economic times hotels are
reminded of a fundamental lesson.
Building guest loyalty is the only way to
compete without sacrificing revenue.
Simply put, the less a hotel or brand is
viewed as a commodity, the more traffic
and revenue it can generate.
At the property, loyalty means that
guests will tolerate a less attractive
location, a higher price, or some other
obstacle, and still stay at your hotel. In
other words, you become a “favorite,”
and people will pay more for their
favorites. Of course, your hotel cannot
be all things to all customers. Your
target is a certain segment or group of
guests that will, if you are viewed
appropriately, be loyal to your product.
Once a segment or segments have
been identified, and the product has
been positioned to be a favorite,
feedback must be gathered to make
sure you stay the favorite.
At the brand level, flags are picked for
hotels based on a guess about the brand
appealing to a highly profitable segment
available in the local market. That is, hotel
owners have to ask themselves, “Which
‘flag’ will be the favorite for the largest
number of potential guests in my
market?” Two questions are often left
unanswered. “Was that the best flag to
pick?” “Does the flag actively help my
property become the favorite?”
For both properties and flags, there are
that need to be
answered if you are going to be and stay
the favorite.
What is the combination of product or
service characteristics and target
segment(s) that will make you the
favorite?
What actions do you need to undertake to
become the favorite of “your” guests?
How do you validate that you have
successfully taken the right actions to
build guest loyalty?
And if the validation indicates something
is amiss, what actions do you take to
correct the problem?
UniFocus has evolved to being a full
service provider that answers all four of
these questions. In that process;
UniFocus has learned a lot, some of
which we share here. Answering each of
these four key questions requires a
different methodology, and we share
these methods one at a time below.
This is a traditional market segmentation
and marketing research question. This
has two elements; identifying the type of
customer you will make the most money
from and the type of customer most likely
to buy again. The notion is that if
customers buy repeatedly, you are
successfully offering what they need.
Segment identification may be easy, or
very difficult, to do. Many businesses start
with a clear idea of their preferred guest
characteristics. After purchasing an
existing property or chain, others have
realized that a profitable future required
repositioning with reevaluation of the
appropriate guest segment(s) to try to
attract.
Segmentation may be performed using:
- Competitive analyses, where
identifying who your competitors attract,
coupled with your brand differentiation,
results in a definition of your customer
niche.
- Evaluation of individual data collected
at Point of Sale (POS) and from loyalty
programs, which is then analyzed to
build desired customer profiles.
- Surveys or focus groups to find out from
potential customers who is interested in
your portfolio.
Expert opinion to define attractive
customers for your business.
Next, market research compares you to
your competitors for your segment, then
“talks” to that segment to identify what
drives them to make their purchase
choices. The approach is analogous for a
brand, but brand analyses take place at
the national not the local market level. In
both cases, we match the products or
services and company image against segment revenue potential, and then perform focus groups or survey research to “talk”
to that segment to identify key drivers. As a brief case study, we performed just this research for a 240-outlet company.
First, UniFocus defined a target segment that had a history of “coming and going.” That is, they were not loyal. Second,
we found that in their segment, the brand was viewed as an interchangeable commodity with no brand differentiation or
added value. Internally, the company had a distinct brand message and a differentiation that added value. Externally,
they did not. After additional research and discussion, several actions were undertaken to effectively communicate the
“differentiation and added value” message to the appropriate segment.
What actions do you need to undertake to become the favorite of “your” guests?
There is no single answer to this question. For one brand UniFocus worked with, it came down to improving customer contact.
We helped them implement a continuous email feedback system that drove company responses. The resulting solicitation of comments
and company actions in response made the customers feel like they were really cared for and important. For another brand, it
came down to creating an explicit price/value model for the guests, and designating the dissatisfiers that were turning the
segment away. For a third, it was emphasizing the unique characteristics that added value and made the product unique.
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Another way to look at this is that there are different kinds of loyalty. One may be loyal to products, and the places that
provide them. As an example, this is the Sharper Image model, where they feature unique products that have a loyal following.
One may be loyal to the service that goes along with those products. This is the Nordstrom?s model, where loyal customers are
on a first name basis with key salespeople. One may be loyal to the cachet of a place. This may be thought of as the Rodeo
Drive model, which has cachet because movie stars shop there. There is an affective or feeling loyalty. This is commonly
associated with the Spas that provide the best “glow.” Some consumers are only loyal to price or location. To win them away
from the place with the best price or location, you have to identify another driver of their behavior. The key is to perform
Step 1, answering “what characteristics of your product or service will influence customers in your segment to make you their
favorite” Once this question is answered, the necessary actions usually become obvious. When the actions are obvious, it all
boils down to implementation.
How do you validate that you have successfully taken the right actions to build customer loyalty?
If Steps 1 and 2 are complete, that is if you have analyzed and implemented, then the next task is validation. This is
where guest comment surveys, be they by e-mail, front desk cards, in person comments to mangers, focus groups, room tents,
or telephone surveys become critical. Only your customers can tell you if you have implemented that which will make them loyal.
There is a lot to writing and administering a survey that produces valid data. Key issues are question wording, question order,
who the survey is sent to, how it is administered, and who responds. The best advice is to hire an expert. If you wish to
review a paper describing how to construct a survey, see Best Practices in the Assessment of Hotel-guest Attitudes printed
in the Cornell Hotel and Restaurant Administration Quarterly in April of 2003. The key point is that without implementing a
valid feedback system, there is no way to know if the resources you are spending are successfully driving loyalty and making
you the favorite for your segment(s).
And if the validation indicates something is amiss, what actions do you take to correct the problem?
If the validation instrument is implemented correctly, the feedback will guide you towards effective actions. Analyses of
survey or focus group results will often narrow down the area to pay attention to first. For example, drilling down on poor
food quality scores may reveal that those people who feel that food quality is poor also feel that their dining experience
was of low value. The conclusion is that the food quality may be ok, especially if it is being prepared to standards, but guests
feel it is not up to the expectations set by its price.
One key here is the use of open-ended comments. Preset questions cannot cover every contingency, but guests will talk to every
possible point in their comments. One of the nicest tools to have is a comment search engine that will return every occurrence of a
specified word or phrase (E.g. bad, meal), provide a count of the number of hits, and put each word, highlighted, in the context of
the comment.
After the analyses, one must build and execute on an action plan. The manager, or their manager, can probably figure out what to
fix, but many managers find that a good action plan building tool can greatly decrease the time between the identification of a way
to increase loyalty and its implementation.
If the validation is really off, and sales are dropping or holding constant, then it is probably time to ask yourself the first
question again, “what is the combination of product or service characteristics and target segment(s) that will make me a favorite?”
Conclusion
So we have the whole cycle, identify positioning and target segments, identify drivers of loyalty, validate, act on validation
results, and repeat as necessary. Too often, companies think loyalty is just a “points” program or a slick advertising campaign.
While that may get heads in beds today, and maybe even tomorrow, it does not produce a long-term high-value loyal customer.
Someone else can come up with a better loyalty program, or a better bed, and win that guest away from you, unless you make them
loyal first. For your business, long term profitability depends on each guest?s lifetime value, that is how much they will spend,
how much they will encourage others to spend, and the lifetime of that spend. The longer the spend lifetime, the greater the
revenue. One moderate value customer who returns continuously for 20 years is worth more to you than one high value customer
who only stays once. Loyalty is a lifestyle for your business that involves a continuing process of reexamination of the company’s
methods, products and services, customers, and the dynamic interplay between all of the above.
Joe Sullivan is the CIO at UniFocus.
1Has the Business Traveler Been Irrevocably Changed?
Issued by Travelocity Business on October 14, 2003
The Travelocity study was fielded from August 6 - 17, 2003 via a phone survey of a
random sample of U.S. business travelers by Synovate Market Research. The research
responses were from 600 Americans who have made a business trip in the last 12 months.
Reprinted from FocusEd, Fall 2004 edition.
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