Customer relationship management and the service sector, looking specifically at hotels
Introduction
1.1 Background
Customer Relationship Management has extreme relevance and application in the service sector and hotels continually asses and try to improve their CRM programmes to improve their service for customers and generate repeat business. Word of mouth marketing, online marketing and promotional offers, can add as much value as paid-for advertising, adding positively to the success of hotels Healthy CRM tactics also play a big role (Buttle, 2008 and Zikmund, 2002) in bringing success to the hotels. Only through the experience of staying there are customers able to confirm that the hotel lives up to the promises it makes and advertises. . If this is the case, the customers are likely to return. But this, obviously, does not guarantee their stay, as competitors also infuse similar quality into their services, ensuring that brand wars are constantly being fought. The only differentiating element that accounts for the brand switch then becomes the price. But is there a way that despite price differences, hotels can retain their customers with the same quality performance?
Customer Relationship Management has become just as important as any other marketing function. It plays the role of keeping the customer share intact after sales and ensures stability in future purchases. With more and more companies becoming strategically oriented and attempting to build higher customer appeal, the idea of CRM is offering a cutting edge solution (Baran et al, 2008). However, the concept takes on different forms in different sectors.
Consider sports teams such as the Manchester United or the New York Yankees. The fans tend to not switch and remain loyal to their respective teams even in hard times when the teams fail to perform to their standard. But similar loyalty is hard to find in consumers of items such as washing powders and cosmetics. Why is that? Why do customers switch products so often and keep a diverse portfolio of brands on their shelves and lists, whereas to some brands, such as sports teams or movie stars, they are so close that they never think of switching? Customers tend to pursue the products that give them the most benefits. These benefits are primarily the price and the quality. Companies come up with one offer after another to gain acceptance and higher customer share. But if competitors do the same, the customers can be tempted away to other brands. As for sports teams and movie stars, they have strong bonds that their supporters share them with. They reflect their childhood aspirations, and experiences they have had with their friends. Moreover, the stars share their life on the camera with them and offer them the entertainment they enjoy. It is the relationship they have developed over the years that binds their fans and viewers closely.
MGM Grand Hotel has highly improvised its services and embedded high quality in all its customer touch points and services to account for the high prices it charges, thus, relying completely on the notion of quality and price (Campbell, Jarez, and Epstein, 2006). Hilton and Fairmount Hotels offer the very recent idea of computer and Internet-based frequency discount programmes that have allowed them to capture many customers. However, the system has not altogether removed the threat of losing customers (Deighton and Shoemaker, 2005) and the hotels are still highly engaged in brand wars where they counter the incentives and offers made by other competitor hotels by offering slightly better offers. They are investing around $3.3 to $10 billion in customer loyalty programs designed to retain customers (Reinartz, Krafft, and Hoyer, 2003). These, however, still do not guarantee maximum retention and hence, leave room for an enhanced customer relationship management strategy.
Now, two things are clear. Firstly is the notion that there is more to the idea of customer relationship management and customer loyalty programs than just mere frequent purchases programmes that offer monetary incentives and discounts. The idea is incumbent of several complexities as building brand loyalty is a challenge for marketers and attaining true brand loyalty is almost impossible to achieve by solely relying on monetary incentives. Secondly is the idea of how much more valuable and long-term customer loyalty can be built through relationships.
The dawn of relationship marketing has brought more focus towards customer relationship management. It infuses the idea of building non-monetary relationships that leads to the brand and customer equity that hotels long for, thus, giving strength to the idea put forward by Uncles, Dowling and Hammond that “loyalty is a function of people rather than something that is inherent in the brands” (Uncles et al, 2003). Quality brands are everywhere and so are valuable offers that benefit customers. How do businesses retain customers still? Customer loyalty programs are indeed a solution, but other than discount offers and membership cards for example, the idea loses strength, and a company comes right back to having a customer staying loyal as long as the monetary benefit is more (Jackson, 1985). The brands appear same to customers and they switch because of the prices. Here comes the idea of such a relationship with the customers that caters to their specific needs and makes them feel highly important, as if the hotel is built just for them and they never think of going into another hotel. Unfortunately, less research has taken place to further enhance the idea put forward by Uncles, Dowling and Hammond as to how people, through relationships can build a true loyal customer, that is, what kind of services customers long for that could make them feel part of the hotel or highly valued by the hotels through personalised services. This calls for the idea of getting to understand and know the hotels’ customer more deeply, to give them a voice to share their feelings with the hotels’ services and to get closer to their needs and preferences. Sigala pointed out the importance of knowledge management in effective customer relationship management, thus, highlighting the need to maintain proper information and understanding of the customers (2004). This creates room for research that attempts to understand the customers’ demands for personalised services and how the hotels can cater to them with an effective customer loyalty program that does not solely focus on discount offers and monetary incentives.
1.2 Purpose and Scope of the Research
The hotel industry has strong implications for relationship marketing (Sin, Tse, Chang, Hueng, and Yim, 2006) and realise the importance of relationship marketing and the influence of strong relationships with customers that leave out the idea of money and prices does exist as spelt out by Uncles et al. But unfortunately how to incumbent such an idea into a hotel’s customer relationship management and more specifically its customer loyalty programs still is an area untouched by any existing research. The purpose of this research is, thus, to truly understand the idea of retaining customers through a strong relationship which regards each customer as a separate entity and infuses their personal preferences and interests into the services offered to them and evokes the idea of emotional attachment on the part of the customer with the hotel so they never think of switching. On what grounds can this personal attachment and emotional relationship be built? This can only be done through listening to the customers’ voice and their demands, other than the prices. The results of which can be used to develop a customer loyalty program that is built on enhancing personal relationships with the customers of the hotel that binds them to the hotel for the foreseeable future. This research is to bring hotel’s customer loyalty program in line with what the customers want in order to make the customers feel the same in-depth association that makes them feel as if they are cheating when they think of switching, just like the sports fans.
1.3 Research Questions
The research will answer the three main research questions:
- What is the current level of satisfaction of the customers of the hotel?
- How attached do they feel they are to the hotel and how loyal are they owing to the many monetary loyalty schemes?
- What are the customers looking for from the hotel and what are their expectations?
References
Baran, R., Galka, R., and Struck, D. (2007). Principles of Customer Relationship Management. South Western College Publication.
Buttle, F. (2008). Customer Relationship Management. Butterworth-Heinemann.
Campbell, D., Jerez, F., and Epstein, M. (2006). Slots, Tables and all the Jazz: Managing Customer Profitability at the MGM Grand Hotel. Harvard Business Review.
Deighton, J., and Shoemaker, S. (2005). Hilton HHonours Worldwide: Loyalty Wars. Harvard Business Review.
Jackson, B. (1985).Building Customer Relationships that Last. Harvard Business Review, 63(6), 120-128.
Reinartz, W., Kraffts, M., and Hoyer, W. (2003). Measuring the Customer Relationship Management Construct and Linking it to Performance Outcomes. Insead Working Paper Series, 1-54.
Sigala, M. (2004). Integrating Customer Relationship Management in Hotel Operations: Managerial and Operational Implications. Hospitality Management, 24, 391-413.
Sin, L., Tse, A., Chan, H., Heung, V., and Yim, F. (2006). The Effects of Relationship Marketing
Zikmund, W. (2002). Customer Relationship Management. Wiley and Sons.
Orientation on Business Performance in the Hotel Industry. Journal of Hospitality and Tourism Research, 30, 407-426.
Uncles, M., Dowling, G., and Hammond, K. (2003). Customer Loyalty and Customer Loyalty Programs. Journal of Consumer Marketing, 20, 294-316.