Building and Maintaining Customer Relationships

Chapter 7

© Hudson & Hudson. Customer Service for Hospitality & Tourism

Topics Covered

o Relationship Marketingo Retention Strategieso Loyalty programs o Benefits of Relationship Marketingo Targeting profitable customers

‘At Your Service’ Spotlight: Wine for Dudes

Where customer service is King!

o Full service website o Quarterly newslettero social networkingo Word of mouth marketing o ‘Dudes of Fortune Quiz Challenge’

o Personal relationships with customers • Accommodates individual needs• Customized group tours

o Encourages repeat customers • Company merchandise as gifts• “Dudes Dollars” trip vouchers • Customer service recovery: • “wine heals all wounds”

Relationship marketingA form of marketing that attracts customers, retains them, and enhances their satisfaction.

o Less expensive to attract repeat customers o Dramatic increases in profits

• Spend twice as much gross income o Enhancing customer satisfaction includes:

• Nurturing individual relationships • Making customers feel unique • Making customers feel singled out for attention• Loyalty programs

Customer Relationship Management Model

Figure 7.1 (Source: Based on Winer, 2001)

Levels of retention strategies

Figure 7.2 (Source: Adapted from Zeithaml and Bitner, 2000)

Industry growth in loyalty programs

Figure 7.2 (Source: Adapted from Zeithaml and Bitner, 2000)

o Social media o Experiential benefitso Customized reward programs o Matched benefits across brandso Coalition model

• Corporate-wide• Across brands

o Hybrid approaches

2008-2010 loyalty program memberships growth in US

Table 7.1 (Source: Based on Hlavinka and Sullivan, 2011)

Industry sector 2008 memberships 2010 memberships Growth 2008-2010

Airline 277, 410,000 324,900,000 17% Hotel 161,896,000 176,800,000 9%

Car rental & Cruise 13,500,000 17,760,000 32% Gaming 106,043,000 133,040,000 26%

Restaurant 8,377,000 9,790,000 17% Total 567,226,000 662,290,000 17%

Hospitality and tourism loyalty programs

o Frequent flyer rewards • Repeat customers • Highest fare holders• Elite status customers

o Co-branded credit cards• Issuers pay carriers for miles awarded • Significant income source

o Hotel loyalty programs:• Complimentary meals, internet access• Included in franchise fees • Joint programs for smaller brands, boutique hotels

o Frequent diner programs:• Rewards Cards• Non-financial incentives e.g. ‘Jump the Line’ perk • Hybrid approaches

Service loyalty classification scheme

Figure 7.3 (Source: Adapted from Dick and Basu, 1994)

Loyalty high repeat patronage less motivated for

alternatives more resistant to other

brands more likely to pass on

positive word-of-mouth

Latent Loyalty strong preference for/

attitude towards a brand

do not purchase repeatedly

due to situational or environmental constraints

Spurious Loyalty frequently purchases a

brand sees no differentiation

between brands Repeat purchase as a

habit

No Loyalty see few differences

between brands low repeat purchase

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Snapshot: Legend Golf & Safari Resort

Getting to the heart of customer relationship management by focusing on customer preferences.

o Corporate relationships linked to management strategieso Dedicated guest relations managers and frontline employee

feedbacko Customer Relationship Management (CRM) strategyo ‘Operation Boat Float’ (OBF). o ‘Most Valued Client’ o Customer feedback

• Attention to unique requirements • Rated response

Benefits of Relationship Marketing

o Customers loyalty incentives:• High perceived value • ‘Get’ should exceed ‘Give’• Rewards for loyalty

o Company benefits:• Higher profits through retaining customers

⁻ More purchases overall⁻ More frequent purchases

• Lowers operating costs⁻ No acquisition costs

• Increases company referrals

Benefits of relationship marketing

Table 7.2

Benefits to the Company Benefits to the Customer

Increased purchases Social benefits Lower costs Confidence and trust Employee retention Special treatment Increased profits Reduced risk Less customer defection Increased value Free advertising (WOM) Customized services

Targeting profitable customers

o Building and improving upon traditional segmentationo Studying loyalty- versus defection-prone customers

• Identify profitability bands• Identify customers most likely to remain loyal• Develop overall strategy around these customers

⁻ Target with retention strategies • Other customers too costly to retain

⁻ Little potential to become profitable

The 80/20 customer pyramid

Figure 7.4 (Source: Adapted from Zeithhaml and Bitnen, 2000)

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Managing loyalty and profitability

Figure 7.5 (Source: Adapted from Kumar and Rajan, 2009, p. 5)

A taxonomy of casino customer segments

Figure 7.6 (Source: Watson and Kale, 2003)

Future Relationship Value C

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Prime Customers Mobile Customers

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Valued Customers

of Tomorrow Incidental Customers

Case Study:Service Excellence at Sheraton Suites

o Service interaction key to customer loyalty • Carefully selected and trained staff• Brand-specific programs

⁻ ‘Building World Class Brands’• Staff empowerment• Strong service culture• Awards for service

o Relationship marketing• Tailored to each guest • Personable, non-intrusive attention• ‘It’s Our Pleasure’ program• Starwood Preferred Guest program • Loyalty reward point system• Social media monitoring

….What people really remember is the guest experience.