Chapter 7 Building and Maintaining Customer Relationships © Hudson & Hudson. Customer Service for Hospitality & Tourism Topics Covered o Relationship Marketing o Retention Strategies o Loyalty programs o Benefits of Relationship Marketing o Targeting profitable customers ‘At Your Service’ Spotlight: Wine for Dudes Where customer service is King! o o o o o Full service website Quarterly newsletter social networking Word of mouth marketing ‘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 marketing A 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 o Social media o Experiential benefits o Customized reward programs o Matched benefits across brands o Coalition model • Corporate-wide • Across brands o Hybrid approaches Figure 7.2 (Source: Adapted from Zeithaml and Bitner, 2000) 2008-2010 loyalty program memberships growth in US Industry sector 2008 memberships 2010 memberships Growth 2008-2010 Airline Hotel Car rental & Cruise Gaming Restaurant Total 277, 410,000 161,896,000 13,500,000 106,043,000 8,377,000 567,226,000 324,900,000 176,800,000 17,760,000 133,040,000 9,790,000 662,290,000 17% 9% 32% 26% 17% 17% Table 7.1 (Source: Based on Hlavinka and Sullivan, 2011) 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        Loyalty high repeat patronage less motivated for alternatives more resistant to other brands more likely to pass on positive word-of-mouth Spurious Loyalty frequently purchases a brand sees no differentiation between brands Repeat purchase as a habit Figure 7.3 (Source: Adapted from Dick and Basu, 1994)      Latent Loyalty strong preference for/ attitude towards a brand do not purchase repeatedly due to situational or environmental constraints No Loyalty see few differences between brands low repeat purchase Snapshot: Legend Golf & Safari Resort Getting to the heart of customer relationship management by focusing on customer preferences. o Corporate relationships linked to management strategies o Dedicated guest relations managers and frontline employee feedback o Customer Relationship Management (CRM) strategy o ‘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 Benefits to the Company Benefits to the Customer Increased purchases Lower costs Employee retention Increased profits Less customer defection Free advertising (WOM) Social benefits Confidence and trust Special treatment Reduced risk Increased value Customized services Table 7.2 Targeting profitable customers o Building and improving upon traditional segmentation o 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) - - Managing loyalty and profitability Figure 7.5 (Source: Adapted from Kumar and Rajan, 2009, p. 5) High Future Relationship Value High Low Prime Customers Low Customer Profitability A taxonomy of casino customer segments Valued Customers Incidental Customers of Tomorrow Mobile Customers Figure 7.6 (Source: Watson and Kale, 2003) Case Study: Service Excellence at Sheraton Suites ….What people really remember is the guest experience. 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