building customer loyalty through quality

©2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th editionUpper Saddle River, NJ 07458 Kotler, Bowen, and Makens

Chapter 11

Building Customer

Loyalty through Quality


“To understand service quality and make quality management effective, we need profound knowledge about the details and activities

connected with the emergence of a service. This presupposes interest in service design and

service production.”

-Evert Gummesson



Chapter Objectives• Define customer value and customer

satisfaction

• Understand the difference between customer satisfaction and customer loyalty

• Discuss attracting new users and retaining current customers by developing relationship marketing



Chapter Objectives• Know tactics for resolving customer

complaints and understand the importance of resolving complaints

• Define quality and discuss the importance of the benefits of quality

• Implement capacity and demand management tactics



Customer Delivered Value• Customer-delivered value is the difference

between total customer value and total customer cost of a marketing offer

• Customer satisfaction depends on the product’s performance relative to a buyer’s expectations

• Companies must be customer centered and deliver superior value to target customers



Customer Delivered Value



Customer Satisfaction

• Buying decisions based on judgments formed about the value of marketing offers

• Customer expectations based on past buying experiences

• Today’s most successful companies raising expectations and delivering performance to match



Customer Satisfaction vs. Customer Loyalty

• Customer satisfaction measures how well a customer’s expectations are met

• Customer loyalty measures how likely customers are to return and their willingness to perform partner shipping activities for the organization

• Customer satisfaction is a requisite for loyalty



Relationship Marketing

• Creating, maintaining, and enhancing strong relationships with customers

– Basic

– Reactive

– Accountable

– Proactive

– Partnership



Benefits of Customer Loyalty

• Continued patronage

• Reduced marketing costs

• Decreased price sensitivity

• Partnership activities



Cost of Lost Customers

• Companies must define and measure retention rate

• Company must identify causes of customer defection and determine which can be reduced or eliminated

• Reducing customer defections by only 5 percent can result in improved profits of over 25 percent



Resolving Customer Complaints

• A critical part of customer retention

• 82% of customers are likely to return if a complaint is handled quickly, as opposed to 9% if it is not

• Most customers do not complain



Quality• Quality has emerged as an important area in

hospitality

• Product features enhance customer satisfaction and adds to the cost of a product

• Freedom from deficiencies increases customer satisfaction



Quality

• Technical quality refers to what the customer is left with after the customer – employee interactions have been completed

• Functional quality is the process of delivering the service or product

• Societal (ethical quality) means firms must consider ethical responsibilities when developing products



Managing the Perceived Service Quality



Benefits of Quality Service

• Customer Retention

• Avoidance of Price Competition

• Retention of Good Employees

• Reduction of Costs©2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th editionUpper Saddle River, NJ 07458 Kotler, Bowen, and Makens


Managing Capacity

1. Involve the customer in the service delivery system

2. Cross-train employees

3. Use part-time employees

4. Rent or share extra facilities and equipment



Managing Capacity

5. Schedule downtime during periods of low capacity

6. Extend service hours

7. Use technology

8. Change the Configuration of the Service



Revenue Management

• Revenue management is a methodological approach to allocating a perishable and fixed inventory to the most profitable customers



Managing Demand

1. Use price to create or reduce demand

2. Use reservations

3. Overbook

4. Use queuing



Managing Demand

5. Shift demand

6. Change the salesperson’s assignment

7. Create promotional events



Class Discussion

The Five-Gap Model of Service Quality

Question: Describe ways in which you as a Manager could use the five-gap model of service quality



The Five-Gap

Model of Service Quality



Close Gap 1

1. Talking to customers

2. Talking to customer contact employees

3. Marketing information systems – customer surveys – analysis by segment – focus groups

4. Reducing levels of management



Close Gap 2

1. Management Commitment – resources, internal marketing, reward systems

2. Use of hard and soft technology

3. Shift demand

4. Is meeting customer expectations financially feasible?



Close Gap 3

1. Training

2. Internal marketing, pride

3. Teamwork

4. Reward systems

5. Service quality audits



Close Gap 4

1. Know the capabilities of the firm

2. Good communications within the firm

3. Internal marketing – teamwork



Best Practices

• Service Guarantees by Hampton Inns

– Unconditional guarantees

– Specific guarantees

– Implicit guarantees



Key Terms• Customer centered

• Customer-delivered value

• Expected service

• Freedom from deficiencies

• Functional quality ©2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th editionUpper Saddle River, NJ 07458 Kotler, Bowen, and Makens


Key Terms

• Product features

• Revenue management

• Societal (ethical) quality

• Technical quality


building customer loyalty through quality

Marketing

pearson education

edition upper saddle

makens customer satisfaction

value of marketing

makens relationship

value customer

customer expectations

customer complaints