Chapter 13

Managing customer satisfaction

Lecture objectives

Define customer satisfaction

Understand the importance of satisfying customers

Evaluate customer satisfaction guarantees in hospitality

Describe tools for measuring customer satisfaction in the hospitality industry

Introduction Satisfying customers’ central component in the philosophy of

marketing

Delivering customer satisfaction is critical to business performance

Customers have choice; if not satisfied they can choose a competitor

We discuss: understanding drivers of customer satisfaction are important customer satisfaction guarantees in hospitality measures for capturing customer satisfaction data and

customer complaint processes

Defining customer satisfactionSatisfaction is a complex phenomenon

Consumer expectations are important comparison standards that help consumers evaluate perceived performance of hospitality offer during and at the end of the service encounter

At the simplest level, customers are satisfied if the experience matches or exceeds their expectations and dissatisfied if the service performance fails to match their expectations

Customer satisfaction can be defined as a ‘positive attitude towards a supplier that is achieved when the customer’s expectations are met’

Different types of satisfaction include: contentment: routine hospitality service delivered satisfactorily pleasure: hospitality experience makes the consumer feel happy delight: experience surprises the consumer and exceeds expectations relief: service overcomes potentially difficult situation and delivers

satisfaction

Figure 13.1 Customer satisfaction

Why customer satisfactionis important

Common sense tells us satisfied customers must be good for business

Research confirms satisfaction important due to: cost of acquiring new customers benefits of repeat purchases by satisfied

customers impact of positive word-of-mouth

recommendations

Also, dissatisfied customers are likely to defect to competitors and generate negative word-of-mouth comments

Repeat customers Know where and how to book, what to expect and how to

find the premises Their expectations can be met – they already know what

the hospitality offer represents, and were relatively satisfied

Customer-contact employees greeting regular customers provides reassurance to first-time visitors regarding product quality and customer satisfaction

Regular customers are less costly to look after because they know how the service operation works

Repeat customers are powerful advocates, encouraging others to patronize the establishment and generating positive word-of-mouth recommendation

Principles of customer satisfaction

1. Identify which customers you are trying to satisfy (segment the market); not all customers or prospects are equally important

2. Identify what is important to those chosen customers; not all customers want same components of hospitality offer, and not all are equally important

3. ‘Get it right first time’ – customers’ expectations should be satisfied at the first opportunity; try to eliminate causes of customer dissatisfaction

4. Provide excellent recovery policies and systems to manage customer dissatisfaction

Customer satisfaction guarantees

When consumers buy manufactured products, the manufacturer provides guarantees and will repair/replace product if customer not satisfied; consumers and manufacturers understand concept of satisfaction guarantees

Most hospitality managers are opposed to the idea of customer satisfaction guarantees – believing too many guests are dishonest and make bogus complaints

BUT most hospitality companies do compensate customers when they have a genuine complaint

Implicit satisfaction guarantee Customers assume satisfactory service, even though

hospitality outlet has no guarantee (formal contract) Experience, education and consumer protection

legislation, encourage hospitality companies to compensate customers for genuine complaints

Most hospitality companies do compensate customers who complain

Problem with informal customer satisfaction guarantees is that no guidelines set out what the company offers and how customers will be compensated if something goes wrong

Explicit satisfaction guarantee Explicit satisfaction guarantee based on specific, measurable

performance

Time-based promises, such as a maximum of 30-min wait for a room service delivery, good example

Length of time to deliver the service can be explicitly incorporated into the guarantee, and it is then simple to establish whether the service has been delivered as guaranteed – on time or not

These guarantees have been used with varying degrees of success

Before companies introduce an explicit satisfaction guarantee, the operation must be able to deliver the promise within the time agreed and at an acceptable performance level

Unconditional satisfaction guaranteeUnconditional satisfaction guarantee promises customers complete satisfaction or their money back

Makes powerful statement about hospitality service provider to deliver customer satisfaction

Gives consumers confidence to purchase (by reducing risk) and reassurance

Before hospitality company introduce unconditional guarantee: target market must be clearly defined company must understand the drivers of customer satisfaction for the

product/service product/service quality standards must be set to deliver customer satisfaction service delivery processes and enabling technology must enable the promise to

be delivered employees must be aware of the 100% satisfaction guarantee and capable of

delivering company must invest significantly in research to evaluate drivers of customer

satisfaction, competitive standards and consumer’s perceptions of price and value; in product quality and training, and effective quality audit processes

very few hospitality companies offer unconditional service guarantees [Hampton Inns (USA), and Premier Inn (UK)]

Measuring customer satisfaction Hospitality companies use a combination of direct and

indirect methods to measure customer satisfaction

Indirect methods include tracking sales/profit figures and monitoring them against forecast or previous period performances

Direct methods include customer research and analysis of complaints and compliments

Hotels and restaurants use customer comment cards/questionnaires completed by customers on the premises – industry does not have a standard approach to measure customer satisfaction, and companies use a variety of different methods

Methods Post-encounter customer surveys – customers, frequent guests and members

of loyalty club emailed/texted questionnaires for comments understand the level of consistency across a hotel brand

Employee surveys – employees are acutely aware of service problems and often know the reasons why performance underperforms customer expectations

Focus groups of customers and employees allow the group moderator to explore customer satisfaction issues in depth

Mystery shopping is a key tool in auditing the service performance of hotels

Analysing customer complaints (from questionnaires, letters, emails) to identify root causes of customer dissatisfaction

Internal brand audits – hospitality chains carry out brand conformance audits on each property to ensure that the unit is delivering performance standards and customer satisfaction

Quantitative and qualitative research methods used to collect data from customers

Importance/performance analysis Important to identify which elements of the hospitality

experience contribute most to customer satisfaction

Companies conduct qualitative research to establish the most important elements of the experience

These elements are then embedded into questionnaires which measure satisfaction

Questionnaires assess customer expectations of key elements and perceptions of actual performance

Analysis identifies where company is not meeting customer expectations

Figure 13.2 Importance/performance matrix

Figure 13.3 Importance/performance matrix, hotel example

Customer satisfaction may not leadto repeat business!

In hospitality, completely satisfied customers may never return to the unit or to the destination for a variety of reasons:

leisure travellers (variety-seeking customers) want to explore the world rather than returning to same tourist destination

price-responsive consumers can choose competitors offer customers attending unique events, such as wedding receptions, sports

matches and exhibitions, will stay at or near the venue and may never return

This does not mean customer satisfaction is unimportant; these customers still need to be satisfied to obtain W-o-M recommendation (especially Trip Advisor)

Conclusion

Customer satisfaction is essential to generate repeat sales, word-of-mouth recommendation and enhancing profitability

Most hospitality companies have difficulty in offering 100% unconditional guarantees of customer satisfaction, many provide implicit service guarantees

Customer satisfaction foundation of successful hospitality business, but satisfied customers may never return

References

Parasuraman, A., Zeithaml, V. A. and Berry, L. L. (1988). ‘SERVQUAL: a multiple item scale for measuring consumer perceptions of service quality’. Journal of Retailing, 64 (1), pp. 5–7.

Reichheld, F. F. (1996). The Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value. Baie and Company.

Zeithaml, V. A. and Bitner, M. J. (2003). Services Marketing. McGraw-Hill.