customer retention by trevor zuze
TRANSCRIPT
FACULTY OF COMMERCE
DEPARTMENT OF TOURISM AND HOSPITALITY
MANAGEMENT
A critique of the customer retention strategies
employed by hotels in Zimbabwe.
Proposed by:
Trevor Takura Zuze
R092242Z(PDP)
Lecturer: Njerekai C
TABLE OF CONTENTS.
Title Page
1.1 Problem background 1
1.2 Statement of the problem 3
1.3 Research objectives 3
1.4 Research questions 3
1.5 Significance of the research 4
2.1 Literature review 4
3.1 Research methodology 7
1.7 Data analysis plan 9
4.1 Reference 11
1.0 background of the problem
Worldwide a number of factors have been attributed to the increase in the high customer
defection rate. In the 1990s, service organizations turned their focus toward complaint
management and recovery efforts as marketing strategies to minimize defections and boost
customer retention. The way customers are served and recognized are critical factors in
attracting, satisfying and retaining customers. Strategies that will help in retaining customers are
considered critical in attaining a wide market share and repeat business. (chobaiwa et al 2010) .
The hotel industry exemplifies a service industry characterized by a high degree of involvement
between customers and service providers
Research by the Forum Corporation revealed that almost 70% of identifiable reasons why
customers switched to competitors were associated with a dissatisfying service experience with a
service provider during the service encounter. Whiteley (1991). Of the 70% of customers who
switched to competitors, 21% switched because there was too little contact and individual
attention from service providers, and 49% switched because the attention was poor. Indeed,
problems experienced in the service encounter were the major cause of customer dissatisfaction
and defection (Barsky & Labagh (1992).
Creating positive service encounters is the essence of customer loyalty, retention, and long-term
relationships. Hence, the quality of the service provided by the service provider during the face-
to-face service encounter with the customer could be the deciding factor on which the customer
makes a repurchase decision and is an influencing factor in the customer’s decision to form and
maintain a long-term relationship with an organization. Bitner, Booms, & Tetreault (1990) From
the viewpoint of the customer, it is often an employee who keeps or breaks the organization’s
promises in the first and subsequent service encounters and, in doing so, creates a service gap
(Bitner, 1995). The outcome of the interaction in the service encounter is the major cause of
customer dissatisfaction and complaint and switching behavior (Keaveney, 1995).With regard to
recovery efforts in the hotel industry, customers were less satisfied after a process failure (a rude
receptionist), and this detracted more from satisfaction than an outcome failure such as the
unavailability of a room because of overbooking (Smith, Bolton, & Wagner, 1999). As service
industries continue to grow in importance, consumers are increasingly expressing their
dissatisfaction with individual service encounters. Whiteley (1991).The interaction in the service
encounter is a major focal point on which the customer evaluates the entire service organization,
thus the quality of the service encounter can be an early indicator of whether an organization’s
relationship with a customer is flourishing or in jeopardy. Bolton (1998).
According to the 2008 Annual report in December, produced by the central statistics office, hotel
occupancy levels dropped by 16%, Statistics of hotel occupancy are provided below in table 1
from January 2009 to 2010 October, according to the central statistics office.
Table 1
Month Percentage of defected
customers
Percentage of new customers
2009 February 5
15
-
10
2009 May 25
-
-
5
2009 September 5
-
20
5
2009 December - -
2010 March 5
15
-
-
2010 June 10 5
2010 September 20 -
2010 October 10 30
(Central statistics internal records 2009-2010)
The hostile economic environment in Zimbabwe has made the formulation of a realistic retention
strategy particularly difficult for most managers across all industries. This has greatly affected
hotel occupancy levels thus seeing a large percentage drop of customers greatly attributed to
poor service provision and poor implementation of retention strategies by hotels in Zimbabwe.
Due to competitive hotel industries, such as in South Africa, hotels need to focus on maintaining
their existing clients (customer retention). Customer retention may be influenced by different
variables pertaining to hotels and its customers.
This study therefor seeks to identify and analyses the variables influencing customer retention in
hotels, and the customer retention strategies employed by hotels in Zimbabwe.
1.1 Problem statement
Rampant customer dissatisfaction, poor customer service, and poor product development, in the
face of aggressive competition causes customer defection, and non-repeat business despite
efforts to employ customer retention strategies by hotels. This research therefore seeks to analyze
the customer retention strategies employed by hotels in Zimbabwe.
1.2objectives
The objectives of the research are as follows
To reveal customer retention strategies employed by hotels in Zimbabwe.
To determine the extent to which the strategies being employed are effective.
To bring out new strategies that the hotel can employ in order to retain customers.
To identify what hotels can use to improve service delivery and ultimately build customer
loyalty to avoid customer defection.
To bring out factors to be considered when coming up with retention strategies by hotels
in Zimbabwe.
To provide recommendations on how to improve the strategies employed by hotels in
Zimbabwe.
1.3 research questions
The researcher seeks to provide solutions to the following questions:
What retention strategies are being employed by hotels in Zimbabwe?
How effective are the strategies being employed by hotels in Zimbabwe.
What challenges are being faced by the hotels in Zimbabwe in employing new retention
strategies?
Which strategies are being employed by hotels to improve service delivery and ultimately
gain competitive advantage
What factors are considered when coming up with retention strategies?
What recommendations can be made to effectively improve on the retention strategies for
hotels in Zimbabwe?
1.4 Significance
The research will help Zimbabwe tourism authority to come up with effective customer retention
strategies which help hotels provide quality service in order to build mutually beneficial
exchange relationships. The research will also assist the hoteliers to know the contribution of
customer relationship management towards customer satisfaction, loyalty and retention and
enable the hoteliers to restructure their policies to increase customer retention strategies and
service delivery so as to build customer loyalty and repeat business and avoid customer
defection. The research will be useful to the university by providing secondary data to scholars
and those who would want to carry out further research on customer retention. The research will
enable the researcher to get depth knowledge of retention strategies employed by hotels in
Zimbabwe, and how organizations who succeed in implementing them to continue to improve
retention strategies to gain a large market share and repeat business.
2.0 literature review
Customer relationship management has rapidly become one of the leading competitive
businesses in the new millennium. This enables hotels to optimize revenue and increase customer
value through understanding and satisfying individual customers’ needs .Lin and Young (2009).
The increased role of customer relationship management has caused misunderstanding and
confusion. Many firms believe that customer retention strategies are a technology tool, which
will automatically improve their business. However other academics are of the view that
customer retention is a philosophy. Stephanou et al (2003) . It is suggested that for a long lasting
relationship to develop between the customer and the organization, a shift in emphasis is
required from a service quality perspective toward the relational factors of the exchange between
the customer and the service provider. Groonroos (1990)
It was noted that hotels should maintain reputation for quality, value and variety if it is to attract
repeat visitation. Prideaux (2008). The capacity of hotel related activities to meet such
expectations depends substantially on the application of sound customer retention strategies.
Oliver (1980) argues that customer satisfaction refers to attitude or evaluation formed by a
customer’s pre purchase expectations of what they would receive from the product or service of
their subjective perceptions of the performance they actually did receive.
According to chakrabarty (2006) the drives to customer satisfaction and retention for hotels may
differ from the drives identified for other services. Manrai and Manrai (2007) seeking to
understand these drives have identified common initiatives all of which were focused on
providing customer centric initiatives and satisfaction.
Chakraberty (2006) identified four factors that determined overall customer satisfaction and
retention. These were in order of importance:
in branch satisfaction – speed of service and staff helpfulness
economic satisfaction – level of bank fees, overdrafts and interest rates
remote satisfaction – responsiveness and efficiency in dealing with remote enquiries and
reservations and reliability
However a customer preferred dimension was identified by Manrai and Manrai (2007) and was
also in order of importance:
personal related considerations- attractiveness and behavior of staff, procedures for
handling complaints, appearance of staff, and service recovery techniques
financial considerations – complimentary
hotel environment related considerations – atmosphere and
convenience related considerations – speed of service and opening hours.
Based on the hotelier satisfaction studies by Chakrabarty (2006) and Manrai and Manrai (2007)
and a further study by Pomering and Dolmicar (2006) it is therefore proposed that customer
centric initiatives will lead to more improved hotel satisfaction and retention.
Using the customer centric initiatives by Manrai and Manrai (2007) but testing these on customer
satisfaction it is contended that these initiatives form a hierarchy with some achieving higher
customer retention and satisfaction that others.
Some scholars assume that retention rate is based only on customer satisfaction, however several
studies have indicated that there is little relationship between customer satisfaction and retention
or future purchases. The real indication of customer retention is not customer satisfaction but
customer actions, such as repeat business, customer recommendations to others, willingness to
pay premium price and frequency of purchases. Customer retention is the strategic objective of
striving to maintain long term relationships with customers, and is a mirror image of customer
defection.
The exploration of literature regarding retention yielded several dimension of work by
researchers .It is proposed that at the relational level, there are critical relational attributes that
emulate the psychological needs of the customer and affectively trigger positive emotional
responses, which are an essential ingredient in the relationship development process. The
development of a future relationship between the firm and the customer can in fact be
determined by this emotional content (Barnes, 1997).Moreover, the relationship between
satisfaction and loyalty is moderated by positive emotions in high involvement services; that is,
the stronger the positive emotions experienced during the servicemen counter, the stronger the
relationship between satisfaction and loyalty ,therefore increasing the chance of forming a
service relationship with that organization.
Service recoveries perceived favorably by customer potentially increase the level of customer
loyalty more than high-quality original service ( Kelly&Davis, 1994). However, we contend that
complaint management and recovery strategies currently used to retain dissatisfied customers do
not appear to have captured customers who never complain to organizations. Further-more, the
strategies only come into operation after the customer has complained .For example, only 5% of
dissatisfied customers complain to organizations, and the remaining 95% who do not complain
will never remain loyal customers and ,hence, are most likely to defect . Therefore, there is a
need for organizations to focus on developing strategies that are aimed at providing the service
attributes in retention .
In general, the longer the customer stays in the relationship, the more profitable the relationship
becomes to the organization (Reichheld & Sasser, 1990) Long term customers buy more, bring in
new customers, take less of the service providers’ time, are less sensitive to price, and require no
start-up or acquisition costs, best of all, in some industries, a 5% reduction in defections can
double profits.
The literature review on customer retention led to the identification of specific hotel related
aspects and variables which can possibly influence hotels customer retention. These variables
include empathy, personalization, social bonding, relationship management and service recovery
in case of service failure.
From the literature overview above, firms should focus on managing customer satisfaction
through customer relationship management.
3.0 methodology
This chapter focuses on identifying the variables and strategies influencing customer retention in
hotels. The positive as well as the phonological research paradigms will be used to test the
client’s perceptions, whereas the phonological will be used to gain insight into manager’s
perceptions on the retention strategies employed by hotels. It gives an overview of the research
design, research instruments, sampling techniques and data analysis techniques.
3.1 research design
The researcher will use a comparative design order to compare, different customer retention
strategies employed by hotels to curb customer defection. Qualitative and quantitative methods
will be used to help reduce each other’s weaknesses and ensure accurate findings, and a case
study method will be applied to find out the factors to be considered in customer retention
efforts. Qualitative methods also enable the researcher to carry out detailed studies on individuals
who are knowledgeable on the subject. Quantitative data collection refers to the practice of
obtaining large amounts of statistical information making it easy for the researcher to analyze
figures and data. Common quantitative methods for tourism research include surveys,
questionnaires and fixed question interviews that are administered to tourism participants.
Qualitative data, balances out the impersonal nature of facts and statistics with personal
information provided by individuals associated with the research project.
3.2.1 Research population
Research populations comprise of the participants of a research. These include General
Managers, Chief Executive Officers, Marketing managers, waiters and customers. The major
research area comprises 5 star hotels such as Meikles hotel, rainbow towers, elephant hills hotel
and kingdom Victoria Falls hotel.
3.2.2 Sampling
Convenience sampling will be used, and a exploratory pilot survey on this research will be
conducted.
3.2.4 Sample size
The study sample is the actual number of respondents who will take part in the study. The study
sample comprises of four five star hotels as they are the thrust of success of the hotel business for
tourism in Zimbabwe. One general manager, one sale and marketing manager, two employees
and four customers will be interviewed.
3.3 research sources
Primary research aims to focus on managing image of hoteliers for customer retention,
qualitative perspective should deem the obvious choice to express the current reality in
explanation and such objective was to offer grounding to secondary research and give the
research in-depth information value and structure. In addition, sources of data can include
primary and secondary sources that will involve first-hand information of research outcomes and
certain literature studies from reliable books, peer reviewed articles and journal from such
academic resources.
3.3.1 Primary data
This refers to collection of data from the field. The respondents provide data as requested by the
questionnaire of interviewee. Surveys in the form of questionnaires will also be used to fill gaps
caused by factors affecting interview occurrence. Questionnaires will mainly be used for
consumers and other employees through either researcher administered or self-administered,
depending on respondents wish and will comprise both open and closed ended questions.
3.3.2 Secondary data
To gather such data the researcher will collect all data from company records of guest patronage,
it also includes information by other scholars such as newspapers, textbooks, journals and the
internet.
3.4 data collection procedures
The researcher will take the following steps to ensure reliability if data:
The researcher will get a letter from the department for compliant assistance and easy
identification.
Prepare a schedule
Collect relevant information of contact person for each hotel, contact information and
address and location of each hotel for back-up facility.
The researcher will make appointments with the hotels for interview times which do not
coincide with peak hours of activity to ensure concentrated data collection processes free
from bias.
Call each facility and confirm appointment the day before. Questionnaires will be
dropped at various outlets with return addressed envelopes for feedback for distant
respondents, but close respondents response will be collected in a week.
3.5 data presentation and analysis
A conceptual framework which gives a clear picture of the subject will be used. Special line
graphs will be used to show trends of hotel occupancy levels and the varying customer retention
strategies employed to encourage repeat business and reduce customer defection.
3.6 data analysis
In order to specify details of such analysis that can be good basis for assessing the research study
as such attempt to further explore the research will be important in creating methods and process
of research which will determine how far the particular choice of methodology in the form of
questionnaire application could continuously lead to the same research measurement and such
detailed results supporting aspects of the study.
the researchers could not guarantee consistency of results if another investigation of the topic
was to be carried out at the same time using different research instruments. However, to
counteract the unconscious deformation of information gathered and to strengthen the reliability
of the primary research, case study presentation will have to be utilized. Despite the fact that
limitations of the questionnaire in terms of depth and relevancy of information gathered could
not be completely eradicated, the data to be apprehended and requested can be deemed
appropriate for such type of research analysis. The focus of the research will not only be on data
collection, but also on interpretation of data. The first step that data analysis will cover is the
frequency distribution, which reflects how different values of a variable are encountered in the
sample. Both absolute frequencies and relative frequencies will be reflected, Where the former
will be represented as simple counts, while the latter will be Represented as percentages.
Measures of centrality will be calculated for service quality, customer contact and reward
programs .All of the data on tourism in the world does no good without a method of analyzing it.
Tourism data can be analyzed either subjectively or objectively. A subjective analysis is usually
applied to quantitative data. An objective analysis examines the data via the scientific method
and in light of other studies that are indicated by the methodology.
References
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