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Building and Maintaining Customer Relationships
Chapter 7
© Hudson & Hudson. Customer Service for Hospitality & Tourism
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Topics Covered
o Relationship Marketingo Retention Strategieso Loyalty programs o Benefits of Relationship Marketingo Targeting profitable customers
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‘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”
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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
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Customer Relationship Management Model
Figure 7.1 (Source: Based on Winer, 2001)
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Levels of retention strategies
Figure 7.2 (Source: Adapted from Zeithaml and Bitner, 2000)
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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
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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%
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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
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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
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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
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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
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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
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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)
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A taxonomy of casino customer segments
Figure 7.6 (Source: Watson and Kale, 2003)
Future Relationship Value C
usto
mer
Pro
fitab
ility
High Low H
igh
Prime Customers Mobile Customers
Low
Valued Customers
of Tomorrow Incidental Customers
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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.