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
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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)
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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
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-
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)
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