Chapter 11 Building Customer Loyalty Through Quality Marketing

Figure 11 -1 Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen,

Relationship Marketing Compared With Traditional Marketing Relationship marketing Traditional Marketing Orientation to customer retention Orientation to single sales Continuous customer contact Discontinuous customer contact Focus on customer value Focus on product features Long time scale Short time scale High customer service emphasis Little emphasis on customer service High commitment to meeting customer expectations Limited commitment to meeting customer expectations Quality is concern of all staff Quality is the concern of the production staff Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen, James Makens © 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Customer Delivered Value Total customer Value Minus Equals Total customer cost Customer Delivered Value Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen, James Makens (Products, services, personnel, and image values) (Monetary, time, energy, and psychic costs) (“Profit” to the consumer) © 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Customer Satisfaction with a purchase depends on the product’s performance relative to a buyer’s expectations. If performance exceeds or meets expectations the customer is highly satisfied or delighted. Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen, James Makens © 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Customer Satisfaction Versus Customer Loyalty • Customer satisfaction – How well expectations are met • Customer Loyalty – Behavior – Do customers come back or intend to come back – Emotional Attachment – Do customer spread positive word of mouth and perform other partnership activities Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen, James Makens © 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Five Levels of Relationships • Basic • The company sells the product but does not follow-up • The company sells the product and encourages the customer to call when the have problems or questions. • The company’s representative checks on customer after the sales and the event to make sure things were satisfactory and to get feedback. • Proactive • The salesperson or others in the company phone customers from time to seek suggestions. • Partnership • The company works continuously with the customer to discover ways to develop better value. • Reactive • Accountable Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen, James Makens © 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Three Customer Value. Binding Approaches Financi al benefit s Social benefit s Structu ral ties Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen, James Makens © 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Establishing a Relationship Marketing Program • Identify the key customers meriting relationship management • Assign a skilled relationship manager to each customer • Develop a clear job description for relationship managers Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen, James Makens © 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Establishing a Relationship Marketing Program • Have each relationship manager develop annual and long-range customer relationship plans • Appoint an overall manager to supervise the relationship managers Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen, James Makens © 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Internal Costs • • • Rework (back of the house) Facility Downtime Loss of Morale High employee turnover Loss of employee marketing

Complaint resolution • Approximate percentages that will purchase again if they have a complaint – 82% if resolved quickly – 50% if resolved – 15% if not resolved – 9% if they don't communicate their complaint

Managers and employees should treat complaining customers as the most important customer - and listen to their complaints • Complaints and problems create opportunities to develop loyalty • Knowing customer value gives us an idea of how far we want to got fix the problem

Managing the Perceived Service Quality Source: Christian Gronroos Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen, James Makens © 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Benefits of Service Quality • Retaining customers • Avoidance of price competition • Retention of good employees • Reduction of costs Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen, James Makens © 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Developing a Service Quality Program 1. Supply strong leadership 2. Integrate marketing throughout the organization 3. Understand the customer 4. Understand the business 5. Apply operational fundamentals Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen, James Makens © 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Developing a Service Quality Program 6. Leverage the freedom factor 7. Use appropriate technology 8. Practice good human resource management 9. Set standards, measure performance, and establish incentives 10. Feed back the results to the employees Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen, James Makens © 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Managing Capacity • Involve customers in the delivery system • Cross-train employees • Use part - time employees • Rent or share facilities and equipment

Managing Capacity • Schedule downtime during periods of low demand • Extend service hours • Use technology • Use price Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen, James Makens © 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Customers as Employees • Reservations • Check - out • Check-in • Salad bar • Honor bar - concierge floor • Macaroni Grill - wine • Fast food - beverages • Cook Steak

Managing Demand • • Use price to increase or reduce Use reservations Overbook Use queuing Shift demand Change salesperson’s assignment Create promotional events

Waiting Time • Unoccupied times feels longer than occupied time • Unfair waits are longer than equitable waits

Chapter 11: Figure 11 -3: Conceptual model of service quality - the gap analysis model. Source: Leonard l. Berry, A. Parasuraman, and Valarie A. Zeithaml. Marketing for Hospitality and Tourism, 3 e Philip Kotler, John Bowen, James Makens © 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Close Gap 1 by; 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?