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Customer usage or customer loyalty?
By feature writer Brett Patten
In my most recent article, Do You Think Your Hotel Has The Right Business Strategy?, I touched upon some critical missing aspects in the hospitality industry's business strategy approach for growing their customer loyalty and top line performance, as well as some possible causes for these missing areas around their business strategy approach. In the article, I made an assertion that the industry may not know what type of economy they're presently competing in for achieving revenue growth, brand relevance, customer loyalty and profitability (i.e. is it product, service, price, or some other economic driver for achieving these outcomes), so as promised I'm here to expand on my reasoning.
There seems to be a consensus that the present economic driver for the industry is based more on price and cost. My research tells me that the industry is not competing in a price driven economy, but rather more of a customer and experience driven economy.
"If you don't know which type of economy you're truly competing in, it can make it very difficult for you to come out on top."
Not having a clear understanding of which economy your business is presently competing in will cause uncertainty for you, as well as generate scarcity in how you run, compete and grow your company. It will also impact your ability to properly interpret the world around you when it comes to connecting and understanding your customer segments. This has become a real conundrum for the industry because your customers are in a position of certainty and confidence when engaging with the hospitality industry, i.e., they know it's a customer driven economy that's based on the value of total customer experience. That's why the industry has had such a hard time elevating their ADR on a consistent basis, or creating inroads when it comes to the customer loyalty aspects of their business.
Since the economic collapse in 2007-2008, a majority of the hospitality industry has been operating from the perspective of a price driven mindset that appears to be very transactional in nature when it comes to the way the industry engages with their customers and competes in the marketplace. Even going back to 9/11, the hospitality industry was very much focused on a product and service oriented economic business platform, with price dictating their business strategy approach. The model has remained in place. Not since the early days of the hospitality industry has value been cultivated one customer at a time.
Don't get lured into a fight you can't win
The hospitality industry has to be careful not to get lured into a fight it can't win when it comes to taking on their competition. It can easily distract you from the important and tangible aspects of your business, namely your customers, and the experience they receive from your business. Often, we're so worried about trying to generate occupancy, that we forget about the customer, and to some extent the core guiding principles that support the brand values of the enterprise.
There is so much focus and pressure on the short-term revenue and financial gains, then there is on building the long term customer relationship for enhancing financial performance. I have been guilty of this more times than I care to admit early in my career. So please don't misinterpret my intentions. I'm not waiving my finger at anyone, only wanting to enlighten the industry of this potential blind spot that is getting in the way of your business truly achieving the level of success you want to experience in these key areas of your business.
"You can't buy your customer's loyalty, you only end up renting them when you compete on price." Brett Patten 2014
My research tells me that we have been in a customer driven economy for quite some time, especially in the hospitality industry. Let me share with you why I feel so confident in making this declaration. It's because customers have evolved in how they perceive and think about value for their time, money, advocacy and loyalty. They want the total experience, and they want to know that you care about the experience they receive from your business.
Economist who focuses on the social behavioral aspects of consumer engagement, have also come to a consensus of this economic reality. It became very evident to economists, that the businesses that have created a strong bond with their customers that goes beyond price, have built sustainability during the recession, i.e. customer capital, and those businesses who solely compete on price have very low customer loyalty and also spend significantly more in their customer acquisition expenses.
Brand equity or experiential value
I believe there's been too much focus by the hospitality industry on trying to build the brand equity position of the company for achieving their bottom-line results, and not enough on building the experiential value of the business. Economic business models that are built on trying to make the customer feel good about the brand are becoming less effective in their ability to influence customers' preference, spending and loyalty.
A more effective approach would be to strategically align the customer experience in a way that makes the customer feel good about themselves from their experience with the hospitality enterprise, that enables your organization to manage the customer expectations. When this is achieved, it has shown to significantly increase spending, loyalty and other customer driven benefits. It's not so much about having the customer feel good or trust in your business, but rather creating a relationship and environment in which the customer feel good about themselves and confident that they placed their trust in the right business.
I think a good motto for 2014 and beyond is "one customer at a time." You build your company's successes by connecting to your customers, one person at a time. I know it sounds a little old school, but I think we need to come full circle as an industry and understand that we're in the business of creating memorable experiences for our customers, not competing with the competition or renting someone a bed for the night. We don't want to be a commoditized business segment like the majority of the airline industry has become, with a poor reputation for taking care of customers needs or understanding there wants.
If the industry continues to be focused on or playing for anything other than their customer's happiness and loyalty as the driving force of their growth and success, then they will end up widening the gap between their brand and their customers ability to connect to it, further pushing them towards a commoditized business existence. So again, utilize a customer experience design business strategy approach that has you playing in a customer driven economy will move you closer to winning the game.
About the author
Brett Patten is approaching 35 years in the hospitality industry. He has spent those years accumulating invaluable experience in a variety of leadership positions and business enterprises, and recently completed his education as an executive leadership and engagement coach in the area of customer experience design.
Brett's unique management and business approach consistently transformed hospitality enterprises with sustainable growth results from his days with the prestigious four and five-star hotels like Stouffer's hotels, Pan Pacific Hotels, and Le Meridien hotels. He has also worked with five-star club resort enterprises like Longboat Key and Greenbrier and launched a nationally award-winning four-star hospitality brand in 2007.
From there, he built a hospitality business strategy platform that he developed and trademarked out of his commitment for achieving customer experience excellence. Brett then turned this business strategy platform into a company called "Five-Star Customer Experience Design." Today, after spending the last 15 years researching, studying and developing customer experience design strategies for the hospitality and tourism industries, he engages with some of the top hotel brands and hospitality groups both nationally and internationally in the industry.
He has created a new customer experience design coaching service out of his Hospitality Brilliance Program. It is designed to give guidance and support to the hospitality industry leadership and management in introducing and establishing customer experience business strategies and experience management systems into their enterprise in a very approachable and manageable way.
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