Design Smarter Guest Surveys: Most Missed Loyalty Measurements
It is commonly known that there is a positive relationship between customer loyalty and profitability. The study by Reichheld and Sasser showing when a company retains just 5% more of its customers, profits increase by 25%-125% started an avalanche of interest in customer loyalty. There are some important concepts related to customer loyalty that are often overlooked by management. These include the idea that the relationship between customer loyalty and customer satisfaction is not linear; there is a difference between behavioral loyalty and emotional loyalty and the voice of loyal customers can be negative. As technology becomes more prevalent on the customer loyalty front though the use of surveys and research strategies, it is highly beneficial that operators take these variables into account when measuring guest loyalty.
During the early days of interest in customer loyalty, management tended to measure customer loyalty
by purchasing behavior. A customer who purchased more often and in greater amounts than the average customer was characterized as a loyal customer. Baloglu conducted a study at casinos and found there was a group of "loyal" customers who would not recommend the casino to friends. This group of customers is referred to as convenience loyals. The casino satisfied their needs and was close, but the guests did not have an emotional attachment to the casino. They simply were not committed to the casino. If a competitor were to open across the street, they would be gone. When one measures loyalty it is important to get a sense of commitment from the customer. One way of measuring commitment is asking the guest if they would recommend the business to a friend. A business is subject to losing regular guests who are not emotionally attached, if competition comes to the area.
Word-of-mouth power
We all know the importance of word-of-mouth. The most credible source of promotion is a friend telling another friend about a restaurant or hotel. When conducting studies where the University of Houston's Conrad N. Hilton College ask guests how they heard about a restaurant, "I heard about it from a friend" is always the number one choice for restaurants when they are located outside the city center. Loyal customers create customers. But loyal customers are also the biggest complainers.
The majority of complaints come from loyal customers. People who have no commitment to the hotel or restaurant usually do not complain, they just leave and never come back. Guests who have enjoyed the business in the past and have had a poor experience feel obligated to let management know, so that things will be better when they return. As managers, we need to view complaints as free consulting. In most cases a complaint is a loyal customer telling you how to fix your business. Many organizations pay for mystery shoppers who are normally not representative of one's target market. They are simply following a script. A complaint is from your best customers. Take a deep breath, listen and respond to complaints.
Guest survey strategies
The above discussion has the following implication for those involved in the application of technology to customer loyalty programs. When designing guest surveys, operators need to make sure they measure both emotional and behavioral loyalty. One should also benchmark the mean scores on various attributes rated by customers who respond in the top box on loyalty and satisfaction measures, so operators can set these benchmarks as goals for the operation to achieve. For example, if those customers who are very satisfied have a mean rating of 6.5 on the quality of service, then one should strive to bring service up to at least a 6.5 mean rating. Finally, operators should keep database records on complaint behavior, follow-ups with customers who complained and how management resolved each problem. Technology is an integral part of any loyalty program. One of technology's roles is to extract and record guest evaluations of our operations.
John Bowen is the Dean and Barron Hilton Distinguished Chair at the Conrad N. Hilton College, University of Houston. John's experience is in the area of food and beverage and he has held previous positions with a number of hotels and freestanding restaurants. John has also won numerous awards for both his teaching and research, including the John Wiley and Sons Award which recognizes lifetime research achievements.
During the early days of interest in customer loyalty, management tended to measure customer loyalty
by purchasing behavior. A customer who purchased more often and in greater amounts than the average customer was characterized as a loyal customer. Baloglu conducted a study at casinos and found there was a group of "loyal" customers who would not recommend the casino to friends. This group of customers is referred to as convenience loyals. The casino satisfied their needs and was close, but the guests did not have an emotional attachment to the casino. They simply were not committed to the casino. If a competitor were to open across the street, they would be gone. When one measures loyalty it is important to get a sense of commitment from the customer. One way of measuring commitment is asking the guest if they would recommend the business to a friend. A business is subject to losing regular guests who are not emotionally attached, if competition comes to the area.Word-of-mouth power
We all know the importance of word-of-mouth. The most credible source of promotion is a friend telling another friend about a restaurant or hotel. When conducting studies where the University of Houston's Conrad N. Hilton College ask guests how they heard about a restaurant, "I heard about it from a friend" is always the number one choice for restaurants when they are located outside the city center. Loyal customers create customers. But loyal customers are also the biggest complainers.
The majority of complaints come from loyal customers. People who have no commitment to the hotel or restaurant usually do not complain, they just leave and never come back. Guests who have enjoyed the business in the past and have had a poor experience feel obligated to let management know, so that things will be better when they return. As managers, we need to view complaints as free consulting. In most cases a complaint is a loyal customer telling you how to fix your business. Many organizations pay for mystery shoppers who are normally not representative of one's target market. They are simply following a script. A complaint is from your best customers. Take a deep breath, listen and respond to complaints.
Guest survey strategies
The above discussion has the following implication for those involved in the application of technology to customer loyalty programs. When designing guest surveys, operators need to make sure they measure both emotional and behavioral loyalty. One should also benchmark the mean scores on various attributes rated by customers who respond in the top box on loyalty and satisfaction measures, so operators can set these benchmarks as goals for the operation to achieve. For example, if those customers who are very satisfied have a mean rating of 6.5 on the quality of service, then one should strive to bring service up to at least a 6.5 mean rating. Finally, operators should keep database records on complaint behavior, follow-ups with customers who complained and how management resolved each problem. Technology is an integral part of any loyalty program. One of technology's roles is to extract and record guest evaluations of our operations.
John Bowen is the Dean and Barron Hilton Distinguished Chair at the Conrad N. Hilton College, University of Houston. John's experience is in the area of food and beverage and he has held previous positions with a number of hotels and freestanding restaurants. John has also won numerous awards for both his teaching and research, including the John Wiley and Sons Award which recognizes lifetime research achievements.