Review literature about customer loyalty, the concept of eCRM and how to handle the same over online channels like web 2.0 and social media.
After reviewing the literature and I found the following.
As written in the conclusion of customer loyalty earlier in this dissertation customer Service has always been important and linked to customer loyalty in the form of satisfied customers and there is not argument that Heskett et al. (1997) and Shoemaker (1999) argument still is just as valid today in, “Satisfaction is a necessary but not a sufficient condition for loyalty.”.
This together with the much-needed update of models measuring the service process like e.g., WEBQUAL that also handles e-service will prove beneficial in the future to. The same goes for the understanding of the emotional part which in the future is going to be even more important as the hardware will be easier to copy and the differences less and less important. This is where the emotions will play a more important role and link even closer to the customer relationship.
Customer loyalty is a well proven concept but as the balance in this relationship has shifted side with the increasing international competition and the fact that the customer now is in charge has made a substantial difference in the strategic thinking today using for example a holistic model like the Loyalty triangle looking at the process, value creation (added and recovery) as well as the foundation of all customer loyalty database management and communication. This together with having a clear strategy of how to deepen the customer loyalty level, as well as making the relationship more long –term and profitable.
The power shift to the customer side has been amplified using web 2.0 as the voice of the customer has gained reach, credibility, and multiple ways of being published for everyone to see in the massive stream of user-generated content. Either way, improving customer strategies, -understanding and -relationships has now become priority for most companies and a key success factor.
As the key is to create Win-win situation and long-term close relationships using s structured holistic approach has become a necessity. The framework and model of the Loyalty Triangle is one way of doing this in order to ensure a better result. This makes it possible to rank, evaluate and measure-, as well as to plan future customer loyalty strategies. These strategies then need to be even more refined in order to create and foster even deeper levels of loyalty to ensure a better profitability and to develop the customer to the best they can be for the benefit of both customer and company.
Because the power shifted to the customer the most important parts of customer loyalty is the customers own participation, interaction, and engagement in the process. This part must be facilitated as much as possible, along with giving the customer the opportunity to use that positive force to develop and come closer to the company processes. To make this happen has been a strong and upcoming trend over the last two, three years but with the current challenges now become the main trend in 2012 according to Loyalty 360 (2012). In the end what you want is for your customers to change their habits and behavior to become sustainable loyal.
Database management, segmentation and customer knowledge is the key and the foundation for all one-to-one marketing. It is also necessary and the source of all customer retention approaches. This has never changed and will most probably not do in the future either.
However, as this used to be an expensive and complicated investment technical progress has changed how it is done significantly creating a difference in cost and the knowledge needed to operate the system. Data mining with focus on discovering customer behavior patterns (travel, purchase, habits, value-adds) and new potential uses for customer information is now standard in most systems, as well as faster due to both new hardware and software. All this facilitates makes companies able to adapt a more pro-active approach and estimate customers’ value in any way shape or form depending on the company strategy within seconds. The exact metrics are not the important part anymore as different metrics are used to measure different things in different companies. Many companies even tailor-make algorithms to fit their specific needs. However, the key is that without a proper database and database management nothing of this is possible.
In order to learn from your customers data, it is good and a necessity however only the sheer volume of data available for the customers in one hotel is massive this makes handling this data even more important. Through segmenting the customers into smaller segments and being able to crystallize new and even more profitable segments makes the data more valuable.
Knowing the segments in more detail also delivers benefits like being able to tailor-make strategies to fit each segment better. This is where the value lies and this information can through partnerships, access points or interfaces open for information to be combined with 3rd part databases to further evolve the knowledge of customers. Providing for example opportunities to monitor effects of communication strategies e.g., like email sending’s and aimed promotional campaigns.
This is also highly valuable for business planning purposes as this facilitates forecasting, trending, and understanding of the individual segment’s performance down to the individual customer types and over time. This sort of knowledge of course makes you sales and marketing team much more effective. According to Hubspot “64% of the best-in-class organizations has access to customer behavior data” (Hubspot, 2010) and this customer data influences sales.
The segmentation is one of the key factors but the company also needs to know how each segment is performing, as well as each individual ranks according to loyalty. There are several metrics currently being used and suggested by the literature review like event history modeling, RFM and CLV. There is still room for these to be used. However, these metrics are highly focused on historical numbers, purchase rate and economic values and it is suggested that they are not used as the only metrics.
As all the metrics has different advantages and disadvantages there is no generic formula for success and with the technological advances most companies adapt and change these metrics according to their current strategy and goals. Nevertheless, developing the customers into the best and most profitable customers they can be is in the interest of both company and customer.
This demands strategies in order to succeed and develop customer loyalty, -profitability and to maintain a healthy long-term customer relationship. In the end it is about how good you can match your customers’ needs, want and expectations and at the same time let them grow and develop with your company.
Nevertheless, the literatures suggest that the key benchmark is the incremental value of what actual business that would not be coming in if the loyalty program was discontinued. Revenue lost because of a service failure, resulting in a brand switch is another factor that should be investigated. ROI should also be calculated on both system basis and property basis to get the global and local perspective.
To be able to develop the customer to the best customer they can be the use of the loyalty triangle together with the matrix for developing customer strategies are good structured approaches that then can be further developed depending on the goals of the company. One important part is that this is not a onetime act when the customer joins the program or show up on the radar for purchase, but it is a living process that must be continuously improved and changed according to how the customer develops and the more you can involve and get to know the customer the better.
As an example, even if a reward program cannot create loyalty the reward program can serve a purpose by accelerating the loyalty life cycle, but only if planned and implemented as part of a larger loyalty management strategy, to motivate and achieve sustainable loyalty. In a holistic approach every piece serves a purpose to excel the customers’ loyalty. However, the programs need to align with the company capabilities and at the same time be valued by the guests. This is also a chance to further strengthen the customer engagement and create a closer relationship and doing so by listening to the customer.
In the end if your strategy worked out this will have developed your customers in to highly profitable and influential brand ambassadors helping you to market the brand and experience of your company. This is good because ambassadors recruiting in the combination with friends and family recruitment create even stronger relationships to your customers. As the brand ambassadors are marketing your brand without being hired, they also have more credibility, represent no cost for the company, until the potential guest shows desired behavior of making a purchase (if the ambassador has commission). For the brand ambassador this also means that with personal investment in time and effort in representing you it also raises the cost of switching towards the competitors. This has created a win-win situation and a highly loyal customer expanding the ambassador’s importance and excel them into highly effective sales people.
For the concept of eCRM it has a long history and not much have changed as the eCRM is directly evolved from CRM and customer retention management, which all three are, based on the customer most basic customer relationship values. The only thing that has changed is the how as the world, technology and life styles change.
From the findings in the literature review one of the difficulties when it comes to social media and the initial investment in eCRM this could prove hard to get due to the difficulty of proving profit. This is partly since existing metrics are old and do not work on the present environment and therefore not being able to highlight the benefits towards management. This can reflect in no or low funding which in turn gets the project off to a slow start showing low numbers leading to even less or no funding the next time.
The core of the loyal customer concept is to know your customer and with the volume of customers’, many customer touch points today and the level of detail this is not feasible without proper database management.
During the study one of the first discoveries was that there was no central data collection point or system to handle customers for this chain all customer knowledge was spread out across the resort PMS systems, as well as in several different systems, formats, and solutions in the head office.
This meant that any attempt to get a complete picture of the customer was made impossible, just as connecting this to any third-party system that would benefit from the same.
In order to learn from your customers data is a necessity to be able to make out and handle smaller segments. The smallest segment also necessary to be able to handle on-to-one marketing and deliver 5-star service is the individual level. However, in the study the global segmentation for the company consisted of 5 segments: FIT, corporate, TA/TO, group and crew. On a local level more attention to the individual was taken however, as there was no central data collection point none of this benefitted the organization, the global strategies for sales, marketing or communication, or the other loyal customer initiatives.
In order to gain any benefit and not just draw various cost in the handling of all systems the company needs to find out for example:
From there management can work with the different strategies, tactics and see what added value that will give the most impact in each segment and in the end for each individual customer. This will deliver a map of the existing customers just as it will give you a better picture of where the gaps are and you can discover new untapped segments and dream guests. This in turn will be part of your customer strategy to lead to increased customer value and in the end a more profitable customer.
With the notion from the literature review that the customer loyalty strategy is so important and one of the keys to customer loyalty id the customer participation, interaction, and engagement an online study of the social media channel Facebook (to get access to the competitor data) was conducted. The study was focusing only on the chains group/brand account so a comparison would be possible even if the number of hotels where different.
In the study the loyal customers were measured by total spend only according to the reward points they earned on their purchases. As the frequency program was open to everyone and had no tiers these resulted in that many applied but never participated ending up with zero points and only became an administrations cost. At the same time some the big spenders were enjoying complementary stays, products, and spa sessions on a regular basis. As no special strategies where applied, no tiers or incentives to become more involved or loyal this left little or no incentive for either side to work towards a goal.
In the study no strategies for developing the customer loyalty existed. This had the effect that the customers did not build a stronger loyalty or excelled in the existing frequency and loyalty programs. However, as the cost of running the program increased with the manual handling and increased administrations there was an incentive not to grow the program. This was because the cost increased more than what the customers spent and if the use would have gone up this would have resulted in a problem reimbursing all the earned points. If a holistic strategy would have been in place together with a structured approach to evolve the customer in to a deeper loyalty this could have been turned into a positive result and the next level of loyal Brand ambassadors.
To see the level of online customer engagement the frequency of likes was measured expecting to find that the more resources, the larger the chain and the longer time the account had been up and running the more fans they would have. It was also expected to find that brand awareness and having a well-renowned brand with many followers play a major role when launching e CRM approach, directly impacted by the social media brand awareness. As this would reach more existing “users” and potential users also indicating that the Brand salience is strong with the brand.
However, there was a strong argument that this was not the case. The findings showed that four tiers emerged somehow indifferent of number of resources, number of resorts or time frame since start. Sheraton was in the first tier (491 properties), followed by Four Seasons (50 properties). The third tier had more players as Marriott international (3,700 properties), Sofitel (130 properties) and Mandarin Oriental (44 properties). Between each of these emerging tiers a quite substantial number created the gaps but within the tiers the chains were quite close.
Realizing this there had to be something else in the strategy that was the man key to separate the chains. Using the experience from the study one of the main challenges was to get the proper support and funding s from management. In combination with these results, it could be ruled out that it was the funding that created the gap so then it had to be more about the level of management support and how this support was reflected in the company strategies. As this was hard to support due to the difficulty of getting the information from the other chains this could only be strengthened by the experience from the own chain and public articles.
This further supported the idea as for example Four Seasons over the last year has appeared in several articles about social media in the hospitality industry, as successful case studies, as guest speakers in social media conferences and as reference case studies for software suppliers of social media solutions.
From the findings in the literature review of difficulties to justify the initial social media and/or eCRM investment this is partly since existing metrics are old and do not work on the present environment and therefore not being able to highlight the benefits towards management. This was also the major hurdle in the study resulting in no funding, low funding, or extremely delayed decision processes. In turn this got the project off to a slow start and put an automatic roof on the results as without software it is not possible to handle more volume and analysis then the size of the staff assigned. This would also explain the fourth tier and why the companies in this tier were separated by so low numbers and the gap to the nest tier was considerably larger.
However, since the study was done in a chain and to further test this idea a comparative study was made between the local resorts as they all have the same global management but local GMs that have influence on the local staff, -resources and to a certain extent the content of the local fan page. This time looking for a similar result as in the first test but with fewer fans separating the tiers among the 14 resorts.
This time the result was similar and three tiers crystallized with one clear leader of 3623 fans, followed by three resorts (2329, 2176, 1637) in the second tier and the rest in the lowest tier. Knowing the GMs and administrators on site it was clear that the best resorts had the most devoted, skilled, and engaged admin’s and foremost a stronger support from management.
To support this further research would have to be done inside all the companies measured as of their eCRM approach from an organizational, technological and skill set perspective. This would provide more key factors in a successful eCRM approach except for the importance of the holistic approach and the level of management support.
The population of Facebook was in September 2011 750 million users. The sample selection consisted of people visiting the chains’ main group account sometime during the period of February 2011 to February 2012. Of the of those the respondents profile participating in the statistics the main profile was represented by female 55%; age 23-34 (25%), 35-44 (17%), 18-24 (7,7%), 45-54 (4,2%) and 55+ (1,4%). The rest was in the age range 13-17. The male profile had a similar age distribution of age 23-34 (16%), 35-44 (13%), 18-24 (4,6%), 45-54 (4%) and 55+ (1,6%). The rest was in the age range 13-17.
Participants were mainly English speaking as most material published on the pages was in English.
(compare with web, email figures)
Finally, a discussion, closed vote and brainstorm were performed around the objectives that should apply to social media in the six senses. For the overall strategy, 3 main objectives and focuses surfaced (in order);
Brand standard and graphical profile (=credibility, trust, risk reduction)
Management by listening around; LISTEN, LEARN and ACT.
And not to mention the jungle of software like Google analytics, Hootsuite, Gigya, Tweetdeck, Revinate, Hubspot, and many more.
Every month a newsletter was sent out to the loyal customers. In order to see what would interest the customers a schedule of themes was established to see which themes that interested and engaged the most customers.
To find out which type of content that generated the most customer engagement the content was divided into 8 groups according to the following grouping (Figure 11). To be able to further follow up which of the clusters that generated the best customer response and engagement. The walls of three 5-star hotel brands were observed over a 7-day period and the amount of engagement made (clicking the like button) was logged.
One valuable lesson from this that will benefit most companies is the realization that you as a company cannot decide what type of content your audience like in web 2.0, your audience tells you right away and they will give the feedback right away.
