Chapter 13

2. Chapter 13 Managing customer satisfaction

3. Lecture objectives • Define customer satisfaction • Understand the importance of satisfying customers • Evaluate customer satisfaction guarantees in hospitality • Describe tools for measuring customer satisfaction in the hospitality industry

4. Introduction • Satisfying customers’ central component in the philosophy of marketing • Delivering customer satisfaction is critical to business performance • Customers have choice; if not satisfied they can choose a competitor We discuss: • understanding drivers of customer satisfaction are important • customer satisfaction guarantees in hospitality • measures for capturing customer satisfaction data and customer complaint processes

5. Defining customer satisfaction Satisfaction is a complex phenomenon • Consumer expectations are important comparison standards that help consumers evaluate perceived performance of hospitality offer during and at the end of the service encounter • At the simplest level, customers are satisfied if the experience matches or exceeds their expectations and dissatisfied if the service performance fails to match their expectations • Customer satisfaction can be defined as a ‘positive attitude towards a supplier that is achieved when the customer’s expectations are met’ • Different types of satisfaction include: • contentment: routine hospitality service delivered satisfactorily • pleasure: hospitality experience makes the consumer feel happy • delight: experience surprises the consumer and exceeds expectations • relief: service overcomes potentially difficult situation and delivers satisfaction

6. Figure 13.1 Customer satisfaction

7. Why customer satisfactionis important Common sense tells us satisfied customers must be good for business Research confirms satisfaction important due to: • cost of acquiring new customers • benefits of repeat purchases by satisfied customers • impact of positive word-of-mouth recommendations Also, dissatisfied customers are likely to defect to competitors and generate negative word-of-mouth comments

8. Repeat customers • Know where and how to book, what to expect and how to find the premises • Their expectations can be met – they already know what the hospitality offer represents, and were relatively satisfied • Customer-contact employees greeting regular customers provides reassurance to first-time visitors regarding product quality and customer satisfaction • Regular customers are less costly to look after because they know how the service operation works • Repeat customers are powerful advocates, encouraging others to patronize the establishment and generating positive word-of-mouth recommendation

9. Principles of customer satisfaction • Identify which customers you are trying to satisfy (segment the market); not all customers or prospects are equally important • Identify what is important to those chosen customers; not all customers want same components of hospitality offer, and not all are equally important • ‘Get it right first time’ – customers’ expectations should be satisfied at the first opportunity; try to eliminate causes of customer dissatisfaction • Provide excellent recovery policies and systems to manage customer dissatisfaction

10. Customer satisfaction guarantees • When consumers buy manufactured products, the manufacturer provides guarantees and will repair/replace product if customer not satisfied; consumers and manufacturers understand concept of satisfaction guarantees • Most hospitality managers are opposed to the idea of customer satisfaction guarantees – believing too many guests are dishonest and make bogus complaints • BUT most hospitality companies do compensate customers when they have a genuine complaint

11. Implicit satisfaction guarantee • Customers assume satisfactory service, even though hospitality outlet has no guarantee (formal contract) • Experience, education and consumer protection legislation, encourage hospitality companies to compensate customers for genuine complaints • Most hospitality companies do compensate customers who complain • Problem with informal customer satisfaction guarantees is that no guidelines set out what the company offers and how customers will be compensated if something goes wrong

12. Explicit satisfaction guarantee • Explicit satisfaction guarantee based on specific, measurable performance • Time-based promises, such as a maximum of 30-min wait for a room service delivery, good example • Length of time to deliver the service can be explicitly incorporated into the guarantee, and it is then simple to establish whether the service has been delivered as guaranteed – on time or not • These guarantees have been used with varying degrees of success • Before companies introduce an explicit satisfaction guarantee, the operation must be able to deliver the promise within the time agreed and at an acceptable performance level

13. Unconditional satisfaction guarantee Unconditional satisfaction guarantee promises customers complete satisfaction or their money back Makes powerful statement about hospitality service provider to deliver customer satisfaction Gives consumers confidence to purchase (by reducing risk) and reassurance Before hospitality company introduce unconditional guarantee: • target market must be clearly defined • company must understand the drivers of customer satisfaction for the product/service • product/service quality standards must be set to deliver customer satisfaction • service delivery processes and enabling technology must enable the promise to be delivered • employees must be aware of the 100% satisfaction guarantee and capable of delivering • company must invest significantly in research to evaluate drivers of customer satisfaction, competitive standards and consumer’s perceptions of price and value; in product quality and training, and effective quality audit processes • very few hospitality companies offer unconditional service guarantees [Hampton Inns (USA), and Premier Inn (UK)]

14. Measuring customer satisfaction • Hospitality companies use a combination of direct and indirect methods to measure customer satisfaction • Indirect methods include tracking sales/profit figures and monitoring them against forecast or previous period performances • Direct methods include customer research and analysis of complaints and compliments • Hotels and restaurants use customer comment cards/questionnaires completed by customers on the premises – industry does not have a standard approach to measure customer satisfaction, and companies use a variety of different methods

15. Methods • Post-encounter customer surveys – customers, frequent guests and members of loyalty club emailed/texted questionnaires for comments understand the level of consistency across a hotel brand • Employee surveys – employees are acutely aware of service problems and often know the reasons why performance underperforms customer expectations • Focus groups of customers and employees allow the group moderator to explore customer satisfaction issues in depth • Mystery shopping is a key tool in auditing the service performance of hotels • Analysing customer complaints (from questionnaires, letters, emails) to identify root causes of customer dissatisfaction • Internal brand audits – hospitality chains carry out brand conformance audits on each property to ensure that the unit is delivering performance standards and customer satisfaction • Quantitative and qualitative research methods used to collect data from customers

16. Importance/performance analysis • Important to identify which elements of the hospitality experience contribute most to customer satisfaction • Companies conduct qualitative research to establish the most important elements of the experience • These elements are then embedded into questionnaires which measure satisfaction • Questionnaires assess customer expectations of key elements and perceptions of actual performance • Analysis identifies where company is not meeting customer expectations

17. Figure 13.2 Importance/performance matrix

18. Figure 13.3 Importance/performance matrix, hotel example

19. Customer satisfaction may not leadto repeat business! • In hospitality, completely satisfied customers may never return to the unit or to the destination for a variety of reasons: • leisure travellers (variety-seeking customers) want to explore the world rather than returning to same tourist destination • price-responsive consumers can choose competitors offer • customers attending unique events, such as wedding receptions, sports matches and exhibitions, will stay at or near the venue and may never return • This does not mean customer satisfaction is unimportant; these customers still need to be satisfied to obtain W-o-M recommendation (especially Trip Advisor)

20. Conclusion • Customer satisfaction is essential to generate repeat sales, word-of-mouth recommendation and enhancing profitability • Most hospitality companies have difficulty in offering 100% unconditional guarantees of customer satisfaction, many provide implicit service guarantees • Customer satisfaction foundation of successful hospitality business, but satisfied customers may never return

21. References • Parasuraman, A., Zeithaml, V. A. and Berry, L. L. (1988). ‘SERVQUAL: a multiple item scale for measuring consumer perceptions of service quality’. Journal of Retailing, 64 (1), pp. 5–7. • Reichheld, F. F. (1996). The Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value. Baie and Company. • Zeithaml, V. A. and Bitner, M. J. (2003). Services Marketing. McGraw-Hill.