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Keywords
Customer loyalty, Customer satisfaction, Database marketing, Hotels
Abstract
Develops and implements a method for hotels to identify attributes that will increase customer loyalty. Other hotels can replicate the methodology used in this study. The study makes the uses of the hotel's database to draw samples for both focus groups and a mail survey. Based on 564 completed surveys from hotel guests, the authors found the relationship between customer satisfaction and customer loyalty was non-linear. The authors use the data to develop internal benchmarks for the hotel based on scores that were representative of loyal customers. The study makes use of the hotel's database to draw samples for both focus groups and a mail survey.
Introduction
It is commonly known that there is a positive relationship between customer loyalty and profitability. Reichheld and Sasser (1990) found that when a company retains just 5 percent more of its customers, profits increase by 25 percent to 125 percent. Their study caught the attention of both practitioners and researchers, arousing a great interest in customer loyalty. Gould (1995) helped consolidate the interest in loyalty through his research that supported Reichheld and Sasser's work. Today, marketers are seeking information on how to build customer loyalty.
The increased profit from loyalty comes from reduced marketing costs, increased sales and reduced operational costs. Loyal customers are less likely to switch because of price and they make more purchases than similar non-loyal customers (Reichheld and Sasser, 1990). Loyal customers will also help promote your hotel. They will provide strong word-of-mouth, create business referrals, provide references, and serve on advisory boards. Raman (1999) states, loyal customers serve as a "fantastic marketing force" by providing recommendations and spreading positive word-of-mouth; those partnership-- like activities are the best available advertising a company can get. Loyal customers increase sales by purchasing a wider variety of the hotel's products and by making more frequent purchases. Bowen and Shoemaker (1998) found loyal hotel customers had higher food and beverage purchases than non-loyal customers. Finally, loyal customers cost less to serve, in part because they know the product and require less information. They even serve as part-time employees. The authors have collected anecdotes from service employees, stating how loyal customers are eager to serve as employees. Loyal...