Building Customer Loyalty through Quality

©2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ 07458 Kotler, Bowen, and Makens
Chapter 11
Building
Customer
Loyalty
through
Quality

“To understand service quality and make quality
management effective, we need profound
knowledge about the details and activities
connected with the emergence of a service.
This presupposes interest in service design and
service production.”
-Evert Gummesson

Chapter Objectives
• Define customer value and customer
satisfaction
• Understand the difference between customer
satisfaction and customer loyalty
• Discuss attracting new users and retaining
current customers by developing relationship
marketing

Chapter Objectives
• Know tactics for resolving customer
complaints and understand the importance of
resolving complaints
• Define quality and discuss the importance of
the benefits of quality
• Implement capacity and demand
management tactics

Customer Delivered Value
• Customer-delivered value is the difference
between total customer value and total
customer cost of a marketing offer
• Customer satisfaction depends on the
product’s performance relative to a buyer’s
expectations
• Companies must be customer centered and
deliver superior value to target customers

Customer Delivered Value

Customer Satisfaction
• Buying decisions based on judgments formed
about the value of marketing offers
• Customer expectations based on past buying
experiences
• Today’s most successful companies raising
expectations and delivering performance to
match

Customer Satisfaction vs.
Customer Loyalty
• Customer satisfaction measures how well a
customer’s expectations are met
• Customer loyalty measures how likely
customers are to return and their willingness
to perform partner shipping activities for the
organization
• Customer satisfaction is a requisite for loyalty

Relationship Marketing
• Creating, maintaining, and enhancing
strong relationships with customers
– Basic
– Reactive
– Accountable
– Proactive
– Partnership

Benefits of Customer Loyalty
• Continued patronage
• Reduced marketing costs
• Decreased price sensitivity
• Partnership activities

Cost of Lost Customers
• Companies must define and measure
retention rate
• Company must identify causes of customer
defection and determine which can be
reduced or eliminated
• Reducing customer defections by only 5
percent can result in improved profits of over
25 percent

Resolving Customer
Complaints
• A critical part of customer retention
• 82% of customers are likely to return if a
complaint is handled quickly, as opposed to
9% if it is not
• Most customers do not complain

Quality
• Quality has emerged as an important area in
hospitality
• Product features enhance customer
satisfaction and adds to the cost of a product
• Freedom from deficiencies increases
customer satisfaction

Quality
• Technical quality refers to what the
customer is left with after the customer –
employee interactions have been completed
• Functional quality is the process of
delivering the service or product
• Societal (ethical quality) means firms must
consider ethical responsibilities when
developing products

Managing the Perceived Service
Quality

Benefits of Quality Service
• Customer Retention
• Avoidance of Price Competition
• Retention of Good Employees
• Reduction of Costs

Managing Capacity
1. Involve the customer in the service delivery
system
2. Cross-train employees
3. Use part-time employees
4. Rent or share extra facilities and equipment

Managing Capacity
5. Schedule downtime during periods of low
capacity
6. Extend service hours
7. Use technology
8. Change the Configuration of the Service

Revenue Management
• Revenue management is a
methodological approach to allocating a
perishable and fixed inventory to the
most profitable customers

Managing Demand
1. Use price to create or reduce demand
2. Use reservations
3. Overbook
4. Use queuing

Managing Demand
5. Shift demand
6. Change the salesperson’s assignment
7. Create promotional events

Class Discussion
The Five-Gap Model
of Service Quality
Question: Describe ways in which you
as a Manager could use the five-gap
model of service quality

The Five-
Gap
Model of
Service
Quality

Close Gap 1
1. Talking to customers
2. Talking to customer contact employees
3. Marketing information systems –
customer surveys – analysis by
segment – focus groups
4. Reducing levels of management

Close Gap 2
1. Management Commitment –
resources, internal marketing, reward
systems
2. Use of hard and soft technology
3. Shift demand
4. Is meeting customer expectations
financially feasible?

Close Gap 3
1. Training
2. Internal marketing, pride
3. Teamwork
4. Reward systems
5. Service quality audits

Close Gap 4
1. Know the capabilities of the firm
2. Good communications within the firm
3. Internal marketing – teamwork

Best Practices
• Service Guarantees by Hampton Inns
– Unconditional guarantees
– Specific guarantees
– Implicit guarantees

Key Terms
• Customer centered
• Customer-delivered value
• Expected service
• Freedom from deficiencies
• Functional quality

Key Terms
• Product features
• Revenue management
• Societal (ethical) quality
• Technical quality

Building Customer Loyalty through Quality

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