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A Critical Evaluation of Customer Relationship Essay

A key characteristic of successful business is having a stable base of customers. Businesses can achieve this by focusing its effort on its loyal customers more and on acquiring new customers less. The principles employed in doing this are in the realm of Customer Relationship Marketing (CRM) and among the most successful in this field is the Millennium Seoul Hilton Hotel.

This study, therefore, aims to evaluate the customer relationship marketing of the said hotel by analyzing existing theories related to customer relationship marketing, analyzing the guest loyalty programme, and collecting relevant information from the hotel to make conclusions and recommendations. Qualitative analysis was performed to the primary data gathered by means of survey of 120 individuals – half of which are hotel staff while the rest are loyal customers. Quantitative analysis was applied to data gathered through structured and semi-structured interview of selected individuals with unique experiences related to CRM.

Chapter 1 Introduction 1. 1 Background Laura Lake (2008) provides some thought provoking questions for business owners. She asked if anyone be interested if sales can be increased by 50% without escalating one’s marketing budget. Of course, no business owners would say no such a seemingly impossible feat. But the truth

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is this can be done by spending ample time in nurturing relationships with customers which fall in the realm of Customer Relationship Marketing. Too often, businesses just assume that customers after providing good service without maintaining good relationship.

This, according to Lake, is a big mistake and costly, in fact. There are actually a number of reasons while customers leave. Some perceive that one’s pricing is unfair or very high. Other would have complaints which were not addressed. Still, others have been lured by competitor’s better offer. It should be noted that the reason customers continue to purchase a service or product is due to its relationship with the business owners, they were referred by a friend or partner, or they owned another product of the company.

Yet, instead of exploring this, businesses rather spend 80% of their funds allocated to marketing to gaining new customers and clients instead of keeping the current clients and maintaining the relationships with them. According to statistics, those customers who have been customers before spend 33% more than those who are new customers. Moreover, repeat customers also have 107% greater referrals than non-customers. Persuading a potential customer to avail of a particular good or service costs six times more compared to selling the same to an old customers.

That is why current marketing budget would go much farther if invested in building, nurturing, and developing current customer relationships rather than spending it on gaining new ones. According to Laura, this is not very difficult as all it takes is handling customers and clients with care and treating them like strategic partners. To do this, everything must be right: from the products and services, to the promotion, and even to the time and location. But this is worth the effort and resources. Besides, new customers will not be attracted if a business fails to hold onto its current base of clients and customers.

The Millenium Seoul Hilton Hotel, based on the interview by The Seoul Times (2005) to its general manager and personal experience of the author, seem to be doing well in this area. But this hypothesis still has to be tested. By embarking on this study, it is hoped that valuable insights can be gained in order for other business to be able to apply principles in Customer Relationship Management for their own advantage. 1. 2 Aim This research aims to critically evaluate the customer relationship marketing at the Millennium Seoul Hilton Hotel. This can be achieved by meeting the following objectives:

1. To critically analyze the existing theories related to Customer Relationship Marketing. 2. To analyze the guest loyalty programme using by the Millennium Seoul Hilton. 3. To collect relevant information gathered from the Millennium Seoul Hilton. 4. To conclude and make recommendation to the Millennium Seoul Hilton. Chapter 2 Literature Review 2. 1 Customer Relationship Marketing Nowadays, many companies are trying to change a way of their Relationship Marketing (RM) and create new methods different from competitors since customers’ needs and wants is continually changing.

One of the active RM tools is a customer loyalty programme which can strengthen relationship with customers. The aim of Customer Relationship Marketing (CRM) is to build strategies that refine and increase the value of relationships, and that involves careful segmentation (Knox et al, 2003). An organisation has to decide which customers it has to focus on. Moreover, it need to consider the nature of its customer strategy and keep improving customer relationship and customers’ value in order to maintain and attract customers.

The site of 12Manage (2008) contains a parallel view of customer relationship marketing. It presents customer relationship marketing as just another view of customer relationship marketing, thereby placing it as functional strategy. It’s take on CRM then is a combination of what Peelen (2006) and the Gartner Group’s (2004) definition that it is a IT-based business strategy which is designed to maximize profitability, revenue and customer satisfaction by working on segments of customer, ensuring behaviours satisfying to the customers and executing processes that are centered on customers.

What is interesting in this definition is that information technology is added in the equation. According to Osborne (2001 cited in Little and Marandi 2003), if you want to change the business with a major step improvement in the way you interact with your customers, everyone in the company must recognize the changes being made, why they are being made, what is required from them personally, what it means for the customers, and what the road map of developments and expected results are.

Thus, maintaining customers with change is a significant factor to retain loyal customers. 2. 2 CRM Effectiveness Indicators There are a number of indicators that are useful in gauging the effectiveness of CRM. Buttle (2004) said that Life time value (LTV) is such. The life time value of a loyal customer can be enormous (Robinson and Etherington, 2006). Therefore, realizing loyalty guests who brings on a large amount of the hotel’s revenue is very important. According to Hughes (2008), LTV has been in customer relationship management programme the measuring rod of success.

Two other measures mentioned by Hugues (2008) which are related to LTV are the return on investment (ROI) and the net present value (NPV). In taking a snap shot of the behaviour of present customers, ROI is used for campaigns to measure profitability and is highly practiced in banks. LTV then is the NPV of all the profits to be made from receiving a particular number of customers – whether acquired or existing – within a given time frame. Some scholars claim that customer retention has an effect on the bottom line.

They further suggest that a 5 % increase in customer retention would create a 125% increase in profit (Buttle, 1996). CRM is based on the company and the customer exchanging ‘value’ rather than money, goods and services. Companies now pay more attention to ‘value’ and how to create, convey, and exploit it better (Knox et al, 2003). So for instance, knowing that a customer had a less than memorable experience in the hotel provides the hotel manager with a chance to win them back the next time. According to Buttle (2004), what differentiates market segmentation in a CRM sense is a very clear focus on customer value.

The marketing team will develop profiles of customer groups based on their insight and experience and then, this is used to guide the development of marketing strategies across the segments (Buttle, 2004). So, the hotel can build a profile on spending pattern of the customers. Thus, it can create customer-centered strategy for increased loyalty. Customer communication are such that managers regularly network on the customers to ensure that they are happy in the way contracts are proceeding, and as a result, close customer relationship is established.

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