The importance of customer service and satisfaction
The customer service process lies at the crux of business for hotel companies. Service delivery is essentially a dynamic interchange of attitudes and perceptions between the employee and the customer, with the former responding to the latter’s expectations and the latter receiving and using the services the former is offering. In another view, service delivery involves tacit actions that usually occur during interactions between customers and service employees, physical resources, products or systems of the supplier, that are offered as viable solutions to problems of customers (Gronroos, 2000, p.
46). In the context of loyalty research, perceived qualities of service and customer satisfaction are given emphasis. At this point, a definition of customer satisfaction as used in this dissertation is warranted to serve as basis for the analysis later on. Most researchers agree that satisfaction reflects the customer’s judgment about the service or product availed in reference to the extent upon which their requirements or expectations are fulfilled or even surpassed (e. g. , Bolton & Drew, 1991; Oliver, 1980, 1997, as listed in Allen and Grisaffe, 2001, p.
213). Thus, satisfaction may be created by giving the customers the perceived value of the product or service being delivered so that they may be ascertained that the perceived benefits that they will receive are worthy of the costs that have been expended in order to avail of such service or product (Monroe, 1991 as mentioned in Ravald and Gronroos, 1996, 21). Boulding, et al (1993) argued that there are essentially two types of customer satisfaction – transaction-specific and cumulative.
The transaction-specific refers to the assessment of the product or service bought and/or availed immediately after the purchase or availment has occurred (Oliver, 1997). Fornell and Johnson (1991) defines cumulative customer satisfaction as a general assessment of the product or service based on accumulated consumption and/or purchase over a long period of time. In other words, transaction-specific involves specific information about a particular product or service experience while cumulative satisfaction implies a holistic judgment about the company’s performance in fulfilling customer expectations and meeting their requirements.
In terms of investments, companies are apt to be more concerned over cumulative rather than transaction-specific satisfaction as the latter represents a more stable benchmark for performance, (Anderson, et al, 1994, p. 54). For the purposes of this study, the cumulative definition of satisfaction will be used in discussing loyalty vis-a-vis customer satisfaction. Lovelock (2001) presents some of the compelling reasons why a company should take customer satisfaction seriously. He argues that high levels of customer satisfaction foster loyalty to the company, repeat business, and referrals to other prospective clients.
Moreover, satisfied clients are likely to be more lenient towards occasional service deficiencies. Ultimately, these lead to better profits for the company. Satisfaction is one of the most important and necessary factors to develop loyalty but it may not be a sufficient condition for loyalty (Mcilroy and Barnett, 2000). People who are satisfied by products or services may be potential loyal customers but it is hard to make them truly loyal guests. However, it is expected that satisfaction should come first whether a customer becomes loyal or not.
As it is shown in figure 1. 1, there exists a general process of creating loyal customers. It all starts from achieving high customer satisfaction through value-added services. The hotel may develop a good loyalty program or implement a strategic marketing approach such as providing a high level of individualised service, offering discounts, frequent stay and/or reward programs etc. Once the customers recognize the high value of the service coupled with strong emotional relationship, long-term customer loyalty may be created. 4.
History of Loyalty Program from the Past to Present The loyalty program was introduced by an American airline in 1981 with the development of typical promotional currency-based (points, miles, etc) program. Since then it was adopted by other airlines and hotels and loyalty programs rapidly became popular in the early 1990s (Malley, 1998). The motivation behind the development of airline loyalty programs was rather simple. The airlines faced virtual uniformity in a deregulated industry and needed a tie-breaker to influence the choice of the traveling customer.
While the programs did not really create more demand for travel, they nevertheless influenced the traveler’s choice of carrier and as a result, helped some airlines improve their market share (Duffy, 1998). Since the 1990s there had also been a lot of organisations that adopted loyalty programs in the hotel industry. Since hotels offered quite similar programs, the rationale behind implementing such programs could not have been to acquire competitive advantage at first.
Rather, it could have mainly been due to the goal of satisfying customers with short-term marketing strategies such as discounts and frequent stay rewards in order to increase sales within a short period of time. Short-term or promotional-currency based programs have pervaded many major industries today such as airlines, hotels, credit cards and telecommunications. Duffy (1998) points out that the situations in which this type of program is used have been quite similar across these industries as follows: • Virtual Parity – little or no difference in price and service.
No competitor has strong product differentiation. • Low involvement decision – consumer don’t spend a lot of time making choices in the categories and once the choice is made, it is typically not repeated for some period of time. For instance, once a customer selects a long distance carrier, he/she will stay with that carrier, at least for a while. • Intense competition among relatively short list of strong competitors (Duffy, 1998). In the past, the entire hotel industry offered an almost uniform loyalty program.
As such, customers were not given a wide variety of choices to choose from. Nowadays however, industries are converging to create distinctive and significant loyalty programs. For example, a hotel cooperates with an airline company and different restaurants to acquire more loyal guests and become obtain an image of a big brand. Thus, loyalty programs have indeed improved over the years. According to Malley (1998), loyalty schemes are now perceived to be one of the most successful marketing tools and have received considerable attention in both trade and academic journals.