Customer Services in Hospitality Industry

Customer Services in Hospitality Industry

Customer Services in Hospitality Industry

Introduction

There is a major change in the way companies organise themselves as firms switch from product-based to customer-based structures. A key driver of this change is the advent of Customer Services which, underpinned by information systems convergence and the development of supporting software, promises to significantly improve the implementation of Relationship Marketing principles. In this paper we explore the three main issues that can enable (or hinder) the development of Customer Services in the hotel; the organizational issues of culture and communication, management metrics and cross-functional integration — especially between marketing and information technology. Customer Services (Customer Services) has its roots in relationship marketing which is based in turn on the formative work by Berry (1983), the IMP Group. Seminal contributions to the relationship marketing debate were made by Reichheld and Sasser (1990) reporting on the customer retention work of Bain and Co. These findings indicated that a 5 per cent increase in customer retention resulted in an increase in average customer lifetime value of between 35 and 95 per cent, leading to significant improvements in company profitability ( Reichheld, p. 36) The purpose of relationship marketing is to improve long run profitability by shifting from transaction-based marketing, with its emphasis on winning new customers, to customer retention through effective management of customer relationships (Christopher et al., 1991, p. 19). While the development of theory in relationship marketing continues unabated, the key question facing practitioners is, how can this shift in management focus be implemented in practice?

Hospitality Industry Customer Services

Customer Services complements the relationship marketing perspective. It is defined by Couldwell (1998) as, '.. . a combination of business process and technology that seeks to understand a company's customers from the perspective of who they are, what they do, and what they're like.' As is the case with relationship marketing, Customer Services focuses on customer retention and relationship development (Galbreath, 1998). According to Kutner and Cripps (1997), Customer Services is founded on four relationship-based tenets:

• Customers should be managed as important assets.

• Customer profitability varies; not all customers are equally desirable.

• Customers vary in their needs, preferences, buying behaviour and price sensitivity.

• By understanding customer drivers and customer profitability, companies can tailor their offerings to maximise the overall value of their customer portfolio. Anton (1996) characterises Customer Services as an integrated approach to managing relationships. However, critically, he underpins relationship management with 'continuous improvement or re-engineering' of customer value through better service recovery and competitive positioning of the offer (Figure 2).

Figure 2: Customer Services as a Series of Relationships

Notwithstanding these technological perspectives, the philosophical bases of Customer Services are a relationship orientation, customer retention and superior customer value created through process management. IT is the 'glue' that holds these together and enables the whole to be operationalised. In consequence, the successful implementation of Customer Services requires Marketing and IT to work closely together to maximise the return on customer ...