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Chapter Four
Relationship and Loyalty Marketing
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.2
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
What is Loyalty and Why is It Important?
Loyalty defined: When the customer feels so strongly that
you can best meet his or her relevant needs, your competition is virtually excluded from the considered set, and the customer buys almost exclusively from you — referring to you as “their restaurant” or “their hotel.”
Winning maximum share of heart, mind and wallet.
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.3
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
What is Loyalty and Why is It Important?
Relationship marketing The process of identifying and creating mutual value for
customers that you share over the relationship’s lifetime
Levitt’s definition compares the relationship to a marriage
Benefits of loyalty Financial importance of maintaining and creating new
customers Loyal customers use word-of-mouth to promote a
product or brand Different from traditional marketing
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.4
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
What is Loyalty and Why is It Important? Drawbacks of Frequency:
Exclusive focus on behavior ignores the emotional and psychological factors that build real commitment
Without that commitment the customer focuses on “the deal,” not the brand or product relevance
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.5
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
How It Plays Out
ObjectivesBuild traffic, sales and profits.
Build sales, profits and the brand.
Real Loyalty
StrategyIncentive repeattransactions.
Build personal brandrelationship.
FocusA segment’s behavior and profitability.
An individual’s emotional and rational needs, and their value.
Traditional Frequency
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.6
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Maintaining a Good Relationship with the Customer
Model of service relationships
Antecedents that affect trust and commitment
Consequences that result from trust and commitment
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.7
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Customer Relationship Management
Creating improved shareholder value through relationships with customers and customer segments
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.8
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Lifetime Value of a Customer Definition
The net profit received from doing business with a customer during the time that the customer continues to buy from your business
Profitability increases over the life of the relationship, due to positive word of mouth
Customer loyalty ladder Moving a customer from a state of
awareness to brand advocacy
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.9
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Exhibit 4-8; The Consumer
Buying Process
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.10
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Exhibit 4-6; Profits through a hotel guest’s life
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.11
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Building Loyalty Evolution of customer loyalty
Sales Targeted promotions Frequency promotions Brand relationships Knowledge relationships
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.12
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Exhibit 4-9: The Evolution of Building Loyalty
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.13
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Building Loyalty The loyalty circle
Process
Value
Communication
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.14
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Exhibit 4-10; The Loyalty Circle
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.15
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Building Loyalty Frequent guest programs
Not the same as loyalty programs Any program with guest rewards
that can be redeemed for free or discounted products or services
Can be one part of a loyalty program
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.16
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Building Loyalty What loyalty
programs don’t do:
Not a “quick fix”
Not a promotion
What makes loyalty programs work:
Database, communication, meaningful rewards, simplicity, attainability, sustainability, measurability, management, manageability, profitability
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.17
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Customer Complaints and Service Recovery Customer complaints
Inevitable, healthy, opportunities, marketing tools, advertising
TARP research study on complaint handling
50% of consumers complain to front line staff 1-5% of those go to management Complaint rates vary by type of problem Twice as many people are told about a bad
experience over a good one Tip of the iceberg phenomenon
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.18
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Exhibit 4-11; Tip of the Iceberg Phenomenon
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.19
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Customer Complaints and Service Recovery What to do about it?
This is marketing’s task Make it easy for customers to
complain Make it known where and how to
complain Do something about the complaint
if it is reasonable
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.20
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Customer Complaints and Service Recovery
Effective complaint handling, from A Complaint is a Gift: Say “thank you” Explain why you appreciate the complaint Apologize for the mistake Promise to do something about it immediately Ask for necessary information Correct the mistake Check customer satisfaction Prevent future mistakes
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.21
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.22
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Employee Relationship Marketing or Internal Marketing
Definition Apply marketing principles to those
who serve the customer (directly or indirectly) and build a mutual bond of trust with them
To create a customer, must create employee value
Lower employee turnover relates to higher profits
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.23
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Employee Relationship Marketing or Internal Marketing
Noncontact employees All employees are part of the marketing effort
Employees need to understand how their job and actions effect the customer
Employees need to be kept up to date on important information
Success ultimately lies with management
© 2008 Pearson Education, Upper Saddle River, NJ 07458.
All Rights Reserved.24
Marketing Essentials in Hospitality and Tourism: Foundations and Practices by Shoemaker & Shaw
Class Discussion Name two products or services to
which you consider yourself extremely loyal.
What has produced that loyalty? How frequently do you buy this
product or service? What do you tell your friends about
this product or service? What do you tell your family?