Impact of Customer Loyalty Program on Customer Perception and Attitude towards Hospitality Brands - Research Proposal Example

Impact loyalty program on perception and attitude towards hospitality brands. The loyalty is a factor which enables the customer to buy a product in repeated manner. There are some factors are related in this context to support the power of loyalty and they are trustworthiness, dependability, allegiance, devotion and excellence. These are the factors which are deeply associated with the loyalty programs (Brooks, 2010, p, x). The loyalty programs are the reason for the Starbucks to pull the same old customer for repeated time. The hospitality industry is surviving on these loyalty programs as the cost of acquiring new customer is high so retention of a customer would lower down many recurring costs. This study all about the positive aspects of the loyalty programs in today’s hospitality industry. Introduction: The legendary question in the history of the business management is how to satisfy the customers. It is very obvious to understand that customer is the king in any business as the customers are the vital factor in the business that generates the revenue for the company. There are many kinds of customers for various kinds of industry but, for any industry it is very important to satisfy the customers mainly for the hospitality industry where the customer speaks the ultimate words. It is very important for the hospitality industry to think from the customers prospective. The customer’s perception and attitude towards the services provided by the hospitality industry are the vital factors. The customer loyalty programs are very much vital for this industry mainly for the hotels, in most of the hotels the loyalty programs run as these hotels want their customer to be happy and the lingering effect of the loyalty programs will get back the customers in the hotel in the near future. The aim of the program: Through out the history of the customer relationship management it has been seen that, the business people have applied many ways to satisfy their customer. The customer loyalty programs have proven to be the most successful methods of satisfying the customers. The needs and wants of the customers are always changing as the time passing by. The main aim of the loyalty programs are to retain and win back the customers. The retention of a customer saves lots of money cost. There are several costs which can be saved and profits can be generated and they are 1: Acquisition cost: the cost of acquiring new customer, 2: Base profit: that is the difference between the price the customer pays and the company’s cost. 3: Revenue growth: a long term loyal customer gives long term revenue for the company. 4: Cost saving: A matured customer tends to be less costly to service (Griffin Jill & Lowenstein Michael W. 2001 P 9). It is very obvious that the so-called typical customers do no longer exist in this changing business environment, and that is the biggest lesson for most of the companies in the recent time. (Dyche. 2002. P 3). Most of the time the companies sell as many as possible products and services to their customers but, they forget to identify to whom they are selling the products. The hospitality industry consists of many categories, mainly in includes the service oriented organizations like restaurants, event planning, theme park or amusement park, cruise lines, lodging that is hotels and also the tourism related services. It is very important to identify the factors which differentiate a service provider from other competitors. Why a customer would come to specific place to get the service while there are several in the same area? What would make a customer happy to return in the specific service provider for next time? These are questions which should be answered to know the proper promotional techniques. The customer loyalty programs are the simple answers for these questions. Methods of loyalty programs: A unique loyalty program may move the organization from lower position to the higher position. The main aim of the loyalty programs is to keep the organization’s name in the customer’s mind. Most of the loyalty programs provide financial incentives to the customers. REI charges a customer fifteen Dollar to become a rewards member. In a year the consumer or the customer gets ten percent off on their purchases for one year. Once a United Airlines frequent flier club member takes the flight for sixty thousand miles then he or she get free ticket to Asia worth of eight hundred dollars to fourteen hundred dollars or some time more than that. (Baran, Galka & Strunk, 2007, p, 340). The loyalty programs should be structured in such a way that they should be very much encouragble for the customers. The loyalty programs help in a word of mouth promotions. The loyalty programs should also provide some money incentives for bringing the family members to the program network. Companies are asking for more and more information about the customers. These information create a huge data base of customer information which helps in running the loyalty program in a systematic manner. There are many methods and many ways to execute a successful loyalty program. Most of the time these loyalty programs are done with price discount. In USA ninety percent of all programs are based on price discount, (Butscher Stephan A. 2002 P 15). However, the loyalty programs which are related to the price discount don’t have a great value as it does not treat special customer at special way and, these kinds of loyalty programs can be replicated by the competitors. (Butscher Stephan A. 2002 P 15). The primary factor in the hospitality industry is the customer loyalty programs but, the vital question is how does it affect the customer’s mind? Service industry is very much dependent on their customers as in this kind of industry the revenue increases from the customers who purchase the service in a repeated manner as the loyal consumers on the services. In this part of the industry the behavioral trait of the target group (TG) plays a vital role for the success of the hospitality business. In the recent business environment it is very important to identify the prospective customers, mainly for the service industry like hospitality industry. It is very important to pamper the clients to make them happy about the services in the hospitality industry. Now, the Loyalty programs are basically pampering the customers. The Customer loyalty programs are found all over the economic markets and in each and every industry. These programs are basically collecting points or some other things like gifts by purchasing things from one particular shop. These points can be redeemed afterwards as money back or discount in the second purchase of the product or the service. For an example, in the field of gas station services many drivers would prefer to wait for the next Shell station in the highway rather than taking gas from some non named gas station only to gather more points for a walkman or from some other attractive gifts. (Kuhnle, 2007, p, 1). The typical marketing and promotional activates are mostly back dated nowadays, as par as the hospitality industry is concern. Some of the recent philosopher thinks, the interactive marketing concept of Peppers and Rogers’ Five Is should replace the traditional Four Ps or the Seven Ps in the information age which is basically run by the digital format. (Chaffey and Smith. 2008. P, 52). Most of them are very visible and effective in the tourism industry where the hospitality industry in banking on. There are several ways to ask the opinions of the customers generally the hotels use two kinds of methods. In one hand they use more structured methods such as the questionnaires made of few fixed important questions and in the other hand they prefer professional interviews. These personal interviews are more personalized and most of the up-scale hotels prefer these interviews as they want to have a deeper interaction with the customers. For an example the hotel manager could offer a cocktail or he can also organize a party for a group of customer to understand the customer’s perception about the service. [Proceedings of the 11th Toulon-Verona International Conference on Quality in Services]. These efforts would help the managers to understand what the customer wants and according to that he can make the loyalty programs to satisfy the customers. Most of the retailers use or rather runs loyalty programs to satisfy and sustain their customer for the longer time. TESCO started the Loyalty Card facility for the existing customers first in the retail segment which has given them the tremendous opportunity to be the number one in the retail business in United Kingdom. TESCO the largest retailer in UK introduced the TESCO Clubcard, which was the main value added service for the stores for the registered buyer had given them the ultimate profit and the lingering branding effect. In this context it can be stated that Sainsbury’s, another retail giant in London had applied this technique much more later and that is one of the main reason of TESCO being the Market leader. And there are many hotels and Tourism Company who run loyalty programs for their customers in different manners. Most of them are highly successful to sustain their customer with the help of the proper customer loyalty programs. Literature revue: The four Ps we have discussed above, now the Seven Ps are the basic service marketing mix. (Hollins & Shinkins. 2006. P, 96). The Seven Ps are Product, Price, Place, Promotion, People, Physical evidence and Process. (Chaffey and Smith. 2008. P, 54). However, the five I, which are sometimes more effective than the traditional 4 or 7Ps are described below. The classifications of the loyalty programs are very much diversified. There are many kinds of loyalty programs available in the market nowadays. Customers are the factor which generates the profit and money out of the market. In the service industry like Hospitality industry the customers are literally treated as the king. There are some big differences between the other industries and the hospitality industry. The main difference is in the hospitality industry mainly the tourism and the hotel industries is, the customers are in directly in contact with the employees. So it is very important to satisfy them some how to make them happy about the services. The service triangle is a model where it can be seen how the organization keep in touch with the employee and customer at the same time to understand the service factors and employee as well as the customer satisfaction. (Kuhnle, 2007, p, 9). It is very vital to understand why customers are so much important in the hospitality or the service industry than any other industry available in the market. In most of the other industries the products are tangible and first it is manufactured and then stored and then sold to the customer. In most of the cases as these products are tangible so the selling of these products is much easier, but in case of hospitality industry the products are generated and sold at the same time and these products are mainly intangible most of the time mainly for the tourism and hotel industry. Selling of intangible products is very tough as the customer will feel it only after the purchase. That is why the loyalty programs play a very vital role in case of post sale customer satisfaction. To make a customer loyal to the respected organization it is very important to apply the loyalty programs. It is very much easy to understand that the repeating customers generate more profit than the normal customers because it is been proved that loyal customers buy more each year than the normal customers (Van Bennekom, 2002, p, 24). One of the positive question in this context would be how does these loyalty programs work? Or rather how effective are these loyalty programs? According the to the study of P.C. Verhoef on effects of the customer relationship marketing instruments (RMIS) on customer retention and consumer share development over the time there are two kinds of loyalty programs one is the loyalty program which provide money incentives such as rewards and price discounts to the customers and other one is the loyalty programs which provide personal touch by providing social benefits. Verhoef found loyalty programs are beneficial in two ways. Firstly they lengthen the customer relation and second they enhance the customer share. Verhoef also checked that the loyalty programs related to the financial or economic discounts are more effective in case of customer retention. (Baran, Galka & Strunk, 2007, p, 340). Customer reception towards loyalty programs: It is a very vital point to be discussed that what the customer thinks towards the loyalty programs. From the business prospective it is beneficial for the company as it provides a long term relation with the customer which provides long tern profit for the organization. It has been seen that consumer’s status also plays a very vital part in case of the perceptions towards the loyalty programs from the customer’s point of view. It has been seen that these loyalty programs does not affect the customers who are having a high status. These loyalty programs are mostly effective to the middle level. These loyalty programs are very much effective in the tier where the people want to be more elite class even after being upper middle class. The status matters as the need to compare one’s self with others is very much pervasive and mostly occurs whether or not individuals intend to do so. (Gilbert, Giesler and Morris 1995). The firms are getting more and more affectionate with these loyalty programs and at the same time firms are increasingly segregating customers based on their status and level of commitment. There are many classes of loyalty cards are there in today’s market and they are platinum class, gold class, silver class etc. All of these segmentations are created to segregate the customer’s status. This is very important to create the well-defined classes to run a proper loyalty program. The benefits of these loyalty programs are mainly tangible as well as intangible. The loyalty programs definitely differs in different service based market but in the recent time some successful loyalty programs which were used in some other sector in the past are getting used in the other sector. Once upon a time exclusive loyalty programs like status programs used to run in airlines now exists in hotel chains for an example Starwood, in casinos like Harrah’s, cruise lines like regent, spas like Spa Chakra etc. (Feeling Superior: The Impact of Loyalty Program Structure on Consumers’Perceptions of Status Nd). Conclusion: From this study it has been cleared that in today’s business scenario mainly in the service industry, the loyalty programs are far more effective than that of expensive marketing and advertising campaigns. Most of the hotels, café and restaurants are giving loyalty cards to the customers so that they come back again. And these loyalty cards act like a reminder effect to the customer while they are away from the hotel or the restaurant. However, some loyalty programs did not work so well and mainly those loyalty programs which did not have any financial discounts. But the overall effect of the loyalty programs is pretty much positive and long lasting. References: Baran Roger J, Galka Roger J & Strunk Daniel P. (2007) The principle of customer relationship management. New Delhi: Cengage Learning Brooks Roger L. (2010). The Power of Loyalty: 10 Essential Steps to Build a Successful Customer Loyalty Strategy. New York: Entrepreneur Press. Butscher Stephan A. (2002). Customer loyalty programmes and clubs. ALDERSHOT: Gower Publishing, Ltd. Chaffey D and Smith Paul R. (2008). eMarketing eXcellence: planning and optimizing your digital marketing. Massachusetts: Butterworth-Heinemann. Gilbert, Daniel T., R. Brian Giesler, and Kathryn A. Morris (1995), “When Comparisons Arise,”Journal of Personality and Social Psychology, 69 (2), 227-36. Griffin Jill & Lowenstein Michael W (2001) Customer winback: how to recapture lost customers and keep them loyal. New Jersey: John Wiley and Sons Hollins B & Shinkins S. (2006). Managing service operations: design and implementation. London: SAGE. Kuhnle T, (2007). Customer Loyalty Program - Tourist Destination and Bonus Card System. Munich: GRIN Verlag Proceedings of the 11th Toulon-Verona International Conference on Quality in Services. Florence: Firenze University Press. Van Bennekom Frederick C. (2002) Customer surveying: a guidebook for service managers. Customer Service Press Nd. Feeling Superior: The Impact of Loyalty Program Structure on Consumers’ Perceptions of Status. Available at: http://www.xdreze.org/Publications/Feeling082008.pdf. Accessed on 9th September 2010. Read More