1. Chapter 11 Building Customer Loyalty through Quality

2. “To understand service quality and make quality management effective, we need profound knowledge about the details and activities connected with the emergence of a service. This presupposes interest in service design and service production.” -Evert Gummesson
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

3. Chapter Objectives Define customer value and customer satisfaction
Understand the difference between customer satisfaction and customer loyalty
Discuss attracting new users and retaining current customers by developing relationship marketing
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

4. Chapter Objectives
Know tactics for resolving customer complaints and understand the importance of resolving complaints
Define quality and discuss the importance of the benefits of quality
Implement capacity and demand management tactics
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

5. Customer Delivered Value
Customer-delivered value is the difference between total customer value and total customer cost of a marketing offer
Customer satisfaction depends on the product’s performance relative to a buyer’s expectations
Companies must be customer centered and deliver superior value to target customers
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

6. Customer Delivered Value
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

7. Customer Satisfaction
Buying decisions based on judgments formed about the value of marketing offers
Customer expectations based on past buying experiences
Today’s most successful companies raising expectations and delivering performance to match
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

8. Customer Satisfaction vs. Customer Loyalty
Customer satisfaction measures how well a customer’s expectations are met
Customer loyalty measures how likely customers are to return and their willingness to perform partner shipping activities for the organization
Customer satisfaction is a requisite for loyalty
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

9. Relationship Marketing
Creating, maintaining, and enhancing strong relationships with customers
Basic
Reactive
Accountable
Proactive
Partnership
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

10. Benefits of Customer Loyalty
Continued patronage
Reduced marketing costs
Decreased price sensitivity
Partnership activities
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

11. Cost of Lost Customers
Companies must define and measure retention rate
Company must identify causes of customer defection and determine which can be reduced or eliminated
Reducing customer defections by only 5 percent can result in improved profits of over 25 percent
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

12. Resolving Customer Complaints
A critical part of customer retention
82% of customers are likely to return if a complaint is handled quickly, as opposed to 9% if it is not
Most customers do not complain
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

13. Quality Quality has emerged as an important area in hospitality
Product features enhance customer satisfaction and adds to the cost of a product
Freedom from deficiencies increases customer satisfaction
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

14. Quality
Technical quality refers to what the customer is left with after the customer – employee interactions have been completed
Functional quality is the process of delivering the service or product
Societal (ethical quality) means firms must consider ethical responsibilities when developing products
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

15. Managing the Perceived Service Quality
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

16. Benefits of Quality Service
Customer Retention
Avoidance of Price Competition
Retention of Good Employees
Reduction of Costs
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

17. Managing Capacity Involve the customer in the service delivery system
Cross-train employees
Use part-time employees
Rent or share extra facilities and equipment
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

18. Managing Capacity Schedule downtime during periods of low capacity
Extend service hours
Use technology
Change the Configuration of the Service
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

19. Revenue Management
Revenue management is a methodological approach to allocating a perishable and fixed inventory to the most profitable customers
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

20. Managing Demand Use price to create or reduce demand Use reservations
Overbook
Use queuing
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

21. Managing Demand Shift demand Change the salesperson’s assignment
Create promotional events
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

22. Class Discussion The Five-Gap Model of Service Quality
Question: Describe ways in which you as a Manager could use the five-gap model of service quality
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

23. The Five-Gap Model of Service Quality
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

24. Close Gap 1 1. Talking to customers
2. Talking to customer contact employees
3. Marketing information systems – customer surveys – analysis by segment – focus groups
4. Reducing levels of management
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

25. Close Gap 2
1. Management Commitment – resources, internal marketing, reward systems
2. Use of hard and soft technology
3. Shift demand
4. Is meeting customer expectations financially feasible?
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

26. Close Gap 3 1. Training 2. Internal marketing, pride 3. Teamwork
4. Reward systems
5. Service quality audits
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

27. Close Gap 4 1. Know the capabilities of the firm
2. Good communications within the firm
3. Internal marketing – teamwork
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens