Building Loyalty by Personalizing the Guest Experience

By Michael DiLeva Executive Vice President, The IDT Group | January 27, 2012

While that's understandable, what's disappointing is that all too often, the shallow implementation of such concepts leaves us working for the concept itself as opposed to the concept working for us. We become mired in the jargon, the mechanisms and the processes. The concept becomes the end itself, as opposed to simply the means to the end and we lose touch with what should be the business goals.

Customer Relationship Marketing (CRM) is a great example. Unlike other popular business concepts that emerged from best-selling books or landmark academic research, CRM more or less evolved from a long line of existing initiatives. It predominantly grew out of database marketing in the early 1980's, most notably with American Airlines' introduction of the landmark AAdvantage frequent flyer program (which ironically itself was somewhat of an evolution of the cultural phenomenon that was S&H Green Stamps) and was quickly followed in the hospitality industry just a few years later by Holiday Inn and Marriott.

CRM originally emerged with the noble goal of increasing revenues and margins by creating customer loyalty. And the path by which to achieve those goals involved the gathering of more information on customer activities and the creation of incentives - such as points or miles - to encourage the customer to increase or consolidate their activity with the provider. Today, some 25 years after its first introduction, CRM unfortunately hasn't evolved all that much and therein lies the problem.

At its core, CRM remains software centric and is hindered by its predominantly internal focus and transactional mindset. Despite incredible advances in information gathering and business intelligence that has revealed amazing information about customers, such information is usually only used by the staff-level, back-of-house marketing and finance teams. Little, if any information ever trickles down to the line level to allow the customer-facing associate to use it to meaningfully impact the guest experience. Even in the one operational area where CRM has made a difference - the Call Center - it's only used for service recovery and up-selling. And from the customer's perspective, the only value that they're receiving from CRM is points. Loyalty - which was the goal from the beginning - isn't achieved through an emotional connection, but is instead simply "bought" (or in reality "rented" since there's little to keep the customer from defecting) via the exchange of points for purchases.

It's because of those weaknesses that CRM is falling out of favor to a certain extent and many service providers are beginning to tout the emerging concept of "Customer Experience Management." Academically, the definition of Customer Experience Management isn't all that much different than that of CRM. Both are involved in managing the interaction with the customer across a number of channels and ideally at every point of contact. Where CEM really differs from CRM and why it should have a particular appeal for hospitality operators is that CEM at its core focuses on "meeting" customer needs as opposed to CRM which focuses more on "exploiting" those needs.

The differences are far from simply semantics and with the proper execution the results can be more than subtle. At its core, CES takes advantage of the fact that points don't make a difference (in fact, they're almost ubiquitous - do you know any airline or hotel company that doesn't have one?), and leverages the philosophy that loyalty can't be bought, but it can be earned via product differentiation. CES is the evolution of CRM as it focuses not on delivering a beneficial and meaningful impact to the transaction, but instead positively impacting and influencing the actual overall shopping or utilization experience itself. And just like the early adopters in the first wave of CRM implementation drove substantial results, the companies that take the lead in introducing CES to impact the guest experience will find themselves with a true competitive advantage.

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There are strong moral and ethical reasons why a hotel should incorporate eco-friendly practices into their business but it is also becoming abundantly clear that “going green” can dramatically improve a hotel's bottom line. When energy-saving measures are introduced - fluorescent bulbs, ceiling fans, linen cards, lights out cards, motion sensors for all public spaces, and energy management systems - energy bills are substantially reduced. When water-saving equipment is introduced - low-flow showerheads, low-flow toilets, waterless urinals, and serving water only on request in restaurants - water bills are also considerably reduced. Waste hauling is another major expense which can be lowered through recycling efforts and by avoiding wastefully-packaged products. Vendors can be asked to deliver products in minimal wrapping, and to deliver products one day, and pick up the packaging materials the next day - generating substantial savings. In addition, renewable sources of energy (solar, geothermal, wind, etc.) have substantially improved the economics of using alternative energies at the property level. There are other compelling reasons to initiate sustainability practices in their operation. Being green means guests and staff are healthier, which can lead to an increase in staff retention, as well as increased business from health conscious guests. Also, sooner or later, all properties will be sold, and green hotels will command a higher price due to its energy efficiencies. Finally, some hotels qualify for tax credits, subsidies and rebates from local, regional and federal governments for the eco-friendly investments they've made in their hotels. The May issue of the Hotel Business Review will document how some hotels are integrating sustainable practices into their operations and how their hotels are benefiting from them.