The Importance of Customer Retention
By Marco Albarran Managing Director, Remarkable Hospitality, Inc. | February 03, 2013
I am certain we can all agree that we place a heavy emphasis on investing to acquire guests, patrons or customers to our establishments/businesses. The majority of investment frequently goes towards the search for new business. A smaller portion tends to be used for the upkeep or retention of the guest. Of course this is not in all hospitality establishments, however, why is this typically the approach? What can we learn from those who understand the other side (customer retention) and how this can be a stronger player in the success of the establishments and brand? Let's go ahead and see more regarding this…
Whenever we do fieldwork and ask the question in terms of why we seek to focus more on the sales and marketing of guests, by labor time and promotion, the answer seems to be quite the same around, in terms of, "yes, we do actually have that approach, but we do not know why". When asked why not focus on marketing more to the current guest, the typical are found is, "yes that does make sense". However, we do see that there is still the same approach regardless, and we believe we found a good reason overall for this. When realizing, after quite a lot of searching for answer to this problem, we conclude that for the most part, the loyalty from the guest is not as strong as it once used to. The generations also play a part on this, as we do see more of a loyalty from an older generation, however, newer generations are more in tuned to looking for the better value, and certainly not call any specific brand a particular one they like to visit time and time again. They are more adventurous and rely on the information they find based on their research. Of course, although not each individual representing each generation does not apply this exactly. It certainly gives a good perspective that at the end of the day, we do see that price and value are what is being searched for, so even as being loyal to a rewards card, which was once launched as an initiative to develop repeat guest, is not what the end results is actually demonstrating. Whenever we look at a location to visit, we search for who has the best price and amenities to offer, period. This then becomes a price war that certainly is not helping the marketing compete adequately. Each establishment needs to be dynamic and playing the competitive game always, making sure they are positioned to offer what the customer perceives as the best value in t own.
An other issue we encounter is the lack of consistency that we may find in a brand. We see that turnover is large and out of control from time to time. We also see that properties do not practice their appropriate service levels, for which they were placed in the market (for example, a three star trying to be a four star hotel. however, not having the infrastructure nor resources/budgets to execute this properly, or at least once or twice and not consistent, thereby upsetting guests.)
With all of this said, now that we have identified the main issues, we do see that the power of the brand is in fact a key element to start developing the repeat customer. Additionally we have another challenge. How do we maintain a longer, ongoing relationship with a guest, especially with a brand or establishment that may not always have the same employees attending the desk or any other front of house/back of house operations, that perhaps the guests were used to and liked on their typical stays?
The key is in the standards and procedures of the established brand, as well as in a focus on how the employee is trained, how competent the employee is, how consistent he is, and that he connects with the guest in a way that ensures that no matter what, the guest will ultimately say to themselves, I will come back because of how I am welcomed and treated here.
Customer retention has been measured by us not only in hospitality focused entities, but in environments such as universities, for instance. Having held 98% retention rate in my courses, this has been accomplished by some simple items that are relationship builders. I will share these, as they have and can work in any customer driven environment. The brand offers the standards; however, the competency of the employee is what will make this happen eventually. And as they say, it all starts from the top, which is a true factor in this formula for success. Executive teams must already go long term with the goals of realizing that focusing on the already sold customers, and keeping them for the long term, perhaps may be the missing key to the big picture efforts of both attracting new customers and retaining existing ones. You see, existing customers speak well and are loyal to the brand. They participate in promotion of the brand, perhaps on the Internet, with commercials, that are genuine in their message. That said, to invest in ensuring we take care of the repeat customer, retaining them consistantly and using the leverage just mentioned will be a key factor that you will realize, is a good return on investment.