Leveraging Service Recovery to Increase Revenue & Reputation
By Ford Blakely Founder & CEO, Zingle | March 08, 2020
Everyone knows mishaps are inevitable in the hospitality industry. No matter how much you plan and prepare, at the end of the day, mistakes can and will happen. But these mistakes don't have to be fatal. In fact, the strategies you put in place to respond to service missteps can prove to be some of your strongest tools to win customers and drive revenue.
However, implementing even the best strategy is impossible to execute when you don't know where problems lie in the first place. A recent consumer research study revealed that only 1-in-4 hotel guests say they'll report any issue that impacts their overall guest experience. That's right -- 75% of guests will not report all the issues that impact their stay.
This is worrisome news for hotel operators. Despite their best efforts to delight guests, they're often left in the dark when things go awry -- robbing them of the opportunity to resolve an issue or even acknowledge one occurred -- until it makes its way online for the world to see. And as new guests check-in, these unreported issues pile up and become exacerbated, leaving you in a place where your revenue and reputation have only one way to go… down.
This is where the power of service recovery as an effective strategy can enhance both your reputation and bottom line.
Building Stronger Customer Bonds
With the latter half of this decade bringing a hotel development boom, competition is as fierce as it's ever been. And in an age where customer expectations around things like personalization are continuously rising, the inability to address service issues will only boost your competitor's business. In fact, research shows that hotel guests are willing to pay significantly more to stay with a hotel nearby that provides better service.
When it comes to winning customers and driving loyalty, the need to tap into emotions and feelings is critical. And this is something that service recovery is adept at. The Service Recovery Paradox suggests that when a customer experiences a service failure and has their issue quickly resolved by a staff member, they're more likely to be loyal to that brand than they would have been if there was never an issue in the first place.
Naturally, your primary goal is to surpass customer expectations and delight customers from the moment they check-in all the way through to when they check out. But when the inevitable mistakes happen, opportunities arise as well. In fact, 42% of U.S. consumers say they would return to stay at a hotel if it turned a poor experience into a positive one. Furthermore, 35% of hotel guests admit to feeling more emotionally connected to a brand when it solves a customer service problem. But why is this?
Few things are more important to consumers today than personalization. It's why companies like Netflix and Amazon have been able to build insurmountable competitive advantages around things like intelligent recommendations, and it's also why some of today's alternative accommodation providers continue to syphon market share from traditional hospitality brands with their experience-driven offerings.
Even if data shows that guests are communicating their experiences less, the expectations for personalization are increasing. But there's good news: Few things convey a personal touch more than the acknowledgement of an individual's problem and the ability to address it in a way that meets the unique needs of the person facing it.
Driving an Increase in Reputation & Revenue
At the end of the day, as an organization, nothing surpases your goal to increase profits. And while there are a myriad of strategies to reach this goal, boosting your bottom line is impossible with a lackluster reputation.
When people have memorable experiences with brands, they take to the internet to share them with their friends, family, and well, the world. And make no mistake, the importance of online reviews cannot be overstated. According to past Harvard studies every one star increase in a Yelp rating equates to a 5% to 9% increase in revenue. Even further, the previously mentioned consumer study found 96% of U.S. consumers say online reviews impact their decisions to do business with a company, with more than half admitting they're "greatly" influenced by these reviews.
And let's face it, we know bad news spreads far more quickly than the good. According to research from ReviewTrackers, consumers are 21% more likely to leave a review after a bad experience than a good one. A good service recovery strategy spots issues as they occur and addresses them in real-time, preventing these potentially destructive reviews from being shared online and harming your reputation permanently.
And with a reputation underpinned by an array of online testimonials that praises your brand for the service you provide, your name isn't the only thing that'll increase. In fact, more than 1-in-3 consumers say that they are willing to pay up to $50 more to stay at a hotel that provides better service than a nearby competitor.
Building an Effective Service Recovery Strategy
The message is clear: Top-quality customer service has penetrated every aspect of businesses' success, and service recovery has a vital role to play. The fundamentals of service recovery are relatively simple, yet it just takes a brief scan of social media to know that a lot of brands struggle. This is where putting together an effective strategy comes into play.
- Getting Employees Onboard the Service Train
Of course, no strategy can be effective if your employees aren't fully trained to execute it. And as is common knowledge, investing in employee training and development is always a smart play. According to the Association for Talent Development (ATD), companies that focus on training enjoy a 24% higher profit margin than those who don't.
However, beyond the tactical level, it's critical for organizations to instill a philosophy of service that isn't uncompromising when it comes to the missteps and mistakes. If a staff member is executing their daily activities only to ensure that service missteps don't occur, when the inevitable does occur, they're likely to find themselves paralized by fear rather than ready to spring into action.
It's important for organizations to train their employees to not only focus on doing whatever they can to prevent problems from taking place, but to be equally adept at problem solving when mishaps do occur. Providing exceptional service takes a nimble mindset, and an ability to take whatever comes your way.
- Opening Lines of Communication
Even with the right philosophy and employee training, there are still barriers that must be overcome when it comes to service recovery. The same study that identified the gap in guests' reporting issues found that the top reasons they aren't reporting them are because there isn't an easy way to do so, or because they don't like confrontation.
To break through to the quiet majority, hotels must be ready to engage consumers on their terms - when, where and how they want. Today, that means through texting. More than 50% of U.S. homes no longer have a landline (U.S. Health Department), 77% of the population owns a smartphone (Pew Research) and texting is now the most common form of communications for Americans under 50 (Gallup). With digital-native millennials surpassing Baby Boomers as the largest generation in the U.S. in 2019, those percentages will surely grow.
If your service recovery strategy does not include a way to establish regular lines of communication with your customers in ways that meet their communication preferences and needs, the chances of identifying issues and righting the ship in realtime are near impossible.
- Encourage and Welcome Feedback
If superior service drives positive reviews, higher rates, and more loyalty, hotels have to know when and where they can improve. If you want to increase guest feedback, both positive and negative, you have to be proactive, and there are two important factors that must be included in the strategy: timeliness and convenience.
With every interaction, whether face-to-face, phone, or text, ask your guests how they're doing and invite them to provide feedback. Even if it's positive, if you've given them a convenient way to identify problems in real-time so they don't have to come to the front desk or make an awkward phone call, you'll be able to fix a problem before it leaves with the guest. And beyond being a reputational hazard, that'll hurt your bottom line.
Think of it this way; if you wait until it's too late, you likely lose that guest forever. Maybe you could win them back with a free vacation, but that could be $1,200 in lost revenue. However, when a problem can be corrected before they leave through encouraging feedback, the hotel saves money and potentially earns another $1,200 if the guest returns on their own, and even more if they tell friends about their great experience.
Rather than look at service recovery as a reactive strategy to stem the bleeding, hotel must shift their mindset to make it a proactive way to drive revenue and manage their reputations. With the proper understanding of the blindspots and challenges that exist and the steps taken to develop and execute a proactive service recovery strategy hotels can open up opportunities that they literally never knew existed.
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