International Resort and Spa Management - Essay Example

The Evaluation of the Relationship between Customer Satisfaction and Customer Loyalty Introduction Table of Contents The Evaluation of the Relationship between Customer Satisfaction and Customer Loyalty 1 Introduction 1 Thesis 3 Findings and Analysis 3 Conclusion 9 Bibliography 12 Marketing theory and practice within the hospitality industry relies heavily on the relationship between customer loyalty and customer satisfaction. This is because the effectiveness of marketing is summarized through these metrics[And04] and so is the profitability of the hospitality firm[Gup06]. It is obvious then that in any organization customers are crucial stakeholders whose satisfaction is the management’s priority. Depending on the lifestyle and income of the customers, they not only expect services, but quality services which then determines their satisfaction[Agb11]. However, as hospitality organizations seek to provide high quality products and services, they have to ensure that they not only minimize their costs, but also maximize their profits. Consequently, Armano [Arm09] reveals that the post-consumption era has seen hospitality organizations change their approach of service provision to include more services beside the format they provide to customers in the form of offers. This approach overrides the consumption era where consumers were only provided with what a company could offer and this limited their choices for recreation or vacation experience. The implication of post-consumption on organization is that their overall improvement in performance depends on the service quality and customer satisfaction. Customer satisfaction is defined by Bae [Bae12] as the attitude defining a consumer’s perception towards their experiences regarding consumption. Customer satisfaction is also the mindset of a customer that results in their behavior or loyalty towards specific commodities. Consequently, customer satisfaction is the major determinant of customer loyalty unlike product or service prices. When built and sustained, customer satisfaction-loyalty relationship results in the generation of shareholder’s wealth through financial performance, and product-marketplace performance, especially where branding involves a combination of internal and external marketing. In order to sustain strong customer satisfaction-loyalty association, organizations must seek to win the current marketplace delivering superior value products compared to competitors[Kot09] such that the targeted customers obtain optimal satisfaction that assists them to differentiate their preferred product within a vast spa and resort. In addition, attaining a competitive advantage requires adhering to customers’ feedback regarding their satisfaction on particular spa and resort services. Thesis This paper seeks to evaluate relationship between customer satisfaction and customer loyalty within a spa and resort settings. The evaluation involves comparing and contrasting existing literature. Findings and Analysis Some marketing researchers define customer satisfaction as customers’ attitude. However, Colbu, et al [Col13] reveal that there is a difference between the two. While customer satisfaction is only evident after consuming a product or a service by a hospitality guest, customer attitude is present even prior to the consumption of the product or service. This implies that hospitality guest do visit hotels or resorts with some expectations that do not mean that they are satisfied. For instance, hotel customers can only be satisfied with hotel booking and check out only after receiving such services. However, prior to their interaction with such hotels and resorts, customers’ attitudes are more of expectations and not satisfaction. According to Pizam & Ellis [Piz99], the knowledge of customer requirements and expectations, and that of the final result after consumption is crucial given that satisfaction is measured as the difference between the two[Hay97]. Hayes [Hay97] reveals that customer expectation also offers an understanding of how customers define service and product quality and this determines their satisfaction/dissatisfaction. Customer dissatisfaction or satisfaction is evident from recurring purchases and word-of-mouth endorsements[Ber961]. In this case, customer satisfaction can be a function of the expectancy-disconfirmation theory developed by Oliver [Oli77], and that obtained very high acceptance among researchers. Due to the model’s nature of comparing cognitive state before an event and after an event has been experienced, Nwankwo [Nwa07] reveals the four main constructs that define the comparison and these are expectations, performance, disconfirmation, and satisfaction. In their study of customer service quality in hospitality enterprises, Pizam & Ellis [Piz99] identified the three main elements of customer satisfaction as being the material product, whether a beverage or food; the attitude and behavior of employees hosting or serving the guest and those that got into contact with the guests; and the environment including the building, its layout, lighting, and furnishing among others. These elements are classified by Lovelock [Lov85] as core and secondary where the core attributes constitutes of beverages and food while the secondary attributes comprise the environment, services, and others. Since customer satisfaction in hospitality enterprises occur after a given time, particularly after service, it is then directly related to the hosting or service employee satisfaction. This relationship indicates that employee satisfaction in the service or hospitality industry is crucial determining customer satisfaction; hence the manner in which organizations treat their employees affects service quality and organization productivity. This is supported by Anderson, et al [And97] who argue that trade-offs between profitability and customer satisfaction are more likely to result from services than goods within the hospitality industry. Besides being the difference between expectations and outputs, customer satisfaction also results from service quality, while influencing customer loyalty. For instance, changes in the expectations with a given meal or beverage can result to changes in needs such as from being hungry to be full; or changes in objectives such as leisure trip vs business trip; or result in new personal experience from another hospitality enterprise. Consequently, hospitality enterprises must seek for customer satisfaction through adherence to reliability, empathy, assurance, responsiveness, tangibles, and responsiveness[Piz99]. Customer loyalty has been identified as being related to customer satisfaction. Research findings indicate that customer loyalty and satisfaction are influenced by differences in competitive settings, and it is these variations that drive hospitality enterprise managers to elevate their ability to convert customer satisfaction into loyalty. According to Wicks & Roethlein [Wic09], consistent satisfaction of hospitality enterprises’ guests results in higher levels of retention and increased profitability due to increased loyalty. It is for this reason that hospitality enterprises, like any other company, seeks to ensure that customer satisfaction translates customers to become loyal to their brands. Good perceptions of a brand by customers indicate that they will always go for it. This is based on the fact that customers always form preferences subject to their attributes and perceptions regarding brands that compete in them [Lar98]. In addition, getting customer loyalty also means creating relationships with customers using data and feedback obtained from research regarding how customers made their purchasing decisions, and how they felt pleased with what the organization offers them in terms of service quality and product quality. Mohajerani & Miremandi [Moh12] define customer loyalty as recurrent purchasing from the same service provider. Such repeated behavior indicates that the customer has a positive attitudinal nature towards that provider, thus only selecting them to satisfy the need. On the other hand organizations must seek to remain committed to their clients through considering their needs and producing exactly that[Kan03]. According to Kandampully & Suhartanto [Kan03], the main evidence of customer loyalty are willingness to pay higher, switching behavior, and positive word-of-mouth. Prior to the attainment of these evidences of customer loyalty, Oliver’s [Oli97] four-stage loyalty model reveals that customers undergo four phases of loyalty that are cognitive, conative, affective, and action, and this confirms why hospitality enterprises must not rely on pricing strategies alone to retain their customers. Non-reliance on pricing strategies indicate that hospitality managers must focus on elevated choice, higher value for the customer’s money, and augmented service levels. The cognitive phase of loyalty involves what the consumer believes about the band based on the information they have regarding brand attributes including prices and other features offered by a hospitality enterprise. At this phase, customers demonstrate the least form of customer loyalty because it is founded on the lowest costs and more benefits from an offer and not the brand[Blu07]. Secondly, affective loyalty refers to a promising attitude towards a given brand given several instances of brand usage resulting in accumulation of satisfaction. Since no final decision is made by the consumer, affective loyalty is subject to deterioration, especially where competitors provide better offerings causing the client to switch to competitor brands. Like affective loyalty, conative loyalty is subject to deterioration upon the experiences of failures causing its reduction. Conversely, conative loyalty accompanied by desire results in the action or the repurchase of services or products and this could end up translating into action loyalty. Action loyalty implies that the customer has made their decision to purchase and no competitive alternatives can change that decision. Throughout the loyalty phases, the two main measurements used are attitudinal and behavioral loyalty[Blu07]. For some customers, loyalty is caused by habit, which means that customers are not ready to switch to other brands because they are either too lazy to engage in brand transfers or the customer is to ready to face the struggle of leaving their brand for another. Behavioral loyalty is present even in instances where the customer is unsatisfied, but this can translate into negative word of mouth, thus deterring potential clients. Conversely, attitudinal loyalty stems from customers’ attitude towards the brand and results I satisfaction that eliminates any substitutes, thus facilitating continued relationship between them and the brand. Attitudinally loyal customers are an advantage to the company since they spread a positive word of mouth to potential customers, thus attracting them. However, some customers combine both attitudinal and behavioral loyalty and fall under what Oliver [Oli77] referred to as ultimate or beyond loyalty. Ultimate loyalty customers are neither affected by external nor internal factors, thus sustain unwavering brand loyalty. The highest priority for hospitality enterprises is customer satisfaction followed by service quality. Customer satisfaction is crucial for service organization’s process for strategic planning must seek to identify the people who will consume its offers, and how much such customers can buy based on how much is getting to them[Agb11]. With the answers to such questions, the management is equipped to offer the best product designs, segment their markets and develop awareness. Although studies indicate not a direct link between customer satisfaction, profitability and customer loyalty, the three share obvious managerial relevance. Additionally, managers and researchers agree that a minor alteration in customer retention and loyalty causes disproportionately huge increase or decrease in profitability[Blu07]. In their research, Seiders et al [Sei05] extended and summarized literature on the link between buyer satisfaction and repurchase decision to include moderation by relational, customer, and market attributes. This defies the traditional belief that company losses are due to under qualified employees. Consequently, employers concentrated on recruitment, hiring, and training new employees. Within the hospitality industry or service industry customer satisfaction and productivity loss amount to very high costs besides the turnover costs because it may take years to reestablish customer relationships or rebrand. Numerous studies support that employee satisfaction and customer satisfaction affect customer loyalty inextricably. Employee satisfaction drives customer loyalty since low turnover rate translates to long-term relationships with customers, thus high customer satisfaction. Additionally, high customer satisfaction is linked to high employees’ retention rates. Through high customer satisfaction and retention rates, hospitality enterprises experience repeat sales, customer loyalty, and positive word-of-mouth[Hes94]. Loyalty on its part affects the business reputation and financial situation, given that satisfied customers urge others to become confident about the brand and create steady revenue today and in the future. Due to their satisfaction experience, loyal customers also use other medium such social media to comment to spread e-word-of-mouth thus increasing the brand’s customer base. Bae [Bae12] also argues that loyal customers assist in reducing the impact of unsatisfied and less satisfied customers by neutralizing negative comments. For most hoteliers, the pursuit of satisfaction for its guests is inevitable given that any changes in satisfaction affect customer loyalty directly. According to Liang [Lia08], customer satisfaction coupled with service quality relates to the likelihood of return and customer loyalty because through determining the elements of a service that are acceptable, and those that need improvement based on guest satisfaction. To demonstrate the attainment of satisfaction within the hospitality industry, the American Customer Satisfaction Index ACSI below demonstrates the relation between six constructs all of which are crucial for hoteliers. Figure 1: The ASCI Model [Moh12] From the diagram it is clear that customers are today more value oriented. According to Heskett, et al [Hes94], value refers to the outcomes obtained relative to the costs incurred in the purchase. Perceived value is linked to customers’ behaviors in the future that could result in repurchase intent or recommendations through the internet or word of mouth. Oliver (1997) asserts that value is therefore, a unique construct arising from both perceived quality and expectation, and is a great contributor towards satisfaction. This means that any changes in the enterprise alter the perceived value that then affects customer satisfaction that then affects customer loyalty. Conclusion On the whole, customer satisfaction and customer loyalty are two major factors that play distinct roles within the hospitality industry. Understanding these terms is crucial for an industry characterized by a very competitive environment where service quantity is vital and information accessibility makes customers more knowledgeable and discerning. Consequently, the pursuit of customer satisfaction is obvious, especially since hoteliers have to not only influence loyalty, but seeks for retention. Based on the analysis of numerous literatures, customer satisfaction and customer loyalty demonstrate a cause-effect relationship. For hospitality enterprises that uphold employee satisfaction, they benefit from customer loyalty because of low employee turnover that translates to high retention rates. The argument in this paper agrees that customer loyalty is not straight forward as consumers must undergo different loyalty phases before getting to the conclusion of making a purchase. This implies that not all customers are the loyalty phases are satisfied with the product as evident in the four-stages of loyalty. Such customers are present in the cognitive, affective, and conative loyalty phases and have not established strong ties with their brands. As a result, there is a likelihood of establishing new relations with substitutes from competitors. Conversely, customers within the action loyalty phase have clearly identified strong ties with their brands and will not turn to substitutes or alternatives at any given time. These phases imply that at any given time, hoteliers and hospitality managers must not be happy because their customers are satisfied. On the contrary, they should seek for ways to transform such satisfaction into customer loyalty. Loyalty from hospitality guests results in the spread of positive word-of-mouth and increased firm profitability. However, since some customers are unsatisfied or less satisfied, but exercise behavioral loyalty, hospitality managers must ensure that their dissatisfaction does not ruin their business. Dissatisfaction can be identified through allowing customers to join loyalty programs and allowing them to choose what program best suits their needs so that they do not just remain with the company for the benefits that they offer and jump to competitors when better offers arise. 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