Changes in the Hotel Industry, Summer Palace's CRM Strategies, Practices, and Loyalty Programs - Case Study Example

Changes in the Hotel Industry Since 1990s, the hotel industry has witnessed a growing complexity in the interactions between customers and employees, driven by rapid technological changes and the emergence of information age. Today’s customers are armed with more information and expect frontline and other hotel staff to be as muck knowledgeable about a firm’s offerings as they are themselves (Kristin, 2001). This can however be difficult in the hotel industry, which is generally characterised by low paid, low skilled personnel and a high degree of behavioral and cultural diversity among employees. Another important aspect of the change that has occurred in the hotel industry relates to the manner in which employees are treated. For effective service delivery and interaction with customers, today’s hotel industry workers expect more freedom and may not tolerate the rigid leadership styles of the past. Instead, workers want to be treated as free agents, be valued for their contributions and compensated fairly. In the modern era, customers are valued as the most important source of competitive advantages necessary for the hotel industry to grow. As such, human resources in the industry have been transformed and equipped with the capabilities necessary to handle new customer interests. One of the most important changes that have occurred in the hotel industry as pertains to market place relates to the manner in which businesses are marketed. Before 1990, hotels relied more on the TV, radio and print advertisement to market their products and services. However, with the advent of the internet, major paradigm shifts in the perception of the role and importance of marketing have occurred. As a result, the internet has become the most important tool and medium for advertising, with many hotels developing their own websites or using social media to reach potential customers (Jeffrey, 2002). Because of the stiff competition in the industry, hotels are finding it difficult to continue relying on the traditional methods of marketing to attract customers. It is for this reason that hotels have resorted to the new technologies as a safe avenue for increasing market presence. Hotels have also diversified the range and variety of their products and services. Generally, the modern hotel industry is characterized by strategic partnerships and collaborations in the areas of catering, hospitality and tourism. This has increased the market presence of hotel and the growing globalization of the industry (Barton, 2008). Impact on CRM While most of the changes that have occurred in the hotel industry impact differently on different hotel companies, their impacts are always related to an individual company’s customer relationship management strategies. As such, some of the factors that contribute to CRM failure or success can apply to most organizations and can be viewed more universally. Undeniably, most of the changes which have occurred in the hotel and tourism industry have had profound effects on Summer Palace’ CRM’s strategies and practices. In a way, these changes have forced the Summer Palace hotels to enhance business cohesion and understanding among stakeholders (chiefly customers and employees) so as to make CRM implementation a success (Lakshman, 2008). Without a clear CRM strategy and understanding of the business model and business practices, it can be difficult for the company to implement a successful CRM strategy. As a result of the changes taking place in the industry, Summer Palace has responded to the demands being imposed on it by utilizing appropriate information technology applications with the objective of improving value to customers and addressing certain business problems. The changes occurring in the hotel industry have also forced the Summer Palace hotel to plan and project its management requirements to avoid staff embarrassments and high turnover rates. In the company, employees have been forced to adopt and believe in the company’s customer relationship management strategy and supporting programs. Summer Palace has actually been compelled to educate its employees in order for them to buy in into the CRM implementation, adoption and utilization. Unless there is continuous training of employees, user adoption can be a major challenge facing the company and hence customer service experience may be based on incomplete or erroneous information. The changes have also forced the company to develop appropriate hardware, software and network capabilities (Lakshman, 2008). Unreliable capabilities are likely to challenge system integrity and can often impose risks which may kill the company’s ability to offer the best customer service experience. Companies in the hotel industry have realized that one of the most important benefits of CRM is that it enables executives to gain visibility and a clear understanding of the company’s business practices. They also get a clear look at their company’s customer relationship practices. These basic objectives are some of the main benefits that Summer Palace stands to gain by implementing innovative and customer oriented CRM strategies and practices. It is the case that the traditional marketing strategies focused on the 4Ps (price, place, product and promotion) of marketing to gain increased market share (Lakshman, 2008). However, the changes taking place in the hotel industry indicate that the traditional 4Ps of marketing are not enough to define an organization’s marketing success. For summer palace, the primary objective of customer relationship management is to increase customer satisfaction, profitability and revenue and also to maintain the company’s reputation. To achieve this objective, Summer Palace has found it necessary to implement organization-wide review of tools, technologies, resources and procedures so as to promote efficient and effective customer care. As such, customer relationship management has become a tool for setting strategic objectives and not just a technical issue. The changes have also impacted on the company’s customer relationship management practices by influencing the managements’ understanding of customer preferences and interests. The company’s CRM process is critical in helping the company identify customer needs and offer products and services which meet those needs. According to Alexander et al. (2003), understanding customer needs is an important consideration in implementation of CRM strategies. Without this understanding, it can be difficult for companies to develop adequate knowledge about changes in customer preferences. Generally, Summer Palace has grown tremendously in the past few decades because of its responsiveness to changes in customer expectations. Empowerment of employees to proactively face emerging issues is another important aspect in which changes in the hotel industry have impacted on Summer Palace’s CRM strategies and practices. Basically, empowerment of employees refers to the processes and strategies that organizations adopt to recognize reward and motivate employees. Employees are the most important resources in an organization and they make important contribution to customer satisfaction by doing whatever is possible to address customer needs and solve their problems (Lakshman, 2008). By implementing modern CRM, Summer Palace has managed to empower and foster loyalty among employees, which in turn enables the company to develop strong loyalty from customers. Summer Palace has also found it necessary to create strategic partnerships with stakeholders in the industry. These partnerships have helped the company to work closely with customers and suppliers and to add certain desired services to the usual services. Essentially, partnerships are an important strategic business step in the hotel industry as it results in the development of durable and close relationships between various stakeholders. The changes have also made it easy for the company to personalize its services. Through personalization the company is capable of assigning single sales agent to each customer and is necessary for effective service delivery. Loyalty Programs Customer loyalty refers to the tendency of customers to choose products and services that satisfy their needs and wants. Because of the availability of a wide range of competing brands, customers have the liberty to choose whichever products or services they believe delivers well. It is for this reason that businesses have to develop loyalty programs to fend of competitors. In the hotel industry, competition is the greatest threat to business survival and growth in the long run. Just like in many other industries, customers in the hotel industry are not obligated to stick to one brand of services for the rest of their purchasing lives. If they feel that a particular brand is no longer delivering well, they can switch to a competing brand. When this is the case, the former brand loses a customer (Kristin, 2001). Therefore, it is imperative for the Summer Inn to develop and implement appropriate loyalty programs. Development of loyalty programs involves building and sustaining strong relationships with customers, which in turn lead to repeated purchases of a product or service over a given period of time. In the hotel industry, a loyal customer base allows companies to devote their energies to more pressing business matters. There are different ways in which customers can demonstrate their loyalty: they can choose to stay in the company; they can increase the quantity of purchases made or they can do both. For the purpose of an organization’s long term objectives, customer loyalty is generally considered as the final result and key element of effective customer relationship management. For Summer Inn, a well conceived and implemented loyalty program can play a crucial role in enabling the company to acquire new customers. Growing a business means developing new ways to reach out to more potential customers in a way that distinguishes the business from others. A loyalty program can also help the business attract and recognize new customers and apply the right strategies to make the customers make repeat visits time and again (Kristin, 2001). The program is also critical in implementing customer recognition. One of the major benefits that summer in will gain as a result of developing loyalty programs is that at the point of sale, its staff will be able to identify customers more readily, for instance by scanning their cards. In this case, the staff can address the customers by names or view customer profiles in terms of sales history and frequency of visits. This can provide further information to the staff and assist them in providing personalized services to customers such as the opportunity to sell or cross sell related products. In addition to helping keep competition at bay, loyalty programs also help companies increase profitability. Hence, it is crucial for Summer Inn to develop such a program as it can help keep its business focused on attaining strategic business objectives (Kristin, 2001). Such a program may include among other things members only sales, discounted products, reward points and other services that provide a company with the edge necessary to distinguish a business from the competition. In the hotel industry, loyalty programs that base customer rewards on cumulative purchasing and frequency of visits are an explicit attempt to enhance customer retention. Such programs not only encourage repeat visits and buying but also improve customer retention rates by providing necessary incentives for customers to purchase in higher volumes and more often. In order for Summer Inn’s loyalty programs to have the desired impact on customer behaviors, the programs should be imbibed with structures that motivate customers to view purchases as a sequence of related decisions rather than as a single, independent transaction. This means the structure must give customers the incentive to adopt dynamic perspectives of their relationships with the company. Jill (2002) has suggested that the main factors to be considered in evaluating the efficacy of loyalty programs are the relative value of awards and the likelihood of achieving rewards. Moreover, the likelihoods of achieving rewards in the hotel industry are a function of time constraints and cumulative buying thresholds. These elements combine with individual level requirements to determine customer’s expected benefits of participating in loyalty programs. According to Rigby and Dianne (2004), loyalty programs represent just but one possible technique for increasing customer loyalty and retention. In reality, customer loyalty may be increased through various means such short term discounts and reduced shipping charges. In view of this consideration, it is important to develop capabilities that can simultaneously increase the influence of current and dynamic factors on long term customer behaviours. In general, it will be more beneficial for Summer Inn to develop capabilities for promoting customer loyalty in its business. Such programs will be beneficial to the company’s long tem business growth and profitability. References Alexander, H et al. 2003, Collaborative Customer Relationship Management: Taking CRM to the Next Level, Germany, Springer. Barton, J 2008, CRM in Real Time: Empowering Customer Relationships, New York, Information Today, Inc. Jeffrey, P 2002, CRM: Redefining Customer Relationship Management, New York, Digital Press. Jill, D 2002, The Crm Handbook: A business Guide to customer Relationship Management, New York, Addison-Wesley Professional. Kristin, A 2001, Customer Relationship Management, Wisconsin, McGraw-Hill Professional. Kristin, A 2001, Customer Relationship Management, Wisconsin, McGraw-Hill Professional. Lakshman, J 2008, Customer Relationship Management: A Strategic Approach, New Delhi, Global India Publications. Rigby, K., and Dianne L. 2004, “CRM Done Right.” Harvard Business Review November 2004. Read More