The relationship marketing

The relationship marketing Introduction Relationship marketing has become a widely applied and recognised way in which the hotel industry has been able to sell itself to guests. Prior to the start of the essay, the definition of relationship marketing must be addressed. Kotler et al. (2007) defines relationship marketing as the process in which the construction, cultivation and strengthening of strong value laden relationships with customers and other stakeholders occur. Another way relationship marketing can be defined is as with Dwyer et al. (1987, p. 12) both business marketing and consumer marketing benefit from attention to conditions that foster relational bonds leading to reliable repeat purchase. With this in mind, the idea that relationship marketing is a marketing strategy used in the context of the hotel industry for increased benefits both financial and otherwise via repeated purchases will be applied to within the scope of this essay. Recent shifts from the traditional side of transactional marketing to the inception of relationship marketing in recent times has seen a softer approach rather than a dominant approach to making sales transactions, and thus increases the relevance of the application of relationship marketing to the hotel industry. (Gummesson, 1999) While there are many perceptions as well as views to the notion of relationship marketing, this essay intends to focus on the advantages as well as the drawbacks of relationship marketing within the hotel industry, recommendations as well as propositions with regards its future directions will too be discussed with relevance to the question. Pros of Relationship Marketing Customer Loyalty A significant benefit that can be derived from successful relationship marketing (RM) in a business is the development of loyalty in customers. Hennig-Thurau, Gwinner Gremler (2002) mentioned that customer loyalty and positive word-of-mouth recommendations are usually the two outcomes of effective RM. Furthermore, it is further emphasised by Reynold Beatty (1999) that RM can provide exclusive benefits for customers, consequently reducing competition from other businesses that offer the same product which can thus assist in the achievement of consumer loyalty. Oliver (1997) defines loyalty as a close bonding between the consumer and the seller which results in frequent purchase of a certain product or service from the same supplier, despite the influence from other competitors which has the potential to evoke switching behaviour in consumers. The concept of customer loyalty has long been regarded as an important aspect of the integral operations occurring in organisations nowadays, as companies are becoming increasingly aware of the rewards to be reaped in the form of superior financial performance in the long run. This is further supported by Dowling Uncles (1997) purporting that loyal customers are more likely to spend additionally and often make favourable recommendations to other potential customers. In addition, McMullan Gilmore (2008) noted that greater knowledge and understanding of customer loyalty may allow companies to align their management strategies to meet the different needs of its customers in a more effective manner and hence, resulting in a more profitable business. Therefore, many hotels in todays world have implemented their own customer relationship management (CRM) system in order to offer their customers a unique and satisfying experience by accurately identifying the various needs of customers. Lo, Stalcup Lee (2010) stated that the concept of CRM has evolved over the past decades into a strategy employed by many organisations to integrate the different aspects present in the company, so that a greater understanding of their customers can be attained and ultimately, resulting in a long-term profitable relationship between the customers and themselves. However, it is crucial for hotels not to overlook other areas that are closely related to the concept of customer loyalty, instead of just merely focusing on the establishment of an effective CRM system. Customer loyalty is often linked to other service management concepts such as customer satisfaction and customer centricity. Businesses including the hotel industry should be mindful and take into consideration these other concepts that might affect the development of customer loyalty the ultimate aim of successful RM. It is also critical for hotels to recognise the obstacles impeding them from instilling loyalty in customers. One of the more noteworthy obstacles includes unresolved areas of dissatisfaction in consumers which, if left unattended, can result in dropping sales and profitability (McMullan Gilmore 2008). Therefore, a two-way communication becomes all the more essential for businesses to understand what customers want and knowing how to deal with dissatisfaction Lastly, managers should always assess the pros and cons of a loyalty program before implementing them, so that resources get measured and managed. Focus on Customer Retention Another advantage derived from relationship marketing is the increased profitability that stems from the retention as opposed to capturing new customers. Firstly, customer retention can be defined as the ability of a firms offer for a customer to purchase or patronage its product over a specific time period. (Shajahan, S, 2004. p.109) This occurs when, in the context of this essay, a hotel adopts a customer management orientation where it seeks to apply RM to retain its customers. Customer retention reduces marketing costs and as such benefits the hotel financially. This means that hotels need to spend potentially less money to attract customers they have lost as a result of the defection of its existing ones. This was exemplified in a study showing increase in profit by 25% to 125% in a company when it retained 5% more of its customers. (Reichheld, F Sasser, WE, 1990) This can be done by the hotel developing a customer retention strategy and thus focussing its energies on particular customers in which they would like to retain. This is as not all customers are worth the additional effort as well as cost to retain, certain customers are with more important with regards to their perceived value to the company as well as potential for development in the future (Buttle F, 2009). In the context of a hotel for example, a hotel might want to centre its attention on the higher spending, more affluent members of its clientele, as they represent more profits for the c ompany as compared to the ordinary spending customer that patronises the hotel. With these measures and understanding of customer retention in place, hotels can reap increased profits as an advantage of relationship marketing. Word-of-mouth (WOM) Advertising As mentioned earlier in this paper, one of the desired outcomes of successful RM is the positive word-of-mouth recommendations by satisfied customers. WOM has been regarded as a powerful tool of communication which can influence consumers purchasing behaviour and judgements (John 1994). Sweeney, Soutar Mazzarol (2008) further elaborated that WOM behaviour plays an influential role in promotion and it is very important especially in businesses that provide services such as hotels. Zeithaml (1981) reinstated that WOM creates significant impacts in service organisations because the intangibility of service made it impossible for consumers to pre-trial the product before purchasing it. Hence, it is paramount that hotel operators are aware that WOM behaviour can affect them to a large extent. Though significant repercussions may prove to be an issue if negative words about the company were to spread around, operators of hotels should be forewarned of the positives that WOM marketing can provide for them. For instance, WOM can reduce geographical boundaries that used to exist in traditional marketing, especially true with the increased affluence of internet in our modern society today. This is supported by Trusov, Bucklin Pauwels (2009) stating that the use of Internet can provide many various platforms and avenues for users to share their views and opinions with one another. In addition, it also serves as an advertising channel which can lower costs and ensure that consumers receive the message in the shortest possible time. Costs Savings for Businesses As most organisations face difficulties in nurturing and maintaining long-term relationships with their customers (1999), the advancement of information technology (IT) has significantly improved efficiency and decreased the costs associated with RM. For customers, RM through the use of IT will ensure a better understanding and better fit for marketing efforts (Xu, Yen, Lin Chou 2002). For hotels, RM through the use of IT means moving from general market segmentation to a more definitive segmentation while enhancing the level of intimacy between the hotel and her guests (Gummesson 1994). Barlow (1992) concurs that generally, guests desires to be communicated with on a one-on-one basis. Based on past data collected through the use of information systems and property management systems, hotels are able to utilise sequential data in RM (Grà ¶nroos 1995). Berry (1995) perceives that the use of IT in customer RM will facilitate information exchange, allow possible tracking of buying patterns, and the personalisation of service experience. This translates into cost-savings for the hotel for their marketing efforts. Understanding the Market Relationship marketing can be taken advantage to narrow the demand gap for accommodation rooms caused by seasonality of tourism demand. As mentioned by Butler (2001), seasonality in tourism exacerbates problems relating to capital access, retention of skilled labour and the under-utilisation of resources such as hotel rooms. Generally, the two main causes of seasonality in tourism has been identified as natural causes and institutionalised causes (Hartmann 1986). Weather conditions can often lead to the seasonality of demand in tourism (Kozak Rimmington 2000). As such, the ski industry has a large turnover rate of employees and often, ski resorts are vacant during the summer (Ismert Petrick 2004). Based on the geographical environment that it is in, hotels can actually sell nature tourism to potential guests during the off peak seasons. By having leisure activities at the destination, it creates a compelling justification for travellers to stay over. This form of marketing would be best communicated via the use of relationship marketing as hotels will have a better understand of guests preferences. Similarly, hotels can utilise existing guest records to target those that do not have work obligations for instance, and those that they deem as potential guests. During the low-peak seasons, hotels can make use of that as a selling advantage. A different group of guests may be attracted as a result of marketing the hotel to be quiet and peaceful. For example, by creating special packages that addresses accessibility issues, and includes a wide variety of leisure options and accommodation standards for the elderly, the hotel is able to tap on the retired greying population and boost room occupancy rates even during these periods. Cons of Relationship Marketing Importance of Recognising Cultural Differences One of the disadvantages of RM, and especially so for global hotel businesses, is that cultural differences are not being recognized when a single approach is being implemented for different societies. Culture must be first defined in this essay as an integrated system of learned behaviour patterns that are distinguishing characteristics of the members of any given society (Czinkota, MR Ronkainen, IA, 2007 p.54) This would mean that different cultures adopt different mindsets on various issues, attitudes and feelings. In the context of this essay this means various cultures respond differently with respect to RM in hotels. For example, Chinese tourists attach great significance to ritualistic behaviour such as a smile, greeting or a hand-shake as part of a service orientated experience which represents respect and importance of the guests. In the UK, however, ritual greetings by hotel employees are rare; furthermore interactions with guests from Chinese cultures are inclined to be h indered by language barriers. (Wang,Y. Vela,MR. Tyler, K.2008) This means that tourists from a Chinese culture would be affected in ways that guests from for example, a western culture would not be. Hotels therefore are faced with the constant challenge of providing a positive service experience for a variety of visitors with different expectations and needs. It is also noted that RM in the Chinese cultural setting is approached in a different manner than how it is done in western cultures. In the former, it is custom to establish kuan-hsi (networking/relationship) first followed by the business dealing. However in western cultures, a closer relationship is fostered only after the business dealing, with the view of acquiring further business opportunities. (Gilbert, DTsao, J,2000) In the hotels context this would mean that international hotel chains such as Starwood would have to deal with local suppliers or partners in different ways with regards to business dealings. A deal in China would not be approached in the same way as a deal in New York, lest offending or putting off potential suppliers. Hence the challenges faced by global hotel brands in RM with regards to different cultures. Involvement of High Costs for Training and Software Because of the different approaches to RM and a need to recognise these different cultural elements, hotel employees are required to undergo a stringent training process. As Zelkowitz (2005) advocates, the high costs related to relationship marketing generally spawns from the recruitment and training of staff. Thus, it contributes to the additional costs of the hotel. Furthermore, managing relationships have now been rarely limited to just the customer and the business, but also relationships with other stakeholders such as agencies and other suppliers which have different levels of integration and ways of operating. As a result of these complexities identified, many hotels are utilising integrated RM software to simplify their business operations process and effectively manage these multiple relationships. As such, this technology acquisition contributes to ongoing operating costs for the hotel and can be viewed as a form of maintenance (Little Marandi 2003). Counter Productivity of Relationship Marketing While trying to meet the needs of existing loyal guests, RM may have an adverse impact on customer loyalty. Sending unsolicited promotional materials such as mass customised emails to guests may risk jeopardising the relationship the hotel has with the guest (Brown Muchira 2004; Prasad, Ramamurthy Naidu 2001). At the same time, RM can result in guests being bombarded with promotional messages from various hotels that they have previously lived in. Bowie and Buttle (2004) believe that customer loyalty can only be dedicated to a small number of brands. Thus, overloading of information via marketing might be counterproductive and will eventually result in less benefits for both the hotel and the customers (Jayachandran, Sharma, Kaufman Raman 2005). Although RM might be able to anticipate guests needs and wants by accessing sequential records in the information system, it is important to remember that individual guests may not always desire for the same product and service even when b eing at the same property (Bowie Buttle 2004). Negligence of Existing Customers RM can be detrimental to any business if used in an improper manner. For instance, certain hotels may tend to use RM or tailor their strategies toward acquiring new markets whilst at the same time, lesser emphasis is placed on managing existing guest relationships. As previously established, the cost of attaining a new customer is five to six times more than retaining a loyal guest (Ndubisi, Malhotra Wah 2009), meaning some hotels suffer from the leaky bucket syndrome as they seem more interested in attracting new customers rather than retaining existing ones (Dowling Uncles 1997; Gummesson 1994). Limitations and Recommendations It has been widely accepted that the main objectives of relationship marketing and management is to establish long lasting relationships between the hotel and its guests through the increase in consumer knowledge and also establishing a two way relationship which is mutual and beneficial for both parties (Llamas-Alonso, Jimenez-Zarco, Martinez-Ruiz Dawson, 2009). The aforementioned points suggest that sound relationship management can lead to several benefits that increase the value of the hotel, provide competitive advantages, and enhance its competitive market positioning, which is then translated to the improvement in the hotels financial performance (Ryals, 2005; Boulding, Staelin, Ehret, Johnston, 2005). However, evidence also points out that effective relationship marketing requires heavy investment in information and communication technologies (ICTs) and also much effort in order to maintain these long-term relationships (Little Marandi 2003). Henceforth, this section aims t o explore existing limitations pertinent in the implementation of a relationship marketing strategy in hotels and subsequently, propose recommendations to address some of these issues identified. A plethora of research have been done in the area of CRM and they all seem to concur that the CRM framework no longer refers to just relationships between the business and the consumer, but also other organisations and parties interconnected within the framework, one where Gummesson (2004) has termed as a complex network of relationships. Several authors continue to expound on this, stating that these relationships frequently involve different mechanisms of governance, instruments of authority and control, levels of integration, and purposes which thus contributes to this complexity (Achrol Kotler, 1999; Rindfleisch Moorman, 2001), making CRM difficult to implement successfully. According to the Gartner Group ( 2002) and authors Srinivasan Moorman (2005), this complexity also mean certain aspects have not been addressed and thus constitutes to one of the reasons why a high percentage of CRM projects have failed and not liven up to the expectations of it. Hence, it is now understoo d that while these challenges are difficult to address, overcoming the complexity is integral for relationship marketing strategies to be successful within any hotel business. The multidimensional nature of relationship marketing entails proper foundations be established by the hotel management before the implementation of any CRM strategies. It is therefore recommended that the strategic objectives to be achieved by implementing CRM be defined clearly in the early in the planning stages. This ensures that it is clearly aligned to the overall hotel objectives and will thus be able to contribute strongly to hotel operations. As managing multiple relationships become more complex, it is also recommended that a performance management tool specifically catered toward CRM should be established in order to evaluate the success of the CRM strategy. This proposal builds upon the works of Sin, Tse Yim (2005), which proposes a potential tool for measuring performances in relationship marketing, defining the concept as a multidimensional construct consisting of four broad areas strategy, people, technology and processes. Therefore, this approach of recognising other dimensions will enable the hotel to take on a more holistic approach toward relationship marketing and CRM. Furthermore, with technology being increasingly relied on in managing these relationships, these evaluative tools will be able to measure the success of these information systems to ensure it delivers its intended outcomes. As mentioned earlier in this paper, relationship marketing not only refer to creating strong and long-lasting relationships with hotel guests, but also extends to other stakeholders such as suppliers and potential and existing employees (Christopher, Payne Ballatyne, 1991). Employees play a decisive role in managing relationships with guests since they become partners and co-producers in the customer experience (Llamas-Alonso et al., 2009). While most CRM strategies have tended to focus on guest satisfaction, guest loyalty and other areas relation to customer attitudes toward the hotel brand, it is then recommended that equal emphasis be placed on managing employee relationships and suppliers alike in order to increase the probability of successfully delivering the intended outcomes of the overall relationship marketing strategy. Benefits of Recommendations The development of measurement systems will allow hotel managers to anticipate how CRM will work and determine the way CRM will influence the achievement of the hotels strategic objectives. By designing and implementing a balanced, complex, and multi-dimensional measurement system, hotels will then be able to anticipate the future ability of CRM to achieve its objectives through a predictive performance measurement system or establish the level of real success achieved by CRM through an evaluative performance measurement system (Llamas-Alonso et al., 2009). Additionally, the implementation of evaluative measures in hotels will be able to provide important information to key decision-makers, allowing them to determine whether their efforts are on track with the overall relationship marketing strategy. Also, it will help managers to understand whether their programs are succeeding or failing by signalling potential managerial problems when the performance indicators are not able to track in the desired function (Llamas-Alonso et al., 2009). Above all, these measures will encourage hotel managers to take initiative and be accountable, at the same time, clarifying the process for the expectations and requirements of policy makers. The implementation of Performance Management and Control Systems (PMCS) with a predictive orientation will essentially help to minimise the risks of decision making and pave the way for hotel strategies to be executed, consequently improving the return on investments associated with the implementation of relationship marketing programs (Argyres, 1999). Furthermore, as Llamas-Alonso et al. (2009) purports, comparing the predictive and achieved objectives in the hotel will be able to establish the divergences between the expected results and the achieved results, thus improving efficiency and efficacy of the relationship marketing strategy as well. Conclusion After a thorough analysis of the relationship marketing concept within the of hotel industry, it is evident that relationship marketing if utilised appropriately, can lead to significant potential benefits for the hotel business. Such benefits include positive word of mouth recommendations to future customers as a direct result of customer loyalty, greater cost savings for business, increasing occupancy rate during off-seasons and also, customer retention all of which translates into higher profits and improving the overall functionality of the hotel. Despite the benefits gained, relationship marketing can also present several drawbacks to hotel operators. In todays world, globalisation has allowed the interactions between people of different ethnicity and cultural practice to take place more frequently. This means that understanding different cultures and learning to deal with different people becomes all the more relevant and could potentially sap large amount of time and effort. In addition to this, the costs required to establish a CRM system and training employees to be proficient in it can be exorbitant. It should be noted however, that these are investments that need to be made in order for relationship marketing to be implemented successfully and thus entail proper planning and objectives setting. Furthermore, the multidimensional nature of relationship marketing means hotels face much complexity. Hence, it is imperative that performance measures with an evaluative focus should be utilised in order to ensure the success of a relationship marketing strategy. It was also noted in this paper that relationships with suppliers and especially employees need to be managed as well, since the latter contribute to delivering the overall guest satisfaction. The adoption of a relationship marketing approach involves a great challenge for the firm, since it means a different way of understanding the marketing strategy, the market and the approach to the guest. Above all, hotel businesses need to be able to communicate this strategy to its staff, and ensure that the relationship marketing strategy is fully embraced and the organisation fully aligned to it in order for the business to face the multitude of challenges for the future. List of References Achrol, R. S. Kotler, P. 1999, Marketing in the network economy [special issue], Journal of Marketing, vol. 63, pp. 146-163. Argyres, N. S. 1999, The impact of information technology on coordination: Evidence from the b-stealth bomber, Organisation Science, vol. 10, no. 2, pp. 162. 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