Optimizing the customer experience. an opportunity for the hotel and hospitality sector
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More effective management of the customer experience is an opportunity area for operators in the hotel and hospitality sector to do more to differentiate their business through the customer ...

More effective management of the customer experience is an opportunity area for operators in the hotel and hospitality sector to do more to differentiate their business through the customer experience. It has the potential to help customer retention, create better internal alignment of actions, identify cost savings, and drive incremental revenue growth. The practical first step towards achieving these goals is Customer Journey Mapping.

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Optimizing the customer experience. an opportunity for the hotel and hospitality sector Document Transcript

  • 1. !London New York Toronto www.mulberryconsulting.com!! 1 of 6Optimizing the Customer Experience. AnOpportunity for the Hotel and HospitalitySectorA Mulberry Consulting White PaperDavid Hicks and Markus MuellerJune 2012www.mulberryconsulting.com
  • 2. !!!MC White Paper Page 2!of!6Executive SummaryMore effective management of the customer experience is already an opportunity area for operatorsin the hotel and hospitality sector to do more to differentiate their business through the customerexperience. Some are already doing this. It has the potential to help customer retention, create betterinternal alignment of actions, identify cost savings, and drive incremental revenue growth. Thepractical first step towards achieving these goals is Customer Journey MappingIntroductionRecessionary times are a sharp reminder for hotels to build loyal customer relationships with theirguests. But a common response among hotels was to implement extensive operating cost reductionprograms, without an understanding of the effect this would have on the customer experience andtherefore on customer loyalty. This raises the question what is the right filter to determine what hotelsshould purposefully stop/start doing or do differently to optimise the customer journey, and maintainloyalty.While competition has been higher than ever in the hotel sector, the proliferation of brands andbranded hotels worldwide has led to a perceived commoditization of the hotel product. The sea ofsameness is obvious and is supported by the fact that more and more individual design and boutiquehotels are opening, each trying to be different. Big hotel chains are re-launching brands or creating lifestyle segments for themselves, developing new service programs to appeal to the next generation ofcustomers and trying to differentiate themselves from a commoditized hotel experience. A commonfactor both limiting companies’ ability to respond and to deliver a consistent brand experience acrossthe estate and regions is the fact all hotels have a cyclical lifetime where physical condition anddesign do not help to deliver a consistent customer experience.A number of hotel brands have recognised this and started to develop distinct brand values andglobal communication strategies to start to differentiate their brand message but the truth from acustomer perspective is that, other than perhaps the advertising, the actual ‘in-hotel’ experience hasnot changed that much (indeed advertising often increases service expectations that are then under-delivered). Nor has the customer journey become more consistent across each property in thebranded estate. In general it appears the bigger the brand the more potential there is forinconsistency within the individual hotels due to the physical condition hotel life cycle and theoperational challenge of delivering a consistent service experience delivery.Whatever strategy a hotel brand might adopt to differentiate itself and deliver a consistent brandedguest experience, we find three operational components which are absolutely essential to buildcustomer trust:• a coherent brand filter and positioning• organisational alignment of all operational programs to minimize friction and enhance servicedelivery• a superior execution of customer experience, delivered consistently across all channels andtouch pointsWhat’s needed is not one or two of these in isolation – the bad news is, it’s all three together.Anything less will not differentiate or create value over time and if developed in isolation increasesdissonance and is likely to end up driving higher costs. .In the hotel industry, where there are inevitably large differences within the same hotel brands ( due toproperty age, physical condition, design, legacy staff and culture), a purposefully designed customerexperience persistently and consistently delivered remains one of the few, cost effective sources ofcompetitive advantage and differentiation.
  • 3. !!!MC White Paper Page 3!of!6Industry ChallengesIn addition, a number of industry-wide business challenges also face hotel companies seeking to builda consistent branded guest experience across their estate and differentiate the customer experiencethey deliver:Ownership alignment: It is a common business strategy for hotel management companies tofranchise or manage hotels and not own the asset. This strategy provides many benefits, allowingcompanies to grow much faster and focusing on the things they can do best. However it also presentschallenges in regards to delivering a consistent branded guest experience across a branded estate.Owners often do not provide extra funding for brand standards or hire new staff without a tangiblereturn of investment. They obviously make decisions in the best interest of their asset return and arehappy to make compromises with the overall brand promise or experience. Hotel managementcompanies therefore have to be prepared to spend time and money in extensive training programs topurposefully create and then persistently and consistently implement a group culture, andexperiences.Financial Viability: Global hotel brands face the challenge of creating a consistent global hotelexperience while also dealing with different regional land and development costs as well as varyingoperating costs (including employee and energy costs), a consistent experience will cost more/less indifferent markets.Distribution versus consistent quality growth: Securing key locations is a major consideration forbrand owners. Just how many brand compromises is a hotel company then willing to make in order toget coverage in key locations? This critically depends on the company brand / experience strategy butcan lead to a vast difference in brand delivery across regions and countries.Cyclical Lifetime of a hotel: The nature of a hotel business is that the physical condition of theasset, the design and furniture are getting older or outdated over time. Hotel companies have to beable to decide where to draw the line when a hotel falls below brand expectations but which might notreflect its financial life cycle – whilst depreciation and contribution figure large in financial statements,brand value is not reflected in the same way. Often these experience “hurdles” and quality controlsare inconsistent or are not in place. A lobby of a hotel could be outdated in terms of the brand deliverybut in perfect physical condition. The question arises how do you “measure” the outdated physicalenvironment? Consumers today buy a new TV every 4-5 years. In a hotel a TV has to last 10 yearsfrom a financial perspective. The answer isn’t only to rely on customer feedback scores which on theirown can be deceiving; an end-to-end view is neededCustomer Expectations: While a hotel from a specific hotel brand might be completely below brandexpectations for their global customer the hotel might have built its own local customer base at alower price point which is perfectly satisfied with the hotel experience and gives them high satisfactionscores. However a global customer of that brand might be shocked by the different experience.Proliferation of brands and branded hotels worldwide: The proliferation of hotel brands is itselfcontributing to the commoditization of the hotel product. There is less room to build a distinct andseparate brand experience that uniquely sets the hotel apart from the crowd. Underlining this trend isthe recent relaunch of the Holiday Inn brand, a large number of budget hotel entrants and the rise ofBoutique & Designer hotels like ALoft, Indigo, Armani Hotels and Bulgari Hotels.Instilling authenticity: Delivering a consistent brand experience that is also authentic and deliversboth the brand promise and reflects local culture remains a challenge to all brands. Customerexpectations and employee needs (arising from cultural differences) are often not understood orconsistently addressed and are usually left to be handled by the best knowledge of the acting generalmanager (not in itself a bad thing) but typically without a corporate framework to help ensure theconsistent delivery of the desired ‘branded’ guest experience.
  • 4. !!!MC White Paper Page 4!of!6Human Resources Issues: Securing qualified and suitable people, (in particular in “developing”countries), is a challenge. Big hotel companies have started to create their own hospitality schools toaddress this challenge, but central training needs to be flavoured by local culture and marketconditions. Operational frameworks are key to effective HR deployment.General Manager Stretch: Hotel managers usually come from an operational background in a hotel.However, the required skills for hotel general managers have changed dramatically over recent years.Today a general manager needs to have well rounded leadership skills, to understand sales, margin,revenue and yield management and finance. They also need to have excellent relationship andcommunication skills to manage all stakeholders (including hotel staff teams, the brand owners andthe hotel owners) and must understand the branded guest experience and service delivery. Oftennumerous corporate programs and different competing priorities create a lack of clarity and focus forhotel general managers, which ultimately impacts on the hotel performance. Again a commonframework for operational prioritization and delivery is key.Business Segmentation: Hotels have operated with effectively the same basic customersegmentation model for at least the last 30 years, which is a mixture of purpose of visit, rate segmentand distribution channel. Existing segmentation models makes it very difficult to capitalize on newtrends and potential new needs-based customer segments (eg: women travellers) since hotels look atthe data within the same basic value based framework. In addition, there is little evidence that hotelsare equipped to be able to deliver a segmented customer experience.A Practical ApproachOptimizing the customer experience does NOT mean “gold plating” everything that the customertouches. Rather, it involves systematically measuring and understanding the rational and emotionaldrivers that customers care about most, and then “operationalising” the consistent delivery of theintended experience persistently and consistently across the business. In simple terms, the key is tounderstand what matters most to customers, purposefully focus on and design the intendedexperience, and then consistently and persistently deliver this across multiple touch points.Our experience suggests the most practical and speediest method for addressing this requirement isto start with Customer Journey Mapping, which is a proven practical way to visualise what customerscurrently experience when dealing with a company, (but looked at from the customers’ ownperspective). Customer Journey Mapping provides not only a visualization of all the touch points andinteractions between an organization and its customers. The process of mapping also shows anddiagnoses where service experience delivery is valued by the customer and where it matters less orfalls short. This map of the current experience identifying moments of truth, and pain points canquickly build into an operational framework with descriptions of the actions needed to deliver adesired experience. An early white paper on this subject “Mapping the Customer Journey” byForrester Research notes that “Mulberry Consulting has customers rate the experience in terms ofimportance and company performance to identify broken moments of truth” which Forrester sees as abest-practice approach.A major challenge to delivering an optimized customer experience is ensuring that the wholeorganization acts in concert, as one. The many business benefits of Customer Journey Mappinginclude improving operational alignment across functions leading to business efficiency improvementsand customer effectiveness improvements.
  • 5. !!!MC White Paper Page 5!of!6Getting StartedFor hotel and hospitality organizations considering a new or revised customer experience effort thereare a number of pragmatic questions that will help establish the starting point:• Has the hotel broken down its brand promise so that it is easy to see how the customerexperience supports and enables the value proposition? Is there visibility as to which touchpoints have the greatest impact on customer retention, persistency and advocacy?• Has the business defined who our customer is? What are their expectations and how do theywant to interact with their hotel?• Do you aim to treat our customers equally? Is there an effective customer segmentationframework in place that differentiates the offer?• Are the key customer-facing capabilities across the organisation identified and aligned toprovide a seamless service experience?• Does the hotel understand the rational and emotional components of its service proposition,and does it know what customers do and do not value? Is the business able to measurewhether equity is being created or destroyed at key touch points?• Do individual staff members understand the purpose of their individual role in delivering acomponent of the overall customer experience, and how that fits into the bigger picture?If the answer to any of these questions is “no”, then Customer Journey Mapping is a good way to startto get an objective and customer-centred view of what is currently in place, what is working and whatis not and where to focus resources to address it..Business BenefitsThe business benefits for hotels of effectively mapping and optimizing the customer experience forkey customer groups are significant and compelling:• Internal and External Alignment: Clear agreement on the desired customer experience anda comprehensive map of the customer journey are powerful tools for achieving internalalignment of functions, with a positive impact on staff morale, motivation and effectiveness.Hotel management companies and franchisors get the benefit of being able to clearlycommunicate the return on investment from following standards to hotel owners and why theyare in place.• Customer Satisfaction & Retention: Studies consistently show that there is a clearcorrelation between customer satisfaction and the impact on top line revenue of hotels. Apositive service experience helps maintain customer retention, persistency rates, andconversely, a poor service experience drives these metrics down. Also, a business cannot up-sell or cross-sell customers who leave, so customer retention needs to be a strategic priorityfor any hotel company. Every company operates with a unique set of circumstances but ourexperience suggests that the financial business case for Customer Journey Mapping is verystrong, with each single percentage point improvement in customer satisfaction addingsignificantly to the top line revenue. This holds true for cross-sell and up-sell opportunities.• Cost Control: Delivering a poor customer experience is in fact significantly more expensivethan optimizing it as money is often wasted in over-servicing areas not valued by customers.Customer Journey Mapping can help businesses to identify the key areas most valued bycustomers in which to invest in order to make the greatest difference, and provide theframework to operationalise better models of customer behaviour, thereby increasing revenueand reducing costs over time.• Segmentation: Customer Journey Mapping can reveal the flaws in existing segmentationmodels and can also provide data and insights leading to more nuanced segmentationstrategies and provide the operational framework to deliver them. For example, hotels tend to
  • 6. !!!MC White Paper Page 6!of!6segment customers around purpose of visit and distribution channels, which can easily leadto a “one size fits none” outcome.• Return of Investment and Differentiation: Hotels are commonly categorised by a star ratingdepending on the product quality and general service levels. They often fail to deliver andcommunicate a different and/or distinguished experience from their competitors. A unique andconsistent service experience is an opportunity to strike away from the “sea of sameness”. Afully mapped and clear operational framework around the core brand proposition, translatedinto all customer touch points have a greater customer impact and create more consistent,differentiated and satisfied guest experiences.About the authorsDavid Hicks is Chief Executive Officer of Mulberry Consulting and has led the business since itsinception in 2002. He has over 20 years experience helping organizations measure, manage andoptimize the customer experience they create. He has led many major customer-focused changeinitiatives and has worked with companies in financial services, auto, retail, publishing and technologyin the UK and abroad. As a board level executive at The Royal Mail, he built and deployed a servicespecification used by 280,000 staff nationwide. David has an MBA from the IBM Business School atSouthampton University and a post-graduate diploma in Strategic Marketing at Harvard. A respectedand accomplished speaker and writer on CRM and Customer Experience, David regularly speaks atevents all over the worldMarkus Mueller is Vice President Sales & Marketing at Moevenpick Hotels & Resorts. Passionateabout building ‘brand love’, he has a strong track record of getting things done in multi-country andculturally diverse organisations including Moevenpick, Hyatt, Marriott, IHG and Dorint Hotel. He hasheld senior leadership roles over the past nine years in corporate and regional functions responsiblefor, among other things, new hotel openings and brand campaigns, and has extensive change andconsumer engagement expertise in the health/ fitness, hospitality and service management sectors.Mulberry ConsultingMulberry Consulting celebrated its 10th anniversary in 2012. Since start-up Mulberry Consulting hasbeen retained by senior management at some of the world’s largest organizations to provide adviceon optimizing the Customer Experience and driving customer-centred change, a process we think ofas helping our clients become more Customer Intelligent. Our proprietary tools and processes havebeen used successfully by many companies to develop frameworks within which disparate internalactivities can be effectively connected and aligned behind a clear Customer Experience proposition.Mulberry Consulting is headquartered in London, UK with offices in New York and Toronto; and withpartners in South Africa. For more information please visit us at www.mulberryconsulting.com orcontact David Hicks, Mulberry Consulting CEO, at david.hicks@mulberryconsulting.com. Our existingclients are also available to talk directly about the impact our work has had on their businesses.Sources:1 American Customer Satisfaction Index2 Forrester 2010 UK Customer Satisfaction Index3 2010 UK Customer Satisfaction Index