To What Extent Does Achieving Customer Satisfaction Help to Retain Customers in the Hospitality Industry?

To what extent does achieving customer satisfaction help to retain customers in the hospitality industry?

Hospitality industry is one of the oldest businesses in history which has developed with the growth of civilizations (hospitalitynet.org, 2003). In present scenario it is one of the fastest growing sectors in the economy which includes hotels, restaurants, and leisure activities. After gone through the impacts of 2001 war on terror and economic recession in 2008, the industry is in a booming trend. As per the data collected form the Chinese travel statistics, the worlds fastest growing economy indicates that 100 percent increase in the hospitality industry from 2001 to 2008 (He, 2011). In present context the management of business entities are no longer focusing their marketing goal merely on new customers. The cost to gain a new customer can be five times more expensive than a retain a existing customer (Mcllory and Barnett; 2000). In many industries the ultimate objective of marketing now has shifted from customer acquisition to customer retention or customer loyalty (Shoemaker and Lewis;1998). Several loyalty programs have been used in several industries to builds customer loyalty and maintain customer retention. It was initially introduced by American Airlines in 1981. However many questions has arrived about the effectiveness of service offered and customer satisfaction can truly enhance the customer loyalty. This report mainly focus to identify the role of customer satisfaction and find out up to what extend customer satisfaction influence to retain customers in the industry. Several academics have been used to come up with the conclusion on this topic.

When concerning about the present business context customer satisfaction is one of the main focus. Satisfaction is the evaluation of emotion. In general it implies the customer's fulfillment of conditions and desires. It is an outcome of the interaction between customer expectation and actual experience of the product or service. Cochran (2003) concludes that customer satisfaction could be in fact 'is whatever the customer happens to think it is at any point in time'. This could be understood more by Kotler's view on customer satisfaction as he states that a person's feeling of pleasure or disappointment resulting from comparing a product perceived performance (or outcome) in relation to his experience. (Kotler;2000). It is evident that customer satisfaction would at some point be dependent upon the customer's personal experience over which the organisations would have not control of. However it is vital to gather marketing data in order to overcome this barrier and reach customer satisfaction.

Hospitality industry's facing major challenges from ever growing volumes and pace of competition. Competition has had major implications for the customer providing the facts such as increased choice, Greater value for money, augmented levels of money. It has become important for hospitality organizations to gain a competitive advantage which could be done by deploying two strategies; cost leadership through price discounting and development of customer loyalty by providing unique benefits to customers. Cost leadership could be utilized to provide customers value for money which could be a main attraction especially at a time when the families are suffering from a recession. This could be low cost holidays providing just above the bare minimum. However, the other side of the coin is to provide customers with an individual experience which they would never receive from another competitor. This way the organisation could attain competitor advantage which would align with the aspired position in the market.

Profit is the main focus when it comes to businesses. Sales of product or services will make the major contribution for the ultimate benefit of any firm. In that case satisfying customer creates repeat purchasing behavior to any kinds of business enterprise. However achieving customer satisfaction may not be the major objective of a business entity. It may varies as maximize profits, increase sales volume through marketing campaigns and innovation, cost reduction, business expansion, diversification, and maintain market share etc. But satisfied customer broadens up the necessary platform to increase sales volumes and ultimately affects to the profits and the yield of the investments to be grow. This is well explained by Allen and Wilburn (2002) who states that a globally renowned company would focus on customer retention as it would ultimately lead to profit.

In that case achieving customer satisfaction plays major role in business to make benefits internally as well as externally. Loyalty is a mental position that occurs within a customer. In business terms it can be identified by repeat purchases the same service provide regularly and who continues to recommend positively towards the service provider.

In general there are three approaches to measure loyalty. Those are behavioral measurement, attitudinal measurement and composite measurement. These measurements have been developed by combining the definitions given by Engel, Kollat and Blackwell (1973) and Jacoby (1971) on customer loyalty (as cited in Ferrand and Torrigiani, 2005).

Behavioural measurement raises the question of repeat purchases are not always the result of emotional commitment towards the service provider. Attitudinal measurement is concerned with the sense of loyalty engagement and allegiance. However, Jacoby's (1971) definition (as cited in Ferrand and Torrigiani, 2005) gave room for the two approaches to come together which suggests that the behavioural measurement as a result of psychological process (Ferrand and Torrigiani, 2005). A customer exhibits repeat purchase behaviour as result of his preference or attachment to that particular brand, for example. Past academics have not clearly identified a theoretical framework or factors that could lead to develop customer loyalty (Gremler and Browns;1997). However there is a consensus amongst academics that customer satisfaction and service quality prerequisite a loyalty. (Gremler and Browns;1997).

Satisfied customers intend to purchase the same service provider whenever possible with a higher moral intention. It leads to make to create a higher density to retain customer with the entity. It comes with the level of experience of the customer and fulfillment of his expectations. So customer satisfaction makes the platform for creating a loyal customer in order to retain customers in the subject field.

There are four main factors influencing loyalty such as customer perceived value, satisfaction, behavioral loyalty and attitudinal loyalty. Since customer satisfaction, customer perceived value by time to time and emotional intention can affect loyalty.