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Report questions link between satisfaction and loyalty.
By Yeoh Siew Hoon - SHY Ventures
Tuesday, 31st August 2004
 
Coincidentally, just as I was mulling over the concept of loyalty (see The SHY Report), comes a report from Cornell which questioned, "Is your satisfied customer loyal?"

The August 2004 report, written by Iselin Skogland and Judy A Siguaw, is based on a study of 364 guests of two similar big-city hotels and questions the firmly-held doctrine that guest satisfaction means repeat business.

The report said that analysis showed only a weak connection between satisfaction and loyalty (which is a precursor to repeat purchases).

The study also revealed another finding which the authors said may give hoteliers pause "especially considering the industry's huge expenditures on frequent-guest programmes".

Business travelers were among the least loyal of the guests responding to this survey.

In thes study, 38 percent of respondents who reported high levels of satisfaction noted that they routinely switched to competing properties.

According to the report, the chief factors that engaged guests' loyalty were hotel design and amenities.

"Moreover, the factor that caused guests to be most involved in the purchase decision (and therefore more interested in the hotel) was its employees.

"The implication is that hoteliers might consider redirecting some of their frequent-guest expenditures toward strengthening human resources and toward improving the guests' experience through design and amenities," said the report.

According to the report, customer-defection rates are high for businesses today.

"US corporations routinely lose half their customers over a span of five years resulting in 25 to 50 percent reduction in corporate performance," it said.

At the same time, the report added, researchers have noted the importance of customer retention, citing evidence to indicate that over time, a returning customer becomes decreasingly costly to serve because of learning effects and reduced service costs, while that customer simultaneously purchases more, pays higher prices, and willingly offers word-of-mouth recommendations to others.

It said that to capture the benefits of having loyal customers, many companies – particularly hospitality firms – have invested millions of dollars in customer retention programmes.

Nevertheless, it noted that customer loyalty programmes are now being heavily scrutinized to determine whether they are doing what they were intended to do: namely, increase customer loyalty and build profits.
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