Report - Service-profit chain in the Hospitality Industry - Assessment – Answer

Report Writing

Case Scenario/ Task

After reading the Heskett, Jones, Loveman, Sasser, & Schlesinger (2008) article “Putting the service-profit chain to work” and watching the Joseph Pine TED talk “The experience economy” analsye how these concepts are imperative for any hospitality manager to use in order to gain and maintain competitive advantage.

In your answer you must:

1. Discuss the intersection of hospitality, service and customer experience as a major challenge to Hotel Managers
2. Provide examples to support the practical application of these concepts
3. Evaluate how a manager would assess the effectiveness of these concepts

The article “Putting the service-profit chain to work” by Heskett et al. and the speech “The experience economy” by Joseph Pine underlined several concepts that a manager in the hospitality industry can apply to succeed and have a competitive advantage in the sector. Joseph’s talk emphasized on authenticity and customization of goods and services to suit the customer preference and needs as some of the major factors determining the success of a business. The service-profit chain by Heskett et al. outlined the interrelationship between profitability, customer loyalty, and employee satisfaction, loyalty, and productivity towards the success of a company(Heskett et al., 2008). These concepts are can be applied by a manager to excel in the hospitality industry. This report analyzes these concepts by outlining how significant they are to the success of a hotel manager. It also outlines the methods that such a manager can use to evaluate the significance of these concepts to his success.

Appropriate Customer Service

One of the key concepts that contributes to the success of a hotel manager is getting the right customer service. The appropriate customer service is not just the right food or having a decent room in a hotel. It encompasses the entire customer’s experiences right from when they choose the hotel for the services required until they leave the premises. It is the responsibility of the hotel manager to ensure that the client has a nice experience in the hotel. This cannot be achieved for instance when the employees are unhappy in their job. Having the appropriate customer service is thus closely linked with employee satisfaction. customer service is very important in the hospitality industry. Aditya Sanghi from the company Hotelogix.com that deals with cloud hotel technology affirms that getting the right customer service is inevitable in the hospitality sector. The customer service offered must be of the highest quality possible. Having the appropriate quality for every service or good offered is a huge step towards maintain the suitable customer service. The quality of the services provided should be evaluated from the customer’s perspective. This s because there can be a variation between what the service provider describes as quality and what the customer expects. The opinion of the customer in such a case should prevail in establishing the quality of the services offered. The quality that matters is thus the quality expected by the customers and not necessarily that provided by the hotel.

Factors that determine the right customer experience

First impression

In providing the right customer service in the hospitality industry, it is imperative for the manager to consider the first impression the clients build upon visiting their premises. This will greatly influence the customer’s perception of the facility as well as the quality of the services provided. The customer’s visit to a hotel usually involves three major stages; the arrival, stay and departure. In order to create the right customer service, a manager should ensure that upon arrival, the customer is treated in the best way possible (Goldstein, D.& Lee, 2005). This first treatment will determine how the customer will perceive the services offered to them.

Customer Expectations

The customer’s expectation on a given facility also affects the perception that the customer will have on the service offered. A hotel manager should seek to know or understand the expectations of the customers for them to fulfill them and succeed in having the appropriate customer service. A customer will not be satisfied unless their expectations are met or exceeded. The expectations of the customer will be based on previous experience or the image that the business has in the sector. The price can also determine the customer expectations (Gordon, 2011). This implies that the hotel manager should ensure that the services offered are proportional to the fee charged. If the customer’s expectations are exceeded and met the customer service will be rated as good. If the expectations are met for a number of times, then this can lead to a loss of the client.

Authenticity

The services and goods offered by a hotel should be authentic. Joseph in his speech explains that authenticity is one of the key aspects that enhances customer satisfaction. that means that when the customers are offered genuine products then they are likely to rate the services offered as good. A business should genuinely describe the services and goods that it offers in its marketing strategies. The customers should except exactly what was described in the advertisements of the firm. If a firm does not tell the truth, then a moment of truth will arise when the actual services are offered. The customers will then be disappointed and the manager will fail in offering the right customer service (Byers, 2001).

Qualified Personnel

A business cannot offer the right customer service if it lacks qualified personnel. The employees involved in offering the services in a hotel should be well trained and qualified to offer the services. The receptionists should be trained in the appropriate public relations skills to handle the customers. This is because they are responsible for creative a positive first impression of the clients. Everyone should be trained in their roles including the chefs, waiters, room keepers, guards as well as the cleaners. With proper training and experience of the employees, the hotel will provide quality services and will succeed in maintaining the appropriate customer service (Park, 2013). Everyone should be well trained especially in external communications skills to guarantee proper treatment of the employees.

Creating customer Loyalty

A manager should always strive to create customer loyalty because this is directly related to profitability and growth of a business. To maximize profits a manager should ensure that the customers are retained through loyalty. One of the firms that have capitalized on customer loyalty is Holy Grail (Tansuhaj et al., 2011). The company has kept a leading position in the hospitality industry for the past decade by ensuring that it maintains its customers. When a company maintains loyalty among its customers, they will give a positive feedback and will always be returning for more services. There will be referrals as well which implies that there will be a growth in the market share of the market. Customer loyalty is a key determinant of the profitability of a business. Reichheld and Sasser estimated that a 5% increase in customer loyalty led to an increase in profitability levels from 25% to 85%. That implies that the volume of the market share is directly proportional to the level of customer loyalty of a business. Customer loyalty is also directly related to customer satisfaction. Unless the customers are satisfied, they cannot be loyal to a hotel. To ensure that the customers are satisfied by the services offered by the hotel then the manager should ensure that quality services are offered. A hotel can evaluate the level of customer satisfaction by conducting a satisfaction survey on the quality of services offered. Xerox succeeded in conducting a customer survey by interviewing 480,000 customers regarding the quality of services offered by the firms on a five-point scale from 5 (high) to 1 (low) (Keen, 2010).

Value enhances customers Satisfaction

Customer satisfaction is closely related to the value of services offered by a hotel. Customers will rate the value of the services offered by the firm depending on the pricing. The insurance companies for instance create value for their services by processing the client’s claims promptly and ensuring that there are satisfied with the services offered. This creates customer satisfactions and enhances loyalty for the services offered (Hochbaum, 2011). In the hotel industry, a manager should ensure that customers are served quickly and all the services that they request are provided.

Employee Productivity and Service Value

Employee productivity enhances the value of services offered by a business. An example of a case where employee productivity led to an increase in service value is the Southwest Airlines. This is one of the largest airlines in the US. Close to 15,000 of the company’s employees perform their duties in teamwork (Hochbaum, 2011). This implies that the employees share their responsibilities ensuring that every job is executed irrespective of whether all the workers are present or not. The positions are designed in such a way that one employee can perform several duties simultaneously. This ensures that the customers are served promptly and released without any unnecessary delay. This has enhanced the effectiveness and efficiency in delivery of services in the company. Employee productivity is a direct result of employee satisfaction. satisfied employees are happy employees and will definitely be productive. They will deliver quality services and consequently improve client loyalty. A study conducted in 1991 in an insurance firm revealed that 30% of all the unhappy employees had intention to quit their employment (Khazaei, 2016). That was a turnover rate ratio of over three times compared to that of the satisfied ones. In the study, it was also revealed employee turnover was directly related to satisfied customers. Low employee turnover is also related with high client satisfaction (Tansuhaj et al., 2011). The study thus established that employee productivity, employee satisfaction and low turnover are significant elements towards the growth of a business. Satisfied employee will love their job and thus will enable the management of a firm to record high employee retention rates.

Internal Quality and employee satisfaction

The level of employee satisfaction is further related to the internal quality of the working environment. If the quality of the working environment is appropriate, then the employees will be motivated and will be satisfied (Tansuhaj et al., 2011). The employer can ensure that the quality of the environment is high by improving the remunerations, motivating workers through rewards and awards and offering other non-salary benefits such as allowances and medical covers. After offering such incentives to the workers, the firm can evaluate internal quality by measuring the feelings of the employees towards their employment.

Leadership is key to success

After considering and applying all the concepts in the management of a hotel, the manager needs to apply leadership skills to succeed in the business. This will entail having the appropriate corporate culture, which will be aimed at improving the service delivery in the hotel. The manager should involve the employees in decision making to ensure that they feel part of the company (Hochbaum, 2011). This will ensure that they are willing to work and are flexible to take any ideas taken positively. Through appropriate leadership skills, and proper application of the concepts discussed a manager will be able to achieve his objectives.

Studies on Employee and Customer Satisfaction

Various studies have been conducted to evaluate the responsibilities of employees towards customer satisfaction. With the rising competition in the service sector and the growing global economy, it is imperative that managers adapt the best possible strategies to manage their businesses. The best policies should be applied in key functional areas of a business such as in production, human resource control and marketing (Dev & Don, 2005). The hospitality industry is a sensitive field because most of the customers are selective in the services that they use. The manager should engage in the appropriate marketing strategies to ensure that they win and retain customers. The sector majors on referrals and returning customers as the best options of maintaining a logical share of the market.

Evaluation of the Strategies

The manager can use several options to evaluate the effectiveness of the adapted strategies in achieving the targeted objectives. It is the responsibility of the hotel manager to enhance the growth and profitability of the business. This can only be achieved by increasing the share of the market that the business controls in the sector. Some of the options that the manager can use to evaluate the success of the strategies include:

Measuring the levels of returning customers and referrals

The manager should conduct consistent surveys amongst the customers to determine whether they are returning customers. Returning customers signify a level of satisfaction with the services offered by the business. If there are several returning customers then this definitely imply that the strategies in use by the hotel manager are appropriate. The manager should also determine the nature of first time customers to find out how they learnt of the services offered by the firm (Hochbaum, 2011). If the customers have visited the business as a result of referrals, then it implies that a majority of clients visiting the hotel are comfortable with the services offered. If the new customers are a result of marketing activities, then the manager will know that the marketing strategies are appropriate for the business

Growth in profitability and market share

Measuring the level of growth and profitability of the business are the most suitable ways of evaluating the effectiveness of the strategies and policies a manager applies in running a business. This is very easy to evaluate because every company has end of year financial records that help to determine whether it has made profits or losses within the year. If the hotel has grown and the company has made profits then the strategies will be considered as effective.

Conclusion

This report has evaluated the most suitable strategies that a hotel manager can use to boost the performance of the business. The concepts analyzed in the report are adopted from the article “Putting the service-profit chain to work” by Heskett at al. and the speech “The experience economy” by Joseph Pine. Some of the key concepts that a manager can adapt to boost profitability include enhancing employee and customer satisfaction, and offering quality services. When quality services are offered, the customers will be happy and as a result enhance their loyalty to the business. All the concepts outlined are interrelated and must be upheld for a business to realize growth and profitability in the hospitality industry. The report has given various practical case examples where these concepts have enhanced growth and profitability of business. Finally, the paper has established some of the methods that a manager can use to evaluate the effectiveness of the adopted strategies.