To Evaluate the Role of Customer Loyalty Programmes in Retaining Existing Customers In
Ronald Cheung
To Evaluate the Role of “Customer Loyalty Programmes” in Retaining Existing Customers in Hong Kong Hotels
Table of Contents
Introduction
Literature Review
Loyalty Programmes and Customer Loyalty
Loyalty Programmes of the Hong Kong Hotels
Benefits of Loyalty Programmes to the Hotels in Hong Kong
Challenges related to the Loyalty Programmes
Findings and Analysis
Findings
Analysis
Conclusions and Recommendations
Conclusions
Recommendations
References
Appendices
1. Questionnaire
2. Aim & Objectives
Introduction
Tourism Industry in today’s world plays a great role in enhancing the world economy. Hong Kong is one of such states that have ahuge level of visitors throughout the year, especially during the seasons of holidays. Therefore, the hotels in Hong Kong also play ahugecontribution in making their trips successful as well as worthwhile. During the year 2015, Hong Kong possessed around 251 hotels for the relaxation of the tourists from different parts of the world (The Information Services Department, 2015). Therefore, the loyalty programmes employed by these hotels to retain their customers and in attracting the newer ones within the immense level of competition makes this an issue of considerable concern. (Customer Loyalty Programmes) CLP is the foremost important perspective of the Customer Relationship Management (CRM) that influences the attitudes within the managerial officials within an organization. The change in their attitudes brings an urge within them to encourage the customers to stay loyal to the brand for a longer span of time. This in turn increases the retention rate of the existing customers along with attracting the new customers (Uncles et. al., 2002).
The complete evaluation of the loyalty programmes in this report will enable the readers as well as the future researchers in understanding the issue in details. The proper investigation of the problem will also provide them with an opportunity to gain a better understanding for the preparation of their future researches. Moreover, it will also provide the readers with additional information about the issue, which hadnot been adequately researchedbefore. Moreover, the primary research conducted with the 100 respondents comprising of both the customers as well as the staff members of the hotels in Hong Kong also contributed to the understanding of the report to the utmost level possible. The report will provide the readers with a deeper insight into the concepts of loyalty programmes as well as that of the loyalty of the customers. The loyalty of the programmes provided by the hotels of Hong Kong along with the significance, and benefits of the same will also be analysed in the report in minute details. The challenges of the loyalty programmes and the recommendations for overcoming them will also cover a large part of the report.
Literature Review
Loyalty Programmes and Customer Loyalty
According to Uncles et. al. (2002), the CLP enhances the level of loyalty of the customers towards the brand based on its services, characteristics, and its utility on the lives of the individuals. The customer loyalty can be clearly interpreted from the three different perspectives namely, Customer Brand Commitment, Customer Brand Buying, and most importantly the Customer Brand Acceptance on the basis of the brand image (Ramiz & Qasim, 2014; Uncles et. al., 2002).Similarly, Robinson (2011) conveyed that the two primary perspectives of earning profits by the business concerns are obtaining business from the existing customers and acquiring new customers. At times, attracting new customers through expensive promotional activities becomes tougher and unaffordable for many, and then the retention of the existing customers with the support of the CLP is greatly feasible. Arguably, concentrating on the old customers, who are well aware of their brands, is a much profitable option for the organisations then trying to get hold of the newer ones who would be completely new to the brand. This is where the loyalty factor for a brand plays the most significant role (Robinson, 2011).
Uncles et. al. (2002) also statedthe persistence of various aspects an individual needs to be well aware of for understanding the role of CLP.Irrespective of any concern, these programmes have the potential to bring about a hike in the acceptance of the brand among the target group of customers, which in turn increases the level of commitment to produce quality products as well as that of the services. Additionally, the co-determinants like the price, availability, and the promotion of the brands contributes largely to the effective understanding of the CLP. The satisfaction of the customers along with that of the image of the hotel has a large impact on the loyalty of the customers and these aspects therefore needs to be managed well with the help of the CLPs, which can be understood clearly with the help of the figure given below (Uncles et. al., 2002; Kandampully & Suhartanto, 2000). In this context, Vyas & Sinha (2008) added that these programmes act as a symbol of innovativeness for leading the concerns towards immense success in the long-term. This is so because, the customers who are loyal to the customers tend to make full use of this loyalty programmes and in case of slight problems, they would not easily agree to change their brand. This makes the bonding between the customers and the brands long lasting, thereby proving the profitable role played by the CLPtowards the retention of the loyal customers of a particular brand (Vyas & Sinha, 2008).
Figure: Major Determinants of Customer Loyalty
Source: Kandampully & Suhartanto (2000)
Loyalty Programmes of the Hong Kong Hotels
According to KPMG (2007), one of the most prevalent loyalty programmes of the hotels in Hong Kong is the collection of points at the time of availing a particular product or service. The points were collected in the form of electronic cards, which store the points on the regular basis. The benefit of the points can be availed ones it crosses the pre-specified limit. The benefits that the customers avail in exchange of the points are similar to that of the discounts. Other than the discounts, certain hospitality organisations also provide its customers with the opportunity to select from a range of products as a gift against the free credited points. Some of the hotels and restaurants also provide the customers with free or discount vouchers as a redemption to the awards (KPMG, 2007). According to Penfold (2014), providing the CLPs by the hotels in Hong Kong is therefore the process of thanking their valuable customers for the customers’ faith and trust on their services and products for such a longer duration.
According toPenfold (2014), most of the hotel in Hong Kong provides its customers the opportunity to gain loyaltypoints on the basis of their membership. The chains of hotels present all round the world provides their existing customers, as well as the new members of its corporate accounts the chanceto enjoy a vast range of unique benefits from any part of the world. This membership programmes,helps not only attracting the new customers, but also in the impressive rate of retention of the old customersthe commitments, loyalty as well as the trust of both the sides. This involves the customers and the hotels on an equal basis that will help immensely in leading the loyalty programmes towards success (Penfold, 2014; Hikkerova, 2014). Another example can be cited from the reward programmes of the Regal Hotel International (2016), wherein the hotels in all parts of the world mostly that of Hong Kong, continuously provides their customers with CLP to increase their level of loyalty towards the respective hotels. The Regal Hotel in Causeway Bay of Kong has a wide variety of rewards ready for its customers at regular intervals of time. One of the most exciting rewards that it provides its loyal customers with is the ‘Regal Rewards point’ for redemption of rewards. ‘925 Card’ is another very unique programme that the hotel provides to its loyal corporate customers, and it provides them with an incentive for conducting their conferences, meetings, and even corporate parties at discounted prices. Therefore, the CLP of the hotels in Hong Kong helps largely in the retention of their existing and loyal customers with great ease (Regal Hotel International, 2016).
Benefits of Loyalty Programmes to the Hotels in Hong Kong
According to Robinson (2011), the CLP also serves the organisations with immense level of benefits in the long-run, which influences it to work more on the loyalty programmes with the passage of time. The most predominantly evidenced benefits of the organisation are undoubtedly the increased retention level of the existing customers along with the rise in the entry of newer customers. Other than these, the hotels in Hong Kong also tend to witness a rise in the level of its sales as well as profit, thereby bringing about an immense level of hike in the loyalty among its customers. The loyalty programmes such as the collection of the reward points has a limited time span therefore, the customers voluntarily tend to buy more of the products to avail the rewards given by the organisation. This therefore increases the sales volume of the customers largely and is greatly accountable towards the profitability of the hotel businesses (Robinson, 2011). Clark (2010) agreed to the above stated benefits and added to it that the removal of the disloyal customers from the lists of those enjoying their CLP is also another great option to eliminate useless expenses. This is turn influences the exempted customers to raise their relationship with the organisation to avail the benefits in the near future. Moreover, the act of providing the Loyalty Programmes to the customers also helps in curtailing various other costs like the promotional costs without hampering the attractiveness of the brand among its targeted as well as the potential customers (Clark, 2010). As stated in the research paper of Hanover Research (2011), the timing as well as the type of the CLP is a very important matter that needs to be considered for the evaluation of the effectiveness of the same in attracting the attention of the customers towards their services (Hanover Research, 2011). This can be clearly understood from the figure illustrated below.
Figure: Types of CLP Schemes
(Source: Hanover Research, 2011)
Challenges related to the Loyalty Programmes
According to Charania (2011), the employment of loyalty programmes in the hospitality department, especially in the hotels of Hong Kong face innumerable challenges in their various phases of operations. The hotels nowadays reward their loyal customers with free and discount vouchers giving them the opportunity to avail products or services outside their core business. This at times tends to distract the loyalty of the customers, thereby influencing them to shift their loyalty from one brand to the other. The CLP also tends to affect the competitive advantages of the organisation, as the prior attention is then given on the retention of the customers. In doing so, the organisations tend to lose track of their performances, which in the long-run affects its performance level (Charania, 2011). In this context, Deloitte Development LLC (2013) added that conducting communities and side programmes for allowing their customers to stay loyal to their brand also costs them largely, thereby posing challenges to the organisations of smooth operations. The differentiating aspect within the customers based on their loyalty at times dissatisfy the potential customers and gets discouraged to purchase the products or services. The support towards the community with various welfare and social programmes attracts the attentions of a large group of people, but CLP brings extreme level of over expenses that pose massive challenges for the organisations (Deloitte Development LLC, 2013).
According to Charania (2011) and the report by The Information Services Department (2015), the foremost important challenges of the organisations under the hospitality industry is the over competitiveness as well as excessive demand. The similar instance is evident within the hotels operating in Hong Kong. In such circumstances, it is predominantly noticeable that the dynamism and the variation in the tastes of the customers make it immensely troublesome in understanding their preferences as well as their needs. This therefore poses tremendous threats in maintaining the loyalty of the customers. The problem in determining the actual increase in the revenue that has been generated because of the CLP also poses another threat to the financial proceedings of the organisation (The Information Services Department, 2015; Charania, 2011). The Information Services Department (2015) also stated that this affects the hotels of Hong Kong the most because the errors in the financial aspects might create issues towards understanding the actual cause of organisational deficiency (The Information Services Department, 2015).
Findings and Analysis
A primary research on the issue has been conducted with a well-designed questionnaire comprising of 12 questions. The survey was been conducted among 100 respondents within the hotel premises of Hong Kong. In this regard, 50 of them were randomly selected among the customers of the hotels in Hong Kong, who were associated with a particular hotel for more than 6 months as loyal. The rest 50 respondents were again randomly chosen from the managers and staff members associated with the CLP of the hotels in Hong Kong.
Findings
The figure illustrated below gives a clear picture concerning the first question (refer to Appendix) that out of the total 100 respondents, 62 of them were males, whereas the rest 38 were females.
Figure 1
Concerning the second question (refer to Appendix), the pie chart provided below depicted that majority of the respondents which accounts for 46%, fell within the age-group of 26-35 years, whereas 25% and 29% of them were within the age group of 18-25 years and above 35 years respectively.
Figure 2
The rest of the questions were segregated between the two sets of respondents, the customers, as well as the mangers and staff members. For the customers, the first question (refer to Appendix) asked was to identifythe facilities provided to them by the hotels during their stay, which has been depicted below with the help of a diagram. In response to this, majority of the respondent customers that is 40% responded CLP, while the least number of the respondents (6%) came up with the response handling of customers’ complaints quickly.
Figure 3
The customers were then asked (refer to Appendix), if the CLPs are successful in meeting their expectations, wherein the response are depicted below in the form of a graphical representation. In this regard, 21 out of the selected 50 candidates responded that they agreed to it, whereas 16 of them strongly agreed to the fact. The minimum of three respondents were strongly disagreed to it.
Figure 4
In response to the third question (refer to Appendix) to the customers, it can be inferred from the diagram below that majority of the respondents (44%) among the randomly selected 50 customers feel that the CLP has the potential to influence their loyal customers to extend their period of their stay for a longer span of time. However, only 6% of the respondents strongly disagree to the same.
Figure 5
The last question (refer to Appendix) that had been presented before the 50 customer respondents was if they felt the method of producing the CLP of the hotel to be trustworthy. 46% of the respondents had given a positive response, whereas 38% of them had strongly agreed to it. On the contrary, 12% and 4% of the respondents had disagreed and strongly disagreed to the fact. These contradictory responses have been clearly shown in the chart given below.
Figure 6
The next set of questions of the questionnaire (refer to Appendix) had been formulated for the survey among the managers and the staff members of the Hong Kong hotels, who were associated with the CLP. The first question of this set was about their feeling related to the quickness and timeliness of the responses that these hotels provided to their loyal customers regarding their loyalty programmes, which has been explained with the help of an illustration below. To this, 26 and 19 out of the 50 respondents gave a strongly positive and positive response respectively, whereas only six of them had given a negative response.
Figure 7
The next question (refer to Appendix) was if the staff of the hotels in Hong Kong felt that the hotels they were associated with possessed effective means for the development of the CLP. The results for this have been provided below in the form of a diagram, which clearly stated that 50% of the respondents agreed to the fact. On the other hand, only 45 strongly agreed with the issue.