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University of Nottingham

The Dark Side of Customer Relationship Management in the Luxury segment of the Hotel Industry

Akshay Jaipuria

MA Management


Today, service organizations are shifting their focus from “transactional exchange” to “relational exchange” for developing mutually satisfying relationship with customers. Extended relationships are reported to have a significant impact on transaction cost and profitability, and customer lifetime value. Serving the customers, in true sense, is the need of the hour as the customer was, is and will remain the central focus of all organizational activities. The hotel industry, especially the luxury segment hotels needs to be purely customer-centric and focus on the customer needs and duly fulfill them.

Customers will not blindly accept poor service quality from a luxury hotel. They expect high quality of service in return for the money they spend on luxury hotels. This paper is an attempt to explain the dark side of CRM in the luxury segment of the hotel industry with the help of the ‘gap model’ available in literature which suggests that gaps in service occur at various instances. The author explains that the gap model is a useful tool to explain the dark side partly. There is more to the dark side like privacy issues, unwillingness of customers to build a relationship with the service provider and changing tastes and preferences of the customer. Ritz- Carlton Hotel Company, L.L.C. has been chosen as a single case study and the research questions have been addressed for the industry at large using Ritz- Carlton as a classic example of superior service quality to the customers. Some simple measures to reduce the dark side have been mentioned, which addresses the third and last research question.

The project would contribute as a useful guide to luxury hotels, giving them some valuable information on what the customer expectations are and if they are duly met then service gaps shall not occur. This paper shall provide scope for luxury hotels to improve their overall service quality and strengthen their position in the industry. The relevant existing theory has been reviewed and the subject has been explored, using the ‘gap model’ (Parasuraman et al 1998) mainly. Based on the research findings and analysis, recommendation has been given to reduce the dark side at Ritz-Carlton and luxury hotels in general.

Table of Contents


Table of Contents2


Chapter 1: Introduction5

Chapter 2: Literature Review7

2.1 What is Customer Relationship Management?7
2.2Customer satisfaction, loyalty and business performance9 2.3CRM and Service Quality13
2.3.1 Customer’s perception of quality:13
2.3.2 The Perceived Service Quality approach16
2.3.3 Gaps between customer expectations and perceptions:17 2.3.4 Service Guarantee24
2.3.5 Service Recovery26
2.3.6 Complaints management28
2.4 Do all customers want a relationship with their service provider?29 2.5 Synopsis31

Chapter 3: CRM and Hotel Industry32

Chapter 4: Methodology and Research Design34

4.1 Overview34
4.2 Research objectives34
4.3 Research design35
4.4 Case study: An introduction36
4.5 History of case study37
4.6 Types of Case Study37
4.7 Choice of case: Ritz-Carlton Hotel Company38
4.8 Components of the Case Study38
4.9 Data collection39
4.9.1 Documentation41
4.9.2 Focus Groups41
4.9.3 Interviews43
4.10 Data Analysis49
4.11 Key issues of Data collection: Reliability and Validity50 4.12 Synopsis51

Chapter 5: Case study52

5.1 Ritz-Carlton: An Overview52
5.2 Ritz-Carlton and the “Gold Standards” of Service Quality54

5.2.1 The Credo54
5.2.3 Three Steps of Service55
5.2.4 Service Values55
5.2.5 Employee Promise56
5.3Ritz-Carlton: Current Reality57...
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