The Relationship Between Customer Loyalty and Customer Satisfaction

Only available on StudyMode
  • Download(s) : 265
  • Published : February 16, 2011
Open Document
Text Preview
The relationship between customer loyalty and
customer satisfaction

John T. Bowen

University of Nevada, Las Vegas, Nevada, USA

Shiang-Lih Chen

University of Nevada, Las Vegas, Nevada, USA

Keywords

Customer loyalty,
Customer satisfaction,
Database marketing, Hotels

Abstract

Develops and implements a
method for hotels to identify
attributes that willincrease
customerloyalty. Otherhotels can
replicate the methodology used in
this study. The study makes the
uses of the hotel’s database to
draw samples for both focus
groups and a mail survey. Based
on 564 completed surveys from
hotelguests, the authors found
the relationship between
customer satisfaction and
customer loyalty was non-linear.
The authors use the data to
develop internal benchmarks for
the hotel based on scores that
were representative of loyal
customers.Thestudy makes use
of the hotel’s database to draw
samples for both focus groups and
a mail survey.

InternationalJournal of
Contemporary Hospitality
Management
13/5[2001]213.217

# MCB University Press
[ISSN 0959-6119]

Introduction

It is commonly known that there is a positive
relationship between customer loyalty and
profitability. Reichheld and Sasser(1990)
found that whenacompany retainsjust5
percent more ofits customers, profits increase
by 25 percent to 125 percent. Their study
caught the attention of both practitioners and
researchers, arousing a great interest in
customer loyalty. Gould(1995) helped
consolidate the interest in loyalty through his
research that supported Reichheld and
Sasser’s work. Today, marketers are seeking
information onhowto build customerloyalty.

Theincreasedprofitfrom loyalty comes
from reducedmarketingcosts, increasedsales
and reduced operational costs. Loyal
customers are less likely to switch because of
price and they make more purchases than
similarnon-loyal customers(Reichheld and
Sasser, 1990). Loyal customers will also help
promote your hotel. They will provide strong
word-of-mouth, create business referrals,
provide references,and serve onadvisory
boards. Raman (1999) states, loyal customers
serve as a ``fantastic marketing force’’ by
providing recommendations and spreading
positiveword-of-mouth; thosepartnershiplike
activities are the best available
advertising a company can get. Loyal
customers increase sales by purchasing a
wider variety of the hotel’s products and by
making more frequent purchases. Bowen and
Shoemaker(1998)found loyal hotel customers
had higherfood and beveragepurchases than
non-loyal customers. Finally, loyal customers
cost less to serve, in part because they know
the product and require less information.
They even serve as part-time employees. The
authors have collectedanecdotes from service
employees, stating how loyal customers are
eager to serve as employees. Loyal customers

The currentissue andfulltextarchive ofthisjournalis available at

http://www.emerald-library.com/ft

have been observed in hotels, telling other
guests about the great restaurants in the
hotels. In casinos, customers explain games
and how the player’s club works to other
customers. Passengers on planes have
explained the lightning system or the audio/
visual system to other passengers. Therefore
loyal customers not only require less
information themselves, they also serve as an
information source for other customers.
Buildingcustomer loyaltyis one ofthe biggest
challengesforthe hotelindustry(Yesawich,
1997). This study investigates and develops
methods that will help hotels increase
customer loyalty.

Purpose of the study

The purpose of this study is to develop and
implement a method for hotels to identify
attributesthat will increase customerloyalty.
Asecondpurposeisto produceamethodology
that can be replicated by other hotels. This
study will...
tracking img