Increasing Brand Loyalty in the Hospitality Industry

Topics: Marketing, Fred Reichheld, Market share Pages: 2 (443 words) Published: November 17, 2008
Hospitality companies can increase their market share and growth rates by increasing their brand loyal customers. This is a more profitable approach than other marketing activities, such as price cuts or promotional programs. As a mature industry, the hospitality business must pursue market-share gains, rather than market-growth gains. Acquiring new customers is expensive because of advertising, promotion, and start-up operating expenses. Besides, it is cheaper to serve current customers. This paper brings together the factors that contribute to brand loyalty in marketing literature and provides strategies to hospitality managers for increasing brand loyal customers. Introduction

Many hospitality firms are having difficulty increasing their market share because of rising international competition, slower growth rates, decreased population growth, and oversupplied and mature markets. Over the last two years, national hotel occupancy in the USA declined modestly, to 64.5 percent in 1997. A record 1,480 new hotels opened, and new records are expected to be set in the coming years (Ford, 1998, p. 59). As a result, an increasing number of hotel firms are pursuing fewer new customers. Under these circumstances, a large share of any firm's resources must be devoted to present customers. Firms may increase sales and their market shares by decreasing prices, expanding their distribution channels, launching promotional campaigns, and retaining their current customers (Cravens, 1994). However, customer loyalty would be a more profitable approach because as a mature industry, the hospitality business must pursue market-share gains, rather than market-growth gains (Jarvis and Mayo, 1986). When customers are lost, new ones must be attracted. However, replacement comes at a high cost. Capturing new customers is expensivebecause of advertising, promotion and sales costs, and start-up operating expenses(Reichheld, 1996). Reichheld, in his book, The Loyalty Effect, argues that in...
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