The Relationship Between Customer Loyalty and Customer Satisfaction

Powerful Essays
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



References: Backman, S.J. and Crompton,J.L. (1991), ``Differentiationbetweenhigh, spurious, latent, Administration, Vol.9No.2, pp.1-17. Bowen, J.T.andShoemaker,S.(1998), ``Loyalty: Coyne, K. (1989), ``Beyond service fads . meaningful strategies for the real world’’, Day, G.S. (1969), ``A two-dimensional concept of brand loyalty’’, Journal ofAdvertising Research, Vol. 9 No. 3, pp. 29-35. Gould,G.(1995), ``Whyitiscustomerloyaltythat Gro.nroos, C. (1990),Service Management and Marketing: Managing the Moments of Truth Hunter, V.L. (1998), ``Measure customer loyalty for complete picture of ROI’’, Business Oliva, T.A.,Oliver,R.L.andMacMillan, I.C. (1992), ``A catastrophe model for developing Pritchard, M.P. and Howard, D.R. (1997), ``The loyal traveler: examining a typology of Pritchard, M.P., Howard, D.R. and Havitz, M.E. (1992), ``Loyaltymeasurement: a critical When an employee of the hotel says she/he will do Raman, P. (1999), ``Way to create loyalty’’, New something, you know it will get done 6.23 5.65 0.58 Straits Times, 17 August, Kuala Lumpur The staff recognizes you by name duringyour stay 3.95 3.39 0.56 Reichheld, F., and Sasser, W.E. (1990), ``Zero The hotel offers you a hassle-free stay Yesawich, P. (1997), ``The myth of the localguest’’, Lodging Hospitality, Vol

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