It is with great frequency hotels and resorts ask us to help them put marketing and customer service solutions into Standard Operating Procedures for their staff to follow.   While we understand the importance of procedures in the back-of-the-house, we find a need for flexibility on its use in the front-of-the-house.  I want to clarify, this is not about production SOP’s and Six Sigma, this is about forcing processes on customers.

Standard Operating Procedures Mapping

Sample of mapping

When Valorem Group approaches the creation of SOPs for clients, we start by following the guest journey and connecting the dots along the way to key internal positions that are key drivers of customer satisfaction.  We look at the breakdown in repeat booking ratios of unsatisfied guests and analyze their dissatisfaction.  In 67% of the cases we have studied, we can peg back dissatisfaction SOP’s.  Yes, the typical escalation processes for improving service are really destroying service, loyalty and the lifetime value of customers.

While this discovery process seems simple, it takes time to rebuild the right procedures, and even more time to create the strategy to eliminate procedures.   We find that many companies with reduced staffs have limited time to look at the perspective from the outside in or from the inside out to establish the best and most sensible operating procedure.  Companies simply call on their employees to create the processes and procedures.  While staff is excellent at working to produce requests from their leaders, they may not be as proficient at mapping the internal value chain and allocating the right steps for the right resources.  In most cases, the staff simply doesn’t have the full range of internal visibility or the clear perspective of the customer’s personal value chain to determine the best approach to deliver service based on needs.  Yes, we are saying it; there is a huge gap between internal mapping and external mapping, and we find that we create policies that usually don’t satisfy customers but do satisfy the immediate need of managers who cannot themselves create proper SOPs.

Standard Operating Procedures that work

We have tested procedures using real guests, real staff, and this is what we have found:

1.  Based on observations at each touch point, both internal and external,  most written policies are barriers to guest satisfaction and add frustration for internal players who had no input in the co-creation of procedures.

2.  The only solution is the procedure itself, and how it satisfies management with no regard to internal or external customers, value chains, or satisfaction.  In such a collaborative corporate environment, we bypass the team for the sake of speed demanded by managers.

3.  We find that when the Directors request continuous SOP’s be written, that it becomes clear to the staff that while there is good “management” there is not real leadership.  Why do we say this?  The standard reaction for a manager if something is out of control is to create more process and procedures in order to manage the situation better the next time.  At the executive leadership level, vision, strategy, and reaching goals are the primary objectives, not battening the hatches on the ship for every wave.  We suggest laying down a customer service vision based on common sense.  What “common sense”?  We find a key difference between managers and leaders in the case of trust.  Manager’s don’t think common sense is found in the ranks, leaders trust the common sense of their staff.

4.  How these procedures are communicated is lackluster and directive.  In today’s highly engaging environments, it is common to see how procedures and processes break all the rules, and are one way streets directed by employees on other employees.  Collaborative mapping is never an option in the case of a time-constrained environment.

5.  Bad procedures are always communicated to guests whether, directly or indirectly, giving guests a worse experience than the one they are probably complaining about in the first place.  We shot ourselves in the foot with an abundance of SOP’s that make dealing with our brands intricate at best.

6.  By setting up excessive SOP’s we eliminate any use of “common sense”.  From our observations, those companies with tight management see a reduction in motivation and in the use of common sense always referring to SOP’s in lieu of thinking.  The lack of motivation in a procedure-driven company is at least 28% more than in less procedure-driven companies. Yes, they are less motivated the more processes are instilled. Employee attrition is higher, even in a time or low employment, and guest satisfaction is lower, with customer loyalty 21% lower due to constraints placed on guests to reach satisfaction.

7.  The most challenging thing about procedures is that it is a huge tradeoff for revolutionary thinking and action.  Procedure driven companies are evolutionary not revolutionary.  Imposing constraints keeps employees thinking inside the box and increases the topple rates of companies, even those that appear clear market leaders today, tomorrow will fall.  Do you think IBM, Microsoft and HP are revolutionary?  How long do you give them?  Is Apple evolutionary or revolutionary?  Test it. Call each with the same complaint and gauge your level of frustrations.  Yes, you can almost certainly peg it back to the blocking of satisfaction through constraining SOP’s.  Are you revolutionary?

8.  Procedures focus on reducing risk, eliminating the sporadic wins that produce high revenue and increase market share.  We are creating process-driven companies that turn out to be mediocre and will “lead” [in it’s manager’s heads] but always from behind.

The Standard Operating Procedure Solution

The solution is to analyze the custom journey, the solution needed, why the SOP is being created in the first place, the result of the SOP, and then map internally collaborating in building a world-class guest service experience.  Or, you could create a world of procedures and put an end to loyalty and profits.  You decide.

Read more articles about resort marketing.  Want to get your SOP’s focused on providing the best guest experience?  Want to have a greater lifetime value of your customer?  Contact us at 617.939.9698 for info, our first consultation is complimentary.

Hotel Customer Loyalty: Who to reward new customers or loyal ones?

Resort loyalty marketing tips

Hotel customer loyalty programs can be very tricky.  Many of our hotel clients ask us which customer we think they should reward: new ones or current ones.  Today, many hotels and resorts reward new customers as way to generate trial to their product, with some rewarding only those loyal customers who stay often at their properties.  When considering adding a loyalty program for your hotel or resort, the question is which one of these strategies to pursue, either rewarding new customers or current customers.

The answer, just like most things, is “it depends”.  Why it depends?  Because every hotel has a unique scenario.  However, we can provide you with a little guidance with two simple scenarios you might have and help choosing the right customer to reward in your loyalty program.

Two Camps of Thought about Customer Loyalty.

At Valorem Group we have two camps of thought about loyalty, the Business Camp that suggests that those customers who repeat often are in love with the hotel’s services and amenities, and that s/he would be willing to pay more for it, making discounting a decision that will negatively impact the bottom line.  They believe that only new customers should be rewarded to generate trial and that current customers should be awarded little in the form of rewards other than low cost upgrades.

The other camp is the Loyalist Camp that believes that the only way to maintain a client is by offering them perks that keep them spending more money, more often, for more products/services.  They claim that discounting leads to a loyal customer with a lifetime value that positively impacts the bottom line in the long term, and that new customers should not be rewarded without proving loyal habits.  They claim that rewarding new customers only decreases the value of patronage to your loyal customers.

Two scenarios to help you decide whom to reward.

We think that both camps have valid points, but that the validity of the points depends on the hotel and resort’s competitive landscape.  Lets first cover the two simple scenarios that hotels and resorts are very familiar with to help us decide whom to reward:  1)  Hyper competition.  We hear about it all the time, more hotels, more inventories, more options for the consumer and more tools which keep consumer focus on price. 2)  A small concentration of customers that repeat often and produce most of the hotel and resorts revenue.  Yes, it is the famous 80/20 rule, where 20% of your customers produce 80% of your revenue.

Discount in Highly Competitive Markets.

The rule of thumb is that if you have a highly competitive environment, you discount to new customers.  If you have low competitive environment then you don’t discount to new customers, yet focus on loyalty.  That should make sense to industry players who might have been at a resort in a not-so-popular area, and as more inventory comes on line have seen ADR and RevPar come down in an effort to drive trial to their resorts.  Imagine for example the first hotels in Cancun and compare it to today’s hyper competitive arena. Hotels and resorts are clamoring for new business [heads in beds] and for that are continuously offering discounts for new guests.

If along with a large competitive set you also have an equal-spend-customer, meaning that every guest spends the same amount of money at your resort or hotel, then we see the path of rewarding new customers as optimal.  Remember,  offering rewards to frequent-stay guests will not ensure a repeat visitor if there are many low priced options from competitors in your market space.  In these two scenarios, discounting to NEW CUSTOMERS is the absolute way to go.

High Competition, Low Concentration of High Paying Customers.

If on the other hand you have a high amount of spend among a small percentage of guests [the 80/20 rule exists], then you only discount to your most loyal and profitable guests.  Yes, this means you measure the amount the dollar spend of those guests to make sure they are your best customers.  It also means you gauge the amount of services that they consume on and off site and debit it to from their total spend [to make sure your margins are not already at an all time low].

When Your Loyal Customer is a Drain on your Budget.

Have you ever had that loyal customer that absorbs most of your front desk personnel’s time and that of the hotel wait staff , who returns more food then s/he consumes, and cancels their reservations more often?  All  of this is cost and should be tallied as a debit to that customer’s loyalty algorithm to ensure that you are not spending all of your staff’s time on one very loyal  customer (unfortunately).  Many ask us if they should “fire” their best clients, and we always say “NO WAY”.  You should reassess their real costs and charge them more.  Yes, charge more and provide little if any loyalty rewards for a return visit.  We suggest you don.t tell them, just do it.

Are loyal customers really loyal?

One thing to watch out for too is the loyalty rate of your most faithful customers.  So before you whip out the Perma Perks program for Mr. Smith, make sure that Mr. Smith’s company offices aren’t next door to your hotel and that he will stay there every time he is in town versus commuting 45 minutes to get to work in the morning from an alternative hotel.    Make sure you are not on the way to the airport and that Mr. Smith doesn’t come in for a meeting and next morning move on to the next country.  Make sure Mr. Smith isn’t an investment banker and that your hotel doesn’t already offer him/her a great image in the community.  His rewards may be different. Everything must be looked at and the right program designed.

We suggest you break down your guests not by the amount they spend and number of times they visit you, but by the different types of customer “personas” carefully reviewing their needs and what provides them with value.  Go ahead and reward differently for each group.  Forget Gold, Silver and Platinum, segment by clusters, kind of like teams, and fulfill their needs.  Maybe the investment banker needs a special table in the lobby that is reserved for him during his stay.  That wont cost more, but is a huge advantage to him during his business trip.

One more note. Now that you are segmenting and rewarding, please segment internally.  What I mean is, please don’t have any reservations agent respond to your most profitable clients, have a special and empowered employee handle those calls, nothing can be worse than being a top customer of a rewards program and then having to hear a customer service representative provide you with no solutions to your simple needs.  Internal segmentation is critical for success of any real loyalty program.  We will discuss this option in further posts.

Want more tips about how to market your resort, simply log into the Tips and News Section of the Valorem Group Website.  If you are searching for corporate incentive programs and want to work with one of our partner hotels to create a corporate incentive program that will increase your bottom line, contact us at info@plannersite.com

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