New York Hospitality by Vijay Dandapani
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TV ad spending: back to the future?

November 22, 2014

Reams have been written about the steady decline if not eventual demise of advertising spending on television. Just earlier this month Forrester Research reported on how internet ad spending will overtake TV buys in little over a year.

While acknowledging that TV remains the biggest advertising platform in terms of money spent, Forrester's report noted that "online marketing is expected to reach $103 billion in 2019 thanks to a 13 percent average annual growth, compared with $86 billion for TV. In all, digital ads by 2019 will account for 36 percent of all ad spending, above 30 percent for TV. 

Forrester's report also  pointed out that "audiences now want more on-demand options for watching videos and listening to music, helping newer services like YouTube and Spotify grow.  Furthermore, "adults in the US already spend 52 percent of their total media time on the Internet during a typical week (including personal and work), up from 45 percent in 2009. Comparatively, TV time is down to 32 percent this year from 34 percent five years ago."

If the foregoing sounds like settled wisdom a new report in the Wall Street Journal on how targeted Television ads are not only possible but are actually being used by a number of companies including Choice Hotels seeks to upend that line of thinking.

The Journal notes how Choice used to consider "ABC’s “Good Morning America” as the prime spot for advertising to would-be travelers. Whereas, the company now also likes to advertise on reruns of “Big Cat Diary” on Animal Planet, where they can reach a similar audience for a lot less. In the former a 30 second ad typically costs $43,000 as compared to a mere $650 for the latter.

The shift back to TV spending, albeit of a different kind, is based on changes on tap from rating company Nielsen and its merger with digital media company Catalina and is called Nielsen Catalina Solutions. By merging shopper loyalty-card data with TV viewership sample, Nielsen is able to "give clients a better picture of what kind of viewer is buying; that is, an improvement on the past where age-and-gender formed the basis of the data on offer.

Nevetheless, the effort seems more like one directed at staving off an eventual mass migration to digital than one that is going to keep TV ads at the top of ad spending budgets. As the Journal article notes "advertisers aren’t using the tools to change how much money they spend, but rather to help decide which shows certain ads should run on." 

It is unclear that TV advertising can ever can reach the depths of knowledge of consumer behaviour that digital can plumb which apart from including their precise geographic location can supply eerily precise and prescient messages to consumers using near-field-communications and biometrics; something which Apple Pay is likely to only enhance once they get past some of their present hurdles with regard to retail acceptance.

The bottom line on customer engagement

November 09, 2014

The bottom line benefits of customer engagement has been settled wisdom for some time with the possible exception of Ryan Air, known for decades for its borderline surly and decidely uncompromising attitudes to customers. However, the airline's CEO with Fawlty Towers like notions of customer service decided to change tack and adopted a "be nice" strategy a year ago. That seems to have paid off with  the airline reporting a 5% increase in passenger loads and finally admitting it has  "historically failed to view customer service as a priority".  

Gallup, the US research-based, global performance-management consulting company in numerous studies over the years has promoted the benefits of customer engagement.  It reiterates that idea in its 2014 Hospitality Industry Gallup Study where it notes that "taking care of guests' well-being can lead to a healthier balance sheet if hotels do it right" while underscoring that "there's a strong link between guests' feelings of well-being and customer engagement.

Guests who strongly agree that the hotel they visit most frequently takes care of their well-being, 79% are fully engaged, compared with 20% who are indifferent and 1% who are actively disengaged. Among those who strongly disagree with this statement, a mere 6% are fully engaged.  The more salient finding is that there is "a strong link between customers' engagement levels with a hotel and the amount of money they spend per visit. Guests spent an average of $457 per stay at the hotel they visited most frequently in the past 12 months, but fully engaged guests spent $588 per stay compared with $403 per stay for actively disengaged guests -- a difference of $185 per customer.

The benefits of engagement transcends all segments of the hotel industry. However, of the six distinct segments of the hotel market analyzed (luxury, upper upscale, upscale, upper midscale, midscale, and economy)  somewhat excpectedly Gallup found that "higher-end hotels do a better job of taking care of their guests' well-being".  Also expectedly,  "Economy (hotel) customers are least likely to strongly agree that the hotel they visit most frequently cares for their well-being (15%)."

While engagement, particularly in the hospitality arena, almost always requires the provision of "premium service as well as a responsive and helpful staff that anticipates guest needs and customizes services" in today's data and technology driven world it can be achieved via smart algorithms that anticpate customer/client needs and preferences.

A prime example of the foregoing is the recently concluded Dublin Web Summit 2014.  The tech conclave that brings in experts from a range of fields including hospitality saw attendance go from a less than 500 at its first conference four years ago to over 22,000 at this month's event. A principal reason was the summit founder's use of an algorithm to maximize networking possibilties resulting in attendees finding like minded individuals with similar needs.  Hotels, particularly conference hotels, could benefit from some Dublin's insights. That could extend to even regular hotels where an electronic "social forum" could be set up for guests to mingle on a voluntary basis and discover shared interests and business opportunities leading to a potential monetization of the effort for the hospitality enterprise.

Sound track: Using audio to enhance customers' perception

October 22, 2014

The Financial Times has  a review of The Sonic Boom, a book that examines "How sound transforms the way we think, we think, feel and buy. The article points out that "the power of a song to transform emotional texture is what Joel Beckerman, a composer who founded Man Made Music, a sonic branding consultancy, calls a “boom moment”: when the right sound played at the right time creates an emotional connection with the listener".  Beckerman explains how marketers and businesses can use sound to influence consumers’ perceptions and behaviour" while noting that "sound is really the emotional engine for any story.”

How music affects for the better productivity in the work place has been acknowledged for some time. A scholarly examination of that was done nearly a decade ago by a Canadian professor, Dr. Teresa Lesiuk who found that those who listened to music completed their tasks more quickly and came up with better ideas than those who didn’t, because the music improved their mood.

Recently, Fast Company ran a story  headlined "How Music Affects Your Productivity". The article mentions a series of experiments that investigated the relationship between the playing of background music during the performance of repetitive work and efficiency in performing such a task. The results give strong support to the contention that economic benefits can accure from the use of music in industry. Yet, a visit to the core operating of areas of many service industries reveal little if any evidence of the lesson being learnt.  Kitchens, with kitchen stewarding in paticular, and other prep areas frequently have a clamor coming from work and the processes therein that are utterly repetitive. The same holds true for most front office operations of hotels which could benefit at two levels where the front desk associates have a fair number of repetitive actions and for the customer as she/he awaits the check-in process.

A hotel company that is considerably ahead of the curve in tuning into the audio needs of customers is the W chain which has a "Global Music Director" whose job includes the  compilation of a collection of songs that is "extremely upbeat, with a relaxing vibe that transitions from bed time to spa time". As the W chain's website notes the "music playing in the background of hotel lobbies, elevators, spas and gyms contributes in a major way to the ambiance of the entire property". 

Tugging on sentiments: customer acquistion and retention via emotion

October 09, 2014

The latest issue of Colloquy, the leader in eclectic research and ideas on loyalty, leads with a piece headlined "Loyalty is an emotion".  The publication backs up the assertion with examples from three leaders in their respective industries: Kimpton Hotels, Neiman-Marcus and Louis Vuitton.

The article starts off by noting that " while loyalty programs inspire their members primarily through discounts and perks, luxury brands are defined by scarcity and intangible benefits – and sometimes without loyalty programs" 

Colloquy contributor and  luxury expert Steven Dennis  goes on to explore the emotional connections between brands and their core consumers by underscoring that "loyalty has less to do with the size of the wallet as it does the depth of the connection." By way of example Dennis notes how he values his American Advantage program for its seat upgrades but would readily trade it for a better program from another airline but for the fact that his "hub" Dallas has no other offerings.

Kimpton Hotels' delightfully named Karma Rewards programs comes in for high praise as they "not only offer strong economic incentives and tangible perks, but do a better job of tying the features of the program to the overall essence of the brand." Further, they "deliver experiences that are often highly personalized and more consistent with their best customers’ lifestyles."

Another example high up on the emotional loyalty totem pole is car maker Tesla whose car is  both literally and metaphorically electric.  According to a review in an oddly named local California daily the car maker is  "associated with a generation of drivers who want something that appeals to their particular beliefs" one of which is a penchant for alternative energy forms and an abhorrence for fossil fuels. That the latter likely is the case can be inferred from an example from the other end of the environmental scale: riders of the considerably more inefficient and noisier Harley Davidson motorcycle are just as doggedly loyal to their brand as Tesla owners are to theirs.

A major hotel brand that has been on the same or similar emotional wavelengths of its customers is IHG which has used Beyond Philosophy, a leading firm in the customer experience space,  to provide for a better guest experience.

The lure of family business: more customer (and employee) friendly?

September 26, 2014

That family businesses endure longer often stretching into successive generations is received wisdom. But are they also more welcoming to customers, employees and even innovation?  With regard to the last of those, a recent Insead (Europe's leading business school) paper has a somewhat surprising conclusion with regard to innovation. Despite a known reluctance to take on additional debt or other external financing measures fearing the dilution of control, attributes which are thought to hinder innovation, family firms put out more patents than similiarly situated non-family firms.  Among the reasons for their lead in new ideas is a longer time horizon, better governance structure and better availability of traditional capital sources as lenders tend to trust family businesses more so than others.

The outcome for employees, at least during adverse times such as the great recession, also appears to favor those who work for family businesses as they are less inclined to lay off personnel than their more corporate counterparts. That was the conclusion of a couple of Michigan based universities who say that family owned businesses place a premium on being loyal to their workers with some owners claiming that even "during times of belt-tightening the last thing they want to do is let employees go".  Their apparently altruistic behaviour includes reducing distributions to themselves with as many as 58 percent of those surveyed saying that  family members would take a pay cut before the business could consider reducing the workforce.

The foregoing  suggests a more receptive environment for better products and services and therefore a better magnet for customers; particularly more loyal  customers. An academic study in the Journal of Retailing and Consumer Studies points to a mixed bag with the authors noting that "consumers evaluate family businesses better in terms of service, frontline employee benevolence, and problem-solving orientation, and worse in terms of selection and price/value. Results further indicate higher consumer trust in family business management policies and practices, frontline employee trust, and satisfaction but no differences in loyalty. The study goes on to show differential effects in how image elements influence customer loyalty directly as well as indirectly through trust and satisfaction.

In sum, on the customer acquisition and retention front family businesses have been slow to bring out their considerable strengths particularly on the social equity front. That the latter can be a magnet was proven by Hilton in its social media stance that embraced opponents of California's Proposition 8. No hotel chain in the US that is family-owned (and there are a few that are out there) puts its family ownership at the heart of its value proposition than Drury Hotels which proudly states "family ownership makes Drury Hotels distinctly different and assures you of quality and consistency every time you stay". Given their long running success it is a message that other similarly situated firms ought to emulate.

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  • President of Apple Core Hotels, a chain of 5 midtown Manhattan hotels offering value and comfort in the heart of the city.

    Member of the board of Directors - Hotel Association of New York.



  • The views expressed in this blog are my own and not that of any company, association or organization.