New York Hospitality by Vijay Dandapani
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Knowing your customers' preferences

April 12, 2014

All US based financial institutions are required abide by KYC (know your customer) guidelines since 9/11 with a view to ensuring they know who they do business with. However, following KYC does little to really knowing a customer from a marketing standpoint much less predict customer behavior in terms of tailoring products and services to meet their needs. It does even less to create new markets and products, the subejct of a research paper that appeared late last year in the Journal of Consumer Research.

The JCR piece examines whether "consumers have the power to do more than just respond to products that companies put on the market; they can actually change and develop new markets." The researchers took up the case of the "minimoto", a miniature bike derived from a toy bike which progressed to its present size despite the two-wheelers being illegal to use it on public roads and pathways. The Journal's researchers noted that such "organic market emergence" helps distribute the risks and the costs associated with developing a market to consumers and away from the firm. 

Seeking to fathom both consumers' minds and create new markets at a human and interpersonal level the insurance giant, State Farm, recently set up an interesting marketing laborartory in Chicago named Next Door.  The insurer's objectives are to "really wanna learn what people really want. Then, we'll shoot those wants back to the Farm. We help you. You help us innovate."  A fairly quick benefit realized by the company was that people did not really want to discuss long term goals but instead sought solutions for short term needs. Perhaps Next Door will generate new policies that cater to that unmet need.

Perhaps there is no better exemplifier of the power to create markets than Google whose latest forays in that area include an Android TV that is reputed to be able to "read your mind and offer you recommendations of what to watch before even you thinking about wanting to watch something." Besides taking the power of suggestion to new levels, Android TV together with Google Glass may well be able to influence consumer choice at an unprecedented scale. Underscoring that is the tech leader's move to follow consumers from their websearches to their visits to brick and mortar stores

In less dramatic fashion, Google is setting about doing the foregoing in the hotel industry with their recently announced acquisition of Room 77 a metasearch site with bells and whistles that include a "concierge service". By adding it to their travel arsenal that includes ITA for airlines Google expects to be the pre-eminent source for travel. Beforelong, given the wealth of data on consumer behavior, the search giant can be expected at the very least to determine when, where and how anyone travels.  

Snooping for better customer service

March 29, 2014

The title for this post is perhaps less of a blooper than the name RIOT that was given for a software program developed last year by Raytheon that can lay out a detailed picture of people’s lives by scrubbing data from social media sites. The initial if predictive backlash from privacy advocates was overwhelmingly negative if not riotous. When RIOT's existence came to light, Raytheon responded with a terse statement defending its scope by saying that it "is a big data analytics system design we are working on with industry, national labs and commercial partners to help turn massive amounts of data into useable information to help meet our (the UK) nation's rapidly changing security needs."

Despite the company's testy response the program likely has more use for marketing purposes than any predictive ability for national security as bad actors are unlikely to post their intentions on social media sites.  (For the record, the company claimed that RIOT had "inovative privacy features that enabled the sharing and analysis of data without personally identifiable information being disclosed".)  

A year later the idea of analyzing chatter on social media sites to get a true sense of consumers' view of products and services has gained considerable currency as companies, big and small, are discovering that people are far more truthful and natural when discussing their experiences on social media as opposed to even well-crafted surveys as there is a tendency, formally dubbed the Hawthorne effect or response bias, on the part of most responders to try and gauge the researchers' intent leading to incorrect and/or incomplete responses 

The sheer volume of data on sites from Instagram to FB makes this a challenge according to a recent article in the Financial Times which quotes an analyst at SAS, a business intelligence company as saying that gleaning information from patterns and frequency of sentiment expressed on social media is a pointless exercise; analytics per this view needs to "learn the nuances of language that people use when discussing specific topics". 

The FT report cites the example of LateRooms, a UK based hotel booking site which dropped "Lucy" a made-up character who sent offers to prospective customers which was subsequently dropped after a survey of social media sites found "she" was disliked.  LateRooms also uses Brandwatch, a social media analytics service that enables queries about customers, events and competitors. 

Despite the more nuanced approach suggested in the foregoing it is unclear that merely following consumer moods and sentiment can lead to either better service or even less the creation of new products as the late Steve Jobs made abundantly clear with his oft-repeated quote " people don't know what they want until you show it".  In the hospitality business the inflection point was the idea and creation of boutique hotels, a concept that has revolutionized the industry but one that was originated by a then newcomer, Ian Schrager. 

Imag(in)ing to enhance CRM

March 15, 2014

The ability to recall the names and faces of repeat guests is an essential trait to being a succesful concierge, front office associate or any other customer interface employee. That's when possession of a photographic memory can be a huge aid except few, if any, are endowed with such faculties. As in many other instances, technology seems to have come up with a solution by way of a mobile application that enables "lightning-fast image recognition" installed on Google Glass.  

The product by tech firm Blippar uses augmented reality where real world elements are enhanced by computer-generated sensory inputs such as sound, video, graphics or even GPS data.  For now, as Techcrunch notes, centers around the ability of "users to explore interactive advertising through augmented reality and image recognition. Users can scan a brand logo or the universal “Blipp” symbol, and unlock all kinds of interesting content from the brand. The service already has almost 5 million users worldwide, and more than 750 brands and publishers are on the platform. Blippar is currently available on iOS, Android, BlackBerry and Windows Phone devices.

Techcrunch goes on to note that "with Glass, Blippar is looking to expand the reach of this technology, which goes well beyond scanning a simple QR code to actually recognizing and processing unique images, and then delivering information based on those images."  

While Blippar has been demonstrated principally with Google Glass in its current limited avatar, as the popularity of Google Glass or some future variant of it catches on its ability to enhance customer service responses will be akin to the early positive gains in that area when caller-id enabled room-service operators  and call center's to respond to each guest's call or request by name.

Image recognition technology may well take the awe out of La Gioconda (Monalisa) and perhaps reveal the purported rotten teeth that the famous smile masks but on the CRM front it can only bring on a full-toothed smile to both customers and management. 

Maximizing revenue via irrational behavior of consumers

March 01, 2014

Tiger mom Amy Chua is out with a new book which controversially suggests that a principal reason certain ethnicities have better academic and career outcomes is their ability to control impulsive behavior in most facets of life. Presumably such behavior results in more sustained efforts and deliberating before acting. While academics and others debate the merits of her polemical book what is clear is that a sustained effort at steering humans away from impulsive behavior likely will result in many tradtional pricing models being upended.

Pricing models across many industries consciously or not seem to rest on irrational behavior among consumers such as the desire for instant gratification and the anchoring effect. Instant gratification often makes people settle for less as when someone chooses a half a box of chocolates today as opposed to a full box the next day or more frequently (and expensively) in car showrooms when customers often buy a "fully loaded" car frequently with unneeded features and colors that they did not intend on initially. Anchoring is more pervasive in brick and mortar retail  where customers tend to splurge based on the suggestions of the sales people about a supposedly "marked down" item. Another characteristic is confirmation bias where consumers have established notions of what they want in a product or service. This often works to a merchant's advantage as they can pander to those biases in order to draw and retain customers.

Thinking on the fly is also what drove a a 3 level pricing model the Economist briefly (and successfully) used. As Duke professor Dan Ariely explains the newspaper had an offer for new subscribers to choose one of 3 subscription options: $59 for digital, $125 for print or $125 for both print and digital. The print only offer seems to make no sense but it did serve to drive more new subscribers to choose the more expensive option rather than the considerably cheaper digital, a medium that is generally far more popular. 

In the preceding example with the Economist, Ariely notes the expensive print offer only served to underscore the "attractiveness" of the combo with the publication reaping rich dividends as a consequence of lazy thinking . It is a surprisingly sparingly used tactic.  Hotels could, for instance, on low occupancy days could use it to bundle room sales with restaurant offers; the latter being a notoriously poor draw in most hostelries.

An incentive for an incentive: convincing consumers to skip OTAs

February 21, 2014

Throughout the past few years, the ever-evolving relationship between hotels and online travel agents (OTAs) has been the subject of much scrutiny. While studies have alleged that OTAs are instrumental in building a hotel’s reputation, and that OTAs have even encouraged an overall increase in quality service efforts within the hospitality industry, it is difficult to ignore the reality that OTAs have firmly wrested control of distribution channels away from hotels. Offering their own forms of extended loyalty programs, these often technologically superior services have left seemingly few avenues through which hotels can distinguish themselves as distribution engines.

In an attempt to analyze the remaining strategies available to hotels to convince guests to overlook OTAs and book direct, hotel management analyst Taylor Short of Software Advice created a poll to find out what – if anything – it would take to encourage consumers to forego OTA discounts. Right off the bat, Short acknowledges that boosting direct bookings is a multifaceted process: “One challenge is getting users to your hotel’s website in the first place, but once there, convincing them to book directly instead of using a discount OTA is a separate challenge altogether.”

Focusing specifically on the second step in that process, Short polled over 2,500 consumers to gauge their interest in general incentive categories (e.g. “room upgrades,” “room service,” “gift cards,” etc.), and in explicit perks within these categories. Perhaps unsurprisingly, 48% of survey participants chose a room upgrade as their preferred stimulus, with free room service coming in as a distance runner-up, receiving 23% of the vote. Investigating further, Short found that responses for specific types of room upgrades were much more evenly matched, leading him to conclude that simple room upgrades (e.g. offering a balcony, or even just a better view) are nearly as desirable as more grandiose alternatives.

When it came to amenity incentives – which received only 14% of overall consumer interest – complementary food and drink garnered 55% of the vote, demolishing alternatives like spa, fitness, and sports packages. Here, Short quotes eMax Hotel Internet Marketing CEO R. Terry Mueller's assertion that “a kids-eat-free offer is something people really seek out, and free breakfast, which is relatively cheap for hotels, works really well.”

Based on his findings, Short concludes that hotels should consider publicizing room upgrade opportunities on their websites and through social media channels. A single incentive option may not be enough, however, as Short's often evenly split findings reveal that the general consumer consciousness is anything but decided on which upgrade it prefers. Instead, consumers appear to desire most the ability to select their own incentive from a variety of offerings. As always, visibility remains a central issue: hotels must first draw attention to their promotional offers if they hope to engage consumers effectively.

While it remains to be seen the extent to which hotels can reassert themselves in the battle for bookings, Short's findings do appear to demonstrate a palpable link between "booking" and "incentives." It appears that it is this relationship that hotels must exploit if they hope to draw consumer attention away from the already beneficent offerings of OTAs, thereby effectively beating these services at their own game.

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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.


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