New York Hospitality by Vijay Dandapani
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Apologizing to retain customers

July 11, 2014

Douglas Horton, an American clergyman is reputed to have said that "being sorry is the highest act of selfishness, seeing value only after discarding it". Selfish or not, the notion of using an apology as a customer rentention strategy is increasingly being used in service industries like airlines and hotels where customers see value in an apology more so than in anything tangible or material leading to better customer retention after service snafus.  

This week's Wall Street Journal's Middle Seat column has an article entitled "the Art of the Airline Apology". Among the interesting nuggets in the article is a2009 study by researchers at the University of Nottingham's School of Economics in the United Kingdom which found that apologies can be more valued by customers than even compensation. Another study of t00 customers who posted negative comments on the German site of eBay found that more of them (45%) withdrew their negative comment pursuant to an apology than the 21% who withdrew it when offered the equivalent of $7.

The Middle Seat notes that SouthWest airlines uses "software to perform triage on upset customers. Computers look for keywords that show up in the letters, then sort the notes into four personality categories: Feelers, Drivers, Entertainers and Thinkers. Customer relations agents then write to that type of personality."  Apparently, the US Dept. of Transportation levies  fines on airlines that do not respond substantively to customer complaints.  

For some airlines like United with a high number of complaints that has prompted the establishment of a department with nearly a thousand employees, all geared around responding promptly to customer grievances.

 Apologizing as a strategy appears to have instantly paid off for the owner of several hotels in the Bay area including  a prestigious resort in Napa, Ca.  Unlike in the Chick-Fil-A case, which also involved an intolerant antediluvian perspective on gay couples, the principal here was quick off the mark with an apology.  That enabled him to keep the honor of being a Grand Marshal for the city's Fourth of July parade.

Horton's musings notwithstanding, a strategy of offering an apology for service and other lacuna, whether real of perceived as so by the customer, is one that is relatively inexpensive with evidently exponentially greater returns as compared to the traditional propensity to upgrade, offer discounts and/or comps. It would of course, be helpful if at the same time organizations use it as a teaching moment to minimize if not avert a recurrence.

Frequency programs: tearing up tiers?

July 02, 2014

Colloquy, the " go-to resource for loyalty intel­ligence" for over two decades in their tireless search for insights into loyalty programs takes another look at loyalty program tiers and what they mean to consumers. Their most recent paper offers a somewhat startling conclusion that a full third of respondents, all subscribers to loyalty programs, were unaware of the "tier" they were at. 

The muddled consumers could be forgiven as anyone who has enrolled in a program, whether for hotels or airlines or retail, is often confronted with what looks like an unscalable ladder before any meaningful rewards come their way.  Colloquy's study (predictably) notes that members of the lower tiers of loyalty programs are almost twice as likely to believe that is too difficult to meet the requirement s for the higher tier level.

More searingly, in what would easily fit into today's class warfare debate, they find that people with incomes below $50,000 per year are fifty percent less likely to earn their way to a higher tier than those with incomes over $100,000 per year. If the latter seems obvious, another finding is that a third of those residing in the bottom tier "do not think they are properly acknowledged for their level of participation"; something that can be easily attested to by anyone who is in the bottom tier of an airline program although those who clambered up a couple of rungs probably have a not too dissimilar experience. 

On the plus side (for the purveyors of loyalty programs) a full 69% of respondents have no problem with people buying their way onto a higher tier. The latter is something airlines, United in particular, has cottoned on to as evidenced by its prodding to customers at almost all stages via a non-sequitur to "earn extra award miles" given that it involves paying and not earning miles. Also on the right side of the ledger for businesses is the finding that 75% of respondents saying that they "approve of businesses giving preferential treatment to customers who spend mroe money. 

The takeaway from the study is that although technology has made it easier for customers to participate in very personalized programs the tiers need  to be more "micro-segmented" internally with a greater focus on the middle tier which offers the most potential in terms of mobility for the customer and revenues and loyalty to the business.

Ancillary charges: What's left out in "all-in" pricing

June 12, 2014

The onset of the summer travel season usually brings out a spate of articles that seek to inform consumers of the best deals and "traps" to avoid. A bete-noire of travel writers but often a favorite of companies, big and small, is "add-on" fees that usually are all but hidden from unwary consumers.  An article in Marketwatch suggests "eight ways to fight hidden fees".  

The column begins with ostensible good news on the government front saying that "the U.S. Department of Transportation just proposed cracking down on many of the dreaded airline surcharges for checked bags, carry-ons and advance seat assignments, starting sometime next year" but quickly goes on to note that "isn’t trying to do away with these fees; it simply wants airlines and third-party travel sites like Expedia and Travelocity to fully disclose the fees when passengers buy their tickets."

As a money-spinner, excess baggage fees generated over $3bn last year with another $2.8bn for the particularly aggravating "change fees". So it's unlikely to go away anytime soon. Nevertheless,  few rub salt in passenger wounds as effectively as Ryanair where there is almost never an opportunity to change flights; what's worse Ryanair often changes flight timings with nary a thought for connecting flights from other airlines, which also often are non-refundable and with change fees, passengers may have to contend with. 

Hospitality has sought to emulate airlines in this regard with the high probability of earning customers' ire in equal measure on what regulators term "drip fees". Marketwatch notes that many resorts have resumed adding “resort fees” to bills with some going so far as charge for a safe that’s in the room whether or not it is used.  Other "surcharges" include  housekeeping fees, concierge charges, energy-use fees, wi-fi costs, luggage-storage fees for storing bags before rooms are ready or for keeping after checking out and a "mandatory" $10 bellman tip fee.

 Given the foregoing, a recent article on Havard University's blog  by a pricing consultant with a headline "Adding Fees That Consumers Won't Hate" seems like a non-sequitur. It recaps the recent settlement of a class action lawsuit by Ticketmaster which heretofore had broken down its pricing based on admission to an event and then "tack on additional charges such as convenience, facility, order-processing, and delivery fees to purchases.

The suit had claimed these fees were misleading as consumers were unaware that the company was making money on them. The consultant points out that consumers evaluate "prices sequentially" on their merits and if they judge add-ons as excessive are unlikely to buy. It is a point that hotels and resorts should take note of with regard to the spate of fees that has attracted the attention of travel experts but yet to catch the regulator's eye. 

 

Nymwars - anonymity and customer feedback

May 31, 2014

Nymwars may sound like a Scrabble bingo but it is short-speak for how users identify themselves on various social media platforms and UGC (user-generated-content).  Specifically, it refers to a tug-of-war between users who wish to remain anonymous and parties who demand the use of real names in online or virtual communications. That ongoing tussle  leads to larger question.  Does the ability to give feedback anonymously lead to more constructive outcomes for business enterprises enabling, at a minimum, a more nimble response? Perhaps.

Most UGC sites such as Tripadvisor allow for monikers that are pseudonyms but only after the site has verified the identity of the poster.  Apart from the tedium associated with registering it necessarily curtails spontaneity and, more importantly, limits a quicker response from the merchant.  While there are many UGC and other platforms that already afford anonymeity few, if any, offer real time feedback to businesses that the latter can use to react instantly.  Sites that allow pseudonyms include AVVO (legal search), Urbanspoon (restaurants), Zillow (real-estate), RateMDs (Doctors' review)  and Angie's List (crowd-sourced review site).

A recent tech-entrant is Quibble which culls customer feedback of any kind via text messages and provides a real-time stream to merchants. The principal presumption underlying the business model for Quibble is that by allowing anonymous and quick text messages businesses, particularly in the service industry, can seek to avert negative UGC comments. 

At the employer-employee level anonymous feedback has long been recognized, if little used, source for the free flow of information to enable better work processes.  A HBR blog report from a year ago points to the benefits of anonymous feedback suggesting that even "confidential" feedbacks where names are associated fail to elicit a thorough and accurate response.   

At another level, the fact that some if not many consumers and users of the internet seek more than a degree of anonymity as well as the ability to keep aspects of themselves private was underscored by Google's recent implementation of a "right to be forgotten" measure that is particular to Europe. Presumably, those features will be, at some point, extended to businesses as well providing relief to particularly to those who have been savaged at times by rigged comments or having come under new management seek to overcome negatives from the past. 

 

 

Shadow advertising: goading customers to buy with retargeting ads

May 18, 2014

Any one who browses the internet looking for things to buy or "window shop" is familiar with ads that follow regardless of one's purchase intent.  Known as retargeted marketing, ads that shadow consumers long after they have visited a website can be useful or annoying depending the customer's original intent. Convention in the digital ad world suggests that retargeted ads help keep brands in front of bounced traffic after customers have left a website without buying-in. A mere 2% of visitors to a website "convert" on first sight and retargeting is geared to "help"  companies reach the vast majority who wander off, whatever their motivations. 

Apropos the foregoing, Forbes has a story on AdRoll, "a part of a wave of ad tech companies whose job is to “retarget” you, or find you later after you’ve looked at something that might suggest you want to make a purchase. It’s a strategy of advertising that only really works if it can follow your browsing from computer to mobile device and back, and it’s a growing sector that’s still very much an open battlefield." AdRoll's success over the years since its launch in 2008 has netted it an additonal $70 million with much of the new money going to expand its product,including mobile platforms, and geographical reach.

In expanding into the mobile arena, AdRoll has devoted efforts to as yet unnamed travel search engines where customers who have searched and not clicked through to buy will then find specific ads on their devices.  That can have considerable appeal to most of the travel sector from airlines to hotels given how Google's rival Facebook has pitched "how revolutionary the impact mobile Internet has been on media-consumption habits and how much more complicated the “path-to-purchase” is as a result."

Others in the retargeting space include companies with odd monikers like MoPub, recently acquired by Twitter and Facebook which last October announced it was testing a new capability for its Custom Audiences tool that would allow companies to retarget people who visited Web sites or mobile apps. Previously, businesses could only retarget Facebook users through customer email lists and/or phone numbers.

Retargeting of the Facebook variety can provide rich dividends to companies in allied industries: like airlines and hotels. An Expedia report from 2012 noted how airlines are missing out on ancillary revenue, baggage fees notwithstanding, by not offering a seamless hotel booking experience that includes customer preferences like packages and special deals. While there is little evidence that the lacunae on the part of airlines has improved retargeting ads to airline customers based on their profile likely will spur hotel buying that is currently taking place on other sites.

 

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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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