FACULTY OF COMMERCE DEPARTMENT OF TOURISM AND HOSPITALITY MANAGEMENT

A critique of the customer retention strategies employed by hotels in Zimbabwe.

Proposed by: Trevor Takura Zuze R092242Z(PDP)

Lecturer: Njerekai C

TABLE OF CONTENTS.

Title 1.1 1.2 1.3 1.4 1.5 2.1 3.1 1.7 4.1 Problem background Statement of the problem Research objectives Research questions Significance of the research Literature review Research methodology Data analysis plan Reference

Page 1 3 3 3 4 4 7 9 11

1.0 background of the problem Worldwide a number of factors have been attributed to the increase in the high customer defection rate. In the 1990s, service organizations turned their focus toward complaint management and recovery efforts as marketing strategies to minimize defections and boost customer retention. The way customers are served and recognized are critical factors in attracting, satisfying and retaining customers. Strategies that will help in retaining customers are considered critical in attaining a wide market share and repeat business. (chobaiwa et al 2010) . The hotel industry exemplifies a service industry characterized by a high degree of involvement between customers and service providers Research by the Forum Corporation revealed that almost 70% of identifiable reasons why customers switched to competitors were associated with a dissatisfying service experience with a service provider during the service encounter. Whiteley (1991). Of the 70% of customers who switched to competitors, 21% switched because there was too little contact and individual attention from service providers, and 49% switched because the attention was poor. Indeed, problems experienced in the service encounter were the major cause of customer dissatisfaction and defection (Barsky & Labagh (1992). Creating positive service encounters is the essence of customer loyalty, retention, and long-term relationships. Hence, the quality of the service provided by the service provider during the faceto-face service encounter with the customer could be the deciding factor on which the customer makes a repurchase decision and is an influencing factor in the customers decision to form and maintain a long-term relationship with an organization. Bitner, Booms, & Tetreault (1990) From the viewpoint of the customer, it is often an employee who keeps or breaks the organizations promises in the first and subsequent service encounters and, in doing so, creates a service gap (Bitner, 1995). The outcome of the interaction in the service encounter is the major cause of customer dissatisfaction and complaint and switching behavior (Keaveney, 1995).With regard to recovery efforts in the hotel industry, customers were less satisfied after a process failure (a rude receptionist), and this detracted more from satisfaction than an outcome failure such as the unavailability of a room because of overbooking (Smith, Bolton, & Wagner, 1999). As service industries continue to grow in importance, consumers are increasingly expressing their dissatisfaction with individual service encounters. Whiteley (1991).The interaction in the service

encounter is a major focal point on which the customer evaluates the entire service organization, thus the quality of the service encounter can be an early indicator of whether an organizations relationship with a customer is flourishing or in jeopardy. Bolton (1998). According to the 2008 Annual report in December, produced by the central statistics office, hotel occupancy levels dropped by 16%, Statistics of hotel occupancy are provided below in table 1 from January 2009 to 2010 October, according to the central statistics office. Table 1 Month 2009 February Percentage of defected customers 5 15 25 5 5 15 10 20 10 Percentage of new customers 10

2009 May 2009 September 2009 December 2010 March 2010 June 2010 September 2010 October

5 20 5 5 30 (Central statistics internal records 2009-2010)

The hostile economic environment in Zimbabwe has made the formulation of a realistic retention strategy particularly difficult for most managers across all industries. This has greatly affected hotel occupancy levels thus seeing a large percentage drop of customers greatly attributed to poor service provision and poor implementation of retention strategies by hotels in Zimbabwe. Due to competitive hotel industries, such as in South Africa, hotels need to focus on maintaining their existing clients (customer retention). Customer retention may be influenced by different variables pertaining to hotels and its customers. This study therefor seeks to identify and analyses the variables influencing customer retention in hotels, and the customer retention strategies employed by hotels in Zimbabwe.

1.1 Problem statement Rampant customer dissatisfaction, poor customer service, and poor product development, in the face of aggressive competition causes customer defection, and non-repeat business despite efforts to employ customer retention strategies by hotels. This research therefore seeks to analyze the customer retention strategies employed by hotels in Zimbabwe. 1.2objectives The objectives of the research are as follows To reveal customer retention strategies employed by hotels in Zimbabwe. To determine the extent to which the strategies being employed are effective. To bring out new strategies that the hotel can employ in order to retain customers. To identify what hotels can use to improve service delivery and ultimately build customer loyalty to avoid customer defection. To bring out factors to be considered when coming up with retention strategies by hotels in Zimbabwe. To provide recommendations on how to improve the strategies employed by hotels in Zimbabwe. 1.3 research questions The researcher seeks to provide solutions to the following questions: What retention strategies are being employed by hotels in Zimbabwe? How effective are the strategies being employed by hotels in Zimbabwe. What challenges are being faced by the hotels in Zimbabwe in employing new retention strategies? Which strategies are being employed by hotels to improve service delivery and ultimately gain competitive advantage What factors are considered when coming up with retention strategies? What recommendations can be made to effectively improve on the retention strategies for hotels in Zimbabwe?

1.4 Significance The research will help Zimbabwe tourism authority to come up with effective customer retention strategies which help hotels provide quality service in order to build mutually beneficial exchange relationships. The research will also assist the hoteliers to know the contribution of customer relationship management towards customer satisfaction, loyalty and retention and enable the hoteliers to restructure their policies to increase customer retention strategies and service delivery so as to build customer loyalty and repeat business and avoid customer defection. The research will be useful to the university by providing secondary data to scholars and those who would want to carry out further research on customer retention. The research will enable the researcher to get depth knowledge of retention strategies employed by hotels in Zimbabwe, and how organizations who succeed in implementing them to continue to improve retention strategies to gain a large market share and repeat business. 2.0 literature review Customer relationship management has rapidly become one of the leading competitive businesses in the new millennium. This enables hotels to optimize revenue and increase customer value through understanding and satisfying individual customers needs .Lin and Young (2009). The increased role of customer relationship management has caused misunderstanding and confusion. Many firms believe that customer retention strategies are a technology tool, which will automatically improve their business. However other academics are of the view that customer retention is a philosophy. Stephanou et al (2003) . It is suggested that for a long lasting relationship to develop between the customer and the organization, a shift in emphasis is required from a service quality perspective toward the relational factors of the exchange between the customer and the service provider. Groonroos (1990) It was noted that hotels should maintain reputation for quality, value and variety if it is to attract repeat visitation. Prideaux (2008). The capacity of hotel related activities to meet such expectations depends substantially on the application of sound customer retention strategies. Oliver (1980) argues that customer satisfaction refers to attitude or evaluation formed by a customers pre purchase expectations of what they would receive from the product or service of their subjective perceptions of the performance they actually did receive.

According to chakrabarty (2006) the drives to customer satisfaction and retention for hotels may differ from the drives identified for other services. Manrai and Manrai (2007) seeking to understand these drives have identified common initiatives all of which were focused on providing customer centric initiatives and satisfaction. Chakraberty (2006) identified four factors that determined overall customer satisfaction and retention. These were in order of importance: in branch satisfaction speed of service and staff helpfulness economic satisfaction level of bank fees, overdrafts and interest rates remote satisfaction responsiveness and efficiency in dealing with remote enquiries and reservations and reliability

However a customer preferred dimension was identified by Manrai and Manrai (2007) and was also in order of importance: personal related considerations- attractiveness and behavior of staff, procedures for handling complaints, appearance of staff, and service recovery techniques financial considerations complimentary hotel environment related considerations atmosphere and convenience related considerations speed of service and opening hours.

Based on the hotelier satisfaction studies by Chakrabarty (2006) and Manrai and Manrai (2007) and a further study by Pomering and Dolmicar (2006) it is therefore proposed that customer centric initiatives will lead to more improved hotel satisfaction and retention. Using the customer centric initiatives by Manrai and Manrai (2007) but testing these on customer satisfaction it is contended that these initiatives form a hierarchy with some achieving higher customer retention and satisfaction that others. Some scholars assume that retention rate is based only on customer satisfaction, however several studies have indicated that there is little relationship between customer satisfaction and retention or future purchases. The real indication of customer retention is not customer satisfaction but customer actions, such as repeat business, customer recommendations to others, willingness to

pay premium price and frequency of purchases. Customer retention is the strategic objective of striving to maintain long term relationships with customers, and is a mirror image of customer defection. The exploration of literature regarding retention yielded several dimension of work by researchers .It is proposed that at the relational level, there are critical relational attributes that emulate the psychological needs of the customer and affectively trigger positive emotional responses, which are an essential ingredient in the relationship development process. The development of a future relationship between the firm and the customer can in fact be determined by this emotional content (Barnes, 1997).Moreover, the relationship between satisfaction and loyalty is moderated by positive emotions in high involvement services; that is, the stronger the positive emotions experienced during the servicemen counter, the stronger the relationship between satisfaction and loyalty ,therefore increasing the chance of forming a service relationship with that organization. Service recoveries perceived favorably by customer potentially increase the level of customer loyalty more than high-quality original service ( Kelly&Davis, 1994). However, we contend that complaint management and recovery strategies currently used to retain dissatisfied customers do not appear to have captured customers who never complain to organizations. Further-more, the strategies only come into operation after the customer has complained .For example, only 5% of dissatisfied customers complain to organizations, and the remaining 95% who do not complain will never remain loyal customers and ,hence, are most likely to defect . Therefore, there is a need for organizations to focus on developing strategies that are aimed at providing the service attributes in retention . In general, the longer the customer stays in the relationship, the more profitable the relationship becomes to the organization (Reichheld & Sasser, 1990) Long term customers buy more, bring in new customers, take less of the service providers time, are less sensitive to price, and require no start-up or acquisition costs, best of all, in some industries, a 5% reduction in defections can double profits. The literature review on customer retention led to the identification of specific hotel related aspects and variables which can possibly influence hotels customer retention. These variables

include empathy, personalization, social bonding, relationship management and service recovery in case of service failure. From the literature overview above, firms should focus on managing customer satisfaction through customer relationship management. 3.0 methodology This chapter focuses on identifying the variables and strategies influencing customer retention in hotels. The positive as well as the phonological research paradigms will be used to test the clients perceptions, whereas the phonological will be used to gain insight into managers perceptions on the retention strategies employed by hotels. It gives an overview of the research design, research instruments, sampling techniques and data analysis techniques. 3.1 research design The researcher will use a comparative design order to compare, different customer retention strategies employed by hotels to curb customer defection. Qualitative and quantitative methods will be used to help reduce each others weaknesses and ensure accurate findings, and a case study method will be applied to find out the factors to be considered in customer retention efforts. Qualitative methods also enable the researcher to carry out detailed studies on individuals who are knowledgeable on the subject. Quantitative data collection refers to the practice of obtaining large amounts of statistical information making it easy for the researcher to analyze figures and data. Common quantitative methods for tourism research include surveys, questionnaires and fixed question interviews that are administered to tourism participants. Qualitative data, balances out the impersonal nature of facts and statistics with personal information provided by individuals associated with the research project. 3.2.1 Research population Research populations comprise of the participants of a research. These include General Managers, Chief Executive Officers, Marketing managers, waiters and customers. The major research area comprises 5 star hotels such as Meikles hotel, rainbow towers, elephant hills hotel and kingdom Victoria Falls hotel.

3.2.2 Sampling Convenience sampling will be used, and a exploratory pilot survey on this research will be conducted. 3.2.4 Sample size The study sample is the actual number of respondents who will take part in the study. The study sample comprises of four five star hotels as they are the thrust of success of the hotel business for tourism in Zimbabwe. One general manager, one sale and marketing manager, two employees and four customers will be interviewed. 3.3 research sources Primary research aims to focus on managing image of hoteliers for customer retention, qualitative perspective should deem the obvious choice to express the current reality in explanation and such objective was to offer grounding to secondary research and give the research in-depth information value and structure. In addition, sources of data can include primary and secondary sources that will involve first-hand information of research outcomes and certain literature studies from reliable books, peer reviewed articles and journal from such academic resources. 3.3.1 Primary data This refers to collection of data from the field. The respondents provide data as requested by the questionnaire of interviewee. Surveys in the form of questionnaires will also be used to fill gaps caused by factors affecting interview occurrence. Questionnaires will mainly be used for consumers and other employees through either researcher administered or self-administered, depending on respondents wish and will comprise both open and closed ended questions. 3.3.2 Secondary data To gather such data the researcher will collect all data from company records of guest patronage, it also includes information by other scholars such as newspapers, textbooks, journals and the internet.

3.4 data collection procedures The researcher will take the following steps to ensure reliability if data: The researcher will get a letter from the department for compliant assistance and easy identification.

Prepare a schedule

Collect relevant information of contact person for each hotel, contact information and address and location of each hotel for back-up facility. The researcher will make appointments with the hotels for interview times which do not coincide with peak hours of activity to ensure concentrated data collection processes free from bias.

Call each facility and confirm appointment the day before. Questionnaires will be dropped at various outlets with return addressed envelopes for feedback for distant respondents, but close respondents response will be collected in a week.

3.5 data presentation and analysis A conceptual framework which gives a clear picture of the subject will be used. Special line graphs will be used to show trends of hotel occupancy levels and the varying customer retention strategies employed to encourage repeat business and reduce customer defection.

3.6 data analysis In order to specify details of such analysis that can be good basis for assessing the research study as such attempt to further explore the research will be important in creating methods and process of research which will determine how far the particular choice of methodology in the form of questionnaire application could continuously lead to the same research measurement and such detailed results supporting aspects of the study.

the researchers could not guarantee consistency of results if another investigation of the topic was to be carried out at the same time using different research instruments. However, to counteract the unconscious deformation of information gathered and to strengthen the reliability of the primary research, case study presentation will have to be utilized. Despite the fact that limitations of the questionnaire in terms of depth and relevancy of information gathered could not be completely eradicated, the data to be apprehended and requested can be deemed appropriate for such type of research analysis. The focus of the research will not only be on data collection, but also on interpretation of data. The first step that data analysis will cover is the frequency distribution, which reflects how different values of a variable are encountered in the sample. Both absolute frequencies and relative frequencies will be reflected, Where the former will be represented as simple counts, while the latter will be Represented as percentages. Measures of centrality will be calculated for service quality, customer contact and reward programs .All of the data on tourism in the world does no good without a method of analyzing it. Tourism data can be analyzed either subjectively or objectively. A subjective analysis is usually applied to quantitative data. An objective analysis examines the data via the scientific method and in light of other studies that are indicated by the methodology.

References Bitner, M.J, Booms, B.M, & Tetreault, M.S., 1990, The Service Encounter: Diagnosing Favorable and Unfavorable incidents, Journal of Marketing, Vol. 54 no1, pp. 71-85 Bolton, R. N. (1998) A dynamic model of the duration of the customers relationship with a continuous service provider: the role of satisfaction. Marketing Science, Vol. 17(1), pp. 4565. Charkrabarty ,A (2006) barking at the wrong tree, - factors influencing satisfaction in banking in the UK, international journal for applied service marketing. Groonroos, C., 2000, Service Management and Marketing, A Customer Relationship Keaveney, S. M. (1995). Customer switching behavior in service industries: An exploratory study. Journal of Marketing, 59, 71-82. Kelly, S. W and Davis, M. A. (1994). Antecedents to customer expectations for service recovery. Journal of the Academy of Marketing Science, 22, 52-61. Manrai L,A and Manrai A,K (2007) a field study of customer switching behavior for services, journal of retailing and customer service. VOL 14 Reichheld, F. F., & Sasser, W. E. (1990). Zero defections: Quality comes to service. Harvard Business Review, 68, 105-111. Whiteley, R. C. (1991). The customer driven company: Moving from talk to action. Adelaide, Australia: Griffin.