- by Iselin Skogland and Judy A. Siguaw, D.B.A.
Service companies worldwide spend billions every year on customer-loyalty programs and other preferred-guest programs aimed at getting their guests to continue their patronage, although it’s clear that many customers defect to competitors. One way to improve customer retention is to analyze guests’ behavior according to four distinct guest segments, which are based on their staying or switching behavior. The four groups are satisfied switchers, dissatisfied stayers, satisfied stayers, and dissatisfied switchers. Two groups, satisfied stayers and dissatisfied switchers, generally behave as one might expect-either staying or defecting based on their level of satisfaction. The other two groups, satisfied switchers and dissatisfied stayers, do not conform to expectations.
Most confounding are satisfied switchers, who report being satisfied but then choose alternative hotels, rather than routinely choosing the hotel with which they have expressed high levels of satisfaction. Thus, although marketers have long advanced the presence of guest satisfaction as instrumental in ensuring repeat business, satisfaction does not appear to drive repeat purchases for all consumers, as previously had been assumed. Also intriguing, dissatisfied stayers are unwilling or unable to exert the effort to identify and use alternative hotels, even though they are unhappy with elements of the hotel at which they stay.
Business travelers were the least satisfied, least loyal, and least involved of the guest segments. Additionally, business travelers were more likely to be dissatisfied switchers than other types of travelers. Hotel managers can use this information to better define those groups in which they want to develop strategic investments and from which they are most likely to obtain the greatest long-term value. The findings suggest that hotel companies should reexamine the target markets for their customer-retention programs to aim at customers groups that are most likely to respond to those programs.