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A market-driven approach to business development

and service improvement in the hospitality industry

John T. Bowen
Research Director (North America) Worldwide Hospitality and Tourism Trends

Reviews hospitality research factors that relate to booking patterns, price


relating to the themes of Introduction sensitivity of market segments, and the distri-
business development and The purpose of this article is to review hospi- bution channel’s tolerance for differential
service improvement. Relates tality research concerning the broad theme of pricing. Jeffrey and Hubbard (1994) developed
this to five sub-theme areas: business development and service improve- a model of occupancy performance that can
market sensitivity and com- ment. This theme is divided into five sub- be easily applied by hotel managers and oth-
petitiveness; segmentation; themes: market sensitivity and competitive- ers with access to hotel occupancy data. The
branding and service cus- ness; segmentation, branding and service model looked at two fundamental aspects of a
tomization; service quality customization; service quality and customer hotel’s occupancy performance: the propor-
and customer retention; retention; product design and internal mar- tionality component, which includes the
product design and internal keting. Journal articles from 1990 to June of effects of regular and periodic demand fluctu-
marketing. 1997 were used in this study. Abstracts of most ations, and the competitive components,
of the articles can be found on the WHATT which include local and unique forces.
CD. Bull (1994) investigated the contribution a
The objective of the study is to provide hotel’s location makes to the market value of
practitioners with suggestions and ideas for the hotel’s rooms. This methodology makes it
business improvement. Millions of dollars of possible to put implicit price-location con-
research are referenced in this article. The tours on an area map. The study also has
results of the research are not proprietary, implications for area growth that may affect
but available for all to use. For practitioners, the contribution of a property’s location to its
the article will explain the management room rate. Weatherford (1995) cited the
implications of the research. For academics, importance of incorporating a guest’s length
the article provides an overview of current of stay into the room allocation decisions. He
research by area and presents suggestions for claimed proper use of the length of stay
future research. dimension can increase revenue by up to 3
per cent. One of the problems with most yield
management systems is that they only look at
Theme 1: Market sensitivity and room revenue. Quain (1992) introduced profit
competitiveness analysis by segment (PABS). PABS takes into
account room and non-room revenue to deter-
The research in the area of market sensitivity mine the value of different market segments.
and competitiveness tended to be on yield As yield management matures in the hotel
management and positioning. The yield man- industry, more robust models will be devel-
agement research was grouped into two gen- oped that take into account total guest expen-
eral issues, pricing systems to increase yield ditures and the long-term value of the guest.
and the choice of market segments that would In developing yield management systems it is
create the highest yield. The positioning important that customer retention be
articles discussed the use of perceptual maps included in the model. Maximizing revenue
as a strategic tool. The methodology used in today has little value if it drives off tomor-
the positioning articles could be applied to row’s customers.
most hospitality companies, giving good
information for strategic planning. Positioning/perceptual maps
Dev et al. (1995) cited the need for managers to
Yield management monitor the implications of their marketing
The yield management articles are broken up strategies. The authors stated that managers
into conventional yield management articles need to examine the attributes that
and methods for choosing the market seg- consumers use to differentiate one hotel
International Journal of ments that will create the highest yield. Grif- brand from another and illustrated how man-
Contemporary Hospitality
Management fin (1995) provided an overview of yield man- agers can do this by using multidimensional
9/7 [1997] 334–344 agement and identified a number of critical scaling to build perceptual maps. Kim (1996)
© MCB University Press success factors for yield management sys- used perceptual maps to show how customers
[ISSN 0959-6119] tems. Among these are several environmental perceive food and beverage at competing
[ 334 ]
John T. Bowen Table I
A market-driven approach to Market sensitivity and competitiveness
business development and
service improvement in the Authors Focus Sub-theme
hospitality industry
Kim (1996) Positioning of food and beverage outlets in competing hotels Positioning/
International Journal of
perceptual maps
Contemporary Hospitality
Management Dev, Morgan and Used multi-dimensional scaling to build perceptual maps Positioning/
9/7 [1997] 334–344 Shoemaker (1995) perceptual maps
Mazanec (1995) Shows how self-organizing maps can be used to analyse a hotel’s Positioning/
position perceptual maps
Shaw (1992) Pricing from a strategic positioning viewpoint Positioning/
perceptual maps
Lewis (1990) Focus on customers rather than objective positioning Positioning/
perceptual maps
Knutson, Malk and Looks at when it may be profitable to turn business away Yield management
Schmidgall (1995)
Weatherford (1995) Length of stay as a variable in yield management Yield management
Bull (1994) Contribution of location to the price of a hotel’s rooms Yield management
Quain (1992) Including non-room revenue in yield management Yield management

hotels. Kim also developed ideal points to This section looks at research on segmenta-
show how a hotel can change its attributes to tion, branding, and service customization.
gain a better position vis-à-vis its competi-
tors. The methodology used in the study Segmentation
could be used to position different product or The segmentation research identifies product
product groups of a hotel or restaurant. attributes that create value for market seg-
Shaw (1992) investigated price from a strate- ments. This information is useful to compa-
gic positioning viewpoint. She explained how nies targeting these segments or companies
price has both a strategic component and a who may have a marketing mix that is valu-
tactical component. Shaw stated a positioning able to these segments. It is always advisable
approach focuses first on price levels, then on to replicate segmentation studies using data
actual price decisions for a specific product. from customers. Owing to time and regional
Shaw’s approach to pricing could help a differences, the wants of customer segments
brand achieve a desired position, which then can vary. The segmentation research also
could be validated through one of the percep- presents a variety of research techniques that
tual mapping techniques. can be used to give greater insight into what
the segments desire and the importance they
put on different product attributes.
Theme 2: segmentation, branding, Shaw et al. (1991) investigated product
and service customization attributes of hotel convention services that
create satisfaction among meeting planners.
It is no secret that different customer seg- The authors went beyond just looking at the
ments want different product attributes. mean ratings of the attributes. They devel-
Commissioned sales people want hotel rooms oped a multivariate approach to analysing
with a free telephone, while upscale business the data, which could be applied to similar
travellers want expedited check-in. Thus, one survey data to provide rich information.
of the first decisions for a company is to Several studies looked at specific segments.
decide what segments it wants to target. This For example, Wight (1996) researched eco-
will determine the company’s marketing mix. tourism and divided it into two market seg-
As segments grow and decline, a company ments: general consumers interested in eco-
must constantly review its segmentation tourism and experienced ecotourism trav-
strategy, looking for viable segments that are ellers. Her findings are useful for resorts that
compatible with the company’s objectives and are interested in catering to this market.
products. After a company chooses a target Callan (1996) compared UK leisure travellers
market, the company must position itself in with business travellers on their importance
the marketplace vis-à-vis the other companies ratings of hotel attributes. Makens (1992)
that are going after the target market. Two investigated catering to the family market
ways of accomplishing this positioning are at resorts. The article provides some case
through branding and service customization. studies of resorts that have children’s
[ 335 ]
John T. Bowen programmes. For more studies that looked at King and Pizza Hut outlets even though they
A market-driven approach to specific segments, see Table II. have the ability to produce products that have
business development and Conjoint analysis gives insight to the a similar quality. Hotels are contracting out
service improvement in the
hospitality industry
importance that customers place on different their food service to local providers and
product attributes. Several studies provided chains that have a strong image. Thus, brand
International Journal of
Contemporary Hospitality examples of how conjoint analysis can be management is an area that is emerging as an
Management used in segmentation studies. Hu and Hiem- important marketing area.
9/7 [1997] 334–344 stra (1996) used hybrid conjoint analysis to The research on branding was scarce, indi-
measure meeting planners’ preferences in cating a need for future research in this area.
hotel selection. Becker-Suttle et al. (1994) used Hallam and Baum (1996) surveyed hotel man-
conjoint analysis to explore restaurant bene- agers in North America and the UK to gain
fits sought by seniors and non-seniors. perceptions of why hotels may contract out
The use of neural networks, a type of artifi- portions or all of their food and beverage
cial intelligence, is becoming a popular seg- operations. One of the major reasons cited in
mentation technique. It is often used in data the study was that a branded or well-known
mining tools to discover relationships between operator could help attract more accommoda-
customers, identifying customer segments tion guests. Thus, managers saw a branded
that might not be apparent to the marketer. restaurant as an amenity that was valued by
Mazanec (1992) illustrated the usefulness of the lodging guests. Connell (1992) looked at the
neural networks by segmenting tourists. benefits and problems of branding in the hotel
industry. He used the rebranding of Forte
Branding after the acquisition of Crest as a case study.
Customers develop brand images, or a set of
beliefs, about where each brand stands on Customization
different product attributes. One of the trends Effective guest history systems now make it
in the hospitality industry is to use brands possible to customize guest service. Unpub-
that have a positive brand image, rather than lished research by Bowen and Shoemaker
a company’s own products which may have found that customized services were one the
little brand image. For example, many hotels most important attributes to luxury hotel
and catering companies in the USA are using customers. Ritz-Carlton used guest history
kiosks to sell Starbucks Coffee, which has a very effectively to produce customized ser-
strong brand image. ARAMARK, a contract vices (Partlow 1993). Dev and Ellis (1991)
food service company, franchises Burger presented a guest history management model

Table II
Segmentation, branding and service customization
Authors Focus Sub-theme
Callan (1996) Leisure and business travellers Segmentation
Hu and Hiemstra (1996) Conjoint analysis as a segmentation tool – benefits sought Segmentation
by meeting planners
Oh and Jeong (1996) Expectation based segmentation Segmentation
Wuest, Tas, and Assessed the importance of services provided by hotels/ Segmentation
Emenheiser (1996) motels as perceived by mature travellers
Wight (1996) Ecotourism Segmentation
Becker-Suttle, Weaver Conjoint analysis as a segmentation tool – benefits sought Segmentation
and Crawford-Welch (1994) by seniors and non-seniors
Weaver and Oh (1993) Service requirements of frequent and infrequent business Segmentation
travellers
Ananth, DeMicco, Moreo Conjoint analysis as a segmentation tool benefits sought Segmentation
and Howey (1992) by seniors and non-seniors
Makens (1992) Families with children at resorts Segmentation
Mazanec (1992) Use of neural networks to segment Segmentation
Hallam and Baum (1996) Leasing of hotel food and beverage operations Branding
Connell (1992) Problems and benefits of branding in the hotel industry Branding
Partlow (1993) Ritz-Carlton Service customization
Sparks (1993) Using guest history to customize services Service customization

[ 336 ]
John T. Bowen and explained how it could be used to cus- is escorted to the room. The experience of
A market-driven approach to tomize service for repeat guests. Customiza- checking into a hotel is an example of func-
business development and tion of services can create a competitive tional quality. Excellent functional quality
service improvement in the advantage by increasing guest loyalty. may make up for a room that is not quite up
hospitality industry
to expectations. If functional quality is
International Journal of unpleasant, a high-quality room might not
Contemporary Hospitality
Management Theme 3: service quality and overcome the guests’ previous dissatisfac-
9/7 [1997] 334–344 customer retention tion.
What is service quality? Models of quality management
A distinction can be made between two types
For a good introduction to service quality see
of quality: product features that enhance
a series of articles by Johns (1992a, 1992b,
customer satisfaction and freedom from defi-
1993). In these articles he presented a compre-
ciencies that increase customer satisfaction.
hensive overview of quality management in
The first type of quality, product features,
the hospitality industry. Partlow (1993) pro-
adds to the cost of the product. Customers vided a comprehensive overview of how Ritz-
must be willing to pay for either the added Carlton won the Malcolm Baldrige Award. In
costs of additional product features or these the article, Partlow presented an overview of
features must make them more loyal. For Ritz’s quality management program. Later,
example, lettuce and tomato is found only on Partlow (1996) focused on the human resource
McDonald’s more expensive hamburgers. practices that support TQM. Heymann (1992)
Hotel rooms on concierge floors have more provided a ten-point model for quality man-
features than standard rooms and command a agement.
higher price. La Quinta Inns offers free local
telephone calls to encourage loyalty among Measuring service quality
salespeople. A service quality audit can identify problems
The expectations of guests are formed by when a firm is first developing a quality man-
company image, word of mouth, the com- agement programme or it can be used to
pany’s promotional efforts, and price. A guest audit an existing programme. Luchars and
paying $35 for a room at a Motel 6 or Formula Hinkin (1996) developed a service quality
1 will have different expectations from a guest audit that can be used to identify errors and
paying $250 for a room at a Four Seasons determine their frequency, assign costs of
Hotel. The person staying at the budget hotel fixing (or not fixing) the errors, and identify
may be perfectly satisfied. The room features steps to prevent them. They provided a case
meet their expectations. The first type of study of a New York hotel to illustrate their
quality, product features, relates to guest service-quality audit.
expectations. People staying in a budget hotel SERVQUAL developed by Parasuraman et al.
may perceive it as the best quality motel for is one of the most popular instruments for
less than $40. They are not comparing it to a measuring service quality. Knutson et
Four Seasons Hotel. Both the guests of a al.(1991) adapted SERVQUAL into a specific
Motel 6 or Formula 1 and a Four Seasons instrument for hotels. They tested the relia-
Hotel will expect the room to be free from bility of their instrument, LODGSERV, and
deficiencies. For example, guests at the Four found it to be a reliable instrument. Later
Seasons and those at the budget hotel are Stevens et al. (1995) developed DINESERV for
both likely to get upset if they return in the measuring service quality in restaurants.
evening to rooms that have not been made up. Barsky (1992) discussed a theoretical model of
There is another way to view quality. A customer satisfaction and then tested the
distinction can be made between technical model using a survey instrument. Using his
and functional quality. Technical quality survey instrument, he was able to support his
refers to what the customer is left with after hypothesis that intent to return will be posi-
the customer-employee interactions have tively related to customer satisfaction.
been completed. For example, technical qual-
ity relates to the guest room in the hotel, the Customer retention
meal in the restaurant, and the car from the One desired outcome of service quality is
rental agency. Functional quality is the customer retention. The following research
process of delivering the service or product investigated customer retention. Dube et al.
(Grönroos, 1982). While the service is being (1994) used conjoint analysis to show the
delivered, customers go through many inter- overall utility of seven service-quality attrib-
actions with the firm’s employees. A guest utes that all bear significantly on customers’
makes a reservation, is greeted by the door intent to return. The authors’ methodology
attendant, is escorted to the front desk by a provides managers with information that
bellperson, checks in with the desk clerk, and will help justify (or not justify) the costs of
[ 337 ]
John T. Bowen Table III
A market-driven approach to Customer retention and service quality
business development and
service improvement in the Authors Focus Sub-theme
hospitality industry
Partlow (1996) Human resource practices that support TQM Models of quality management
International Journal of
Contemporary Hospitality Yasin and Benchmarking Models of quality management
Management Zimmerer (1995)
9/7 [1997] 334–344
Page (1994) Case study of Sutcliffe Catering’s approach to Models of quality management
continuous improvement
Partlow (1993) Overview of Ritz Carlton’s TQM programme Models of quality management
Heymann (1992) TQM model Models of quality management
Johns (1992a, Overview of quality management in hospitality Models of quality management
1992b,1993) industry
Watson, McKenna Barriers to successful implementation of TQM and Models of quality management
and McLean (1992) ways to overcome these barriers
Lee and Hing (1995) Use the SERVQUAL instrument to measure quality Measuring quality
in restaurants
Stevens, Knutson Developed DINERSERV to measure consumer’s Measuring quality
and Parton (1995) perception of quality in restaurants
Almanza, Jaffe and Measuring satisfaction and importance of product Measuring quality
Lin (1994) attributes
Barsky (1992) Customer satisfaction and retention Measuring quality
Knutson, Stevens, Developed LODGESERV, a 26 item index to measure Measuring quality
Wullaert, Patton and consumer’s perception of quality in the hotels
Yokoyama (1992)
Knutson et al. (1990) LODGESERV Measuring quality
Callan (1990) Found a wide diversity of opinions among travel industry Measuring quality
journalist’s measurement on the value of qualitative
award schemes as a measure of service quality
Buttle and Bok Used theory of reasoned action model to predict Customer retention
(1996) intention to return
Dube, Renaghan and Investigated service attributes that are related to Customer retention
Miller (1994) intention to return
Reid and Reid (1993) Communication strategies relating to customer Customer retention
retention
Toh, Rivers and Frequent guest programmes Customer retention
Withiam (1991)

improving quality. Toh et al. (1991) researched desired by its target market. The articles
the effectiveness of frequent-guest on service design were on both the macro
programmes in hotels. They found many of and micro level. Some articles looked at the
the programmes were not effective in creat- overall design of a hospitality operation,
ing repeat customers. The authors provide while other articles looked at specific
insights on how the programmes could be issues. This section will first review the
improved. Buttle and Bok (1996) provided an macro articles and then discuss the micro
overview of Fishbein’s theory of reasoned articles.
action. They found two predictor constructs:
attitude towards the act, and subjective norm Comprehensive design models
jointly explain about 65 per cent of the inten- Pannell Kerr Forster Associates (1993) con-
tion to stay in a hotel on the next trip. cluded that hotel design factors can be sum-
marized into three areas: market factors
including customer requirements, competi-
Theme 4: product design tive influences and trends; impact of new
A company must build a service delivery technology enabling new services or
system that provides product attributes increased levels of comfort to be available
[ 338 ]
John T. Bowen Table IV
A market-driven approach to Product design
business development and
service improvement in the Authors Focus Sub-theme
hospitality industry
Verma and Thompson Design model using discrete choice analysis Comprehensive design model
International Journal of
(1995)
Contemporary Hospitality
Management Elliott and Johns Trends in resort designs Comprehensive design model
9/7 [1997] 334–344 (1995)
Pannell Kerr Forster Hotel design Comprehensive design model
Associates (1993)
West and Purvis (1993) Looks at hotel design effectiveness Comprehensive design model
Miner (1996) Menu items New product design
Shoemaker (1996) Importance of scripts in new product development New product design
Jones (1995) Applies a model for new product development to New product design
airline catering
Makens and Bowen Restaurant merchandizing Specific products
(1996)
Bowen and Morris Menu design Specific products
(1995)
Goldman (1993) Restaurant concept selection Specific products
Monteson and Singer Spa at resorts Specific products
(1992)

and leading to improvements in construc- Specific products


tion techniques and choice of materials Another set of research looked at the design
used; and statutory requirements affecting of special projects. Goldman (1993) discussed
the design and construction of buildings and the importance of concept selection for inde-
specific legislation relating to hotels. pendent restaurants. He discussed the differ-
Verma and Thompson (1996) illustrated ent external factors that affect concept selec-
how discrete choice analysis can be used to tion. Makens and Bowen (1996) discussed mer-
design business concepts based on the chandise opportunities for restaurants.
importance that customers place on differ- Design consideration for restaurants wanting
ent product attributes. The researchers use to implement a merchandising programme
delivery pizza as an example, but the tech- include space to merchandise the products
nique could be applied to the development or and storage space. Bowen and Morris (1995)
design of any concept. looked at the design of a menu to increase
product sales. They found that menu design in
New product design a sit-down service restaurant may not be as
Several articles looked at the development of effective in selling products as previously
new products. Jones (1995) applied Scheuing thought. Monteson and Singer (1992) explain-
and Johnson’s model for new service devel- ed how spas can add value as an amenity in a
opment to flight catering. His research found destination hotel or resort. They gave advice
that airlines lack many of the systematic on how to manage and market a spa properly,
procedures suggested by Scheuing and John- so it creates maximum value for the guests
son. Shoemaker (1996) looked at how cus- and adds to the bottom line of the hotel.
tomers develop a series of actions regarded Conner (1991) focused on how renovations
as necessary or appropriate for a service could capture the original glitz and glamour
transaction. Variations from the script can of the hotel, while making the hotel opera-
be a source of dissatisfaction. Thus, when tionally efficient. Conner provides specific
developing new service delivery systems, examples from design renovations in New
companies must assist customers in York City. Knapp (1991) provides a case study
developing a new script. Miner (1996) pre- of the renovation of the Sheraton Palace in
sented a customer focused approach to devel- San Francisco.
oping new products in a restaurant. The six
stage process includes product ideas, initial
Theme 5: internal marketing
evaluation, consumer reaction, sensory
testing, field testing, and product The hospitality industry is unique in that
introduction. employees are part of the product. When
[ 339 ]
John T. Bowen Table V
A market-driven approach to Internal marketing
business development and
service improvement in the Authors Focus Sub-theme
hospitality industry
Ross (1994) Explores how they work Culture
International Journal of
Contemporary Hospitality Meudall and Gadd Culture in short life organizations Culture
Management (1994)
9/7 [1997] 334–344
King and Garey Environment’s influence on employee attitudes Culture
(1997)
Shimko (1994) Barriers to service orientation Service orientation
Dienhart et al. (1992) Factors that influence service orientation Service orientation
Dienhart et al. (1991) Factors that influence service orientation Service orientation
Barsky (1992) World class service Service orientation
Samenfink (1991) Predicting service orientation Service orientation
Francese (1993) Organizational structures and customer satisfaction Service orientation
Brownell (1994) Management-employee communication Listening
Sparks (1994) Communication and customer satisfaction Listening
Lashley (1997) Framework for employee empowerment Empowerment
Lashley (1995) Benefits of empowerment Empowerment
Sparrowe (1994) Psychological empowerment Empowerment
Brymer (1991) Framework for employee empowerment Empowerment
Hales and Use of internal marketing in British Hotels which are Internal marketing – overview
Mecrate-Butcher (1994) part of consortia

people think of marketing, they usually think earlier work by the authors on short-life orga-
of efforts directed externally towards the nizations.
marketplace; but a hotel or restaurant’s first
marketing efforts should be directed inter- Service orientation
nally to employees. Managers must make If management expects employees’ attitudes
sure that employees know their products and to be positive towards the customer, manage-
believe that they are good value. The employ- ment must have a positive attitude towards
ees must be excited about the company they the customer and the employees. Too often
work for and the products they sell; other- organizations hire trainers to come in for one
wise, it will be impossible for the guests to day to get their customer-contact employees
become excited. External marketing brings excited about providing quality customer
customers into the hotel but does little good if service. The effect of these sessions is usually
the employees do not perform to the guest’s short-lived because the organizations do little
expectations. The sub-themes identified in to support the customer-contact employees. A
the research relating internal marketing company must develop policies and an orga-
include culture, service orientation, empow- nizational structure to support its service
erment and listening. orientation.
Barsky (1996) described how to build a sys-
Culture tem to deliver world-class service. In the arti-
An internal marketing programme flows out cle he provided numerous examples from
of a service culture. A service marketing hospitality firms, including a sample of a
programme is doomed to failure if its organi- guest survey. Barsky also provided examples
zational culture does not support serving the of how to map the customer cycle. At the
customer. It is difficult to establish an effec- heart of this process is a step that redesigns
tive culture in a permanent organization and exiting processes based on both customer and
even harder to establish a culture in a tempo- employee input. The second part of this step
rary organization. Meudell and Gadd (1994) is to develop employee programmes that
looked at the establishment of a culture in support the new processes.
short-life organizations. The authors used an Shimko (1994) explained how existing
organizational beliefs questionnaire to inves- decision-making polices, coupled with the
tigate the National Garden Festival Wales’ manner in which organizations reward con-
organizational culture. This article built on forming behaviour, may result in polices that
[ 340 ]
John T. Bowen prevent employees from providing optimal support. Most of the research on empower-
A market-driven approach to customer service. King and Garey (1997) ment dealt with the process of empowering
business development and looked at how the organizational context in employees.
service improvement in the which a service encounter takes place affects Brymer (1991) presented a framework for
hospitality industry
employee interactions with customers, and implementing employee empowerment and
International Journal of resulting guest satisfaction. They found that also provided some guides which will help
Contemporary Hospitality
Management stress-related factors including a bureau- measure the results of empowerment. Lash-
9/7 [1997] 334–344 cratic climate were negatively related to ley (1995) provided an overview of the benefits
guest satisfaction ratings. Dienhart et of empowerment and illustrated how differ-
al.(1991) and Dienhart et al. (1992) investi- ent hospitality companies have implemented
gated factors that might influence restaurant empowerment. Lashley (1997) later provided
employees’ degree of service orientation. The frameworks for employee empowerment and
authors developed a questionnaire that was called for research to investigate the tradeoffs
administered to supervisory and non-super- between employee empowerment and
visory employees. The results of the research improved organizational performance. Spar-
suggest that increasing employee’s job rowe (1994) proposed that investments in
involvement, job satisfaction, and job secu- psychological empowerment among hospital-
rity could assist in improving their overall ity employees seem worthwhile, as satisfac-
service orientation. tion with promotion opportunities should
rise and intent to leave should decline. Thus,
Listening empowerment can not only lead to guest
Perhaps one of the most important research satisfaction, it can also result in employee
areas of internal marketing is the manage- satisfaction.
ment of listening. Employees have the poten-
tial for collecting information directly from Thematic interrelationships
the guests. Through proper training and The linkage between the themes is shown in
information collection systems employees Figure 1. Through market analysis, percep-
can provide more information than market tual maps are developed providing insights
research costing tens of thousands of dollars. into attractive market segments. Much of the
However, for these systems to work, employ- research in the area of market segmentation
ees must trust the organization. Good com- focused on the importance different market
munication between employees and man- segments place on product attributes. The
agers not only provides good customer infor- target market determines the design of the
mation, but it also supports a service culture product. Quality management ensures that
by identifying management problems and the product is being delivered at a level which
solutions to those problems. Several will create repeat business. Quality measure-
researchers investigated the area of listening ment validates that the quality management
and communication. system is working. The quality measurement
Brownell(1994) focused on the importance also monitors changes in wants and expecta-
of managers creating an environment that tions of the target market. Changes in market
fosters good communication between employ- expectations or wants can be met through
ees and management. She stated, “The vision product redesign. Thus, the link between
of strong listening environments may foster quality measurement and product design
practices and attitudes that become the most indicates an ongoing process of shaping the
important tools managers bring with them product to meet the needs of the target mar-
into the twenty-first century”. Sparks (1994) ket.
found that customers evaluate the quality of Since employees are part of the product,
the service, in part, on the manner in which they need to be included in the design of ser-
information is communicated by employees. vice delivery systems. Employees that deliver
Thus, part of customer satisfaction is depen- good service also contribute to the quality of
dent on the ability of employees to listen to the organization and will be included in the
customers and communicate with them. quality management process. Finally, quality
impacts on brand image.
Empowerment Customer retention is one of the objectives
Empowerment has been associated with a of most businesses. Figure 1 shows that
number of benefits including increased brand image, service customization, and
employee and customer satisfaction. The internal marketing all affect customer reten-
increased customer satisfaction comes tion. At the heart of this model is the target
through better complaint resolution, ability market or customer. When a company
to customize products, and more responsive chooses a market segment that can create
service. One problem in the implementation value for the firm, then the firm must
of empowerment can be lack of management deliver a product that creates value to the
[ 341 ]
John T. Bowen market segment. The literature reviewed in Barsky, J.D. and Laubagh, R. (1992), “A strategy for
A market-driven approach to this article will help hospitality managers customer satisfaction”, The Cornell Hotel and
business development and gain insight into the process of choosing the Restaurant Quarterly, Vol. 33 No. 5, pp. 32-40.
service improvement in the right target markets and delivering value to Becker-Suttle, C.B., Weaver, P. and Crawford-
hospitality industry Welch, S. (1994), “A pilot study utilizing con-
their target markets.
International Journal of joint analysis in the comparison of age-based
Contemporary Hospitality segmentation strategies in the full service
Management restaurant market”, Journal of Restaurant
9/7 [1997] 334–344 Summary and conclusions and Food Service Marketing, Vol. 1 No. 2,
This article reviewed a broad set of research pp. 71- 91.
Bowen, J. and Morris, A. (1995), “Menu design:
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