Are We Ready for Markets of One?

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March 01, 2003
Customer | Relationship Management
Mary Loftness - Mary@ProfitableCustomers.co

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© 2003 Hospitality Upgrade. No reproduction without written permission.

The industry is abuzz with the pricing challenges that have arisen from marketing hotel rooms over the Internet. The guest is frustrated with how to get the best value, members of the financial markets express concern that hotel rooms have become a commodity, property revenue management staff, while happy that they’re no longer arguing average rate and occupancy battles, now pull their hair out about which channel to allocate what inventory and at what price. To regain control companies are pushing guests to book on their property Web sites, but is the guest really experiencing added value from this transaction?

Are we technically and culturally ready to offer pricing by the value of the individual customer? In the gaming business, it has been done for years – players who gamble more, get a better rate for their rooms; however, this is a manual process of customer valuation in most cases. A casino host or VIP services representative reviews the customer value and provides pricing to the guest – verbally. Alternatively, the casino or hotel offers a segment a special offer via direct mail or e-mail based on broad assessments of customer value and purchase potential.

In the perfect world a guest logs on to the Web site or calls the reservations center and enters his unique customer identifier (frequent guest number or player card number). The customer database is integrated and understands this guest’s profile and purchase potential. The customer is offered pricing based on customer value, purchase potential and an optimized revenue model. The offer may not be just about discounting either. The guest could be offered an upgraded accommodation or suite based on preference or the guest could be offered a special package based on the customer database information about golf, spa or dining purchase behavior. The trick will be in ensuring that this offer is the best value available to the guest over the specific time period.

Sounds easy, right? No! The establishment of a trustworthy customer value measurement or score for a guest is an enormous challenge. Establishing a source system for the customer value information can be a multi-million dollar IT investment. Then the process of integrating the customer database with the yield management system with the property management system – and making some part of this available to each distribution channel – sends most vendors run ning and screaming.

Is it really a market of one? Sometimes it is, sometimes not. Current yield management function could possibly be enlarged to manage more segments (also known as one-to-some marketing rather than one-to-one marketing). However each property has some guests who really are a market of one. A clear example of a market of one is the guest you never turn down or the guest you never want to return.

Hospitality Upgrade put the concept to the test with the team at IDeaS. Not surprisingly, they live this revenue-plus-customer value techno-babble every day. Is a market of one feasible? They said, “Yes!” Are there challenges? They said, “Lots!”

The upside potential, however, is huge in terms of incremental revenue, increased customer loyalty and improved staff productivity. According to Dr. Ravi Mehrotra, VP of business development for IDeaS, the challenges are the complexity of forecasting as the data becomes more and more disaggregated, and the complexity of establishing a comprehensive customer value measurement. Imagine having a computer system that could evaluate each customer in the same way you currently analyze the cost/benefit of your biggest annual rooms contract. It’s critical that the revenue generated from each customer from each outlet and service be integrated.

We could hope that the gaming industry would grab hold of this concept and start proving the benefits of a real-time customercentric pricing solution based on customer value.

First Take Baby Steps
For your markets of one, establish a special telephone number to call or a person to email to reserve for each visit. Protect these special guests. Assign one reservations agent to be the point person for high-value guests.

Use e-mail and your Web booking engine, with special private booking codes, to extend special offers for guests to accept electronically. When making offers to special segments of the customer database, make certain the offer is really special. Don’t mail an offer to valued past guests which is worse than the one you’re currently running in the newspaper.

Assign a guest history agent to review electronic reservations to ensure that if the guest has a frequent stay profile, that the guest is attached to their historical profile.

Review available technology for integrating the varying data sources at the property. Begin the process of establishing a true sense of customer value by integrating hotel, food and beverage, spa, recreation and gaming revenues into a master customer record. If your yield management process is currently not automated, it will need to be. If you think you’ve got several years to watch this all play out before you move forward, you are mistaken. There are major players moving now who will have competitive advantage with any shared customers when they provide real time, personalized pricing based on quality lifetime value assessments.

Mary Loftness is a CRM consultant for the hotel and gaming industries. She can be reached at Mary@ProfitableCustomers.com.

 

Core Requirements for Markets of One
  • A culture-focused company providing excellent service to its most valuable guests
  • Integrated customer contact systems via the call center, Web and in person
  • Automated yield management in place
  • Automated customer valuation processes in place


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