Does Remarkable Customer Service Drive Economic Recovery?

Depending on who you talk to, or which news channel you are following, there is chatter that our country is emerging from the recession… I wonder which dial or meter validates this magical news!!??  Reality is you can’t  flip a switch and announce our world is no longer in economic turmoil.  There are still plenty of signs we are not out of the danger zone.

While our Government claims the “recession is over” and the DOW is back above 10,000, that is only the tip of the iceberg.  In our business, the Meetings & Events world, the outlook is still difficult at best.  Across our industry hotels, associations, suppliers and other businesses are feeling the pain in a multitude of ways.

Sadly, in an era where “existing” customer relationships are more important than ever, budget cuts and service cutbacks occur all too frequently.  The historical survival strategy in a down economy has been for businesses to reduce fees, cut expenses, simplify or eliminate non-core services and reduce staff.  Ironically, this tactic may be “biting the hand that feeds them” … that of their existing customers.

It is questionable whether the above strategy has ever been optimal, but in our present situation it certainly isn’t.  Here are a couple of relevant discussions I found in my “blog surfing” addressing this issue:

• The Price of a Poor Experience — Peter Bregman, Blogger for Harvard Business writes about the relationship between membership loyalty, pricing and service experience in the context of “non-profit” associations.  His reference point is a consulting firm, called Measuring Success, which helps non-profits make decisions based on quantitative data. This firm collected data across hundreds of organizations and noticed something surprising about their successes and challenges in this economic downturn:

“First, what they didn’t find: there was no correlation between membership and price increases. In other words, customers didn’t leave simply because an organization raised its prices.

But they did find a different correlation: between membership and an organization’s net promoter score, which measures how likely a customer is to recommend the organization to a friend. It turns out that if customers liked an organization’s products or services enough to recommend them to others, then that organization could raise its prices, even in a down economy, without losing any of its customers. But if the organization downgraded the customer’s experience, then not even lower prices would prevent customers from abandoning it.”

• Toxic Hospitality Marketing Strategies — Madigan Pratt, in his blog article focusing on counterproductive hotel trends and strategies asserts the following:

“What happens in a hotel cycle [during a recession] is always exactly the same. Revenue dissipates, occupancies go down, hoteliers then sacrifice rates, discounting to boost occupancy. As they discount rates, they also decrease services and they cut back on every item of expense. Rates continue to fall as occupancy rises.” [Bloomberg Report]

Referencing Bregman (above) Pratt continues with these statements, “In the highly competitive hotel industry, people may be looking to pay less today but still expect to receive good value. Cutting rates while diminishing the guest experience will decrease a hotel’s “net promoter score” and brand value, which makes it more difficult to recover when the recession subsides.”

All year we have been hearing about the “new normal” in business; that things are going to be different “post-recession.”  Businesses are going to be more prudent about when and how they spend their financial resources.  As a natural by-product of their increased diligence, customer loyalty will shift to those organizations delivering the best customer service at a competitive fee.

So, in my mind’s eye (and many others) if I manage a hotel, or a service-providing business, I would be focusing on finding ways to deliver enhanced value to my customers at a moderate price point.  If I am an association or meetings professional, I would be brainstorming with my team to develop new services driving membership/attendee satisfaction (and therefore retention.)

In a highly competitive business climate customers have higher expectations.  If your organization does not deliver, they will look elsewhere and likely find what they need from someone else!

Question — Where does your company/organization fall on the service spectrum?  Are you delivering (positively) memorable customer service experiences to your clients, or are you just getting by with reduced resources?  What are you doing to distinguish yourself from your competition?

Let the conversation continue!