Assessment title: Literature Review Assessment type: Literature Review DUE DATE: Week 21 / Friday 21 June 2019
Assessment weighting: 50%
Word limit: 2500 Equivalent
Aim: This literature review aims to develop students' ability to review and critically analyse the factors that influence customer satisfaction and loyalty in the hospitality service industry. ITask: Your task is to select four (4) factors influencing customer satisfaction and customer loTilly 1 in a hospitality industry (i.e. hotels, restaurant, winery etc.) of your choosing.
The literature review must use a minimum four (4) factors from the topics below:
• Topic 6: Pricing service product • Topic 10: People as strategy - customer • Topic 11: People as strategy - employees • Topic 13: Service quality • Topic 14: Handling customer complaints and service recovery
The literature review requires you to:
• Explain the factors and the effect they have on customer satisfaction and customer loyalty • Address the importance of the factors as predictors of customer satisfaction and customer loyalty. Assessment format 1.0 Introduction • Clearly specify the aim • Indicate the scope of the discussion
2.0 Literature Review
2.1 Factor 1 • A summary of the factor and its relationship to customer satisfaction and customer loyalty • Why this factor is important to understanding customer satisfaction and customer loyalty
2.2 Factor 2 • A summary of the factor and its relationship to customer satisfaction and customer loyalty • Why this factor is important to understanding customer satisfaction and customer loyalty
2.3 Factor 3 • A summary of the factor and its relationship to customer satisfaction and customer loyalty • Why this factor is important to understanding customer satisfaction and customer loyalty 2.1 Factor 4 • A summary of the factor and its relationship to customer satisfaction and customer loyalty
ASSESSMENT 3: LITERATURE REVIEW
This report chiefly focuses on performing a literature review on the subject of hospitality management and the improvement of the same. Several literary articles were studied in this process to primarily cover the factors of pricing service product, People as strategy, including both customers as well as the employees and the handling of complaints or grievances by the customers and immediate service recovery. A number of theories and concepts have been found t be applicable in this regards as well.
The report primarily aims at the development of the knowledge and understanding of the abilities of students to comprehend the several factors involved in influencing loyalty and customer satisfaction in the hospitality industry. Furthermore, the project aids in the understanding of the importance of the identified factors in the development of customer satisfaction has been established.
Since this study is principally focused on students in the hospitality industry, the scope is considered to be widespread. Firstly, the hospitality industry is extensive and covers a number of sub-industries in itself. In addition to that, the hospitality sector is constantly growing; therefore a prominent scope is quite evident for the study. This report focuses in studying the four major factors, namely, pricing service products, using people as a strategy and handling and resolving customer complaints of the consumers for the better and effective management of the hospitality services to ensure customer loyalty and satisfaction. Upon studying this paper, it is to be evident that there are several factors which influence the role of customers and employees in the hospitality industry. Hence, it provides the students with an opportunity to improve these particular segments by focusing on them by comprehending the relevant literature on the subject.
The article by Jeong & Lee (2017), thoroughly discusses major strategies often implemented by hotel managers to redeem or resuscitate the services for the appropriate functioning of the hospitality services at a hotel. The service recovery is a part of the customer grievance handling and is implemented once the customer complaints are handled (Han & Ryu 2009). Figure 4 illustrates the importance and the cost of improving customer service for rendering a better experience does not necessary the overall cost of operations but brings a significant increase in sales of the organisation (Mensah & Dei Mensah 2018). Furthermore, Figure 4 depicts that an increase in the number of customers is also evident in this regards. According to Jeong & Lee (2017), customers are bothered and driven by their effectiveness and superiority in terms of determining the resolution of the complaints and hotel service recovery. It may be stated that the recovery efforts made by the hotel management or the management in-charge may be noted to be acknowledged by customers in case the services are recovered and the complaints are adequately addressed (Jeong & Lee 2017).
It may be mentioned in this context that despite being prevalent, this particular employee motivation strategy is often opposed by many, but considered to be effective by most (Gibbs et al. 2018). According to Sutton et al. (2004), the empowerment of employees may be brought about only in case the managers or the management body of the hospitality institution is well-informed. In addition to that, the paper by Wu (2011) primarily focuses on the development of the interpersonal relationship between the customers and the employees. Though the strategy may seem to be thoroughly customer-oriented, the strategy may prove effective in maintaining a cognitive psychological balance among employees. This may eventually lead to better employee satisfaction and therefore employee retention. Furthermore, this is reflected in the performance of employees which leads to improved customer services and customer satisfaction and the development of customer loyalty.
The characteristics of food, determines the quality, which is acceptable to the customers (Gibbs et al. 2018). According to Gibbs et al. (2018), there are external as well as internal factors involved in the determination the food quality. For instance the major external features are shape, size, colour, quantity, consistency and gloss. However, these external factors vary from item to item being served to the customers. In addition to that, it may be stated in this context that other factors such as compliance with the grade standards determined and set by the legislative and regulatory bodies of the country of service (Repetti et al. 2015). Furthermore, internal factors, include chemical composition such as pH, microbial content or microbial load and other physical factors.
It may be stated that having adequate knowledge regarding the food, the services to be provided, as well as the pricing, considering what is worth the value is essential. Ladki (1993) demonstrates the applicability of the customer satisfaction theory as well as the customer self-concept theory. It may be stated in this regards that the calculation of a negative Mallow’s Coefficient is considered to imply that the physical attributes did not play a crucial role in the further visits by customers (Ladki 1993). However, the factors of food quality may be attributed to one of the major factors for customer satisfaction and customer retention. Furthermore, these factors contributed to the impact on the consumers on their first visit (Lai 2015).
According to Ladhari (2008), a comparative analysis of the perceived standards or expectations denoted by E, while the perceived performance is denoted as P. The calculation of service quality is often mathematically represented as SQ=P-E. The expectations of a consumer is kept high, and the contemporary conceptualisation states that the performance is measured against the expectations of the client. Kim et al. (2014) states that high service quality in the hospitality industry can be identified through meeting or even exceeding the customer expectations, at the same time remaining economically feasible and competitive. Furthermore, research establishes that improved service quality leads to long-term competition as well as enhanced profitability. According to Kim et al. (2014), service quality may be improved through an improvement in the operations as well as focusing on the identification of issues in the service provisions and the development of a contingency plan. Providing quality services, including quality food is essential within a budget. Food is a major factor in the hospitality industry, and it is the one constant which cannot be compromised on,. It may also be emphasised that customers have even been willing to pay more in case of quality food and services.
According to the study by Bateson (2002), Script Theory may be applied in explaining the role of cognitive psychology among the customers and their overall experience in the development of satisfaction. Furthermore, psychological aspects are to be taken into consideration in order to study and analyse the influence of the net customer experience into the development of customer loyalty (Bateson 2002). Figure 1 illustrates the major factors and the impact that it has on developing customer loyalty. For instance, 72% of the respondents in the study conducted stated that the customer experience played a vital role in the willingness of consumers to be loyal to the brand (Alhelalat et al. 2017). Additionally, 40% of the participants mentioned that they were willing to pay extra charges for a better experience (Alhelalat et al. 2017). Hence, it may be emphasised that service quality played a vital role in developing customer satisfaction and loyalty.
Figure 1: Factors affecting customer loyalty and experience
(Source: Alhelalat et al. 2017)
The article by Ladhari (2008), mentions that emotional factors play a crucial role in the development of factors constituting a major satisfactory experience of the customers. Furthermore, the determinants as well as the consequences of the satisfactory experience have been identified and further investigated in this article (Ladhari 2008). It has been evident that positive emotional impact can be emphasised in case of positive customer experience in the hospitality sector (Ladhari 2008). Therefore, the use of strategies which may cater to the development of customer satisfaction, willingness to pay more as well as develop customer loyalty may be established through positive emotional impact (Ladhari 2008). In addition to that, the paper by Kim et al. (2014), it has been evident that culture has also been known to influence customer satisfaction and loyalty. It is to be noted that responsiveness in terms of customer service is essential. For instance, according to several studies, it has been evident that adding comments such as “Please provide your feedback”, “Contact Us”, “We value your opinion” have aided in better customer satisfaction.
Kim et al. (2014) state that it is therefore imperative that the strategies devised to influence the customers should be primarily customer-oriented. For instance, grievance handling for customers along with the provision of maintaining a perfectly operational or functional professional relationship with the customers is one of the most effective strategies in the hospitality industry (Wu 2011). In addition to that, resolving the issues require certain mitigation strategies which positively impact customer satisfaction, enabling their retention and loyalty. As per Wu (2011), a Hierarchical moderated regression analysis was implemented in understanding and exploring the various factors contributing to the development of customer satisfaction. The article by Wu (2011) states that satisfaction does not always result in the generation of customer loyalty, while at the same time, it is wrong to assume that dissatisfaction would necessarily result in defection. Nevertheless, the behaviour of the consumers is strongly justified through the use of credence attributes services, along with the locational convenience and interpersonal relationships which strongly influence and drive customer satisfaction (Pettijohn et al. 1997).
Figure 3: Conceptual model of customer satisfaction and customer loyalty
(Source: Wu 2011)
It has been evident in research conducted with regards to marketing in the hospitality industry that interpersonal relationships between the consumers and the service providers, aid in bonding of the customers, leading to a better service experience (Pettijohn et al. 1997). Additionally, the barriers identified in customer loyalty and customer satisfaction may be effectively overcome with the aid of a positive impact through the development of interpersonal relationships (Pettijohn et al. 1997). Furthermore, the aforementioned interpersonal relationship may be established through the social interaction between the individuals (Meuter et al. 2000).
According to Lai (2015), price is an important factor in the hospitality industry as there are a number of strategies that revolve around the profitability of the business. It may be stated that differential pricing, dynamic pricing are several pricing strategies which are implemented in the hospitality industry in accordance to the profitability goals of the organisation. The primary objective of customers going to restaurants is chiefly focused on the quality of food, apart from other major factors such as the physical environment or the ambience as well as the price factors.
Additionally, there are a number of tactics used in the hospitality industry in Dubai, as per the article by Sutton et al. (2004). Chief among the strategies implemented is the empowerment of the employees within the overall operations of the hotels (Lai 2015). Though catering to the customers is regarded as one of the major factors in developing customer loyalty and satisfaction, it is imperative that it develops respect within the organisational culture in the hospitality industry (Lai 2015). According to Wu (2011), this particular factor is related to the development of customer loyalty and satisfaction as it contributes to the sense of value for money among the customers. Analysing the services provided to the consumers for a specific sum of money develops an understanding of the worth of the service, and whether the sum invested for the particular service is worth the price imposed (Kim et al. 2014). As per the article by Jeong & Lee (2017), the value for money is related proportionally to the development of customer loyalty and satisfaction.
Figure 3: Factors involved in pricing service products
(Source: Kim et al. 2014)
As depicted in Figure 3, the major factors involved in pricing service products are namely, value offering, expertise in the field, as well as the attainment of the break-even cost. In addition to that, it has been evident that the competitive advantage, customer requirements, customer demographics are known to play a crucial role in this regard. According to the literature by Castro et al. (2016), it is evident that the current pricing trends play a major role in influencing the loyalty as well as the satisfaction among the consumers. A case of the cities of Lisbon and Porto in the country of Portugal is demonstrated in the paper. Additionally, Castro et al. (2016), focuses on the major attributes namely, the room features as well as the hotel characteristics are responsible for the determination of room rates in these rentals. Therefore, offering the consumers value for money for the services provided is evident in this regards. Castro et al. (2016), in their paper, have implemented the hedonic pricing method, which enables a proper understanding of the impact of the perception of each of the aforementioned feature of the hotel rental facilities on the customers' value for money conceptions. The results depicted the importance of room size, star ratings and customer ratings to play a major role in the pricing as well as the likelihood of staying at the particular hotels (Castro et al. 2016).
In addition to that, the paper by Han & Ryu (2009), demonstrated that there are a number of factors positively and negatively influencing customer satisfaction and loyalty, chief among them is the price perception and physical environment. Han & Ryu (2009) differentiates the perceived price as the price which is encoded by the customer, while objective price refers to the actual cost or price of the service or the product offered. In addition to that, it has been evident that the process of customer price perception is chiefly dependent on the ways how the price can be meaningful to the consumers (Bettencourt & Brown 2003). Moreover, it may be emphasised in this regards that the price perception has been noted to be strongly influenced by the ambient conditions in the physical environment and the attributes of the customer, which is directly involved in influencing customer satisfaction (Priporas et al. 2017). Customer satisfaction may further be evaluated to contribute to customer loyalty.
Moreover, research conducted by Repetti et al. (2015), demonstrates a comparative study on the factual pieces of evidence implying whether customers in the hospitality industry prefer bundled pricing or partitioned pricing through a la carte strategies. It has been evident that 67% of the consumers had preferred a bundled pricing over partitioned pricing as it added to the convenience of the consumers (Repetti et al. 2015). Furthermore, it may be stated that this research had provided the hotel management with the relevant information regarding implementing certain pricing strategies and analysing which may be the most beneficial (Gibbs et al. 2018).
According to Han & Ryu (2009), waiting time can be referred to the average time that a customer has to wait for starting from placing the order, until the time the food arrives on the table. Higher waiting times have been identified to be strongly associated with customer dissatisfaction, and negative behavioural intentions. Waiting time is also known as Response time, based on the ‘psychology of waiting lines’, it may be identified as a major factor in decreasing customer satisfaction. Waiting service management can be undertaken to reduce the response time or the waiting time.
Figure 4: Factors involved in improving customer service
(Source: Mensah & Dei Mensah 2018)
It may be stated in this regard that a relationship can be established with respect to the waiting time of customers to be served. It is to be noted that it is the first interaction between the delivery process executives and the customers during the waiting time. In addition to that, it has been evident that consumers typically concerned with the time for waiting, the perception of the time that is spent for waiting to be served, can be used as an appropriate measure for predicting the satisfaction levels of consumers (Mensah & Dei Mensah 2018). However, the actual waiting time for busy customers concerning with the waiting time may not be an actual factor for consideration of customer loyalty and customer satisfaction.
As per the article by Ro (2013), the relationship investment theory, along with the justice theory is implemented in the study of customer complaint handling and appropriate implementation of mitigation strategies. It has been evident that the major domains involved in this regards are mainly the communication process involved in facilitating the mitigation processes, along with the compensation involved and the customer’s entitlement to it (Castro et al. 2016). According to the reports, social media has been attributed as one of the major factors involved in handling customer complaints through direct communication with them (Meuter et al. 2000). Furthermore, social media has been quite effective in mitigating service recovery plans. According to Ro (2013), complaints are primarily categorised as friendly complaints and redress seeking complaint. The article also states that in case there are no complaints, this behaviour may further be classified as neglect and loyalty. Emotional bonding, service failures, are factors which contribute to this behaviour (Repetti et al. 2015).
This report focuses on the key factors, namely, pricing service product, People as strategy, including customers as well as the employees and the handling of complaints or grievances by the customers and immediate service recovery, for the improvement of customer loyalty and satisfaction. Furthermore, it has been evident that numerous theories may be studied to comprehend the cognitive psychology applicable to the consumer behaviour involved in the development of positive customer experience and thereafter customer loyalty.
Personally, this report has been quite effective in drawing my attention towards the several factors which play a subsequently important and influential role in the effective management of customer satisfaction. Furthermore, customer loyalty and customer satisfaction have been found to be generally related, though there is literature in the subject opposing this concept. Factors such as pricing strategies, ambient environment and the development of interpersonal relationship are among the major factors affecting customers and employees. In addition to that, I have effectively identified that service quality, as well as the quality of food are major factors that contribute to the development of a positive idea regarding the restaurant or hotel. Furthermore, I have realised that taking care of both the internal as well as external qualities of the food is imperative.
It has been evident that effective customer handling, along with the the reduction in waiting time has been found to be quite effective. Being kept waiting creates the idea of being unwanted and makes the customer assume that the higher response time is due to the same. Furthermore, addressing the challenges of pricing strategies have been identified through research conducted in identifying partition pricing and bundled pricing. Furthermore, a friendly and soothing environment may be comfortable for the customers, thereby is likely to be the strongest predictor in customer loyalty and satisfaction.
The major theories which have been found to be quite effective and may play a crucial role in understanding the concepts of customer satisfaction and loyalty are namely, relationship investment theory, along with the justice theory, customer satisfaction theory and the customer self-concept theory. These theories have been effective in understanding customer complaint handling and rending service recovery (Bowen & Ford 2004). Script theory explains the role of cognitive psychology in customer satisfaction and loyalty as well.
The literature review undertaken in this study has provided an insight into the key skills and concepts applicable to the hospitality industry. In addition to that, it has provided me with the idea of being friendly and patient with the customers may lead to positive outcomes and may aid in my professional growth. Furthermore, the development of interpersonal relationships with customers has generally yielded beneficial outcomes for institutions operating in the hospitality industry (Priporas et al. 2017). In a restaurant, it is imperative that the aforementioned identified factors are taken into account and adequate strategies are developed to address the negative impact occurring through these. Furthermore, this literature review aids in providing an insight into handling situations concerning inadequate service quality, high pricing, higher response time and poor food quality.