When it comes to luxury brand management in the Caribbean, guest loyalty and guest satisfaction is important. Loyal customers always come back, spend more money, and spread good word of mouth.
There’s an oft quoted rule in the luxury hotel segment and it’s the 20/80 rule, meaning that 80% of a resort’s business will come back from the 20% of its loyal customers. Looking for ways to create customer loyalty is key, and customer satisfaction is often thought of as the most important thing in creating customer loyalty. But, guest satisfaction won’t necessarily keep people coming back time and time again. There’s a second factor that needs to be looked at.
Switching costs can be both negative and positive. For the guest a negative switching cost might be lack of alternatives or monetary. Positive switching costs may be something like a loyalty program or amenities that can’t be found elsewhere. There are many different kinds of switching costs that need to be examined when determining how to create more loyalty and they’ll be specific to your target markets.
If the switching cost of changing from one hotel to another in your competitive set is very low, then the switch may occur. If the cost is very high, you’re more likely to create a loyal customer. Therefore, when thinking about creating your 20% base, you should not only take customer satisfaction into account, but also switching costs as they both have a direct impact on customer loyalty.
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image of Shore Club in Turks & Caicos4