Reversing the drop in repeat business

In response to recent comments made by the President of the Malta Hotels and Restaurants Association, that Malta had "lost a lot of repeat business in tourism" (September 18, 2008), it is worth pointing out that the key to customer loyalty is "retention", "repeat business" and "referral" and business research shows that this is best achieved when a business/industry successfully manages its "service profit chain".

The argument goes that highly satisfied customers drive revenue growth and profitability and this is best achieved by enhancing internal service quality which in turn increases employee satisfaction, which fuels employee loyalty and productivity, which boosts external service value - which then increases customer satisfaction and loyalty (hence the term service-profit chain).

Research in America shows that a mere five per cent increase in customer loyalty can produce profit increases of between 25 per cent and 85 per cent. This is why the MHRA and its members need to perhaps stop focusing on general market research (e.g. number of beds sold per annum) since this doesn't necessarily help them manage their service profit chain.

The big secret is that "quality of market share" (measured in terms of customer loyalty) is far more important than "quantity of share".

How to do this? From a practical, micro, perspective, local businesses in general - and this applies more so for the tourism industry - need to regularly engage outside professionals to conduct customer service audits. This practice would ensure that front line employees, support staff and top management, alike, are all constantly monitored by independent experts with the aim of kaizen (Japanese term for "continuous improvement").

In this manner, businesses can gauge/measure the pulse of their respective service-profit chains so as to ensure that profits grow via customer retention, repeat business and customer referral rather than expensive sales-and-marketing campaigns.

From a high-level, macro-perspective, the industry in collaboration with key partners ("stakeholders") needs to ensure that their business strategy is crafted in such a way as to "actively shape the game" rather than simply maintaining the status quo. One effective way of doing so is by employing the tactic of "co-opetition" (defined as simultaneous cooperation and competition). Put another way, to also look at win-win business opportunities rather than just win-lose opportunities with competitors and "complementors" (defined as any other product or service which increases the attractiveness of the subject product) alike.

Conclusion: There is a solution to reversing the recent drop in repeat business but it will take a (long-term) concerted effort by both individual business and high-level players at the macro-level.

This is being suggested since the competitive landscape is becoming more and more sophisticated and an industry as important as the tourism industry (from the perspective of the Maltese economy) needs to be ahead of the game if it is to grow and flourish.