Customer Behavioural Intentions in the Hospitality Industry

Article excerpt

Abstract

This paper reports on a study that refined and tested an instrument that was designed to monitor behaviours associated with customers' intentions towards a service or a firm. The refined instrument was aimed at measuring customers `intentions in the hospitality industry. During the months from July to October, 1998, a total of 1 000 questionnaires were distributed to five Australian hotels of three to five-star standard. Key findings of the study suggested that there were three dimensions of behavioural intentions in the hospitality industry: loyalty to company; propensity to switch; and willingness to pay more, with loyalty to the company emerging as the best predictor of overall behavioural intentions. These results have implications for both managers and academics in the hospitality field

Keywords: Customer Loyalty, Behavioural Intentions, Hospitality Industry

Introduction

As the overall pattern of world trade is changing, new technologies and increasing global competition are transforming markets. As a result, many organisations are seeking innovative ways to achieve competitive advantage and improve efficiency without sacrificing quality of service. This has forced marketers to rethink their marketing strategies and position (Javalgi and Moberg 1997). The current consumer climate and competition for market share has pressured managers to focus on customer retention as well as customer satisfaction (Pritchard and Howard 1997). Research has shown that it is a more profitable strategy to increase customer retention rates than to gain market share or reduce costs (Reichheld and Sasser 1990).

It has been demonstrated that a marginal change in customer retention rate has significant effects on future revenue, as increasing customer retention by a mere five per cent can increase profitability by up to eighty per cent (Gould, 1995). Doing business with repeat customers reduces costs of:

* advertising to entice new customers;

* personal selling to solicit new prospects;

* setting up new accounts;

* explaining business procedures to new clients;

* inefficient dealings during new customers' learning processes

(Peppers and Rogers 1993).

As suggested by Zeithaml, Berry and Parasuraman (1996), the longevity of a customer's relationship with a firm favourably influences profitability. Customers who remain with a firm for a period of years because they are pleased with the service are more likely than short-term customers to buy additional services or spread favourable word-of-mouth communication. The firm may also charge a higher price than other companies as these customers value maintaining their relationship with the servico provider (Zeithaml et al. 1996). Additionally, these long-standing customers are more likely to be responsive to the suggestion of buying a greater variety of products and services from the firm (Gould 1995). The initial costs of attracting and establishing these customers have already been absorbed and, due to experience curve effects, they can often be served more efficiently (Reichheld and Sasser 1990).

Measuring Customer Loyalty

Clearly, there are many good reasons for marketers and managers to concentrate on retaining customers. Understanding the behaviours and conditions that foster repeat patronage is an important part of this endeavour. Traditionally, much of the research concerned with understanding behaviours associated with customer buying-intentions has focused on customer loyalty, which has been defined and measured in attitudinal and or behavioural terms (Javalgi and Moberg 1997). Loyalty is usually determined by measuring customers' preferences towards a product, the number of purchases or the amount of brand-switching. Usually, this information was obtained with the use of one or two item scales (Boulding, Kalra, Staelin and Zeithaml 1993; Cronin and Taylor 1992). …