A Peek at the Shopping Cart

 

analytics

Big data and analytics can be applied over broad parts of the organization to enhance and optimize operations, 360 degree customer analysis, business decision optimization, security intelligence and a range of other value adding factors of the organization. Today we will delve into pattern evaluation and informed decision making through the observation of the single most important part of businesses- the shopping cart.

Usually the analysis of shopping carts in Data sciences is part of Affinity Analysis- an analysis of the property of patterns arising from co-occurrences in user/user group behaviour. This analysis is a key driver into providing valuable insights into cross selling and upselling of products to existing customers. This analysis could also empower organizations with the ability to provide strategic decision making guidelines for marketing and sales.

A well-known example of this kind of analysis, is Amazon.com ‘People who bought this item also bought’ section on details page of the item being viewed.

Affinity analysis of the shopping cart is done from different perspectives- the order level, the item level and customer level. The order level analysis provides insights into the opportunities for cross sells and upsells. Customer level analysis provides insights into the evaluation of the products that can be sold in a customer’s lifecycle- this information becomes more potent when combined with the segment of the customer. The bright side of customer level analysis and implementation of decisions made on this evaluation could lead to the further sale of products which could increase customer loyalty – involves the evaluating the customer needs and providing them with what they need, before they consciously state the need for the product/service.

In the hospitality industry evaluation for cross sell and upsell is immense. Even in markets lie India, it is would be surprising how often customers are keen about availing deals either in the form of extra services that they would inevitably avail as a traveller (cross sell- as in local public transport, sightseeing packages, etc) or affordable upgrades (upsell- as in moving to a better room).

Hotels that sell directly through their hotel websites, can now understand their customers better. Affinity analysis on their guests’ shopping cart can tell them a lot about their guests buying behaviour, buying patterns and means of increasing sales closures.

Hotels selling rooms directly on their own website have access to large data that could then be used for improving and furthering their marketing and sales efforts through means like the above explained affinity analysis of their shopping cart. Apart from the commonly known disadvantage of empowering middlemen, the loss of valuable marketing and sales that can be gathered on direct sales done on hotel websites, lead to a major flaw in future business decision making.

A seemingly valid argument against the application of big data for small businesses/hotels is the expense and know how involved in ETL (Extraction, transformation and loading) for the organization. However, the counter argument for this line of argument is also straight forward through two possible solutions:

  • Tools for the extraction and utilization of data across transactions and also the evaluation and application of advanced analytics are becoming increasingly simple to integrate with your website.
  • Organizations and businesses now working in the niche hospitality segment provide for analytics, analytics based decision making and implementation of decisions made through analytics, provide for out sourced solutions that are connected directly to the hotel website.

While the first means might still be error prone for non-tech intensive small/medium size hotels, the second means is easily accessible and affordable with more guarantee of control over data and strategy for sales of room nights for hotels.

Brand Loyalty in General and for the hospitality industry – A Study of trends

A brand is a name, term, sign, symbol, or design that is intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. But a brand is much more than this. Brand is an intangible element of business that can make a guest fall in love with it. Brand is an extremely expensive intangible asset that purely symbolic and emotional. This intangible preciousness makes branding an extremely complex beast to rear and control.

To successfully build a brand, the firm’s perspective of the brand should be efficiently and exactly communicated to the end customers, to ensure that the firm’s perspective of the brand is a close match to the customer’s perspective of the brand.

The process of building a brand identity is as shown:

image001The entire effort invested into Branding yields Brand equity (Brand equity is defined in terms of marketing effects uniquely attributable to the brand and relates to the fact that different outcomes result in the marketing of a product or service because of its brand name, as compared to if the same product or service did not have that name) .

The benefits of Brand Equity are:

  • Facilitates a more predictable income stream
  • Increases cash flow by increasing market share, reducing promotional costs, and allowing premium pricing
  • Brand equity is an asset that can be sold or leased.
  • Good Brand Equity generates Brand Loyalty
  • Building a strong brand involves a series of steps as part of a “branding ladder”.

 

image002The foundation of the brand ladder is created through the creation of deep and broad brand awareness- the ability for your product/company/project/any ‘brandable’ item to stand out and be identified.

Brand awareness consists of both brand recognition, which is the ability of consumers to confirm that they have previously been exposed to your brand, and brand recall, which reflects the ability  of consumers to name your brand when given the product category, category need or some other some other similar cue.

Brand awareness should allow for:

  •  the ease of recognition and recall
  • Strength and clarity of category membership
  • Purchase and consumption consideration

Once brand awareness is established, the key focus is laid on the product quality and characteristics, durability and reliability, style, design and price.

Beyond brand awareness and the core product characteristics, the emotional, rational and finally the irrational responses to the established brand, need to come together to create brand equity that can be used to increase brand loyalty.

The importance of Brand Loyalty for Hotels:

Once brand awareness is established, the endeavour to grapple of brand loyalty begins. Brand Loyalty is a commodity that all establishments should vie for because, it ensures that Guests blindly pick the brand that they are loyal to. This blind choice is because the constant evaluation of the risk of the ‘right choice of hotel’ is a cumbersome and worrying prospect for your customers. Once trust is established between the hotel and its guests, the consumer’s decision making process shifts from:

image003To:

image004Every time your consumer takes this direct path to your hotel, you save on marketing and sales spend required to capture new customers and induce them to select you over competition. In an era there are few differences between the offerings made by your competitor and you, brand differentiation are vital for regular travellers who do not invest/involve immensely into the resources spent for booking a hotel.

In the highly competitive hotel industry, where products and services have reached“commodity” status , hoteliers are required to find ways to set their products and services apart from others .This need has given rise to the use of branding strategies as a source of differentiation and competitive advantage , making branding one of the most dominant trends in the global hotel industry .

Customer brand identification (CBI) can lead to a range of consumer outcomes, including brand loyalty. To begin the brand association process, the hotel needs to start by controlling the first point of contact with its customers- the hotel’s online presence- it’s website. The hotel needs to start building a relationship with its guests, from the time they go online looking for a hotel to book. The longer the brand journey with the hotel, the longer lasting is the customer relationship with the hotel. Longer customer relationships help in etching the brand in a guest’s mind and help along the journey of building a relationship where the guests begin to identify themselves with the hotel’s brand.

Brand equity is becoming an increasingly important asset for economy hotels, and not just luxury hotels because brand loyalty is important for the following reasons:

  • Cost- It costs 5 times more get to new customers than it does to keep existing ones. The acquisition cost of attracting new customers greatly outnumbers the retention cost put into keeping your existing customers from leaving.
  • Turnover rate- According to the book ‘Leading On The Edge Of Chaos’, reducing the customer turnover by 5% leads to an increase of 25%-125% profit.
  • Revenue- 80% of revenue for most companies comes from 20% of their customers – the loyal customers. Remember, a large customer base will deem nothing if none of them are loyal customers because most of the revenue comes from avid brand users.
  • Likeability to sell-  It is much harder to sell a new product to prospective customers than it is to sell to your existing consumer base. The probability of selling to a prospect is 5%-20%, whereas the probability for existing ones is60%-70%.
  • Retention- 91% of unsatisfied customers who switch over to another service provider will never come back. It is imperative to keep existing customers because if they leave, a good majority will certainly never return

While customer relationship management (CRM) has been promoted in the hospitality literature as an interactive relationship between the customer and firm , the hotel industry’s operationalization of CRM practices seems to entail mainly loyalty programs that offer incentives, which are considered more transactional than relationship-based. These pricing incentives are arguably the lowest level of relationship marketing practices and are vulnerable to competitor promotions . They do not fully deliver on the CRM proposition, and hotel firms should consider adopting a higher level of relationship marketing practices that foster social bonding, such as regular communications with customers and socially oriented programs .

image005Finally, even though it is hard to wade through all the research and information available on the topic of ways to achieve brand loyalty, there is no shirking of the fact that brand loyalty is an imperative for the hospitality industries- an imperative that is currently becoming increasing insignificant under the domination and commoditization of hotels by Online travel agents.

Kevin Lane Keller (2012). Strategic Brand Management. 4th ed. Essex: Pearson. 29

Kevin Lane Keller (2012). Strategic Brand Management. 4th ed. Essex: Pearson. 18

Hanna Bornmark, Asa Goransson, Christina Svensson (2005). A study to indicate the importance of brand awareness in brand choice. Malmo: Kristianstad University. 20

Mattila, A.S., 2006. How affective commitment boosts guest loyalty (and promotes frequent guest programs). Cornell Hotel and Restaurant Administration Quarterly 47, 174-181

Choi, T.Y., Chu, R., 2001. Determinants of hotel guests’ satisfaction and repeat patronage in the Hong Kong hotel industry. International Journal of Hospitality Management 20, 277-297.

Pappu, R., Quester, P.G., Cooksey, R.W., 2005. Consumer-based brand equity: improving the measurement – empirical evidence. Journal of Brand and Product Management 14, 143-154.

Kim, C.K., Han, D., Park, S.B., 2001. The effect of brand personality and brand identification on brand loyalty: Applying the theory of social identification. Japanese Psychological Research 43, 195-206.

Kayaman, R., Arasli, H., 2007. Customer based brand equity: evidence from the hotel industry. Managing Service Quality 17, 92-109.

He, H., Li, Y., Harris, L., 2012. Social identity perspective on brand loyalty. Journal of Business Research 65, 648-657.

http://www.second-to-none.com/. (2012). 5 Staggering Statistics On Brand Loyalty. Available: http://www.second-to-none.com/5-staggering-statistics-on-brand-loyalty/. Last accessed 19th Nov 2014

Piccoli, G., O’Connor, P., Capaccioli, C., Alvarez, R., 2003. Customer relationship

management—A driver for change in the structure of the US lodging industry. Cornell

Hotel and Restaurant Administration Quarterly 44, 61-73

Berry, L.L., 1995. Relationship marketing of services—growing interest, emerging perspectives. Journal of the Academy of Marketing Science 23, 236-245.

Rust, R.T., Zeithaml, V.A., Lemon, K.N., 2000. Driving customer equity: How customer lifetime value is res haping corporate strategy. The Free Press, New York.