Ray F. Iunius Director of Business Development
In the IIIth part of our Hospitality series, (“Technologies, Brands, Emotions and Imprinting”) I mentioned the vital role of the Perception in the Customer Satisfaction equation. In Total Quality Management (TQM) theories, Juran defines quality as “fitness for use”, and his concept incorporates the customer’s viewpoint more closely. He is prepared to measure everything and relies on systems and problem-solving techniques. Unlike Deming, Juran focuses on top-down management and technical methods rather than worker pride and satisfaction. Deming counsels that businesses should design quality products and services that customers want.
In one well-known case, he wanted to revolutionize the way Beefy’s Burgers produces its hamburgers. To gain a better understanding of the customer’s preferences, he surveyed everyone involved in the operation, from the customers to the employees. He even called the company’s suppliers for their opinions. Customers were thrilled with the new and improved burgers. However, during busy times, it wasn’t feasible to make each burger as ordered. Lines formed, creating more customer complaints. This time, however, complaints were about the system rather than the hamburger itself.
The big problem with Deming’s and Juran’s concepts about quality is the fact that customers are not homogeneous, and it is extremely difficult for a production system to satisfy a heterogeneous market in a consistent way. Crosby re-defined quality to mean conformity to standards set by the industry or organization that must align with customer needs. The hospitality industry’s response to this approach is through market segmentation. In the last decade, we witnessed the acceleration of the customization of hospitality products, and in the future this customization process will probably continue, thanks to new technologies. As previously mentioned, customers – beginning primarily with the “digital generation” – are demanding more and more that they should retain the maximum level of choice and control in all aspects of their lives. This demand manifests itself in such processes as booking a room, checking in, checking out, providing feedback, etc. The hospitality journey has thus become complex – and more exciting.
Well, dear friends, its time for a next level and for a little bit mathematics. Customer satisfaction involves the fundamental role of perception: what one in fact measures is how well products and services meet or surpass the customer’s expectations:
Cs ≥ P – E (1)
E represents the customer’s expectations and
P the customer’s perception
When speaking about “hospitableness” as a performance (vs. “hospitality” as a profession), the first thing that comes to mind is the wish to make the customer “feel at home”. But the truth is that the last thing guests wish to feel is “at home” (Brotherton, 1999). As he put it: “The whole ‘feel at home’’ issue is predicated on the assumption that an individual’s home life is akin to some kind of stereotypical middle-class idyll, but if an individual has a miserable home life the last thing they would wish to be made to feel is as though they were at home!”
The major benefit of staying in a hotel is that the individual feels different from being at home. There is a novelty value, a chance to do and experience something different, a freedom from everyday home-based routines and obligations, involved in receiving hospitality away from home. This being the case, the “customer satisfaction” model is not enough for us to develop a better understanding of our future market
Exponomy or Experience Economy
In 1998 Pine and Gilmore introduced the concept of the “Experience Economy”, which would follow the agrarian, industrial, and most recently, the service economies. Based on their approach, the hospitality experience is one of the best gifts that we can offer our customers. The progression of economic value corresponds to the different stages of the evolution of the economy in general.
In hospitality management academic programmes in the USA and Europe, the so-called “Experience Economy” is often shortened to Exponomy and is of increasing focus.
According to Schacter (2011), perception in this case is the organization, identification, and interpretation of sensory information in order to represent and understand the environment. Since the rise of experimental psychology, its understanding has progressed by combining a variety of techniques. “Sensory information” depends on two elements: the experience (Ex) as a non-tangible and rational element, and the explicit environment that we can describe by our expectations (E). In this case:
P ≥ Ex + E (2)
Ex represents the Experience (or Exponomy in fig. 2)
E represent the customer’s expectations and
P the customer’s perception
But if we take equation (1), as follows:
Cs ≥ P – E
and replace P with Ex – E, thus:
Cs ≥ Ex + E – E
we then arrive at the following equation:
Cs ≥ Ex (3)
This equation (3) leads us to the conclusion that, under certain conditions, Customer Satisfaction (Cs) is the experience (Ex) that we have when we “consume” a service. This conclusion is also logical because Customer Satisfaction is ultimately the result of all our imprints. The way it is represented in the pyramid does not mean that Experience is superior to Customer satisfaction, but is on a superior level of understanding. Thanks to this “Exponomy”, we now have more elements to help us explain Customer Satisfaction.
In his book Future Shock (1970), Toffler criticized the fact that economists could only envisage the economy in terms of the scarcity of resources. He talked about the upcoming “experiential industry”, in which people in the future would be willing to exchange a large portion of their income for the possibility of living amazing experiences. This is already true today and will be amplified even more in the future.
The work of Toffler, Pinn and Gilmore depicts the evolution of a product through the different stages of the economy. “As a vestige of the agrarian economy,” write Pinn and Gilmore in The Experience Economy” (1998), “mothers made birthday cakes from scratch, mixing farm commodities (flour, sugar, butter, and eggs) that together cost mere dimes. As the goods-based industrial economy advanced, moms paid a dollar or two to Betty Crocker for premixed ingredients. Later, when the service economy took hold, busy parents ordered cakes from the bakery or grocery store, which, at $10 or $15, cost ten times as much as the packaged ingredients. Now, in the time-starved 1990s, parents neither make the birthday cake nor even throw the party. Instead, they spend $100 or more to “outsource” the entire event to Chuck E. Cheese’s, the Discovery Zone, the Mining Company, or some other business that stages a memorable event for the kids—and often throws in the cake for free.”
But Experience is not the end of the value chain or the top of our pyramid. Even though experiences are memorable, a Transformation business aims at a sustained and persistent change. In this economy, the end customer becomes the product (as the graduate of a university), wherein he/she undergoes a personal change. What is involved here is co-creation, an important driver of change for the future economy, with the business acting as a supporter or enabler of the change that the customer is undergoing. The Customer of a Transformation business is more than just a customer – he/she becomes an ambassador for the business. If you want to know how, please follow me in the next issue.
Ray F. Iunius Director of Business Development
Prof. Dr Ray F. Iunius is the author of various academic and professional articles published by journals in the management of services, technology, and innovation. He is also the author of a number of books such as « Industrie de l’accueil », « Hôtellerie de Luxe », « La gestion des spas », “Un Hôtel, un modèle ?” in de Boeck editions and co-author of the “Lausanne Report on the future of Hospitality Industry.”
He is the founder of the Ecole hôtelière de Lausanne Institute of Technology and Entrepreneurship (EHLITE), the Institute for Innovation and Entrepreneurship (INTEHL), the Students Business Projects (SBP), the EHLITE magazine, and the Chair of Innovation Paul Dubrule.
Ray earned a BSc, MS and PhD in Technical Sciences from the University of Transylvania Brasov and an MBA and PhD from the Faculty of Business and Economics (HEC) of the Lausanne University. He is currently Director of Business Development at Lausanne Hospitality Consulting, an Ecole hôtelière de Lausanne and Swiss Hotel Association company.