Figure 1. Beautiful rice field in the north of Bali

Bali, also called the Island of Gods, is Indonesia’s undisputed top tourism destination, accounting for approximately a quarter of all tourism receipts of Indonesia’s 33 provinces. Located in the west of Indonesia between Java and Lombok, this small island was to be the third destination of our Asia-Pacific fieldwork trip. The NHTV ‘Tourism Destination Management’ Master Students had different expectations towards this place and each student made different experiences, of course.

Before explaining my individual experiences, let me first introduce this small, but highly diverse island to you. Besides the fact that tourism is an important source of economic growth and beside Bali’s outstanding performance in tourism, the island is very well-known for its strong culture and community (also called ‘Banjar’) system. The Balinese consider themselves a distinct ethnic group within Indonesia, as Hindus make up 93 per cent of the population, but only account for 2 per cent of the total Indonesian population. Culture has always been the island’s strongest attraction. However, the massive tourism industry inevitably left its altering impacts on the society and it is exploiting several resources. In addition, Bali is confronted with overpopulation, lack of education, waste mismanagement, lack of water and huge traffic congestion. Illegal aspects such as unlicensed villas and missing industry standards in the accommodation sector coin the island, too. Bali is generally hindered by a lack of law enforcement and corruption. The country only recently went through a process from dictatorship to democracy and tourism and the general economy are very influenced by the local government and the community, sometimes less by decisions on a provincial level.

In the first weeks of our research, we were assigned to identify and tackle these constraints. The task this time was to provide strategic advice for different stakeholders with regards to positive tourism development. Our group this time focused on Public Organisations (POs), whereas other research groups focused on Small- and Medium Sized Enterprises (SMEs) and Large Tourism Organisations (LTOs). Treating public organisations is not always an easy task, as structures and motivations are not always as clear as in the private sector.

Figure 2. NHTV group picture at Balinese temple

Figure 3. NHTV group picture at Dreamland beach

However, our and other groups successfully managed to be committed again to the whole project. In our case it was due to the fact that the development of tourism organisations and associations, as part of the public sector, is very interesting. We identified that there are many of these associations, having a strong and leading voice in the tourism industry (but being restricted at the same time which led us to identifying ways for improvement) and working very sustainably. Our research area was determined to be the beautiful Bukit Peninsula in the south of Bali. Three other groups out of six focused on the Kuta/ Legian/ Seminyak area. The Bukit Peninsula (also called South Badung as the whole regency including Kuta, Legian, Seminyak and Sanur up to the central part of the island is called Badung Regency) is characterised by stunning nature due to limestone formations and beautiful beaches, the most beautiful beaches on the whole islands (Figure 5). Two developments determine the Bukit area: On the eastern part of the island one can find a well-developed and managed luxurious golf and resort area with various water sport activities, attracting a high-end customer. The western part of the island is characterised by a local touch, attracting many surfers looking for cheaper accommodation such as homestays. Especially Uluwatu with its nice temple, little restaurants and beaches and its laid-back atmosphere was very impressive. Less traffic and less ‘over-development’ which can be found in and around Kuta made this research area even more attractive to us. However, the Bukit region is often ignored in tourism literature and travel guides, which makes it not so well-known especially among European travellers.

Therefore, throughout the whole research process, our group found out that public organisations and  their interests are spread around the island and that they could co-operate and work together more closely, as their internal operations could be improved in the future and as the island could be marketed and even developed more successfully. Particularly in the last week our research group became even more committed and enthusiastic about giving strategic advice and supporting these organisations (Figure 4). By applying different management tools, an analysis of these stakeholders became easier. While talking to and interviewing the different organisations and industry leaders such as the Bali Development Tourism Corporation (BDTC), the Bali Tourism Board (BTB) and/ or non-governmental organisations such as the Nusa Dua Reef Foundation, insights became even better.

Figure 5. Group 5 final presentation

Figure 4. View from Uluwatu temple

Another advantage was that all six groups worked together more closely. Each group arranged different meetings and interviews where representatives of the group could join. If this was not possible, questions related to the different stakeholders and topics were asked and results were shared. This approach did not only make research easier and less time-consuming, it also showed that there has been progress from the first to the very last destination.

Bali as the third ‘beach’ destination was an amazing experience. Unfortunately, I heard many bad news about the island, being full of garbage, over-crowded and without any nice beaches. However, my impression turned completely the other way round: The Island is not only coined by the beautiful and very diverse nature and beaches, it is the friendly, open-minded and spiritual people that make this destination so special. Besides, being an Asian place it offers a mixture of local, Asian and Western atmosphere, including important aspects such as nightlife, food and shopping. Bali has this special atmosphere, which makes you feel emotionally attached and comfortable after the very first day. This is why so many Australians and other tourism markets are repeated visitors to the island.

Finally, I would like to thank NHTV University of Applied Sciences Breda for being part of this project. Of course it was not always easy for all of us to work among different nationalities, with very different characters, working experiences and working attitudes. But this fieldwork trip – and I think I can speak now speak on behalf of the whole group – made us more mature and capable of working with different people, sometimes exceeding our personal capacities. Personally I must say that this second phase made me even more aware about my passion to work in the tourism field, to research, analyse and giving recommendations to different destinations, while living in or at least working with different countries. This master has strengthened my commitment and enthusiasm to change future directions and policies in a positive way- which I really appreciate.

Bali- ‘the Island of Gods, the Island of Tourism’ is a post from: the weblog of the NHTV master's course in Tourism Destination Management

My personal knowledge of Thailand was very limited at the beginning of the TDM Course, and I was not the only confused student in the classroom when we were informed that this would be our second destination. Where was this place, anyway?

Known amongst Thais as ‘the Rose of the North’, Chiang Mai is a moated and walled city that is surrounded by mountains which are filled with legends and mysticism. Although it is not a typical beach destination like other Thai tourism hotspots, it does have its unique selling points; which our class had the fortune to experience first-hand. As tourism experts in-the-making, it was our job to become acquainted with and analyse this developing destination’s attraction factors, locating the strengths, weaknesses, threats and opportunities for development, from the perspective of Small and Medium Enterprises, Large Tourism Organisations, and Public Organisations.

TDM students in Chiang Mai

To welcome us into this new and delightfully mysterious place, a typical red taxi had been arranged and took us to visit the Wat Prathat Doi Suthep; a Theravada Buddhist temple that attracts many a tourist. We were engulfed by Thai culture as we walked around the gold-wrapped chedi and received our blessings from Buddhist monks, and sipped on a straw in a coconut while we were tricked into buying paintings from local artists for twice the normal price. The next day, a visit to the Lisu village and their community-based lodge was followed by some rafting on the Mae Taeng River, and we planted diverse tree saplings according to Chiang Mai University’s FORRU (Forest Restoration Research Unit) concept as part of a local attempt to restore the rainforest. During the month, some of us spent a day playing with elephants, zip-wiring through the forest canopy, trekking in the mountains, visiting the Tiger Kingdom, watching a snake show, crossing the border into Myanmar, shopping on the Saturday and Sunday night markets, or simply benefiting from the goodness of a traditional Thai massage during the weekends.

TDM students in Chiang Mai

But March 2012 was not all fun and games. During the week, every group worked intensively on the assigned research and analyses, hoping to get a better grip on the situation with regard to the different stakeholders located here. Difficulties were experienced due to cultural and language barriers; which were luckily overcome in creative ways. Time flew past and before we knew it the presentations were right in our face; some of us had to spend sleepless nights in order to finish what we had started… Generally speaking, the research here pointed out that Chiang Mai’s public organisations and the private sector have quite a long way to go, and that they must attempt to cooperate more with each other, to come up with well-structured, long-term organisational strategies, as well as more innovative products and marketing, to keep the city’s head above the surface in an ever-increasing competitive global tourism market.

As Chiang Mai does not have the attributes of the typical ‘Thai’ destination image, it must learn to play a different set of cards. Referred to as the Northern Thai culture capital with a fine history and more than 300 temples, Chiang Mai hosts festivals, a distinctive cuisine and local traditions; and it is home to numerous hill tribe villages in the surrounding area. To the North, adventure tourism takes place in the forest-covered mountains, and tourists can visit elephant camps, while to the South, there are handicraft villages and a hot spring centre, which have great potential for developing health, culture and art tourism; for both domestic and international markets.

After the work was done, our final day in Chiang Mai was dedicated to buying souvenirs, taking pictures, drinking our favourite fruit smoothies whilst eating our favourite Thai dish (Khao Soi, in my case!), sending postcards and generally being a real tourist that has become acquainted with the destination, as well as visiting our favourite spots for the last time and saying goodbye to new-made friends. All in all, Chiang Mai was a rewarding experience and it is the perfect example to demonstrate how fast the South-East Asian region is developing economically. As a conclusion to this colourful destination, we raised our glasses of Chang beer to the next adventure… Cheers!

TDM students in Chiang Mai

Chiang Mai: ‘the Rose of the North’ is a post from: the weblog of the NHTV master's course in Tourism Destination Management

To many people, Sydney is just another city. Located too far away for comfortable travel and virtually indistinguishable from any other urban metropolis, Sydney struggles to make itself heard and felt in between the melee of New York, the glamour of Paris and the inordinate chaos of the Mumbai. And hence to many, that’s where the story of Sydney begins and ends – one amongst a thousand cities in the world.

For someone who was privileged enough to live in and experience this city for a whole month, I say you haven’t even scratched the surface. Sydney is not just another city. It may not be able to boast of the glamour afforded by its competitors over the world but Sydney’s charm does not lie with highflying jet setters and glamorous settings. It teems within the city itself.

Sydney is a multicultural, warm, vibrant and welcoming destination. It is teeming with life and energy, but does not descend into chaos and bedlam. Somehow, Sydney has managed to hit a perfect balance between dynamic and laid back, between fast paced and mellow. And this is what makes Sydney a unique city – the people, the flow, the balance.

As with any first time visitor, The Harbour Bridge and the Sydney Opera House were first on our ‘to-do’ list, with the koalas as a close second. But we soon discovered so much more to see and do. Whether it was exploring the Saturday Glebe market, spending the day in Centennial Park, soaking up the sun at Bondi Beach or strolling down Darling Harbour at night, Sydney afforded something new and interesting everyday.

Of course, it wasn’t all fun and games. Within a week, we were hard at work.

As our first destination, Sydney was the perfect place for TDM 2011 for the kick off of our much awaited Phase 2. Divided into groups of six, we scoured the city in search of Public Organisations, Large Travel Operators and Small and Medium Enterprises. For the first time, we were sent into the real world and told to ‘go for it’. For many, this was the first time we had done anything of this sort. It meant organising, planning, reading articles, getting in touch with industry professionals and converting all that assimilated data into viable results. A process that is both rewarding and intimidating.
As students, we learned and experimented with new techniques and unfamiliar and unconventional methods. We had the freedom to explore and make mistakes, find solutions to new and unexpected challenges. Sydney was the perfect starting point for this process as it was a hospitable and developed tourism climate with experienced professionals who were willing to share their experience and insights. Challenges of time and know-how were experienced, but were adapted to quickly and we were able to get the desired results.

All in all, Sydney is a turning point for all of us at TDM 2011. It was a rewarding experience which presented many opportunities and possibilities. It was our first ‘real world experience’ and has left us better prepared for new challenges and expectations in Thailand and Bali. For me, it was an unforgettable month and Sydney has a permanent place in my memories. It was truly an incredible journey.

Sydney: A Trip to Remember is a post from: the weblog of the NHTV master's course in Tourism Destination Management

Master TDM Graduates January 2012

We are very proud to announce that recently another batch of 16 NHTV students received their master in Tourism Destination Management degree. Their thesis topics were as interesting as varied:

• Positioning Bulgaria as an international golf destination
• Complexity in Tourism: The case of Veerse meer
• Participation in Tourism Development – Community Perceptions linked with Applied Stakeholder Theory in Lombok, Indonesia
• An investigation of the Destination Brand Personality of Hamburg as perceived by tourists and Residents using Projective Techniques
• Future of Online Travel in Europe
• An Investigation of Cologne’s Destination Brand From Three Perspectives: Brand Founders, Tourists and Residents
• Understanding experienced independent travellers’ vacation decision making process
• Bali as an incentive travel destination, An evaluation of the inbound incentive travel business
• EURO 2012 Assessement of the Investment Related Situation in Poland
• Tourism and Museums
• Bhutan “happiness is a place” -An investigation to Explore the Relationship between the Happiness concept of the Bhutanese people and the value the concept adds to a Dutch Visitor.
• Developing Tourism Strategies through Arts & Culture can add Quality to an Emerging Destination
• Euregio met Smaak – The development of a succesful culinary brand based on the example of the Austria Genuss Regionen.
• Managing a business tourism destination in times of ‘sustainability’ – a curse or blessing?
• Medical Wellness as a rejuvenation tool for destinations – A case study of the region Harz / Germany
• The challenges and opportunities of senior tourism in Grevelingen

Congratulations everyone! We wish you a happy, bright and successful future!

Congratulations TDM master students! – Janauary 2012 - is a post from: the weblog of the NHTV master's course in Tourism Destination Management

Our master in Tourism Destination Management students have arrived in Sydney, Australia for the start of the second phase of their studies: the field research project. This phase is designed for putting knowledge and skills, acquired through classes and seminars during Phase I, into practice by carrying out assignments at three different locations in the Asia Pacific.

For this academic year (2011/2012) the destinations are:

• Sydney, Australia
• Chiang Mai, Thailand
• Bali, Indonesia

Below you can find some pictures which provide an impression of their first few days at the destination, during which they are introduced to the destination through (guest)lectures, visits and discussions. We’ll keep you updated on some of the things they are doing during the next 3 months!

Students start second phase of their studies in Sydney – the first of 3 destinations is a post from: the weblog of the NHTV master's course in Tourism Destination Management

Sasiwan "Mink" Kludkesa

Born in a small town of Thailand and bound with the belief that girls should not study much, I was never confident of myself. After completing a Bachelor degree in Economics in Thailand, I realized that I wanted to work in the field of tourism. After one year, I moved to Bhutan, a small landlocked kingdom between India and China with pristine nature and unique culture. Coming from a business-oriented family combining with my interest in tourism, I saw an opportunity to bridge Thailand and Bhutan. I opened the first travel agent that organized tours to Bhutan specifically for Thai tourists and it became a big success. A few years later I started the first Thai restaurant and it has been recommended in the Lonely Planet Book of Bhutan. The keys to success were combinations of right timing, hard work and good luck.

However, I knew that something was lacking, the real knowledge. As a result, I decided to further my study in this field and here I am in the Netherlands pursuing a Master in Tourism Destination Management at NHTV. The main reason that I chose this particular program was its practicality with three-month field trip in three different destinations. This program is specially designed for an international classroom with students from all over the world and from different backgrounds. The class dynamic allows the students to learn from each other’s experience and build the networks.

The NHTV’s teaching method differs greatly from the Thai way. In Thailand interaction with teachers during class were not encouraged and asking questions was regarded as a sign of weakness. This special teaching method helps me to break through and speak up without any fear of embarrassment. I have also learnt not to believe everything I hear or see but to question and analyze it first. As a result, my critical thinking has been developed. Furthermore, the program has changed my perspectives as it abolished my belief that Westerners were superior and I start to feel confident and competent. This program has undoubtedly helped me discover my full potential and I know that after completing my Master degree, the sky is my limit!

Discover your full potential at TDM, NHTV by Sasiwan “Mink” Kludkesa is a post from: the weblog of the NHTV master's course in Tourism Destination Management

Laura van Meer

My name is Laura van Meer and I finished TDM by the end of 2010. I have been working for over a year now and would not have thought to enjoy it so much after some great student years. I always wondered where this master would take me professionally and what extra value it would bring. Now that I have found a job, I know that this master was the experience I needed to get there. My job is titled as ‘destination specialist’, which means that I advise clients on specific destinations they would like to travel to. All Over Tours, the tour operator where I’m employed, specializes in exclusive, tailor made travels to East and South Africa and the Pacific, which also include destinations I visited during the field research of TDM. It’s a small company, which means I get big responsibilities and therefore build great experience. The best part about the job is to get to know the destinations, study them, create routes and most of all of course; visit them! I’m going to South Africa in two weeks to experience the accommodations and environment that clients would be in on their travels, in order to sell the destinations more successfully (no need to disagree!). Next to this I learned and practiced many skills, such as being helpful to people (top priority), commercial thinking (financial aspect), advising clients face to face in their itinerary, thinking ‘out of the box’ and creatively organizing travels, etcetera. Subjects during TDM are very relevant in my day to day work, such as marketing, finance, management, but also sustainable tourism. We work with many lodges that pay attention to this matter  and think of tourism in the long run, also we only work with small scale accommodations and private game reserves that limit damage to the environment and pay back to the community. The thing that attracts me the most in my job is the variety, not one day is the same as all travels are tailor made and I handle the process from beginning to end, from the itinerary request and the correspondence with agents up until the invoices and preparing the clients’ travel documents in detail. My bachelor would not have been sufficient to apply for this job and I am grateful that I chose to follow this master, as it has opened doors to great opportunities.

Next to my job I am also active in the city marketing area, as I wrote my thesis on this subject and it still interests me very much. I got a request from my thesis coach to present at the International Place Branding conference, and my answer was of course “yes!”. I have written an academic article that summarizes my thesis and am about to present this coming Saturday at the conference, all very exciting!  Especially as many people from the city marketing field will be present. The articles for the blog written during TDM have definitely added to my experience in taking on this great opportunity.

Tourism is a great sector to work in and I wish you all the best of luck in finding your passion!

Laura van Meer, TDM alumnus about combining working life and academic achievements is a post from: the weblog of the NHTV master's course in Tourism Destination Management

Frank Murangwa is a NHTV Master in Tourism Destination Management alumnus and in this blogpost he shares what the program has contributed to his career.

It had always been my dream to advance my career in the tourism field. Having completed my bachelors in tourism management in 2006 and having worked in the tourism industry in Rwanda for four years my mind was pushing me to move forward in the tourism field.
The idea of joining NHTV was then born in 2009 when I was browsing through the internet searching for a master’s course in tourism management. It was in October 2009 when I landed on the course “Masters in Tourism Destination Management (TDM) at NHTV Breda”. My first impression on the course was a great one. I envisioned that, TDM course entailed what I needed as a person who wanted to advance my career in the tourism field but also suited what my government of Rwanda required as a country that is building its Tourism Industry and eventually this visualization became true!

Subsequent, I enrolled for the Masters courseTourism Destination Management at NHTV-Breda in 2010-2011 and the voyage of the course was a memorable one!! Firstly, here we were 31 students from 16 countries across the globe- it was indeed an international course! Different cultures and different backgrounds making it the best place to meet and experience other people’s culture.
The TDM course experience is still vivid in my mind from the theory part conducted at NHTV, Breda by the skillful lectures to the unforgettable journey of the second phase of the program that takes you to three destinations in South Asia Pacific, Australia- Melbourne to Cambodia, and Bali in Indonesia for the field research- the practical exposure! Indeed the combination of both theory part and the field research equips the students with the technical knowhow which is vital for today’s competitive market and finally the third phase which involves thesis writing is a rewarding one.

Although the course was a bit challenging especially in the second phase due to different reasons, I honestly find the course very beneficial. Having settled back home in Rwanda and currently working as a Senior Officer in charge of Accommodation and Catering in the Tourism Department at Rwanda Development Board. After a 15 Months of TDM experience, I feel I have gained a wealth of knowledge and skills which will contribute to the development of the tourism sector in my country and I would therefore recommend all those people aspiring to advance their career in the tourism field to undertake the course at NHTV Breda!

Folks, TDM is the way to go, you will not regret it and you will never forget the experience!!

TDM 2010-2011 at Four Seasons in Bali

The amazing journey from Rwanda “the land of thousand hills” to NHTV Breda in the Netherlands is a post from: the weblog of the NHTV master's course in Tourism Destination Management

Literature review

This literature review is written by Bernd-Niklas Bierbaum as part of his NHTV Master in Tourism Destination Management.

In their paper, Hesket et al. (1994) introduce the concept of the service profit chain.  “The S-PC postulates that operations contribute to the profits of a service firm via the following chain of logical deduction (Yee et al. 2009, p.617):”

1. Profitability and growth are primarily stimulated by customer loyalty.
2. Loyalty is influenced by customer satisfaction.
3. Satisfaction is influenced by the service values provided.
4. Value is created by loyal productive and satisfied employees.
5. Employee satisfaction results from support services and policies that enable employees to deliver high quality services. (Heskett et al. 1994)

This paper will focus on the question whether it is enough for a company to simply „satisfy“ their customers in order to achieve loyalty and finally profitability. In the following, the question will be raised and discussed whether there might be more to the concept of profitability than simply being able to satisfy a customer. Therefore, customer satisfaction, customer loyalty, the relationship between loyalty and profitability and finally the importance of the “moment of truth” and the service encounter will be evaluated and highlighted from different standpoints.

Customer Satisfaction

Customer satisfaction and service quality seem to go hand in hand. In fact, both terms are often used interchangeably, causing confusion (O’Neill in Kandampully et al. 2001, Knutson in Kandampully et al. 2001, Cronin & Taylor 1992). Therefore, a distinction is necessary. To differentiate satisfaction from service quality, Cronin & Taylor 81992), Bitner (1990) and Parasuraman, Zeithaml& Berry (1988) describe perceived quality as a form of attitude where the customer forms a long-run evaluation whereas satisfaction is described as a reaction to a specific transaction. Supporting the theory by Cronin & Taylor et al., Rust & Oliver (1994) describe satisfaction as a result of a service quality encounter.

Bolton & Drew (1991, p.2) state: “A customer’ satisfaction/ dissatisfaction with a service […] depends on his or her current perception of performance, prior expectations about performance and perceptions of the discrepancy between these two constructs.”

Several studies have proven that customer satisfaction together with quality is one of the key drivers of service performance for a company (Anderson et al. 1994; Fornell 1992). Hence, companies should offer services that are able to satisfy not only the consumers’ expectations but also their perceptions of service quality. As they may however differ from customer to customer, companies should evaluate the perceptions and expectations of customers on a regular basis. On this ground, it is eminent to constantly assure service performance in order to increase or at least preserve customer satisfaction. The degree of satisfaction is furthermore believed to increase the probability of repurchase through a customer, hence eminent for a successful company.

O’Neil (in Kandampully et al. 2001) conclusively states that if the customer experiences better service than expected a high level or positive disconfirmation and therefore satisfaction will result (also discussed in Rust & Oliver 1994; Erevelles& Leavitt 1992).

It was Hesket et al. (1994) who, with their implementation of the service profit chain model, defined customer satisfaction as a prerequisite to customer loyalty. This customer loyalty then again would result in profitability.

Customer Loyalty

For an organization’s success, consumer loyalty plays a critical role (Li & Green 2011). This is underlined by the definition of Van Looy et al. (2003) defining loyalty as:

“Customer behavior characterized by a positive buying pattern during an extended period (measured by means of repeat purchases, frequency of purchase, wallet share or other indicators) and driven by a positive attitude towards the company and its products or services (p.59).”

Aside from a financial aspect, Oliver (1997) defines customer loyalty as “a deeply held commitment to rebuy or re-patronize a preferred product or service consistently in the future […] (p.392).” In view of Li & Green (2010) loyal costumers’ then provide a constant stream of revenue as well as ensuring cost reductions due to less promotional expenses for the acquisition of new customers; hence, increasing profitability.

As outlined in Li & Green (2010), Oliver (1997) proposes four stages loyal customers go through:

1. Cognitive stage: the customer must confirm that his expectations of the service are met on a constant basis.
2. Affective sense: customers are repeatedly satisfied with purchasing decisions.
3. Conative stage: consumers have a deep commitment to buy.
   1. Customers overcome obstacles like price sensitivity (price increase, attractive offers from competitors)

In order to create a long lasting relationship between the customer and the company, the customer needs to run through the above-mentioned stages. On the other hand, the degree on how satisfied the customer is will then determine the level of loyalty. In this context, Van Looy et al. (2003) point out that opposed to the belief that loyalty results automatically from satisfaction; research found out that there is actually a rather weak link between plain satisfaction scores and loyalty. In their paper, Heskett et al. (2008) identify that relationships between the scores and actual loyalty strongly depend on whether customers were “very satisfied” or simply “satisfied” with the product or service. Customers being “very satisfied” were 5 times more likely to repurchase. According to these findings, Van Looy et al. (2003) specify several reasons to explain the weak correlation between “satisfied” customers and loyalty.

1. As positive and negative feelings can coexist, customers may like parts of the service while rejecting other parts.
2. Non-directly related factors may play a role. E.g. an accident happens during the holiday. It is not the tour operator’s fault but the client might not be willing to book another holiday with the same tour operator again.
3. Satisfaction scores may vary upon the mood and circumstances the customer is in while answering the satisfaction survey.
4. Customer loyalty may also vary upon the commitment the customer has towards the company.

Figure 1: The relationship between customer satisfaction & customer loyalty (Hesket et al. 2008)

The figure above shows the loyalty (retention) of customers based on their satisfaction. It briefly divides the customers into three groups, subdivided into 3 different zones. The “terrorists” are those customers who are “extremely dissatisfied” up to “slightly dissatisfied” with the service of the company. According to Heskett et al. (2008) those customers are not only highly likely of defecting to a competitor but are also likely to spread negative word of mouth to others (see also Stauss& Seidel 2004). “Apostles” on the other hand are those customers who are truly satisfied with the company or the service offered resulting in true loyalty to the company.

Thus, it must be the effort of a service provider trying to achieve zero or a minimum number of customer defections. This will lead to more profitability in the long run.

Relationship between Profitability & Loyalty

Increasing and preferably maximizing growth and profitability are obviously at the end of the service profit chain developed by Heskett et al. (1994) as they constitute the final goal of every organization. In order to achieve profitability, companies need to pass through many different stages including employee satisfaction, retention and productivity to be able to achieve high level of customer satisfaction resulting in high customer loyalty and eventually profitability (for more information see Heskett et al., 1994). The relation between customer retention and customer profitability has been examined by several researchers who mostly agreed on the assumption that “increased customer loyalty has a positive effect on customer profitability” (Helgesen, 2006, p.258).

This positive relationship is mainly based on two factors. On the one hand, companies usually invest a great amount of money into each customer, which is the highest in the initial phase of the company-customer relationship. An organization must spend money on resources to acquire customers – acquisition and marketing costs – and later on to cultivate them – maintenance costs (Anderson & Mittal 2000). These costs constantly decrease each year the customer stays with the company as marketing and sales costs are lowered among other things by the customer’s engagement in positive word of mouth (Reinartz& Kumar, 2002) and due to their familiarity with the firm’s service delivery system (Hallowell 1996). A financial consulting business found out, that costs, a company spends for each customer, drop by two-thirds from the first year of the relationship to the second (Reichheld&Sasser 1990).

This leads to the second factor supporting the thesis that “retained customers are a revenue-producing asset for a firm” (Anderson & Mittal 2000, p.116) as they are interrelated. Simultaneously with the decreasing costs, customers generate increasingly more revenues throughout the relationship with a company. In fact, loyal customers buy more frequently, in higher volumes and are likely to positively respond to cross- or up- selling’s (Reichheld&Sasser 1990). Moreover, they are less price-sensitive and less likely to complain (Hallowell 1996; Reinartz& Kumar 2002). In addition, a defecting customer costs a company way more than serving existing ones; acquisition costs have to be spend once more, new customers buy less frequently and in smaller quantities, require more service, and are less active as word-of-mouth marketers (Anderson & Mittal 2000).

“These cost savings and additional revenues combine to produce a steadily increasing stream of profits over the course of the customer’s relationship with the company” (Reichheld&Sasser 1990, p.107). It is estimated that a low customer defection rate can result in profit increases between 25% and 85% concluding that managers should pay at least as much attention to the quality of market share, measured in terms of customer loyalty, as to the quantity of share (Heskett et al. 1994).

The Service Encounter and „the Moment of Truth“

The following part will emphasize the overall importance of the service encounter and the “moment of truth” for the achievement of customer satisfaction. It will outline that it is a crucial part in the derivation of the satisfaction process.

Due to Hesket et al. (1994) in the new economics of service, frontline workers and customers need to be the center of management concern. Investment in people, technology that supports frontline workers, revamped recruiting and training practices are the factors that drive profitability in the new service paradigm. These frontline workers act as ambassadors for their companies during service encounters, playing a crucial role in influencing customers’ perceptions of quality (Lee-Ross 2001). Lovelock (2007) describes a service encounter as every time a customer interacts with an employee. In line with this, many researchers define the service encounter as a dyadic interaction between customer and service provider, each influencing the other’s activity and experience (Solomon et al. 1985; Bitner et al. 1990; Ma &Dubé 2011). Presbury et al. (2005) confirm that every encounter between an employee and a customer is an opportunity for the customer to evaluate the service provided. Therefore, every service encounter is a “moment of truth”. Swedish consultant Richard Normann (as quoted in Lovelock 2007) borrowed the metaphor of “the moment of truth” from bullfighting saying:

“We could say that the perceived quality is realized at the moment of truth, when the service provider and the service customer confront each other in the arena. At that moment they are very much on their own… It is the skill, the motivation, and the tools employed by the firm’s representative and the expectations and behavior of the client which together will create the service delivery process (p.55).”

Instead of a live or death decision, Normann points out the relationship between service provider and customer, being at stake every time during an encounter (Lovelock 2007). In the post purchase phase of an encounter, a customer then evaluates if prior expectations have been met during the encounter and therefore determines if he is satisfied (Lovelock 2007).

As the service encounter (as discussed above) is an eminent or crucial factor for the overall satisfaction of a customer, researches have proposed ideas on how to improve service encounters from a companies and customers’ point of view. Pugh (2001) in his study “service with a smile” examines on how employees feel and act towards customers and in which sense displaying emotions influences customer affect and judgment of service quality. In his conclusion, Pugh (2001) points out that it is a valid tool for employees to display emotions (see also Morris &Feldmann 1996) as they can influence the customers’ attitude towards an organization through altering moods. It is not necessary though to display real emotions but to “learn norms about which emotions are appropriate to express when interacting with customers (p.1019). Pugh (2001) states that “a professional acts as they must, not as they feel (p.1018).” Hence, service encounters can to some extent be scripted or blueprinted (Lee-Ross 2001). Bitner et al. (1990) as well as Ma &Dubé (2011) suggest in their findings of improvements to service encounters for a more satisfied customer, that employee responses to customer query should be coordinated in order to create a positive synergy. In their work, Chase &Dasu (2001) add that it is possible and effective to engineer service encounters in order to enhance the customers’ experience during, and the recollection of the encounter afterwards. Using behavioral science they found out that several principles apply for a successful encounter with a customer. As people tend to especially remember the last days/ things/ sentences etc. it is important to always finish strong, get bad experiences out of the way early, combine those bad experiences rather than splitting them and give people the possibility to choose (Chase &Dasu 2001). Especially the last three findings can be very important when it comes to customer complaints as customers’ should be able to savor rather positive than negative events at the end of sequences.

All in all, the service encounter and the moment of truth are crucial parts of the overall service experience. Ultimately in the end, all that counts for a service provider during a service encounter is what the customer perceives occurred (Chase &Dasu 2001).

Conclusion

This paper has analyzed and discussed the steps from customer satisfaction to company profitability as outlined in Hesket et al. (1994). Throughout the research, the author has emerged the fact, that there is a correlation between customer satisfaction, loyalty and company profitability. Nevertheless, it has become clear that simply satisfying a customer will not make him or her loyal to a given company. The literature review does not support the viewpoint of researchers like Thurau-Klee (1997) and Khumar Shah (2004) who neglect the importance of customer satisfaction and customer loyalty for the profitability of a company. It has been pointed out though, that the customer has to be more then satisfied with a given service in order to becoming loyal as there are crucial differences in the degree of satisfaction levels. Customer loyalty is then considered to be an important milestone for a company on the way to becoming profitable. As previously discussed, processes during service encounters have to be optimized in order to achieve the goal of a more than satisfied customer.

As a result, customer satisfaction can be seen as a crucial element for profitability. The satisfaction of the customer goes hand in hand with every service encounter (“moment of truth”) a customer faces, each defining the grade of satisfaction and therefore the degree of loyalty towards the company in the future. It is only then, that the company can be profitable.

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Customer satisfaction – a big step towards company profitability? is a post from: the weblog of the NHTV master's course in Tourism Destination Management

Giancarlo Fedeli

The plan was set up from the beginning: after the field trip to the three destinations, Melbourne, Cambodia and Bali, I would have headed back down under to delve into this country that fascinated me since childhood. My intention was combining the duty and challenge of undertaking my own research thesis, with the delight and excitement to be able to live in Australia, a land as distant as hankered by many. Thus, I packed my stuff once more, invigorated by an extended stay in Bali yet after strenuously weathering the tempting decoying of the small Indonesian gem’s character.. I eventually made it!

“There is nothing like Australia” the slogan launched by Tourism Australia claims and to be frank … I have to admit that nothing is more appropriate than this motto! The lure of Australia lies in the stunning assortment of natural attractions of this country; iconic spots such as the hallowed Aboriginal monolith rock Uluru in the red central Outback of Australia, the Great barrier reef and its coral beach islands, the northern rain forests, the wine regions of NSW and Victoria, the one of a kind wildlife make the country a unique miscellany of attractions, along with the ancient 60.000 year-old native settlements and the more recent  European ones, nowadays grown into the so called Big Smokes (Aussie lingo for cities as Sydney and Melbourne). What more I was struck with, has been the meticulous organization and tidiness of the places I visited during the first month of my stay; the attention to detail, the quality of services and infrastructures is flawless and the support provide to visitors are noteworthy. Even the placid koalas seem to be trained for tourists, kangaroos and wallabies created by a deity of tourism who knew how to contribute to the exceptionality of the country. Australia’s structured and functional tourism structure that includes a variety of state, territorial and regional organizations, along with associations, councils and tourism research centers, all under control of the government agency, is the clear sign of an important sector for the country’s economy.

Thus, after a short appearance back in the chilly Melbourne, as a migratory bird or the most skilled backpacker, I  flew to Brisbane to meet with some of my Banana benders friends (an extravagant term to call a person from Queensland – as far as I know, not offensive), and got over the pleasant resorts of Surfers’ Paradise, Byron Bay, Noosa and the Sunshine Coast to eventually end up in Sydney and literally be infatuated with it. It must be the cosmopolitan, lively and cultural personality of this hectic business city combined with the outdoorsy character of it, due a mild climate for the most part of the year… stunning beaches just 20 minutes away from the city, a vivacious night life and events running all year round are a motive to keep habitants entertained and attract visitors 365 days a year; in fact a progression of sport multicultural, art and lifestyle events show how dynamic and active the city management operates. This fervent tourism buzz certainly attracts travelers and provide them with a wide range of options and pull factors, stimulating them  to visit Sydney and the rest of Australia.

In the last decades the relationship between China and Australia has grown stronger, due to economic reasons. China has experienced the fastest and most astonishing economy growth along with the outbound wave of tourists who are increasingly travelling outside the country, with higher income at their disposal. From destinations’ point of view, China has become an important source market for Australia, replacing markets like Japan as primary inbound markets. Estimates are bright for the tourism industry and see China exponentially growing  in the next 20-25 years – warding off any sort of crisis. The actuality of the subject along with the tourism potential that the Chinese outbound market represents caught my attention; thus, the focus of my thesis research looks at the segment of Mainland Chinese leisure tourists who, specifically are characterized by an affluent travelling behavior in Sydney, as a destination.

Although language and cultural barriers may represent an obstacle to the research, my interest and motivation have gone beyond those; a smile to break the ice among the approached tourists’ distrust and doubt, and gadget as mark of gratitude have resulted  to be a winning strategy. Last but not least, I must mention Ri, my Chinese friend, and his precious support during the interview sessions.  Ri (whose Chinese meaning is very intelligent) just warned me: “Mate, I will give you a hand only if when you are asked by someone about noodles…you tell them that you Italians stole them from us!”. I had no choice, caught in the middle, with deep regret, I had to take him up on that. I could experience on my skin, the great power of China.

A TDM student stuck in between China’s power and Australian tourism is a post from: the weblog of the NHTV master's course in Tourism Destination Management