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The MBA (Hospitality management) students must look at the profitability aspects to shine--Part--1

How to increase profitability in hospitality industry?

 

Reduced operation cost, improved sales as well as reduced marketing cost are the factors responsible for increasing profit. As a result, less expenditure is done on loyal consumers as they are aware with product and need little information. Loyal consumers also act as a source of information for other consumers so they are considered as part-time employees.

By considering the association between profits and loyalty, it is noted by Haywood (1989, stated in McIlory & Barnett 2007) that profitability has direct connection with the development of consumer loyalty. It is also claimed by the previous researches that obtaining a new consumer is more expensive than retaining the existing one. To retain the already existing consumer is five time less expensive.

It is pointed out by Clarke (1997, pg 146) that consumers can remain associate for a long time by making them loyal. It will facilitate them to purchase more, would pay best prices and, significantly, extra business is generated via referring consumers. Personal suggestions of the colleagues, family and friends are considered as a more trustable source of support and guarantee. By this observation it could be said that consumers act as a source of marketing via referrals.

Profit is a result of loyalty and loyalty is a result of developing value for consumers (Tapp 2005, pg 173). Several factors jointly affect the margins which is required for determining profitability. Loyalty is one among all those factors (Uncles and Dowling 1997). There is an apparent association between profit and loyalty and this association might primarily seem to be quiet simplistic. Now, the present consumer has become savvier as number of services and good’s supplier has increased through internet.  There are number of website offering goods and services at competing price and deals are posted on these websites by other members for different services and goods, which impact on a consumer to become more sensitive towards price.

Research of a buyer becomes more efficient by using internet. Egan (2001, pg 381) makes an arguments that by taking the benefits of suppliers, consumers are moving from one place to another where they can get best deals.

 

Do these Customer Reward Programs are carried out for long term?

The marketing strategy, loyalty program, is depended on providing the incentives to consumers and the aim behind doing so is to secure the loyalty of consumers for a retailer. There is good connection between the frequency of purchasing and attaining rewards. Thus this kind of program is also known as reward programs (Kim et al.) (Arranz, Gómez and Cillán 2006, pg 387) and 2001; Kopallaet al., 1999 or frequent buy programs (Bell and Lall, 2002; Schiffman and Long, 2000; Shoemaker and Lewis, 1999).

As per the suggestion of Byromet al. (2001) and by analyzing the increasing value of such loyalty programs. A well-known fact is that over 150 such programs are there that are presently adopted by UK. Hunt and Humby (2004, pg 14) argued that the number of loyalty programs that have been failed is more in comparison to those programs that achieved success.

 

Continued to last part

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