Free Custom «Customer Loyalty in the Restaurant Business» Essay Paper

Introduction

Customer loyalty is the creation and retention of loyal customers, who continue to buy products of an enterprise. It tends to measure the success of a business in creating and maintaining long-term relationships with its customers. Such clients always prefer products being offered by the business to the ones of rivals. Customer loyalty is essential in today’s business environment due to increasing global competition among businesses. The latter is a result of the globalization and volatile economic conditions that may threaten the survival of a business. It is therefore essential to develop customer-centric approaches that address various customer tastes and preferences in a unique way. Customer loyalty plays a central role in customer retention rates for a company. In the restaurant business, the image that a restaurant has acts as a powerful tool and a vital determinant of customer satisfaction levels and as a result loyalty. A restaurant manager must continuously focus on improving the image of the restaurant through continued upgrades and improvements in ambience, décor and internal appearance. These characteristics are crucial for attracting new customers and differentiating the business from its competitors, or in other words retaining customer loyalty.  

 

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Literature Review

There are various definitions of customer loyalty given by different authors. Hensley (2004) describes it as the ability of customers to make repeat purchases of the same or different products from the same supplier or provider. Most definitions tend to be based on the authors’ perceptions of whether loyalty is an attitude or behavior. Estaban (2005) bases his definition on the attitudinal aspect and defines customer loyalty as the willingness of a consumer of a particular brand to pay a premium price for that product in comparison with competing products. The author places particular emphasis on this issue. He concludes that for an increase in customer loyalty, a manufacturer must invest heavily in valuable characteristics that increase the customer’s preference of the product over competing ones. The behavioral definition of customer loyalty mainly deals with customer’s involvement in re-purchasing a product brand regardless of internal beliefs or attitudes. Gupta (2004) asserts that a manufacturer, who aims at increasing customer loyalty, must focus on improving product quality, which results into increased customer satisfaction. Customer loyalty can therefore be defined as the emotional attachment of a buyer to a certain product, which makes him give it first priority when making purchasing decisions.   

Researches provide various links between customer loyalty and performance of the restaurant business. Most factors that influence its success are heavily linked with customer loyalty. Some of these include the quality of products being served, the responsiveness of front line workers, such as waiters, menu variety, the ambience of facilities, food consistency, convenience, and waiting times. These attributes are vividly reflected on the image of a restaurant and the nature and frequency of customers, who patronize such a business. While designing its products and services, a company must familiarize itself fully with diverse customer tastes and preferences to address them totally (Taylor, 2003). This design will involve both the attitudinal and behavioral aspects of customer loyalty in the restaurant. Specific service quality, such as a diverse menu and competitive product pricing, may address the latter aspect. It is because the customer will tend to develop a repeated attitude anytime he or she wants to dine. A diverse menu may be an indication of professionalism and knowledge of product preparation and development. Service quality may address the attitudinal aspect of customer loyalty. It means when the customer will be willing to spend money on restaurants’ products and recommend the organization to colleagues and friends.  

The restaurant business must be willing to address the main aspects of customer loyalty that have the widest effect on it. These two include customer satisfaction and service quality. A restaurant must always focus on maintaining high-quality foods and drinks, which it serves. These will give customers a high quality dining experience, which increases the probability of such clients returning and recommending the restaurant to colleagues. It can increase the level of market share of the company due to a strong customer base. There are various activities, in which the management of the restaurant should engage to maintain and increase chances of its customers being loyal to the business. These include implementing frequency and customer loyalty programs, using follow-up strategies to contact the most loyal customers and giving free products or accompaniments, when such clients patronize the restaurant. The latter aim at developing an emotional and psychological attachment of the customer to products for sale, while the former tend to increase the frequency of repeated purchases by the customer.

Service quality is an important aspect in the restaurant business. It refers to the customers’ perception of products and services offered as being up to acceptable standards of quality. The customer has his or her own judgment of product quality, which shapes his or her opinions and ratings concerning it. It plays a leading role in guiding buyer’s purchase decisions (Richard, 2005). In the restaurant business, the quality of food being served is of immense value in developing customer’s perceptions. The food must address the four main characteristics of quality, which are its safety, nutritional value and package. These attributes can positively or negatively impact a customer’s dining experience, since they are the major determinants of dining satisfaction.

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The perception developed by the customer in a restaurant concerning service quality is dependent on the three main dimensions of its service. These include the interaction between the customer and the employees of the restaurant, particularly waiters, the outcomes and the service environment. The quality of service can be determined by various attributes, such as:

1. The quality of food. It can be determined by menu variety, consistency in service provision, innovativeness in preparation and presentation of food, and the ability to research current trends in the industry, which allows for including new ingredients into the main food products.
2. The quality of service. It can be conditioned by the appearance and courtesy of the employees, waiting times before serving food and before paying bills. In order for a restaurant to increase the number of loyal customers, it is imperative to empower its employees. Such worker show greater responsibility for their duties, since they have the capacity to make crucial decisions regarding customer service. It increases the effectiveness of the employees and their capacity to utilize skills in addressing situational problems that are pervasive in the service industry (Henry, 2008).
3. The cost and value of service. It can be determined by the amounts charged for various products and services in comparison with the ones of competitors. It gives customers the best value for their money and plays a crucial role in giving a restaurant competitive advantage over rivals in the business.
4. The environment inside and outside the restaurant. It covers such vital areas as parking, ambience and general appearance of the restaurant. The management must invest in suitable designs that are peculiar to customers. Such ambience gives customers memorable experiences, which lead to customer retention and loyalty.

The management of a restaurant must invest heavily in the development of the above attributes in order to experience real benefits of customer loyalty. Its business plan must include various actions that need to be taken on the continuous basis in order to cultivate customer retention and loyalty, which are gradual (Arnold, 2007). Employees can be trained and guided on personal etiquette and behavior when attending to customers. It is usually courteous to greet return clients by name. Such recognition makes them feel appreciated and develops their attachment to the restaurant. The management can also design and implement reward programs for repeat customers. It can be done through the issuance of customer loyalty cards to those who qualify. Such a card entitles the customer to a free product or service every time he or she patronizes the restaurant. Repeat clients can also be offered free drinks or meals at particular times designated by the management. Loyal customers can also be rewarded for every referral, which they make to the restaurant. This attracts more customers, which leads to higher sales and automatically raises profits of the business.

The loyalty business model is composed of several stages that demonstrate the impact of investing in quality services in relation to loyalty of customers.

The model is an indication of the need for quality services and products, especially for the restaurant business. Such products must be developed after obtaining relevant information on the consumption needs of the targeted customer segments. This information can be obtained through market surveys. It is vital in designing menu varieties and deciding on other important aspects of the business, such as pricing mechanisms that will be used. It ensures that products and services being offered are affordable to targeted customers. It can be done through conducting interviews in the form of questionnaires given to current customers. Questions must be designed in a way, whereby the management will know whether customers’ expectations have been met through the products and services offered in the restaurant. It is because the loyalty business model recognizes quality provided by a business with strong exit barriers to current customer segments. The latter exist because the existing customers will have fewer satisfactory alternatives. They will develop strong bonds with the business due to high-quality services being provided.    

Another model is the service quality or the gap one (Daniel, 2006). It highlights the main areas or gaps that need to be addressed in order to deliver a high quality service. These may cause unsuccessful delivery of the desired service, which leads to the lack of the achievement of business goals and objectives. Gaps occur as a result of comparing the behavior of customers based on their experiences after visiting the restaurant and their expectations.

The first gap is the difference between expectations of the consumer and management’s perceptions. The latter must correctly analyze the needs of consumers in order to design the right product combinations that address different preferences. Such products will ensure customer satisfaction and increase the possibility of repeat purchases by such customers. After having been attended in the restaurant premises, the experiences of clients must exceed expectations. It ensures that the level of satisfaction is high, and the possibility of such a customer returning is enhanced. Product quality must be high. It is because the restaurant business serves consumption goods, which can have adverse effects on the health of the consumer, if quality is compromised. High quality products make buyers develop the right perceptions of the restaurant in regard to quality. Some product attributes may exceed the zone of tolerance for a particular customer segment and may classify service as either exceptional or intolerable. The impeccable quality of goods and services  improves the ratings of the restaurant in the minds of customers. It raises switching costs to competitors (Keller, 2000).

The second gap exists between managerial perceptions and specifications of service quality. Having the right perceptions of customers’ tastes and preferences, the management must design standards and policies that will guide product and service delivery. The team working in the restaurant business must have trained personnel having necessary expertise in customer service. The business must also invest in the right infrastructure that will provide an ambience and exceptional service experience, which will develop a positive relationship with customers. Specific and suitable duties must be allocated to employees based on their qualifications and experience. It boosts their morale and makes them more enthusiastic to deliver quality services. It also improves the creativity of such employees, which leads to greater customer and employee satisfaction with the restaurant.  

The third gap may exist between service quality specification and service delivery. It is mainly caused by employees of the business. If they fail to have the right qualifications and experience, they will not have the capacity to perform various roles in a competent and suitable manner. The management must invest in offering employee training and development opportunities, performance appraisals and job evaluations. It ensures that each of the employees is suitable for his or her role and feels adequately compensated and comfortable when discharging responsibilities. It improves the productivity of employees, since they are comfortable and feel secure while executing their roles.   

The fourth gap exists between service delivery and external communication. The management must ensure that the information given to the public on the nature of products and service levels is correct and factual. It makes possible to avoid the development of wrong customer perceptions of products and services offered. Most advertisements tend to exaggerate the availability and nature of services, which leads to wrong customer perceptions and poor decision-making (Vincent, 1999). Any information targeting customers and the general public must be vetted for clarity and the lack of generalization. Restaurants should only indicate product and service varieties that are offered. It makes prospective customers make clear decisions, such as budgeting and choosing based on the correct information. Clear, factual and succinct messages tend to attract the right clientele, who add to the existing customer base and may eventually lead to customer loyalty.

The fifth gap is the one between the service, which the customer expects to get, and the one experienced. The main reason for this gap is misinterpretation by the client of service parameters. Customers use various cues to develop their perception of a product and service levels. Such include word-of-mouth and personal needs and experiences. The restaurant business can conduct transactional surveys on its customers after attending to them. Such surveys help to understand the customer perceptions of service. The business can then identify areas, where improvements are needed in order to be more customer-centric. 

The stages that a brand passes before consumers develop attachment to it can also be used to design strategies for developing customer loyalty (Robert, 2001). 

1. At the first level, customers are aware of the availability of products and services, but have no attachment to them.
2. At the second level, customers start thinking whether a brand is suitable for their needs. They evaluate whether it is worth being bought by comparing its price and the value it adds to them.
3. At the third level, customers start developing attachment to the brand. They list it among their choices for comparison with others.
4. At the fourth level, buyers note distinct qualities and attributes of the brand in comparison with others. They start associating their emotions and needs with it and develop attachment.
5. At the fifth level, there is a strong bondage between customers and the brand. They have assessed costs, performance and value addition and have settled on the brand as their choice. At this stage, customer loyalty is evident.

It is imperative for the business to ensure its full marketing to shorten the time taken to move from one level to the next.  It shortens decision-making periods for most customers before they become loyal to the restaurant.

At the presence and relevance levels, that is the first and the second levels, it can adopt marketing strategies, such as the 4P’s one that focuses on the product, price, place and promotion (Aaker, 1996). The latter builds awareness among the targeted customer segments of the availability of the brand, namely products and services the restaurant is selling, its location, pricing and even opening and closing times. The management can also use conjoint analysis tools to know preferences of buyers. Such information is vital for developing product designs and suitable marketing strategies.

At the third level, product attributes must be clear to consumers. The information contained in marketing materials must be adequate. It allows prospective customers to make a comparison between the chosen brand and competing ones, and make their independent decisions. For the restaurant business, the messages designed should focus more on communicating benefits of products rather that their features. In order to identify whether products meet the right needs of customers, the management of the restaurant can utilize a unique selling proposition analysis (Kieran, 2009).

At the fourth and fifth levels, further attributes of products and services should be communicated, including excitement, fun and approval from peers. They enhance customers’ emotions and increase the degree of attachment. Those clients who have strong attachment to the brand will recommend it to others within their social, professional and even family circles. These people are the ones, who should be targeted by the management when implementing loyalty awards and reward schemes.             

Another vital determinant of customer loyalty in the restaurant business is its image. It is conceived by the consumer both factually and emotionally. Customers normally develop perceptions about the business through images that they construe while visiting the restaurant. There are various cues, which customers use to develop an image. These include such factors as the prices of products, quality perceptions they develop after patronizing the restaurant, diversity of the menu and flexibility of services being offered.

Another determinant of the image of a restaurant is the nature of service. The availability of delivery service and favorable credit policies also tend to cultivate positive images of the business in the minds of customers.

The availability of physical facilities, such as elevators, air conditioning, lighting and general architecture improves the accessibility and general comfort, which work for the purpose of the development of positive images. It becomes convenient for the customer to patronize the business, since such services as parking, security, and general atmosphere details are addressed fully. It improves the reputation and reliability of the restaurant in the eyes of the customer.

The business must also use such promotional facilities as advertising and displays. It improves brand visibility in the market. Besides, it increases and updates the level of information available to current and prospective customers. The availability of such data increases the chances of having prospective customers seeking to be served in the restaurant. The improved visibility of the business increases choice options available to customers.

Tepecci (1999) has summarized the key factors that play a crucial role in enhancing customer loyalty in the restaurant business. The awareness of prospective consumers of the existence of the restaurant and its product offerings increases the customer base, which leads to the high number of loyal clients. The exposure of offered services can be done through the adoption of integrated marketing techniques that ensure that information is made available to a large number of people using cost-effective means. It ensures the competitiveness of products in the face of competing ones. The increased awareness of prospective customers of the availability of services raises the potential of the business attracting new consumer profiles.

Another factor that determines customer loyalty is reputation. The information distributed by the restaurant during its marketing drives must be accurate and factual. Its management of must ensure that the promised quality is delivered. A high reputation of the restaurant in the eyes of its main customers creates attachment of the latter to the former. The restaurant should have the ability to provide customer centric services. Customers can be charged premiums prices for, since they have higher attachment levels to the business. Building and sustaining the right image is vital for the restaurant business. It is the main distinguishing factor between the products offered by the restaurant in comparison to those of competitors. Different styles and elegance are perceived by customers to be available in particular themed restaurants. There should be no ambiguity in the description of services offered. Clear messages that are easy to comprehend improve the time that consumers take to make their purchasing decisions.

Promotions also play a leading role in developing customer loyalty. They can be used to create differentiation. Information availed during promotions can be used by customers to make their decisions and may lead to consumer loyalty in the long run.

Managerial Implications

 Most decisions and resources required to implement customer loyalty determinants are in the hands of the management. Such resources include the provision of enough finances to conduct market surveys and invest in the infrastructure of the restaurant. It also entails recruiting adequate personnel, who possess the right expertise and skills for efficient service delivery. The employees hired by the business play crucial roles in determining whether service delivery is in line with the organizational goals and culture. As a result, workers must be adequately motivated. According to Elvis (2002), the organizational culture determines the key procedures and processes that influence communication, customer service and interpersonal skills that are essential for the business. Employees should be provided with training services, which enhance their suitability for various roles. The management should also implement feedback mechanisms. These allow for the flow of information from customers to the management. A customer feedback is essential, as it informs of areas that need improvement. The performance levels of employees must also be measured in order to gauge their productivity. It is also imperative for the business to develop a reward mechanism for employees. The recognition and reward of talent through monetary and non-monetary means increases the productivity of workers. It nurtures their enthusiasm and boosts morale.

The management must also create an effective and elaborate service delivery mechanism. It is vital for the business to map the entire service delivery process to eliminate all wastes. It requires the development of effective and workable policies and standards that guide daily operations. The flow of information through the hierarchy in the business must be clear. It eliminates ambiguity and duplication of roles. The management must carry out a job evaluation process, whereby the suitability of each employee is rated. Afterwards, each worker must be given his or her individual job description. It stipulates particular roles and responsibilities that one should play in the business. Various sections and departments in the restaurant must set individual goals and targets, which are aligned to the overall ones. The business must also have service level agreements with all stakeholders, including suppliers. It ensures that there is more certainty in the operations of the enterprise. Any lack of coordinated efforts can have detrimental effects on customer loyalty, because service delivery is easily compromised.

The management must also lay the foundation for effectively dealing with any flows that may emerge in the business. There are problems, which can emanate from service or oversights by employees or customers. The efficiency of management structures put in place in handling such concerns determines the overall impacts that such flows may have on the business. The recovery process must be prompt to safeguard any gains the enterprise could have made in terms of customer loyalty. There are various measures that the management can institute in order to successfully recover. A customer feedback must be sought at all times. It highlights areas, where improvements are needed. Employees must also be adequately equipped to deal with diverse customer experiences. If errors occur, they should have the capacity to use the right strategies in empathizing, apologizing and resolving it. The management must also adopt optimal policies for conflict resolution, such as root cause analysis, to deal with the main problem and not only its symptoms. The management can also organize forums, where proactive problem solving strategies can be adopted in the business.

It is also advisable for the management to adopt innovative techniques in service delivery. It enhances the ability of the business to stay ahead of its competitors and demonstrate prompt response mechanisms to changes in customer styles, perceptions, attitudes, and beliefs. There are continuous changes in the technological arena, which inform of market dynamics. In order for the business to remain ahead and keep pace with market changes, it must adopt innovative service offerings. Such strategy makes it possible for the restaurant to maintain market share with huge prospects of increasing it. Adopting innovative technologies in the dissemination of services reduces transactional costs for the business.

Conclusion

Customer loyalty plays a crucial role in the determination of the success of any business, especially in the long run. As far as the restaurant business is concerned, it must focus both on attracting new customers and retaining current ones. Customer loyalty ensures that the enterprise benefits from repeat business opportunities offered by loyal customers. The latter recommend their friends and colleagues through referrals offered products and services. Such word-of-mouth marketing increases the level of brand awareness in the market. Loyal customers are known to act as free marketing agents and brand ambassadors, who play a leading role in creating awareness. It promotes the business through an increase in the customer base, which automatically raises business volumes and profitability levels. Activities of the most loyal customers play a leading role in shielding the restaurant from the effects of competition. Customer loyalty can considerably favor the enterprise. It is due to the ability of the business to conduct cross-selling activities among these loyal customers. If the restaurant decides to introduce new product varieties, such as foods and drinks, it is easier for the latter to penetrate into the market, since loyal customers act as a ready market for them. Consumer loyalty is also known to drastically reduce the cost of acquiring new customers. Loyal buyers increase the prospects of potential customers trying out products and services for sale. The latter mainly rely on the confidence portrayed by the loyalists, which influences the time they need to make purchasing decisions. In addition, loyal customers are also more reliable in providing a necessary feedback that can be used by the business in decision-making.