Marketing
Data-base Marketing:
Building
Yesterday’s broad-spectrum demographic information
hotel marketers
by Paula A. Francese
and Leo M. Renaghan
COMPETITIVE STRATEGY for ho-
tel companies in the 1990s will be
based on the concept of brand loy-
alty. For the hotel customer of the
’90s, service quality will increas-
ingly become synonymous with
brand image. The tangible aspects
of the lodging experience, which
most chains have under control, will
be less important in marketing than
the image associated with a particu-
lar hotel brand. Purchase decisions
and brand loyalty will be deter-
mined by the three important fac-
tors that define the image of a ho-
tel’s service in the consumer’s mind.
These are individualized personal
attention, incentives, and
recognition.
Cultivating brand loyalty in a ho-
tel guest based on these three
Customer Profiles
is nota sufficient tool for tomorrow’s
points will require hoteliers to ex- to ask the customer tirelessly and
amine their customers more closely sincerely what he or she is looking
than in the past. The broad canvass for in lodging services. Then you
painted by the usual demographic will have to communicate through
information must give way to a advertising or personal contact your
more detailed, multi-dimensional firm’s to meet these needs at
profile of the complex expectations the appropriate level. Finally, you
and attitudes of people who look to will have to go back to the customer
a particular hotel flag whenever they repeatedly and ask whether your
travel. In this article, we will discuss operation, in fact, met the guest’s
some of the important aspects of expectations and make adjustments
building your customer data base accordingly
for micro-marketing. As has been pointed out before in
these pages, you have a golden op-
Dialogue portunity to find out about your cus-
Dialogue will be the marketing tomers when they are in your house.
watchword of the ’90s, according to Like other service businesses, hotels
marketing experts Robert Shaw and are in a market where a substantial
Merlin St®neel 1 To
get to the heart of
your customers’ opinions and atti- Paula A. Francese is a doctoral
tudes, your company will first have candidate at the Cornell School of
Robert Shaw and Merlin Stone, "Competitive Su-
1
Hotel Administration, where Leo
periority through Data Base Marketing," Long
M. Renaghan, Ph.D., is an associ-
Range Planning, 21, No. 5, pp. 24-40. ate professor of services marketing.
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number of customers make frequent
repeated purchases. Each such pur-
chase represents an opportunity to
learn more about your customers.
Consumer-products companies
dream of having such a great oppor-
tunity to get close to the customer.
Data-base The pro-
cess of developing an enhanced pic-
ture of your customers and their
buying behavior we call data-base
marketing. As a component of com-
petitive strategy, data-base market-
ing has four advantages over con-
ventional marketing practices. First,
it builds the loyalty of existing cus-
tomers. Second, it expands your
market share through identification
and acquisition of potential custom-
ers, through &dquo;conquest sales,&dquo; or
through the discovery of new, un-
tapped markets. Third, it provides a
basis for revenue-stream analysis,
as well as helping generate incre-
mental revenues, and, finally it re-
duces marketing costs over the long
run by allowing you to target the use
of your marketing budget more pre-
cisely (i.e., micro-marketing).
A customer data base is raw infor-
mation that can be sorted and en-
hanced to produce a marketing plan
on which you can take action. Infor-
mation in a well-designed data base
typically falls into two large catego- direct-marketing rule known as the find other people like them who will
ries : operational data (e.g., cus- RFM principle (recency, frequency, likely want to buy your product.
tomer name, and munificence). Your best custom- In examining your accounts, you
title, company name,
ers are those who have purchased can use the familiar Pareto assump-
home and work address, and
method of payment) and marketing recently, purchase frequently, and tion that about 20 percent of your
information (e.g., source of reserva- deliver the greatest monetary ex- customers will generate 80 percent
tion, lead time of reservation, prior penditure. For many hotel compa- of your business. The initial task
use, frequency of stay, responses to nies, reservation histories or the then is to identify your most fre-
promotions, special preferences). listing of your frequent-guest pro- quent guests or those who provide
Clearly, despite the distinction be- gram will be a logical starting point the largest portion of the top 80 per-
tween these two types of informa- for this research. cent of your business. Analyze all
tion, they are both essential to a Another marketing precept bor- the information that is available on
rowed from the direct-marketing in- these customers and list the domi-
meaningful marketing-information
data base. dustry has to do with the identifia- nant attributes they have in com-
A systematic approach to building ble psychographic, socio-economic, mon. Traditional dimensions used

a customer data base starts with the
obvious step of identifying your best
customers.2 You can use the classic
oseph Schwartz, "Data Bases Deliver the
J2
American Demographics, September 1989,
Goods,"
p. 24.
and life-style attributes of custom- to segment and target markets are
ers. Direct marketers have long demographic characteristics, geo-
understood that certain attributes graphic location, psychographics,
correspond with purchase behavior. and prior purchase behavior.
If you know the important attributes Included in the list should be all
of some of your customers, you can of the demographic, socio-eco-

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nomic, personal, and financial life-
style information that you can possi-
bly gather from any legitimate
source.
Here are some of the factors to
examine. How many of your fre-
quent guests belong to a particular
industrial classification? Do you
have a predominance of financial-
services executives, independent
entrepreneurs, or sales people? Do
the names of particular firms come
up time after time? What is the most
common method of payment?
Which credit card do your guests
use most frequently?
® Digging
Data on psychographic, financial,
and media behavior are more diffi-
cult to find, but well worth the
search. Much of this information
can be purchased from outside
sources. Knowing which magazines
and newspapers your customers
read, which TV programs they
watch, what they do in their leisure
time, and even which consumer
products they buy can help you un-
derstand them as individuals so you
can effectively aim your marketing
messages at them. This information
also supports your own service-
planning efforts.
Financial life-style information re-
flects past purchase behavior that
will help you predict future actions.
Whether your guest buys through
catalogues or donates money to
charities can be an indicator of his
or her propensity to buy travel and
leisure services.
Overlays. Most likely you will not
have all this information in your cur-
rent files. Supplement what you al-
ready have gathered in-house with
direct surveys of current customers,
or seek the help of data firms that
can supply enhanced behavior infor-
mation based on what you can sup-
ply. This process is called overlaying
data from secondary sources. Its
purpose is to compare data in one
data base with those in another.
Many hotel companies overlay or be in a position to design promo-
link data-base information with tions, advertising campaigns, and
credit-card or transportation com- even new services. Instead of shoot-
panies. Secondary overlays are also ing in the dark, you will be starting
available from geodemographic and from a position of strength.
psychographic information firms, Expanding your understanding of
many of which have developed af- your customers’ attributes and
fordable desktop-computer analysis shedding assumptions as to who
packages. In combination, the data they are can be an eye-opening ex-
from these external sources provide perience. Until recently, for in-
invaluable enhancements to your stance, supermarket chains thought
own in-house records. of their customers as being women,
If you know your customers’ me- primarily homemakers. Much to the
dia habits, you can learn even more amazement of the food marketers,
about them from the audience- an analysis showed that 40 percent
measurement surveys conducted by of supermarket customers are men
newspapers and radio and television who typically are in a hurry and do
stations. These outlets will often little impulse buying. Moreover, as
give you audience or reader profiles more women enter the labor force,
at no charge in the hope that you their food-buying behavior increas-
will eventually purchase advertising ingly matches that of their male
from them. counterparts. The result of this
Once you have all this informa- study has been a revolution in food
tion, your next step is to analyze the marketing that has had an impres-
transaction histories of your most sive impact on corporate profitabil-
valued customers. Find out whether ity, customer satisfaction, and store
stays follow a particular pattern. loyalty.
Are they seasonal? What did the After the data-gathering process
guest purchase from your hotel dur- is complete, you need to sort the
ing the stay? Did the person eat at data and expand your overlay analy-
in-house restaurants, purchase sis. Your objective in this process is
room service, or go to the freestand- to compile a list of productivity cri-
ing restaurant across the street? Did teria-factors that are connected
the guest return for a personal stay with a purchase decision. By assign-
after first sampling your hotel dur- ing weights to various characteris-
ing a conference? Look at credit tics and attributes, you can develop
cards. There are specific character- a more rational and efficient base of
istics that distinguish, for instance, information about your best cus-
holders of the American Express tomers and those whom you believe
Gold card from holders of the AmEx make good prospects.
Platinum. Those who use a bank
card have an entirely different set of Micro-Marketing Holiday
characteristics. These differences Holiday Inns started its marketing
could influence your future commu- data-base project in 1987. The sys-
nications strategy, tem has now been extensively inte-
For many hotels, this data-gather- grated throughout the chain and is
ing process has the potential of in full operation, according to John
merely introducing another level of Durr, director of data-base market-
confusion to an already busy opera- ing. Durr said that prior to 1987 Holi-
tion. Don’t be discouraged by disor- day had a financial focus for its data
ganized customer files. Push on, be- base. The company primarily used
cause the results will be well worth the data bases to track customer
the effort. Armed with a new, ex- point accumulations in its Priority
panded information base, you will Club, allocate club expenses among
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the chain’s properties, and track ag-
gregate sales.
Holiday quickly saw the advan-
tages of having a base of informa-
tion about known customer groups
-Priority Club members, leisure
customers, senior citizens, and so
on. Moreover, Durr said, the firm
was able to identify customers who
were not using particular services.
This information provides Holiday
with specific targeted groups for fu-
ture promotion and advertising.
Holiday added geodemographic
overlays to its in-house information.
The result is that the company has
been able to create what it calls key
clusters of customers. Holiday
placed a value on these clusters by
matching geodemographic clusters
with purchase behavior in terms of
room-nights and other purchases
made during the guest’s stagy
Once Holiday’s marketers could
put a value on the purchase activity
associated with specific customer
groups, they were able to assess
which clusters were the most valu-
able. Being able to pinpoint the flow
of revenues from these groups has
greatly enhanced the efficiency of
Holiday’s marketing programs and
advertising, Durr said. Holiday is
now able to predict future trends
and fine-tune promotions to these
specific groups of customers. The
company has the information it
needs to create several customized
versions of a promotion or advertis-
ing piece that is specifically de-
signed for a particular group of cus-
tomers. While there continues to be
a need for mass marketing (e.g., net-
work advertising to build brand im-
age), data-base marketing is the tool
of choice for execution of specific
marketing efforts.
Linked Companies
In 1984, an all-suites lodging firm
used a &dquo;linked companies&dquo; strategy
to reduce to one-fourth the amount
of time it took to achieve full occu-
pancy in a new property in a south-
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eastern U.S. city. The company con- came available throughout the com-
sulted a direct-response agency to pany, notably at the customer-ser-
compile a prospect list of business vice center. As a result, the firm was
executives who have a need to able to track revenues and monitor
travel to that city. By matching SIC purchase behavior in conjunction
codes with information from the with promotional campaigns and
Dun and Bradstreet data base, the special publications that announce
all-suite property was able to pin- marketing programs. With these
point companies that had headquar- data, the company was able to as-
ters in that city with branch offices sess its return on investment in mar-
elsewhere, or branch offices in that keting expenditures.
city with headquarters in other For this company., the success of
cities. In short, these were busi- the data base far exceeded any ini-
nesses that would have executives tial projections or expectations for
visiting town from time to time for financial returns, applications, and
meetings and other activities. The utility. The return on the investment
hotel focused a special pre-opening in this project is real and can be
program in these linked companies. translated into financial results.
As a result, the property recorded
full occupancy in just four months, Wise
instead of the usual 18 months or Sophisticated profiling of customers
longer. The company has since used can be looked on as an investment
this program to open properties in with tangible future returns similar
other locations. to those of an investment in new
equipment or renovation. The poten-
Preference Profile tial difficulties of designing and im-
Another hotel company used a data plementing an in-house marketing
base to develop its own version of a data base are not small, but the re-
frequent-guest program. The com- wards of gathering primary data di-
pany wanted to identify its most fre- rect from customers can far out-
quent guests and set up a program weigh the expense and limited
that would give them special recog- potential of research from an out-
nition while it also generated incre- side supplier.
mental revenue. As is often the case, Regardless of your company’s
the company’s guest-list informa- size, the technology is available for
tion was not well organized. It took developing long-lasting relation-
several months of sorting through ships with customers -relation-
in-house and external overlay rec- ships based on dialogue, loyalty, and
ords to put the data base into a us- recognition. Moreover, the rationale
able form. In the end, customer in- for building this kind of relationship
formation came from many sources, is compelling, in view of the current
including American Express. competitive situation. Holiday’s se-
Once the list was compiled, the nior vice president for worldwide
company enlisted its customers’ as- marketing, Ray Lewis, put it well
sistance in developing a preference when he quipped, &dquo;Johnny Hotel-
profile via a survey. The survey in- seed has been roaming the land.
formation was added to the previous Where there was once only one ho-
marketing data and linked electroni- tel, now there are seven.&dquo; In the al
cally to the company’s reservation analysis, companies that make the
system. In this way, the data base is investment in personalized, respon-
available at any company location sive marketing systems will be the
where the preferred customer might ones who gain the competitive edge
do business. in the battle for market share in the
Eventually the information be- 1990s. 0
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