Mike Hohnen

Coaching for personal growth, change and development

Hotel

The Big Shift – Products to Services

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This is the second post in a series on the new service economy. You will find the first post here.

Before we start dissecting what it actually means to create fantastic experiences and great services, I think it’s useful to take a step back and try to understand the big picture on how the world that we are operating in, as service providers, is changing quite dramatically.

There is a big shift taking place world-wide, and it is a shift that moves away from a focus on producing stuff to delivering services. It is also described as the move from a goods-dominate logic towards a service-dominate logic.

What that basically means is that for thousands of years, we have been used to creating value by taking something, adding to it, and then exchanging it with somebody else in return for their money. The focus has been on the functionality, the specifications, and the quality of the actual product. The better the specifications, the more money we have been able to obtain for that product.

Service Excellence (1).005
What is happening now is a gradual shift away from a focus on products towards a focus on needs.

Recently I realized I needed go buy a new power drill in order to put a cupboard up on the wall. My old drill doesn’t work very well anymore because it has been lying at the bottom of my cupboard for the past ten years without being used. So, I decide to go get a better drill. But, do I really have a need for a drill? My next drill is probably also going to lie in the cupboard for a few years before I use it again. What I really need is two holes in a very hard wall. If somebody could provide those holes for me in a faster, easier way that would require less effort, less resources, or less trouble for me, I would grab that opportunity immediately.

If you are in the service industry, you may not have paid attention to this because, in the service industry, one has been, in a certain respect, in the service-dominate logic forever. But what is happening is that a lot of traditional manufacturers and producers are also moving away from their traditional goods-dominate logic, and instead they are thinking about how they can make that shift from product specifications to needs fulfillment.

In a service-dominate logic, the value is not created by a transfer of ownership, value is created in use. When I use your product or service, it brings value to me; and the minute I am not using it, it no longer provides value for me.

A great example of this is Mercedes-Benz, their smart car, and the service they have now created in more than 30 cities called “Car2Go”. You can grab the car off of the street with just your membership card and drive from A to B and then leave the car. Most of us living in big cities don’t need to own a car – in fact, it is a downright nuisance. What we do need is flexible transportation at our fingertips. There are lots of other examples of this new trend if you start looking around.

Why do I think this is important?

Because, what this means for the traditional part of the service industry is that more and more consumers are going to experience higher and higher levels of service. Great service is going to be the new normal.

And, that is going to raise the bar…the level of service expected across the board…is my prediction.

In my next blog post, we will examine the concept of value.

Customer Centric : they get it – Virgin Hotels

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In my previous post, I tried to illustrate how some hotels (and other service businesses) truly understand what it means to be customer centric and then all the others who really just don’t get it.

Two days after posting that I came across the following video from Virgin – who is now entering the hotel industry.

This is interesting because Virgin has always had a strategy of moving into industries where most of the players just don’t get it… Airlines, trains, banks, phone providers, and now hotels. What it means is that Virgin sees an opportunity to do it much better…there is room for improvement… Check out their website

Virgin Hotels – ‘Brilliant’ Not To Scale New York. from Not To Scale on Vimeo.

We make love and steal hearts. We’re passionate about creating brilliant experiences that make peoples’ lives better. And there’s nothing more honorable than that.

Building the emotional connection

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Here is a great example of a brand making the emotional connection

In my view a brand is a product that you have feelings for – it becomes a brand the moment you ‘care’ about it in some way.

That is also the reason why we spend so much time talking about the importance of generating customer loyalty when we work with implementation of the Service Profit Chain.
Emotions drive loyalty.

Your ‘product’ becomes a brand in your guests head as a result of the emotional connection that your staff makes with the guest.

The first step in brand building is therefore making that connection ( it is not advertising spend) – then you can always reinforce that with clever advertising as it is done here – but it starts with positive moments of truth

Are you the frog in the pot?

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During summer, a period notoriously known for its lack of news, the media seem to have been very busy reporting and analysing a steady news stream predicting their own demise. We have seen headlines such as ‘Not dead yet’ or ‘Thinking the unthinkable’ the latter referring to a possible scenario in a not too distant future where the New York Times is no longer published — not on paper at least.

If you have not followed the discussion the crux of the matter is very well summed up in the following video clip:

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
End Times
www.thedailyshow.com
Daily Show
Full Episodes		 Political Humor Joke of the Day

My point here is not so much to enter into the discussion — to me the conclusion is inevitable — but to point out the fact that once again an industry has been caught out by the famous frog syndrome.
( if you drop a frog into a very hot water it will do its very best to scramble and get out, if however you put it in a pot of cold water and heat the pot slowly, the frog will not try to get out before it’s too late ) i.e. not responding to gradual changes in your environment. The situation in which print media finds itself today was predicted five if not 10 years ago. They just all hoped that the pot would not get too hot. In 10 years time this will be a classic business school case in line with the one about the buggy whip manufacturers, typesetting and landline telephones.

So how does that relate to the world of hotels, travel and conference centres? Well – I think there is a similar shift taking place in our environment. Well possibly not directly in our own environment but in the environment that provides us with our business.

There are three key drivers of this shift: The financial crisis, energy/co2 awareness and Web 2.0 together they have inspired a growing number of business leaders to rethink the need for travel and face-to-face meetings.

IKEA a trendsetting company is running an internal campaign under the banner of: Meet more – travel less. Encouraging the use of interactive web technology for meeting purposes while at the same time reducing travel costs and CO2 emissions. The target for 2009 is to reduce travel by 50 percent and CO2 emission as a consequence by 25 percent. And they are not the only ones, they are just very visible in the way they do it.

It makes sense. Cramming 20, 50 or 500 people into a conference room and feeding them an endless parade of PowerPoint slides, be they ever so pretty and well-designed is not efficient knowledge transfer, (let alone learning) We know that.

Ah but wait – I hear you say – what about the networking? That is the truly important part of meetings – it may be important, but traveling 4 or 6 hours, spending 2 days away from the job and then taking a chance on who you share the stand-up coffee table with during a 10 minute break is not efficient networking.
You could spend an hour systematically working LinkdIn, Facebook or even Twitter and you would probably produce some far more interesting connections and possibilities. So lets not kid ourselves about the networking.

And there is a fourth driver adding to this:

“During the next 5-10 years, the Millennium generation will become a signi?cant proportion of meeting participants. This is perhaps the largest generation gap in history and the consequences for meetings will be fundamental. If meetings for the older generations serve the purposes of information and networking, this means online communities, such as Facebook and MySpace to the younger generations, and they learn from Google, Wikipedia and online peers more than parents, teachers
and conference speakers. They don’t see the difference between virtual and real any more than they see why work and play should not happen at the same time. ” From The Meeting Manifesto

But it is not just meeting planers who are shifting their focus to ROI – the other sector where we can see a shift is taking place as well is within the training industry. Traditional training companies are also in the hot pot if they still believe in classrooms and PowerPoint’.

“Learning budgets are decreasing. Spending on external services are decreasing even more. And learning departments need to do more with fewer resources.

If you are inside a corporate learning department, assuming you still have your job, then you feel this by being more busy. In many ways, that’s not a bad feeling compared to either the person who lost their job. Or the people who have seen their learning business crushed by this”
Read more here

So two major purchasers of hotel rooms, F&B and meeting space, the meeting organizers and the training companies are in this shifting paradigm. Looking for new solutions and ways to connect but with out the travel. What was once a considered a perk – is now almost a curse.

Meetings and tourism are now two different worlds.

Tourism is all about pleasure and experiences which is fine, but meetings/training are business and business means somebody is looking for a return on investment. If there is no ROI or if it is too low, meetings (gatherings/trainings etc) in their current form will be cut.

That is what is happening in the market just now.

And if you think that once the so-called crisis is over then everything will be back to normal and we can do business as usual then and you have just joined all those very uncomfortable newspapermen in their very hot pot.

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If you would like to pursue this subject here are a few links that you may find interesting:

European Event ROI Making Meetings and Events More Profitable.

The Meeting Architecture Manifesto

The state of Learning as a Business

It's all about value

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From www.4hoteliers.com

Travel is changing. There’s a lot of talk about average rates dropping in many markets, but don’t kid yourself, it’s all about value. Packaging is a wonderful way to add to perceived value without sacrificing your rate positioning in the marketplace. Getting more for less is pretty much a human concept. There is still a lot of business out there; we’ll just have to work smarter to get it.

Keeping up will require a greater emphasis on the hotel’s location and perceived value. Hoteliers will finally realize that people travel to get to a particular location and then, with few exceptions, choose a hotel based upon the best-value deal within that location. Hoteliers will ultimately understand that rate alone doesn’t sell rooms, no matter how low; what one gets for that rate is how we determine “value”. Perceived value sells rooms, not rates.

Read the full article here