How to Manage the Economics of Return on Experience (ROX)? - Balance Between Guest Expectation and Cost
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In recent blog articles, Bookboost has discussed ROX (Return on Experience), focusing on explaining what is ROX, why it’s important, and how to increase ROX using Guest Messaging solutions.
However, many hotel managers have this wonder: does valuing guest experience mean to fulfill guest expectations as much as we can, regardless of costs? And how can we measure ROX to monitor the cost and return? A report by KPMG provides insights into these questions.
Striking the Right Balance Between Guest Experience and Cost
Although guest experience is vital, pursuing ROX doesn’t mean to delight guests regardless of cost and investment.
Julio Hernandez, KPMG's US Customer Advisory Leader says: "Yes, you need to understand everything about your customers' expectations and needs, but you also need to understand the value they bring to your organization. There needs to be the right balance between meeting your customers' expectations and understanding the value that attaches to it."
While failing to meet guest expectations influences the guest experience negatively, exceeding guest expectations is also risky. It increases the threshold of guest satisfaction, making it even harder to fulfill guest expectations and harming the company’s profit. To reach the right balance, hoteliers should have good knowledge of the economics. Understanding the cost of fulfilling guest expectations helps hoteliers operate effectively and invest wisely. In the meantime, it enables hotels to optimize their spend while delivering a satisfying guest experience.
How to Manage the Economics of ROX?
Most hoteliers do not have a clue in measuring the cost of guest experience and managing the return on guest experience. KPMG introduces four ways to help hotels have clearer visions.
1. Manage ROX by Metrics
Having a clear understanding of the metrics of ROX helps hoteliers better see the value of guest experience and measure the profit margin, as well as making well-informed business decisions.
First of all, before making any investment in ROX, link the cost of guest experience to specific operational measures that clearly generate financial impacts for the hotel. One of the suggestions is to develop a business case that helps you translate measures (costs) into financial numbers (return). Secondly, when investing to meet guest expectations or to fix broken experiences, make sure these actions are tied to metrics with a proven association to guest experience. Thirdly, balance the cost assessment of delighting guests and the diminishing returns.
As the Bookboost's Guest Messaging platform clearly shows the number and value of conversations with a detail report, it’s easy to see the cost invested and the return of satisfying guest experience. ROX can also be translated into financial numbers via Guest Messaging systems, which can be revenue from cross-selling, up-selling or marketing campaigns. With this clarity, hotels are able to achieve the balance between guest experience and investment.
2. Analyze the Benefit Potential per Segment
Segmentation is critical when it comes to analyzing the guests’ expectations in detail and identifying the value of meeting guest expectations in each guest segment.
Firstly, segment your guests according to their experiences. For example, family travelers expect different things compared to business travelers. Then, identify the whole journey in each segment, understand the value of each segment, and get to know the importance of each interaction with different guest segments. Make sure to understand the gap between each segment’s expectations and its current level of satisfaction with the interaction.
Conduct a value gap analysis based on the understandings that you’ve got regarding the expectation and value. Determine how much value created by experience improvement for each segment at specific interactions, and estimate what the potential customer responses will be.
Guest Messaging has its unparalleled advantages in guest segmentation and personalization. By micro-segmenting guests according to a variety of filters, personalized interactions can be created through Guest Messaging. And the value of interactions is highly measurable because all happens on a platform with records and reports.
3. Gain Clarity on Costs
Even for experienced hotel managers, it’s not easy to take a grasp on which costs contribute to which interactions/guest experiences exactly. A use case helps to probe into this complicated issue.
Take a case study to see the functional areas and cost categories in the costing process, and gain insights from the specific case. Based on different cases, you are able to develop a strategic vision for the costing of guest experience. At the same time, a tracking method that is sustainable and duplicable is needed. It’s necessary to invest in creating a sustainable way to keep track of guest experience costs, including standardized processes, tools, and policies to make guest experience repeatable and calculable.
4. Internal Alignment for Success
To put ROX to the core of your business, strategies and internal cooperations are important. Scenario planning helps to design the organization structure and responsibilities for your staff.
Develop alternative scenarios on how the new experience will be delivered. Consider the people, process, and technology involved, and test the selected scenarios among different guest segments. Then establish a model to monitor and manage guest experience and report on CX journey economics.
On the other hand, align people internally is the key to success. One of the practices is to build a guest experience committee or a guest experience hub, drawing people from across the organization to focus on achieving guest experience excellence. These people will be motivated to be leaders for guest experience in their departments or professional areas, and they will actively drive the projects across the hotel.
In general, data analytics is vital to assist hoteliers to understand and manage the economics of ROX. Only when the costs and values of guest experience are clear, hotel managers can gain more resources and take further steps. Guest Messaging is a functional tool for hotels to communicate with guests and to build guest experiences, meanwhile, it also provides detail data and reports to facilitate hotel manager’s decision-making in ROX.