EFFECTIVENESS OF CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN STAR HOTELS IN KARNATAKA

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1 EFFECTIVENESS OF CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN STAR HOTELS IN KARNATAKA Dr.Ashoka.M.L, Faculty, Department of Post-Graduate Studies and Research in Commerce, University of Mysore, Manasagangotri, Mysore & Ali Reza Mahnam, Research Scholar, DOS in Commerce, University of Mysore Abstract Customer Relationship Management (CRM) in star hotels is a key element that allows star hotels to develop their customer base and sales capacity. With the help of CRM, the star hotels can manage all aspects of customer interactions in a manner that enables star hotels to maximize profitability from every customer. CRM is widely acknowledged as an important component of marketing management and corporate communication management processes in most of star hotels in Karnataka. The study revealed a significant difference in the mean factors effectiveness on CRM practices among star hotels. It was found that the mean values of three-star hotels differed significantly from mean values of four-star and fivestar hotels. It was also found that the relationship between CRM practices and influence on the category to which they belong is higher than expected. Finally it was found that the relationship between CRM practices and influence on the category to which they belong is that only three-star hotels differed significantly from four-star and five-star hotels. Keywords: Customer Relationship Management (CRM), Globalization, Competition, Customers Expectations & Star Hotels Efficiency Introduction Customer Relationship Management (CRM) is widely used to create a personalized experience that will give the individual customer a sense of being cared for, thus opening up new marketing opportunities. CRM is a business strategy, which is adapted by modern organizations to select and manage the most valuable customer relationships since they require a customer-centric business philosophy and culture to support effective marketing, sales and service strategies. The practice of customer relationship management requires right leadership, strategy and culture. Modern organizations have realized that managing customer relationships is a very important factor for their success. Hotels are increasingly challenged to find ways to reduce costs without sacrificing the quality standards imposed to consistently meet guest expectations. The idea of "doing more with less" requires managers to think about ways to operate more effectively (in other words to "do the right things in the right way") and to examine possibilities for cost saving that will not affect the guest s perception of value. Thus, though cost reduction is a key profit maximization factor in the hospitality industry, customer satisfaction should not be undetermined. The present study evaluates the effectiveness of customer relationship management practices in star hotels in Karnataka. The hotel industry

2 INTERNATIONAL CONTEMPORARY RESEARCH JOURNAL IN MANAGEMENT AND SOCIAL SCIENCE (ICRJMSS) VOLUME 1 ISSUE 1 DECEMBER 2014 cannot survive without the customer because customers have more choices today and the targeted customers are most valuable for star hotels. Customer service and customer care must receive high priority within the hotel industry. CRM practices particularly in star hotels are very challenging. If star hotels develop and sustain a solid relationship with their customers, their competitors cannot easily replace them and therefore this relationship provides for a sustained competitive advantage. CRM in star hotels is a key element that allows star hotels to develop their customer base and sales capacity. With the help of CRM, the star hotels can manage all aspects of customer interactions in a manner that enables star hotels to maximize profitability from every customer. There are a lot of star hotels in Karnataka that cater to the needs of guests coming from different parts of the country and the world. According to Karnataka Department of Tourism, there are 903 star hotels in Karnataka boasting of 21 fivestar hotels, 63 four-star hotels, 162 three-star hotels and 657 budget hotels as on March Customer Relationship Management Bose (2002) observes: CRM is about managing customer knowledge to better understand and serve them. It is an umbrella concept that places the customer at the center of an organization. The practice of CRM assumes great significance in modern business environment since it has become an important instrument of marketing, sale and service process. Greenberg (2002) states: CRM is a coherent and complete set of processes and technologies for managing relationships with current and potential customers and associates of the company, using the marketing, sales and service departments, regardless of the channel of communication. According to the scholar CRM contains three basic elements namely an integrated single view of customers, managing CRM in a single way and improving the efficacy of marketing management system. In reality, CRM basically represents a paradigm shift in marketing thoughts and deeds based on two-way communication strategies and technologies. Chen and Popovich (2003) elaborate: CRM focuses on leveraging and exploiting interactions with the customer to maximize customer satisfaction, ensure return business, and ultimately enhance customer profitability. The practice of CRM is an allpervasive phenomenon, which has brought about remarkable togetherness and cooperation between the service providers and customers. Xu and Walton (2005) highlight: Basically, CRM is an idea regarding how a company can keep their most profitable customers by increasing the value of interaction. The value is maximized through differentiation of the management of customer relationships". Basically, CRM is a notion regarding how an organization can keep their most important customers and at the same time reduce costs, increase the values of interaction to consequently maximize the profits". Practically, CRM is an all-embracing approach, which seamlessly integrates sales, customer service, marketing, field support and other functions that impact the thoughts, deeds and lives of the customers. The definitions offered by various scholars commonly identify the goals of CRM, which include the following: Provide better customer service Dr.ASHOKA.M.L & ALI REZA MAHNAM 16

3 EFFECTIVENESS OF CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN STAR HOTELS IN KARNATAKA Dr.ASHOKA.M.L & ALI REZA MAHNAM Make service providers more efficient Simplify marketing processes Facilitate customer loyalty Discover new customers Increase customer revenues Build positive corporate identity Objectives of CRM CRM has mainly three objectives: 1) To achieve higher revenues per customer by knowing and serving one s customers better. 2) To increase customer satisfaction and retention by integrating information from multiple channels stored in disparate systems. 3) To lower costs to acquire and service customers by using technology to automate, manage, and analyze processes and data. Significance of the study The hotel industry is experiencing increased globalization, competition, higher customer turnover, growing customer acquisition costs and rising customer expectations, meaning that hotels performance and competitiveness is significantly dependent on their ability to satisfy customers efficiently and effectively, observe Olsen (1996). Experience reveals that systematic adaption of CRM strategies and application of CRM technologies would bring about rapid progress in the hospitality management sector, opine Sigala and Christou (2002). The major deficiency observed in the researches works in India is the lack of emphasis on analyzing the effectiveness of customer relationship management in the hotel industry in Karnataka. This study is significant for three reasons. Firstly, it aims to identify the effective factors for encouraging star hotels to practice CRM. Few prior studies in recent years in India focus on CRM implementation strategies in hotel industry (Kumar Yadav 2013), CRM practices in hospitality (Tanvi, 2013), and service quality of hotel industry (Kumar et al., 2012). Therefore, this study attempts to uncover the factors effectiveness on CRM practices in star hotels in Karnataka. Secondly, this study evaluates the relationship between CRM practices and influence on category to which they belong. Finally, it is hoped that this new knowledge will help future researchers and practitioners alike to better understand the effectiveness of CRM practices in star hotels in Karnataka. The findings and recommendations of this study are important for hotel owners specially the management of star hotels. Hence, the problem Effectiveness of Customer Relationship Management Practices in Star Hotels in Karnataka was chosen for the present study. Statement of the problem To survive in the global markets, focusing on the customer is becoming a key factor for the hotel industry. It is known that it takes up to five times more money to acquire a new Dr.ASHOKA.M.L & ALI REZA MAHNAM 17

4 INTERNATIONAL CONTEMPORARY RESEARCH JOURNAL IN MANAGEMENT AND SOCIAL SCIENCE (ICRJMSS) VOLUME 1 ISSUE 1 DECEMBER 2014 customer than to get an existing customer to make a new purchase. CRM is an emerging marketing activity or function, which has gained prominence among academics and practitioners. The adaption of CRM as tool of competitive edge is in ascendance worldwide (Parvatiyar and Sheth, 2001). There is no doubt that an effective and efficient practice of CRM is crucial in the successes of a firm. The present study was carried out to evaluate the effectiveness of CRM practices in star hotels in Karnataka not as a means of communication but as a support to sustainable hotel industry development. Indeed, this study is to measure the factors effectiveness on CRM practices among star hotels and evaluate the relationship between CRM practices and influence on category to which they belong in order to make recommendations for improvement. Finally, this study indicates that customers are vital for star hotels in Karnataka and it intends to understand the factors effectiveness on CRM practices and the relationship between CRM practices and influence on category to which they belong in Karnataka. To reach this purpose, the following research questions emerge: 1. What is the influence of factors on CRM practices among star hotels? 2. What is the relationship between CRM practices and influence on the hotel category? Need for the Study CRM in star hotels is fundamental to building a customer-centric organization. CRM in star hotels is a key element that is allowed to develop its customer base and sales capacity. A successful CRM strategy can be practiced by coordinating with the business operations, strategy and employee and customer acceptance. The present study attempts to evaluate the effectiveness of customer relationship management in star hotels in Karnataka as well as making policy recommendations for the improvement of CRM practices in star hotels. The present study would throw light on: CRM as an important component of organizational management process in star hotels in Karnataka, This age of economic liberalization, where star hotels are required to cater to the increasing needs and demands of the customers, A constant and continuous research on the changing economic scenario subject to rapid progress in tourism promotion and hospitality development sector imperative in a model state like Karnataka. Objectives of the Study 1) To measure the factors effectiveness on CRM practices among star hotels. 2) To evaluate the relationship between CRM practices and influence on the category to which they belong. Research Hypotheses The study aims to test the following hypotheses to measure the effectiveness of CRM practices in star hotels in Karnataka: H 1: There is a significant difference between factors effectiveness and CRM practices in star Dr.ASHOKA.M.L & ALI REZA MAHNAM 18

5 EFFECTIVENESS OF CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN STAR HOTELS IN KARNATAKA Dr.ASHOKA.M.L & ALI REZA MAHNAM hotels. H 2: CRM practices are different among respective star hotels. Research Methodology The present study is both descriptive and exploratory. The research approach is quantitative because relationship can be expressed in numbers. In this study both primary and secondary data was used for a specific purpose. The primary data was collected through interviews, questionnaires and observations from the sample units of star hotels. In addition to questionnaire, schedules were used to collect unpublished information from the management and authorities of star hotels. The secondary data was collected to supplement the questionnaire and schedule survey information. The annual reports, prospectus and brochures of star hotels, publications of Tourism, books, research papers, articles, periodicals and statistics on star hotels and hotel websites were used as important sources of secondary data. The population of this study consists of all registered star hotels in Karnataka. According to Karnataka Department of Tourism, there are 903 star hotels in Karnataka boasting of 21 five-star hotels, 63 four-star hotels, 162 three-star hotels, and 657 budget hotels (two-star and one-star categories) as on March The sample units in this study consist of 213 of three categories (20 five-star, 54 four-star and 139 three-star). The respondents are a composition of males and females of varied ages, levels of education and experiences. Table No. 1 shows top three cities in Karnataka namely Bangalore, Mysore and Mangalore considered in this study because of more star hotels. Table 1: Distribution of Study Area and Sample Hotels Study Area Total Bangalore Mysore Mangalore 5-Star Star Star Total Source: Karnataka Department of Tourism (March 2013) The authority concerned of Karnataka State Tourism Development Corporation (KSTDC) was approached and information gathered regarding the selection of three top cities of Karnataka for the purpose of primary data collection regarding the effectiveness of CRM in star hotels in Karnataka. In this study, 213 star hotels were considered for the purpose of study in Karnataka and 607 respondents were selected from top three cities which has the highest number of star hotels compared to the rest of the cities in Karnataka, Bangalore (171), Mysore (29) and Mangalore (13) respectively. Questionnaire Design In this study, a self-administered questionnaire has been used for collecting data from the managers perspective of star hotels in Karnataka. Salmant and Dillman, (1994) argue that, to achieve as high response rate as possible, researchers need to explain clearly and concisely why they want the respondent to complete the survey on the first page. With reference to this Dr.ASHOKA.M.L & ALI REZA MAHNAM 19

6 INTERNATIONAL CONTEMPORARY RESEARCH JOURNAL IN MANAGEMENT AND SOCIAL SCIENCE (ICRJMSS) VOLUME 1 ISSUE 1 DECEMBER 2014 a covering letter is provided on the first page. The questionnaire was designed to poll the opinions of star hotels personnel in Karnataka with respect to: 1. The factors effectiveness on CRM practices 2. The relationship between CRM practices and influence on the category to which they belong Testing Hypotheses H 2: There is a significant difference between factors effectiveness on CRM practices in star hotels Table 2: Mean observed and expected values on factors effectiveness on CRM practices and results of one sample t test N Observed Mean Std. Deviation Expected Difference t value P value According to the above table, the observed mean for factors effectiveness on CRM practices was as against the expected value of Further, one sample t-test revealed a significant difference between observed and expected values (t=9.553; P=0.000) indicating that mean observed values were higher than expected ones and factors effectiveness on CRM practices were much better than expected. Table 3: Mean scores on factors effectiveness on CRM practices element for respondents among star hotels and results of One-way ANOVA Category Mean S.D F Value P Value 5-star B star B star A Note: Mean values with different superscripts are significantly different from each other as indicated by Duncan s Multiple Range Test (DMRT) (Alpha=0.05). H 2 stated: there is a significant difference between factors effectiveness on CRM practices in star hotels is accepted. According to table No. 2, the observed mean for factors effectiveness on CRM practices was as against the expected value of Further, one sample t-test revealed a significant difference between observed and expected values (t=9.553; P=0.000) indicating that mean observed values were higher than the expected ones and factors effectiveness on CRM practices were much better than expected. According to table No. 3, it revealed a significant difference in the mean factors effectiveness on CRM practices among three categories of star hotels (five-star, four-star and three-star). F value of was found to be significant at level. The mean CRM scores for five-star, four-star and threestar hotels were 43.19, and respectively. Further, Duncan s multiple range tests revealed that only mean value of three-star hotels differed significantly from mean values of four-star and five-star hotels. Factors effectiveness on CRM practices: One-way ANOVA revealed a significant difference in the mean factors effectiveness on CRM practices among three categories of star hotels (five-star, four-star and three-star). F value of was found to be significant at level. The mean CRM scores for five-star, four-star and three-star Dr.ASHOKA.M.L & ALI REZA MAHNAM 20

7 EFFECTIVENESS OF CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN STAR HOTELS IN KARNATAKA Dr.ASHOKA.M.L & ALI REZA MAHNAM hotels were 43.19, and respectively. Further, Duncan s multiple range tests revealed that only mean value of three-star hotels differed significantly from mean values of four-star and five-star hotels. H 2: CRM practices are different among respective star hotels. Table 4: Mean observed and expected values on relationship between CRM practices and influence and results of one sample t test N Observed Mean Std. Deviation Expected Difference t value P value The above table shows that the observed mean for relationship between CRM practices and influence on the category to which they belong was as against the expected value of Further, one sample t-test revealed a significant difference between observed and expected values (t=31.670; P=0.000) indicating that mean observed values were higher than expected ones and relationship between CRM practices and influence on the category to which they belong were much better than expected. Table 5: Mean scores on relationship between CRM practices and influence element for respondents among star hotels and results of One-way ANOVA Category Mean S.D F Value P Value 5-star B star B star A Note: Mean values with different superscripts are significantly different from each other as indicated by Duncan s Multiple Range Test (DMRT) (Alpha=0.05). H 2 stated: CRM practices are different among respective star hotels is accepted. According to table No. 4 it is accepted that the observed mean for CRM practices are different among star hotels, which was as against the expected value of Further, one sample t-test revealed a significant difference between observed and expected values (t=31.670; P=0.000) indicating that mean observed values were higher than expected. According to table No. 5, it revealed a significant difference in the mean relationship between CRM practices and influence among three categories (five-star, four-star and three-star). F value of was found to be significant at level. The mean CRM scores for five-star, four-star and threestar hotels were 39.76, and respectively. Further, Duncan s multiple range tests revealed that only mean value of three-star hotels differed comparably from mean values of four-star and five-star hotels. Relationship between CRM practices and influence on the category to which they belong: One-way ANOVA revealed a significant difference in the mean relationship between CRM practices and influence on the category to which they belong (five-star, four-star and three-star categories). F value of was found to be significant at level. The mean CRM scores for five-star, four-star and three-star hotels were 39.76, and respectively. Further, Duncan s multiple range tests revealed that only mean value of three-star hotels differed comparably from mean values of four-star and five-star hotels. Dr.ASHOKA.M.L & ALI REZA MAHNAM 21

8 INTERNATIONAL CONTEMPORARY RESEARCH JOURNAL IN MANAGEMENT AND SOCIAL SCIENCE (ICRJMSS) VOLUME 1 ISSUE 1 DECEMBER 2014 Findings of the study The findings showed that the factors effectiveness on CRM practices among star hotels in Karnataka are that only three-star hotels differed significantly from four-star and five-star hotels. It should be noted that staff training and behavior, business activity quality, idea of gaining new customers through CRM practices should be improved in star hotels in Karnataka. Finally it was found that the relationship between CRM practices and influence on the category to which they belong is that only three-star hotels differed significantly from four-star and five-star hotels. Suggestions When compared to five-star and four-star hotels, three-star hotels should regularly measure and monitor customer satisfaction, loyalty and commitment in order to build sound customer relationships. All the star hotels (five-star, four-star and three-star) need to engage in regular board meetings, to give high priority to non-financial factors such as customer and employee satisfaction. Three-star hotels need to improve staff training and behavior, which definitely affects the level of performance in star hotels in Karnataka in comparison to fivestar and four-star hotels. All the star hotels (five-star, four-star and three-star) need to focus on the quality of business activities and provide the idea of gaining new customer influence through well-established CRM practices. When compared to five-star hotels, four-star and three-star hotels many a time fall behind in giving quickly offered, tangible rewards for completing surveys or requests for information. The management of four-star and three-star hotels should look into this and improve the CRM practices. Conclusion India has become a prominent center of tourism promotion in the world over a period of time. Karnataka has better infrastructural facilities in regard to hotels, transportation and allied amenities. Many prestigious hotels have also grown in Karnataka in order to cater to the needs of the domestic and foreign travelling public. Karnataka is a developing state that has achieved commendable progress in the field of hotel industry in general and adoption of healthy CRM practices in particular, although they are half way according to the findings of the study. Star hotels have understood the need and importance of CRM practices in the present age of competitiveness. The importance of CRM forming the core of organizational management strategies is being increasingly recognized in Karnataka. The relationship between star hotels and CRM practices is such that nowadays it is almost impossible to think of the former without the latter. Karnataka is not an exception to this universal realization of adaption of CRM practices in star hotels and other institutions. CRM practices are contributing immensely towards improving the bond between star hotels and customers who matter most in the contemporary business world in Karnataka and other developing states. The outcome of the present study would help the policy makers in Indian star hotels to formulate suitable CRM intervention strategies and use appropriate methods for the enhancement of the status of hotel industry. Dr.ASHOKA.M.L & ALI REZA MAHNAM 22

9 EFFECTIVENESS OF CUSTOMER RELATIONSHIP MANAGEMENT PRACTICES IN STAR HOTELS IN KARNATAKA Dr.ASHOKA.M.L & ALI REZA MAHNAM References Bose, R. (2002) Customer Relationship Management: Key Components for IT Success, Industrial Journal of Management and Data Systems, 102(2): Chen, I.J. and Popovich, K. (2003) Understanding Customer Relationship Management (CRM): People, Process and Technology, Business Process Management Journal, 9(5): Greenberg, P. (2002) CRM at the Speed of Light: Capturing and Keeping Customers in Internet Real Time, Sydney: McGraw-Hill. Kumar Yadav, B. (2013) Customer Relationship Management Implementation Strategies in Hotel Industry, MERC Global s International Journal of Management, ISSN (Print) and ISSN (Online), Vol. 1, Issue 2: October-2013, pp , Kumar, B., Banga, G., and Thapar, J. (2012) An Assessment of Service Quality of Hotel Industry, A Refereed Quarterly Journal, Vol. 4, Issue 1, Udaipur (Raj.). Olsen, M. (1996) Into the New Millennium. A White Paper on the Global Hospitality Industry, International Hotel Association. Parvatiyar, A. and Sheth, J.N. (2001) Customer Relationship Management: Emerging Practice, Process and Discipline, Journal of Economic and Social Research, 3(2):1-34. Salmant, P., and Dillman, D.A. (1994) How to conduct your own survey, New York: John Wiley and sons. Sigala, M. and Christou, E. (2002). Conceptualizing the measurement of service quality and TQM performance for hotels: The HOSTQUAL model. Journal of Acta Touristica. Vol. 14, No. 2. pp Tanvi (2013) Studying the Comprehensive CRM Practices in Hospitality: A Critical Review, International Journal of Techno-Management, Vol. 01, Issue 03, December 2013, ISSN: Xu, M. and Walton, J. (2005) Gaining Customer Knowledge through Analytical CRM, Journal of Industrial Management and Data Systems, 105(7): Dr.ASHOKA.M.L & ALI REZA MAHNAM 23