Ⅰ. Introduction Segmentation, Targeting and Positioning, what we called STP, are most important key to successful marketing strategy in hospitality industry. This means dividing the characteristics of various customers into similar groups and implementing a marketing strategy tailored to the needs and desire of customers. For the first step, STP marketer should identify various customer's group (Kotler, Bowen, & Makens, 2017). Marketers believe that they should be aware of customer segments that can make them more satisfied than their competitors, provide them with direct * Professor, College of Hospitality and Tourism, Sejong University, e-mail: [email protected]† (Corresponding author) Professor, Sogang Business School, Sogang University, e-mail: [email protected]marketing activities, and then provide products or services that can capture target segments. The most carefully selected step for this strategic approach is to choose which segments the company will focus on. Many hospitality companies use several methods for this approach. It is more important to know which method to use for this purpose (Bowen, 2000). For example, while male business people often enjoy hotels with restaurants such as bars and clubs, families or housewives may prefer hotels that include large restaurants or bakeries. Therefore, knowing who can be satisfied with the products and services offered by companies is a beginning and a necessary step in hospitality business. Prior to 1950, direct marketers used ‘mail orders’ to accomplish mass marketing. The purpose of mass marketing in the traditional approach was to reach a larger number of International Journal of Tourism and Hospitality Research Volume 31, Number 10, pp. 85-97, 2017 ISSN(Print): 1738-3005 Homepage: http://www.ktra.or.kr DOI: http://dx.doi.org/10.21298/IJTHR.2017.10.31.10.85 Grouping hotel restaurant customers based on a behavioral scoring model : An exploratory study Yukyeong Chong * ⋅Gunhee Lee † College of Hospitality & Tourism, Sejong University, 209 Neungdong-ro, Gwangjin-gu, Seoul 05006, Republic of Kore Sogang Business School, Sogang University, 35 Baekbeom-ro, Mapo-gu, Seoul 04107, Republic of Kore Abstract Segmentation, targeting, and positioning are the most important keys to a successful marketing strategy in the hospitality industry. Among these three keys, segmentation is the first step for a marketer to identify various customer needs and desires. Hospitality operators have been trying to increase customer satisfaction and corporate profits by utilizing mass marketing, database marketing, and individual marketing. Despite the increased interest in scoring consumer behavior, applications of the score remain difficult. The lack of understanding and utilization of scores has been an important issue in the hospitality industry. Analysis of customer behavior is not an easy problem to solve because dynamic modeling is required due to changes to customers’ records over time. The current study explores customer data in hotel restaurants and proposes an individual behavior scoring model (BSM) based on the traditional RFM (recency, frequency, monetary) concept. By comparing it with the traditional profiling scoring model (PSM), it is shown that BSM provides a high prediction power of future consumers' behavior. However, PSM has an important role in a complementary sense to identify potential customers who have low behavior scores. This research proposes how to build and validate BSM and PSM with a focus on the utilization of the two models to identify future potential customers efficiently. Key words: Segmentation, Customer scoring, Behavior scoring model (BSM), Profiling scoring model (PSM), RFM measure
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Ⅰ. Introduction
Segmentation, Targeting and Positioning, what we
called STP, are most important key to successful marketing
strategy in hospitality industry. This means dividing the
characteristics of various customers into similar groups and
implementing a marketing strategy tailored to the needs and
desire of customers. For the first step, STP marketer should
identify various customer's group (Kotler, Bowen, &
Makens, 2017). Marketers believe that they should be
aware of customer segments that can make them more
satisfied than their competitors, provide them with direct
* Professor, College of Hospitality and Tourism, Sejong University,
marketing activities, and then provide products or services
that can capture target segments. The most carefully
selected step for this strategic approach is to choose which
segments the company will focus on. Many hospitality
companies use several methods for this approach. It is more
important to know which method to use for this purpose
(Bowen, 2000). For example, while male business people
often enjoy hotels with restaurants such as bars and clubs,
families or housewives may prefer hotels that include large
restaurants or bakeries. Therefore, knowing who can be
satisfied with the products and services offered by
companies is a beginning and a necessary step in hospitality
business.
Prior to 1950, direct marketers used ‘mail orders’ to
accomplish mass marketing. The purpose of mass marketing
in the traditional approach was to reach a larger number of
International Journal of Tourism and Hospitality ResearchVolume 31, Number 10, pp. 85-97, 2017 ISSN(Print): 1738-3005Homepage: http://www.ktra.or.kr DOI: http://dx.doi.org/10.21298/IJTHR.2017.10.31.10.85
Grouping hotel restaurant customers based on a behavioral scoring model
: An exploratory study
Yukyeong Chong*⋅Gunhee Lee†7)
College of Hospitality & Tourism, Sejong University, 209 Neungdong-ro, Gwangjin-gu, Seoul 05006, Republic of Kore
Sogang Business School, Sogang University, 35 Baekbeom-ro, Mapo-gu, Seoul 04107, Republic of Kore
AbstractSegmentation, targeting, and positioning are the most important keys to a successful marketing strategy in the
hospitality industry. Among these three keys, segmentation is the first step for a marketer to identify various customer needs and desires. Hospitality operators have been trying to increase customer satisfaction and corporate profits by utilizing mass marketing, database marketing, and individual marketing. Despite the increased interest in scoring consumer behavior, applications of the score remain difficult. The lack of understanding and utilization of scores has been an important issue in the hospitality industry. Analysis of customer behavior is not an easy problem to solve because dynamic modeling is required due to changes to customers’ records over time. The current study explores customer data in hotel restaurants and proposes an individual behavior scoring model (BSM) based on the traditional RFM (recency, frequency, monetary) concept. By comparing it with the traditional profiling scoring model (PSM), it is shown that BSM provides a high prediction power of future consumers' behavior. However, PSM has an important role in a complementary sense to identify potential customers who have low behavior scores. This research proposes how to build and validate BSM and PSM with a focus on the utilization of the two models to identify future potential customers efficiently.
Key words: Segmentation, Customer scoring, Behavior scoring model (BSM), Profiling scoring model (PSM), RFM measure
86 Grouping hotel restaurant customers based on a behavioral scoring model
customers and to reach a wider customer base. The traditional
mass marketing processes have been challenged by
one-to-one marketing of new approaches (Rygielski, Wang,
& Yen, 2002). Although the purpose of direct marketing or
mass marketing has not been changed, the current issues have
changed to refer to a practice of database or relationship
marketing that emphasizes individual customer and focuses
on customers’ needs and wants (Petrison, Blattberg, & Wang,
1993). In other words, the recent marketing approach to
improve the satisfaction of one-on-one individual customers
is to build a deep relationship by filling each individual
customer's needs rather than a wide customer base. A deep
relationship with customers can be achieved through a more
customized approach that utilizes individual customer data.
Database marketing, sometimes is called integrated
marketing, relationship marketing, or even maxi-marketing.
Regardless of the names, all techniques seek to build
customer’s behavior information (Nash, 2000). To
accomplish sound relationship with customers, scoring
techniques based on historical transaction data are important
to differentiate customers to develop relationship marketing
strategies. The most common scoring method is to sort the
customers from those who are profitable to those who are not.
Typical customer data available in this case are recency,
frequency, and monetary data (Miglautsch, 2000). The more
advanced form of customer data is the customer's transaction
data.
The current research is exploratory study to investigate
customer’s transaction data in hotel restaurants and
checking possibility of applications in future customer’s
behavior and aims to provide a view of scoring modeling in
the context of the hospitality industry. In particular,
predicted expenditure estimates were used to assign a score
to each individual. The score proposed several scoring
techniques and suggested segmentation of customers based
on the scores. This paper is divided into three sections. First,
traditional relationship marketing concepts and several
scoring techniques are reviewed. In the next section,
empirical study of behavior scoring models (BSM) and
profiling scoring model (PSM) are conducted with
investigating prediction power and customer segmentation.
Conclusions that can provide new approach for customer
behavior quantification are finally addressed.
Ⅱ. Literature review
It is important to understand data-driven relationship
marketing. In general, four aspects of relationship marketing
should be considered: statistical model produced by
quantitative analysis, customer’s information collected at the
individual level, design of linkage between analytic results
and marketing activities to increase the effectiveness of
customer contact, and time and efforts to make relationship
building (Roberts, 1992). Well-designed sets of customer’s
historical records that can track historical pattern of buying
products or services are required to use of scientific statistical
methods to support relationship marketers to keep strong
relationships. Identifying profitable customers to expand
relationship with customers is vital. Also building strong
relationships with loyal customers is the key reason for
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