Value for money and customer perception

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How do you go about building a hospitality business? I get this question in various forms from almost all of the business people I deal with. Everybody is looking for the magic formula — the simple fix that will cure all their income problems.

While every business is different, there is one basic issue that is common to all. The issue is value for money. It is the first thing I try to assess when I go to help a business. The concept is often referred to, but more in lip service than in action.

Value for money is a perception, or to put it more simply, a feeling. It is the state of mind that a customer has when they leave your premises. Your opinion of your business’s value for money is meaningless, it doesn’t count. The only opinion that counts is that of the silent majority of your customers — who vote with their wallets and purses.

I first pondered this issue of customer perception when I worked for the Hilton Hotel, Melbourne, nearly ten years ago. I often used to dine in the Hotel’s bistro and spent a great deal of time observing the behaviour of the diners. The first great revelation I had was as a result of the waiting staff telling me that they had far more problems and complaints from single diners than from group diners.

About the same time, I was doing a fair amount of travelling and often used to dine alone in restaurants and hotels. I used to hate it — going to strange, unfamiliar places, eating alone with no one but the staff to talk to. I was often left sitting for long periods, waiting for the food to arrive. Naturally, I would spend that time examining everything that was happening around me in great detail. It is easy to adopt a critical outlook in these circumstances, and I often did.

I also had my fair share of business and social dinners in these same restaurants, when I shared company for the meal. If my company was stimulating, I became largely oblivious to what was happening around me and concentrated on the conversation.

The important point in all this is not so much the difference between single and accompanied diners, but that diners in different circumstances can have the same meal in the same restaurant and come up with two totally different perceptions of the experience. Invariably, when I dined alone my perception of value for money was a great deal lower than when I dined in company (by the way — smart restaurant staff give single diners a newspaper or magazine to divert their attention).

Carrying these observations about perception one step further, I gathered all the research on customer response in the hospitality industry I could find. It struck me that if some simple rules or procedures could be formulated to help business owners manage customer perceptions, I would have valuable information for my training courses and consulting services.

The first rule that became obvious should read like this: ‘The information you obtain from customers who volunteer comment and feedback are interesting, but not terribly relevant. The opinions you should be seeking are those from the silent majority’. A recurring statement I get from business owners with troubled businesses is, ‘I get good feedback from my customers’. Customers like to be recognised by business owners, so they often tell them what they think they want to hear. Again, the only true measure of customer satisfaction is the degree people vote with their money.

The second rule should perhaps go like this: ‘A customer’s perception of your value for money is formed by comparing the cost of what they have received from you with the cost of what is generally available elsewhere’. If you are average, you have a problem — average was defined by one wit as ‘the creme of the crap’. Average is not good enough to generate growth in customer numbers during a difficult economic period.

It is amazing the reaction I get when I map all the real competition a business has and drag the owner around to look at it. The result is often a complete and immediate re-evaluation of priorities. Only a minority of business owners get out regularly and assess their real competition — they usually assess those they think are their competition. The public perception can be quite different.

Perception is everything. The best hospitality operators are those who become masters at managing perceptions. You have to be very clever to justify expensive dining when diners know they can emerge from the local well-run ‘cheap and cheerful’ with bill a fraction of yours, and yet with a similar feeling of satisfaction.

Consistency is also a critical factor in perception. You are not doing yourself any favours if your standards vary. People usually dine out with some hidden agenda — it could be anything from seduction to simply impressing a business colleague. You put your social standing on the line every time you recommend a restaurant or take someone to one.

If you go to a restaurant and it is brilliant, you usually tell others. How often has somebody passed back to you that they went to a restaurant on your recommendation and were not impressed. How did you feel? — embarrassed, I’ll bet. Your customers lose big brownie points in the social stakes if you are inconsistent. This can easily destroy their perceptions of your business.

Value for money is a feeling. If your business is not buzzing, your customers are not feeling it.

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