The highly competitive service industry has undergone a complete evolution in the way competition is perceived, both in context and scope.
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Today, more than ever before, every service-oriented organization must come up with ways and techniques to retain and attract new customers and at the same time maintain competitiveness and sustainable profit margins if it is to survive the ever competitive landscape (Walter et al 2010).
Equally challenging is the fact that customers today have more information available to them, are more flexible in their decision-making processes and have more choices than ever before (Hu et al 2009), triggering a measured and sustained need by service firms to develop innovative strategies aimed at winning the satisfaction and loyalty of their customers (Simpeh et al 2011).
To achieve customer loyalty and competitiveness, therefore, the management of service organizations not only need to understand the uniqueness of their customers but also develop strategies that can create value and influence the nature of customer experiences (Bitner, 1992; Simpeh et al, 2011).
Against this backdrop, the present paper seeks to employ a case study approach to discuss how the InterContinental Shenzhen, based in China, applies the value creation concepts to shape customer experiences and create a differentiated service firm in the highly competitive service industry, and also to facilitate customer satisfaction.
In particular, the discussion and analysis will focus on two fundamental value creation strategies – servicescape and employees. In servicescape, the interior decor of the hotel will be evaluated with a view to delineate how the added value concepts have been delivered, and how they influence customer service experiences, satisfaction and firm competitiveness.
In terms of employees, this paper purposes to discuss and analyze how the front-line workers of the five-star hotel add value through the provision of differentiated customer experiences in service settings.
Additionally, the paper aims to build on the Stimulus Response Model and the Resource-Based Approach, to provide a conceptual understanding of how the value creation concepts influence customer behaviour, satisfaction and loyalty, and service experiences.
Lastly, the paper aims to provide some critique by discussing the benefits and drawbacks of InterContinental Shenzhen’s value delivery strategies.
Justification of the Study
Hu et al (2009) suggest that “…whether a firm produces products or services is no longer a debate in the boardroom or among academics; the focus is centred primarily on the customer and the pursuit of superior customer perceived service quality, value, and image” (p. 111).
Central to the achievement of these objectives, according to Minghetti (2005), is the strategic use of value creation concepts that demonstrate a deeper understanding and knowledge of customers’ needs, behaviour, and preferences.
However, research demonstrates that many service firms are yet to understand the dynamics involved in the creation of differentiated services through the application of value creation concepts (Simpeh et al 2011), and others are still in the dark regarding the issue of using their physical environments to achieve competitive advantage through the creation of memorable customer experiences (Kim & Oh 2004).
It is these gaps in knowledge that the present paper seeks to address.
Brief Overview of InterContinental Shenzhen
As noted in the hotel’s official website, the main objective of establishing the Intercontinental Hotels and Resorts brand “…was to assist local developers in the design, construction and management/operations of individual hotels in important international gateway destinations and traffic centres” (InterContinental Hotels & Resorts 2012b, para. 2).
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Each hotel operating under this brand is designed to provide an experience uniquely and distinctly its own, qualifying the InterContinental brand to assume the undisputed emblem of glamour, sophistication and success that decades later, continue to define global travel and commerce in important destinations across the world.
Opened in 2006 as a Spanish flavour resort, InterContinental Shenzhen hit the headlines not only for maintaining and preserving the legend’s original facade but also for honouring its innovative acumen by becoming China’s first upmarket hotel to adopt a captivating Spanish theme and architecture (InterContinental Hotels & Resorts 2012a).
The interior design of the hotel, rooms, and amenities characteristically reflect the Spanish theme in every little detail, not only generating a complete immersion for its esteemed customers but also availing a customer’s service experience that meets and even surpasses the guests’ expectations (Spencer 2010).
This experiential marketing strategy, according to Bruggen et al (2011), creates a memorable and highly differentiated customer experience while maintaining a highly targeted return on investment. The hotel boasts of highly trained multicultural and multilingual employees, who appear keen to take service experience to the next level (Kattara et al 2008).
Application of Value Added Strategies in InterContinental Shenzhen
Emergent perspectives in the marketing literature are of the opinion that the creation of added value, in either product or service settings, is one of the fundamental variables involved in not only determining customer satisfaction, loyalty and behavioural intentions (Hu et al 2009), but also organizational competitiveness and success (Donnelly et al n.d.).
Indeed, Chan et al (2010) underscore the predominant need for organizations to learn from and collaborate with consumers if they are to develop value additions that meet and even surpass the customers’ individual and dynamic demands and expectations.
Against this backdrop, this particular segment aims to critically discuss how InterContinental Shenzhen continues to employ its value addition strategies to achieve customer satisfaction and maintain competitiveness, as well as the theoretical underpinnings related to these concepts.
The Physical Evidence: The Interior Decor
The impact on customers’ service experiences of the physical evidence, particularly the servicescape, has been well documented in the literature, with a strand of existing literature (e.g., Bitner 1992; Bruggen et al 2011) demonstrating that servicescapes have the capacity not only to differentiate an organization from its competitors but also to signal the market segment that is the organization’s target for a particular service offering.
Indeed, Simpeh et al (2011) acknowledge that the physical environment “…plays a critical role in shaping expectations, differentiating service firms, facilitating customer and employee goals, and influencing the nature of customer experiences” (p. 119).
The physical evidence has been defined in the literature as “…the environment in which the service is delivered and where the firm and the customer interact, and any tangible commodities that facilitate performance or communication of the service” (Ezeh & Harris 2007, p. 60).
The physical environment is important in the hotel and hospitality industry as customers attempt to seek evidence of the ultimate ‘quality’ of the intangible service (e.g., the dining experience, accommodation) from physically observing and relating to the tangible components that constitutes the servicescape (Lin 2004).
Consequently, it is imperative for service organizations to manipulate/influence the servicescape as a value addition strategy aimed at not only enhancing customer satisfaction, productivity, and motivation, but also promoting organizational competitiveness through increased repeat business (Simpeh et al, 2011).
A case study analysis of InterContinental Shenzhen Hotel’s interior decor reveals that the management has done well to utilize this attribute of the physical environment to add value to customers’ experiences and service quality.
The hotel’s interior decor exemplifies an exquisite Spanish theme (InterContinental Hotels & Resorts 2012a), but, more importantly, the management has greatly invested in the spatial aspects of the guestrooms, with the trend projecting towards the provision of larger and more comfortable rooms (Spencer 2010).
Other decor aspects that have been used to conjure the impression of serene comfort and spaciousness include furniture, hanging art placement, mirrors, customized shades of colours and lighting.
It is these physical aspects of the interior decor that influence the customers’ evaluations and responses toward the various product/service offerings provided at InterContinental Shenzhen.
The Stimulus Response Model, which derives its basic theoretical underpinnings from the Mehrabian-Russell Theory, best captures how InterContinental Shenzhen uses the value addition strategy of interior decor to not only stimulate customer satisfaction and loyalty but also increase its competitive advantage.
Graa & Dani-elKebir (2012) note that the basic proposition of the model “…is that the impact of the situation on behaviour is mediated by emotional responses, so that any set of conditions initially generates an emotional (affective, connotative, feeling) reaction, which in turn leads to a behavioural response” (p. 56).
In the case scenario, the environmental stimuli arises from the interior decor of the hotel, which then triggers various emotional states in customers, such as pleasure, arousal and dominance.
Pleasure, according to the framers of the model, represents a composite of feelings (e.g., happiness, contentment and satisfaction) that are likely to be exhibited by the organism (customer), while arousal represents “…an activity orientation and is a measure of how wide awake the organism is, of how ready it is to act” (p. 56).
Lastly, dominance implies a reflection to which the organism feels in control of or overwhelmed by the environmental stimuli, with available literature demonstrating that the higher the level of dominance professed in a particular situation, the more submissive is the state of the organism (Graa & Dani-elKebir 2012).
It therefore follows that the hotel’s interior decor bears the capacity to arouse customers with feelings of happiness, contentment and satisfaction, with the aim to reinforce approach behavioural and emotional responses, and, as such, not only influencing customer satisfaction but also increasing competitiveness by encouraging repeat purchases of product/service offerings.
Extant literature demonstrates that “…employees’ behaviours are important in a service company as they connect the organization with its customers and they represent a critical factor in developing effective working relationships with customers” (Kattara et al 2008, p. 310).
These authors further posit that employees, particularly frontline employees, are an integral component in any service setting as they are vital for not only maintaining customer satisfaction through fulfilling the promises made to customers, but also for creating positive customer perceptions of service quality, primarily because they are the individuals ultimately tasked with the responsibility of providing a quality service that meets and even surpasses customer expectations.
As acknowledged by Teng & Barrows (2009), employee actions and behaviour in their interaction with customers in service settings influences the customer experience, customer perceptions of the organization, and are ultimately associated with the determination of customers’ satisfaction and organizational performance.
These assertions demonstrate that organizations can indeed use the employee element as a strategy to create value aimed at achieving customer satisfaction and competitive advantage.
The InterContinental Shenzhen hotel has done well in using the people element to create value. Apart from training their frontline staff in the use of multiple languages to serve customers of diverse origins, employees are also adequately prepared in the virtues of demonstrating passionate empathy and commitment to serve customers and to demonstrate to them how value can be added to their service (Jones 2009).
Indeed, this author further observe that in InterContinental Shenzhen, “…words such as ‘open’, ‘happy’, ‘genuine’, [and] ‘progressive’ appear to be accurate in terms of staff attitudes and have a corporate application regarding external positioning” (p. 273).
The hotel is also known for employing tall, attractive female employees, who could also be considered a component of the servicescape as they directly influences customers’ perceptions about the services offered (Spencer 2010).
The Resource-Based Approach (RBA) of the firm can be used to demonstrate how InterContinental Shenzhen has succeeded in applying the people element as a value addition strategy.
The basic premise of the RBA is that the qualities and quantities of resources found within an organization are asymmetrically distributed among competitors (Moller et al 2008), and that competitive advantage arises “…from internally-developed resources with characteristics of value, rareness, inimitability and non-substitutability, because resources with such characteristics can be neither commonly traded nor easily acquired by their competitors” (Kim & Oh 2004, p. 66).
Consequently, it can be suggested that the InterContinental Shenzhen’s internal human resources (i.e., highly trained, multicultural and multilingual, highly attractive staff) acts as a value addition strategy, not only to achieve customer satisfaction and loyalty through providing memorable service experiences, but also to enhance firm’s competitiveness and performance.
Benefits and Limitations
There are many benefits that accrue to the InterContinental Shenzhen from engaging in the discussed value addition strategies.
Among the predominant benefits, it can be argued that the hotel has been able to differentiate its product/service offerings from its competitors, and has also succeeded in targeting the upper-end market segment by introducing less costly physical aspects in its interior decor (Chan et al 2010).
This implies that the hotel continues to leap handsome profits and maintain competitive advantage in the highly competitive service industry.
The highly trained and friendly members of staff have reinforced positive customer evaluations and repeat behaviour through the provision of memorable service experiences, leading to high customer satisfaction levels and retention.
Additionally, the value addition strategies adopted by the hotel have been instrumental in ensuring that the establishment remains unique in the market, thereby contributing to the creation of a positive image and reputation (Spencer 2010).
Still, another strand of literature (e.g., Bitner 1992; Bruggen et al 2011) demonstrate that customers are likely to stay longer in, and feel committed to, service organizations that provide memorable service experiences through servicescapes.
Such predispositions, in my view, contribute to increased profits and competitiveness for the organization through positive word-of-mouth ratings and repeat behaviours.
This position draws upon one of the strong premises of the Stimulus Response Model, which insinuates that customer repeat behaviour is reinforced by positive environmental stimuli, while avoidant behaviour is reinforced by negative environmental stimuli (Graa & Dani-elKebir 2012).
In limitations, extant literature demonstrates that “…the physical setting can influence employee satisfaction, productivity and motivation” (Bitner 1992, p. 57).
Although the Stimulus Response Model is effective in demonstrating how customers respond to stimuli in the environmental settings, and how such stimuli can enhance customer satisfaction and organizational competitiveness (Graa & Dani-elKebir 2012), it remains silent on how the same environmental stimuli either positively or negatively influence employee satisfaction, productivity and motivation.
This gap in knowledge, in my view, is a weakness in theory as it is the employees who interact with the physical environment on a daily basis. Perhaps this shortcoming in knowledge could explain why the InterContinental Shenzhen registers high turnover among its employees (Spencer 2010).
The RBA provides a reasonable and acceptable account of how organizations, particularly in the service settings, go about maintaining their existing competitive advantages by making use of their internal resources.
From the discussion, it is clear how InterContinental Shenzhen continues to use its highly trained, friendly, attractive, and multilingual employees to lock onto the upscale market segment. However, several weaknesses of the theory arise.
First, although RBA suggests that a firm’s internal resources are inimitable and non-substitutable (Kattara et al 2008), we continue to witness situations whereby some service organizations poach key staff from their competitors with the promise of higher pay and other benefits.
The RBV is not clear on how to deal with such a situation which, if not well managed, can eat into the profitability and competitiveness of InterContinental Shenzhen. More important, the theory is less convincing in how organizations create such competitive advantages in the first instance, or even surmount incumbent advantages of other competitors, when an organization start with minimal resources.
The germane issues discussed not only demonstrates that added value can be created using servicescape and the people element of the organization, but such value addition contributes positively to the achievement of customer satisfaction, differentiation of services, image and reputation creation, and firm competitiveness.
The discussion has also demonstrated how the Stimulus Response Theory can be used to show the relationship between environmental stimuli and customers’ evaluations and repeat/avoidant behaviours of the service experience, and how the RBA can be used to show the value of having unique employees in the pursuit of customer satisfaction and competitive advantage.
The implication for InterContinental Shenzhen, therefore, is to build upon the already existing value addition strategies to positively influence customer evaluations and behaviours toward the hotel’s product/service offerings and to create an image that will enhance its competitive advantage.
The hotel needs to critically evaluate if its physical settings have a direct and positive correlation with the considerably high employee turnover witnessed among frontline staff and management employees.
Second, the hotel needs to evaluate if the Spanish-oriented theme offer any value, taking into consideration that it serves international customers of diverse backgrounds. Some customers may indeed project a negative evaluation of the service experience due to the hotel’s Spanish theme. Lastly, the hotel needs to develop benchmarks to measure its value addition strategies against the industry’s best practices.
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