Introduction
Description of the Company
Ritz-Carlton Hotel is one of the leading hotels in Russia. According to Woodcock (2007, p. 73), the hotel was started in 1905 by Ritz Carlton as a series of restaurants that were run on board SS Amerika ocean liners. Carlton was determined to offer high value to its customers on board these ocean liners. As the firm developed, Carlton realized that his customers wanted high value for the products they purchased.
Most of the customers on board the liners were holiday makers. During this time, the rich would go on a voyage for general entertainment. People of the lower social class could not afford such voyages, and as Faulkner (2003, p. 67) states, it remained a preserve for the rich. The management of this firm learnt the dynamics of this market segment. It realized that this segment of the market was very keen on the value of products offered to them.
They did not mind paying high prices for these products as long as their quality was satisfactory. This is what defined Ritz-Carlton as a major player in the luxury hotel industry. When the World War One started in 1914, the firm had to move from the ocean liners to other facilities along the beaches in some major cities because voyages were no longer safe. Although the firm experienced some growth during this early, period, it was faced with a number of challenges that forced it out of the market.
In 1983, William Johnson bought the brand Ritz-Carlton and a few of its assets. Under his leadership, this firm experienced a massive growth not only in Europe, but also in some selected countries in Asia. Currently, the firm has worldwide market coverage, with 81 hotels in 26 countries.
Reports in their website show that their revenue for the year ending December 2012 was $ 3 billion. Its permanent employee base is also estimated to be over 38000 people, with many others employed indirectly. In Russia, it is one of the leading luxury hotels that are very popular with tourists from Britain, France and the United States.
Some of the products offered in this giant luxurious hotel include a variety of food, accommodation, travel services especially for the tourists, spa, and other entertainment services. The firm has remained focused on the higher end markets, and in Russia, it is considered one of the most expensive hotels. This has worked positively in strengthening its brand, because the rich believe that it is a symbol of class.
Description of the country
It has been mentioned that Ritz-Carlton operates in 26 countries around the world. However, this research will only focus on the Russian market. Russia is a federal state in Eastern Europe comprising 83 federal subjects (
Kumar & Reinartz 2011, p. 85). These scholars also observe that this is the largest country in the world. It has a population of 143 million people, making it one of the most populous nations in the world. The economy of this country was ranked sixth largest by purchasing power.
Some of these characteristics make the country very attractive for luxury products because a large segment of the market has the capacity to purchase these products. Ritz Hotel started in the West, but it has received acceptance among the local consumers because of the focus it gives on value. The high-end market segment in this country has come to appreciate the superiority of the brand Ritz-Carlton.
The brand Ritz has gained popularity among the rising population in Russia, especially due to its focus on meeting individual consumer demands. This market segment is relatively large, and this means that the firm has the capacity to expand its market share locally. Business environment is also very friendly. The federal government has eliminated most of the bottlenecks that strained few international firms that were operating locally.
The free market entry means that competition has been enhanced. Firms from other countries have the liberty to enter this market. Another favorable factor in this environment is that consumers always base their decision to buy, on the value associated with the brand, and not nationality of such a brand. This means that Ritz has equal chances of excelling in this industry just as other local Russian firms.
Using Customer Relationship Management to Improve Customer Experience
It has been mentioned that the Russian market for luxury products is increasingly becoming competitive. New firms are still making attempts to penetrate this market with superior products. They are aware that the top brands like Ritz are firmly in control. However, they are still determined to penetrate the market with high value products that exceeds customers’ expectations. This means that these top brands must determine ways of protecting their market share from such aggressive market rivals.
They must learn to maintain their current customer base while still making advances towards other new markets that were not covered before. The focus should be turned to customer relationship management. According to Grönroos (2007, p. 57), customers in this market segment are very sensitive when it comes to the quality of products they buy.
They prefer paying premium prices if they are assured of high quality products. Firms in this industry are trying to use various approaches to win over more customers from their competitors. They are using various models that can help them achieve a higher level of customer satisfaction. One of the models that have become very popular among this group is customer relationship management concept.
Customer relationship management is not a new concept in the market for high-end hotel industry. Although it had not been viewed as a new concept that can be used to give firms competitive advantage over their rivals, some of the players in this industry used it as a way of attracting and maintaining specific customers.
According to Hayes and Dredge (1998, p. 67), Ritz Carlton was one of the luxurious hotels that used this strategy without the knowledge that it could earn them admiration among a larger market segment. In Britain, the Royal family preferred visiting this hotel because of the superior value it offered, and the class with which it was associated. The management considered this an honor.
In order to enhance satisfaction of its customers from the royal family, this hotel assigned one of the guards the role of ringing a bell the moment any of its members was seen approaching the gates (Kelly 2006, p. 95). This was supposed to alert workers to prepare a table for these valued guests. To the management, it was meant to make its staff ready to receive the dignitaries. However, to the royal family, this was a symbol of class.
They loved the idea that the bell was specifically to announce their presence. It was a bell of class, meant to make people to be ready to receive the royal family. It worked magic in terms of attractive members of the royal family to this hotel. Some even started associating the hotel with the family, giving it even a more superior image in the market.
Customer relationship management is very important when selling luxurious products. The market has varying tastes and preferences, and firms that fail to identify this diversity are likely to lose a section of its customers.
For this reason, a firm must define its target segment and develop a deep understanding of what it needs. Rigby, Reichheld and Schefter (2002) say, “By defining the broader customer scenarios -and then managing them meticulously-companies can deliver much more value to buyers and reap much greater loyalty in return” (p. 1).
These scholars say that firms in this competitive and delicate industry must understand that the variation in customer tastes may offer them opportunity to diversify their products. This means that the diversity should not be looked at as a threat, but an opportunity to expand a firm’s operations.
The larger segment of the rich should be further segmented into smaller units with related demands. Each sub-segment should have consumers who share as much as possible in terms of their taste, preferences, and any other relevant demographic factor. Hawkins (2003, p. 34) calls this getting inside the lives of the customer. It involves a deliberate attempt to understand their specific needs, and define how this need may be met in the most appropriate method.
While many firms using this concept now prefer classifying their customers into sub-segment, there are cases where a more specific approach may be required of such a firm. Ritz Hotel in Moscow serves various consumers in the high end social class. Some of these customers are tourists who may not be served for a long time before getting back to their countries. However, such customers are always good ambassadors back in their country.
They can be used as evangelists to advertise the brand to these foreign countries, making it build a stronger image. The main problem that firms such as Ritz face is how to determine the exact tastes of such mobile customers so that the superior value needed may be offered. These are total strangers who may not easily be placed in any of the sub-segments that this firm has developed.
It means therefore, that the management would be forced to give such a client a more personal approach when delivering the product. It may even involve engaging the customer on his or her preferred cuisine. It may appear to be a costly approach to such a giant firm such as Ritz, but it is a strategy that can help it remain the preferred choice in the market. This is the strategy that has helped the firm maintain a positive image in the market.
According to Kracklauer (2004, p. 56), every customer in this firm is unique, and is always given personalized attention to enhance their satisfaction. Enhancing customer experience is not a simple process that only involves giving them what they want. It also includes involving them when delivering this value.
For instance, Ritz realized that giving its customers free bottled water before they made their order increased their level of satisfaction, making them order more expensive meals. However, this approach was quickly adopted by other top ranking hotels in this market. Ritz changed this strategy, and started asking its customers whether they would prefer milk, fruit juice, or water before they are served.
This is what is referred to as involving the customers in delivering superior experience (Guirdham 1972, p. 45). It erases the mentality that they are customers of this hotel, and in its place brings the impression that they are members of this family. As a valued member of the family, their opinion matter a lot when offering value to them.
Expected Changes in the Future Market
The market for luxury products is very dynamic, especially in developed countries like Russia. There are some changes that are expected to take place in this market in the near future, and it would be prudent if firms such as Ritz pay close attention to monitor them. One such change will be the increased relevance of technology in this industry. People of this class highly value time, and they are uncomfortable with the ideas of waiting for some time before their food can be served.
This may change in the near future with the help of technological invention. Firm would be forced to introduce a new item in their website, which is a complete menu of what they have. This way, customers will be able to order and pay for their meal while on their way towards the facility (Seybold 2001, p. 2). They will only need to identify the code given to approve the purchase and the meal would be presented in less than two minutes.
This means that these firms must be very keen to understand some of the modern trends brought by technological advancements. Another possible change may be in the entertainment sector. Currently, Ritz has a music system that plays soft background music to entertain customers while eating.
This will change in a near future because young adults are also finding themselves in the league of the super rich. They make substantial part of consumers in this segment. Their music taste cannot be the same as that of the aging population that were previously considered to control big estates in the country. The entertainment may take a more personal approach.
Firms in this industry may need to find a way in which music will be individualized in order to enhance customer experience. These customers will have the liberty of choosing the music they prefer, without interfering with the immediate neighbor. This would also require the use of the emerging technologies.
It was stated that a big percentage of customers served by this firm are tourists. Tourism is growing in this country, and this means that Ritz will continue receiving more guests. However, they may not prefer the current approach where they are forced to look for tour firms once they check into their rooms. It is clear that this class of customers prefer making most of their purchases in a single basket (Peppers, Rogers & Dorf 1999, p. 4).
This means that firms in this industry would need to expand line of their production to include a wide range of productions that their customers may require once they visit the country.
List of Reference
Faulkner, M 2003, Customer Management Excellence, John Wiley & Sons, Chichester.
Grönroos, C 2007, Service management and marketing: Customer management in service competition, Wiley, Chichester.
Hawkins, G 2003, Customer intelligence: The value of customers, the power of profits, Breezy Heights Publishers, Skaneateles.
Kelly, S 2006, Customer Intelligence: From Data to Dialogue, John Wiley & Sons, Chichester.
Kracklauer, A 2004, Collaborative customer relationship management: Taking CRM to the next level, with 7 tables, Springer, Berlin.
Kumar, V & Reinartz, W 2011, Customer Relationship Management: Concept, Strategy, and Tools, Springer Berlin, Berlin.
Peppers, D, Rogers, M & Dorf, B 1999, Is Your Company Ready For One-To-One Marketing? Harvard Business Review, pp. 151-160.
Rigby, D, Reichheld, F & Schefter, P 2002, Avoid the Perils of CRM. Harvard Business Review, pp. 101-108.
Seybold, P 2001, Get inside their Lives of Your Customers, Harvard Business Review, pp. 80-89.
Woodcock, N 2007, The customer management scorecard: Managing CRM for profit. Thomson Gale, Farmington Hills.