Cutting costs, and alienating customers
February 28, 2011 - 12:15PM
The old saying “penny wise and pound foolish” provides a very important lesson for all business owners. Too often in the chase for saving cents, businesses alienate their most important people - staff and customers - which ends up costing them much more.
Trying to save cents often leads to employees and customers feeling that they are being shortchanged and undervalued. The single biggest reason why people change suppliers of goods or services is because of perceived indifference. In other words they get the impression the supplier takes them for granted.
A recent experience when staying in Fiji brought this fact home to me. I was staying in a resort on the Coral Coast, one of a pair owned by an international hotel group. I had visited Fiji on a number of occasions and had always been impressed with the welcoming friendliness of the Fijians.
At this resort the friendliness of the reception desk staff ranged from warm and friendly down to almost complete indifference. Hoping that this was an isolated example I was soon to be disappointed. Instead of the majority of the staff making us feel welcome and valued almost 50 per cent of the staff treated guests with apathy and hostility.
The reason soon became evident. After chatting with a few staff I found that the hourly rates paid by the two resorts were below those paid by other resorts. In addition the Fijian employees appeared to be intimidated by senior management. Unfortunately for many of the Fijian employees they had no alternative as the resorts were the only employer in their area.
The surest way of harming a business is to not treat employees properly. When you operate a service business, and you depend on employees treating your customers in a friendly and efficient manner, it can prove fatal. This was the case with this resort's guests as they were suffering and sharing the pain of the underpaid and harried employees.
This treatment of employees also impacts on one of the main ingredients of business success, creating repeat customers. Research done on the importance of generating customer loyalty, by such people as Frederick F Reicheld, author of The Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value , shows that the cost of acquiring new customers is five times as much of servicing existing ones.
Clearly the management of the hotel group had not read any of the literature on customer loyalty. As well as the customer service problems, cost-cutting decisions had also been implemented. Several returning guests informed me they would not be coming back due to some on the penny pinching changes made. These included:
Small business owners must therefore find ways to show customers they are special and valued. This starts with treating employees fairly and with dignity, prompting them to treat customers the same way. Ways of recognising loyal customers must be found to deliver a clear message to clients that they are not taken for granted.
- Reducing the menu options for guests on an all inclusive food and beverage package,
- Charging for a once free shuttle bus to the sister resort,
- Sporting equipment such as tennis racquets, and non-motorised water craft, that was previously free now had to be paid for, and
- Switching from locally Fijian made toiletries in the rooms to inferior imported products.
What businesses shouldn't do is undertake cost-cutting measures that result in poorer quality products or services.
March 01, 2011
Fiji's tourism sector exposed
Despite efforts by the regime-supporting tourism industry to woo more Australian tourists to Fiji, articles like this in the Sydney Morning Herald (check out their circulation figures) do nothing to help their cause.
In effect what this article does, is expose the exploitation of the locals and highlights how the infamous "bula smile" charm can quickly change when the ability to put food on the table is hampered.
Dixon Seeto can forget about any mop up tourists from the RWC festivities, and instead face the facts about reduced hours for local hotel workers which only came into effect after the the illegal and treasonous coup executed by Bainimarama backed by Aiyaz Sayed Khaiyum --who were ironically lauded, hurrah-ed and pandered to by tourism operator's only day's ago.