Many brands are continually striving to save money while making more money, and if you’ve been reading the news, you may have noticed a new trend that seems to be taking root. Many of these brands’ cost cuts and blame COVID for why they are doing it. I remember going to a restaurant recently that charged me a dollar for tap water. Tap Water! They had never done it before and when I asked, they blamed it on COVID and cost-cutting. I remember a family of four seated on the next table who got up and left when told they had to pay four dollars for 4 cups of tap water.
Think about what that restaurant lost that day?
Now I get it, brands need to survive but I argue that they need to be strategic about how they cost cut at the expense of their brand experience.
I wanted to share an experience with a Hotel Brand that I stayed with. I will not be mentioning any names in this article as it is not intended to be a brand bash. Rather I hope that brands consider the implications of poor experiences or poor cost-cutting strategies on their long-time growth.
I recently stayed at a 5-star hotel in my home country of Singapore as I was delivering a brand leadership program for a client, who was using the hotel function room. I had been looking forward to the experience for some time given that I had not travelled out of Singapore. I love staying in hotels and in this particular chain I had high tier elite status. I booked a stay from Monday to Friday.
Two things happened during this stay that disappointed me. Firstly, the car park charges. As a regular hotel user, I know most hotels offer complimentary parking. Not in the case of this hotel. I found this out after my second day when I wanted to drive out from the car park to go grab dinner at a nearby restaurant. I realised that I had to pay almost $183 after just two days of parking.
According to the hotel, there were NO complimentary car park charges on Weekdays and only offered for Weekends. I was upset, given that room nights at this said hotel cost almost $500, this was absolutely ridiculous. My total bill for car park charges amounted to around $450 for the 5 weekday nights that I stayed there.
The second thing that happen was asking for breakfast. I had booked a room initially for myself. I had decided to bring my wife for the first night as she was not well and I wanted to look after her. I requested breakfast for her. I was told that I had to fork out extra for an additional set breakfast. Now I know I did initially indicate that it was only going to be me staying when I booked the hotel, but a quick check on the rates online indicated that what I paid for a room night typically included breakfast for two.
What was so difficult about adding an extra breakfast for one more person? Add on to the fact that I supposedly had elite status with this hotel chain … I was very disappointed. I had spent thousands of dollars on this hotel chain in the past. For context, just in 2019 alone before COVID, I had spent almost $10 000 on this hotel brand. Would an additional set breakfast meal set for my wife be a difficult request to ask for? I reminded them about my loyalty and status but was declined with a firm NO.
The duty manager sheepishly mentioned that they would have done it in the past but due to policy changes they had to be strict now. Yes, the curse of cost-cutting. That $20 they saved on breakfast was going to go a long way (sarcasm).
Related: Seven Ways Leaders Can Prepare For Post-Pandemic Times
During this period interestingly, I had an organisation that I was delivering a training program for in the later part of year, ask me about this hotel since they knew I was staying there. I shared my experiences and they were horrified. They decided to pick another hotel instead. Again, for context, that organisation would have easily brought in a minimum of $20 000 to this hotel. This is the danger. Word of mouth of a bad experience travels fast and can lead to customers looking for alternatives.
The cost of poor experiences cannot be discounted and it worries me to see this trend emerging. In these challenging times, little gestures count, loyalty counts and the ability of brands to recognise that is key. I understand that hotels and other brands are struggling to survive but think about the longer impact of cost-cutting. Think about the impact of losing your loyal customers.
Related: Creating and Delivering Value to Customers
So here are my 3 tips for brands to consider when they think about cost cutting:
1. Do not Overlook your Customer when you Cut Costs
A more effective cost-cutting strategy should begin — and end — with a customer focus. Customer focus tends to be overlooked during cost-cutting because it is usually seen as a revenue enhancement strategy. This is a mistake: Brands that ignore what customers value when they are cutting costs leave a lot of money on the table.
2. Manage Customers Effectively
Focusing on the most important drivers of customer value will reinforce the perception among your current customers that you understand their needs, which will earn their loyalty and help your company win the right new customers. Customer loyalty and word-of-mouth recommendations are particularly valuable, especially in this instance.
3. Use Customer Feedback to Create Superior Experiences
Most of what differentiates a good customer experience from a bad one are how the organization applies its data– and its knowledge of the particular customer through feedback. Remember to use this data wisely. If you intend to cut costs, cut it on things that customers do not rate highly.
In this unprecedented business climate, many brands are pursuing cost-cutting initiatives. But as they do, they should consider that cost-cutting, like growth strategies, must be driven by customer value. Thinking about a long-term, customer-centered strategy is the key to Creating Extraordinary Brand Experiences to keep your customers coming back.
This article was also published on Dr. Jerome Joseph's LinkedIn