Let’s talk for a second about the value of a happy guest and to outline our discussion I have created the matrix below that shows the effects of positive word-of-mouth as well as how strong your marketing ROI can be when you “get it right”.
What the discussion boils down to is both the value of a happy guest and the value of an unhappy guest because both have equally important values.
Let’s assume you have a $20 per-person-average (PPA) and that for every happy guest they will tell five people within a month of their great experience. Those five people then visit your business and have a great experience and each of them tell five more people and so on. It will look something like this:
Happy Guest #1 is worth $240 to you a year if he visits you just once per month at the $20 PPA level. Do you have happy guests who just visit you once a month? Perhaps but most visit you much more.
So by the end of the fifth month, the initial guest has told enough people about his great experience to garner you over $15,000 worth of business – not bad for just getting it right – and after a full year of positive word-of-mouth, the initial guest has helped create over $128,000 worth of business for you simply by communicating to the people in his close community about how great an experience he had at your business.
Now contrast this with the understanding we all have that when you “get it wrong”, people have a tendency to tell more people about the bad experience than the positive one. Then assume the $20 PPA again and multiple these amounts by a factor of 2 or 3 or 4 (whichever you understand to be the case about the flow of conversations about bad experiences) and you can see how much money is potentially lost from the negative word-of-mouth generated by bad experiences.
Now consider the amplification of the bad experience and subsequent communication about it by people engaged with social media and you see a whole bunch of potential for lost sales as well as erosion of your brand reputation.
Finally, add in the lost opportunity cost of getting the marketing wrong or not listening to your guests and understanding their level of dissatisfaction with your experience.
So the lessons of situations like this are what I rant and rave about to business and hospitality operators on a daily basis. Those being:
- The reason most operators fail is not for lack of capitalization, it’s from bad marketing.
- The reason most operators continue to fail, even when they see how bad things are is because they can’t admit they need help.
- No marketing strategy is more effective or powerful than those which work to leverage positive word-of-mouth strategies and tactics.
- Failing to implement a serious Voice-of-the-Guest program to measure guest expectations is suicidal.
- The potential for success is too great to dilute by using any discounting strategy when what you should be doing is adding value to support and enhance each guest experience.
- Social Media can serve to amplify a great experience or a negative one more so than any other and underscores why you have to be listening, engaging and facilitating with those conversations.
What do you think?
How We Can Help
At its heart, business development is all about figuring out how fundamental forces can be combined together to create opportunities for growth.
I’ve spent the best part of 33+ years building successful hospitality businesses. But I’m never surprised at the failure rates for our industries: 24% of you will go out of business in your first year – 76% by year three.
Why? It all boils down to this: The operator did not know what he didn’t know. And it killed his business.
We have spent decades successfully honing our abilities and experience to understand how to create/build/manage/lead great hospitality businesses. We can help you design, finance, build, staff, train, create, market, and duplicate a successful hospitality business.
Our intense, professional programs can make a tremendous impact on your business by focusing on the fundamentals:
- Perspective – Build your vision into a long-term success from the beginning.
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- Performance – Systems and process design and implementation.
- Products – Create the best tactics to use in rounding out your businesses sales potential.
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