Jochen Wirtz: “Rebranding is the best option for damaged brands”

Corporates need to engage into successful service revolution in order to compete with smaller and more nimble businesses that are capable of growing quickly, warns Jochen Wirtz. The professor at the National University of Singapore is at the forefront of LUX*’s strategy to revamp its product offering.

BUSINESSMAG. You have elaborated the “LUX*: staging a service revolution in a resort chain” report in collaboration with Ron Kaufman. Why should corporates go for service revolution?

According to a National University of Singapore (NUS) Business School customer service study, companies looking to either establish or transform a service culture should focus on creating new or greater value for others. The study, which analysed customer service operations over 25 years, found that almost all companies want to provide great service as it translates into improved customer loyalty and better business in the long run. However, the traditional approach of frontline staff training does not work as they are fragmented, incremental and based on faulty assumptions about the true nature of service.

In order to engineer a service revolution, organisations should follow the following rules. Firstly, don’t start with customer-facing employees. Instead, involve everyone, with a special focus on internal service providers. Often, the real problem lies with back-end functions. By including everyone in service training, everyone will understand the importance of satisfied customers.

Secondly, don’t start by training people on specific service skills, scripts and procedures. Instead, educate them first to a better understanding of what service excellence really means. Employees should continually ask themselves: “whom am I going to serve and what do they need and value most?” By understanding the customers’ perspectives, employees can take actions that will delight their clients.

Thirdly, don’t pilot the change. Instead, go big and go fast to build momentum for the new culture. Conventional wisdom calls for limited experiments that, if successful, are rolled out more broadly.

BUSINESSMAG. How is the service culture changing in the hotel industry?

As the industry is becoming more competitive, customers become more demanding and performance is more transparent, for example through TripAdvisor, service performance globally has been moving up.

BUSINESSMAG. LUX* is trying to incorporate sustainable development in its new model. How can we strike the right balance when it comes to profitability and sustainability particularly in the hotel industry?

These two don’t have to be in contradiction. For example, saving energy and water can actually be cost saving, and investments into solar energy are often not more expensive than generators. I would urge every organization, not just energy and water-intensive operations like hotels to work towards becoming carbon-neutral and exerting less load on the environment. We all have only one planet to live on, let’s protect it better for future generations.

BUSINESSMAG. LUX*’s new business model now lays emphasis on managing hotels rather than owning them. Is hotel ownership no longer a profitable investment? Are we moving towards a shift in the structure of the hotel industry?

The return on capital is much less for owning hotels than for managing hotels. Plus, a lot more capital is needed for fast growth if the strategy is not asset-light. If you have a successful business model where much of the value rests in the service culture, the brand, the management processes, etc., it makes sense to grow faster and grow asset-light.

 BUSINESSMAG. What is your assessment of the impact of branding and rebranding on the consumption trends of customers? Are such strategies likely to bring about improvement when one knows that many companies are choosing to go for cost-cutting options?

If you have a damaged brand, rebranding may be the best option. If the brand is good, but weak, it needs to be developed and pushed. Regarding cost-cutting, almost no industry can spend more to get better quality. We constantly have to work towards doing things better, cheaper, faster. That’s the secret of our increasing standard of living. And technology, systems, and training and education drive this continuous and simultaneous improvement of quality and cost-effectiveness.