by Jonathan Barsky, Lenny Nash, May 2007

The future of your business is largely determined by keeping your customers happy and coming back.But how well you understand and monitor the impact you have on your customers can have a profound effect on the growth and success of your business.

A popular model that provides a differentiated view of customer loyalty is the Apostle Model, developed at Harvard Business School.  Based on satisfaction and loyalty, this approach segments customers into four quadrants: Loyalists, Hostages, Mercenaries, and Defectors.  

The Apostle Model applied to hotels

The Apostle Model has been adopted and refined by Market Metrix into a practical tool for grouping hospitality industry segments, brands and individual customers.  Customer satisfaction is important because of its close link to future purchase behavior and willingness to recommend.  But satisfaction alone cannot ensure loyalty.  Using the Apostle model we see that some customers may be very satisfied but not at all loyal (mercenaries).  Others may have low satisfaction but display high loyalty (hostages).  The Apostle Model identifies and helps manage each of these combinations.

Based on results from the 2006 Market Metrix Hospitality Index (140,000 customer surveys completed during the year), hotel brand scores for customer satisfaction (horizontal axis) and loyalty (vertical axis) were plotted on a chart (see selected results below).  
�Satisfaction and Loyalty: Selected Hotel Brands � 2006�
 
Here is a snapshot of the customers and brands in each quadrant: 
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Hotel brands create Apostles when they deliver not only superior products and services, but also create an emotional connection derived from the total experience.  These customers are loyal because they love a business.  The Ritz-Carlton and Four Seasons have created apostles who are so satisfied that they want to convert others to share their experience.  These are your most important customers � protect them to the best of your ability.

Defectors - those who have low satisfaction and low loyalty.  A sub-segment comprises the Terrorists, with the lowest satisfaction and loyalty scores.  In addition with the costs associated with losing them, these customers are so unhappy that they speak out against a brand at every opportunity.

Hotel brands found in the Defector quadrant include a number of chains whose products and services have not evolved as quickly as customer expectations have changed.  Customer feedback can uncover changing needs, or dissatisfaction, while there is still time to address them.   

Hostages - those who have low satisfaction, but still report high loyalty. This typically is due to lack of competition or high switching costs.  Customers in this category feel �trapped.�  

Hotel brands in this category often win business simply due to their location (when no suitable alternatives are nearby) or, because of the strength of their loyalty club.  However, these customers exhibit �false loyalty� - acting loyal even when they are just waiting for a chance to jump ship.  The strategy for these guests is to improve communication with them - understand and address their concerns to convert them to Loyalists.

Mercenaries - those who have high satisfaction, but low loyalty. These customers are often price-sensitive and will switch easily when they have the opportunity.  

Companies in this category may provide superior products and services but do not stand out from the competition.  They may be seen as interchangeable with other similar level hotels because they have not created a passion for their brand (like the Loyalists have).  For these customers, you may want to assess your pricing versus the competition or refine your marketing messages to convey value delivered.  Incorporating barrier-to-exit elements in your product may also help retain these guests.

The Apostle Model is especially valuable because it measures both satisfaction and loyalty, provides a robust method of understanding and grouping customers, and helps you take action on a customer-by-customer or market-by-market basis. Most importantly, this model provides advance warning of customer dissatisfaction, so you can take steps to preserve the relationship before it�s too late.