Introduction To Customer Relationship Management Marketing Essay

5551 words (22 pages) Essay

1st Jan 1970 Marketing Reference this

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Customer Relationship Management is a concept which has a number of business applications and therefore carries a correspondingly diverse variety of definitions as it relates to marketing, operations management, personnel administration, and information systems (“IS”). With respect to the foregoing components which comprise CRM, it has more recently been defined as “a strategic approach that enables organizations to use internal resources (i.e. Technology, people, and process) to manage the relationship with customers for the whole of their lives cycles, in order to create a competitive advantage and improve an organization’s performance” (Mohammed & Rashid, 2012). To this end, and in terms of IS, CRM is a “managerial philosophy” which enables a firm to leverage ISs for the acquisition, storage, manipulation, and dissemination of customer information (Piccoli, O’Connor, Capaccioli, & Alvarez, 2003). This aspect of technology-based CRM invariably entails the interplay of various aspects of a firm’s information technology (“IT”) infrastructure in order to establish and maintain a competitive advantage within an industry. Within service oriented industries, namely, hotels, technology-based CRM has historically been an essential element towards enabling firms seeking such an advantage against competing operators to realize optimum customer lifetime value (“CLV”) by securing the loyalty of clients through the effective exploitation of IS which automates the marketing, contact management, customer service, and sales processes (Fan & Ku, 2008). With respect to these processes, advantages gained through CRM ISs are represented by the effective integration of customer data originating from a firm’s Transaction Processing Systems (“TPS”) with that of relational databases which are subsequently leveraged for analysis by Business Intelligence Systems (“BIS”) and Decision Support Systems (“DSS”) within an Enterprise Resource Planning (“ERP”) framework towards the continuous improvements of customer relations and quality of offerings.

History of Technology Based CRM in Hotel Industry

In an industry where customer relationship management comprises a key component within the mission statements of competing firms, hotel companies have been relatively slow in adopting CRM technology solutions as the central component in their IS infrastructures (Songini, 2001). The challenge arising from implementing a CRM IS within the hotel industry can be understood from an analysis of the industry’s operational infrastructure. Hotels are typically operated by three parties: the owner, the franchiser, and the management company; all of whom have conflicting interests or definitions of success. These conflicts subsequently give rise to a “data ownership dilemma” whereby the parties are reluctant to share essential customer data with each other which is an essential element of CRM. As an industry such as hotels, whose target markets are geographically diverse and segmented, the question comes into play as to how to implement CRM: on a brand level, geographic level, individual property level, or operator level (i.e. owner, franchiser, or manager). Finally, disparate standards with respect to IS implementation on the operational level also contribute to the difficulty and expense of rolling out new ISs in general (Piccoli, O’Connor, Capaccioli, & Alvarez, 2003). However, as the cost of IS decreased and the sophistication of application software increased because of rapid advances technological advances forecasted by Moore’s Law , the barriers precluding the implementation of a CRM IS were all but eliminated.

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The Hilton Hotels Group became a pioneer in early 2001 through its initial one million dollar investment in privately owned technology startups, OpenGrid Inc. and Broad Daylight, Inc. to build its fledgling company-wide CRM applications consisting of reservation, information access application, and web-based customer service application (Songini, 2001). This initial stake in technology based CRM enabled Hilton to reduce the higher costs associated with customer reservations and inquiries via telephone in favor of an inexpensive and more efficient web-based system for the then 1,800 property global hotel chain (Songini, 2001). Hilton’s initial investment could be interpreted as an initial step towards replacing its TPS with one that was automated whose function was to collect vital customer information for processing. As an additional measure which further bolstered the Hilton’s technology based CRM initiative, the company replaced its obsolete legacy mainframe reservation system in 2001 with one which also functioned as an integrated ERP framework: the E.5 Suite of CRM reporting and analysis by then partially-Hilton-owned E.piphany Inc. (Picarille, 2002). This company-wide web-based application addresses certain challenges posed by the operational infrastructure of the industry which had precluded early adoption of CRM ISs. As a web-based application-based software solution, the issue with standardization becomes moot because all stakeholders within the firm can access this system within a web browser. Additionally, “data ownership” became less of a limiting factor because of the standardized approach and user-friendly interface enabling queries for customer information within all levels of the organizational structure that had previously been an arduous process performed by a legacy SQL database whose queries for information had taken two to four weeks (Picarille, 2002). Furthermore, because Hilton had owned a large stake in the application developer, E.piphany, Inc., the proprietary nature of the CRM IS enabled it to be a source of Hilton’s sustainable competitive advantage, differentiating itself among all other hotel chains, and to seamlessly integrate with existing ISs within the company. Further promoting its success was its powerful data-reporting capabilities by providing the ability for operators to generate reports in standardized formats such as Excel spreadsheets and PowerPoint presentations thereby enabling decision support and business intelligence with respect to leveraging customer information compiled from vast data libraries (Picarille, 2002).

Implementation of OnQ

Continuing to recognize the importance of customized IS-based CRM solutions with respect to gaining a competitive advantage within the industry, Hilton Hotels invested $50 million dollars in 2003 into a custom-built customer-information system notwithstanding “one of the worst industry downturns in decades” during that year (Kontzer, 2004). OnQ is the scalable, proprietary, and fully integrated Windows-based CRM system that Hilton developed from a previous failed attempt at consolidating their ISs after a merger with Promus Hotels in 1999. Initially developed as a PMS, Hilton’s CIO Tim Harvey had foreseen the need to for the company to provide consistent services across the entire Hilton brand portfolio, personalized to each of 15.5 million HHonors loyalty program customers across 2,100 properties staffed by approximately 200,000 employees, thereby maximizing the number of touch points towards preserving a consistent brand promise (Paul, 2003). This aspect of Hilton’s IS strategy can be summarized by Tim Harvey’s statement: “At Hilton we have a belief that information technology is so intertwined without brands and our culture that you need a consistent infrastructure to enable the brand promise.” (Applegate & Gabriele Piccoli, 2008). As expected, implementation of this company-wide standardized system initially posed to be a challenge because of the hotel industry’s structure. Hilton addressed the structural issues by providing the upfront and maintenance costs to all franchisees and property managers in order to implement OnQ across all properties thereby reducing investments required by these parties for using the Hilton brand name. Hilton subsequently charged these parties a technology fee which is represented by 0.75 percent of Hilton’s franchisees’ of property owners’ gross room revenues, a method which not only enabled these non-owner parties to reduce their initial start-up costs by eschewing significant investments in IT infrastructure, but also provided them with a lower barrier to entry into the hotel industry by simultaneously leveraging a well-established brand and contributing to Hilton’s continued growth (Hitlon Worldwide, 2009).

OnQ, a User Perspective

Hilton’s proprietary software technology/CRM platform, OnQ, creates a streamlined and standardized workflow experience and provides a user-friendly tool for all employees within the organization that rely upon it on a continuous basis.  This rationale applies to all types of positions at every operational level whether they’d be the front desk managers, customer service agents , or the IT help desk support resources.  OnQ functions as more than just a CRM tool or software product for the hotel chain, it adds value and provides a competitive advantage for the company with respect to IS. As the previous CIO of Hilton, Robert Webb, referred to the system, OnQ is a “tremendous asset for the company because…it serves as…a single image of inventory globally” (Lordon 2010).  Furthermore, the standardized implementation of OnQ system across the Hilton enterprise clearly demonstrates its central role as the “center of the Hilton Technology strategy” (Lordon).  By having taken the time to detail, develop, and expand the capabilities of their initial stake in developing a proprietary technology to bolster a consistent yet customized customer experience, complete with interfaces establishing connectivity to other proprietary and standard applications, OnQ has still been able to retain its business simplicity and functionality for end users while allowing Hilton to differentiate itself from industry competitors.  This insight is a key component in assessing OnQ’s value to the firm because many other enterprises across all types of industries have historically invested significant amounts of capital in robust software applications and IS infrastructures which have taken on layers of complexity thereby precluding end-users from deriving any value from its use and contributing to operational inefficiencies.  As Tom Keltner, President of Hilton’s Brand Performance and Franchise Development Group, explains: “utilizing a single, common technology platform across all brands and sharing real-time information across every guest touch point – the hotel front desk, reservations, the HHonors Service Center and our brand websites – enables us to take better care of guests at every single point of contact while ensuring their privacy” (Hilton Worldwide, year).  Thus, it becomes evident that the customer-facing users of the system is able to conveniently access this tool when a customer need arises and with respect to this process, the nature of this IS alleviates the bottlenecks which would otherwise be an issue arising from front office operations in a service-oriented industry.  The front desk user of the system is able to instantly review the profile information of the customer, transaction history, and preferences for specific accommodations as “a simple single message…that delivers a message to its guests that is on target and reflects the company’s marketing approach” (Paul 2003).  Ostensibly, this highly customized system was neither easily developed nor cost effective.  OnQ is approximately 70% custom coded with those specific components mainly written in PERL including a property-management system, the CRM application, and a hotel-owner-reporting module” (Kontzer 2004).  However, the costs and difficulty associated with implementing this IS can be justified because the end-users are able to reduce processing times for “a variety of check-in tasks and makes it more likely that an [end user] can give customers what they want, making the job more rewarding” (Kontzer).  Consequently, OnQ provides an essential service to Hilton as a whole by improving the job satisfaction and performance of employees thereby reducing employee turnover and empowering employees towards contributing towards the achievement of the organizational mission statement: “To be the preeminent global hospitality company – the first choice of guests, team members, and owners alike” (Hilton Worldwide, 2012).

Another aspect of OnQ which has facilitated the success of the end-user experience is the importance that Hilton places on its network of IT support staff and resources throughout the company.  The company maintains a staff consisting of over 500 full time IT employees that provides support to over 150,000 Hilton employees globally (Whitney, ).  In a similar manner to how the OnQ system was designed and built internally, this same level of customized/focused support provides OnQ end-users with the best resources required to perform their duties day in and day out. Hilton’s vice president of IT marketing and communications, Laurel Bailey, asserts that their IT division performs the “bulk of the work internally…[with a] large [internal] software development organization,… data centers and network engineering group, …[a] help desk call[ed] the OnQ support center… testing [and] telecommunications support, [a] database management group, [and] architects and engineers (Whitney, ).  The more striking aspect of this self-contained model of IT support and resources is that Hilton requires “standardized online training and OnQ technology certification for the roughly 200 employees in its support organization who work with the system directly, as well for those who will operate the system in individual hotels” (Whitney).  Hilton appears to have a genuine interest towards continually improving OnQ for their employees and customers by recognizing the need for continuing education for IT support staff and understanding that these employees could contribute towards the evolution  of the OnQ infrastructure by developing a mastery in the functions of the system through a variety of continuing education opportunities. However, Hilton still looks to keep tight controls on the OnQ system and limits its access to those franchises or properties that are able to exhibit a genuine desire to meet the standards of quality set forth by the company with respect to their understanding of OnQ. A hotel franchise or property is required to pass with a score of at least 80 percent before they are able to go live with OnQ (Whitney).  The focus on additional training and education offered by the Hilton appears to assist franchises and properties towards meeting this standard but there is still a requirement that key users or support teams for the OnQ system maintain an acceptable level of skill and knowledge to ensure that the system is being maintained and used as intended.  It is powerful to observe that a business is so finely attuned to the continued success of an IS so that its overall revenue and future sustainability can remain viable.  From a user standpoint, such a system can be the absolute best and provide a true competitive advantage for a business but without a true understanding, measure, and goal for how its employees need to interact with the system on a day to day basis, the outputs of the system will not demonstrate viable numbers/sales for the future.

OnQ – Data Collection on Guests

The OnQ platform enables Hilton Hotels Corp to collect personal data and preferences when a customer provides information through Hilton Family of Hotels websites, hotel or central reservations or Hilton HHonors membership programs.  The system, equipped with this information, creates a Guest Profile manager which is constantly updated with a variety of new data collected at every touch point or guest interaction (1/2).  Some examples of personal data gathered are passport number and date and place of issue, travel and stay histories, frequent flyer miles, and purchases of services or products during a guest’s stay (Hilton Worldwide, 2011).  According to Hilton’s website, the company uses this information in order to “improve Hilton’s services; provide you with the expected level of hospitality; ensure our site, products and services are of interest to you; and to process enrollments and applications” (Hilton Worldwide, year)  By effectively leveraging the data, the Hilton Family of Hotels is able to use Guest Profile Managers to offer real-time customization and personalization of products and service to guests from pre-reservation to post-stay.  Guests have easier time booking reservation via online or phone and are presented with a wide range of useful information pertinent to their stay. For instance, a guest is able to use the customer facing search capability of the IS to find rooms by price and area; manage reservations by integrating with Outlook; reserve car service, check local weather; and accumulate flight miles all within the same website (6).  Furthermore, valued Hilton HHonors members are able to customize preferences on their online profile to request tailored treatments that include extra pillows, water or a treadmill be placed in the room prior to arrival (3).  Unfortunately, the accessibility and convenience associated with providing this data are not without a few risks for the the customer.  As of 2008, there were over 3.5 TB of data OnQ held on approximately 22.5 million guests but more recently Hilton HHonors surpassed a record of 34 million members (6 & Hilton website).  We can safely conclude from this upsurge that OnQ holds immense amounts of acquired data and this raises a few concerns with respect to security and privacy issues for Hilton’s customers.  Generally guests voluntarily provide personal information by filling out forms or joining one of Hilton HHonor programs but some data on behavior and preferences are passively collected, then distributed to third parties or affiliates.  Furthermore, OnQ allows information to be available and accessible in real-time by all of the entire brand portfolio of Hilton Family of Hotels.  This widespread access to guests’ private information significantly increases the risk of privacy violations, in addition to greater exposure to, and misuse of, personal data.  Hilton Hotel Corp’s privacy policy states that they may share “personal information with other members of the Hilton Worldwide Portfolio of Brands, franchisees, managed hotels or service providers that may be located in countries outside (U.S.).”   When private data is distributed to parties located outside the U.S., it is not protected by our comprehensive data protection laws because various countries have different regulations governing the use of personal data.  Although Hilton Hotel Corp. clearly provides a privacy policy on its website, guests are usually unaware of how and where their information is being used and distributed until it may be too late.  Although taking advantage of OnQ’s sophisticated design is an important aspect of Hilton Hotel Corp.’s competitive advantage in regards to collection of data to market and identify their most loyal and valuable guests, the company must ensure that this does not violate privacy rights and that a guest’s personal information is safeguarded from misappropriation.

OnQ – Guest Recognition

Within the hospitality industry, one of the most important elements of guest satisfaction is guest recognition.  In order to gain and retain guest loyalty, it is vital to demonstrate appreciation for guests and handle complaints in the most utmost care possible.  Hilton Hotel Corp. is able to establish just that by effectively incorporating OnQ system into guest check-in, check-out, and throughout the stay.  Prior to guest check-in, OnQ consolidates guest database and provides a comprehensive arrival report in order to enhance guest recognition upon arrival.  In addition to guest personal profile and preferences, the report includes information such as: HHonors loyalty level, number of times guest stayed with Hilton, Hilton Family of Hotels, and Hilton International Hotel in the past 12 months, any problems or complaints from guest during past stays, and “Service Recovery Action” section that indicates certain areas hotel should pay special attention to (11).  This report allows front desk to greet each guest with a personalized welcome message, address guest by his/her name, and recommend personalization of products and services,  thus making the guest feel special.  The advantages of guest recognition are apparent but to rely solely on information OnQ provides may lead to over-engineering of customer data, ultimately preventing hotel staff from making good judgment calls.  For instance, a hotel employee, in order to accommodate a guest with high HHonors points may refuse to let lower-points HHonors CEO, who has just brought 25 employees along, from spending an extra night (3).  The information should be used as a basis for enhancing guest recognition, not as a focal point in determining guest-related decisions.  When employees are delivered with so much information on guests, it may be harder to balance common sense and make appropriate judgment call whenever necessary.

OnQ – Major Innovations (eCheck-In, Kiosks, eFolio)

The value of OnQ goes beyond its ability to collect and provide decision-supporting information on guests.  Due to OnQ’s capabilities, Hilton Hotel Corp. successfully implemented major innovations that provide a fast and convenient ways for guests to check-in using the web (eCheck-in) or kiosks and print folios (itemized descriptions of hotel charges).  During peak hours, hotels may not be able to quickly check-in valuable guests as they arrive and make the whole process tedious and time-consuming.  As a result, Hilton Hotel Corp., with the support of OnQ platform, implemented eCheck-in for HHonors members and placed kiosks so all guests have an option of faster and easier ways of checking in regardless of how they made their reservation.  The entire eCheck-in process takes about two minutes and is available between 36 hours up until two hours prior to arrival (5). Once guest checks in via web and information is transmitted to OnQ database, the hotel is notified electronically and prepares key cards with a welcome packet, which will be available at front desk.  Since OnQ stores guests’ preference and profile, which is shared with Hilton Family of Hotels, the guests do not need to provide the same information again at check-in, thus allowing them to quickly pick up their room key cards upon arrival (4).  Another great technology available at selected Hilton Family of Hotels is self-service kiosks, which use web services to retrieve information from OnQ system and allow guests to check in, select room, receive key card, print registration information and airline boarding passes, and check out (3&4).  Although credit card activated kiosks and eCheck-in features are beneficial most of the time, it is important to note that they lack a personal touch.  Automated kiosks will not have any positive effects on guests, particularly those staying at smaller properties and looking for more personalized intimate attention; therefore, they are most beneficial to larger full-service hotels, especially for frequent guests who want a quick and simple check-in process (7).  Hilton Hotel Corp. realized the importance of treating frequent business travelers, most frequent guests, with special care and created eFolio, another online feature made possible by the company’s OnQ technology.  Business travelers can sign onto their online account to access, review and print their hotel folios following their stays at any of the Hilton Family of Hotels.  This makes it easier for guests to manage travel expense reporting and allow them to retrieve eFolio for most hotels for three months after their check out date (Hilton Worldwide, 2013).  In addition, eFolio allows guests to make last minute services or products without spending extra time during check-out to request an updated hotel folio since it will be available online for future references. All of the mentioned technologies are only possible as a result of OnQ’s sophisticated and complex platform and its ability to gather, integrate and distribute information.  Hilton Hotel Corp., by effectively and efficiently leveraging OnQ’s capabilities, was and still is able to gain competitive advantage within the hotel industry.

An Analysis of OnQ’s Contributions to Hilton International’s Sustainable Competitive Advantage

With the help of ONQ, Hilton has been able to modify its systems in a way that is consistent with its brand image. Customer Management Systems, the Reservation system, and the management of its properties are now all under the ONQ. Hilton claims of being the only company that has a system that is used by all the brands that the companies own. This works as a huge advantage for this Hotel group since it helps connect the various organizational levels of the different brands that the company possesses. The different systems’ work in sync this way so that there is uniformity in serving the diversely segmented clientele of the Hotel group.

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ONQ provided the means to establishing competitive advantage for Hilton. This system helped build and sustain its own brand image and has been effective in compiling and analyzing a wide array of information about its customers which is then used to target its offerings across all its customer segments. The loyalty program of Hilton caters to a vast customer base and the ONQ system ensures that each experience is customized on an individual as opposed to a group basis. Competitive advantage refers to the ability of a firm to differentiate itself with respect to  its competitors so that more and more customers are drawn towards the particular firm. This may be with the help of certain business policies, inventive techniques, or even ISs that the firm may have adopted and implemented. The ONQ system that is used by the Hilton gives the Hotel group a podium upon which it can leverage a single database common across all its brands thereby allowing owners and franchisees the ability to promote a consistent message through integrated marketing communications. This means that when a customer checks in at one of the Hilton hotels for the second time, even if it is not the same hotel the customer may have checked in the first time, the database will understand the customers’ needs better in order to further improve upon its brand image with respect to customer satisfaction and services. Therefore, all staff within Hilton branded hotels are able to exploit database information and can subsequently develop a clear picture of all of their customers’ expectations.

OnQ is unique and such a tightly integrated IS is not used by any other hotel chain to date. The more a customer checks in at a Hilton-branded hotel, the more information is stored about the customer a central database thereby allowing Hilton to continually customize its offerings for that particular customer through its industry-leading customer profiling capabilities. The Hilton’s unique customer loyalty programs work more efficiently towards serving the needs of their loyal customers in such a way. The Web-based check in system, the Electronic Folio Services and the use of multiple Kiosks for check in and check out have contributed to the competitive advantage granted by the Hilton’s ONQ technology. Another factor that helps ONQ to establish competitive advantage is the fact that this system is not only used as a medium of information to maintain loyalty over customers but is also being used as the means to take decisions regarding customers. The ONQ system is also used by the hotel staff to develop novel ideas in order to promote improvements to customer service throughout the hotel chain’s offerings.

Contributing to the Hilton Group’s leadership in the industry is the fact that it established its CRM IS specifically to focus on optimizing customer service and satisfaction. Having a well-established reputation within the hospitality sector, Hilton ostensibly recognizes that customers need to be treated as the first priority while simultaneously conveying a consistent brand message. Through ONQ, Hilton seamlessly consolidates the various parts of the Hotel group thereby creating an effective integrated marketing communication channel that successfully coordinates all of its brands to achieve this end. Having been extensively customized specifically for this purpose, ONQ’s strength lies with its ability to convey customer information across different business units within individual brands in addition to being able to integrate this information across the entire brand portfolio all the while remaining opaque to customers seeking to receive consistent service across all of Hilton’s offerings.

If we evaluate Hilton’s OnQ based on the Michael Porter’s Generic Strategies with respect to establishing a competitive advantage within an industry, we can clearly see that Hilton does not establish cost leadership over other hotel companies. Hilton spent over $50 million dollars when it launched ONQ in the year 2003 and continues to invest in the IS to further posture itself from imitators. The question therefore arises if the firm has captured equivalent return on this investment. Fortunately, ONQ yielded positive results for Hilton since its implementation. There was a remarkable increment of more than 20% in the amount of money customers’ spent on this Hotel group. Also, now that there was a single online account management system with the help of ONQ, there was no need for six call centers Hilton used. The number came down to four now.  Hilton’s processes were streamlined through the implementation of this IS thereby resulting in substantial savings due to an increase in operational efficiencies. Since the IS provided consistent yet customized services for the customers, there was an increase in the customer satisfaction levels as well. Due to the well-positioned system with respect to mitigating operational costs associated with staffing call centers while maintaining a focus on the customer, an increase in the number of internet bookings by customers has also been observed. Therefore, with respect to Porter’s Generic Strategies, it appears that Hilton’s OnQ enables the firm to focus on individual customers thereby customizing its marketing mix to specific target segments.

Porter’s second method for a firm to establish sustainable competitive advantage is through differentiation. Innovative products and improved or unique methods of carrying out business processes that helps a company overpower its competitors form the basis of differentiation. Hilton has clearly out casted its competitors by using ONQ that brings together the processes of hotel reservations, sales, guests services, operations  and business-intelligence gathering activities into one system thereby reducing redundancies of information and helping in making sound, integrated and profitable decisions for the company. (2)

The most significant element of differentiation that Hilton employed was when the “Customers Really Matter” initiative was incorporated through ONQ. As discussed previously, customers need to be given the utmost priority within the hospitality sector. Hilton did exactly that by establishing this initiative. ONQ provided the Hilton Hotel group the means to a central IT system that would provide personalized assistance and services at each of the customer touch points present in all the brands of the company. This proved to become a huge part of the competitive advantage for Hilton. The implementation of such a strategy provided immediate results. ONQ helped the systems collect a lot of information about the customers and therefore greater ability to gauge the customers’ needs. As a result of that, Hilton was able to foster stronger relationship with its customers which became a huge threat for Hilton’s competitors. (3)

Over the years, Hilton Hotel has been able to maintain a stable increase in its room revenue rate or REVPAR with the help of the ONQ system. While in the year 2001, the room revenue for the Hilton Hotels brand was $2,565,871,860, for the year 2006 this revenue

Customer Relationship Management is a concept which has a number of business applications and therefore carries a correspondingly diverse variety of definitions as it relates to marketing, operations management, personnel administration, and information systems (“IS”). With respect to the foregoing components which comprise CRM, it has more recently been defined as “a strategic approach that enables organizations to use internal resources (i.e. Technology, people, and process) to manage the relationship with customers for the whole of their lives cycles, in order to create a competitive advantage and improve an organization’s performance” (Mohammed & Rashid, 2012). To this end, and in terms of IS, CRM is a “managerial philosophy” which enables a firm to leverage ISs for the acquisition, storage, manipulation, and dissemination of customer information (Piccoli, O’Connor, Capaccioli, & Alvarez, 2003). This aspect of technology-based CRM invariably entails the interplay of various aspects of a firm’s information technology (“IT”) infrastructure in order to establish and maintain a competitive advantage within an industry. Within service oriented industries, namely, hotels, technology-based CRM has historically been an essential element towards enabling firms seeking such an advantage against competing operators to realize optimum customer lifetime value (“CLV”) by securing the loyalty of clients through the effective exploitation of IS which automates the marketing, contact management, customer service, and sales processes (Fan & Ku, 2008). With respect to these processes, advantages gained through CRM ISs are represented by the effective integration of customer data originating from a firm’s Transaction Processing Systems (“TPS”) with that of relational databases which are subsequently leveraged for analysis by Business Intelligence Systems (“BIS”) and Decision Support Systems (“DSS”) within an Enterprise Resource Planning (“ERP”) framework towards the continuous improvements of customer relations and quality of offerings.

History of Technology Based CRM in Hotel Industry

In an industry where customer relationship management comprises a key component within the mission statements of competing firms, hotel companies have been relatively slow in adopting CRM technology solutions as the central component in their IS infrastructures (Songini, 2001). The challenge arising from implementing a CRM IS within the hotel industry can be understood from an analysis of the industry’s operational infrastructure. Hotels are typically operated by three parties: the owner, the franchiser, and the management company; all of whom have conflicting interests or definitions of success. These conflicts subsequently give rise to a “data ownership dilemma” whereby the parties are reluctant to share essential customer data with each other which is an essential element of CRM. As an industry such as hotels, whose target markets are geographically diverse and segmented, the question comes into play as to how to implement CRM: on a brand level, geographic level, individual property level, or operator level (i.e. owner, franchiser, or manager). Finally, disparate standards with respect to IS implementation on the operational level also contribute to the difficulty and expense of rolling out new ISs in general (Piccoli, O’Connor, Capaccioli, & Alvarez, 2003). However, as the cost of IS decreased and the sophistication of application software increased because of rapid advances technological advances forecasted by Moore’s Law , the barriers precluding the implementation of a CRM IS were all but eliminated.

The Hilton Hotels Group became a pioneer in early 2001 through its initial one million dollar investment in privately owned technology startups, OpenGrid Inc. and Broad Daylight, Inc. to build its fledgling company-wide CRM applications consisting of reservation, information access application, and web-based customer service application (Songini, 2001). This initial stake in technology based CRM enabled Hilton to reduce the higher costs associated with customer reservations and inquiries via telephone in favor of an inexpensive and more efficient web-based system for the then 1,800 property global hotel chain (Songini, 2001). Hilton’s initial investment could be interpreted as an initial step towards replacing its TPS with one that was automated whose function was to collect vital customer information for processing. As an additional measure which further bolstered the Hilton’s technology based CRM initiative, the company replaced its obsolete legacy mainframe reservation system in 2001 with one which also functioned as an integrated ERP framework: the E.5 Suite of CRM reporting and analysis by then partially-Hilton-owned E.piphany Inc. (Picarille, 2002). This company-wide web-based application addresses certain challenges posed by the operational infrastructure of the industry which had precluded early adoption of CRM ISs. As a web-based application-based software solution, the issue with standardization becomes moot because all stakeholders within the firm can access this system within a web browser. Additionally, “data ownership” became less of a limiting factor because of the standardized approach and user-friendly interface enabling queries for customer information within all levels of the organizational structure that had previously been an arduous process performed by a legacy SQL database whose queries for information had taken two to four weeks (Picarille, 2002). Furthermore, because Hilton had owned a large stake in the application developer, E.piphany, Inc., the proprietary nature of the CRM IS enabled it to be a source of Hilton’s sustainable competitive advantage, differentiating itself among all other hotel chains, and to seamlessly integrate with existing ISs within the company. Further promoting its success was its powerful data-reporting capabilities by providing the ability for operators to generate reports in standardized formats such as Excel spreadsheets and PowerPoint presentations thereby enabling decision support and business intelligence with respect to leveraging customer information compiled from vast data libraries (Picarille, 2002).

Implementation of OnQ

Continuing to recognize the importance of customized IS-based CRM solutions with respect to gaining a competitive advantage within the industry, Hilton Hotels invested $50 million dollars in 2003 into a custom-built customer-information system notwithstanding “one of the worst industry downturns in decades” during that year (Kontzer, 2004). OnQ is the scalable, proprietary, and fully integrated Windows-based CRM system that Hilton developed from a previous failed attempt at consolidating their ISs after a merger with Promus Hotels in 1999. Initially developed as a PMS, Hilton’s CIO Tim Harvey had foreseen the need to for the company to provide consistent services across the entire Hilton brand portfolio, personalized to each of 15.5 million HHonors loyalty program customers across 2,100 properties staffed by approximately 200,000 employees, thereby maximizing the number of touch points towards preserving a consistent brand promise (Paul, 2003). This aspect of Hilton’s IS strategy can be summarized by Tim Harvey’s statement: “At Hilton we have a belief that information technology is so intertwined without brands and our culture that you need a consistent infrastructure to enable the brand promise.” (Applegate & Gabriele Piccoli, 2008). As expected, implementation of this company-wide standardized system initially posed to be a challenge because of the hotel industry’s structure. Hilton addressed the structural issues by providing the upfront and maintenance costs to all franchisees and property managers in order to implement OnQ across all properties thereby reducing investments required by these parties for using the Hilton brand name. Hilton subsequently charged these parties a technology fee which is represented by 0.75 percent of Hilton’s franchisees’ of property owners’ gross room revenues, a method which not only enabled these non-owner parties to reduce their initial start-up costs by eschewing significant investments in IT infrastructure, but also provided them with a lower barrier to entry into the hotel industry by simultaneously leveraging a well-established brand and contributing to Hilton’s continued growth (Hitlon Worldwide, 2009).

OnQ, a User Perspective

Hilton’s proprietary software technology/CRM platform, OnQ, creates a streamlined and standardized workflow experience and provides a user-friendly tool for all employees within the organization that rely upon it on a continuous basis.  This rationale applies to all types of positions at every operational level whether they’d be the front desk managers, customer service agents , or the IT help desk support resources.  OnQ functions as more than just a CRM tool or software product for the hotel chain, it adds value and provides a competitive advantage for the company with respect to IS. As the previous CIO of Hilton, Robert Webb, referred to the system, OnQ is a “tremendous asset for the company because…it serves as…a single image of inventory globally” (Lordon 2010).  Furthermore, the standardized implementation of OnQ system across the Hilton enterprise clearly demonstrates its central role as the “center of the Hilton Technology strategy” (Lordon).  By having taken the time to detail, develop, and expand the capabilities of their initial stake in developing a proprietary technology to bolster a consistent yet customized customer experience, complete with interfaces establishing connectivity to other proprietary and standard applications, OnQ has still been able to retain its business simplicity and functionality for end users while allowing Hilton to differentiate itself from industry competitors.  This insight is a key component in assessing OnQ’s value to the firm because many other enterprises across all types of industries have historically invested significant amounts of capital in robust software applications and IS infrastructures which have taken on layers of complexity thereby precluding end-users from deriving any value from its use and contributing to operational inefficiencies.  As Tom Keltner, President of Hilton’s Brand Performance and Franchise Development Group, explains: “utilizing a single, common technology platform across all brands and sharing real-time information across every guest touch point – the hotel front desk, reservations, the HHonors Service Center and our brand websites – enables us to take better care of guests at every single point of contact while ensuring their privacy” (Hilton Worldwide, year).  Thus, it becomes evident that the customer-facing users of the system is able to conveniently access this tool when a customer need arises and with respect to this process, the nature of this IS alleviates the bottlenecks which would otherwise be an issue arising from front office operations in a service-oriented industry.  The front desk user of the system is able to instantly review the profile information of the customer, transaction history, and preferences for specific accommodations as “a simple single message…that delivers a message to its guests that is on target and reflects the company’s marketing approach” (Paul 2003).  Ostensibly, this highly customized system was neither easily developed nor cost effective.  OnQ is approximately 70% custom coded with those specific components mainly written in PERL including a property-management system, the CRM application, and a hotel-owner-reporting module” (Kontzer 2004).  However, the costs and difficulty associated with implementing this IS can be justified because the end-users are able to reduce processing times for “a variety of check-in tasks and makes it more likely that an [end user] can give customers what they want, making the job more rewarding” (Kontzer).  Consequently, OnQ provides an essential service to Hilton as a whole by improving the job satisfaction and performance of employees thereby reducing employee turnover and empowering employees towards contributing towards the achievement of the organizational mission statement: “To be the preeminent global hospitality company – the first choice of guests, team members, and owners alike” (Hilton Worldwide, 2012).

Another aspect of OnQ which has facilitated the success of the end-user experience is the importance that Hilton places on its network of IT support staff and resources throughout the company.  The company maintains a staff consisting of over 500 full time IT employees that provides support to over 150,000 Hilton employees globally (Whitney, ).  In a similar manner to how the OnQ system was designed and built internally, this same level of customized/focused support provides OnQ end-users with the best resources required to perform their duties day in and day out. Hilton’s vice president of IT marketing and communications, Laurel Bailey, asserts that their IT division performs the “bulk of the work internally…[with a] large [internal] software development organization,… data centers and network engineering group, …[a] help desk call[ed] the OnQ support center… testing [and] telecommunications support, [a] database management group, [and] architects and engineers (Whitney, ).  The more striking aspect of this self-contained model of IT support and resources is that Hilton requires “standardized online training and OnQ technology certification for the roughly 200 employees in its support organization who work with the system directly, as well for those who will operate the system in individual hotels” (Whitney).  Hilton appears to have a genuine interest towards continually improving OnQ for their employees and customers by recognizing the need for continuing education for IT support staff and understanding that these employees could contribute towards the evolution  of the OnQ infrastructure by developing a mastery in the functions of the system through a variety of continuing education opportunities. However, Hilton still looks to keep tight controls on the OnQ system and limits its access to those franchises or properties that are able to exhibit a genuine desire to meet the standards of quality set forth by the company with respect to their understanding of OnQ. A hotel franchise or property is required to pass with a score of at least 80 percent before they are able to go live with OnQ (Whitney).  The focus on additional training and education offered by the Hilton appears to assist franchises and properties towards meeting this standard but there is still a requirement that key users or support teams for the OnQ system maintain an acceptable level of skill and knowledge to ensure that the system is being maintained and used as intended.  It is powerful to observe that a business is so finely attuned to the continued success of an IS so that its overall revenue and future sustainability can remain viable.  From a user standpoint, such a system can be the absolute best and provide a true competitive advantage for a business but without a true understanding, measure, and goal for how its employees need to interact with the system on a day to day basis, the outputs of the system will not demonstrate viable numbers/sales for the future.

OnQ – Data Collection on Guests

The OnQ platform enables Hilton Hotels Corp to collect personal data and preferences when a customer provides information through Hilton Family of Hotels websites, hotel or central reservations or Hilton HHonors membership programs.  The system, equipped with this information, creates a Guest Profile manager which is constantly updated with a variety of new data collected at every touch point or guest interaction (1/2).  Some examples of personal data gathered are passport number and date and place of issue, travel and stay histories, frequent flyer miles, and purchases of services or products during a guest’s stay (Hilton Worldwide, 2011).  According to Hilton’s website, the company uses this information in order to “improve Hilton’s services; provide you with the expected level of hospitality; ensure our site, products and services are of interest to you; and to process enrollments and applications” (Hilton Worldwide, year)  By effectively leveraging the data, the Hilton Family of Hotels is able to use Guest Profile Managers to offer real-time customization and personalization of products and service to guests from pre-reservation to post-stay.  Guests have easier time booking reservation via online or phone and are presented with a wide range of useful information pertinent to their stay. For instance, a guest is able to use the customer facing search capability of the IS to find rooms by price and area; manage reservations by integrating with Outlook; reserve car service, check local weather; and accumulate flight miles all within the same website (6).  Furthermore, valued Hilton HHonors members are able to customize preferences on their online profile to request tailored treatments that include extra pillows, water or a treadmill be placed in the room prior to arrival (3).  Unfortunately, the accessibility and convenience associated with providing this data are not without a few risks for the the customer.  As of 2008, there were over 3.5 TB of data OnQ held on approximately 22.5 million guests but more recently Hilton HHonors surpassed a record of 34 million members (6 & Hilton website).  We can safely conclude from this upsurge that OnQ holds immense amounts of acquired data and this raises a few concerns with respect to security and privacy issues for Hilton’s customers.  Generally guests voluntarily provide personal information by filling out forms or joining one of Hilton HHonor programs but some data on behavior and preferences are passively collected, then distributed to third parties or affiliates.  Furthermore, OnQ allows information to be available and accessible in real-time by all of the entire brand portfolio of Hilton Family of Hotels.  This widespread access to guests’ private information significantly increases the risk of privacy violations, in addition to greater exposure to, and misuse of, personal data.  Hilton Hotel Corp’s privacy policy states that they may share “personal information with other members of the Hilton Worldwide Portfolio of Brands, franchisees, managed hotels or service providers that may be located in countries outside (U.S.).”   When private data is distributed to parties located outside the U.S., it is not protected by our comprehensive data protection laws because various countries have different regulations governing the use of personal data.  Although Hilton Hotel Corp. clearly provides a privacy policy on its website, guests are usually unaware of how and where their information is being used and distributed until it may be too late.  Although taking advantage of OnQ’s sophisticated design is an important aspect of Hilton Hotel Corp.’s competitive advantage in regards to collection of data to market and identify their most loyal and valuable guests, the company must ensure that this does not violate privacy rights and that a guest’s personal information is safeguarded from misappropriation.

OnQ – Guest Recognition

Within the hospitality industry, one of the most important elements of guest satisfaction is guest recognition.  In order to gain and retain guest loyalty, it is vital to demonstrate appreciation for guests and handle complaints in the most utmost care possible.  Hilton Hotel Corp. is able to establish just that by effectively incorporating OnQ system into guest check-in, check-out, and throughout the stay.  Prior to guest check-in, OnQ consolidates guest database and provides a comprehensive arrival report in order to enhance guest recognition upon arrival.  In addition to guest personal profile and preferences, the report includes information such as: HHonors loyalty level, number of times guest stayed with Hilton, Hilton Family of Hotels, and Hilton International Hotel in the past 12 months, any problems or complaints from guest during past stays, and “Service Recovery Action” section that indicates certain areas hotel should pay special attention to (11).  This report allows front desk to greet each guest with a personalized welcome message, address guest by his/her name, and recommend personalization of products and services,  thus making the guest feel special.  The advantages of guest recognition are apparent but to rely solely on information OnQ provides may lead to over-engineering of customer data, ultimately preventing hotel staff from making good judgment calls.  For instance, a hotel employee, in order to accommodate a guest with high HHonors points may refuse to let lower-points HHonors CEO, who has just brought 25 employees along, from spending an extra night (3).  The information should be used as a basis for enhancing guest recognition, not as a focal point in determining guest-related decisions.  When employees are delivered with so much information on guests, it may be harder to balance common sense and make appropriate judgment call whenever necessary.

OnQ – Major Innovations (eCheck-In, Kiosks, eFolio)

The value of OnQ goes beyond its ability to collect and provide decision-supporting information on guests.  Due to OnQ’s capabilities, Hilton Hotel Corp. successfully implemented major innovations that provide a fast and convenient ways for guests to check-in using the web (eCheck-in) or kiosks and print folios (itemized descriptions of hotel charges).  During peak hours, hotels may not be able to quickly check-in valuable guests as they arrive and make the whole process tedious and time-consuming.  As a result, Hilton Hotel Corp., with the support of OnQ platform, implemented eCheck-in for HHonors members and placed kiosks so all guests have an option of faster and easier ways of checking in regardless of how they made their reservation.  The entire eCheck-in process takes about two minutes and is available between 36 hours up until two hours prior to arrival (5). Once guest checks in via web and information is transmitted to OnQ database, the hotel is notified electronically and prepares key cards with a welcome packet, which will be available at front desk.  Since OnQ stores guests’ preference and profile, which is shared with Hilton Family of Hotels, the guests do not need to provide the same information again at check-in, thus allowing them to quickly pick up their room key cards upon arrival (4).  Another great technology available at selected Hilton Family of Hotels is self-service kiosks, which use web services to retrieve information from OnQ system and allow guests to check in, select room, receive key card, print registration information and airline boarding passes, and check out (3&4).  Although credit card activated kiosks and eCheck-in features are beneficial most of the time, it is important to note that they lack a personal touch.  Automated kiosks will not have any positive effects on guests, particularly those staying at smaller properties and looking for more personalized intimate attention; therefore, they are most beneficial to larger full-service hotels, especially for frequent guests who want a quick and simple check-in process (7).  Hilton Hotel Corp. realized the importance of treating frequent business travelers, most frequent guests, with special care and created eFolio, another online feature made possible by the company’s OnQ technology.  Business travelers can sign onto their online account to access, review and print their hotel folios following their stays at any of the Hilton Family of Hotels.  This makes it easier for guests to manage travel expense reporting and allow them to retrieve eFolio for most hotels for three months after their check out date (Hilton Worldwide, 2013).  In addition, eFolio allows guests to make last minute services or products without spending extra time during check-out to request an updated hotel folio since it will be available online for future references. All of the mentioned technologies are only possible as a result of OnQ’s sophisticated and complex platform and its ability to gather, integrate and distribute information.  Hilton Hotel Corp., by effectively and efficiently leveraging OnQ’s capabilities, was and still is able to gain competitive advantage within the hotel industry.

An Analysis of OnQ’s Contributions to Hilton International’s Sustainable Competitive Advantage

With the help of ONQ, Hilton has been able to modify its systems in a way that is consistent with its brand image. Customer Management Systems, the Reservation system, and the management of its properties are now all under the ONQ. Hilton claims of being the only company that has a system that is used by all the brands that the companies own. This works as a huge advantage for this Hotel group since it helps connect the various organizational levels of the different brands that the company possesses. The different systems’ work in sync this way so that there is uniformity in serving the diversely segmented clientele of the Hotel group.

ONQ provided the means to establishing competitive advantage for Hilton. This system helped build and sustain its own brand image and has been effective in compiling and analyzing a wide array of information about its customers which is then used to target its offerings across all its customer segments. The loyalty program of Hilton caters to a vast customer base and the ONQ system ensures that each experience is customized on an individual as opposed to a group basis. Competitive advantage refers to the ability of a firm to differentiate itself with respect to  its competitors so that more and more customers are drawn towards the particular firm. This may be with the help of certain business policies, inventive techniques, or even ISs that the firm may have adopted and implemented. The ONQ system that is used by the Hilton gives the Hotel group a podium upon which it can leverage a single database common across all its brands thereby allowing owners and franchisees the ability to promote a consistent message through integrated marketing communications. This means that when a customer checks in at one of the Hilton hotels for the second time, even if it is not the same hotel the customer may have checked in the first time, the database will understand the customers’ needs better in order to further improve upon its brand image with respect to customer satisfaction and services. Therefore, all staff within Hilton branded hotels are able to exploit database information and can subsequently develop a clear picture of all of their customers’ expectations.

OnQ is unique and such a tightly integrated IS is not used by any other hotel chain to date. The more a customer checks in at a Hilton-branded hotel, the more information is stored about the customer a central database thereby allowing Hilton to continually customize its offerings for that particular customer through its industry-leading customer profiling capabilities. The Hilton’s unique customer loyalty programs work more efficiently towards serving the needs of their loyal customers in such a way. The Web-based check in system, the Electronic Folio Services and the use of multiple Kiosks for check in and check out have contributed to the competitive advantage granted by the Hilton’s ONQ technology. Another factor that helps ONQ to establish competitive advantage is the fact that this system is not only used as a medium of information to maintain loyalty over customers but is also being used as the means to take decisions regarding customers. The ONQ system is also used by the hotel staff to develop novel ideas in order to promote improvements to customer service throughout the hotel chain’s offerings.

Contributing to the Hilton Group’s leadership in the industry is the fact that it established its CRM IS specifically to focus on optimizing customer service and satisfaction. Having a well-established reputation within the hospitality sector, Hilton ostensibly recognizes that customers need to be treated as the first priority while simultaneously conveying a consistent brand message. Through ONQ, Hilton seamlessly consolidates the various parts of the Hotel group thereby creating an effective integrated marketing communication channel that successfully coordinates all of its brands to achieve this end. Having been extensively customized specifically for this purpose, ONQ’s strength lies with its ability to convey customer information across different business units within individual brands in addition to being able to integrate this information across the entire brand portfolio all the while remaining opaque to customers seeking to receive consistent service across all of Hilton’s offerings.

If we evaluate Hilton’s OnQ based on the Michael Porter’s Generic Strategies with respect to establishing a competitive advantage within an industry, we can clearly see that Hilton does not establish cost leadership over other hotel companies. Hilton spent over $50 million dollars when it launched ONQ in the year 2003 and continues to invest in the IS to further posture itself from imitators. The question therefore arises if the firm has captured equivalent return on this investment. Fortunately, ONQ yielded positive results for Hilton since its implementation. There was a remarkable increment of more than 20% in the amount of money customers’ spent on this Hotel group. Also, now that there was a single online account management system with the help of ONQ, there was no need for six call centers Hilton used. The number came down to four now.  Hilton’s processes were streamlined through the implementation of this IS thereby resulting in substantial savings due to an increase in operational efficiencies. Since the IS provided consistent yet customized services for the customers, there was an increase in the customer satisfaction levels as well. Due to the well-positioned system with respect to mitigating operational costs associated with staffing call centers while maintaining a focus on the customer, an increase in the number of internet bookings by customers has also been observed. Therefore, with respect to Porter’s Generic Strategies, it appears that Hilton’s OnQ enables the firm to focus on individual customers thereby customizing its marketing mix to specific target segments.

Porter’s second method for a firm to establish sustainable competitive advantage is through differentiation. Innovative products and improved or unique methods of carrying out business processes that helps a company overpower its competitors form the basis of differentiation. Hilton has clearly out casted its competitors by using ONQ that brings together the processes of hotel reservations, sales, guests services, operations  and business-intelligence gathering activities into one system thereby reducing redundancies of information and helping in making sound, integrated and profitable decisions for the company. (2)

The most significant element of differentiation that Hilton employed was when the “Customers Really Matter” initiative was incorporated through ONQ. As discussed previously, customers need to be given the utmost priority within the hospitality sector. Hilton did exactly that by establishing this initiative. ONQ provided the Hilton Hotel group the means to a central IT system that would provide personalized assistance and services at each of the customer touch points present in all the brands of the company. This proved to become a huge part of the competitive advantage for Hilton. The implementation of such a strategy provided immediate results. ONQ helped the systems collect a lot of information about the customers and therefore greater ability to gauge the customers’ needs. As a result of that, Hilton was able to foster stronger relationship with its customers which became a huge threat for Hilton’s competitors. (3)

Over the years, Hilton Hotel has been able to maintain a stable increase in its room revenue rate or REVPAR with the help of the ONQ system. While in the year 2001, the room revenue for the Hilton Hotels brand was $2,565,871,860, for the year 2006 this revenue

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