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 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 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 might 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.

Satisfaction and loyalty for selected hotel brands, 2006

Based on results from the 2006 Market Metrix Hospitality Index (140,000 customer surveys completed during the year), hotel brand scores for customer satisfaction and loyalty were plotted on a chart.

Here is a snapshot of the customers and brands in each quadrant:

Loyalists: those who have high satisfaction and high loyalty. Subsegments are apostles, who have the highest satisfaction and loyalty scores, and near apostles, who give high ratings for both, but at a slightly lower level.

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 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 subsegment comprises the Terrorists, with the lowest satisfaction and loyalty scores. In addition to 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 because of their location (when no suitable alternatives are nearby) or because of the strength of their loyalty club. But 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 often are price-sensitive and will switch easily when they have the chance.

Companies in this category might provide superior products and services but do not stand out from the competition. They might be seen as interchangeable with other, similar-level hotels because they have not created a passion for their brand. You might 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 also might help retain these guests.

The Apostle Model is especially valuable because it provides advance warning of customer dissatisfaction so you can take steps to preserve the relationship before it's too late.

Jonathan Barsky and Lenny Nash are principles with Market Metrix LLC ( http://MarketMetrix.com/), a firm that provides customer and employee survey programs for the hospitality industry. For more information, call (800) 239-7515.

hmm@questex.com