Working my whole work life in a product industry, I have very limited knowledge of what it’s like to be successful in a service industry. As of 11/28 at 8:20pm, I have acquired two whole hours of service success knowledge. I did however, find these two hours very informing, and was able to draw one big parallel between having a successful product and running a successful service; know your customers. In a service industry, knowing your customers has to go a little bit further than just knowing their age, and income. Ok, I’m simplifying here, but really, instead of just knowing your customers, you actually have to manage them in a service. What does this mean exactly?
Well, searching through my News app on my Iphone (love the new update by the way!), the first story happens to deal with a fast growing service business – Airbnb. Before reading this article, Airbnb gave me the creeps – mostly from the “I’m going to pay you to stay in your bed, that I have no idea what you do there” point of view. There must be $25.5 billion dollars worth of disagreeance (is this not a word?!) with me though, based on the company’s latest valuation over the summer. To summarize this specific article, Hilton’s CEO Christopher Nassetta says that he is in no way, shape, or form threatened by Airbnb stating that they will never be able to replicate what Hilton is doing. By the way, Hilton was valued at at a measly 1/2 billion dollars less than Airbnb. Let’s go back to my point on knowing your customer, and managing them. What better way to explain what “managing your customer” means than by giving examples. In Hilton’s case, they need to manage their customer’s expectations and experiences. According to Frances X. Frei, they state that managing customer’s is one of the four critical elements to being successful in a service industry, and its crucial to keeping costs low and quality high. Back to Hilton examples for real this time, Hilton has its customers do several things; make their own reservations and incentivize them to make their own beds by turning down housekeeping (or hanging up their towels), just to name a few. They also have to manage their expectations, because this could lead to poor publicity, which we know could spread like rapid fire. What Nassetta fails to mention in his article, is what Airbnb is doing right in regards to managing it’s customers. First, Airbnb’s customers also double as employees. Their business model, for anyone who doesn’t know, relies on people signing up as “Hosts”, and then people looking for a place to stay, and go and book a stay at these host’s house, whether it’s a one room stay, or an entire house stay. Airbnb reaches all over the globe, and has grown tremendously year over year. They rely on guest’s reviews and prices; almost always being significantly cheaper than Hilton.
According to Frei, another one of the four things to being successful is having a good employee management system. So to me, it seems Hilton and Airbnb both are managing their customers well but where Airbnb is excelling is their successful combination of customer and employee management. They are able to keep costs of employment very low, by having the Host/employee’s taking a lot of this own their own, thus making it a much more attractive place to stay, at such a lower price. Something else I found in my research of Airbnb, is that they promote the global experience, the camaraderie of sharing a space, and making new friends in new culture. Something, Hilton does not offer. With a generation of Millennials on their side, Airbnb has a lot to offer.
So Mr. Nassetta, I will tell you this – You may not be worried now, but I might want to start considering them a threat before it’s too late.
.. and from my point of view, I may just look into getting over my bed cootie fear.. maybe.