Customer Expectations and Trust in the Hospitality Industry

How Expectations Are Formed

The development of expectations is formed from the interaction of social exchange and voluntary performance behaviors, with both sets of factors contributing to the formation and growth of trust. This analysis defines what expectations are in general—including their nature and characteristics—along with an examination of how expectations are formed. The interaction of customer satisfaction, trust, and commitment as social exchange behaviors, and loyalty, cooperation, and participation as voluntary performance behaviors, serve as the foundations for how expectations are formed. All six of these combined factors contribute to the development of expectations (Hawes, Strong, & Winick, 1996). Specifically, the level of performance or quality of a product or service to be delivered is defined by the interaction of social exchange and voluntary performance behaviors. As a result, confirmation of whether expectations are met or not leads to expectations being reinforced and a new level of performance being defined (Hawes, Mast, & Swan, 1989).

The continual raising of expectations is entirely dependent on each of these specific sets of factors remaining in equilibrium and balanced with each other. Social exchange and voluntary behaviors, however, require trust to be present and strengthened in each interaction and product or service experience (Young & Wilkinson, 1989). In organizations that rely extensively on distribution channels, the interaction of both social exchange and voluntary behaviors is inherently more difficult to manage given the coordination efforts required between channel partners (Zaheer, McEvily, & Perrone, 1998). Expectations of customers across each distribution channel they interact with vary significantly and have been shown to be directly related to the level of electronic enablement within each given channel, including its levels of personalization, perceived security, and trustworthiness (Zaheer, McEvily, & Perrone, 1998). This has been shown to extend into the services sectors of the global economy as well, and specifically into the hospitality industry (Lee, 1983).

Expectations are solidified when the two sets of factors—social exchange and voluntary behaviors—are strengthened through greater and more consistent levels of trust (Chow & Holden, 1997). What emerges from this analysis is that managing expectations over time must be consistent, transparent, and deliberate if trust is to be gained (Hawes, Mast, & Swan, 1989). Expectations and trust are interrelated, and from the standpoint of a consumer acquiring services, the interlinking of these two factors is even more integrated than it is for consumers purchasing products. The reason is that implicit in the sale of any service is the implied expectation that its delivery will meet the satisfaction level agreed upon (Milliman & Fugate, 1988).

Nature and Characteristics of Expectations

The interchange between social exchange and voluntary performance behaviors—which both fuel and are fueled by the validation and reinforcement of trust—serves as the catalyst for expectations being created and sustained. Implicit in the defining of expectations is that they will align with and be congruent to the ethical norms of both the organizational and individual level (Larzelere & Huston, 1980), and this is particularly relevant in the acquisition of services, where expectations are integral to the purchase process (Altinay, 2007).

The nature and characteristics of expectations, especially in service-related industries, can be defined through the Proposed Services Expectation Model, which graphically represents how both social exchange and voluntary performance behaviors are influenced by organizational and individual ethical norms, all of which directly contribute to the validation and reinforcement of trust. The tight and loose coupling of the components of the model defines its ability to remain permeable and agile enough to support how expectations vary across the wide variety of company cultures, distribution channels, and previous experiences with a specific company. This model is entirely predicated on trust being continually strengthened through the interaction of ethical norms, social exchange, and voluntary performance behaviors—all contributing to a more recursive approach in which expectations fuel trust over the long term.

Based on the studies cited and an analysis of how trust is achieved in service industries where the deliverable is often the experience itself, a recursive model that takes into account the expectations of individual and organizational norms is essential. The need for consistency and equilibrium—indirectly between social exchange and voluntary performance behaviors, and directly via organizational and individual ethical norms—is crucial if expectations are to be initially met and continually sustained. Keeping these aspects of expectations synchronized with each other is critical for trust to be achieved and loyalty eventually attained.

This model is particularly relevant in the hospitality industry, where social exchange and voluntary performance behaviors interact before, during, and after services are provided. The processes required to create, execute on, and fulfill expectations are defined within the Proposed Services Expectation Model through the tight/loose coupling of organizational ethical norms and the validation and reinforcement of trust. Only by making this interrelationship agile enough to sustain cultural change can a service-based company hope to create sufficient sustained trust to generate customer loyalty.

Consistently creating and fulfilling expectations as part of any services strategy also requires an intensive level of coordination across positioning strategies that appeal to customers' social exchange and voluntary performance behaviors, as implied in the Proposed Services Expectation Model.

For any services organization to create sustainable value and differentiation that transcends specific service offerings and generations—inclusive of pricing strategies—there needs to be a strategic focus on achieving balance throughout the Proposed Services Expectation Model. Just as Porter's Determinants of Competitive Advantage have proven their ability to predict international competitiveness by first establishing local competitive uniqueness and core differentiated values, the same holds true for the Proposed Services Expectation Model from a managing-expectations standpoint.

Implicit in the design of the model is balance between organizational ethical norms and individual ethical norms. Like the Porter model of global competitive advantage, the Proposed Services Expectation Model becomes more relevant over time as loyalty is achieved between companies and their customers when service expectations are consistently exceeded. This bond surpasses the transaction level—which has proven to be transient at best—and operates at the level of values and trust. When a service company's performance reaches this level, it is called solution selling. Solution selling is a deliberate strategy to become a trusted advisor to customers, focusing on their unmet needs rather than merely fulfilling transactions over time.

The biggest challenge for many organizations—both profit and non-profit focused—is the ability to generate and sustain trust through the continual meeting and exceeding of expectations. Given the skepticism brought on partly by the disillusionment of dot-com failures and the wanton disregard of ethics by Enron and others, trust has rapidly become the most precious commodity a company has to offer its prospects and customers. Trust sits at the center of the Proposed Services Expectation Model because it is a critical component of expectations being set and consistently fulfilled. The higher the level of trust, the greater the congruence between organizational ethical norms and individual ethical norms, fueling greater congruence of social exchange and voluntary performance behaviors. Conversely, the lower the level of trust, the greater the fragmentation of each component of the model and the disintegration of the relationships and process flows that encompass it, eventually leading to a decline in customer engagement within this framework. A significant proof point for this model can be found in the work of Hatch and Schultz (2002), which shows that aspiring to the role of a trusted advisor actually increases the coherence and consistency between organizational and individual ethical norms.

When the interactions in the Proposed Services Expectation Model are taken into account, it is no wonder that so many firms in the hospitality services industry specifically focus on the position of trusted advisor for both business and leisure travel. By being in alignment with both organizational and individual ethical norms, services companies become trusted advisors over time. Trusted advisors are created through consistency of ethical norms and consistency of execution between social exchange and voluntary performance behaviors. For any hospitality services business to attain the role of trusted advisor, it must consistently keep these elements of the Proposed Services Expectation Model synchronized with each other.

The approaches companies take to create cooperative advantage—achieving improved organizational performance while simultaneously delivering superior customer value—require a tightly coupled integration between the validation and reinforcement of trust, social exchange behaviors, and voluntary performance behaviors. Every customer, at any specific point in time, is at a specific level of trust or mistrust with an organization. The extent to which an organization can earn the trust of its customers determines the velocity and flow of information through the Proposed Services Expectation Model. More critical, and more long-term in effect, is the ability to redefine organizational values based on what customers require an organization to be, and vice versa. In this sense, the Proposed Services Expectation Model needs to be reciprocal in fostering and nurturing trust within the organization around customers' expectations being accurate and attainable.

Also inherent in the nature and character of expectations is the ability of company cultures to consistently create and sustain intense brand loyalties. Apple has been very successful at tightly coupling its values with those of its customers, creating in effect an ecosystem where each reinforces the other. Another example is Toyota and the trusted advisor status it has achieved in the automotive industry. There are many more examples of this dynamic, where the Proposed Services Expectation Model is illustrated by the relative proximity and intimacy an organization is capable of achieving with its customers.

Validation and reinforcement of trust must be tightly coupled with social exchange and voluntary performance behaviors to create equilibrium and balance throughout an organization. The ability to earn and keep trust defines the extent of cooperative advantage overall, leading to consistent organizational performance and the development of exceptional customer value over time. Trust becomes the catalyst of continual financial performance and growth—not price or a short-term focus on competitive tactics. From this perspective, customer loyalty earned through consistently exceeding expectations becomes the unique competitive advantage of any firm. This is particularly relevant in the area of hospitality firms, where the development of a unique competitive advantage must emanate from staff's ability to sense and respond to the unique requirements of customers and tailor responses to their specific needs.

Like Porter's Determinants of Competitive Advantage, the Proposed Services Expectation Model illustrates the need to create localized competitive competence and strength first, and then scale globally—specifically focusing on how to transform the ability to regularly exceed expectations into a competitive advantage.

The Proposed Services Expectation Model also shows how organizations need to create shared visions, make shared commitments and promises, and work with intensity to fulfill—and indeed exceed—the many expectations they create. Only by making this dynamic a core strength can an organization hope to remain viable and competitive.

One of the more valuable aspects of expectations being continually met over time is the creation of a high perceived value of the product or service being delivered. When a given product or service attains this level of value, the credibility and integrity of the brand become part of the nature and characteristics of the expectations consumers hold. This is apparent in the hospitality industry in the differing expectations customers have when checking into a Four Seasons versus a mid-tier hotel from Accor or Marriott, for example. The ability of any services firm to consistently meet expectations—leading to high levels of customer loyalty—produces brand value creation over time. Value creation, understood as the accumulation of customer loyalty over time, is increasingly being quantified in the context of the hospitality industry (Bowen & Sparks, 1998). The creation of customer value has increasingly been seen as the next source of competitive advantage (Woodruff, 1997). Yet, despite the attention focused on this concept, there is still remarkably little agreement in the literature on what constitutes "value" and "customer value," or how it is related to expectations and the creation of customer loyalty.

Both value and customer value now need to be seen in the context of the alignment of customer and organizational values, which may be referred to as "relational value congruence."

The notion of value creation through continual reinforcement and exceeding of expectations has been implicit in marketing science since the earliest studies of how loyalty affects perception of service quality. Gronroos (1996), for example, referred to an ancient Chinese merchant who progressively built stronger and deeper relationships with customers in his village by changing his role from that of a "transaction-oriented channel member to a value-enhancing relationship manager." In this way the merchant continually sought to exceed the expectations of his clients by reinforcing their trust. Sheth and Parvatiyar (1995) pointed out that relational bonding between traders in pre-industrial society was prevalent, and that the development of markets in this period was concerned with the continuity of the repeat purchaser—which also served to quantify trust as a differentiator in service relationships. Such continuity was achieved because those who participated in the market knew and trusted each other (MacKenney, 1987). These early examples illustrate buyer-seller relationships in which both parties received some form of value and had common preferences that led to an ongoing relationship. The foundation of these findings is the fact that expectations met or exceeded over time led to higher levels of trust being attained.

Value is also implied in theoretical work on exchange theory. The pioneering work of Kotler and Levy (1969) and Kotler (1972) on broadening the concept of the marketing mix regarded the process of exchange as an essential part of marketing activity: "The core concept of marketing is transaction. A transaction is the exchange of values between two parties. The things-of-value need not be limited to goods, services, and money; they include other resources such as time, energy, and feelings" (Kotler, 1972). Bagozzi (1975) subsequently focused on the importance of the exchange process in greater detail, noting that there are three broad determinants of exchange relationships: (a) social actor variables (attraction, similarity, prestige, and expertise); (b) social influence variables (specific actions, communications, and information transmitted between parties); and (c) situational variables (alternative sources of value, the physical and psychological setting, and the legal and normative setting, including organizational norms and values). While the exchange theory of marketing provides useful normative rules for exchange relationships, it does not yet fully explain why and how value is directly created from expectations (Sheth, Gardner, & Garrett, 1988).

Consumer values and consumer value were researched extensively in the 1970s and 1980s to understand specifically how expectations influence them over time from a marketing standpoint. Much of this research was based on the seminal work of Kotler (1972). More recently, researchers have explored value as a way of explaining economic behavior based on expectations fueling trust over time. Other work focused on developing a priori lists of values, such as that developed by Rokeach (1973), who created a classification scheme based on 36 personal values—further attempting to quantify the effects of expectations on long-term perception of value on the part of services purchasers.

Work on consumer values has its origins in research on human values. It is important, however, not to confuse the terms consumer "values" and consumer "value," and a distinction needs to be made between value (singular) and values (plural). According to Holbrook (1994), the term value refers to a preferential judgment, while values refers to the criteria by which such judgments are made. Rokeach (1973) described values as deeply held beliefs, whereas value implies a preference that results in a trade-off (e.g., between benefits and sacrifices) and an interaction (e.g., between a customer and the product or service). The research on consumer values in marketing can be traced to work in consumer research by scholars such as Kotler, who sought to understand the decision-making and buying behaviors of consumers by identifying the product attributes that could be linked to a customer's values.

Levitt (1969) pointed out that competition is not between what companies produce in their factories but between what they add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing, and other things that people value—and, most importantly, whether their expectations were met or not. In later work, Levitt (1980) proposed that, in addition to the generic or core product, there also exists an expected product, an augmented product, and a potential product. Levitt (1981) also distinguished between the marketing of intangible products and product intangibles, noting that, from the buyer's perspective, the product is a promise, or a cluster of value expectations, wherein intangible parts are as important as tangible parts. Here, the concept of value for the customer came to be viewed as an inherent part of the product or service. Levitt's model allows us to reconcile the marketer's traditional view of the product—seen in terms of the various inputs and processes needed to produce it—and the consumer's view of the product as a set of solutions and supporting benefits.

Research into customer satisfaction and service quality as defined by expectations—concerned with the measurement of value outputs—has recently focused on multi-attribute measurement models developed by researchers such as Parasuraman, Zeithaml, and Berry (1985, 1988). These multi-attribute models of customer satisfaction and service quality are primarily concerned with value outputs and have made a significant impact on our understanding of what customers value in terms of product and service attributes.

Measurement of Customers' Expectations

There are several different approaches to capturing the expectations of consumers; the most commonly used are briefly discussed in this section. Customer satisfaction is often considered the most measurable aspect of expectations. Attitudinal measures of performance that depend on 5- and 7-point Likert scaling, in addition to the use of multi-dimensional scaling to plot data for graphical analysis, are techniques that aid in the analysis of expectations and resulting satisfaction levels. Researchers will often rely on combining the approaches described below depending on the study objectives, strategies, and approaches in use.

The first approach is telephone surveying, which is by far the most widely used survey method. Telephone surveying enables researchers to quickly collect data. While generally considered cost-effective, refusal rates among telephone surveys have increased over the past decade, and given the enactment of the U.S. National Do Not Call list, researchers expect telephone refusal rates to continue to rise.

The second approach is online and e-mail surveying. Often cited as more time- and cost-efficient than traditional research methods, online methodologies are widely used for collecting customer satisfaction data. Companies benefit most from this technology when the majority of their customers are accessible through online channels.

The third approach is the use of focus groups to understand customer expectations and satisfaction levels. While focus groups enable companies to gather data from only a small number of customers, they serve as effective forums for engaging customers in qualitative discussions to identify key underlying drivers of satisfaction, as well as causes of dissatisfaction.

The fourth approach is the use of reply cards and mail surveying. Although a relatively easy-to-administer research approach that provides wide access to a company's customer base, mail surveys do not facilitate the depth obtained with face-to-face research in which trained moderators administer follow-up questions.

The fifth approach is mystery shopping, used primarily by retailers to gain candid and often anonymous information on how their operations are performing. This approach is designed to evaluate specific customer interactions with employees. Shopper studies measure the process of delivering customer service, while other satisfaction techniques tend to assess the outcome of customer service performance. Shopper studies may contain "shopper bias," as the mystery shoppers visit a location with specific instructions to critique predetermined attributes.

Research professionals emphasize that effective customer satisfaction programs focus on assessing customers' perceptions of how well a company delivers on critical satisfaction drivers. For example, General Electric uses a Customer Satisfaction Index Model to identify four general categories of satisfaction drivers: Image, Expectations, Products or Services, and Customer Service. Within each of these categories exists a variety of specific satisfaction drivers. These underlying drivers vary by division and sometimes even between lines of business within the same company; for business-to-business companies, these factors may also vary between customer groups in the supply chain. The Customer Satisfaction Index Model maps the impact of the four general categories of satisfaction on customers' perceptions of value, satisfaction levels, and loyalty. GE has found that divisions that fail to identify positive correlations between customer satisfaction, loyalty, and retention often discover that customers did not consider the identified drivers relevant or applicable—indicating a lost connection between expectations and satisfaction. To ensure that any given division identifies and measures the correct drivers, GE conducts qualitative research, including focus groups, to better understand the underlying drivers of customer satisfaction.