Thin Slicing Your Way to Lower Profits

September 21, 2009
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hermes tieA hotel manager looks out in the lobby and notices a guest with a Hermes tie. Another is carrying a Prada handbag. In an instant and through “the power of the glance,” the hotelier decides these folks “look right” and are worth giving special attention. Unfortunately, this hotelier has probably just thin-sliced his or her way to lower profits.

No surprise to anyone, some upscale retailers and hotels are looking for visual cues to determine the service level they should provide to customers. According to a somewhat dated 2007 WSJ article, “The Gatekeeper: How Posh Hotel Sizes Up Guests,” some hotels are sizing up guests based on what car they park in valet, or what they’re wearing when they walk in the door.

In addition to keeping a record of the spending of hotel guests, the staff of the Peninsula Beverly Hills looks for signs of wealth and sophistication in guests. The article notes:

“The hotel’s managing director, Ali Kasikci, is something of an anthropologist of status signals. He is highly aware of the delicate hierarchy of fashion and symbols of influence, and he looks for small details to tell him what a pair of jeans and a T-shirt can’t.”

In the article, Mr. Kasicki

hermes tieA hotel manager looks out in the lobby and notices a guest with a Hermes tie. Another is carrying a Prada handbag. In an instant and through “the power of the glance,” the hotelier decides these folks “look right” and are worth giving special attention. Unfortunately, this hotelier has probably just thin-sliced his or her way to lower profits.

No surprise to anyone, some upscale retailers and hotels are looking for visual cues to determine the service level they should provide to customers. According to a somewhat dated 2007 WSJ article, “The Gatekeeper: How Posh Hotel Sizes Up Guests,” some hotels are sizing up guests based on what car they park in valet, or what they’re wearing when they walk in the door.

In addition to keeping a record of the spending of hotel guests, the staff of the Peninsula Beverly Hills looks for signs of wealth and sophistication in guests. The article notes:

“The hotel’s managing director, Ali Kasikci, is something of an anthropologist of status signals. He is highly aware of the delicate hierarchy of fashion and symbols of influence, and he looks for small details to tell him what a pair of jeans and a T-shirt can’t.”

In the article, Mr. Kasicki spots a Hermes tie and a Charvet shirt among his wealthy guests and says, “It’s like a skunk. There’s enough scent being sprayed around that you can connect the dots.”

And while as of last year, Mr. Kasicki has recently moved on from the Peninsula Hotel to the Montage Beverly Hills, undoubtedly he’s still thin-slicing; segmenting and treating customer’s differently based on his seasoned observations and intuition.

It’s also a dangerous strategy.

Malcolm Gladwell, in his best seller, Blink, defines the concept of thin-slicing as, “the ability of our unconscious to find patterns in situations and behavior based on very narrow slices of experience.” Essentially, it’s the ability to see patterns based on extensive experience in a particular field or discipline. In the case of Mr. Kasicki, his years of hotel experience at the Peninsula and Four Seasons give him visual cues and “distinctive signatures” of which guests can afford his services.

Here’s the problem with intuition however. Solely relying on “at a glance” decision making, or decision making based on gut instinct can be very costly to our business and careers. For Mr. Kasicki to make better decisions on which guests should receive special attention, both observational data (visual cues) and hard numerical data are necessary.

It’s probably challenging in a service business like high-end hoteling, to not consciously or unconsciously segment and then treat customers differently based on how they dress or what they drive. However, even Mr. Kasicki admits that sometimes he gets it wrong when it comes to sizing up his guests. For example, the article notes a poorly dressed retired pharmaceutical executive is one of Mr. Kasicki’s wealthy guests!

It often makes sense to build loyalty programs, marketing campaigns and service/product offers to keep valuable customers spending money with your company. A good segmentation strategy, based on quantitative data, can help a company determine what customers to keep and which ones to let go to the competition.

For example, a data-driven customer profitability and life time value (LTV) analysis could show that while an individual is a frequent guest to a high end hotel, they also tend to bargain for the lowest rates, berate the service staff, tip poorly, steal towels and swipe hotel fixtures.

In an era of fierce competition, taking care of your most profitable and valuable customers has never been more important. Just don’t base your definition of a valuable customer on criteria such as he or she “looks the part.” Even Gladwell admits, “We are often careless with our powers of rapid cognition.”

Can you judge a book by its cover? Providing better levels of service to your top customers is a good strategy, but close your eyes for a moment and let your data speak to you for a comprehensive picture of who is “valuable.”