Hilton Drives Premium Marketing Performance from Balanced Scorecard

 

 

Hilton Hotels Corp. adopted the balanced scorecard in 1997 and since has considered it the foundation in translating its corporate strategic vision to marketing, brand management, and operations as well as to a handful of constituent groups including hotel guests, company shareholders, and Hilton employees. Hilton's balanced scorecard not only keeps score but serves as a way to identify and prioritize activities that will improve scores, execute corrective action, and reward improvement.

The Hilton value chain shows the prominence of continuous improvement among the other steps that link the corporate vision and strategy to marketing, operations, and finance. First the corporate strategy is tested for its ability to support the vision. Then marketing's (and other departments') strategy and tactics are developed, resulting in specific key performance indicators (KPIs) and goals incorporated into the balanced scorecard.

 

Hilton uses a rigorous annual business-planning process that links its business strategy with tactical actions. Each key performance indicator on the scorecard is derived from and aligns with one of four value drivers. Each of the eight KPIs, some lag indicators, or diagnostic measures that show the outcomes of a strategy, and some lead indicators, or predictive measures that help modify marketing design to take advantage of future opportunities, is reported as a numerical score and within one of three color zones. Green indicates achievement, if not excellence, beyond the goal; yellow signals results slightly below the goal; and red flags performance well below the goal.

By communicating results visually to show strengths and weaknesses, marketing can clearly see how it is performing on its objectives and where to focus its efforts, not to mention its resources.

 

To assist in identifying areas of potential value growth, customized priority reports identify the key drivers of customer satisfaction on which marketing and its colleagues in other departments should focus, thus concentrating efforts on the elements of a Hilton stay most important to guests.

Hilton puts a priority on improving its strategies, business processes, and balanced scorecard toward ensuring that its stated value drivers adequately describe how the company can best meet its corporate goals. Continuous improvement of the Hilton balanced scorecard, nicknamed STP for Situation-Target-Proposal, is a multi-phase process for determining a course of action.

 

Although the power of the Hilton brand attracts guests to the properties for their first stays, sustainable, long-term profitabilty relies on customer loyalty. Using the balanced scorecard, Hilton was able to deliver a 3% higher profit margin than other full-service hotels. Between 2000 and 2002, this translated to a 100% increase in stock price.

Non-financial measures such as customer satisfaction, likelihood to recommend Hilton, and likelihood to return to Hilton have improved as well. Hilton has improved the price-value relationship at its properties while raising its room rates so guests have not fallen away from the brand despite increases to the cost of their stays.

At a strategic level, use of the balanced scorecard also has increased brand equity by reinforcing quality control of the Hilton experience. These diagnostic successes meant that Hilton Garden Inns, from launch, could command premium rates over competitors.