Marketing in Hospitality Industry

Chapter objectives
Understand the relationships between the hospitality and travel industry

Define the role of marketing and discuss its core concepts
Discuss how marketing managers go about developing profitable customer relationships
Understand how the marketing concept calls for a customer orientation
Explain marketing strategies that are useful in the hospitality and travel industries
Marketing for Hospitality and Tourism
CHAPTER 1:
INTRODUCTION: MARKETING OR HO!PITA"IT# AND TOURI!M
I$tro%&ctio$
Today marketing isnt simply a business function its a philosophy! a way of thinking! and a way of
structuring your business and your mind" Marketing is much more than a new ad campaign"
Marketing! more than any business function! deals with customers # creating customer value and
satisfaction are at the heart of hospitality and travel industry marketing" Many factors contribute to
making a business successful" However! todays successful companies at all levels have one thing in
common they are strongly customer focused and heavily committed to marketing" $s a manager!
you will be motivating your employees to create superior value for your customers"
Marketings tasks
To design a product%service combination that provides real value to targeted customers
Motivates purchase
&ulfills genuine consumer needs
'ustomer orientation
The purpose of a business is to create and maintain profitable customers" 'ustomer
satisfaction leading to profit is the central goal of hospitality marketing
Marketing definition
Marketing is a social and managerial process by which individuals and groups obtain
what they need and want through creating and exchanging products and value with
others
C&sto'er Orie$tatio$
(uccessful managers understand that profits are best seen as the result of running a business well
rather than as its sole purpose" )hen a business satisfies its customers! the customers will pay a fair
price for the product # a fair price includes a profit for the firm" Managers who forever try to
maximi*e short%run profits are short%selling both the customer and the company"
The alternative management approach is to put the customer first and reward employees for serving
the customer well" +t is wise to assess the customers long%term value and take appropriate actions
to ensure a customers long%term support"
,-./- )orld%0oint $cademy of Tourism (dn" 1hd" $ll 2ights 2eserved"
The importance of customer orientation and its implication for marketing planning
a" providing information to the customers
b" understanding customer needs
c" fulfilling customer needs
d" creating and delivering customer value
e" sustaining customer satisfaction
f" maintaining long%term relationship with customers
g" obtaining customer loyalty
Mar(eti$)
+n the hospitality industry! marketing and sales are often thought to be the same! and no wonders
the sales department is one of the most visible" (ales managers provide prospective clients with
tours and entertain them! thus the sales function is highly visible" )hereas! most of the non%
promotional areas of the marketing function take place behind closed doors" The four%0 framework
calls upon marketing professionals to decide on the product and its characteristics! set the price!
decide how to distribute their product! and choose methods for promoting their product" +f
marketers do a good 3ob of identifying consumer needs! developing a good product! and pricing!
distributing! and promoting it effectively! the result will be attractive products and satisfied
customers"
Marketing mix
Elements include product! price! promotion and distribution channels" (ometime distribution is
called place and the marketing situation facing a company" $lso known as the 40s
/" 0roduct5service
$ product is seen as an item that satisfies what a consumer needs or wants" +t is a tangible
good or an intangible service" +ntangible products are service based like the tourism industry
6 the hotel industry or codes%based products like cellphone load and credits" Tangible
products are those that can be felt physically" Typical examples of mass%produced! tangible
ob3ects are the motor car and the disposable ra*or"
-" 0rice
The price is the amount a customer pays for the product" The price is very important as it
determines the company7s profit and hence! survival" $d3usting the price has a profound
impact on the marketing strategy! and depending on the price elasticity of the product! often!
it will affect the demand and sales as well" )hen setting a price! the marketer must be aware
of the customer perceived value for the product"
8" 0lace 9distribution channel:
2efers to providing the product at a place which is convenient for consumers to access"
0lace is synonymous with distribution" ;arious strategies such as intensive distribution!
selective distribution! exclusive distribution! franchising can be used by the marketer to
complement the other aspects of the marketing mix"
4" 0romotion
2epresents all of the methods of communication that a marketer may use to provide
information to different parties about the product" 0romotion comprises elements such as
advertising! public relations! personal selling and sales promotion"
$dvertising covers any communication that is paid for! from cinema commercials! radio
and +nternet advertisements through print media and billboards"
0ublic relations is where the communication is not directly paid for and includes press
releases! sponsorship deals! exhibitions! conferences! seminars or trade fairs and events"
)ord%of%mouth is any apparently informal communication about the product by ordinary
individuals! satisfied customers or people specifically engaged to create word of mouth
momentum"
(ales staff often plays an important role in word of mouth and public relations
The Extended Marketing Mix 9<0s:
The additional 0s have been added because today marketing is far more customer oriented than ever
before! and because the service sector of the economy has come to dominate economic activity in
this country" These 8 extra 0s are particularly relevant to this new extended service mix" The three
extra 0s are
/" 0hysical layout 9evidence:
2efers to the experience of using a product or service! for example! when a service goes out
to the customer! it is essential that you help him see what he may or may not buy" Examples
are brochures and pamphlets"
-" 0eople 9provision of customer service:
2efers to the customers! employees! management and everybody else involved in it" +n
tourism industry especially! it is essential for everyone to reali*e that the reputation of the
brand is in the peoples hand" Example= a &>$ service is the first impression of the hotel"
8" 0rocesses
2efers to the methods and process of providing a service and is hence essential to have a
thorough knowledge on whether the services are helpful to the customers" Example= how the
customer services handle customer complaints"
Travel industry marketing
Travel industry marketing is about the marketing effort done in introducing and distributing tourist
destinations to the domestic and international customers 9tourists:" The aim is to ensure that the
known destination will become one of the top chosen destination in the world" Travel marketing
also will ensure that the destinations available resources and consumption level is properly
monitored! so that the industry can be deem as successful"
(uccessful hospitality marketing is highly dependent on the entire travel industry" ?overnment or
@uasi%government agencies play an important role in travel industry marketing through legislation
aimed at enhancing the industry and through promotion of regions! states and nations" &ew
industries are as interdependent as the travel and hospitality industries"
+mportance of marketing
The entrances of corporate giants into the hospitality market and the marketing skills these
companies have brought to the industry have increased the importance of marketing within the
industry" $nalysts predict that the hotel industry will consolidate in much the same way as the
airline industry has! with five or six ma3or chains dominating the market" (uch consolidation will
create a market that is highly competitive" The firms that survive this consolidation will be the ones
that understand their customers" +n response to growing competitive pressures! hotel chains are
relying on the expertise of the marketing director"
U$%ersta$%i$) 'ar(eti$)
'ore marketing concepts
/" Aeeds! wants and demands
Aeeds $ state of deprivation in a person" Human beings have many complex needs"
These include the five basic needs theory by $braham Maslow= the Maslow
Hierarchy of Aeeds # these needs were not invented by marketers but are part of the
human makeup
)ants The form that a human needs takes when shaped by culture and individual
personality" Many sellers often confuse wants and needs" )ants are how people
communicate their needs"
Demands Human wants that are backed by buying power" 0eople have almost
unlimited wants! but limited resources" They choose products that produce the most
satisfaction for their money" )hen backed by buying power! wants become demand"
>utstanding marketing companies go to great lengths to understand their customers needs
wants and demands"
Maslow Hierarchy of Aeeds
-" 0roducts
0eople satisfy their needs and wants with products" $nything that can be offered to a market
for attention! ac@uisition! use or consumption and that might satisfy a need or want" +t
includes physical ob3ects! services! persons! places! organi*ations and ideas"
>ne of the most interesting areas of marketing is product planning and development" Travel
industry customers continually seek new products # sometimes the old is new today
Bheritage tourismC is increasingly important
8" ;alue! satisfaction and @uality
;alue The consumers estimate of the products overall capacity to satisfy his or her
needs" Todays consumer behaviorists have gone beyond narrow economic
assumptions of how consumers form value in their mind and make product choices"
>ne of the biggest challenges for management is to increase the value of their
product for their target market
(atisfaction (atisfaction with a product is determined by how well the products
meet the customers expectations for that product" 'ustomer expectations are based
on past buying experiences! the opinions of friends! and market information"
Duality The totality of features and characteristics of a product that bear on its
ability to meet customer needs" The fundamental aim of todays total @uality
movements has become total customer satisfaction" Marketers have two ma3or
responsibilities in @uality%centered company
i" They must participate in forming strategies
ii" They must perform each marketing activity to high standards
4" Exchange! transactions and relationships
Exchange The act of obtaining a desired ob3ect from someone by offering
something in return" Exchange is only one of several ways people can obtain a
desired ob3ect"
Transaction Marketings unit of measurement" $ transaction consists of a trade of
values between two parties" $ transaction involves at least two things of value! a time
of agreement! and a place of agreement"
2elationships marketing &ocuses on building a relationship with a companys
profitable customers" Most companies are finding that they earn a higher return from
resources invested in getting repeat sales from current customers than from money
spent to attract new customers" (mart marketers work at building relationships with
valued customers! distributors! dealers and suppliers"
2elationship marketing within the hospitality industry is particularly important in the
following areas
1etween hospitality organi*ations and their customers
1etween hospitality organi*ations and their employees
1etween retailers of travel%hospitality services! such as hotels or airlines! and
marketing intermediaries! such as tour wholesalers! incentive houses! and travel
agency conglomerates
1etween retailers of travel%hospitality services and key customers! such as large
corporations and government agencies
1etween retailers of food service such as $2$M$2E or McDonalds and
organi*ations such as universities! bus terminals! and large corporations in which this
food chain is one of a handful of providers
1etween retailers of one type of travel%hospitality service! such as a motel chain and
a restaurant chain" 9both are mutually interdependent:
1etween retailers of travel%hospitality services and key suppliers
1etween hospitality organi*ations and their marketing agencies! banks! and law
firms
F" Markets
$ set of actual and potential buyers who might transact with a seller" The si*e of a market
depends on the number of persons who exhibit a common need! have the money or other
resources that interest others! and are willing to offer these resources in exchange for what
they want" The fact is that modern economies operate on the principle of the division of
labor by which each person speciali*es in the production of something! receives payment!
and buys needed things with money"
Mar(eti$) 'a$a)e'e$t
Definition The analysis! planning! implementation and control of programs designed to create!
build and maintain beneficial exchanges with target buyers for the purpose of achieving
organi*ational ob3ectives"
Marketing means working with markets to bring about exchanges for satisfying human needs and
wants" Most people think of a marketing manager as someone who finds enough customers to buy
the companys current output # but! it is too limited" The marketing manager is interested in shaping
the level! time! and composition of demand for the companys products and services"
Marketing management philosophies
/" Manufacturing concept
$lso called the production concept % Holds that customers will favor products that are
available and highly affordable! and therefore management should focus on production and
distribution efficiency" The problem is that management may become so focused on
manufacturing systems that they forget the customer"
-" 0roduct concept
Holds that customers prefer existing products and product forms! and the 3ob of management
is to develop good versions of these products" This misses the point that consumers are
trying to satisfy needs and might turn to entirely different products to better satisfy those
needs"
8" (elling concept
Holds that consumer will not buy enough of the organi*ations product unless the
organi*ation undertakes a large selling and promotion effort" Does not establish a long%term
relationship with the customer! because the focus is on getting rid of what one has rather
than creating a product to meet the needs of the market"
The selling concept exists within the hospitality industry # a ma3or contributing factor is
overcapacity" )hy do ma3or sectors continuously face overcapacityG
0ride in being the biggest! having the most capacity
$ false belief that economies of scale will occur as si*e increases
Tax laws that encourage real estate developers to overbuild properties because of the
generous tax write%offs
Etc"
4" Marketing concept
Holds that achieving organi*ational goals depends on determining the needs and wants of
target markets and delivering the desired satisfaction more effectively and efficiently than
competitors"
The marketing concept is fre@uently confused with the selling concept
a" The selling concept takes an inside%out perspective # it starts with the companys
existing products and calls for heavy selling and promoting to achieve profitable
sales
b" The marketing concept starts with a well%defined market! focuses on customer needs
and integrates all the marketing activities that effect customers" +t meets the
organi*ational goals by creating long%term customers relationships based on
customer value and satisfaction"
The selling and marketing concepts contrasted
F" (ocietal marketing concept
Holds that the organi*ation should determine the needs! wants and interest of target markets
and deliver the desired satisfactions more effectively and efficiently than competitors in a
way that maintains or improves the consumers and societys well%being" The societal
marketing concept @uestions whether the marketing concept is ade@uate in an age of
environmental problems! resource shortages! rapid population growth! worldwide inflation!
and neglected social services" $ broader issue facing the hospitality and travel industries is
expansion that has a positive impact on local residents" The hospitality and travel industries
cannot insulate themselves from the continuing need for societal approval"
The !ervice C&*t&re
The service culture focuses on serving and satisfying the customer" The service culture has to start
with top management and flow down" $ service culture empowers employees to solve customer
problems" +t is supported by a reward system based on customer satisfaction" Human beings
generally do what is rewarded # if an organi*ation wants to deliver a @uality product! the
organi*ations culture must support and reward attention to customer needs"
(ervice marketers must be concerned with four characteristics of service
/" +ntangibility
(ervices cannot be seen! tasted! felt! heard or smelled before they are purchased" To reduce
uncertainty caused by intangibility! buyers look for tangible evidence that will provide
information and confidence about the service"
Example Hotel does not sell a room! but the right to use a room for a specific period of
time" )hen hotel guest leave! they have nothing to show for the purchase but a receipt"
-" +nseparability
(ervices produced and consumed at the same time! and cannot be separated from their
providers! whether the providers are people or machines"
Example The food in a restaurant may be outstanding! but if the service person has a poor
attitude or provides inattentive service! customers will down%rate the overall restaurant
experience"
8" ;ariability
(ervice @uality depends on who provides the services and when and where they are
provided"
Example $ guest can receive excellent service one day! and mediocre service from the same
person the next day= the service person may not have felt well or perhaps experienced an
emotional problem"
4" 0erishability
(ervices cannot be stored" +f service providers are to maximi*e revenue! they must manage
capacity and demand because they cannot carry forward unsold inventory
Example $ /..%room hotel that sells only H. rooms on a particular night cannot inventory
the 4. unused rooms and then sell /4. rooms the next night" 2evenue loss from not selling
4. rooms is gone forever"
Ma$a)e'e$t strate)ies +or service b&si$esses
(ervice marketers can do several things to increase service effectiveness in the face of intrinsic
service characteristics" Iust like manufacturing business! good service firms use marketing to
position themselves strongly in chosen target markets" However! services differ from tangible
products and often re@uire additional marketing approaches"
+n a service business! the customer and frontline service employee interact effectively with
customers to create superior value during service encounters" (uccessful service companies focus
their attention on both their employees and customers" They understand the service%profit chain!
which links service firms profits with employee and customer satisfaction"
Three types of marketing in service industries
/" +nternal marketing
To train effectively and motivate its customer%contact employees and all the supporting
service people to work as a team to provide customer satisfaction" &or the firm to deliver
consistently high service @uality! everyone must practice customer orientation"
-" External marketing
$ll marketing efforts done and targeted towards the external market 9the consumers:
8" +nteractive marketing
2ecogni*ed that perceived service @uality depends heavily on @uality of buyer%seller
interaction" +n service marketing! service @uality depends on both the service deliverer and
the @uality of the delivery
Managing the customer relationship # '2M
'ollaborative marketing 9also known as '2M: in which the various departments of a company!
such as sales! technical support! and marketing! share any information they collect from interactions
with customers"
'ustomer relationship management 9'2M: is a managerial philosophy and practice that has
received widespread acceptance in many industries # it combine marketing! business strategy and
information technology to better understand the customers! to custom%develop products for key
customers! and to develop closer relationships with key customers" '2M focuses on managing
revenue opportunities from customers! retaining customers! and en3oying a stream of income from
them over their lifetime" $s the name implies! '2M calls for developing uni@ue and lasting
relationships with customers"
&or example! customer feedback gathered from a technical support session could inform marketing
staff about products and services that might be of interest to the customer" The purpose of
collaboration is to improve the @uality of customer service! and! as a result! increase customer
satisfaction and loyalty"
Di++ic&*t, i$ 'eas&ri$) 'ar(eti$) e++ective$ess
'ommonly cited obstacles to measuring marketing effectiveness included insufficient marketing
data! insufficient tools to analy*e data! and a long sales cycle"
Chapter objectives
Understand the processes involved in defining a company mission and setting goals and
ob3ectives
Discuss how to design business portfolios and growth strategies
Explain the steps involved in the business strategy planning process
+dentify the micro% and macro%environment 90E(T: factors in marketing
CHAPTER -:
THE RO"E O MARKETING IN !TRATEGIC P"ANNING
!trate)ic P*a$$i$)
The aim of strategic planning is to help a company select and organi*es its business in a manner that
keeps the company healthy despite unexpected upsets in any of its specific business or product
lines" Three ideas that define strategic planning
Managing a companys business as an investment portfolio to determine which business
entities deserve to be built! maintained! phased down or terminated
$ssessing accurately the future profit potential of each business by considering the markets
growth rate and the companys position and fit
Underlying strategic planning is that of strategy and developing a game plan for achieving
long%run ob3ectives
&our ma3or organi*ational levels
/" 'orporate level
2esponsible for designing a corporate strategic plan to guide the entire enterprise" +t makes
decision on how much resource support to allocate to each division! as well as which
businesses to start or eliminate
-" Division level
Each division establishes a plan covering the allocation of funds to support that business unit
within that division
8" 1usiness level
Each business unit in turn develop its business units strategic plan to carry that business unit
into profitable future
4" 0roduct level
Each product level within a business unit develops a marketing plan for achieving its
ob3ectives in its product market
Difference between strategic! corporate and marketing ob3ectives
(trategic 'orporate Marketing
(trategy is a companys plan
for controlling and utili*ing its
resources % human! physical
and financial capital! in an
effort to promote and secure its
interests"
Example= efficient use of the
resources relative to the output
They are usually set by the top
management of the business"
'orporate ob3ectives tend to
focus on the desired
performance and results of the
business"
Example= expected market
share 9/-J:
Marketing ob3ectives define
what you want to accomplish
through your marketing
activities"
(M$2T approach"
Example= )e aim to achieve
<FJ customer awareness of our
brand in our target markets"
Corporate !trate)ic P*a$$i$)
'orporate head@uarters has the responsibility for setting into motion the whole planning process"
(ome corporations give a lot of freedom to their business units but let them develop their own
strategies= others set the goals and get heavily involved in the individual strategies" The hospitality
industry faces the need for greater empowerment of employees! particularly at middle%management
levels" The hospitality and tourism industries are international and multicultural in nature # attitude
and culture sometimes create sharp differences in management style and in the perceived
importance of strategic planning! empowerment! and other concepts"
Mission and vision statements
KMission (tatementsK and K;ision (tatementsK do two distinctly different 3obs"
$ Mission (tatement defines the organi*ation7s purpose and primary ob3ectives" +ts prime function
is internal # to define the key measure or measures of the organi*ation7s success # and its prime
audience is the leadership team and stockholders"
;ision (tatements also define the organi*ations purpose! but this time they do so in terms of the
organi*ation7s values rather than bottom line measures 9values are guiding beliefs about how things
should be done": The vision statement communicates both the purpose and values of the
organi*ation" &or employees! it gives direction about how they are expected to behave and inspires
them to give their best" (hared with customers! it shapes customers7 understanding of why they
should work with the organi*ation"
Example
The mission statement of &arm &resh 0roduce is
"To become the number one produce store in Main Street by selling the highest quality,
freshest farm produce, from farm to customer in under 24 hours on 75% of our range and ith !"%
customer satisfaction#$
Here7s the ;ision (tatement creates and shares with employees! customers and farmers alike%
"&e help the families of Main Ton li'e happier and healthier li'es by pro'iding the
freshest, tastiest and most nutritious local produce% (rom local farms to your table in under 24
hours#"
1usiness >b3ectives
>b3ectives give the business a c*ear*, %e+i$e% tar)et" 0lans can then be made to achieve these
targets" This can motivate the employees" +t also enables the business to measure the progress
towards to its stated aims"
The most effective business ob3ectives meet the following criteria
! . !peci+ic # ob3ectives are aimed at what the business does! e"g" a hotel might have an
ob3ective of filling H.J of its beds a night during >ctober! an ob3ective specific to that
business"
M / Meas&rab*e # the business can put a value to the ob3ective! e"g" L/.!... in sales in the
next half year of trading"
A / A)ree% by all those concerned in trying to achieve the ob3ective"
R / Rea*istic # the ob3ective should be challenging! but it should also be able to be achieved
by the resources available"
T/ Ti'e speci+ic # they have a time limit of when the ob3ective should be achieved! e"g" by
the end of the year"
Examples of company ob3ectives are
/" To earn at least a -. percent after%tax rate of return on our net investment during the next
fiscal year
-" To increase market share by /. percent over the next three years"
8" To lower operating costs by /F percent over the next two years by improving the efficiency
of the manufacturing process"
4" To reduce the call%back time of customers in@uiries and @uestions to no more than four
hours"
Establishing strategic business units
(trategic 1usiness Units 9(1Us:
$ single business or collection of related businesses that can be planned for separately from
the rest of the company
Has its own set of competitors
Has a manager who is responsible for strategic planning and profit performance
1oston 'onsulting ?roup Model
Different types of business
/" Duestion marks % 'ompany business that
operate in high%growth markets but have
relatively low market share
-" (tars % The market leader in a high%
growth market
8" 'ash cows % 0roduces a lot of cash for
the company and en3oys economies of
scale and higher profit margins
4" Dogs % 'ompany businesses that have
weak market shares in low%growth
markets"
&our alternatives ob3ectives
/" 1uild % To increase the (1Us market
share! even foregoing short%term
earnings to achieve this ob3ective
-" Hold % To preserve the (1Us market
share
8" Harvest % To increase the (1Us short%
term cash flow regardless of the long%
term effect
4" Divest % To sell or li@uidate the business
because resources can be better used
elsewhere
$lthough the portfolio is basically healthy! wrong ob3ectives or strategies could be assigned" The
worst mistake would be to re@uire all the (1Us to aim for the same growth rate or return level"
$dditional mistakes would include the following
Meaving cash%cow businesses with too little or too much in retained funds
Making ma3or investments in dogs hoping to turn them around but failing to make the
turnaround before cash reserves are gone
Maintaining too many @uestion marks and under%investing in each
Developing growth strategies
1eyond evaluating current businesses! designing the business portfolio involves finding businesses
and products the company should ac@uire" 'ompanies need growth if they are to compete and
attract top talent" Marketing must identify! evaluate! and select opportunities and lay down strategies
for capturing them"
1y considering ways to grow via existing products and new products! and in existing markets and
new markets! $nsoff matrix template provides four different growth strategies
/" Market 0enetration % the company seeks to achieve growth with existing products in their
current market segments! aiming to increase its market share"
-" Market Development % the company seeks growth by targeting its existing products to new
market segments"
8" 0roduct Development % the company develops new products targeted to its existing market
segments"
4" Diversification % the company grows by diversifying into new businesses by developing new
products for new markets"
(trategy formulation 9how do we get thereG: # ?eneric types of strategy
/" >verall cost leadership # the real key is for a firm to achieve the lowest costs among those
competitors adopting a similar differentiation or focus strategy
-" Differentiation # the firm cultivates strengths that will give it a competitive advantage in one
or more benefits
8" &ocus # the firm gets to know the needs of these segments and pursues either cost leadership
or a form of differentiation within the target segments
4" (trategic alliances # can be defined as relationships between independent parties that agree
to cooperate but still retain separate identities" 'ooperative agreements between
organi*ations that allow them to benefit from each others strengths"
!0OT A$a*,sis
$ tool that used to identifies the (trengths! )eaknesses! >pportunities and Threat of an
organi*ation" (pecifically! ()>T is a basic! straightforward model that assesses what an
organi*ation can and cannot do as well as its potential opportunities and threats" The method of
()>T analysis is to take the information from an environmental analysis and separate it into
internal 9strengths and weaknesses: and external issues 9opportunities and threats:"
>nce this analysis is completed! ()>T analysis determines what may assist the firm in
accomplishing its ob3ectives! and what obstacles must be overcome or minimi*e to achieved desired
results" ()>T can help management in a business discover
)hat the business does better than the competition
)hat competitors do better than the business
)hether the business is making the most of the opportunities available
How a business should respond to changes in its external environment
The result of the analysis is a matrix of positive and negative factors for management to address
Positive +actors Ne)ative +actors
I$ter$a* +actors !tre$)ths 0ea($esses
E1ter$a* +actors Opport&$ities Threats
The key point to remember about ()>T is that
Strengths and weaknesses:
$re internal to the business
2elate to the present situation
Opportunities and threats:
$re external to the business
2elate to changes in the environment
which will impact the business
/" (trengths are
Things a business is good at
$ characteristic giving a business an important capability
(ources of clear advantage over rivals
Distinctive competencies and resources that will help the business achieve its
ob3ectives
-" )eaknesses are
$ source of co'petitive %isa%va$ta)e
Things the business lacks or does poorly
&actors that place a business at a disadvantage
+ssues that may hinder or constrain the business in achieving its ob3ectives
8" $n opportunity is any feature of the external environment which creates positive pote$tia*
+or the b&si$ess to achieve its objectives"
4" Threats are any e1ter$a* %eve*op'e$t that may hinder or prevent the business from
achieving its ob3ectives"
Differences between internal and external factors
+nternal factors include the strengths and weaknesses of the business" These aspects relate to the
present situation and contain within the company environment itself! example the financial
availability and the employees capability"
External factors relate to changes in the large environment which will impact the whole business
operation in terms of the opportunities and threats" Examples are technological innovation and
demographic change"
Technological
leadership
1rand reputation
0rotected +0
Distribution network
Employee skills
High market share
$chieving economies of
scale
High @uality
Meadership 6
management skills
&inancial resources
E1a'p*es o+ Pote$tia* 2&si$ess !tre$)ths
'ash flow problems
Undifferentiated
products
+nade@uate distribution
Mow productivity
(kills shortages
Mow market share
+nefficient plant
>utdated technology
0oor @uality
Mack of innovation
E1a'p*es o+ Pote$tia* 2&si$ess 0ea($esses
PE!T A$a*,sis
PE!T a$a*,sis stands for KPolitical! Economic! !ocial! and Technological analysisK and describes a
framework of macro%environmental factors used in the environmental scanning component of
strategic management"
+t is a part of the external analysis when conducting a strategic analysis or doing market research!
and gives an overview of the different macroenvironmental factors that the company has to take
into consideration" +t is a useful strategic tool for understanding market growth or decline! business
position! potential and direction for operations"
Economic downturn
2ise of low cost
production abroad
Higher input prices
Aew substitute products
'ompetitive price
pressure
Aew market entrants
'hange in customer
tastes or needs
Demographic change
'onsolidation among
buyers
Aew regulations
Pote$tia* 2&si$ess Threats
Higher economic
growth
Trade liberali*ation
EU enlargement
Diversification
opportunity
Deregulation of the
market
Technological
innovation
Aew demand
Market growth
Demographic change
(ocial or lifestyle
change
?overnment spending
programs
Pote$tia* 2&si$ess Opport&$ities
/" 0olitical factors
Po*itica* factors are how and to what degree a government intervenes in the economy"
(pecifically! political factors include areas such as tax policy! labour law! environmental law!
trade restrictions! tariffs! and political stability"
0olitical factors may also include goods and services which the government wants to
provide or be provided 9merit goods: and those that the government does not want to be
provided 9demerit goods or merit bads:" &urthermore! governments have great influence on
the health! education! and infrastructure of a nation
-" Economic factors
Eco$o'ic factors include economic growth! interest rates! exchange rates and the inflation
rate" These factors have ma3or impacts on how businesses operate and make decisions" % &or
example! interest rates affect a firm7s cost of capital and therefore to what extent a business
grows and expands" Exchange rates affect the costs of exporting goods and the supply and
price of imported goods in an economy
8" (ocial factors
!ocia* factors include the cultural aspects and include health consciousness! population
growth rate! age distribution! career attitudes and emphasis on safety" Trends in social factors
affect the demand for a company7s products and how that company operates" % &or example!
an aging population may imply a smaller and less%willing workforce 9thus increasing the
cost of labor:" &urthermore! companies may change various management strategies to adapt
to these social rends 9such as recruiting older workers:"
4" Technological factors
Tech$o*o)ica* factors include technological aspects such as 26D activity! automation!
technology incentives and the rate of technological change" They can determine barriers to
entry! minimum efficient production level and influence outsourcing decisions" &urthermore!
technological shifts can affect costs! @uality! and lead to innovation"
F" Environmental factors
E$viro$'e$ta* factors include ecological and environmental aspects such as weather!
climate! and climate change! which may especially affect industries such as tourism!
farming! and insurance" &urthermore! growing awareness of the potential impacts of climate
change is affecting how companies operate and the products they offer! both creating new
markets and diminishing or destroying existing ones"
H" Megal factors
"e)a* factors include discrimination law! consumer law! antitrust law! employment law! and
health and safety law" These factors can affect how a company operates! its costs! and the
demand for its products"
I'porta$ce o+ 'ar(eti$) e$viro$'e$ta* a&%it as part o+ the p*a$$i$) process
Chapter objectives
Explain the concept of the marketing information system
+dentify the different kinds of information the company might use
>utline the marketing research process! including defining the problem and research plan!
implementing the research plan! and interpreting and reporting the findings
a" The audit provides the marketers with an in depth view of the marketing activities that are
going around in the concern" +t brings out a complete picture of the entire operations of the
concern"
b" $ marketing audit can help a company refine its business practices and improve its
productivity and profitability"
c" Marketing audit helps to marketing executives! top management and investors to ensure that
they are doing the right things to help drive growth for their organi*ations"
d" $ marketing audit is a careful examination and evaluation of marketing practices and results"
+t offers a baseline for performance measurements and a framework for effective business
planning to maximi*e positive external perception and demand generation"
e" $n audit helps the company determine the value of a sale and a sales lead"
CHAPTER 3:
MARKETING INORMATION !#!TEM! AND MARKETING RE!EARCH
The Mar(eti$) I$+or'atio$ !,ste' 4MI!5
$n M+( consists of people! e@uipment and procedures to gather! sort! analy*e! evaluate and
distribute needed! timely and accurate information to marketing decision makers" The M+( begins
and ends with marketing managers! but managers throughout the organi*ation should be involved in
the M+("
/" The M+( interacts with managers to assess their information needs
-" +t develops needed information from internal company records! marketing intelligence
activities and the marketing research process % +nformation analysts process information to
make it more useful
8" The M+( distributes information to managers in the right form and at the right time to help
in marketing planning! implementation and control"
I$ter$a* co'pa$, recor%s
+nternal records # internal records information consists of information gathered from sources within
the company to evaluate marketing performance and to detect marketing problems and
opportunities
Many companies use internal records to build extensive internal databases! computeri*ed
collections of information obtained from data sources within the company
Marketing managers can readily access and work with information in the database to
identify marketing opportunities and problems! plan programs! and evaluate performance
Mar(eti$) i$te**i)e$ce
Marketing intelligence # marketing intelligence includes everyday information about developments
in the marketing environment that help managers to prepare and ad3ust marketing plans and short%
run tactics" Marketing intelligence can come from internal sources or external sources
/" +nternal sources # include the companys executives! owners and employees
The company must sell the employees on their role as intelligence gatherers and train them
to spot and report new developments
-" External sources # include competitors! government agencies! suppliers! trade maga*ines!
newspapers! business maga*ines! trade association newsletters and meetings! and databases
available on the internet"
Three types 9/: macro%market information! 9-: competitive information! and 98: new
innovation and trends"
Mar(eti$) research process
(tep / 0roblem Definition
The first step in any marketing research pro3ect is to define the problem" +n defining the problem!
the researcher should take into account the purpose of the study! the relevant background
information! what information is needed! and how it will be used in decision making" 0roblem
definition involves discussion with the decision makers! interviews with industry experts! analysis
of secondary data! and! perhaps! some @ualitative research! such as focus groups" >nce the problem
has been precisely defined! the research can be designed and conducted properly"
(tep - Development of an $pproach to the 0roblem
Development of an approach to the problem includes formulating an ob3ective or theoretical
framework! analytical models! research @uestions! hypotheses! and identifying characteristics or
factors that can influence the research design" This process is guided by discussions with
management and industry experts! case studies and simulations! analysis of secondary data!
@ualitative research and pragmatic considerations"
The three general types of ob3ectives are
/" Exploratory research where the ob3ective is to gather preliminary information that will help
to better define problems and suggest hypotheses for their solution"
-" Descriptive research is where the intent is to describe things such as the market potential for
a product or the demographics and attitudes of customers who buy the product"
8" 'ausal research is research to test hypotheses about cause%and%effect relationships" The
statement of the problem and research ob3ectives will guide the entire research process" +t is
always best to put the problem and research ob3ectives statements in writing so agreement
can be reached and everyone knows the direction of the research effort"
(tep 8 2esearch Design &ormulation
$ research design is a framework or blueprint for conducting the marketing research pro3ect" +t
details the procedures necessary for obtaining the re@uired information! and its purpose is to design
a study that will test the hypotheses of interest! determine possible answers to the research
@uestions! and provide the information needed for decision making"
'onducting exploratory research! precisely defining the variables! and designing appropriate scales
to measure them are also a part of the research design" The issue of how the data should be obtained
from the respondents 9for example! by conducting a survey or an experiment: must be addressed" +t
is also necessary to design a @uestionnaire and a sampling plan to select respondents for the study"
More formally! formulating the research design involves the following steps
/" (econdary data analysis 9Aote N/:
-" Dualitative research 9AoteN-:
8" Methods of collecting @uantitative data 9survey! observation! and experimentation: 9AoteN8:
4" Definition of the information needed
F" Measurement and scaling procedures
H" Duestionnaire design
<" (ampling process and sample si*e 9AoteN4:
O" 0lan of data analysis
AoteN/
?athering secondary information"
a:" (econdary data is information that already exists somewhere! having been collected for another
purpose" (ources of secondary data include both internal and external sources" 'ompanies can buy
secondary data reports from outside suppliers 9i"e"! commercial data sources:" +nformation can be
obtained by using commercial online databases" Examples include 'ompu(erve! Dialog! and Mexis%
Aexus" Many of these sources are free"
$dvantages of secondary data include
+t can usually be obtained more @uickly and at a lower cost than primary data"
(ometimes data can be provided that an individual company could not collect on its
own"
(ome problems with collecting secondary data include
The needed information might not exist"
Even if the data is found! it might not be useable"
The researcher must evaluate secondary information to make certain it is relevant!
accurate! current! and impartial" (econdary data is a good starting point= however! the
company will often have to collect primary data"
b:" 0rimary data is information collected for the specific purpose at hand"
0lanning 0rimary Data 'ollection" % $ plan for primary data collection calls for a number of
decisions on research approaches! contact methods! sampling plans! and research instruments"
AoteN-
Differences between @ualitative and @uantitative research
Duantitative research % is an in@uiry into an identified problem! based on testing a theory! measured
with numbers! and analy*ed using statistical techni@ues" The goal of @uantitative methods is to
determine whether the predictive generali*ations of a theory hold true"
1y contrast! a study based upon a @ualitative / process of in@uiry has the goal of understanding a
social or human problem from multiple perspectives" Dualitative research is conducted in a natural
setting and involves a process of building a complex and holistic picture of the phenomenon of
interest"
AoteN8
Market research techni@ues
a" (urveys / )ith concise and straightforward @uestionnaires! you can analy*e a sample group
that represents your target market" The larger the sample! the more reliable your results will
be"
b" &ocus groups % +n focus groups! a moderator uses a scripted series of @uestions or topics to
lead a discussion among a group of people" These sessions take place at neutral locations!
usually at facilities with videotaping e@uipment and an observation room with one%way
mirrors" $ focus group usually lasts one to two hours! and it takes at least three groups to get
balanced results"
c" 0ersonal interviews % Mike focus groups! personal interviews include unstructured! open%
ended @uestions" They usually last for about an hour and are typically recorded"
d" >bservation % +ndividual responses to surveys and focus groups are sometimes at odds with
people7s actual behavior" )hen you observe consumers in action by videotaping them in
stores! at work! or at home! you can observe how they buy or use a product" This gives you a
more accurate picture of customers7 usage habits and shopping patterns"
e" &ield trials % 0lacing a new product in selected stores to test customer response under real%
life selling conditions can help you make product modifications! ad3ust prices! or improve
packaging" (mall business owners should try to establish rapport with local store owners and
)eb sites that can help them test their products"
AoteN4
(ampling # statistical method of obtaining representative data or observations from a group 9lot!
batch! population or universe: 5 the process of selecting units from a population of interest"
(ampling methods
a: probability
i" a simple random % choosing elementary units in search a way that each unit in the
population has an e@ual chance of being selected
ii" stratified # obtained by independently selecting a separate simple random sample from
each population stratum5class
iii" cluster # obtained by selecting clusters from the population on the basis of simple
random sampling
b: non%probability
i" convenience # researchers @uestions anyone who is available
ii" @uota # the sample audience is made up of potential purchasers of your product
iii" the 3udgment # obtained according to the discretion of someone who is familiar with the
relevant characteristics of the population
AoteNF
'ontact methods # information can be collected by mail! telephone or personal interview
Mail (urveys
$dvantages
2elatively inexpensive
Ao interviewer bias
'onsistent @uestions 9for all respondents:
Marge number of respondents can be included
$nonymity
2espondents can choose the most convenient
Telephone (urveys
$dvantages
More flexibility compared to mail surveys
Duick and inexpensive
High response rates
Disadvantages
More obtrusive than mail
time to answer
Disadvantages
Mow response rates 9relative to other survey
types:
Iunk mail syndrome
+mpersonal nature
?reater difficulties in rapport building
Mong%distance calls are expensive
0ersonal +nterviews
$dvantages
High response rate
?reat flexibility 9ability to adapt5explain
@uestions:
'an show or demonstrate items
&uller explanations can be given
;ery timely data
Disadvantages
2elatively expensive
0ossibility of interviewer bias
0ersonal nature of @uestions 9e"g"! age or
income:
2espondents not relaxed 9put on the spot:
Time may not be convenient for respondents
>nline 2esearch
$dvantages
+nexpensive
&ast
$ccuracy of data! even for sensitive @uestions
;ersatility
Disadvantages
(mall samples
(kewed samples
Technological problems
+nconsistencies
(tep 4 &ield )ork or Data 'ollection 9AoteNF:
Data collection involves a field force or staff that operates either in the field! as in the case of
personal interviewing 9in%home! mall intercept! or computer%assisted personal interviewing:! from
an office by telephone 9telephone or computer%assisted telephone interviewing:! or through mail
9traditional mail and mail panel surveys with prerecruited households:" 0roper selection! training!
supervision! and evaluation of the field force helps minimi*e data%collection errors"
(tep F Data 0reparation and $nalysis
Data preparation includes the editing! coding! transcription! and verification of data" Each
@uestionnaire or observation form is inspected! or edited! and! if necessary! corrected" Aumber or
letter codes are assigned to represent each response to each @uestion in the @uestionnaire" The data
from the @uestionnaires are transcribed or key%punched on to magnetic tape! or disks or input
directly into the computer" ;erification ensures that the data from the original @uestionnaires have
been accurately transcribed! while data analysis! guided by the plan of data analysis! gives meaning
to the data that have been collected"
Univariate techni@ues are used for analy*ing data when there is a single measurement of each
element or unit in the sample! or! if there are several measurements of each element! each 2'H
variable is analy*ed in isolation" >n the other hand! multivariate techni@ues are used for analy*ing
data when there are two or more measurements on each element and the variables are analy*ed
simultaneously"
(tep H 2eport 0reparation and 0resentation
Chapter objectives
Aame the elements of the stimulus%response model of consumer and organi*ational
behavior
>utline the ma3or characteristics affecting consumer and organi*ational behavior
Explain the buyer and organi*ational decision process
The entire pro3ect should be documented in a written report which addresses the specific research
@uestions identified! describes the approach! the research design! data collection! and data analysis
procedures adopted! and presents the results and the ma3or findings" The findings should be
presented in a comprehensible format so that they can be readily used in the decision making
process" +n addition! an oral presentation should be made to management using tables! figures! and
graphs to enhance clarity and impact"
&or these reasons! interviews with experts are more useful in conducting marketing research for
industrial firms and for products of a technical nature! where it is relatively easy to identify and
approach the experts" This method is also helpful in situations where little information is available
from other sources! as in the case of radically new products"
CHAPTER 6:
CON!UMER AND ORGANI7ATIONA" MARKET! AND 2U#ING
2EHA8IOR
Mo%e* o+ co$s&'er behavior
The company that really understands how consumers will respond to different product features!
prices and advertising appeals has a great advantage over its competitors" $s a result! researchers
from companies and universities have heavily studied the relationship between marketing stimuli
and consumer response"
The marketing stimuli consist of the 40s
>ther stimuli include ma3or forces and events in the buyers environment economic!
technological! political and cultural
$ll these stimuli enter the buyers black box! where they are turned into a set of observable
buyer responses product choice! brand choice! dealer choice! purchase timing and purchase
amount
Perso$a* characteristics a++ecti$) co$s&'er behavior
'ultural factors
/" 'ulture
0roduct
0rice
0lace
0romotion
Economic
Technological
0olitical
'ultural
1uyer
'haracteristics
1uyer
Decision
0rocess
0roduct choice
1rand choice
Dealer choice
0urchase timing
0urchase amount
Marketing
(timuli
>ther
(timuli
1uyers black box
1uyers
2esponses
'ulture
(ubculture
(ocial class
'ultural
1uyer
Motivation
0erception
Mearning
1eliefs and
attitudes
$ge and life%
cycle stage
>ccupation
Economic
'ircumstances
Mifestyle
0ersonality and
(elf%concept
2eference
?roups
&amily
2oles and
(tatus
0sychological
0ersonal
(ocial
The most basic determinant of a persons wants and behavior" +t compromises the basic
values! perceptions! wants and behaviors that a person learns continuously in a society"
'ulture is expressed through tangible items such as food! architecture! clothing! and art #
culture is an integral part of the hospitality and travel business"
+t determines what we eat! how we travel! where we travel! and where we stay" 'ulture is
dynamic! adapting to the environment" Marketers try continuously to identify cultural shifts
in order to devise new products and services that might find a receptive market"
-" (ubculture
Each culture contains smaller subcultures! groups of people with shared value systems based
on common experience" (ubcultures include nationalities! religions! racial groups! and
geographic regions" Many subcultures make up important market segments! and marketers
often design products and marketing programs tailored to their needs"
8" (ocial classes
These are relatively permanent and ordered divisions in a society whose members share
similar values! interests and behaviors" Marketers are interested in social class because
people within a given class tend to exhibit similar behavior! including buying behavior"
(ocial classes show distinct product and brand preferences in such areas as food! travel! and
leisure activity"
(ocial factors
/" 2eference groups
These groups serve as direct 9face to face: or direct point of comparison or reference in the
forming of a persons attitude and behavior" 2eference groups influence consumers in at
least three ways
a" They expose the person to new behaviors and lifestyles
b" They influence the persons attitudes and self%concept
c" They create pressures to conform that may affect the persons product! brand! and
vendor choices
0eople can also be influenced by aspirational groups to which they do not belong but would
like to" ?roups commonly have opinion leaders # these are people within a reference group
who! because of special skills! knowledge! personality! or other characteristics! exert
influences over others"
-" &amily
&amily members have a strong influence on buyer behavior" The family remains the most
important consumer%buying organi*ation in any society" Marketers are interested in the roles
and influence of the husband! wife! and children on the purchase of different products and
services" 1uying roles change with evolving consumer lifestyles"
8" 2ole and status
$ person belongs to many groups family! clubs and organi*ations # an individuals position
in each group can be defined in terms of role and status" $ role consists of the activities that
a person is expected to perform according to the persons around him or her" Each role carries
a status reflecting the general esteem given to it by society" 0eople often choose products
that show their status in society"
0ersonal factors
/" $ge and life%cycle stage
The types of goods and services people buy change during their lifetimes # preferences for
leisure activities! travel destinations! food! and entertainment are often age related" $s people
grow older and mature! the products they desire change" The makeup of the family also
affects purchasing behavior" (uccessful marketing to various age segments may re@uire
speciali*ed and targeted strategies"
-" >ccupation
$ persons occupation affects the goods and services bought" Marketers try to identify
occupational groups that have above%average interest in their products
8" Economic situation
$ persons economic situation greatly affects product choice and the decision to purchase a
particular product" Marketers need to watch trends in personal income! savings and interest
rates"
4" Mifestyle
Mifestyle profiles a persons whole pattern of acting and interacting in the world" Mifestyle
portrays the Bwhole personC interacting with his5her environment" Marketers search for
relationships between their products and people who are achievement oriented" )hen used
carefully! the lifestyle concept can help the marketer understand changing consumer values
and how they affect buying behavior"
F" 0ersonality and self%concept
Each persons personality influences his or her buying behavior" 1y personality we mean
distinguishing psychological characteristics that disclose a persons relatively individuali*ed!
consistent and enduring responses to the environment" 0ersonality can be useful in analy*ing
consumer behavior for some product or brand choices"
Many marketers use a concept related to personality a persons self%concept 9also called
self%image:" Each of us has a complex mental self%picture! and our behavior tends to be
consistent with that self%image" The role of self%concept obviously has a strong bearing on
the selection of recreational pursuits such as golf! sailing! fishing and hunting"
0sychological factors
/" Motivation
$ need becomes a motive when it is aroused to a sufficient level of intensity" 'reating a
tension state causes a person to act to release the tension" Most popular theory of motivation
is Maslows Theory 9refer to 'hapterN/:"
-" 0erception
0erception is the process by which a person selects! organi*es and interprets information to
create a meaningful picture of the world" There are three perceptual processes
a" (elective attention % (elective attention is the tendency for people to screen out most
of the information to which they are exposed" &or example! the average person may
be exposed to more than F.. ads in all these stimuli" +t implies that marketers have to
act carefully to attract the consumers attention" Their message will not reach the
most people who are not in the market" Even people who are in the market may miss
the message unless it is distinctive from other advertisements"
b" (elective distortion % (elective distortion explains the tendency of people to interpret
information in a way that will support their existing belief" (elective distortion
implies that marketers must try to understand the mind%sets of consumers and how
these will influence"
c" (elective retention % 0eople generally will forget many things that they learn"
(elective retention is the tendency of the people to retain information that supports
their attitudes and beliefs"
8" Mearning
Mearning describes changes in a persons behavior arising from experience" Mearning
theorists say that learning occurs through the interplay of drives! stimuli! cues! responses and
reinforcement
4" 1eliefs and attitude
$ belief is a descriptive thought that a person holds about something # these beliefs may be
based on real knowledge! opinion or faith" Marketers are interested in the beliefs that people
have about specific products and services # beliefs reinforce product and brand images"
$n attitude describes a persons relatively consistent evaluation! feelings and tendencies
toward an ob3ect or an idea" $ttitudes put people into a frame of mind for liking or disliking
things and moving toward or away from them" $ttitudes are very difficult to change # a
persons attitude fit into a pattern! and changing one may re@uire making many difficult
ad3ustments"
2&,er %ecisio$ process
/" 0roblem recognition
The buying process starts when the buyer recogni*es a problem or need
-" +nformation search
$n aroused consumer may or may not search for more information" How much searching a
consumer does will depend on the strength of the drive! the amount of initial information!
the ease of obtaining more information! the value placed on additional information and the
satisfaction one gets from searching
8" Evaluations of alternatives
Unfortunately! there is no simple and single evaluation process used by all consumers or
even by one consumer in all buying situations" There are several evaluation processes
4" 0urchase decision
+n the evaluation stage! the consumer ranks brands in the choice set and forms purchase
intentions" ?enerally! the consumer will buy the most preferred brand"
Aeed
2ecognition
0ost%purchase
1ehavior
Evaluation of
$lternatives
0urchase
Decision
+nformation
(earch
Evaluation of
$lternatives
$ttitude of
>thers
0urchase
Decision
Unexpected
(ituational
&actors
0urchase
+ntention
F" 0ost%purchase behavior
The marketers 3ob does not end when the customer buys a product" &ollowing a purchase!
the consumer will be satisfied and dissatisfied and will engage in post%purchase actions of
significant interest to the marketer"
'ognitive dissonance
'ognitive dissonance # buyer discomfort caused by post%purchase conflict" Every purchase involves
compromise # consumers feel uneasy about ac@uiring the drawbacks of the chosen brand and losing
the benefits of the re3ected brands" Thus! consumers feel some post%purchase dissonance with many
purchases! and they often take steps after the purchase to reduce dissonance" Dissatisfied customers
may take several actions
May return the product or complain to the company and ask for a refund or exchange
May initiate lawsuit
May also simply stop buying the product and discourage purchases by family and friends
Types of decision making processes
The decision process is used each time a good or service is bought! often subconsciously" There are
three ways in which the decision process may be used"
/" Extensive decision%making process >ccurs when a consumer makes full use of the process"
+t is used for expensive! complex items with which the consumer has little or no experience"
0erceived risk is high and time pressure is low"
-" Mimited decision making process takes place when each step of the process is used! but the
consumer does not need to spend a great deal of time on any of them" The consumer has
some experience" The thoroughness with which the process is used depends on the amount
of experience! the importance of the purchase! and time pressure"
8" 2outine decision%making process involves habitual behavior and skips steps in the process"
2egularly purchased items are bought in this manner" +nformation search! evaluation! and
post%purchase behavior are normally omitted"
2&si$ess 'ar(ets
Characteristics o+ b&si$ess 'ar(et
Market structure and demand
>rgani*ational demand is derived demand= it comes ultimately from the demand for consumer
goods and services # it is derived or a function of the businesses that supply the hospitality and
travel industry with the meetings! special events! and other functions" 'ompared with consumer
purchases! a business purchase usually involves more buyers and a more professional purchasing
effort"
The nature of organi*ational buyers 9Types of decisions and the decision process:
>rgani*ational buyers usually face more complex buying decisions than consumer buyers" Their
purchases often involve large sums of money! complex technical! economic considerations and
interactions among many people at all levels of the organi*ation" The organi*ational buying process
tends to be more formali*ed than the consumer process and a more professional purchasing effort"
1uyer and seller are often very dependent to each other"
0articipants in the organi*ational buying process
The decision%making unit of a buying organi*ation sometimes called the buying center" The buying
center can be defined as Ball those individuals and groups who participate in the purchasing
decision%making process! who share common goals and the risks arising from the decisionsC
1uying centers vary by number and type of participants" (alespersons calling an organi*ational
customer must determine the following
)ho are the ma3or decision participantsG
)hat decisions do they influenceG
)hat is their level of influenceG
)hat evaluation criteria does each participant useG
The buying center includes all members of the organi*ation who play any of six roles in the
purchase%decision process
/" Users % Users are those who will use the product or service" They often initiate the buying
proposal and help define product specifications"
-" +nfluencers % +nfluencers directly influence the buying decision but do not make the final
decision themselves" They often help define specifications and provide information for
evaluating alternatives"
8" Deciders % Deciders select the product re@uirements and suppliers"
4" $pprovers % $pprovers authori*e the proposed actions of deciders or buyers"
F" 1uyers % 1uyers have formal authority for selecting suppliers and arranging the terms of
purchase" 1uyers may help shape product specifications and play a ma3or role in selecting
vendors and negotiating"
H" ?atekeepers % ?atekeepers have the power to prevent sellers or information from reaching
members of the buying center"
Major i$+*&e$ces o$ or)a$i9atio$a* b&,ers
Environmental factors
>rgani*ational buyers are heavily influenced by the current and expected economic environment"
&actors such as the level of primary demand! the economic outlook! and the cost are important"
>rgani*ational factors
Each organi*ation has specific ob3ectives! policies! procedures! organi*ation structures and systems
related to buying" The hospitality marketer has to be as familiar with them as possible and want to
know the following
How many people are involved in the buying decisionG
)ho are theyG
)hat are the evaluation criteriaG
)hat are the companys policies and constraints on the buyersG
+nterpersonal factors
The buying center usually includes several participants with differing levels of interest! authority
and persuasiveness" (alespeople commonly learn the personalities and interpersonal factors that
shape the organi*ational environment and provide useful insight into group dynamics"
+ndividual factors
Each participant in the buying decision process has personal motivations! perceptions and
preferences" The participants age! income! education! professional identification! personality and
attitude toward risk all influence the participants in the buying process"
The or)a$i9atio$a* b&,i$) process
/" 0roblem recognition
The buying process begins when someone in the company recogni*es a problem or need that
can be met by ac@uiring a good or a service
-" ?eneral need description
The buyer goes on to determine the re@uirements of the product
8" 0roduct specifications
>nce the general re@uirements have been determined! the specific re@uirements for the
product cam be developed
4" (uppliers search
The buyer now tries to identify the most appropriate suppliers
F" 0roposal solicitation
Dualified suppliers will be invited to submit proposals" (killed research! writing and
presentation are re@uired"
H" (upplier selection
>nce the meeting planner as drawn up a short list of suppliers! @ualified hotels will be
invited to submit proposals
<" >rder%routine specification
The buyer writes the final order! listing the technical specifications" The supplier responds
by offering the buyer a formal contract"
O" 0erformance review
The buyer does post purchase evaluation of the product" During this phase! the buyer will
determine if the products meets the buyers specifications and if the buyer will purchase
from the company again
The )ro&p b&si$ess 'ar(ets
>ne of the most important types of organi*ational business is group business" The group business
market is often more sophisticated and re@uires more technical information than the consumer
market" Many group markets book more than a year in advance" During this time! cognitive
dissonance can develop= thus marketers must keep in contact with the buyer to assure them that they
made the right decision in choosing the sellers products or services" There are four main categories
of group business
'onventions
$ssociation meetings
+ncentive travel
'orporate meetings
(ME2& 9social! military! education! religious and fraternal organi*ations:
'onventions
'onventions are a specialty market re@uiring extensive meeting facilities" 'onventions are usually
the annual meeting of an association and include general sessions! committee meetings and special
interest sessions" $ trade show is often an important part of an annual convention" $ssociations
usually select convention sites two to five years in advance! with some large conventions planned
ten to fifteen years before the event" +mportant attributes for a convention planner other than
facilities and rates are food @uality! billing procedures! and the professionalism and attention of the
staff" 'onvention bureaus # non%profit marketing organi*ations that help hotels sign conventions
and meetings"
$ssociation meetings
$ssociations sponsor many types of meetings! including regional! special interest! educational and
board meetings" The most important attributes of a destination for an association meeting planner
are availability of hotel and facilities! ease of transportation! distance from attendees! and
transportation costs" Members attend association meetings voluntarily" The hotel should work with
meeting planners to make the destination seem as attractive as possible" Making sure that the
meeting planner is aware of local attractions! offering suggestions for spousal activities! and
assisting in the development of after%convention activities can be useful to the hotel and the meeting
planner"
'orporate meetings
$ corporate meeting is a command performance for employees of a company # they are directed to
attend the meeting without choice" The corporations ma3or concern is that the meeting be
productive and accomplish the companys ob3ectives" Types of corporate meetings include training!
management and planning= another type is the incentive meeting" The most important attributes of a
destination are availability of hotel and facilities! ease of transportation! distance from attendees!
and transportation costs" 'orporate culture also plays an important part in the choice of a hotel"
(mall groups % Meetings of less than fifty rooms are gaining the attention of hotels and hotel chains
+ncentive travel
+ncentive travel! a uni@ue subset of corporate group business! is a reward participants receive for
achieving or exceeding a goal % 'ompanies give awards for both individual and team performance"
1ecause travel serves as the reward! participants must perceive the destination the hotel as
something special" 'limate! recreational facilities! and sightseeing opportunities are high on an
incentive meeting planners list of attributes looked for in a site"
+ncentive travel is handled in house or by incentive houses! travel agencies! consultants! and travel
fulfillment firms that handle only the travel arrangements" +ncentive houses usually provide a choice
of several locations to the company! so the ultimate choice of location is made by the company!
even when it uses an incentive house"
(ME2& groups
(tands for social! military! education! religious and fraternal organi*ations" This group of specialty
markets has a common price%sensitive thread" >n the positive side! they are willing to be flexible to
ensure a lower room rate # they are willing to meet during the off%season or on week%ends"
(omeone new to hotel sales will often start with the (ME2& market"
Dea*i$) :ith 'eeti$) p*a$$ers
)hen negotiating with meeting planners! it is important to try to develop a win%win relationship"
Meeting planners like to return to the same property" >ne successful techni@ue for negotiating with
Chapter objectives
Explain market segmentation! and identify several possible bases for segmenting consumer
markets! business markets and international markets
Mist and distinguish among the re@uirements for effective segmentation measurability!
accessibility! substantially and actionability
>utline the process of evaluating market segments and suggest some methods for selecting
market segments
+llustrate the concept of positioning for competitive advantage by offering specific
examples
Discuss choosing and implementing a positioning strategy and contrast positioning based
on product! service! personnel and image differentiation
a meeting planner is to determine the groups re@uirement and work out a package based on needs
and budget % Taking a consultative approach is more effective"
Most meeting planners maintain a history of the group for the purpose of planning future meetings #
a salesperson can gain valuable information by asking @uestions about past conferences" Ultimately!
when dealing with group business! the hotel has to please both the meeting planner and the meeting
planners clients" >ne of the most important aspects creating successful function is a pre%function
meeting between the hotel staff and the meeting planner before the function
The corporate acco&$t a$% trave* 'a$a)er
$ non%group form of organi*ational business is the individual business traveler" Most hotels offer a
corporate rate! which is intended to provide an incentive for corporations to use the hotel" )hen
negotiating a corporate contract! it is important to understand what creates value for the company"
The corporate business traveler is a sought%after segment" +n addition to paying a good rate! the
business travelers also on an expense account and makes use of the hotels restaurants! health club!
laundry and business center facilities"
The most important attributes to the travel managers when negotiating a hotel contract are
$ favorable image of the hotels brand by the companys travelers
?uaranteed availability of negotiated rate
Mocation
2eputation of the hotels brand
Aegotiated rate
&lexibility on charges for late cancellation of room reservations
CHAPTER ;:
MARKET !EGMENTATION< TARGETING AND PO!ITIONING
Mar(ets
Mar(et a market is the set of all actual and potential buyers of products
Market stages
Mass marketing 9no segmentation: % The seller mass produces! mass distributes and mass
promotes one product to all buyers
(egment marketing 9some segmentation: % The seller produces two or more products that
have different features! styles! @uality! si*es and so on
Micromarketing 9complete segmentation: % The sellers offer products to suit the tastes of
individuals and location
'ustomi*ed marketing 9niche segmentation: % >ffer different products to subgroups within
segment
Tar)et 'ar(eti$)
Tar)et 'ar(eti$) the seller identifies market segments! selects one or more! and develops
products and marketing mixes tailored to each selected segment
Market segmentation
The process of dividing a market into distinct groups of buyers who might re@uire separate products
and5or marketing mixes
Market targeting
The process of evaluating each segments attractiveness and selecting one or more of the market
segments
0ositioning
The process of developing a competitive positioning for the product and an appropriate marketing
mix
(teps in segmentation! targeting and positioning
Mar(et se)'e$tatio$
There is no single way to segment a market" $ marketer has to try different segmentation variables!
alone and in combination! hoping to find the best way to view the market structure
/" ?eographic segmentation
+dentify bases for
segmenting the market
Develop profiles of
resulting segments
Develop positioning for
each target segment
Develop marketing mix for
each target segment
Develop measures of
segment attractiveness
(elect the target
segment 9s:
Market segmentation
Market positioning
Market targeting
Dividing the market into different geographic units! such as nations! states! regions!
counties! cities or neighborhoods" ?eographic location also relates to culture! language and
business attitudes" &or example! Middle Eastern!European! Aorth $merican! (outh
$merican and $siancompanies will all have different sets of businessstandards and
communication re@uirements" Enowledge of geographic customer preferences permits a
company to modify or change its product offering" &or example pi**a! E&'! banks
extending there business by opening different branches" The success of local and regional
tourism depends upon creative geographical segmentation"
-" Demographic segmentation
Dividing the market into groups based on demographic variables such as age! gender! family
life cycle! income! occupation! education! religion! race and nationality" Ma3or factors are
a" $ge and life%cycle stage # consumer preferences change with age" (ome companies
offer different products or marketing strategies to penetrate various age and life%
cycle segments"
b" ?ender # ?ender marketing is by no means simplistic" ?ender marketing is most
effective when combined with lifestyle and demographic information"
c" +ncome # the lodging industry is particularly effective in using income segmentation"
+ncome does not always predict which customers will buy a given product or service"
+ncome segmentation is commonly believed to be one of the primary variables
affecting pricing strategies"
8" 0sychographic segmentation
Divides buyers into different groups based on social class! lifestyle and personality
characteristics"
a" (ocial class # relatively permanent and ordered divisions in a society whose
members share similar values! interests and behaviors"
b" Mifestyle # profile a persons pattern of acting and interacting in the world" )hen
used carefully! the lifestyle concept can help the marketer understand changing
consumer values and how they affect buying behavior"
c" 0ersonality # marketers use personality variables to segment markets! endowing their
products and personalities" Many companies within the hospitality industry have
been developed as an extension of the founders personality
4" 1ehavior segmentation
Divides buyers into groups based on their knowledge! attitude! use or response to a product
a" User status # many markets can be segmented into non%users! former users! potential
users! first%time users! and regular users of a product" 0otential users and regular
users often re@uire different marketing appeals"
b" Usage rate # markets can be segmented into light%! medium%! and heavy%user groups"
Many hospitality firms spread their marketing resources evenly across all potential
customers"
c" Moyalty status # a market can also be segmented on the basis of consumer loyalty" +n
the hospitality and travel industries! marketers attempt to build brand loyalty through
relationship marketing"
d" 1uyer readiness stage 9refer to chapterNP: # at any given time! people are in different
stages of readiness to buy a product" (ome are unaware of the product= some are
aware= some are informed= some want the product= and some intend to buy" The
relative number in each stage makes a big difference in designing a marketing
program"
F" (pecial occasion segmentation
(pecial occasion segmentation # buyers can be grouped according to occasions when they
make a purchase or use a product" >ccasion segmentation helps firms build product use" &or
example! air travel is triggered by occasions related to business! vacation! or family"
H" 1enefits sought
1enefits sought # buyers can also be grouped according to the product benefits they seek"
Enowing the benefits sought by customers is useful in two ways
a" Managers can develop products with features that provide the benefits their
customers are seeking
b" Managers communicate more effectively with their customers if they know what
benefits they seek
<" Q 0ositive segmentation
Q0ositive % dividing the market into groups of individual markets with similar wants or
needs that a company divides into distinct groups which have distinct needs! wants! behavior
or which might want different products 6 services
O" Multivariable segmentation
a" Use multiple Demographic ;ariables such as age!gender! income 6 education"
a" Use various Demographic! 0sychographic!?eographic! and 1ehaviorist ;ariables
b" ?eodemographic (egmentation 9'ombines ?eographic and Demographic info:
c" 0sychographics and Demographics ;ariables9;$M(! based on values! attitudes!
lifestyles!and demographic" Therefore! combines 0sychographic and Demographic
variables:
2e@uirements for effective segmentation
Measurability % The degree to which the segments si*e and purchasing power can be
measured" 'ertain segmentation variables are difficult to measure"
$ccessibility % (egments can be accessed and served"
(ubstantiality % (egments are large or profitable enough to serve as markets" $ segment
should be the largest possible homogeneous group economically feasible to support a
tailored marketing program"
$ctionability % Effective programs can be designed for attracting and serving segments"
Differential % (egment must respond differently to different marketing mix elements and
programs"
Eva*&ati$) 'ar(et se)'e$ts
(egment si*e and growth
'ompanies will analy*e the segment si*e and growth and choose the segment that provides the best
opportunity" $ company must first collect and analy*e data on current segment sales growth rates
and expected profitability for various segments" +t will be interested in segments that have the right
si*e and growth characteristics! but Bright si*e and growthC is a relative matter"
(egment structural attractiveness
$ company must examine ma3or structural factors that affect long%run segment attractiveness" &or
example! a segment is less attractive if it already contains many strong and aggressive competitors"
The relative power of buyers also affects segment attractiveness # if the buyers in a segment possess
strong bargaining power relative to sellers! they will force prices down! demand more @uality
services! and set competitors against one another" &inally! a segment may not be attractive if it
contains powerful suppliers who control prices and reduce the @uality of ordered goods and
services"
'ompany ob3ectives and resources
The company must consider its own ob3ectives and resources in relation to a market segment" (ome
attractive segments can be dismissed @uickly because they do not mesh with the companys long%
run ob3ectives" $lthough such segments might be tempting in themselves! they might divert a
companys attention and energies away from its main goal" $ company should enter segments only
where it can gain sustainable advantages over competitors"
!e*ecti$) 'ar(et se)'e$ts
(egmentation reveals market opportunities available to a firm" The company then selects the most
attractive segment or segments to serve as targets for marketing strategies to achieve desired
ob3ectives
Market%coverage alternatives
/" Undifferentiated marketing strategy % +gnores market segmentation differences and goes
after the whole market with one market offer
-" Differentiated marketing strategy % The firm targets several market segments and designs
separate offers for each
8" 'oncentrated marketing strategy % Especially appealing to companies with limited
resources" +nstead of going for a small share of a large market! the firms pursue a large
share of one or more small markets
'hoosing a market%coverage strategy
'ompanies need to consider several factors in choosing a market%coverage strategy
/" 'ompany resources % )hen the companys resources are limited! concentrated marketing
makes the most sense
-" Degree of product homogeneity % Undifferentiated marketing is more suited for homogenous
products" 0roducts that can vary in design! such as restaurants and hotels! are more suited to
differentiation or concentration"
8" Market homogeneity % +f buyers have the same tastes! buy the products in the same amounts
and react to the same way of marketing efforts! undifferentiated marketing is appropriate
4" 'ompetitors strategies % )hen competitors use segmentation! undifferentiated marketing
can be suicidal" 'onversely! when competitors use undifferentiated marketing! a firm can
gain an advantage by using differentiated or concentrated marketing"
Mar(et positio$i$)
$ products position is the way the product is defined by consumers on important attributes # the
place the product occupies in consumers minds in relative to competing products
The positioning tasks consist of three steps
+dentifying a set of possible competitive advantages upon which to build a position
(electing the right competitive advantages
Effectively communicating and delivering the chosen position to a carefully selected target
market
&or example % $ company can differentiate itself from competitors by bundling competitive
advantage= it gains competitive advantage by offering consumers lower prices than competitors for
similar products or by providing more benefits that 3ustify higher prices
CHAPTER =:
DE!IGNING AND MANAGING PRODUCT
Chapter objectives
Define the term product! including the core! facilitating! supporting and augmented
product
Explain how atmosphere! customer interaction with the service delivery system! customer
interaction with other customers and customer co%production are all elements with which
one needs to be concerned when designing a product
Understand branding and the conditions that support branding
Explain the new product development process
Understand how the product life cycle can be applied to the hospitality industry
Pro%&ct
$ product is anything that can be offered to a market for attention! ac@uisition! use or consumption
that might satisfy a want or need" +t includes physical ob3ects! service! places! organi*ations and
ideas
Pro%&ct *eve*s
/" 'ore product
$nswers the @uestion of what the buyer is really buying" Every product is a package of
problem%solving services
-" &acilitating product
$re those services or goods that must be present for the guest to use the core product
8" (upporting product
Extra products offered to add value to the core product and to help to differentiate it from the
competition
4" $ugmented product
+nclude accessibility 9geographic location and hours of operation:! atmosphere 9visual! aural!
olfactory! and tactile dimensions:! customer interaction with the service organi*ation
93oining! consumption and detachment:! customer participation and customers interaction
with each other
Pro%&ct c*assi+icatio$: co$s&'er pro%&cts
/" 'onvenience % These refer to items that the consumer buys with minimum shopping effort"
Essentially these are goods that are habitual with the consumers" They are bought fre@uently
but not in large @uantities because they are non%durable good" +n other words they are Qused
upC goods" The buying decision of the consumers for convenience goods is ignited by habit
and he knows all the retail outlets"
-" (pecialty % These refer to goods for which consumers are habitually willing to make a
special purchasing effort" These categories of goods possess uni@ue characteristics or high
degree of brand identification" Examples include specific brands and types of fanny foods!
cars! stereo components! photographic e@uipment and suits" (pecialty goods do not involve
buyer in making comparisons buyers invest time only to reach the dealers of the specialty
goods"
8" (hopping % These set of product are selected by consumers based on certain yardsticks such
as suitability! @uality! price and style" $ll! products that involve shopping comparison before
selection fall into this category" (uch goods are! furniture! rugs! dresses! computers! shoes
and household appliances" 1efore a consumer makes up his mind to buy a shopping good! a
lot of exercise must have been carried out to know the different prices of the various stores
that sell the product"
4" Unsought % These are goods that the consumer does not know about or know about but does
not normally think of buying" Examples are insurance! cemetery plots! coffin and
encyclopedia" &or consumers to be attracted to these products substantial marketing effort is
re@uired in form of advertising and personal selling"
Pro%&ct co$si%eratio$s
/" $ccessibility % This refer to how accessible the product is in terms of location and hours of
operation
-" $tmosphere 9AoteN/:
8" 'ustomer interactions with the service system 9AoteN-:
4" 'ustomer interactions with other customers 9AoteN8:
F" 'o%production % +nvolving the guest in service delivery= can increase capacity! improve
customer satisfaction and reduce costs
AoteN/
$tmosphere the physical environment
$tmosphere is appreciated through the senses # sensory terms provide descriptions for the
atmosphere of a particular set of surroundings
The main visual dimensions of atmosphere are color! brightness! si*e and shape
The main aural dimensions of atmosphere are volume and pitch
The main olfactory dimensions of atmosphere are scent and freshness
The main tactile dimensions of atmosphere are softness! smoothness and temperature
$tmosphere can affect purchase behavior in at least four 94: ways
$tmosphere may serve as an attention%creating medium
$tmosphere may serve as a message%creating medium to the potential customers
$tmosphere may serve as an effect%creating medium
Environment can be a mood%creating medium
AoteN-
'ustomer interaction with the service delivery system
The customer participates in the delivery of most hospitality and travel products" There are three 98:
phases to this involvement
Ioining # the customer makes the initial in@uiry contact" )hen designing products! we must
make it easy for people to learn about the new product" The 3oining phase is often enhanced
through sampling"
'onsumption # takes place when the service is consumed" Designers of hospitality products
must understand how guests will interact with the product" The employees! customers! and
physical facilities are all part of the product"
Detachment # when the customer is through using a product and departs
AoteN8
'ustomer interaction with other customers
$n area that is drawing the interest of hospitality researchers is the interaction of customers with
each other" The issue of customer interaction is a serious problem for hotels and resorts # the
independent non%tour guest consistently ob3ects to the presence of large group%inclusive tours
9?+Ts:" This problem is magnified if the ?+T guests represent a different culture! speak a foreign
language! or are from an age group years different from that of independent! non%tour guests"
Many hotels provide free wine and cheese for guests during a set time period in the evening # these
hotels commonly report that this act of hospitality has an added benefit of bringing guests together=
lasting friendships and business deals have resulted from the evening wine and cheese"
I$%ivi%&a* pro%&ct %ecisio$
/" 0roduct attributes
Developing a product5service involves defining the benefits that it will offer such as
0roduct @uality # ability of a product to perform its functions= includes levels and
consistency
0roduct features # differentiates the product from from competitors products
0roduct style and design # process of designing a product style and usefulness
-" 1randing
2ra$% $ name! term! sign! symbol! design or a combination of these elements that is intended
to identify the goods or services of a seller and differentiate them from those of competitors
$ trademark is a brand or part of a brand that is given legal protection= it protects the sellers
exclusive rights to use the brand name or brand mark" 1rands are increasingly important to
tourist destinations even if they are not registered as such" +f we look at the value of a brand as
a percentage of market capitali*ation! we can see that some brands are very valuable" (ome!
like (tarbucks! Disney! and McDonalds are estimated to be worth billions of dollars
'onditions that support branding
The product is easy to identify by brand or trademark
The product is perceived as the best value for the price
Duality and standards are easy to maintain
The demand for the general product class is large enough to support a regional or
national chain
There are economies of scale
8" 0ackaging
Designing and producing the whole visual image of products5services" (teps in developing a
good package
0ackaging concept
Develop apecific elements of the package
elements must support product position and marketing strategy
Main functions of packaging are
utilitarian # example= protect breakable products! or keep many small parts safely
together
implement strategy # example= changing the consumers perceptions of your product
through the visual image it pro3ects through the package
to increase profit # example= cosmetics and perfumes cost very little to make but pretty
packaging allows a huge markup and profit
4" Mabeling
0rinted information appearing on or with the package" +t perform several functions
identifies product and brands
describes several things about the product
promotes the product through attractive graphics
F" 0roduct support services
'ompanies use product support services as a ma3or tool in gaining competitive advantage"
HowG
(tep / # survey customer to assess the value of current services and to obtain ideas for
nes services
(tep - # assess costs of providing desired services
(tep 8 # develop a package of services to delight customers and yield profits to the
company
Pro%&ct %eve*op'e$t
0roduct development is about developing the product concept into a physical product to ensure that
the product idea can be turned into a workable product" 0roduct development can be obtained
through ac@uisition 9ac@uired company! ac@uired patents and ac@uired licenses: and new product
development 9existing product! product improvement or modification and new product
development:"
Aew product development
/" +dea generation
Aew product development starts with idea generation! the systematic search
for new ideas" The company should carefully define the new product development strategy=
The strategy should start with what products and markets to emphasi*e
+t should also state what the company wants from its new products 9i"e" high cash
flow! market share and etc":
+deas are gained from internal sources! customers! competitors! distributors and suppliers"
'ompanies can find new ideas through formal research and development! or
brainstorm session
'onsumer needs and wants can be examined through consumer surveys
$ company can also watch competitors ads and other communications to obtain
clues about new products
Distributors and suppliers can tell about new concepts! techni@ues! and materials that
can be used to develop new products
-" +dea screening
The purpose of screening is to spot good ideas and drop poor ones as soon as
possible" The idea or concept screening stage is the appropriate time to review carefully the
@uestion of product line compatibility" $ common error in new product development is to
introduce products that are incompatible with the company" The following describes ma3or
compatibility issues" How will the product assist us to
&ulfill our missionG
Meet corporate ob3ectivesG
Meet property ob3ectivesG
0rotect and promote our core businessG
0rotect and please our key customersG
1etter utili*e existing resourcesG
(upport and enhance existing product linesG
8" 'oncept development and testing
(urviving ideas must now be developed into product concepts" These concepts are
tested with target customers" +t is important to distinguish between a product idea! product
concept and product image
0roduct idea envisions a possible product that company managers might offer to the
market
0roduct concept a detailed version of the idea stated in meaningful consumer terms
0roduct image the way that consumers picture an actual or potential product
Aew product concepts may be presented through word or picture descriptions # in most
cases! however! simpler consumer attitude surveys are used" &or new product with large
capital investments! the expenditure of a few thousand dollars and a few extra months for
concept testing might prove invaluable in the long run"
4" Marketing strategy development
)here by designing an initial marketing strategy for introducing the product into the market"
There are three parts of the marketing statement
Describes the target market! the planned product positioning and the sales! market
share and profit goals for the first two years
>utlines the products planned price! distribution and marketing budget for the first
year
Describes the planned long%run sales! profit and the market%mix strategy over time
F" 1usiness analysis
+nvolves a review of the sales! costs and profit pro3ections to determine whether they satisfy
the companys ob3ectives" To estimate sales! the company should look at the sales history!
similar products! and should survey market opinion # it should estimate minimum and
maximum sales to learn the range of risk" The analysis includes the estimated marketing
costs # the company then uses the sales and cost figures to analy*e the new products
financial attractiveness" ;isitors products supported by tax money! such as museums! *oos
and convention centers should be developed only after careful and unbiased business
analysis! including a professional marketing plan"
H" 0roduct development
0roduct development turns the concept into a prototype of the product" $ prototype that
hopefully meets the following criteria
'onsumers perceive it as having the key features described in the product concept
statement
+t performs safely under normal use
+t can be produced for the budgeted costs
Developing a successful prototype can take days! weeks! months or even years" >ne
problem with developing a prototype is that the prototype is often limited to the core
product= many of the intangible aspects of the product! such as the performance of the
employees! cannot be included"
<" Market testing
The stage in which the product and marketing program are introduced into more realistic
market settings" Market testing allows the marketer to gain experience in marketing the
product! to find potential problems! and to learn where more information is needed before
the company goes to the great expense of full introduction"
O" 'ommerciali*ation
The product is brought into the market place" +n launching a new product! the company must
make four decisions
)hen is the right time to launchG
)here is the most suitable location to begin the distributionG
To whom the product is targetedG
How the actions plan is developedG
Pro%&ct *i+e c,c*e sta)es
/" 0roduct development
1egins when the company finds and develops a new product idea" During product
development! sales are *ero and the companys investment costs add up
-" +ntroduction
$ period of slow sales growth as the product is being introduced into he market" 0rofits are
non%existent at this stage because of the heavy expenses of product introduction
8" ?rowth
$ period of rapid market acceptance and increasing profits
4" Maturity
$ period of slow down in sales growth because the product has achieved acceptance by most
of its potential buyers" 0rofits level off or decline because of increased marketing outlays to
defend the product against competition" Three strategies that can be used
Market modification
0roduct modification
Marketing mix modification
F" Decline
The period when sales fall off @uickly and profits drop
0roduct Deletion
The 0M' illustrates that most products will become obsolete and have to be replaced" +f a product
no longer sellable! it is important to terminate it rather than continue to pour money and resources
into reviving it" Thus! understanding the product deletion process is 3ust as important as
understanding product development"
The deletion analysis is a systematic review of a products pro3ected sales and estimated costs
associated with those sales" +f the analysis indicates that the product should be deleted! there are
three choices
0hase%out # enables a product to be removed in an orderly fashion
2un%out # would be used when sales for an item are low and costs exceed revenue
+mmediate drop # usually chosen when the product may cause harm or complaints
(ales and profit
0rofits
(ales
Time
?rowth Decline Maturity +ntroduction
0roduct
Development
Mosses5investment
.
Chapter objectives
>utline the internal and external factors affecting pricing decisions
'ontrast the differences in general pricing approaches and be able to distinguish among
cost%plus! target profit pricing! value%based pricing and going rate
+dentify the new product pricing strategies of market%skimming pricing and market%
penetration pricing
Understand how to apply pricing strategies for existing products! such as price bundling
and price ad3ustment strategies
CHAPTER >:
PRICING CON!IDERATION!< APPROACHE! AND !TRATEG#
Price
The amount of money charged for a good or service" The sum of the values consumers exchange for
the benefits of having or using the product or service"
actors to co$si%er :he$ setti$) prices
+nternal factors
/" Marketing ob3ectives
a" (urvival % +t is used when the economy slumps or a recession is going on" $
manufacturing firm can reduce production to match demand and a hotel can cut rates
to create the best cash flow
b" 'urrent profit maximi*ation % 'ompanies may choose the price that will produce the
maximum current profit! cash flow or return on investment! seeking financial
outcomes rather than long%run performance
c" Market%share leadership % )hen companies believe that a company with the largest
market share will eventually en3oy low costs and high long%run profit! they will set
low opening rates and strives to be the market%share leader
d" 0roduct%@uality leadership % Hotels like the 2it*%'arlton chain charge a high price
for their high%costs products to capture the luxury market
e" >ther ob3ectives % (tabili*e market! create excitement for new product! draw more
attention
E1ter$a* +actors
Aature of the market and demand
'ompetition
>ther environmental factors
9economy! resellers! government:
Prici$)
%ecisio$s
I$ter$a* +actors
Marketing ob3ectives
Marketing mix strategy
'osts
>rgani*ation for pricing
-" Marketing mix strategy
0rice must be coordinated with product design! distribution and promotion decision
to form a consistent and effective marketing program" $ firms promotional mix also
influences price
8" 'osts
'osts set the floor for the price a company can charge for its product
a" &ixed costs % 'osts that do not vary production or sales level
b" ;ariable costs % 'osts that vary directly with the level of production
4" >rgani*ational considerations
Management must decide who within the organi*ation should set prices" +n small
companies! pricing is typically handled by a corporate department or by regional or unit
manager under guidelines established by corporate management"
External factors
/" Aature of the market and demand
a" 'ross selling % The companys other products are sold to the guest
b" Up%selling % This occurs through training of sales and reservation employees to offer
continuously a higher%priced product that will be better meet the customers needs!
rather than settling for the lowest price
-" 0ricing in different markets # there are four types of markets
a" 0ure competition % The market consists of many buyers and sellers trading in a
uniform commodity
b" Monopolistic competition % The market consists of many buyers and sellers who
trade over a range of prices rather than a single market price
c" >ligopolistic competition % The market consists of a few sellers who are highly
sensitive to each others pricing and marketing strategies
d" 0ure monopoly % The market consists of one seller! it could be a government
monopoly! a private regulated monopoly! or a private non%regulated monopoly
8" 'onsumer perception of price and value
+t is the consumer who decides whether a products price is right" The price must be buyer
oriented" The price decision re@uires a creative awareness of the target market and
recognition of the buyers differences
4" $naly*ing the price demand relationship
Demand and price are inversely related= the higher the price! the lower the demand" Most
demand curves slope downward in either a straight or a curved line" The prestige goods
demand curve sometimes slopes upward
F" 0rice elasticity of demand
+f demand hardly varies with a small change in price! we say that the demand is inelastic= if
demand changes greatly! we say that the demand is elastic" 1uyers are less price sensitive
when the product is uni@ue or when it is high in @uality! prestige or exclusiveness"
'onsumers are also less price sensitive when substitute products are hard to find" +f demand
is elastic! sellers will generally consider lowering their prices to produce more total revenue"
The following factors affect price sensitivity
a" Uni@ue value effect % 'reating the perception that your offering is different from
those of your competitors avoid price competition
b" (ubstitute awareness effect % Mack of the awareness of the existence of the
alternatives reduces price sensitivity
c" 1usiness expenditure effect % )hen someone else pays the bill! the customer is less
price sensitive
d" End%benefit effect % 'onsumers are more price sensitive when the price of the
product accounts for a large share of the total cost of the end benefit
e" Total expenditure effect % The more someone spends on a product! the more sensitive
he or she is to the products price
f" (hared cost effect % 0urchasers are less price sensitive when they are sharing the cost
of the purchase with someone else
g" (unk investment effect % 0urchasers who have an investment in products that they
are currently using are less likely to change for price reasons
h" 0rice @uality effect % 'onsumers tend to e@uate price with @uality! especially when
they lack any prior experience with the product
H" 'ompetitors price and offers
)hen a company is aware of its competitors price and offers! it can use this information as
a starting point for deciding its own pricing
<" >ther environmental factors
>ther factors include inflations! boom or recession! interest rates! government purchasing!
birth of new technology
Ge$era* prici$) approaches
/" 'ost%based pricing % 'ost%plus pricing a standard markup is added to the cost of the product
-" 1reak%even analysis % 0rice is set to break even on the costs of making and marketing a
product
8" Target profit pricing % To make a desired profit 9target a certain return on investments:
4" ;alue%based pricing % 'ompanies base their prices on the products perceived value"
0erceived value pricing uses the buyers perceptions of value! not the sellers cost! as the
key to pricing
F" 'ompetition%based pricing % 1ased on the establishment of price largely against those of
competitors! with less attention paid to costs or demand
Prici$) strate)ies
/" 0restige pricing % Hotels or restaurants seeking to position themselves as luxurious and
elegant will enter the market with a high price that will support this position
-" Market%skimming pricing % (etting a high price when the market is price insensitive" +t is
common in the industries with high research and development costs! such as pharmaceutical
companies and computer firms
8" Marketing%penetration pricing % 'ompanies set a low initial price to penetrate the market
@uickly and deeply! attracting many buyers and winning a large market share
4" 0roduct%bundle pricing % (ellers using product%bundle pricing combine several of their
products and offer the bundle at a reduced price" Most used by cruise lines
F" Discounts based on time of purchase % $ seasonal discount is a price reduction to buyers
who purchase services out of season when the demand is lower" (easonal discounts allow
the hotel to keep demand steady during the year
H" ;olume discounts % Hotels have special rates to attract customers who are likely to purchase
a large @uantity of hotel rooms! either for a single period or throughout the year
<" Discriminatory pricing % This refers to segmentation of the market and pricing differences
based on price elasticity characteristics of the segments" +n discriminatory pricing! the
company sells a product or service at two or more prices! although the difference in price is
not based on differences in cost" +t maximi*es the amount that each customer pays
)ield management a yield management system is used to maximi*e a hotels yield or
contribution margin
O" Mast minute pricing % 0rovides an outlet for unsold inventory! it is not a substitute for
effective marketing and a well%devised pricing strategy
P" 0sychological pricing % 0sychological aspects such as prestige! reference prices! round
figures and ignoring end figures are used in pricing
/." 0romotional pricing % Hotels temporarily price their products below list price! and
sometimes even below cost! for special occasions! such as introductions or festivities"
0romotional pricing gives guests a reason to come and promotes a positive image for the
hotel
Price cha$)es
/" +nitiating price cuts
2easons for a company to cut price are excess capacity! unable to increase business through
promotional efforts! product improvement! follow%the%leader pricing! and to dominate the
market
-" +nitiating price increases
2easons for a company to increase price are cost inflation or excess demand
8" 1uyer reactions to price changes
'ompetitors! distributors! suppliers and other buyers will associate price with @uality when
evaluating hospitality products they have not experienced directly
4" 'ompetitor reactions to price changes
'ompetitors are most likely to react when the number of firms involved is small! when the
product is uniform! and when buyers are well informed
F" 2esponding to price changes
+ssues to consider are reason! market share! excess capacity! meet changing cost conditions!
lead an industry%wide program change! temporary versus permanent
Chapter objectives
Describe the nature of distribution channels! and tell why marketing intermediaries are
used
Understand the different marketing intermediaries available to the hospitality industry and
the benefits each of these intermediate offers
Enow how to use the internet as a distribution channel
Discuss channel behavior and organi*ation! explaining corporate! contractual and vertical
marketing systems! including franchising
CHAPTER ?:
DI!TRI2UTION CHANNE"!
Nat&re o+ %istrib&tio$ cha$$e*s
$ distribution channel is a set of independent organi*ations involved in the process of making a
product or service available to the consumer or business user"
Reaso$s that 'ar(eti$) i$ter'e%iaries are &se%
/" ?reater efficiency in making goods available to target markets
-" >ffer the firm more than it can achieve on its through the intermediaries
a" 'ontacts
b" Experience
c" (peciali*ation
d" (cale of operation
8" Match supply and demand
Distrib&tio$ cha$$e* +&$ctio$s
/" +nformation % ?athering and distributing marketing research and intelligence information
about the marketing environment
-" 0romotion % Developing and spreading persuasive communications about an offer
8" 'ontact % &inding and communicating with prospective buyers
4" Matching % (haping and fitting the offer to the buyers needs
F" Aegotiation % $greeing on price and other terms of the offer so that ownership or possession
can be transferred
H" 0hysical distribution % Transporting and storing goods
<" &inancing % $c@uiring and using funds to cover the cost of channel work
O" 2isk taking % $ssuming financial risks! such as the inability to sell inventory at full margin
N&'ber o+ cha$$e* *eve*s
The number of channel levels can vary from direct marketing! through which the manufacturer sells
directly to the consumer! to complex distribution systems involving four or more channel members"
Mar(eti$) i$ter'e%iaries
Marketing intermediaries available to the hospitality industry and travel industry include travel
agents! tour operators! tour wholesalers! specialists! hotel sales representatives! incentive travel
agents! government tourist associations! consortia and reservation systems and electronic
distribution systems"
+nternet
The internet is an effective marketing tool for hospitality and travel companies" 'ompanies can use
pictures! both still and moving! to display their product" 'ustomers can make reservations and pay
for products directly from the internet"
Manufacturer
Manufacturer
Manufacturer
Manufacturer )holesaler 'onsumer Iobber 2etailer
)holesaler
'onsumer
'onsumer
'onsumer 2etailer
2etailer
C&sto'er 'ar(eti$) cha$$e*s
1usiness
1usiness
1usiness
1usiness
1usiness
2epresentatives
>r sales
1ranch
1usiness
2epresentatives
>r sales
1ranch
1usiness
Distributor
1usiness
Distributor
1usiness
'ustomer
1usiness
'ustomer
1usiness
'ustomer
1usiness
'ustomer
I$%&stria* 'ar(eti$) cha$$e*s
Cha$$e* behavior
'hannel conflict
$lthough channel members depend on each other! they often act alone in their own short%run best
interests" They fre@uently disagree on the roles each should play on who should do what for which
rewards" The channel will be most effective when=
Each member is assigned tasks it can do best
$ll members cooperate to attain overall channel goals to satisfy the target market
Types of conflict
Hori*ontal conflict % 'onflict between firms at the same level
;ertical conflict % 'onflict between different levels of the same channel
Cha$$e* or)a$i9atio$
Distribution channels are shifting from loose collections of independent companies to unified
systems"
'onventional marketing system
'onsist of one or more independent producers! wholesalers and retailers" Each is a separate business
seeking to maximi*e its own profits! even at the expense of profits for the system as a whole"
;ertical marketing system
'onsist of producers! wholesalers and retailers acting as unified system" ;M(s were developed to
control channel behavior and manage channel conflict and its economies through si*e! bargaining
power and elimination of duplicated services" There are three ma3or types of ;M(s
Manufacturer
'onsumer
2etailer
)holesaler
Manufacturer
'onsumer
2etailer
)holesaler
'onventional marketing
'hannel
;ertical marketing system
/" 'orporate % 'oordination and conflict management are attained through common ownership
at different levels in the channel" 'ombine successive stages of production and distribution
under single ownership"
-" $dministered % 'oordinates successive stages of production and distribution! not through
common ownership or contractual ties! but through the si*e and power of the parties
8" 'ontractual % 'onsists of independent firms at different levels of production and distribution
who 3oin through contracts to obtain economies or sales impact
a" (ranchising 9AoteN/: # method of doing business by which a franchisee is granted
the right to engage in offering! selling or distributing goods or services under a
marketing format that is designed by the franchisor" The franchisor permits the
franchisee to use its trademark! name and advertising
b" *lliances # developed to allow two organi*ations to benefit from each others
strength
Hori*ontal marketing system
Two or more companies at one level 3oin to follow new marketing opportunities" 'ompanies can
combine their capital! production capabilities or marketing resources to accomplish more than one
company working alone"
Multi%channel marketing system
$ single firm sets up two or more marketing channels to reach one or more customer segments"
AoteN/
A%va$ta)es Disa%va$ta)es
&ranchisee
2ecognition of brand
Mess chance of a business failure
Aational advertising! pre%made
advertisements! and marketing plans
&aster business growth
Help with site selection
$rchitectural plans
>perational systems! software! and manual
to support the systems
Aational contracts with suppliers
0roduct development
'onsulting
Help with financing
&ees and royalties are re@uired
+t limits the products sold and the recipes
used
The franchisee is often re@uired to be open a
minimum number of hours and offer certain
products
$ poorly operated company can affect the
reputation of the entire chain
The franchisors performance affects the
profitability of franchisees
(ome franchisees may not benefit from
national advertising as much as other
franchisees # often a source of conflict
&ranchisor
2eceives a percentage of gross sales
Expands brand
(upport for national advertising campaign
Aegotiating support for national contracts
with suppliers
There are limits on other options of
expanding distribution= for example! the
ability to develop alliances may be limited if
the alliances violate the territorial
agreements of the franchisees
&ranchisees must be monitored to ensure
product consistency
There is limited ability to re@uire franchisees
to change operations
&ranchisees want and need to have an active
role in decision making
Cha$$e* 'a$a)e'e$t %ecisio$s
/" (electing channel members
)hen selecting channel members! the companys management will want to
evaluate each potential channel members growth and profit record! profitability!
cooperativeness and reputation
-" Motivating channel members
$ company must motivate its channel members continuously
8" Evaluating channel members
$ company must regularly evaluate the performance of its intermediaries and counsel
underperforming intermediaries
4" 2esponsibilities of channel members and suppliers
The company and its intermediaries must agree on the terms and responsibilities of each
channel member" $ccording to the services and clientele at hand the responsibilities are
formulated after careful consideration
2&si$ess *ocatio$
There are four steps in choosing a location
/" Understanding the marketing strategy % Enow the target market of the company
-" 2egional analysis % (elect the geographic market areas
8" 'hoosing the area within the region % Demographic and psychographic characteristics and
competition are factors to consider
4" 'hoosing the individual site % 'ompatible business! competitors! accessibility! drainage!
sewage! utilities and si*e are factors to consider
Chapter objectives
>utline the six steps in developing effective communications
Define the ways of setting a total promotional budget affordable! percentage%of%sales!
competitive%parity! and ob3ective and task method
Explain each promotional tool # advertising! personal selling! sales promotion and public
relations # and the factors in setting the promotion mix type of product and market! push
versus pull strategies! buyer readiness states and product%life%cycle stage
CHAPTER @:
PROMOTING PRODUCT!: COMMUNICATION AND PROMOTION
PO"IC#
Co''&$icatio$ a$% pro'otio$
I$tro%&ctio$
$ company7s total marketing communication! called its promotion mix or communication mix!
consists of a specific blend of advertising! sales promotion! public relations! and personal selling to
achieve advertising and marketing ob3ectives"
The four 94: ma3or promotion tools can be defined as
$dvertising # any form of non%personal presentation and promotion of ideas! goods! or
services by an identified sponsor
(ales promotion # short%term incentives to encourage the purchase or sales of a product or
service
0ublic relations # building good relations with the companys various publics by obtaining
favorable publicity! developing a good corporate image! and handling or heading off
unfavorable rumors! stories! events
0ersonal selling # oral presentation in a conversation with one more prospective purchasers
for the purpose of making sales
The co''&$icatio$ process
/" +dentify the target audience
-" Determine the response sought
(ix buyer readiness state
8" Design a message
$+D$ model # the message should get Attention! hold Interest! arouse Desire and obtain
Action
Three problems that the marketing communicator must solve
Message content 9what to say:
2ational appeals # relate to audience self%interest" They show that the product will
produce desired benefits
Emotional appeal # attempt to provoke emotions that motivate purchase
Moral appeal # directed to the audiences sense of what is right and proper
Message structure 9how to say it:
)hether to draw a conclusion or leave it to the audience
)hether to present a one% or two%sided arguments
)hether to present the strongest arguments first or last
Message format 9how to say it symbolically:
;isual ad # using novelty and contrast! eye%catching pictures and headlines!
distinctive formats! message si*e and position! color! shape and movement
$udio ad # using words! sound and voices
Message source # using attractive sources to achieve higher attention and recall! such
as using celebrities
4" 'hoose the media through which to send the message
0ersonal communication channels
Two or more people communicate directly with each other
Used for products those are expensive and complex
+t can create opinion leaders to influence others to buy
Aon%personal communication channels
Media that carry messages without personal contact or feedback
+nclude media 9print! broadcast and display media:! atmosphere and events
F" (electing the message source % Messages delivered by highly credible sources are persuasive
H" Measure the communications results % Evaluate the effects on the targeted audience
Estab*ishi$) the tota* 'ar(eti$) co''&$icatio$ b&%)et
&our common methods for setting the total promotion budget
/" $ffordable method % $ budget is set based on what management thinks they can afford
-" 0ercentage of sales method % 'ompanies set promotion budget at a certain percentage of
current or forecasted sales or percentage of the sales price
8" 'ompetitive parity method % 'ompanies set their promotion budget to match competitors
$wareness Miking 0reference 'onviction
0urchase
Enowledge
4" >b3ective and task method % 'ompanies develop their promotion budget by 9/: defining
specific ob3ectives! 9-: determining the tasks that must be performed to achieve these
ob3ectives and 98: estimating the costs of performing them
Ma$a)i$) a$% coor%i$ati$) i$te)rate% 'ar(eti$) co''&$icatio$s
/" $dvertising
(uggest that the advertised product is standard and legitimate= it is used to build a long%term
image for a product and to stimulate @uick sales" However! it is also considered impersonal!
one%way communication"
$dvantages
Used to build a long%term image for a product
(timulate @uick sales
2each masses of geographically dispersed buyers at a low cost per exposure
Disadvantages
+mpersonal
>nly a one%way communication
'an be very costly
-" 0ersonal selling
1uilds personal relationship! keeps the customers interests at heart to build long%term
relationships and allows personal interactions with customers" +t is also considered the most
expensive promotion tool per contact"
$dvantages
+nvolves personal interaction
$ll kind of relationship spring up
Eeep the customers interest at heart to build a long%term relationship
1uyer usually feels a greater need to listen and respond
Disadvantages
$ sales force re@uires a longer%term company commitment than advertising
8" (ales promotion
+nclude assortments of tools coupons! contests! cents%off deals! premiums and others # short
term incentives" (ales promotions offer strong incentives to purchase by providing
inducements or contributions that give additional value to consumers
$dvantages
+t attracts consumers attention and provides information
+t creates a stronger and @uicker response
+t dramati*es product offers and boosts sagging sales
Disadvantages
+t is also considered short%lived
Aot effective in building long%run brand preference
4" 0ublic relations
Messages get to buyers as news rather than as a sales%directed communication
$dvantages
Has believability
+t reaches prospective buyers
Dramati*es a company or product
Disadvantages
Time and cost consuming
$ relatively new addition is the infomercial # hybrid between advertising and public
relations
actors i$ setti$) the pro'otio$ 'i1
/" Type of product and market % The importance of different promotional tools varies among
consumers and commercial markets
-" 1uyer readiness state % 0romotional tools vary in their effects at different stages of buyer
readiness
8" 0roduct life cycle stage % The effects of different promotion tools also vary with stages of the
product life cycle
4" 0ush versus pull strategy
a" 0ush strategy % The 'ompany directs its marketing activities at channel members to
induce them to order carry and promote the product
b" 0ull strategy % $ company directs its marketing activities toward final consumers to
induce them to buy the product
A%vertisi$)
Major %ecisio$s i$ a%vertisi$)
/" (etting ob3ectives
>b3ectives should be based on information about the target market! positioning and market
mix" $dvertising ob3ectives can be classified by their aim
0roducer
'onsumers
2etailers and
)holesalers
0roducer marketing
$ctivities
9personal selling!
trade promotion!
other:
2eseller marketing
$ctivities
9personal selling!
trade promotion!
other:
0roducer
2etailers and
)holesalers
'onsumers
Demand Demand
0roducer marketing activities
9consumer advertising! sales promotion! others:
P&sh strate),
P&** strate),
+nformative advertising % Used to introduce a new product category or when the
ob3ective is to build primary demand
0ersuasive advertising % Used as competition increases and a companys ob3ective
becomes building selective demand
2eminder advertising % Used for mature products! because it keeps the consumers
thinking about the product
-" (etting the advertising budget
&actors to be consider in setting a budget are the stage in the product life%cycle! market
share! competition and clutter! advertising fre@uency and product differentiation
8" 'reating the advertising message
Messages must be better planned and more imaginative! entertaining and rewarding to
consumers" $dvertising can only succeed if its message gains attention and communicates
well"
Message generation % Marketing managers must help the advertising agency create a
message that will be effective with their target markets
Message evaluation and selection % Messages should be meaningful! distinctive and
believable
Message execution % The impact of the message depends on what is said and how it
is said" 'reative staff must find a style! tone! words! and format for executing the
message= example # slice of life! lifestyle! fantasy! and etc"
4" Media decisions
a" Deciding on reach! fre@uency and impact
b" 'hoosing among ma3or media types 9AoteN/: % 'hoose among newspaper! television!
direct mail! radio! maga*ines and outdoor
c" (electing specific media vehicles % 'osts should be balanced against the media vehicles
audience @uality! ability to gain attention and editorial @uality
d" Deciding on media timing
The advertiser must decide on how to schedule advertising over the course of a year
based on seasonal fluctuation in demand! lead time in making reservations! and if
they want to use continuity in their scheduling or if they want to use a pulsing format
2oad blocking # where by advertisers use a tactic that help ensure that an intended
audience receives the advertising message
F" $dvertising evaluation
These are three ma3or methods of adverting pre%testing and two popular methods of post%
testing ads"
a" 0re%testing
Direct rating # the advertiser exposes a consumer panel to alternative ads and
asks them to rate the ads
0ortfolio tests # the interviewer asks the respondent to recall all ads and their
contests after letting them listen to a portfolio of advertisements
Maboratory tests # use e@uipment to measure consumers physiological reactions
to an ad
b" 0ost%testing
2ecall tests # the advertiser asks people who have been exposed to maga*ines or
television programs to recall everything that they can about the advertisers and
products that they saw
2ecognition tests # the researcher asks people exposed to media to point out the
advertisements that they have seen
c" Measuring the sales effect
The sales effect can be measured by comparing past sales with past advertising
expenditures and through experiments
AoteN/
P&b*ic re*atio$s
Aewspaper
Television
Direct mail
2adio
Maga*ines
>utdoor
E%mail
MED+UM $D;$AT$?E(
&lexibility= timeliness= good local market
coverage= broad acceptance= high
believability
'ombines sight! sound and motion=
appealing to the senses= high attention!
high reach
$udience selectivity= flexibility= no ad
competition within the same medium=
personali*ation
Mass use= high geographic and
demographic selectivity= low cost
High geographic and demographic
selectivity= credibility and prestige= high%
@uality reproduction= long life= good pass%
along readership
&lexibility= high repeat exposure= low
cost= low competition
$udience selectivity= personali*ation= low
cost
(hort lift= poor reproduction @uality= small
pass%along audience
High absolute cost= high clutter= fleeting
exposure= less audience selectivity
2elatively high cost= 3unk mail image
$udio presentation only= lowers attention
than television= non%standardi*ed rate
structures= fleeting exposure
Mong ad purchase lead time= some waste
circulation= no guarantee of position
Ao audience selectivity= creative
limitations
Aeed to gain permission= message must be
relevant or it will be viewed as 3unk mail
M+M+T$T+>A
De+i$itio$
Definition the process by which we create a positive image and customer preference through third%
party endorsement
&ive public relations activities
0ress relations % The aim is to place newsworthy information into the news medias to attract
attention to a person! product or service
0roduct publicity % 0roduct publicity involves efforts to publici*e specific products
'orporate communication % 'overs internal and external communications and promotes
understanding of the organi*ation
Mobbying % +nvolves dealing with legislators and government officials to promote or defeat
legislation and regulation
'ounseling % +nvolves advising management about public issues and company positions and
image
Mar(eti$) p&b*ic re*atio$s
0ublicity is the task of securing editorial space= marketing 02 goes beyond simple publicity"
Marketing 02 can contribute to the following tasks
$ssist in the launch of new products
$ssist in repositioning a mature product
1uild up interest in a product category
+nfluence specific target groups
Defend products that have encountered public problems
1uild corporate image in a way that pro3ects favorably on its products
The p&b*ic re*atio$s process
/" 2esearching to understand the firms mission! culture and target of the communication
-" Establishing marketing ob3ectives
1uild awareness
1uild credibility
(timulate the sales force and channel intermediaries
Hold down promotion costs
8" Defining the target audience
4" 'hoosing the 02 message and vehicles! such as event creation
F" +mplementing the marketing 02 plan
H" Evaluating 02 results
Exposures
$wareness5comprehension5attitude change
(ales%and%profit contribution
Overvie: o+ the 'ajor too*s i$ p&b*ic re*atio$s
/" 0ublications % 'ompanies can reach and influence their target market via annual reports!
brochures! cards! articles! audiovisual materials and company newsletters and maga*ines
-" Events % 'ompanies can draw attention to new products or other company activities by
arranging special events
8" Aews % 02 professionals cultivates the press to increase better coverage to the company
4" (peeches % (peeches create products and companies publicity" The possibility is
accomplished by printing copies of the speech or excerpts for distribution to the press!
stockholders! employees and other publics
F" 0ublic service activities % 'ompanies can improve public goodwill by contributing money
and time to good causes such as supporting community affairs
H" +dentity media % 'ompanies can create a visual identity that the public immediately
recogni*es! such as with companys logos! stationary! signs! business forms! business cards!
buildings! uniforms! dress code and rolling stock
P&b*ic re*atio$s opport&$ities +or i$%ivi%&a* properties
/" 1uild 02 around the owner5operator
-" 1uild 02 around the location
a" &or instance! the isolation and obscurity of an enterprise can be used as a 02 tactic
8" 1uild 02 around the product or service
'risis management
Take all precautions to prevent negative events from occurring" )hen a crisis does occur
$ppoint a spokesperson" This to ensures that the company is giving a consistent story based
on facts
'ontact the firms public relations agency if it has one
The company should notify the press when a crisis does
'risis communication Dos and Donts
!a*es pro'otio$
/" (etting sales promotion ob3ectives
;ary widely and can include increasing short%term sales! increasing long%term sales! getting
consumers to try a new product! luring customers away from competitors or creating loyal
customers
-" (electing sales promotion tools
The promotion planner should consider the type of market! the sales promotion ob3ectives!
the competition and the costs and effectiveness of each tool" 'ommon sales%promotion tools
include samples! coupons! premiums! patronage rewards! point%of%purchase 90>0:! contests!
sweepstakes and games
8" Developing the sales promotion program
The following steps are involved in developing a sales%promotion program
Decide on the si*e of the incentive
(et the conditions for participation
Decide how to promote and distribute the promotion program
(et promotion dates
Decide on the sales promotion budget
4" 0re%testing and implementing the plan
)henever possible! sales promotion tools should be pre%tested to determine if they are
appropriate and of the right incentive si*e
F" Evaluating the results
The company should evaluate the results against the ob3ectives of the program
Perso$a* !e**i$)
The !a*es Process
Most business owners would like to focus all their energy on daily business operations and serving
existing client demands" +t7s critical to your success! however! to focus on gaining new business
from current and potential customers in order to grow and sustain your company"
The selling process has six key steps" ;irtually every sales interaction will follow these steps!
whether it lasts several minutes or several months
/" 0rospecting
&inding @ualified prospects for your products or services is a necessary first step in the sales
process" Rou need to have someone to sell to before you make a sale" 1ut! making certain
that there is a good possibility that they will buy is what makes them K@ualified prospects"K
>nce you7ve identified prospects! you will want to learn all you can before you approach
them" 'ontacting each prospect takes a lot of time and energy so look at each potential
prospect carefully to
a" determine your sales approach and plan your sales calls
b" determine which products and services best suit particular prospects
c" uncover reasons why you should not pursue some prospects! saving you valuable
time and resources
-" +nitial 'ontact
&hen the +rospect ,nitiates the -ontact
0rospects will visit you during normal business hours if you have a store or business
location" +f you do not have a store! they might contact you by phone! mail! email! or
through your website to re@uest information! ask @uestions and5or to make a purchase"
0rospects might also call at odd hours to find out when you7re open or where your store is
located" 1e sure your answering machine message! answering service or website answers
these @uestions"
&hen )ou ,nitiate the -ontact
>ne of the most common initial contacts is a Kcold callK conducted by phone or in person" $
cold call refers to a contact made with prospects who have not indicated they desire the call"
+t7s obviously much more efficient % and most say more successful % to conduct cold calls on
the telephone rather than to drive around town! but you might have a reason that warrants an
in%person cold call on occasion"
Make an appointment! giving them choices of appointment times and meeting locations"
Here are some ideas to help turn cold calls into warm prospects
&irst! determine your ob3ective and the purpose of your call"
Try to do a little homework before the call"
(end a fax or mail some information prior to the cold call"
)hen you7re ready to make the call! make sure you have all the materials you need at
hand" &or example! if the purpose of your call is to make an appointment! have your
appointment book open and a working pen or pencil in front of you"
(tate your purpose @uickly % within /F seconds"
?et prospects interested by asking @uestions that make them think"
Make statements that build rapport and confidence"
Use humor % people love to laugh"
1e sincere"
1e friendly % people like to buy from people they like"
Eeep your eye on the pri*e % never lose sight of your ob3ective! regardless of the
outcome of the call"
8" (ales 0resentation
Many sales people feel the most exciting part of the sales process is presenting products or
services to prospects" &inally! the vast amount of knowledge you have about your products!
services and your company comes into playS
Here are some suggestions for putting your best foot forward in your sales presentation
Don7t be afraid to be excited about your product"
During presentations! focus on the benefits of your products and services"
(et ob3ectives for sales calls"
1e on time for sales appointments" +f you are unavoidably delayed! call before the
appointment to let the prospect know your estimated time of arrival"
1e prepared for your call" Have your sales brochures! demonstration materials! and other
supplementary information available"
1e relaxed during sales calls"
Met prospects talk P. percent of the time= they7ll tell you how to sell to them" Rou 3ust
need to listen"
Use testimonials" Rour best selling tool is a reference from a satisfied customer"
Don7t be afraid to ask for their business"
+nvite prospects to interact with products" &or example! encourage customers to try a
watch on! operate a device or smell the bubble bath"
Mimit the choices during a sales presentation" Most experts advise sales people to show
prospects only three options at a time"
$dapt your sales presentation to your prospect" &or example! a travel agent would
provide different types of information about a cruise package to a couple going on their
first cruise than to a couple that has been on do*ens of cruises"
2ate yourself after sales calls" Determine what you did well and what you need to
improve upon" Develop action steps for improvement"
$lways follow through on promises"
Determine what your prospect seemed most interested in and work that into your follow%
up plan"
&ollow up! follow up! follow up" +t often takes five to /. exposures to get a sale"
4" Handling >b3ections
During the sales process! you will most likely meet ob3ections" >b3ections are prospects7
comments about the reasons why they don7t plan to buy your product or service" +t may be
something like K+ already buy those products from $1' 'ompany and am happy with their
product"K
Don7t be put off by an ob3ection= it is a normal part of the sales process" +n fact! ob3ections
sometimes are a signal that the sale is progressing and you7re getting closer to a positive
response" )hen a prospect voices an ob3ection! they may simply be asking for more
information about your product % and their ob3ection tells you in what area they need more
information" &or instance! if they say they are happy with a product from another competitor!
that is your opening to explain how your product differs from your competitor7s product"
$nticipate ob3ections" 2ehearse answers to standard ob3ections" Mearn to ask @uestions of
prospects to get to their real @uestions"
Here are a few proven techni@ues for overcoming ob3ections" Treat every ob3ection with
respect and a thoughtful response"
$cknowledge your customers7 position and then offer them new information"
Duestion prospects when they make statements about why they won7t buy or what they
don7t like about your product" Try to learn why they feel as they do= this will help you
get to the root cause of their concerns"
2estate the ob3ection so the customer can hear it" This tends to reduce the magnitude of
an ob3ection and allows prospects to modify your statement to more accurately express
their true ob3ection"
Tactfully respond directly to the customer7s statement" +f you must contradict what they
are saying because you honestly believe they are wrong! provide factual information that
can help them see where they may have a misunderstanding"
F" 'losing the (ale
$lthough you should never be shy about asking for business! prospects will probably give
you some signals when they are ready to become customers" Here are some signals that
suggest they are ready to buy
$sking about availability
$sking specific @uestions about rates! prices or affordability
$sking about features! options! @uality! guarantees or warranties
$sking positive @uestions about your business
$sking for something to be repeated
Making statements about problems with previous vendors= they may be seeking
reassurance from you that you won7t pose the same problems
$sking about follow%up service or other products you carry
2e@uesting a sample or asking you to repeat a demonstration for them or for others in
their company or family
$sking about other satisfied customers" Rou should have a list of satisfied customers
ready to give to prospects who ask" 9Make sure you7ve already contacted these customers
about serving as references:
These are some techni@ues that often help prospects make the decision to buy"
Duit talking after you ask a closing @uestion" ?ive prospects the opportunity to say yes"
>ffer an added service! such as delivery"
>ffer a choice! such as Kwould you prefer the blue one or green oneGK
>ffer an incentive such as a /. percent discount for purchases made now"
Mead the customer through a series of minor decisions
about such factors as their preferred color or model that are easier to make and that lead
to make the bigger decision to actually purchase"
Don7t give up too soon" Mearn to understand prospects7 buying styles= some people take
longer than others to make a decision"
H" &ollow%Up and (ervice after the (ale
Rou have made the sale" Aow whatG (ome sales people believe that follow%up after the sale
is 3ust as important as making the sale" That7s when your relationship with a customer can
mature and develop into loyalty to your product"
1uilding long%term relationships with customers allows you to leverage or make additional
use of your initial investment of time and money spent selling to that customer" +n other
words! you don7t have to spend time prospecting! @ualifying and conducting other pre%sales
activities for that particular customer again"
There is no better advertising than a satisfied customer" ?ood follow%up and service after the
sale will
establish and maintain your good reputation!
build goodwill between you customers and your business!
and generate repeat and referral business"
$s you develop a sales process that is right for you and your business! here are some other
pointers to keep in mind
'ontinuously improve your sales skills! learn from others and stay open to new ideas"
1e sincere about your desire to help the prospect" Making the sale should be your
secondary ob3ective" This attitude will come through in every encounter and will help
you build long%term relationships"
'ontribute more than 3ust your product" 0rovide industry news updates! creative ideas!
and business advice as part of the service you offer"
1e direct with your communication" 1eating around the bush only frustrates people"
$nswer all @uestions" Aever patroni*e"
Enclose your business card with every letter and note"
Chapter objectives
Describe the relationship between internet marketing! database marketing and direct
marketing
Evaluate a companys web site and comment on its marketing potential
Describe how to set up an effective database
Discuss the growth of e%mail marketing
Understand how databases can be used to develop direct marketing campaigns
Thank people who refer prospects to you" +f the referral results in business! send a small!
business%related thank%you gift also"
Aever lie" Don7t badmouth the competition or say negative things about their clients"
Don7t gossip"
Don7t overbook yourself so much that you don7t have time to listen and be available to
your customer for their @uestions and comments"
+mportance of personal selling
a" built personal relationship
b" allow personal interactions with customers
c" keep the customers interest at heart to build a long%term relationship 9customi*ed
information:
d" buyer usually feels a greater need to listen and respond
e" reaching customers who are not easily reached through other methods especially business
market
CHAPTER 1A:
E"ECTRONIC MARKETING: INTERNET MARKETING< DATA2A!E
MARKETING AND DIRECT MARKETING
I$ter$et 'ar(eti$)
The internet represents an untapped opportunity for many companies" +t is not only useful as a sales
outlet! but it also provides a medium for communication between a company and its customers"
Underlying electronic business are two phenomena
/" Digitali*ation # consists of converting text! data! sound and image into a stream of bits that
can be dispatched at incredible speeds from one location to another
-" 'onnectivity # involves building networks and expresses the fact that much of the worlds
business is carried over networks connecting people and company
+ntranets # connect people within a company
Extranets # connect a company with its suppliers and customers
+nternet # connect users to an ama*ingly large Binformation superhighwayC
+nternet marketing activities
/" (ales % >ne of the advantages of the internet as a sales channel is the customer does the work
-" 'ommunication % )eb sites have the chance to communicate information to a number of
different segments" The home page can provide information targeted to reach a number of
different audiences
8" 0roviding content % +t is important to give customers a reason to come back to your site by
providing useful content
4" )eb site development % The site should also be organi*ed so the users can @uickly get to the
information they need and pro3ect an image that supports the product or brand"
Three basic principles of electronic marketing
a" 1uild and actively manage a customer database
b" Develop a clear concept on how the company should take advantage of the internet
c" 1e easily accessible and @uick in responding to customer calls
(ales benefits of internet marketing
a" addressability # enables a company to individually address consumers in its marketing
communication 9personali*e marketing:
b" interactivity # capable of giving feedback in response to the action users perform in the
computer 9relationship marketing:
c" flexibility # can gather fresh and updated information based on the direct feedback received
from customers
d" accessibility # improve the information availability and user interaction
e" service improvement % web%based distribution systems for easy access to transparent and
easy to compare information! immediate confirmation and speedy documentation
f" cost saving # reduce sales cost! staff training cost! distribution cost
How electronic marketing will change marketing
Deve*opi$) a 'ar(eti$) %atabase s,ste'
$ marketing database is an organi*ed collection of data about individual customers! prospects or
suspects that is accessible and actionable for such marketing purposes as lead generation! lead
@ualification! sale of a product or service or maintenance of customer relationships 92efer to '2M:"
$dvertising
'ustomer
service
(elling
Marketing
research
Marketing
$ctivity
Traditional marketing 'yber marketing
0repare print! video or voice copy and use
standard media vehicles such as
television! radio! newspapers and
maga*ines"
Usually only very limited information can
be presented"
0rovide service five days a week! eight
hours a day in the store or over the phone
in response to customer calls= provide on%
site visit
0honing or visiting prospects and
customers and demonstrating product
physically or by pro3ective e@uipment
Use of individual interviews! focus groups
and mailed or phones surveys
Design extensive information and put it on
the companys web page= 'D brochures
linked to your site= distribution of public
relations information over the internet
0rovide seven day! twenty%four hour
service response= send phone! fax or e%mail
solutions= allow customers to co%produce
their customer service= access to fre@uent
guest diner and flyer information over the
internet
;ideo conferencing with prospect=
showing the product on the computer
screen= enabling customer to purchase their
own hospitality and travel products
Use of newsgroups for conversation and
interviewing= e%mail @uestionnaires= access
to focus groups over the internet
)hy would a customer want to be on your databaseG
+f you were a customer! why would you want to be on your databaseG 1y answering this @uestion!
you find out whether your database has a strategic focus or is mainly used for tactical purposes"
Direct 'ar(eti$)
Direct marketing is an interactive system of marketing that uses one or more advertising media to
affect a measurable response and5or transaction at any location
2easons for the growth of direct marketing
0recision marketing
0ersonali*ation % >ffers to fit the target market and timing offers to fit the needs of the
consumer! such as offers associated with a birthday
0rivacy % The offer is not visible to competitors
+mmediate results
Measurability
Types of direct marketing
/" Telemarketing % $ form of direct marketing that combines aspects of advertising! marketing
research and personal sales
-" E%mail % 'an be both low cost and effective
8" 'Ds % 1oth full si*e and miniature 'Ds about the si*e of a business card! are replacing color
brochures as a marketing communication
4" 2elationship marketing % Direct marketing can be used to develop a relationship with
customers" +t costs four to seven times as mush to create a customer as it does to maintain a
customer
F" +ntegrated direct marketing % $ more powerful approach to direct marketing through a
multiple%vehicle! multiple%stage campaign
$dvantages and disadvantages for direct selling
A%va$ta)es Disa%va$ta)es
The >rgani*ation
0otential to earn an unlimited amount of
money
+nitial cost is fairly cheap
>pportunities to meet new people
'an use the internet to increase your sales
E%mail potential customers
'an create a marketing list easily by
having an internet site by offering free
information to people who subscribe to
your site
0romoting this type of business can be
very time consuming
This type of business is highly competitive
Unpredictable source of income
)ill get @uite a bit of re3ection before
finding people who will buy what you
have to offer
(ometimes you have to sell so many
products or a set dollar amount to remain
in good standing with the business
'onsumers
'ustomers can ask @uestions and get
advice in a relaxed environment
0roducts are delivered to the customer at
home directly to their door
+nconvenience or obtrusive
Chapter objectives
Understand why internal marketing is an important part of a marketing program
Explain what the service culture is and why it is important to have a company where
everyone is focused on serving the customer
Describe the four step process involved in implementing an internal marketing program
Explain why the management of non%routine transactions can create the image of being an
excellent service provider
There is usually a money%back guarantee
for the customer
CHAPTER 11:
INTERNA" MARKETING
I$ter$a* 'ar(eti$)
The hospitality industry is uni@ue in that employees are part of the product" Terms 'o'e$t o+
tr&th # occurs when employee and customer have contact= it is the skill! motivation! and tools
employed by the firms representative and the expectations and behavior of the client together that
create the service delivery process"
Marketers must develop techni@ues and procedures to ensure that employees are able and willing to
deliver @uality service" +nternal marketing is marketing aimed internally at the firms employees"
Employee satisfaction and customer satisfaction are correlated"
Employee satisfaction and customer satisfaction are linked
?ood internal programs create employee satisfaction! which in turn creates customer satisfaction"
There is a two%way relationship between customer satisfaction and employee satisfaction # when
customer satisfaction increases! employee satisfaction increases= however! when customer
satisfaction decrease! employee satisfaction decrease"
There is also a relationship between @uality and employee satisfaction" (ome employees who leave
companies do so because of the poor level of service being given to customers and the overall
negative attitude of the organi*ation" The human resource function and marketing are inseparable in
hospitality and travel organi*ations # they must work together to create both satisfied employees
and satisfied customers"
Estab*ish'e$t o+ a service c&*t&re
$ service marketing program is doomed to fail if its organi*ational culture does not support serving
the customer"
$ service c&*t&re is an organi*ational cultural that supports customer service through
policies! procedures! reward systems and actions
$n or)a$i9atio$a* c&*t&re is a pattern of shared values and beliefs that gives members of
an organi*ation meaning! providing them with the rules for behavior in the organi*ation
$ strong culture helps organi*ations in two ways 9/: it direct behavior and 9-: give employees a
sense of purpose and makes them feel good about their company" Developing a customer%oriented
organi*ation re@uires a commitment from management of both time and financial resources" The
change to a customer%oriented system may re@uire changes in hiring! training! reward systems! and
customer complaint resolution! as well as empowerment of employees"
Turning the organi*ational chart upside down
(ervice organi*ations should create an organi*ation that supports those employees who serve the
customers"
Deve*op'e$t o+ a 'ar(eti$) approach to HRM
'reate positions that attract goods employees
Use a hiring process that identifies and results in hiring service%oriented employees
0rovide initial employee training designed to share the companys vision with the employee
and supply the employee with product knowledge
0rovide continuous employee training programs
Uniforms can affect an employees attitude" Employees should be involved in the selection
of uniforms
Employees must be able to maintain a positive attitude" Managing emotional labor helps
maintain a good attitude
'reating 3obs that attract good people
Managers must use the principles of marketing to attract and retain employees" Marketers can use
marketing research techni@ues to segment the employee market! choosing the best segments for the
firm and developing a marketing mix to attract those segments" &or employees! the marketing mix
is the 3ob! pay! benefits! location! transportation! parking! hours! and intangible rewards! such as
prestige and perceived advancement opportunities"
The hiring process
(ervice organi*ations need to hire for attitude and train for skills # this idea means that service
firms place more emphasis on personality! energy! and attitude than on education! training and
experience in their recruitment! selection! and training strategies"
The importance of initial training
To be effective! employees must receive information regularly about their company # the
companys history! current businesses! and its mission statement and vision are important for
employees to know" They must be encouraged to fell proud of their new employer" Employees than
receive specific training for their particular assignments"
+n addition! there is the orientation process # the purpose is to create an inspiring atmosphere and
build a solid work commitment that helps reduce turnover" 0roperly trained employees can deliver
@uality service! which helps the image of the firm! attracting more guests and employees to the
organi*ation"
Managing emotional labor
+n the hospitality industry! managers re@uire employees to display friendliness and courtesy toward
guests" The term emotional labor can be defined as the necessary involvement of the service
providers emotion in the delivery of the service" The display of service can strongly influence the
customers perception of service @uality"
To manage emotional labor! managers must hire employees who can cope with the stress caused by
dealing with customers" (ome common techni@ues used to manage emotional labor include
Monitoring overtime and avoiding double shifts
Encouraging work breaks
(upport from fellow workers and managers
Disse'i$atio$ o+ 'ar(eti$) i$+or'atio$ to e'p*o,ees
>ften! the most effective way of communicating with customers is through customer%contact
employees" Employees should hear about promotions and new products from management! not
from advertisements meant for external customers" Management at all levels must understand that
employees are watching them for cues about expected behavior"
Chapter objectives
Define customer value and customer satisfaction
Understand the difference between customer satisfaction and customer loyalty
Discuss attracting new users and retaining current customers by developing relationship
marketing
Enow tactics for resolving customer complaints and understand the importance of
resolving complaints
Define @uality and discuss the importance of the benefits of @uality
Hospitality organi*ations should use printed publications as part of their internal communication"
Hotels can use technology and training to provide employees with product knowledge" Employees
should receive information on new products and products changes! marketing campaigns and
changes in the service delivery process"
I'p*e'e$tatio$ o+ a re:ar% a$% reco)$itio$ s,ste'
Employees must know how they are doing to perform effectively" 'ommunication must be designed
to give them feedback on their performance" $n internal marketing program includes service
standards and methods of measuring how well the organi*ation is meeting these standards" +f you
want customer%oriented employees! seek out ways to catch them serving the customer! and reward
and recogni*e them for making the effort"
Aon%routine transactions
$ good internal marketing program should result in employees who can handle non%routine
transactions" >ne benefit of an internal marketing program is that it provides employees with the
right attitude! knowledge! communication skills and authority to deal with non%routine transactions"
$ non%routine transaction is a guest transaction that is uni@ue and usually experienced for the first
time by the employees" Management must be willing to give employees the authority to make
decisions that will solve guests problem"
CHAPTER 1-:
2UI"DING CU!TOMER "O#A"T# THROUGH BUA"IT#
De+i$i$) c&sto'er va*&e a$% satis+actio$
To win in todays marketplace! companies must be customer%centered they must deliver superior
value to their target customers. 'onsumers buy from the firm that they believe offers the highest
customer%delivered value! the difference between total customer 'alue and total customer cost# The
customer derives value from the core products! the service delivery system and the companys
image" 'osts to the customer include money! time! energy and physic costs"
'ustomer satisfaction with a purchase depends on the products performance relative to a buyers
expectations
'ustomer loyalty! on the other hand! measures how likely a customer is to return and their
willingness to perform partner shipping activities for the organi*ation
2elationship marketing involves creating! maintaining and enhancing strong relationships with
customers" 2etaining customers
The cost of lost customers" 'ompanies should know how much it costs when a customer
defects! this is the same as the customers lifetime value
2esolving customer complaints" 2esolving customer complaints is a critical component of
customer retention
The consumers assessment of the products overall capacity to satisfy his5her needs determines
customer value" The difference between total customer value and total customer cost of a marketing
offer is Qprofit to the customer or customer%delivered value"
Total customer value is the total of all product! services! personnel and image values that a
buyer receives from a marketing offer
Total customer cost is the total of all the monetary! time! energy! and psychic costs
associated with a marketing offer
Example= a business traveler will value a non%stop flight over a direct flight that makes a stop
because of the reduced travel time" They may avoid certain airports as connecting points because
they are large and re@uire a lot of walking" The business traveler will prefer the non%stop because it
has a higher customer%delivered value
'ustomer satisfaction
'onsumers form 3udgments about the value of marketing offers and make their buying decisions
based on these 3udgments" 'ustomer satisfaction with a purchase depends on the products
performance relative to a buyers expectation" $ customer might experience various degree of
satisfaction"
+f the products performance fall short of expectations! the customer is dissatisfied
+f performance matches expectations! the customer is satisfied
+f performance exceed expectations! the customer is highly satisfied or delight
Expectations are based on the customers past buying experiences! the opinions of friends and
associates! and marketer and competitors information and promises"
'ustomer satisfaction versus customer loyalty
'ustomer loyalty # measures how likely customers are to return and their willing ness to perform
partner shipping activities for the organi*ation" 'ustomer satisfaction is a re@uisite for loyalty% the
customers expectation must be met or exceeded in order to build loyalty"
However! there are several reasons why satisfied customers may not become loyal customers
(ome travelers do not return to an area on a regular basis
(ome customers like to experience different hotels and restaurants when they return to an
area
(ome guests are price sensitive and will shop for the best deal
'ustomers expect to be satisfied with their purchase= if not! they would not have made the purchase
Re*atio$ship Mar(eti$)
>nce a manager has identified patrons who are likely to become loyal customers! the manager must
identify ways of creating a relationship with these customers # relationship that leads to customer
loyalty" 2elationship marketing involves creating! maintaining and enhancing strong relationship
with customers" 2elationship marketing is oriented more toward the long term # the goal is to
deliver long term value to customers! and the measure of success is long term customer satisfaction"
&ive 9F: different levels of relationships that can be formed with customers
1asic # the company sells the product but does not follow up in any way
2eactive # the company sells the product and encourages the customer to call whenever he
or she has any @uestions or problems
$ccountable # the companys representative phones the customer a short time after the
booking to check with the customer and answer @uestions" During and after the event! the
salesperson solicits from the customer any product improvement suggestions and any
specific disappointments
0roactive # the salesperson or others in the company phone the customer from time to time
with suggestions about improvements that have been made or creative suggestions for future
events
0artnership # the company works continuously with the customer and with other customers
to discover ways to deliver better value
There are three 98: customer value%binding approaches
2elies primarily on adding financial benefits to the customer relationship
To add social benefits! as well as financial benefits
To build strong customer relationships is to add structural ties! as well as financial and social
benefits
Main steps in establishing a relationship marketing program in a company
+dentify the key customers meriting relationship management # choose the largest or best
customers and designate them for relationship management" >ther customers can be added
who show exceptional growth or who pioneer new industry developments
$ssign a skilled relationship manager to each key customer # the salesperson currently
servicing the customer should receive training in relationship management or be replaced by
someone more skilled in relationship management
Develop a clear 3ob description for relationship managers # describe their reporting
relationships! ob3ectives! responsibilities! and evaluation criteria
Have each relationship manager develop annual and long%range customer relationship plans
# these plans should state ob3ectives! strategies! specific actions! and re@uired resources
$ppoint an overall manager to supervise the relationship managers
The *i$( bet:ee$ 'ar(eti$) a$% C&a*it,
The pursuit of high @uality is the never%ending 3ourney that hospitality organi*ations must take in
order to achieve a link between the product and their customers"
)hat is @ualityG There are several views of product @uality"
/" 0roduct features" (ome view product features that enhance customer satisfaction as a way of
measuring @uality" $ccording to this! a luxury hotel has a higher level of @uality than that of
a limited%service hotel
-" &reedom from deficiencies" &reedom from deficiencies is another way of viewing @uality"
$ccording to this view! a limited%service hotel and a luxury hotel could both be @uality
products if the product they offered was free of deficiencies
8" Three categories of service @uality" $ third view divides @uality into three categories
a" Technical quality refers to what the customer is left with after the customer%
employee interactions have been completed
b" (unctional quality is the process of delivering the service or product
c" Societal quality is a credence @uality= it cannot be evaluated by the consumer before
purchase and is often impossible to evaluate after purchase
1enefits of service @uality
/" 2etaining customers % High @uality builds loyal customers and creates positive word of
mouth
-" $voidance of price competition % High @uality can help to avoid price competition and help
to maximi*e potential revenue
8" 2etention of good employees % Employees appreciate working in operations that are well
run and produce high%@uality products" )hen an operation has good @uality! it can retain
good employees" 2ecruiting is easier and training costs are reduced"
4" 2eduction of costs
a" ,nternal cost are those associated with correcting problems discovered by the firm
before the product reaches the customers
b" ./ternal costs are associated with errors that the customers experience
c" 0uality systems costs are costs viewed as investment in the future of the company to
ensure that customers returns
Managing capacity
'orporate management is responsible for matching capacity with demand on a long%term basis!
whereas units managers are responsible for matching capacity with fluctuations in short%term
demand"
+nvolve the customer in the service delivery system
'ross%train employees
Use part%time employees
2ent or share extra facilities and e@uipment
(chedule downtime during periods of low capacity
Extend service hours
Use technology
Use price
Managing demand
Use price to create or reduce demand
Use reservations
>verbook
Use booking curve analysis
Use @ueuing
(hift demand
'hange the salespersons assignment
'reate promotional events

Marketing in Hospitality Industry

Transféré par

Informations du document

Description originale:

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Marketing in Hospitality Industry

Transféré par

Droits d'auteur :

Formats disponibles

Chapter objectives

Understand the relationships between the hospitality and travel industry

Vous aimerez peut-être aussi