Lecture 1

A Review of Marketing
Concepts for Hospitality
Cornelia Voigt

BUSS 2060 Advanced Marketing

Thursday 21 January 2010
 Link between Hospitality and Travel Industries

 Travel is the world’s most international and largest industry: worth 30%
(US$ 944 million of world’s export industry (UNWTO, 2010)
 Explosive growth in the past 30 years of travel and tourism
 Example: Dubai
 Link between Hospitality and Travel Industries

The development of Dubai demonstrates...

 The high dependence of hospitality development and marketing on

the travel and tourism industries.

 The speed and scale of tourism development.

 The ability to develop tourism in almost any environment.

 The importance of marketing to generate demand for new products.

 Importance of Marketing

 Customers have become more sophisticated and super-empowered

through instant access to information and competitor’s prices, customer
loyalty is shrinking
 Power of brands has grown
 Rapid changes make yesterday’s techniques out-of-date  innovation
needed
 Corporate giants have increased marketing importance for the
hospitality industry
 Predicted hotel consolidation into 5 or 6 chains will create more intense
competition in a global environment
 Hospitality industry is competitive but involves considerable collaboration.
 Industry Characteristics

 Hospitality industry consists of very different segments (e.g. lodging,

commercial food services, tourist attractions, travel agency services,
event services, transportation services)
 Government agencies play an important role through legislation and
infrastructure development to support tourism development.

 The establishment of cooperative relationships with other

organisations is becoming increasingly crucial.
 Hospitality industry is highly interdependent.
 Five Marketing Management Philosophies
Table adapted from Bowie & Buttle, 2004:12

Philosophy/ Starting Point Focus Means End Example

Orientation

1. Manufacturing Innovative, strong Satisfying high demand New technology Profit through mass sales Early fast-food
(also called hospitality products generating mass operations
production at low prices
production)

2. Product Existing hospitality Maintain and improve Minor improvements and Profit dependent on Celebrity chefs who
product/service existing products adaptations to existing stable market conditions serve what they think
marketing mix customers want

3. Selling Existing hospitality Existing and new Aggressive selling and Profit through sales “A sales orientation is
product/service products promotional tactics volume endemic in the hospitality
industry”

4. Marketing Customers Customer needs and Integrated marketing Profit through customer Mandarin Oriental
wants (including research) satisfaction Four Seasons (p.11)

5. Societal- Consumers AND the Socially concerned Integrated marketing Profit through enhanced Six Senses Resorts &
marketing needs and wants of the hospitality business which takes into account image and customer Spas
community and activities sustainability satisfaction The Duke of Cambridge
environment
 Examples of Hospitality Businesses with a Marketing
(Customer-Focused) Orientation
 To provide products that offer value to targeted customers
 To fulfill customer needs and to motivate purchase
 To put the customer first and reward employees for serving the customer well

Mandarin Oriental Four Season’s

‘Briefcase Incident’ (p.11)
“No service, no profit”
Mission Statement, Service Culture
Wolfgang Hultner,
chief executive of Mandarin Americas “We have chosen to specialise within the hospitality
industry by offering only experiences of
Mission Statement: ‘DELIGHT’ exceptional quality... We create properties of
“Our luxury brand strives to delight our guests by providing enduring value using superior design and finishes,
service that is gracious and sincere and steeped in the and support them with a deeply instilled ethic of
values of the orient”. personal service. Doing so allows Four Seasons to
satisfy the needs and tastes of our
discriminating customers, and to maintain our
position as the world's premier luxury hospitality
 Examples of Hospitality Businesses with a Societal
Marketing Orientation
Six Senses Resorts & Spas
Key objective: To be the industry leader in
environmental and social responsibility while not
sacrificing the quality of the SLOW LIFE
(Sustainable – Local – Organic – Wholesome
Learning – Inspiring – Fun –) Experiences of
customers
The Duke of Cambridge
London’s first organic pub
"I believe business must act responsibly and with a
moral code of conduct. Businesses must be driven
by strong values and a sense of their contribution
and impact on society, not just by money, growth
and greed. Our business is ethical as well as
profitable.“
Geetie Singh
Founder and Managing Director
 Marketing Mix

Marketing does not equal advertising or sales; these are just part of the
marketing mix – or the 4 P’s:
Product  Solution
Promotion  Information
Price  Value
Place (Distribution)  Access
McCarthy, 1960 Dev & Schultz, 2005

However, the marketing mix has been criticised for being less relevant for
service marketing and internally-driven rather than customer-focused.
Therefore, alternative models have been developed to reflect customer
 Definition of Marketing

“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” (Kotler, Bowen & Makens,
2006:13).

“Marketing is ... About helping to strive for a sensible matching of

customer’s interests and that of the firm or organisation on behalf of its
shareholders. It is about helping to manage an appropriate exchange
between the two parties, and helping ensure that possibility for exchange
is enduring. Marketing therefore is a process: it is not something that is
done once” (Corkindale, Balan & Rowe, 1996:9).
 Fundamental Marketing Concepts
Needs, Wants and Demands

A human need is a state of felt deprivation:

Basic needs (e.g. hunger, thirst, security, warmth)
Social needs (e.g. belonging, affection, relaxation)
Esteem needs (e.g. prestige, recognition)
Individual needs (e.g. education, self-actualisation, spirituality)

Wants are how people communicate their needs.

Resources turn wants into demands.

Question: Can marketers create consumer needs and wants?

 Fundamental Marketing Concepts
Needs, Wants and Demands

“ Marketers cannot create consumer needs ... They can stimulate

latent needs, ... unconsciously felt by consumers” (Darmon,
2005:185).

Recent example of stimulated consumer needs and wants:

‘Babymoons’ and ‘Hotel Baby Programs’ (Voigt & Laing, in press)
 Fundamental Marketing Concepts
Products

 People satisfy their needs and wants with products. It includes much
more than physical goods: services, persons, places, information, ideas
and experiences.

 Industrial Economy  Service Economy  Experience Economy

 Fundamental Marketing Concepts
Customer Value

 Customer value is the difference between the benefits that the customer
gains from owning and/or using a product and the costs of obtaining the
product.

 Costs can be monetary and non-monetary

 Example: Domino’s pizza- delivery saves customer time but is more
expensive than pick up
 Fundamental Marketing Concepts
Customer Satisfaction

 Customer satisfaction depends on a product’s perceived performance in

delivering
 Just valuecustomers
satisfying relative toisbuyer’s expectation.
no longer enough
 Relying on results of customer satisfaction
surveys can be fatal Unanticipated

Desirable

Expected

Basic

The Hierarchy of Customer Value (Bowie & Buttle, 2004:9)

 Fundamental Marketing Concepts
Quality

 Quality is the totality of features and characteristics of a product or

service
that bear on its ability to satisfy customer needs

 There is a direct relationship between product quality and the financial

performance of hotels

 “For most companies, customer-driven quality has become a way of doing

business. Most companies no longer tolerate poor or average quality.

Companies today have no choice but to adopt quality concepts if they
wish to stay in the race, let alone be profitable” (p. 19).
 Fundamental Marketing Concepts
Quality

 Quality is the totality of features and characteristics of a product or

service
that bear on its ability to satisfy customer needs

 There is a direct relationship between product quality and the financial

performance of hotels

 “For most companies, customer-driven quality has become a way of doing

business. Most companies no longer tolerate poor or average quality.

Companies today have no choice but to adopt quality concepts if they
wish to stay in the race, let alone be profitable” (p. 19).
 Fundamental Marketing Concepts
Exchange ,Transactions and Markets

 Exchange is the act of obtaining a desired object from someone by

offering something in return

 A transaction is marketing’s unit of measurement and consists of a

trade of values between two parties

 A market is a set of actual and potential buyers who might transact

with a seller
 Fundamental Marketing Concepts
Relationship Marketing

 Attracting, maintaining and enhancing relationships

 “Increasingly, marketing is shifting from trying to maximize the profit

of each individual transaction to maximizing mutually beneficial
relationships with customers and other parties. … build good
relationships and profitable transactions will follow.” (p.20).

 3 types of relationship marketing:

 External marketing (satisfying customers)

 Internal marketing (satisfying employees)
 Interorganisational (IR, satisfying B2B partnerships)