HOTEL AND TOURISM MARKETING (HDHT 2117)

BY: MS NORHASIMAH HAMIM

CHAPTER 1: INTRODUCTION: MARKETING FOR HOSPITALITY AND TOURISM

Chapter objectives

Understand the relationships between the hospitality and travel industry Define the role of marketing and discuss its core concepts Explain the relationships between customer value, satisfaction and quality Discuss how marketing managers go about developing profitable customer relationships Understand how the marketing concept calls for a customer orientation

Introduction
Marketings tasks: To design a product-service combination that provides real value to targeted customers Motivates purchase Fulfills genuine consumer needs Customer orientation: The purpose of a business is to create and maintain profitable customers. Customer 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

Marketing
Marketing mix: Elements include product, price, promotion and distribution channels. Sometime distribution is called place and the marketing situation facing a company Also known as the 4Ps

Product Price Promotion Place

Travel industry marketing: Successful hospitality marketing is highly dependent on the entire travel industry Government or quasi-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 Few industries are as interdependent as the travel and hospitality industries

Importance of marketing

The entrance 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 Analysts predict that the hotel industry will consolidate in much the same way as the airline industry has, with five or six major chains dominating the market. Such consolidation will create a market that is highly competitive. The firms that survive this consolidation will be the ones that understand their customers

In response to growing competitive pressures, hotel chains are relying on the expertise of the marketing director

Understanding marketing

Core marketing concepts

Needs, Wants, and Demands

Products and Services

Markets

Value, Satisfaction And Quality Exchange, Transactions And Relationships

Needs, wants and demands

Needs: A state of deprivation in a person. Human beings have many complex needs. These include the five basic needs theory by Abraham Maslow; the Maslow Hierarchy of Needs Wants: the form that a human needs takes when shaped by culture and individual personality. Wants are how people communicate their needs. Demands: Human wants that are backed by buying power. People have almost unlimited wants, but limited resources. They choose products that produce the most satisfaction for their money. When backed by buying power, wants become demand.

Products

Anything that can be offered to a market for attention, acquisition, use or consumption and that might satisfy a need or want. It includes physical objects, services, persons, places, organizations and ideas.

Value, satisfaction and quality

Value: 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. Satisfaction: Satisfaction with a product is determined by how well the products meets the customers expectations for that product Quality: The totality of features and characteristics of a product that bear on its ability to meet customer needs. The fundamental aim of todays total quality movements has become total customer satisfaction

Exchange, transactions and relationships

Exchange: The act of obtaining a desired object from someone by offering something in return Transaction: Marketings unit of measurement. A transaction consists of a trade of values between two parties Relationships marketing: Focuses 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

Markets

A set of actual and potential buyers who might transact with a seller.

Marketing management: The analysis, planning, implementation and control of programs designed to create, build and maintain beneficial exchanges with target buyers for the purpose of achieving organizational objectives

Marketing management
Marketing management philosophies: Manufacturing concept

Holds that customers will favor products that are available and highly affordable, and therefore management should focus on production and distribution efficiency Holds that customers prefer existing products and product forms, and the job of management is to develop good versions of these products Holds that consumer will not buy enough of the organizations product unless the organization undertakes a large selling and promotion effort Holds that achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfaction more effectively and efficiently than competitors Holds that the organization 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

Product concept

Selling concept

Marketing concept

Societal marketing concept

CHAPTER 2: SERVICE CHARACTERISTICS OF HOSPITALITY AND TOURISM MARKETING

Chapter objectives

Describe a service culture Identify four service characteristics that affect the marketing of a hospitality or travel product Explain marketing strategies that are useful in the hospitality and travel industries

The service culture

The service culture focuses on serving and satisfying the customer. The service culture has to start with top management and flow down.

Four characteristics of services: Intangibility

Services 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 Services produced and consumed at the same time, and cannot be separated from their providers, whether the providers are people or machines Service quality depends on who provides the services and when and where they are provided. Services cannot be stored. If service providers are to maximize revenue, they must manage capacity and demand because they cannot carry forward unsold inventory

Inseparability

Variability

Perishability

Management strategies for service businesses

Service-profit chain Healthy service profits and growth

Superior service firm performance Satisfied customers who remain loyal, repeat purchase and refer other customers More effective and efficient customer value creation and service delivery More satisfied, loyal and hardworking employees Superior employee selection and training, a high quality work environment and strong support for those dealing with customers

Satisfied and loyal customers

Greater service value

Satisfied and productive service employees

Internal service quality

Three types of marketing in service industries

Company

Internal marketing

External marketing

Employees Interactive marketing

Customers

Internal 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

External marketing Interactive marketing

Recognized that perceived service quality depends heavily on quality of buyer-seller interaction

Tangibilizing the service product - Promotional material, employees appearance and the service firms physical environment all help tangibilize service Trade dress

The distinctive nature of a hospitality industrys total visual image and overall performance. To compete effectively, an entrepreneur, operator or owner must design an effective trade dress while taking care not to imitate too closely that of a competitor Uniforms and costumes are common to the hospitality industry. These have a legitimate and useful role in differentiating one hospitality firm from another and for instilling pride in the employees Physical surroundings should be designed to reinforce the products position in the customers mind. A firms communication should also reinforces their positioning The use of outside natural landscaping and inside use of light and plants has become a popular method of creating differentiation and tangibilizing the product

Employee uniforms and costumes

Physical surroundings

Greening of the hospitality industry

CHAPTER 3: THE ROLE OF MARKETING IN STRATEGIC PLANNING

Chapter objectives

Explain companywide strategic planning Understand the concepts of stakeholders, processes, resources and organization as they relate to a high-performing business Explain the four planning activities of corporate strategic planning Understand the processes involved in defining a company mission and setting goals and objectives Discuss how to design business portfolios and growth strategies Explain the steps involved in the business strategy planning process

Strategic planning
The aim of strategic planning Helps a company select and organizes 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 Assessing 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 objectives

Four major organizational levels

Corporate level

Responsible for designing a corporate strategic plan to guide the entire enterprise. It makes decision on how much resource support to allocate to each division, as well as which businesses to start or eliminate Each division establishes a plan covering the allocation of funds to support that business unit within that division Each business unit in turn develop its business units strategic plan to carry that business unit into profitable future Each product level within a business unit develops a marketing plan for achieving its objectives in its product market

Division level

Business level

Product level

Four nature of high-performance business

Stakeholder

The principle that a business must at least strive to satisfy the minimum expectations of each stakeholder group Companies build cross-functional teams that manage core business processes in order to be superior competitors Companies decide to outsource less critical resources. They identify their core competencies and use them as the basis for their strategic planning Companies align their organizations structure, policies and culture to the changing requirements of business strategy

Processes

Resources

Organization

Four elements of defining the corporate mission

-

A mission statement provide companys employees with a shared sense of purpose, direction and opportunity. The company mission guides geographically dispersed employees to work independently and collectively toward realizing the organizations goal. History

Every company has a history of aims, policies and achievements, and the organization must not depart too radically from its past history Consideration of the current preferences of the owner and management The organizations resources determine which missions are possible The organization should base its mission on its distinctive competencies

Preferences

Resources

Competencies

Mission statements characteristic and focused goals

Industry scope

The range of industries that the company will consider The range of products and applications in which the company will participate The range of technological and other core competencies that the company will master and leverage The types of market or customers that the company will serve The number of channel levels from raw materials to final products and distribution in which the company will engage The range of regions or countries where the corporation will operate

Products and applications scope

Competencies scope

Market-segment scope

Vertical scope

Geographic scope

Establishing strategic business units Three dimensions in defining a business: customer groups, customer needs and technology

Strategic Business Units (SBUs)

A 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 Question marks

Boston Consulting Group Model

Build

Company business that operate in highgrowth markets but have relatively low market share

To increase the SBUs market share, even foregoing short-term earnings to achieve this objective
To preserve the SBUs market share To increase the SBUs short-term cash flow regardless of the long-term effect To sell or liquidate the business because resources can be better used elsewhere

Stars

Hold

The market leader in a high-growth market Produces a lot of cash for the company and enjoys economies of scale and higher profit margins Company businesses that have weak market shares in low-growth markets.

Cash cows

Harvest

Divest

Dogs

Planning new businesses The strategic planning gap is the gap between future desired sales and projected sales

Intensive growth opportunities

To identify further opportunities to achieve growth within the companys current business
To identify opportunities to build or acquire businesses that are related to the companys current business

Integrative growth opportunities

Backward integration Forward integration Horizontal integration

Diversification growth opportunities

To identify opportunities to add attractive businesses that are unrelated to the companys current businesses

Concentric diversification strategy Horizontal diversification strategy Conglomerate diversification strategy

Business Strategy Planning Business mission External environment analysis

Macro environment forces Microenvironment factors Opportunities Threats Strengths analysis Weaknesses analysis Hierarchical Quantitative Realistic Consistent Overall cost leadership Differentiation focus

Internal environment analysis

Goal formulation

Strategy formulation

Program formulation Implementation Feedback and control

CHAPTER 4: THE MARKETING ENVIRONMENT

Microenvironment

The microenvironemnt consists of actors and forces close to the company that can affect its ability to serve its customers.

Company Suppliers Competitors Marketing Intermediaries Customers

Publics

The company

Marketing managers work closely with top management and the various company departments Firms and individuals that provide the resources needed by the company to produce its goods and services Firm that help the company promote, sell and distribute its goods to the final buyers

Suppliers

Marketing intermediaries

Transportation system Marketing services agencies Financial intermediaries

Competitors

Those who serve a target market with similar products and services against whom a company must gain a strategic advantage Markets that purchase a companys good and services

Customers

Publics

Macroenvironment

The macroenvironment consists of the larger societal forces that affect the whole microenvironment.

Competitive Cultural Demographics

Company
Political Economic

Technological

Natural

Competitive environment

Each firm must consider its size and industry position in relation to its competitors. A company must satisfy the needs and wants of consumers better than the competitors do in order to survive A study of human population in terms of size, density, location, age, sex, race, occupation and other statistics. The demographic environment is of major interest to marketers because markets are made up of people Consists of factors that affect the consumer purchasing power and spending patterns. Purchasing power depends on current income, price, saving and credit; marketers must be aware of major economic trends in income and changing consumer spending patterns Consists of natural resources required by marketers or affected by marketing activities Forces that create new technologies, creating new product and market opportunities Made up of laws, government agencies and pressure groups that influence and limit various organizations and individuals in society Includes institutions and other forces that affect societys basic values, perceptions, preferences and behaviors

Demographic environment

Economic environment

Natural environment

Technological environment

Political environment

Cultural environment

Responding to the marketing environment

Many companies view the marketing environment as an uncontrollable element to which they must adapt. Other companies take a environmental management perspective. Rather than simply watching and reacting, these firms take aggressive actions to affect the publics and forces in their marketing environment. These companies use environmental scanning to monitor the environment.

CHAPTER 5: MARKETING INFORMATION SYSTEMS AND MARKETING RESEARCH

Chapter objectives

Explain the concept of the marketing information system Identify the different kinds of information the company might use Outline the marketing research process, including defining the problem and research plan, implementing the research plan, and interpreting and reporting the findings

The Marketing Information System (MIS)

An MIS consists of people, equipment and procedures to gather, sort, analyze, evaluate and distribute needed, timely and accurate information to marketing decision makers The MIS begins and ends with marketing managers, but managers throughout the organization should be involved in the MIS

The MIS interacts with managers to assess their information needs It develops needed information from internal company records, marketing intelligence activities and the marketing research process Information analysts process information to make it more useful The MIS distributes information to managers in the right form and at the right time to help in marketing planning, implementation and control.

Marketing Information System

Marketing Managers Analysis Planning Developing information Assessing Information Needs Internal records Marketing intelligence

Marketing Environment Target Markets Marketing Channels Competitors

Implementation
Organization Control

Distributing Information

Information analysis

Marketing research

Publics MacroEnvironment forces

Marketing decisions and communications

Assessing information needs a good marketing information system balances information that managers would like to have against that which they really need and feasible to obtain Developing information information needed by marketing managers can be obtained from internal company records, marketing intelligence and marketing research. The information analysis system processes this information and presents it in a form that is useful to managers

Internal records internal records information consists of information gathered from sources within the company to evaluate marketing performance and to detect marketing problems and opportunities Marketing intelligence marketing intelligence includes everyday information about developments in the marketing environment that help managers to prepare and adjust marketing plans and short-run tactics. Marketing intelligence can come from internal sources or external sources

Internal sources include the companys executives, owners and employees External sources include competitors, government agencies, suppliers, trade magazines, newspapers, business magazines, trade association newsletters and meetings, and databases available on the internet.

Marketing research a process that identifies and defines marketing opportunities and problems, monitors and evaluates marketing actions and performance, and communicates the findings and implication to management. Marketing research is a project oriented and has a beginning and ending. It feeds information into the marketing information system that is ongoing. Information analysis information gathered by the companys marketing intelligence and marketing research systems can often benefit from additional analysis. This analysis helps to answer the questions related to what if and which is best

Distributing information marketing information has no value until managers use it to make better decisions. The information that is gathered must reach the appropriate marketing managers at the right time

Marketing research process consists of four step:

Defining the problems and research objectives

Exploratory to gather preliminary information that will help define the problem and suggest hypotheses Descriptive to describe the size and composition of the market Causal to test hypotheses about cause-and-effect relationships Determining specific information needs Research approaches

Developing the research plan for collecting information

Observational research Survey research Experimental research

Contact methods Sampling plan Research instruments Presenting the research plan

Implementing the research plan Interpreting and reporting the findings

CHAPTER 6: CONSUMER MARKETS AND CONSUMER BUYING BEHAVIOR

Chapter objectives

Name the elements of the stimulus-response model of consumer behavior Outline the major characteristics affecting consumer behavior, and list some of the specific cultural, social, personal and psychological factors that influence consumers Explain the buyer decision process and discuss need recognition, information search, evaluation of alternatives, the purchase decision and post-purchase behavior

Model of consumer behavior

The company that really understand how consumers will respond to different product features, prices and advertising appeals has a great advantage over its competitors As a result, researchers from companies and universities have heavily studied the relationship between marketing stimuli and consumer response The marketing stimuli consist of the 4Ps Other stimuli include major forces and events in the buyers environment: economic, technological, political and cultural All 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

Marketing Stimuli

Other Stimuli

Buyers black box

Buyers Responses Product choice Brand choice

Product Price Place Promotion

Economic Technological Political Cultural Buyer Characteristics Buyer Decision Process

Dealer choice
Purchase timing Purchase amount

Personal characteristics affecting consumer behavior

Cultural

Social

Personal Age and lifecycle stage Occupation Economic Circumstances Lifestyle Personality and Self-concept

Psychological Motivation

Culture

Reference Groups

Perception
Learning Beliefs and attitudes

Buyer

Subculture

Family

Social class

Roles and Status

Cultural factors

Culture

The most basic determinant of a persons wants and behavior It compromises the basic values, perceptions, wants and behaviors that a person learns continuously in a society

Subculture

Each culture contains smaller subcultures, groups of people with shared value systems based on common experience

Social classes

These are relatively permanent and ordered divisions in a society whose members share similar values, interests and behaviors

Social factors

Reference groups

These groups serve as direct (face to face) or direct point of comparison or reference in the forming of a persons attitude and behavior Family members have a strong influence on buyer behavior. The family remains the most important consumer-buying organization in any society A 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 People often choose products that show their status in society

Family

Role and status

Personal factors

Age and life-cycle stage

The types of goods and services people buy change during their lifetimes As people grow older and mature, the products they desire change The makeup of the family also affects purchasing behavior A persons occupation affects the goods and services bought A persons economic situation greatly affects product choice and the decision to purchase a particular product Lifestyle profile a persons whole pattern of acting and interacting in the world When used carefully, the lifestyle concept can help the marketer understand changing consumer values and how they affect buying behavior Each persons personality influences his or her buying behavior By personality we mean distinguishing psychological characteristics that disclose a persons relatively individualized, consistent and enduring responses to the environment Many marketers use a concept related to personality: a persons self-concept (also called self-image) Each of us has a complex mental self-picture, and our behavior tends to be consistent with that self-image

Occupation

Economic situation

Lifestyle

Personality and self-concept

Psychological factors

Motivation

A need becomes a motive when it is aroused to a sufficient level of intensity Creating a tension state causes a person to act to release the tension Perception is the process by which a person selects, organizes and interprets information to create a meaningful picture of the world Learning describes changes in a persons behavior arising from experience

Perception

Learning

Beliefs and attitude

A belief is a descriptive thought that a person holds about something An attitude describes a persons relatively consistent evaluation, feelings and tendencies toward an object or an idea

Buyer decision process

Need Recognition Information Search Evaluation of Alternatives Purchase Decision Post-purchase Behavior

Problem recognition

The buying process starts when the buyer recognizes a problem or need An 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

Information search

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

Attitude of Others
Evaluation of Alternatives Purchase Intention Unexpected Situational Factors

Purchase Decision

Purchase decision

In the evaluation stage, the consumer ranks brands in the choice set and forms purchase intentions Generally, the consumer will buy the most preferred brand The marketers job does not end when the customer buys a product Following a purchase, the consumer will be satisfied and dissatisfied and will engage in postpurchase actions of significant interest to the marketer

Post-purchase behavior

CHAPTER 7: ORGANIZATIONAL BUYER BEHAVIOR OF GROUP MARKET

Chapter objectives

Understand the organizational buying process Identify and discuss the importance of the participants in the organizational buying process Identify the major influences on the organizational buyers List the eight stages of the organizational buying process Identify and describe the group markets in the hospitality industry

Business markets

Characteristics of business market

Market structure and demand Nature of buying unit Types of decisions and the decision process

The nature of organizational buyers

Their purchases often involve large sums of money, complex technical, economic considerations and interactions among many people at all levels of the organization Buyer and seller are often very dependent to each other

Participants in the organizational buying process

Users

Users are those who will use the product or service Influencers directly influence the buying decision but do not themselves make the final decision Deciders select the product requirements and suppliers Approvers authorize the proposed actions of deciders or buyers Buyers have formal authority for selecting suppliers and arranging the terms of purchase Gatekeepers have the power to prevent sellers or information from reaching members of the buying center

Influencers

Deciders

Approvers

Buyers

Gatekeepers

Major influences on organizational buyers

Environmental Level of primary Demand Economic outlook Cost of money Supply conditions Rate of technological Change Political and Regulatory Developments Competitive developments

Organizational
Interpersonal Objectives Policies Procedures Organizational Structure Systems Authority Education Individual Age

Status
Job position Empathy Personality Persuasiveness Risk attitudes

Buyers

Environmental factors

Organizational buyers are heavily influenced by the current and expected economic environment Each organization has specific objectives, policies, procedures, organization structures and systems related to buying The buying center usually includes several participants with differing levels of interest, authority and persuasiveness 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

Organizational factors

Interpersonal factors

Individual factors

The organizational buying process

Problem recognition

The buying process begins when someone in the company recognizes a problem or need that can be met by acquiring a good or a service The buyer goes on to determine the requirements of the product

General need description

Product specifications

Once the general requirements have been determined, the specific requirements for the product cam be developed
The buyer now tries to identify the most appropriate suppliers

Suppliers search

Proposal solicitation

Qualified suppliers will be invited to submit proposals Skilled research, writing and presentation are required Once the meeting planner as drawn up a short list of suppliers, qualified hotels will be invited to submit proposals The buyer writes the final order, listing the technical specifications The supplier responds by offering the buyer a formal contract 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

Supplier selection

Order-routine specification

Performance review

The group business markets

Conventions

Conventions are usually the annual meeting of an association and include general sessions, committee meetings and special interest sessions A trade show is often an important part of an annual convention Associations sponsors many types of meetings, including regional, special interest, educational and board meetings A corporate meeting is a command performance for employees of a company The corporations major concern is that the meeting be productive and accomplish the companys objectives Meetings of less than fifty rooms are gaining the attention of hotels and hotel chains Incentive travel, a unique subset of corporate group business, is a reward participants receive for achieving or exceeding a goal Stands for social, military, education, religious and fraternal organizations This group of specialty markets has a common price-sensitive thread

Association meetings

Corporate meetings

Small groups

Incentive travel

SMERF groups

Dealing with meeting planners

When negotiating with meeting planners, it is important to try to develop a win-win relationship Meeting planners like to return to the same property

The corporate account and travel manager

A non-group form of organizational 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

CHAPTER 8: MARKET SEGMENTATION, TARGETING AND POSITIONING

Chapter objectives

Explain market segmentation, and identify several possible bases for segmenting consumer markets, business markets and international markets List and distinguish among the requirements for effective segmentation: measurability, accessibility, substantially and actionability Outline the process of evaluating market segments and suggest some methods for selecting market segments Illustrate 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

Markets
Market: a market is the set of all actual and potential buyers of a products Market stages Mass marketing (no segmentation)

The seller mass produces, mass distributes and mass promotes one product to all buyers The sellers produces two or more products that have different features, styles, quality, sizes and so on The sellers offer products to suit the tastes of individuals and location Offer different products to subgroups within segment

Segment marketing (some segmentation)

Micromarketing (complete segmentation)

Customized marketing (niche segmentation)

Target marketing
Target marketing: the seller identifies market segments, select 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 require separate products and/or marketing mixes The process of evaluating each segments attractiveness and selecting one or more of the market segments The process of developing a competitive positioning for the product and an appropriate marketing mix Develop measures of segment attractiveness Select the target segment (s) Market targeting Develop positioning for each target segment Develop marketing mix for each target segment Market positioning

Market targeting

Positioning

Identify bases for segmenting the market Develop profiles of resulting segments Market segmentation

Market segmentation
Bases for segmenting a market There is no single way to segment a market. A marketer has to try different segmentation variables, alone and in combination, hoping to find the best way to view the market structure

Geographic segmentation

Dividing he market into different geographic units, such as nations, states, regions, counties, cities or neighborhoods. Dividing the market into groups based on demographic variables such as age, gender, family life cycle, income, occupation, education, religion, race and nationality Divides buyers into different groups based on social class, lifestyle and personality characteristics Divides buyers into groups based on their knowledge, attitude, use or response to a product

Demographic segmentation

Psychographic segmentation

Behavior segmentation

Requirements for effective segmentation

Measurability

The degree to which the segments size and purchasing power can be measured
Segments can be accessed and served Segments are large or profitable enough to serve as markets Effective programs can be designed for attracting and serving segments Segment must respond differently to different marketing mix elements and programs

Accessibility

Substantiality

Actionability

Differential

Evaluating market segments

Segment size and growth

Companies will analyze the segment size and growth and choose the segment that provides the best opportunity

Segment structural attractiveness

A company must examine major structural factors that affect long-run segment attractiveness

Company objectives and resources

The company must consider its own objectives and resources in relation to a market segment

Selecting market segments

Segmentation 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 objectives

Market-coverage alternatives Undifferentiated marketing strategy

Ignores market segmentation differences and goes after the whole market with one market offer The firm targets several market segments and designs separate offers for each Especially appealing to companies with limited resources Instead of going for a small share of a large market, the firms pursue a large share of one or more small markets

Differentiated marketing strategy

Concentrated marketing strategy

Choosing a market-coverage strategy Companies need to consider several factors in choosing a market-coverage strategy

Company resources

When the companys resources are limited, concentrated marketing makes the most sense Undifferentiated marketing is more suited for homogenous products Products that can vary in design, such as restaurants and hotels, are more suited to differentiation or concentration If 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 When competitors use segmentation, undifferentiated marketing can be suicidal Conversely, when competitors use undifferentiated marketing, a firm can gain an advantage by using differentiated or concentrated marketing

Degree of product homogeneity

Market homogeneity

Competitors strategies

Market positioning

A 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

Positioning strategy Specific product attributes

Price and product features can be used to position a product Marketers can position products by the needs that they fill or the benefits that they offer Marketers can also position for certain classes of users A product can be positioned against an existing competitors

Needs products fill or benefits products offer

Certain classes of users

Against an existing competitor

Choosing and implementing a positioning strategy The positioning tasks consists of three steps:

Identifying a set of possible competitive advantages upon which to build a position Selecting the right competitive advantages Effectively communicating and delivering the chosen position to a carefully selected target market

Communicating and delivering the chosen position Once having chosen positioning characteristics and a positioning statement, a company must communicate their position to targeted customers All of a companys marketing mix efforts must support its positioning strategy

CHAPTER 9: DESIGNING 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 coproduction 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

Product

A product is anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. It includes physical objects, service, places, organizations and ideas

Product levels Core product

Answers the question of what the buyer is really buying. Every product is a package of problem-solving services Are those services or goods that must be present for the guest to use the core product Extra products offered to add value to the core product and to help to differentiate it from the competition Include accessibility (geographic location and hours of operation), atmosphere (visual, aural, olfactory, and tactile dimensions), customer interaction with the service organization (joining, consumption and detachment), customer participation and customers interaction with each other

Facilitating product

Supporting product

Augmented product

Product classification: consumer products Convenience Specialty Shopping Unsought

Product considerations Accessibility

This refer to how accessible the product is in terms of location and hours of operation Is a critical element in services, it is appreciated through the sense. Sensory terms provide descriptions for the atmosphere as a particular set of surroundings. The main sensory channels for atmosphere are sight, sound, scent and touch Managers must think about how the customers use the product in the three phases involvement: joining, consumption and detachment Customers become part of the product you are offering Involving the guest in service delivery can increase capacity, improve customer satisfaction and reduce costs

Atmosphere

Customer interactions with the service system

Customer interactions with other customers

Co-production

Product category
Existing New

Existing

Line extension

Brand extension

New

Multi-brands

New brands

Brand decision
Brand: A 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 Individual product decision
Product attributes

Branding

Packaging

Labeling

Product support service

Conditions that support branding The product is easy to identify by brand or trademark

It should suggest something about the products benefits and qualities It should be easy to pronounce, recognize and remember It should be distinctive For larger firms looking for future expansion into foreign markets, the name should translate easily into foreign language It should be capable of registration and legal protection A brand name derives its value from customer perception Brands attract customers by developing a perception of good quality and value

The product is perceived as the best value for the price

Quality and standards are easy to maintain

If the brand is successful in developing an image of quality, customers will expect quality in all outlets carrying the same brand name Consistency and standardization are critical factors for a multi-unit brand

The demand for the general product class is large enough to support a regional or national chain

New products are generally developed to serve a particular market niche Later the product may expand to encompass multi-niches, or the original niche may grow in market size until it is a huge market share product The brand should provide economies of scale to justify expenditures for administration and advertising

There are economies of scale

New product development

Product life cycle stages Product development

Begins when the company finds and develops a new product idea. During product development, sales are zero and the companys investment costs add up A period of slow sales growth as the product is being introduced into he market. Profit are non-existent at this stage because of the heavy expenses of product introduction A period of rapid market acceptance and increasing profits A period of slow down in sales growth because the product has achieved acceptance by most of its potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition The period when sales fall off quickly and profits drop

Introduction

Growth

Maturity

Decline

Sales and profit

Sales

Profits

0
Product Development Introduction Growth Maturity Decline

Time

Losses/investment

Strategies for obtaining new product ideas A company has to develop new products to survive. New products can be obtained through acquisition or through new product development

Acquired Companies

Original Products

Acquired Patents

Product Improvements

Acquired licenses

Product Modifications

New products

Major stages in new product development

Idea generation

Idea screening

Concept development and testing

Marketing strategy

Business analysis

Product development

Test marketing

Commercialization

Idea generation

Ideas are gained from internal sources, customers, competitors, distributors and suppliers The purpose of screening is to spot good ideas and drop poor ones as soon as possible Surviving ideas must now be developed into product concepts. These concepts are tested with target customers It is important to distinguish between a product idea, product concept and product image Product idea: envisions a possible product that company managers might offer to the market Product concept: a detailed version of the idea stated in meaningful consumer terms Product image: the way that consumers picture an actual or potential product there are three parts of the marketing statement:

Idea screening

Concept development and testing

Marketing strategy development

Describes the target market, the planned product positioning and the sales, market share and profit goals for the first two years Outlines 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

Business analysis

Involves a review of the sales, costs and profit projections to determine whether they satisfy the companys objectives Product development turns the concept into a prototype of the product A prototype that hopefully meets the following criteria:

Product development

Consumers perceive it as having the key features described in the product concept statement It performs safely under normal use It can be produced for the budgeted costs

Market testing

The stage in which the product and marketing program are introduced into more realistic market settings The product is brought into the market place

Commercialization

CHAPTER 10: INTERNAL MARKETING

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

Internal marketing

The hospitality industry is unique in that employees are part of the product Marketers must develop techniques and procedures to ensure that employees are able and willing to deliver quality service Internal marketing is marketing aimed internally at the firms employees Employee satisfaction and customer satisfaction are correlated

The internal marketing process Establishment of a service culture Development of a marketing approach to HRM Dissemination of marketing information to employee Implementation of a reward and recognition system

Establishment of a service culture

A service culture is an organizational cultural that supports customer service through policies, procedures, reward systems and actions An organizational culture is a pattern of shared values and beliefs that gives members of an organization meaning, providing them with the rules for behavior in the organization Turning the organizational chart upside down. Service organizations should create an organization that supports those employees who serve the customers
Customers Line employees Supervisors Department manager General manager Corporate management

Development of a marketing approach to HRM

Create positions that attract goods employees Use a hiring process that identifies and results in hiring service-oriented employees Provide initial employee training designed to share the companys vision with the employee and supply the employee with product knowledge Provide 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

Dissemination of marketing information to employees

Often, the most effective way of communicating with customers is through customercontact 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 Hospitality organizations 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

Implementation of a reward and recognition system

Employees must know how they are doing to perform effectively. Communication must be designed to give them feedback on their performance An internal marketing program includes service standards and methods of measuring how well the organization is meeting these standards If you want customer-oriented employees, seek out ways to catch them serving the customer, and reward and recognize them for making the effort

Non-routine transactions A good internal marketing program should result in employees who can handle nonroutine transactions One 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 A non-routine transaction is a guest transaction that is unique 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 11: BUILDING CUSTOMER LOYALTY THROUGH QUALITY

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 Know tactics for resolving customer complaints and understand the importance of resolving complaints Define quality and discuss the importance of the benefits of quality Implement capacity and demand management tactics

Defining customer value and satisfaction

To win in todays marketplace, companies must be customer-centered: they must deliver superior value to their target customers Consumers buy from the firm that they believe offers the highest customer-delivered value, the difference between total customer value and total customer cost

The customer derives value from the core products, the service delivery system and the companys image Costs to the customer include money, time, energy and physic costs Customer satisfaction with a purchase depends on the products performance relative to a buyers expectations Customer loyalty, on the other hand, measures how likely a customer is to return and their willingness to perform partner shipping activities for the organization

Relationship marketing involves creating, maintaining and enhancing strong relationships with customers Retaining customers

The cost of lost customers. Companies should know how much it costs when a customer defects, this is the same as the customers lifetime value Resolving customer complaints. Resolving customer complaints is a critical component of customer retention

The link between marketing and quality. The pursuit of high quality is the neverending journey that hospitality organizations must take in order to achieve a link between the product and their customers What is quality? There are several views of product quality. One is based on product features, another is based on freedom from deficiencies, and a third is based on categories

Product features. Some view product features that enhance customer satisfaction as a way of measuring quality. Freedom from deficiencies. Freedom form deficiencies is another way of viewing quality. Three categories of service quality. A third view divides quality into three categories:

Technical quality refers to what the customer is left with after the customer-employee interactions have been completed Functional quality is the process of delivering the service or product Societal quality is a credence quality; it cannot be evaluated by the consumer before purchase and is often impossible to evaluate after purchase

Benefits of service quality

Retaining customers

High quality builds loyal customers and creates positive word of mouth The PIMS data show that firm in the top third in quality could charge 5% to 6% higher than those in the bottom third High quality can help to avoid price competition and help to maximize potential revenue Employees appreciate working in operations that are well run and produce high-quality products When an operation has good quality, it can retain good employees Recruiting is easier and training costs are reduced Internal cost are those associated with correcting problems discovered by the firm before the product reaches the customers External costs are associated with errors that the customers experience Quality systems costs are costs viewed as investment in the future of the company to ensure that customers returns

Avoidance of price competition

Retention of good employees

Reduction of costs

Developing a service quality program

Supply strong leadership Integrate marketing throughout the organization Understand the customer Understand the business Apply operational fundamentals Leverage the freedom factors Use appropriate technology Practice good human resources management Set standards, measure performance and establish incentives Feed back the results to the employees

Managing capacity
-

Corporate management is responsible for matching capacity with demand on a longterm basis, whereas units managers are responsible for matching capacity with fluctuations in short-term demand Involve the customer in the service delivery system Cross-train employees Use part-time employees Rent or share extra facilities and equipment Schedule downtime during periods of low capacity Extend service hours Use technology Use price

Managing demand

Use price to create or reduce demand Use reservations Overbook Use booking curve analysis Use queuing Shift demand Change the salespersons assignment Create promotional events

CHAPTER 12: PRICING PRODUCTS: PRICING CONSIDERATIONS, APPROACHES AND STRATEGY

Chapter objectives

Outline the internal factors affecting pricing decisions, especially marketing objectives, marketing mix strategy, costs and organizational considerations Identify and define the external factors affecting pricing decisions, including the effect of the market and demand, competition and other environmental elements Contrast the differences in general pricing approaches and be able to distinguish among cost-plus, target profit pricing, value-based pricing and going rate Identify 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 adjustment strategies Discuss the key issues related to price changes, including initiating price cuts and price increases, buyers and competitors reaction to price changes and responding to price changes

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

Factors to consider when setting prices

Internal factors Marketing objectives Marketing mix strategy Costs Organization for pricing

Pricing decisions

External factors Nature of the market and demand Competition Other environmental factors (economy, resellers, government)

Internal factors Marketing objectives

Survival

It is used when the economy slumps or a recession is going on. A manufacturing firm can reduce production to match demand and a hotel can cut rates to create the best cash flow Companies 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 When companies believe that a company with the largest market share will eventually enjoy low costs and high long-run profit, they will set low opening rates and strives to be the market-share leader Hotels like the Ritz-Carlton chain charge a high price for their high-costs products to capture the luxury market Stabilize market, create excitement for new product, draw more attention

Current profit maximization

Market-share leadership

Product-quality leadership

Other objectives

Marketing mix strategy

Price must be coordinated with product design, distribution and promotion decision to form a consistent and effective marketing program

Costs

Fixed costs

Costs that do not vary production or sales level Costs that vary directly with the level of production

Variable costs

Organizational considerations

Management must decide who within the organization should set prices. In small companies, pricing is typically handled by a corporate department or by regional or unit manager under guidelines established by corporate management

External factors Nature of the market and demand

Cross selling

The companys other products are sold to the guest This occurs through training of sales and reservation employees to offer continuously a higherpriced product that will be better meet the customers needs, rather than settling for the lowest price

Up-selling

Pricing in different markets there are four types of markets

Pure competition

The market consists of many buyers and sellers trading in a uniform commodity The market consists of many buyers and sellers who trade over a range of prices rather than a single market price The market consists of a few sellers who are highly sensitive to each others pricing and marketing strategies The market consists of one seller, it could be a government monopoly, a private regulated monopoly, or a private non-regulated monopoly

Monopolistic competition

Oligopolistic competition

Pure monopoly

Consumer perception of price and value

It is the consumer who decides whether a products price is right. The price must be buyer oriented. The price decision requires a creative awareness of the target market and recognition of the buyers differences 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

Analyzing the price demand relationship

Price elasticity of demand If 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 Buyers are less price sensitive when the product is unique or when it is high in quality, prestige or exclusiveness Consumers are also less price sensitive when substitute products are hard to find If demand is elastic, sellers will generally consider lowering their prices to produce more total revenue The following factors affect price sensitivity:

Unique value effect

Creating the perception that your offering is different from those of your competitors avoid price competition Lack of the awareness of the existence of the alternatives reduces price sensitivity

Substitute awareness effect

Business expenditure effect

When someone else pays the bill, the customer is less price sensitive Consumers are more price sensitive when the price of the product accounts for a large share of the total cost of the end benefit

End-benefit effect

Total expenditure effect

The more someone spends on a product, the more sensitive he or she is to the products price
Purchasers are less price sensitive when they are sharing the cost of the purchase with someone else Purchasers who have an investment in products that they are currently using are less likely to change for price reasons Consumers tend to equate price with quality, especially when they lack any prior experience with the product

Shared cost effect

Sunk investment effect

Price quality effect

Competitors price and offers

When a company is aware of its competitors price and offers, it can use this information as a starting point for deciding its own pricing Other factors include inflations, boom or recession, interest rates, government purchasing, birth of new technology

Other environmental factors

General pricing approaches

Cost-based pricing

Cost-plus pricing: a standard markup is added to the cost of the product Price is set to break even on the costs of making and marketing a product To make a desired profit (target a certain return on investments) Companies base their prices on the products perceived value. Perceived value pricing uses the buyers perceptions of value, not the sellers cost, as the key to pricing Based on the establishment of price largely against those of competitors, with less attention paid to costs or demand

Break-even analysis

Target profit pricing

Value-based pricing

Competition-based pricing

Pricing strategies

Prestige 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 Setting a high price when the market is price insensitive. It is common in the industries with high research and development costs, such as pharmaceutical companies and computer firms Companies set a low initial price to penetrate the market quickly and deeply, attracting many buyers and winning a large market share Sellers using product-bundle pricing combine several of their products and offer the bundle at a reduced price. Most used by cruise lines Hotels have special rates to attract customers who are likely to purchase a large quantity of hotel rooms, either for a single period or throughout the year

Market-skimming pricing

Marketing-penetration pricing

Product-bundle pricing

Volume discounts

Discounts based on time of purchase

A seasonal discount is a price reduction to buyers who purchase services out of season when the demand is lower. Seasonal discounts allow the hotel to keep demand steady during the year This refers to segmentation of the market and pricing differences based on price elasticity characteristics of the segments. In 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. It maximizes the amount that each customer pays Yield management: a yield management system is used to maximize a hotels yield or contribution margin Provides an outlet for unsold inventory, it is not a substitute for effective marketing and a welldevised pricing strategy Psychological aspects such as prestige, reference prices, round figures and ignoring end figures are used in pricing Hotels temporarily price their products below list price, and sometimes even below cost, for special occasions, such as introductions or festivities. Promotional pricing gives guests a reason to come and promotes a positive image for the hotel

Discriminatory pricing

Last minute pricing

Psychological pricing

Promotional pricing

Price changes

Initiating price cuts

Reasons 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 Reasons for a company to increase price are cost inflation or excess demand Competitors, distributors, suppliers and other buyers will associate price with quality when evaluating hospitality products they have not experienced directly Competitors are most likely to react when the number of firms involved is small, when the product is uniform, and when buyers are well informed Issues to consider are reason, market share, excess capacity, meet changing cost conditions, lead an industry-wide program change, temporary versus permanent

Initiating price increases

Buyer reactions to price changes

Competitor reactions to price changes

Responding to price changes

CHAPTER 13: DISTRIBUTION CHANNELS

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 Know how to use the internet as a distribution channel Discuss channel behavior and organization, explaining corporate, contractual and vertical marketing systems, including franchising Illustrate the channel management decisions of selecting, motivating and evaluating channel members Identify factors to consider when choosing a business location

Nature of distribution channels

A distribution channel is a set of independent organizations involved in the process of making a product or service available to the consumer or business user

Reasons that marketing intermediaries are used Greater efficiency in making goods available to target markets Offer the firm more than it can achieve on its through the intermediaries

Contacts Experience Specialization Scale of operation

Match supply and demand

Distribution channel functions

Information

Gathering and distributing marketing research and intelligence information about the marketing environment Developing and spreading persuasive communications about an offer Finding and communicating with prospective buyers

Promotion

Contact

Matching

Shaping and fitting the offer to the buyers needs

Agreeing on price and other terms of the offer so that ownership or possession can be transferred Transporting and storing goods Acquiring and using funds to cover the cost of channel work Assuming financial risks, such as the inability to sell inventory at full margin

Negotiation

Physical distribution

Financing

Risk taking

Number of channel levels

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

Manufacturer Manufacturer Manufacturer Manufacturer Wholesaler Wholesaler Jobber Retailer Retailer Retailer

Consumer Consumer Consumer Consumer

Customer marketing channels

Business

Business Customer Business Distributor Business Representatives Or sales Branch Business Representatives Or sales Branch Business Customer

Business

Business

Business Customer

Business

Business Distributor

Business Customer

Industrial marketing channels

Marketing intermediaries

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

Internet The internet is an effective marketing tool for hospitality and travel companies. Companies can use pictures, both still and moving, to display their product. Customers can make reservations and pay for products directly from the internet

Channel behavior
Channel conflict Although channel members depend on each other, they often act alone in their own short-run best interests They frequently disagree on the roles each should play on who should do what for which rewards Horizontal conflict

Conflict between firms at the same level Conflict between different levels of the same channel

Vertical conflict

Channel organization

Distribution channels are shifting from loose collections of independent companies to unified systems
Conventional marketing channel Manufacturer Vertical marketing system

Manufacturer Wholesaler

Wholesaler

Retailer

Retailer

Consumer

Consumer

Conventional marketing system

-

Consist of one or more independent producers, wholesalers and retailers. Each is a separate business seeking to maximize its own profits, even at the expense of profits for the system as a whole Consists of producers, wholesalers and retailers acting as unified system. VMSs were developed to control channel behavior and manage channel conflict and its economies through size, bargaining power and elimination of duplicated services. There are three major types of VMSs: Corporate
-

Vertical marketing system

-

Combine successive stages of production and distribution under single ownership Coordinates successive stages of production and distribution, not through common ownership or contractual ties, but through the size and power of the parties Consists of independent firms at different levels of production and distribution who join through contracts to obtain economies or sales impact Franchising 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 Alliances developed to allow two organizations to benefit from each others strength

Administered
-

Contractual
-

Horizontal marketing system

-

Two or more companies at one level join to follow new marketing opportunities. Companies can combine their capital, production capabilities or marketing resources to accomplish more than one company working alone A single firm sets up two or more marketing channels to reach one or more customer segments

Multi-channel marketing system

-

Channel management decisions

Selecting channel members

When selecting channel members, the companys management will want to evaluate each potential channel members growth and profit record, profitability, cooperativeness and reputation A company must motivate its channel members continuously A company must regularly evaluate the performance of its intermediaries and counsel underperforming intermediaries The company and its intermediaries must agree on the terms and responsibilities of each channel member. According to the services and clientele at hand the responsibilities are formulated after careful consideration

Motivating channel members

Evaluating channel members

Responsibilities of channel members and suppliers

Business location

There are four steps in choosing a location Understanding the marketing strategy

Know the target market of the company Select the geographic market areas Demographic and psychographic characteristics and competition are factors to consider Compatible business, competitors, accessibility, drainage, sewage, utilities and size are factors to consider

Regional analysis

Choosing the area within the region

Choosing the individual site

CHAPTER 14: PROMOTING PRODUCTS: COMMUNICATION AND PROMOTION POLICY AND ADVERTISING

Chapter objectives

Outline the six steps in developing effective communications Define the ways of setting a total promotional budget: affordable, percentage-of-sales, competitive-parity, and objective 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 Describe the major decisions in advertising, including setting objectives and budget; creating the advertising message; selecting advertising medias; and choosing media types, vehicles, and timing and evaluating advertising

The communication process

Identify the target audience Determine the response sought

Six buyer readiness state:

Awareness

Knowledge

Liking

Preference

Conviction

Purchase

Design a message

AIDA model the message should get Attention, hold Interest, arouse Desire and obtain Action Three problems that the marketing communicator must solve:

Message content (what to say)

Rational 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 Whether to draw a conclusion or leave it to the audience Whether to present a one- or two-sided arguments Whether to present the strongest arguments first or last Visual ad using novelty and contrast, eye-catching pictures and headlines, distinctive formats, message size and position, color, shape and movement Audio ad using words, sound and voices Message source using attractive sources to achieve higher attention and recall, such as using celebrities

Message structure (how to say it)

Message format (how to say it symbolically)

Choose the media through which to send the message

Personal communication channels

Used for products that are expensive and complex It can create opinion leaders to influence others to buy Include media (print, broadcast and display media), atmosphere and events

Non-personal communication channels

Measure the communications results

Evaluate the effects on the targeted audience

Establishing the total marketing communication budget

Four common methods for setting the total promotion budget Affordable method

A budget is set based on what management thinks they can afford Companies set promotion budget at a certain percentage of current or forecasted sales or percentage of the sales price Companies set their promotion budget to match competitors Companies develop their promotion budget by defining specific objectives, determining the tasks that must be performed to achieve these objectives and estimating the costs of performing them

Percentage of sales method

Competitive parity method

Objective and task method

Managing and coordinating integrated marketing communications Advertising

Suggest that the advertised product is standard and legitimate; it is used to build a long-term image for a product and to stimulate quick sales However, it is also considered impersonal, one-way communication Builds personal relationship, keeps the customers interests at heart to build long-term relationships and allows personal interactions with customers It is also considered the most expensive promotion tool per contact Includes an assortments of tools: coupons, contests, cents-off deals, premiums and others It attracts consumers attention and provides information It creates a stronger and quicker response It dramatizes product offers and boosts sagging sales It is also considered short-lived Has believability It reaches prospective buyers and dramatizes a company or product

Personal selling

Sales promotion

Public relations

Factors in setting the promotion mix Type of product and market

The importance of different promotional tools varies among consumers and commercial markets Promotional tools vary in their effects at different stages of buyer readiness The effects of different promotion tools also vary with stages of the product life cycle

Buyer readiness state

Product life cycle stage

Push versus pull strategy

Push strategy

The company directs its marketing activities at channel members to induce them to order, carry and promote the product A company directs its marketing activities toward final consumers to induce them to buy the product

Pull strategy

Push strategy Producer marketing Activities (personal selling, trade promotion, other) Reseller marketing Activities (personal selling, trade promotion, other)

Producer

Retailers and Wholesalers

Consumers

Pull strategy
Demand Demand

Producer

Retailers and Wholesalers

Consumers

Producer marketing activities (consumer advertising, sales promotion, others)

Major decisions in advertising

Message decisions Message generation Message evaluation and selection Message execution Objectives setting Communication Objectives Sales Objectives Budget decisions Campaign evaluation

Affordable approach Percent of sales Competitive parity Objective and task

Media decision Reach, frequency, impact Major media types Specific media vehicles Media timing

Communication Impact
Sales impact

Setting objectives Objectives should be based on information about the target market, positioning and market mix. Advertising objectives can be classified by their aim:

Informative advertising

Used to introduce a new product category or when the objective is to build primary demand Used as competition increases and a companys objective becomes building selective demand

Persuasive advertising

Reminder advertising

Used for mature products, because it keeps the consumers thinking about the product

Setting the advertising budget Factors to be consider in setting a budget are the stage in the product life-cycle, market share, competition and clutter, advertising frequency and product differentiation

Creating the advertising message Advertising 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
Messages should be meaningful, distinctive and believable The impact of the message depends on what is said and how it is said

Message evaluation and selection

Message execution

Media decisions

Deciding on reach, frequency and impact Choosing among major media types

Choose among newspaper, television, direct mail, radio, magazines and outdoor Costs should be balanced against the media vehicles: audience quality, ability to gain attention and editorial quality 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

Selecting specific media vehicles

Deciding on media timing

Profiles of major media types MEDIUM

Newspaper

ADVANTAGES
Flexibility; timeliness; good local market coverage; broad acceptance; high believability Combines sight, sound and motion; appealing to the senses; high attention, high reach

LIMITATIONS
Short lift; poor reproduction quality; small pass-along audience High absolute cost; high clutter; fleeting exposure; less audience selectivity

Television

Direct mail

Audience selectivity; flexibility; no ad competition Relatively high cost; junk mail image within the same medium; personalization Mass use; high geographic and demographic selectivity; low cost Audio presentation only; lower attention than television; non-standardized rate structures; fleeting exposure Long ad purchase lead time; some waste circulation; no guarantee of position

Radio

Magazines

High geographic and demographic selectivity; credibility and prestige; high-quality reproduction; long life; good pass-along readership Flexibility; high repeat exposure; low cost; low competition Audience selectivity; personalization; low cost

Outdoor

No audience selectivity; creative limitations

E-mail

Need to gain permission; message must be relevant or it will be viewed as junk mail

Advertising evaluation These are three major methods of adverting pre-testing and two popular methods of post-testing ads

Pre-testing

Direct rating the advertiser exposes a consumer panel to alternative ads and asks them to rate the ads Portfolio tests the interviewer asks the respondent to recall all ads and their contests after letting them listen to a portfolio of advertisements Laboratory tests use equipment to measure consumers physiological reactions to an ad Recall tests the advertiser asks people who have been exposed to magazines or television programs to recall everything that they can about the advertisers and products that they saw Recognition tests the researcher asks people exposed to media to point out the advertisements that they have seen The sales effect can be measured by comparing past sales with past advertising expenditures and through experiments

Post-testing

Measuring the sales effect

CHAPTER 15: PROMOTING PRODUCTS: PUBLIC RELATIONS AND SALES PROMOTION

Chapter objectives

Understand the different public relations activities: press relations, product publicity, corporate communications, lobbying and counseling Understand the public relations process: research, establishing marketing objectives, defining the target audience, choosing the PR message and vehicles and evaluating PR results Know how the different PR tools are used: publications, events, news, speeches, public service activities and identity media Implement a crisis management program in a hospitality business Discuss the growth and purpose of sales promotion, setting objectives and selecting consumer promotion tools

Public relations

Definition: the process by which we create a positive image and customer preference through third-party endorsement

Five public relations activities Press relations

The aim is to place newsworthy information into the news medias to attract attention to a person, product or service Product publicity involves efforts to publicize specific products Covers internal and external communications and promotes understanding of the organization Involves dealing with legislators and government officials to promote or defeat legislation and regulation Involves advising management about public issues and company positions and image

Product publicity

Corporate communication

Lobbying

Counseling

Marketing public relations

Publicity is the task of securing editorial space; marketing PR goes beyond simple publicity. Marketing PR can contribute to the following tasks:

Assist in the launch of new products Assist in repositioning a mature product Build up interest in a product category Influence specific target groups Defend products that have encountered public problems

The public relations process

Researching to understand the firms mission, culture and target of the communication Establishing marketing objectives

Build awareness Build credibility Stimulate the sales force and channel intermediaries Hold down promotion costs

Defining the target audience Choosing the PR message and vehicles, such as event creation Implementing the marketing PR plan Evaluating PR results

Exposures Awareness/comprehension/attitude change Sales-and-profit contribution

Overview of the major tools in public relations

Publications

Companies can reach and influence their target market via annual reports, brochures, cards, articles, audiovisual materials and company newsletters and magazines Companies can draw attention to new products or other company activities by arranging special events PR professionals cultivates the press to increase better coverage to the company Speeches 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 Companies can improve public goodwill by contributing money and time to good causes such as supporting community affairs Companies can create a visual identity that the public immediately recognizes, such as with companys logos, stationary, signs, business forms, business cards, buildings, uniforms, dress code and rolling stock

Events

News

Speeches

Public service activities

Identity media

Public relations opportunities for individual properties

Build PR around the owner/operator Build PR around the location

For instance, the isolation and obscurity of an enterprise can be used as a PR tactic

Build PR around the product or service

Crisis management

Take all precautions to prevent negative events from occurring When a crisis does occur:

Appoint a spokesperson. This to ensures that the company is giving a consistent story based on facts Contact the firms public relations agency if it has one The company should notify the press when a crisis does

Sales promotion

Setting sales promotion objectives

Vary 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 The promotion planner should consider the type of market, the sales promotion objectives, the competition and the costs and effectiveness of each tool. Common sales-promotion tools include samples, coupons, premiums, patronage rewards, point-of-purchase (POP), contests, sweepstakes and games The following steps are involved in developing a sales-promotion program:

Selecting sales promotion tools

Developing the sales promotion program

Decide on the size of the incentive Set the conditions for participation Decide how to promote and distribute the promotion program Set promotion dates Decide on the sales promotion budget

Evaluating the results

The company should evaluate the results against the objectives of the program

CHAPTER 16: ELECTRONIC MARKETING: INTERNET MARKETING, DATABASE MARKETING AND DIRECT MARKETING

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

Internet marketing
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The internet represents an untapped opportunity for many companies. It is not only useful as a sales outlet, but it also provides a medium for communication between a company and its customers Sales

One of the advantages of the internet as a sales channel is the customer does the work Web 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 It is important to give customers a reason to come back to your site by providing useful content The site should also be organized so the users can quickly get to the information they need and project an image that supports the product or brand. Three basic principles of electronic marketing:

Communication

Providing content

Web site development

Build and actively manage a customer database Develop a clear concept on how the company should take advantage of the internet Be easily accessible and quick in responding to customer calls

How electronic marketing will change marketing Marketing Activity

Advertising

Traditional marketing
Prepare print, video or voice copy and use standard media vehicles such as television, radio, newspapers and magazines. Usually only very limited information can be presented. Provide 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

Cyber marketing
Design extensive information and put it on the companys web page; CD brochures linked to your site; distribution of public relations information over the internet

Customer service

Provide seven day, twenty-four hour service response; send phone, fax or e-mail solutions; allow customers to co-produce their customer service; access to frequent guest diner and flyer information over the internet Video 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 questionnaires; access to focus groups over the internet

Selling

Phoning or visiting prospects and customers and demonstrating product physically or by projective equipment

Marketing research

Use of individual interviews, focus groups and mailed or phones surveys

Developing a marketing database system

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A marketing database is an organized collection of data about individual customers, prospects or suspects that is accessible and actionable for such marketing purposes as lead generation, lead qualification, sale of a product or service or maintenance of customer relationships Why would a customer want to be on your database?

If you were a customer, why would you want to be on your database? By answering this question, you find out whether your database has a strategic focus or is mainly used for tactical purposes

Direct marketing
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Direct marketing is an interactive system of marketing that uses one or more advertising media to affect a measurable response and/or transaction at any location

Reasons for the growth of direct marketing

Precision marketing Personalization

Offers to fit the target market and timing offers to fit the needs of the consumer, such as offers associated with a birthday

Privacy

The offer is not visible to competitors

Immediate results Measurability A form of direct marketing that combines aspects of advertising, marketing research and personal sales

Telemarketing

E-mail

Can be both low cost and effective Both full size and miniature CDs about the size of a business card, are replacing color brochures as a marketing communication Direct marketing can be used to develop a relationship with customers. It costs four to seven times as mush to create a customer as it does to maintain a customer

CDs

Relationship marketing

Integrated direct marketing

A more powerful approach to direct marketing through a multiple-vehicle, multiple-stage campaign

REFERENCE

Kotler, P., Bowen, J. and Makens, J. (2003) Marketing for Hospitality and Tourism. Third Edition. New Jersey: Pearson Education Inc.

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