CHAPTER 1:

Marketing for Hospitality and Tourism

CHAPTER 1:

INTRODUCTION: MARKETING FOR HOSPITALITY AND TOURISM

Introduction Today marketing isnt simply a business function: its a philosophy, a way of thinking, and a way of structuring your business and your mind. Marketing is much more than a new ad campaign. Marketing, more than any business function, deals with customers creating customer value and satisfaction are at the heart of hospitality and travel industry marketing. Many factors contribute to making a business successful. However, todays successful companies at all levels have one thing in common: they are strongly customer focused and heavily committed to marketing. As a manager, you will be motivating your employees to create superior value for your customers.Marketings tasks:

To design a product-service combination that provides real value to targeted customers

Motivates purchase

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

Customer OrientationSuccessful managers understand that profits are best seen as the result of running a business well rather than as its sole purpose. When a business satisfies its customers, the customers will pay a fair price for the product a fair price includes a profit for the firm. Managers who forever try to maximize short-run profits are short-selling both the customer and the company.

The alternative management approach is to put the customer first and reward employees for serving the customer well. It is wise to assess the customers long-term value and take appropriate actions to ensure a customers long-term support.

The importance of customer orientation and its implication for marketing planning:a. providing information to the customers

b. understanding customer needs

c. fulfilling customer needs

d. creating and delivering customer value

e. sustaining customer satisfaction

f. maintaining long-term relationship with customers

g. obtaining customer loyalty

MarketingIn the hospitality industry, marketing and sales are often thought to be the same, and no wonders: the sales department is one of the most visible. Sales managers provide prospective clients with tours and entertain them, thus the sales function is highly visible. Whereas, most of the non-promotional areas of the marketing function take place behind closed doors. The four-P framework calls upon marketing professionals to decide on the product and its characteristics, set the price, decide how to distribute their product, and choose methods for promoting their product. If marketers do a good job of identifying consumer needs, developing a good product, and pricing, distributing, and promoting it effectively, the result will be attractive products and satisfied customers.

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

1. Product/serviceA product is seen as an item that satisfies what a consumer needs or wants. It is a tangible good or an intangible service. Intangible products are service based like the tourism industry & the hotel industry or codes-based products like cellphone load and credits. Tangible products are those that can be felt physically. Typical examples of mass-produced, tangible objects are the motor car and the disposable razor.

2. Price

The price is the amount a customer pays for the product. The price is very important as it determines the company's profit and hence, survival. Adjusting the price has a profound impact on the marketing strategy, and depending on the price elasticity of the product, often, it will affect the demand and sales as well. When setting a price, the marketer must be aware of the customer perceived value for the product.

3. Place (distribution channel)Refers to providing the product at a place which is convenient for consumers to access. Place is synonymous with distribution. Various strategies such as intensive distribution, selective distribution, exclusive distribution, franchising can be used by the marketer to complement the other aspects of the marketing mix. 4. Promotion

Represents all of the methods of communication that a marketer may use to provide information to different parties about the product. Promotion comprises elements such as: advertising, public relations, personal selling and sales promotion.

Advertising covers any communication that is paid for, from cinema commercials, radio and Internet advertisements through print media and billboards.

Public relations is where the communication is not directly paid for and includes press releases, sponsorship deals, exhibitions, conferences, seminars or trade fairs and events.

Word-of-mouth is any apparently informal communication about the product by ordinary individuals, satisfied customers or people specifically engaged to create word of mouth momentum.

Sales staff often plays an important role in word of mouth and public relations

The Extended Marketing Mix (7Ps)

The additional Ps have been added because today marketing is far more customer oriented than ever before, and because the service sector of the economy has come to dominate economic activity in this country. These 3 extra Ps are particularly relevant to this new extended service mix. The three extra Ps are:

1. Physical layout (evidence)

Refers to the experience of using a product or service, for example, when a service goes out to the customer, it is essential that you help him see what he may or may not buy. Examples are brochures and pamphlets.2. People (provision of customer service)Refers to the customers, employees, management and everybody else involved in it. In tourism industry especially, it is essential for everyone to realize that the reputation of the brand is in the peoples hand. Example; a FOA service is the first impression of the hotel.3. Processes Refers to the methods and process of providing a service and is hence essential to have a thorough knowledge on whether the services are helpful to the customers. Example; how the customer services handle customer complaints.Travel industry marketing

Travel industry marketing is about the marketing effort done in introducing and distributing tourist destinations to the domestic and international customers (tourists). The aim is to ensure that the known destination will become one of the top chosen destination in the world. Travel marketing also will ensure that the destinations available resources and consumption level is properly monitored, so that the industry can be deem as successful.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 marketingThe entrances of corporate giants into the hospitality market and the marketing skills these companies have brought to the industry have increased the importance of marketing within the industry. 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 marketingCore marketing concepts

1. 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 these needs were not invented by marketers but are part of the human makeup

Wants: The form that a human needs takes when shaped by culture and individual personality. Many sellers often confuse wants and needs. 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.

Outstanding marketing companies go to great lengths to understand their customers needs wants and demands.

Maslow Hierarchy of Needs:

2. Products

People satisfy their needs and wants with 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.

One of the most interesting areas of marketing is product planning and development. Travel industry customers continually seek new products sometimes the old is new: today heritage tourism is increasingly important3. 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. One of the biggest challenges for management is to increase the value of their product for their target market

Satisfaction: Satisfaction with a product is determined by how well the products meet the customers expectations for that product. Customer expectations are based on past buying experiences, the opinions of friends, and market information.

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. Marketers have two major responsibilities in quality-centered company:

i. They must participate in forming strategies

ii. They must perform each marketing activity to high standards4. Exchange, transactions and relationships

Exchange: The act of obtaining a desired object from someone by offering something in return. Exchange is only one of several ways people can obtain a desired object.

Transaction: Marketings unit of measurement. A transaction consists of a trade of values between two parties. A transaction involves at least two things of value, a time of agreement, and a place of agreement.

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. Smart marketers work at building relationships with valued customers, distributors, dealers and suppliers.Relationship marketing within the hospitality industry is particularly important in the following areas:

Between hospitality organizations and their customers

Between hospitality organizations and their employees

Between retailers of travel-hospitality services, such as hotels or airlines, and marketing intermediaries, such as tour wholesalers, incentive houses, and travel agency conglomerates

Between retailers of travel-hospitality services and key customers, such as large corporations and government agencies

Between retailers of food service such as ARAMARK or McDonalds and organizations such as universities, bus terminals, and large corporations in which this food chain is one of a handful of providers

Between retailers of one type of travel-hospitality service, such as a motel chain and a restaurant chain. (both are mutually interdependent)

Between retailers of travel-hospitality services and key suppliers

Between hospitality organizations and their marketing agencies, banks, and law firms5. Markets

A set of actual and potential buyers who might transact with a seller. The size of a market depends on the number of persons who exhibit a common need, have the money or other resources that interest others, and are willing to offer these resources in exchange for what they want. The fact is that modern economies operate on the principle of the division of labor by which each person specializes in the production of something, receives payment, and buys needed things with money.Marketing managementDefinition: 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 means working with markets to bring about exchanges for satisfying human needs and wants. Most people think of a marketing manager as someone who finds enough customers to buy the companys current output but, it is too limited. The marketing manager is interested in shaping the level, time, and composition of demand for the companys products and services.

Marketing management philosophies:1. Manufacturing concept

Also called the production concept - Holds that customers will favor products that are available and highly affordable, and therefore management should focus on production and distribution efficiency. The problem is that management may become so focused on manufacturing systems that they forget the customer.

2. Product concept

Holds that customers prefer existing products and product forms, and the job of management is to develop good versions of these products. This misses the point that consumers are trying to satisfy needs and might turn to entirely different products to better satisfy those needs.

3. Selling concept

Holds that consumer will not buy enough of the organizations product unless the organization undertakes a large selling and promotion effort. Does not establish a long-term relationship with the customer, because the focus is on getting rid of what one has rather than creating a product to meet the needs of the market.The selling concept exists within the hospitality industry a major contributing factor is overcapacity. Why do major sectors continuously face overcapacity?

Pride in being the biggest, having the most capacity

A false belief that economies of scale will occur as size increases

Tax laws that encourage real estate developers to overbuild properties because of the generous tax write-offs

Etc.4. Marketing concept

Holds that achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfaction more effectively and efficiently than competitors.

The marketing concept is frequently confused with the selling concept

a. The selling concept takes an inside-out perspective it starts with the companys existing products and calls for heavy selling and promoting to achieve profitable sales

b. The marketing concept starts with a well-defined market, focuses on customer needs and integrates all the marketing activities that effect customers. It meets the organizational goals by creating long-term customers relationships based on customer value and satisfaction.

The selling and marketing concepts contrasted:

5. Societal marketing concept

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. The societal marketing concept questions whether the marketing concept is adequate in an age of environmental problems, resource shortages, rapid population growth, worldwide inflation, and neglected social services. A broader issue facing the hospitality and travel industries is expansion that has a positive impact on local residents. The hospitality and travel industries cannot insulate themselves from the continuing need for societal approval.

The Service CultureThe service culture focuses on serving and satisfying the customer. The service culture has to start with top management and flow down. A service culture empowers employees to solve customer problems. It is supported by a reward system based on customer satisfaction. Human beings generally do what is rewarded if an organization wants to deliver a quality product, the organizations culture must support and reward attention to customer needs.

Service marketers must be concerned with four characteristics of service:

1. 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.Example: Hotel does not sell a room, but the right to use a room for a specific period of time. When hotel guest leave, they have nothing to show for the purchase but a receipt.2. Inseparability

Services produced and consumed at the same time, and cannot be separated from their providers, whether the providers are people or machines.Example: The food in a restaurant may be outstanding, but if the service person has a poor attitude or provides inattentive service, customers will down-rate the overall restaurant experience.3. Variability

Service quality depends on who provides the services and when and where they are provided.

Example: A guest can receive excellent service one day, and mediocre service from the same person the next day; the service person may not have felt well or perhaps experienced an emotional problem.4. Perishability

Services cannot be stored. If service providers are to maximize revenue, they must manage capacity and demand because they cannot carry forward unsold inventory

Example: A 100-room hotel that sells only 60 rooms on a particular night cannot inventory the 40 unused rooms and then sell 140 rooms the next night. Revenue loss from not selling 40 rooms is gone forever.Management strategies for service businessesService marketers can do several things to increase service effectiveness in the face of intrinsic service characteristics. Just like manufacturing business, good service firms use marketing to position themselves strongly in chosen target markets. However, services differ from tangible products and often require additional marketing approaches.In a service business, the customer and frontline service employee interact effectively with customers to create superior value during service encounters. Successful service companies focus their attention on both their employees and customers. They understand the service-profit chain, which links service firms profits with employee and customer satisfaction.

Three types of marketing in service industries:

1. 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. For the firm to deliver consistently high service quality, everyone must practice customer orientation.

2. External marketingAll marketing efforts done and targeted towards the external market (the consumers)

3. Interactive marketing

Recognized that perceived service quality depends heavily on quality of buyer-seller interaction. In service marketing, service quality depends on both the service deliverer and the quality of the delivery

Managing the customer relationship CRM

Collaborative marketing (also known as CRM) in which the various departments of a company, such as sales, technical support, and marketing, share any information they collect from interactions with customers.

Customer relationship management (CRM) is a managerial philosophy and practice that has received widespread acceptance in many industries it combine marketing, business strategy and information technology to better understand the customers, to custom-develop products for key customers, and to develop closer relationships with key customers. CRM focuses on managing revenue opportunities from customers, retaining customers, and enjoying a stream of income from them over their lifetime. As the name implies, CRM calls for developing unique and lasting relationships with customers.For example, customer feedback gathered from a technical support session could inform marketing staff about products and services that might be of interest to the customer. The purpose of collaboration is to improve the quality of customer service, and, as a result, increase customer satisfaction and loyalty.

Difficulty in measuring marketing effectivenessCommonly cited obstacles to measuring marketing effectiveness included insufficient marketing data, insufficient tools to analyze data, and a long sales cycle.

CHAPTER 2: THE ROLE OF MARKETING IN STRATEGIC PLANNING

Strategic PlanningThe aim of strategic planning is to help 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 objectivesFour major organizational levels:1. 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 eliminate2. Division level

Each division establishes a plan covering the allocation of funds to support that business unit within that division3. Business level

Each business unit in turn develop its business units strategic plan to carry that business unit into profitable future4. Product level

Each product level within a business unit develops a marketing plan for achieving its objectives in its product market

Difference between strategic, corporate and marketing objectives:

Strategic Corporate Marketing

Strategy is a companys plan for controlling and utilizing its resources - human, physical and financial capital, in an effort to promote and secure its interests.

Example; efficient use of the resources relative to the output

They are usually set by the top management of the business.

Corporate objectives tend to focus on the desired performance and results of the business.

Example; expected market share (12%)Marketing objectives define what you want toaccomplish through your marketing activities.

SMART approach.

Example; We aim to achieve 75% customer awareness of our brand in our target markets.

Corporate Strategic PlanningCorporate headquarters has the responsibility for setting into motion the whole planning process. Some corporations give a lot of freedom to their business units but let them develop their own strategies; others set the goals and get heavily involved in the individual strategies. The hospitality industry faces the need for greater empowerment of employees, particularly at middle-management levels. The hospitality and tourism industries are international and multicultural in nature attitude and culture sometimes create sharp differences in management style and in the perceived importance of strategic planning, empowerment, and other concepts.

Mission and vision statements"Mission Statements" and "Vision Statements" do two distinctly different jobs.

A Mission Statement defines the organization's purpose and primary objectives. Its prime function is internal to define the key measure or measures of the organization's success and its prime audience is the leadership team and stockholders.

Vision Statements also define the organizations purpose, but this time they do so in terms of the organization's values rather than bottom line measures (values are guiding beliefs about how things should be done.) The vision statement communicates both the purpose and values of the organization. For employees, it gives direction about how they are expected to behave and inspires them to give their best. Shared with customers, it shapes customers' understanding of why they should work with the organization.

Example:The mission statement of Farm Fresh Produce is:

"To become the number one produce store in Main Street by selling the highest quality, freshest farm produce, from farm to customer in under 24 hours on 75% of our range and with 98% customer satisfaction.

Here's the Vision Statement creates and shares with employees, customers and farmers alike:

"We help the families of Main Town live happier and healthier lives by providing the freshest, tastiest and most nutritious local produce: From local farms to your table in under 24 hours."

Business Objectives

Objectives give the business a clearly defined target. Plans can then be made to achieve these targets. This can motivate the employees. It also enables the business to measure the progress towards to its stated aims.

The most effective business objectives meet the following criteria: S Specific objectives are aimed at what the business does, e.g. a hotel might have an objective of filling 60% of its beds a night during October, an objective specific to that business. M - Measurable the business can put a value to the objective, e.g. 10,000 in sales in the next half year of trading. A - Agreed by all those concerned in trying to achieve the objective. R - Realistic the objective should be challenging, but it should also be able to be achieved by the resources available. T- Time specific they have a time limit of when the objective should be achieved, e.g. by the end of the year.

Examples of company objectives are:

1. To earn at least a 20 percent after-tax rate of return on our net investment during the next fiscal year

2. To increase market share by 10 percent over the next three years.

3. To lower operating costs by 15 percent over the next two years by improving the efficiency of the manufacturing process.

4. To reduce the call-back time of customers inquiries and questions to no more than four hours.

Establishing strategic business unitsStrategic 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 performanceBoston Consulting Group Model:

Different types of business:

1. Question marks - Company business that operate in high-growth markets but have relatively low market share

2. Stars - The market leader in a high-growth market

3. Cash cows - Produces a lot of cash for the company and enjoys economies of scale and higher profit margins

4. Dogs - Company businesses that have weak market shares in low-growth markets.

Four alternatives objectives:

1. Build - To increase the SBUs market share, even foregoing short-term earnings to achieve this objective

2. Hold - To preserve the SBUs market share

3. Harvest - To increase the SBUs short-term cash flow regardless of the long-term effect

4. Divest - To sell or liquidate the business because resources can be better used elsewhereAlthough the portfolio is basically healthy, wrong objectives or strategies could be assigned. The worst mistake would be to require all the SBUs to aim for the same growth rate or return level. Additional mistakes would include the following:

Leaving cash-cow businesses with too little or too much in retained funds

Making major investments in dogs hoping to turn them around but failing to make the turnaround before cash reserves are gone

Maintaining too many question marks and under-investing in each Developing growth strategiesBeyond evaluating current businesses, designing the business portfolio involves finding businesses and products the company should acquire. Companies need growth if they are to compete and attract top talent. Marketing must identify, evaluate, and select opportunities and lay down strategies for capturing them.

By considering ways to grow via existing products and new products, and in existing markets and new markets, Ansoff matrix template provides four different growth strategies:

1. Market Penetration - the company seeks to achieve growth with existing products in their current market segments, aiming to increase its market share.

2. Market Development - the company seeks growth by targeting its existing products to new market segments.

3. Product Development - the company develops new products targeted to its existing market segments.

4. Diversification - the company grows by diversifying into new businesses by developing new products for new markets.

Strategy formulation (how do we get there?) Generic types of strategy:

1. Overall cost leadership the real key is for a firm to achieve the lowest costs among those competitors adopting a similar differentiation or focus strategy

2. Differentiation the firm cultivates strengths that will give it a competitive advantage in one or more benefits

3. Focus the firm gets to know the needs of these segments and pursues either cost leadership or a form of differentiation within the target segments

4. Strategic alliances can be defined as relationships between independent parties that agree to cooperate but still retain separate identities. Cooperative agreements between organizations that allow them to benefit from each others strengths.SWOT AnalysisA tool that used to identifies the Strengths, Weaknesses, Opportunities and Threat of an organization. Specifically, SWOT is a basic, straightforward model that assesses what an organization can and cannot do as well as its potential opportunities and threats. The method of SWOT analysis is to take the information from an environmental analysis and separate it into internal (strengths and weaknesses) and external issues (opportunities and threats).Once this analysis is completed, SWOT analysis determines what may assist the firm in accomplishing its objectives, and what obstacles must be overcome or minimize to achieved desired results. SWOT can help management in a business discover: What the business does better than the competition

What competitors do better than the business Whether the business is making the most of the opportunities available

How a business should respond to changes in its external environmentThe result of the analysis is a matrix of positive and negative factors for management to address:

Positive factorsNegative factors

Internal factorsStrengthsWeaknesses

External factorsOpportunitiesThreats

The key point to remember about SWOT is that:

Strengths and weaknesses: Are internal to the business

Relate to the present situationOpportunities and threats: Are external to the business

Relate to changes in the environment which will impact the business1. Strengths are:

Things a business is good at

A characteristic giving a business an important capability

Sources of clear advantage over rivals

Distinctive competencies and resources that will help the business achieve its objectives2. Weaknesses are:

A source of competitive disadvantage Things the business lacks or does poorly

Factors that place a business at a disadvantage

Issues that may hinder or constrain the business in achieving its objectives3. An opportunity is any feature of the external environment which creates positive potential for the business to achieve its objectives.

4. Threats are any external development that may hinder or prevent the business from achieving its objectives.

Differences between internal and external factors: Internal factors include the strengths and weaknesses of the business. These aspects relate to the present situation and contain within the company environment itself, example the financial availability and the employees capability.

External factors relate to changes in the large environment which will impact the whole business operation in terms of the opportunities and threats. Examples are technological innovation and demographic change.

PEST AnalysisPEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management.

It is a part of the external analysis when conducting a strategic analysis or doing market research, and gives an overview of the different macroenvironmental factors that the company has to take into consideration. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations.

1. Political factors

Political factors are how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability.

Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads). Furthermore, governments have great influence on the health, education, and infrastructure of a nation 2. Economic factors

Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. - For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy 3. Social factors

Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. - For example, an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor). Furthermore, companies may change various management strategies to adapt to these social rends (such as recruiting older workers). 4. Technological factors

Technological factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation.5. Environmental factors

Environmental factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones. 6. Legal factors

Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products. Importance of marketing environmental audit as part of the planning process

a. The audit provides the marketers with an in depth view of the marketing activities that are going around in the concern. It brings out a complete picture of the entire operations of the concern. b. A marketing audit can help a company refine its business practices and improve its productivity and profitability.

c. Marketing audit helps to marketing executives, top management and investors to ensure that they are doing the right things to help drive growth for their organizations.

d. A marketing audit is a careful examination and evaluation of marketing practices and results. It offers a baseline for performance measurements and a framework for effective business planning to maximize positive external perception and demand generation.

e. An audit helps the company determine the value of a sale and a sales lead.CHAPTER 3: MARKETING INFORMATION SYSTEMS AND MARKETING RESEARCH

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.

1. The MIS interacts with managers to assess their information needs

2. 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

3. The MIS distributes information to managers in the right form and at the right time to help in marketing planning, implementation and control.Internal company records

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

Many companies use internal records to build extensive internal databases, computerized collections of information obtained from data sources within the company

Marketing managers can readily access and work with information in the database to identify marketing opportunities and problems, plan programs, and evaluate performance

Marketing intelligenceMarketing 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

1. Internal sources include the companys executives, owners and employees

The company must sell the employees on their role as intelligence gatherers and train them to spot and report new developments

2. External sources include competitors, government agencies, suppliers, trade magazines, newspapers, business magazines, trade association newsletters and meetings, and databases available on the internet.

Three types: (1) macro-market information, (2) competitive information, and (3) new innovation and trends.Marketing research processStep 1: Problem DefinitionThe first step in any marketing research project is to define the problem. In defining the problem, the researcher should take into account the purpose of the study, the relevant background information, what information is needed, and how it will be used in decision making. Problem definition involves discussion with the decision makers, interviews with industry experts, analysis of secondary data, and, perhaps, some qualitative research, such as focus groups. Once the problem has been precisely defined, the research can be designed and conducted properly.Step 2: Development of an Approach to the ProblemDevelopment of an approach to the problem includes formulating an objective or theoretical framework, analytical models, research questions, hypotheses, and identifying characteristics or factors that can influence the research design. This process is guided by discussions with management and industry experts, case studies and simulations, analysis of secondary data, qualitative research and pragmatic considerations. The three general types of objectives are:

1. Exploratory research where the objective is to gather preliminary information that will help to better define problems and suggest hypotheses for their solution.

2. Descriptive research is where the intent is to describe things such as the market potential for a product or the demographics and attitudes of customers who buy the product.

3. Causal research is research to test hypotheses about cause-and-effect relationships. The statement of the problem and research objectives will guide the entire research process. It is always best to put the problem and research objectives statements in writing so agreement can be reached and everyone knows the direction of the research effort.Step 3: Research Design FormulationA research design is a framework or blueprint for conducting the marketing research project. It details the procedures necessary for obtaining the required information, and its purpose is to design a study that will test the hypotheses of interest, determine possible answers to the research questions, and provide the information needed for decision making. Conducting exploratory research, precisely defining the variables, and designing appropriate scales to measure them are also a part of the research design. The issue of how the data should be obtained from the respondents (for example, by conducting a survey or an experiment) must be addressed. It is also necessary to design a questionnaire and a sampling plan to select respondents for the study.

More formally, formulating the research design involves the following steps:

1. Secondary data analysis (Note #1)2. Qualitative research (Note#2)3. Methods of collecting quantitative data (survey, observation, and experimentation) (Note#3)4. Definition of the information needed

5. Measurement and scaling procedures

6. Questionnaire design

7. Sampling process and sample size (Note#4)8. Plan of data analysisNote#1:Gathering secondary information.

a). Secondary data is information that already exists somewhere, having been collected for another purpose. Sources of secondary data include both internal and external sources. Companies can buy secondary data reports from outside suppliers (i.e., commercial data sources). Information can be obtained by using commercial online databases. Examples include CompuServe, Dialog, and Lexis-Nexus. Many of these sources are free.

Advantages of secondary data include:

It can usually be obtained more quickly and at a lower cost than primary data.

Sometimes data can be provided that an individual company could not collect on its own.

Some problems with collecting secondary data include:

The needed information might not exist.

Even if the data is found, it might not be useable.

The researcher must evaluate secondary information to make certain it is relevant, accurate, current, and impartial. Secondary data is a good starting point; however, the company will often have to collect primary data.

b). Primary data is information collected for the specific purpose at hand.

Planning Primary Data Collection. - A plan for primary data collection calls for a number of decisions on research approaches, contact methods, sampling plans, and research instruments.

Note#2:

Differences between qualitative and quantitative research:

Quantitative research - is an inquiry into an identified problem, based on testing a theory, measured with numbers, and analyzed using statistical techniques. The goal of quantitative methods is to determine whether the predictive generalizations of a theory hold true.

By contrast, a study based upon a qualitative - process of inquiry has the goal of understanding a social or human problem from multiple perspectives. Qualitative research is conducted in a natural setting and involves a process of building a complex and holistic picture of the phenomenon of interest.

Note#3:Market research techniques:

a. Surveys - With concise and straightforward questionnaires, you can analyze a sample group that represents your target market. The larger the sample, the more reliable your results will be.

b. Focus groups - In focus groups, a moderator uses a scripted series of questions or topics to lead a discussion among a group of people. These sessions take place at neutral locations, usually at facilities with videotaping equipment and an observation room with one-way mirrors. A focus group usually lasts one to two hours, and it takes at least three groups to get balanced results.

c. Personal interviews - Like focus groups, personal interviews include unstructured, open-ended questions. They usually last for about an hour and are typically recorded.

d. Observation - Individual responses to surveys and focus groups are sometimes at odds with people's actual behavior. When you observe consumers in action by videotaping them in stores, at work, or at home, you can observe how they buy or use a product. This gives you a more accurate picture of customers' usage habits and shopping patterns.

e. Field trials - Placing a new product in selected stores to test customer response under real-life selling conditions can help you make product modifications, adjust prices, or improve packaging. Small business owners should try to establish rapport with local store owners and Web sites that can help them test their products.

Note#4:Sampling statistical method of obtaining representative data or observations from a group (lot, batch, population or universe) / the process of selecting units from a population of interest.

Sampling methods:

a) probability

i. a simple random - choosing elementary units in search a way that each unit in the population has an equal chance of being selected

ii. stratified obtained by independently selecting a separate simple random sample from each population stratum/class

iii. cluster obtained by selecting clusters from the population on the basis of simple random sampling

b) non-probability

i. convenience researchers questions anyone who is available

ii. quota the sample audience is made up of potential purchasers of your product

iii. the judgment obtained according to the discretion of someone who is familiar with the relevant characteristics of the population

Note#5:

Contact methods information can be collected by mail, telephone or personal interview

Mail Surveys

Advantages: Relatively inexpensive

No interviewer bias

Consistent questions (for all respondents)

Large number of respondents can be included

Anonymity

Respondents can choose the most convenient time to answerDisadvantages:

Low response rates (relative to other survey types)

Junk mail syndrome

Impersonal nature Telephone Surveys

Advantages: More flexibility compared to mail surveys

Quick and inexpensive

High response ratesDisadvantages: More obtrusive than mail

Greater difficulties in rapport building

Long-distance calls are expensive

Personal Interviews

Advantages: High response rate Great flexibility (ability to adapt/explain questions)

Can show or demonstrate items

Fuller explanations can be given

Very timely dataDisadvantages: Relatively expensive

Possibility of interviewer bias

Personal nature of questions (e.g., age or income)

Respondents not relaxed (put on the spot)

Time may not be convenient for respondents Online Research

Advantages: Inexpensive

Fast

Accuracy of data, even for sensitive questions

VersatilityDisadvantages: Small samples

Skewed samples

Technological problems

Inconsistencies

Step 4: Field Work or Data Collection (Note#5)Data collection involves a field force or staff that operates either in the field, as in the case of personal interviewing (in-home, mall intercept, or computer-assisted personal interviewing), from an office by telephone (telephone or computer-assisted telephone interviewing), or through mail (traditional mail and mail panel surveys with prerecruited households). Proper selection, training, supervision, and evaluation of the field force helps minimize data-collection errors.Step 5: Data Preparation and AnalysisData preparation includes the editing, coding, transcription, and verification of data. Each questionnaire or observation form is inspected, or edited, and, if necessary, corrected. Number or letter codes are assigned to represent each response to each question in the questionnaire. The data from the questionnaires are transcribed or key-punched on to magnetic tape, or disks or input directly into the computer. Verification ensures that the data from the original questionnaires have been accurately transcribed, while data analysis, guided by the plan of data analysis, gives meaning to the data that have been collected. Univariate techniques are used for analyzing data when there is a single measurement of each element or unit in the sample, or, if there are several measurements of each element, each RCH variable is analyzed in isolation. On the other hand, multivariate techniques are used for analyzing data when there are two or more measurements on each element and the variables are analyzed simultaneously. Step 6: Report Preparation and PresentationThe entire project should be documented in a written report which addresses the specific research questions identified, describes the approach, the research design, data collection, and data analysis procedures adopted, and presents the results and the major findings. The findings should be presented in a comprehensible format so that they can be readily used in the decision making process. In addition, an oral presentation should be made to management using tables, figures, and graphs to enhance clarity and impact.

For these reasons, interviews with experts are more useful in conducting marketing research for industrial firms and for products of a technical nature, where it is relatively easy to identify and approach the experts. This method is also helpful in situations where little information is available from other sources, as in the case of radically new products.

CHAPTER 4: CONSUMER AND ORGANIZATIONAL MARKETS AND BUYING BEHAVIORModel of consumer behaviorThe company that really understands 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

Personal characteristics affecting consumer behavior

Cultural factors1. 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. Culture is expressed through tangible items such as food, architecture, clothing, and art culture is an integral part of the hospitality and travel business.It determines what we eat, how we travel, where we travel, and where we stay. Culture is dynamic, adapting to the environment. Marketers try continuously to identify cultural shifts in order to devise new products and services that might find a receptive market.2. Subculture

Each culture contains smaller subcultures, groups of people with shared value systems based on common experience. Subcultures include nationalities, religions, racial groups, and geographic regions. Many subcultures make up important market segments, and marketers often design products and marketing programs tailored to their needs.3. Social classes

These are relatively permanent and ordered divisions in a society whose members share similar values, interests and behaviors. Marketers are interested in social class because people within a given class tend to exhibit similar behavior, including buying behavior. Social classes show distinct product and brand preferences in such areas as food, travel, and leisure activity.Social factors

1. 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. Reference groups influence consumers in at least three ways:

a. They expose the person to new behaviors and lifestyles

b. They influence the persons attitudes and self-concept

c. They create pressures to conform that may affect the persons product, brand, and vendor choices

People can also be influenced by aspirational groups to which they do not belong but would like to. Groups commonly have opinion leaders these are people within a reference group who, because of special skills, knowledge, personality, or other characteristics, exert influences over others.2. Family

Family members have a strong influence on buyer behavior. The family remains the most important consumer-buying organization in any society. Marketers are interested in the roles and influence of the husband, wife, and children on the purchase of different products and services. Buying roles change with evolving consumer lifestyles.3. Role and status

A person belongs to many groups: family, clubs and organizations an individuals position in each group can be defined in terms of role and status. 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.Personal factors1. Age and life-cycle stage

The types of goods and services people buy change during their lifetimes preferences for leisure activities, travel destinations, food, and entertainment are often age related. As people grow older and mature, the products they desire change. The makeup of the family also affects purchasing behavior. Successful marketing to various age segments may require specialized and targeted strategies.2. Occupation

A persons occupation affects the goods and services bought. Marketers try to identify occupational groups that have above-average interest in their products3. Economic situation

A persons economic situation greatly affects product choice and the decision to purchase a particular product. Marketers need to watch trends in personal income, savings and interest rates.4. Lifestyle

Lifestyle profiles a persons whole pattern of acting and interacting in the world. Lifestyle portrays the whole person interacting with his/her environment. Marketers search for relationships between their products and people who are achievement oriented. When used carefully, the lifestyle concept can help the marketer understand changing consumer values and how they affect buying behavior.5. Personality and self-concept

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. Personality can be useful in analyzing consumer behavior for some product or brand choices.

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. The role of self-concept obviously has a strong bearing on the selection of recreational pursuits such as golf, sailing, fishing and hunting.Psychological factors1. 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. Most popular theory of motivation: is Maslows Theory (refer to Chapter#1).2. Perception

Perception is the process by which a person selects, organizes and interprets information to create a meaningful picture of the world. There are three perceptual processes:

a. Selective attention - Selective attention is the tendency for people to screen out most of the information to which they are exposed. For example, the average person may be exposed to more than 500 ads in all these stimuli. It implies that marketers have to act carefully to attract the consumers attention. Their message will not reach the most people who are not in the market. Even people who are in the market may miss the message unless it is distinctive from other advertisements.b. Selective distortion - Selective distortion explains the tendency of people to interpret information in a way that will support their existing belief. Selective distortion implies that marketers must try to understand the mind-sets of consumers and how these will influence.c. Selective retention - People generally will forget many things that they learn. Selective retention is the tendency of the people to retain information that supports their attitudes and beliefs.3. Learning

Learning describes changes in a persons behavior arising from experience. Learning theorists say that learning occurs through the interplay of drives, stimuli, cues, responses and reinforcement

4. Beliefs and attitude

A belief is a descriptive thought that a person holds about something these beliefs may be based on real knowledge, opinion or faith. Marketers are interested in the beliefs that people have about specific products and services beliefs reinforce product and brand images.

An attitude describes a persons relatively consistent evaluation, feelings and tendencies toward an object or an idea. Attitudes put people into a frame of mind for liking or disliking things and moving toward or away from them. Attitudes are very difficult to change a persons attitude fit into a pattern, and changing one may require making many difficult adjustments.Buyer decision process

1. Problem recognition

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

2. Information search

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

3. Evaluations of alternatives

Unfortunately, there is no simple and single evaluation process used by all consumers or even by one consumer in all buying situations. There are several evaluation processes:

4. 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.5. Post-purchase behavior

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 post-purchase actions of significant interest to the marketer.

Cognitive dissonance

Cognitive dissonance buyer discomfort caused by post-purchase conflict. Every purchase involves compromise consumers feel uneasy about acquiring the drawbacks of the chosen brand and losing the benefits of the rejected brands. Thus, consumers feel some post-purchase dissonance with many purchases, and they often take steps after the purchase to reduce dissonance. Dissatisfied customers may take several actions:

May return the product or complain to the company and ask for a refund or exchange

May initiate lawsuit

May also simply stop buying the product and discourage purchases by family and friendsTypes of decision making processesThe decision process is used each time a good or service is bought, often subconsciously. There are three ways in which the decision process may be used.

1. Extensive decision-making process: Occurs when a consumer makes full use of the process. It is used for expensive, complex items with which the consumer has little or no experience. Perceived risk is high and time pressure is low.2. Limited decision making process: takes place when each step of the process is used, but the consumer does not need to spend a great deal of time on any of them. The consumer has some experience. The thoroughness with which the process is used depends on the amount of experience, the importance of the purchase, and time pressure.

3. Routine decision-making process: involves habitual behavior and skips steps in the process. Regularly purchased items are bought in this manner. Information search, evaluation, and post-purchase behavior are normally omitted.

Business marketsCharacteristics of business marketMarket structure and demandOrganizational demand is derived demand; it comes ultimately from the demand for consumer goods and services it is derived or a function of the businesses that supply the hospitality and travel industry with the meetings, special events, and other functions. Compared with consumer purchases, a business purchase usually involves more buyers and a more professional purchasing effort.The nature of organizational buyers (Types of decisions and the decision process)Organizational buyers usually face more complex buying decisions than consumer buyers. Their purchases often involve large sums of money, complex technical, economic considerations and interactions among many people at all levels of the organization. The organizational buying process tends to be more formalized than the consumer process and a more professional purchasing effort. Buyer and seller are often very dependent to each other.Participants in the organizational buying processThe decision-making unit of a buying organization sometimes called the buying center. The buying center can be defined as all those individuals and groups who participate in the purchasing decision-making process, who share common goals and the risks arising from the decisions

Buying centers vary by number and type of participants. Salespersons calling an organizational customer must determine the following:

Who are the major decision participants?

What decisions do they influence?

What is their level of influence?

What evaluation criteria does each participant use?The buying center includes all members of the organization who play any of six roles in the purchase-decision process:

1. Users - Users are those who will use the product or service. They often initiate the buying proposal and help define product specifications.

2. Influencers - Influencers directly influence the buying decision but do not make the final decision themselves. They often help define specifications and provide information for evaluating alternatives.

3. Deciders - Deciders select the product requirements and suppliers.4. Approvers - Approvers authorize the proposed actions of deciders or buyers.

5. Buyers - Buyers have formal authority for selecting suppliers and arranging the terms of purchase. Buyers may help shape product specifications and play a major role in selecting vendors and negotiating.

6. Gatekeepers - Gatekeepers have the power to prevent sellers or information from reaching members of the buying center. Major influences on organizational buyersEnvironmental factors

Organizational buyers are heavily influenced by the current and expected economic environment. Factors such as the level of primary demand, the economic outlook, and the cost are important.

Organizational factors

Each organization has specific objectives, policies, procedures, organization structures and systems related to buying. The hospitality marketer has to be as familiar with them as possible and want to know the following:

How many people are involved in the buying decision?

Who are they?

What are the evaluation criteria?

What are the companys policies and constraints on the buyers?

Interpersonal factors

The buying center usually includes several participants with differing levels of interest, authority and persuasiveness. Salespeople commonly learn the personalities and interpersonal factors that shape the organizational environment and provide useful insight into group dynamics.Individual factors

Each participant in the buying decision process has personal motivations, perceptions and preferences. The participants age, income, education, professional identification, personality and attitude toward risk all influence the participants in the buying process.The organizational buying process1. 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

2. General need description

The buyer goes on to determine the requirements of the product

3. Product specifications

Once the general requirements have been determined, the specific requirements for the product cam be developed

4. Suppliers search

The buyer now tries to identify the most appropriate suppliers5. Proposal solicitation

Qualified suppliers will be invited to submit proposals. Skilled research, writing and presentation are required.6. Supplier selection

Once the meeting planner as drawn up a short list of suppliers, qualified hotels will be invited to submit proposals

7. Order-routine specification

The buyer writes the final order, listing the technical specifications. The supplier responds by offering the buyer a formal contract.8. Performance review

The buyer does post purchase evaluation of the product. During this phase, the buyer will determine if the products meets the buyers specifications and if the buyer will purchase from the company again

The group business marketsOne of the most important types of organizational business is group business. The group business market is often more sophisticated and requires more technical information than the consumer market. Many group markets book more than a year in advance. During this time, cognitive dissonance can develop; thus marketers must keep in contact with the buyer to assure them that they made the right decision in choosing the sellers products or services. There are four main categories of group business:

Conventions

Association meetings Incentive travel Corporate meetings

SMERF (social, military, education, religious and fraternal organizations)

ConventionsConventions are a specialty market requiring extensive meeting facilities. 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 usually select convention sites two to five years in advance, with some large conventions planned ten to fifteen years before the event. Important attributes for a convention planner other than facilities and rates are food quality, billing procedures, and the professionalism and attention of the staff. Convention bureaus non-profit marketing organizations that help hotels sign conventions and meetings.Association meetingsAssociations sponsor many types of meetings, including regional, special interest, educational and board meetings. The most important attributes of a destination for an association meeting planner are availability of hotel and facilities, ease of transportation, distance from attendees, and transportation costs. Members attend association meetings voluntarily. The hotel should work with meeting planners to make the destination seem as attractive as possible. Making sure that the meeting planner is aware of local attractions, offering suggestions for spousal activities, and assisting in the development of after-convention activities can be useful to the hotel and the meeting planner.Corporate meetingsA corporate meeting is a command performance for employees of a company they are directed to attend the meeting without choice. The corporations major concern is that the meeting be productive and accomplish the companys objectives. Types of corporate meetings include training, management and planning; another type is the incentive meeting. The most important attributes of a destination are availability of hotel and facilities, ease of transportation, distance from attendees, and transportation costs. Corporate culture also plays an important part in the choice of a hotel.Small groups - Meetings of less than fifty rooms are gaining the attention of hotels and hotel chainsIncentive travelIncentive travel, a unique subset of corporate group business, is a reward participants receive for achieving or exceeding a goal - Companies give awards for both individual and team performance. Because travel serves as the reward, participants must perceive the destination the hotel as something special. Climate, recreational facilities, and sightseeing opportunities are high on an incentive meeting planners list of attributes looked for in a site.Incentive travel is handled in house or by incentive houses, travel agencies, consultants, and travel fulfillment firms that handle only the travel arrangements. Incentive houses usually provide a choice of several locations to the company, so the ultimate choice of location is made by the company, even when it uses an incentive house.SMERF groupsStands for social, military, education, religious and fraternal organizations. This group of specialty markets has a common price-sensitive thread. On the positive side, they are willing to be flexible to ensure a lower room rate they are willing to meet during the off-season or on week-ends. Someone new to hotel sales will often start with the SMERF market.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. One successful technique for negotiating with a meeting planner is to determine the groups requirement and work out a package based on needs and budget - Taking a consultative approach is more effective.Most meeting planners maintain a history of the group for the purpose of planning future meetings a salesperson can gain valuable information by asking questions about past conferences. Ultimately, when dealing with group business, the hotel has to please both the meeting planner and the meeting planners clients. One of the most important aspects creating successful function is a pre-function meeting between the hotel staff and the meeting planner before the function

The corporate 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. When negotiating a corporate contract, it is important to understand what creates value for the company. The corporate business traveler is a sought-after segment. In addition to paying a good rate, the business travelers also on an expense account and makes use of the hotels restaurants, health club, laundry and business center facilities.

The most important attributes to the travel managers when negotiating a hotel contract are:

A favorable image of the hotels brand by the companys travelers

Guaranteed availability of negotiated rate

Location

Reputation of the hotels brand

Negotiated rate

Flexibility on charges for late cancellation of room reservationsCHAPTER 5: MARKET SEGMENTATION, TARGETING AND POSITIONING

Markets Market: a market is the set of all actual and potential buyers of products

Market stages: Mass marketing (no segmentation) - The seller mass produces, mass distributes and mass promotes one product to all buyers

Segment marketing (some segmentation) - The seller produces two or more products that have different features, styles, quality, sizes and so on

Micromarketing (complete segmentation) - The sellers offer products to suit the tastes of individuals and location

Customized marketing (niche segmentation) - Offer different products to subgroups within segment

Target marketingTarget marketing: the seller identifies market segments, selects one or more, and develops products and marketing mixes tailored to each selected segment

Market segmentation

The process of dividing a market into distinct groups of buyers who might require separate products and/or marketing mixesMarket targeting

The process of evaluating each segments attractiveness and selecting one or more of the market segmentsPositioning

The process of developing a competitive positioning for the product and an appropriate marketing mixSteps in segmentation, targeting and positioning:

Market segmentationThere 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

1. Geographic segmentation

Dividing the market into different geographic units, such as nations, states, regions, counties, cities or neighborhoods. Geographic location also relates to culture, language and business attitudes. For example, Middle Eastern,European, North American, South American and Asiancompanies will all have different sets of businessstandards and communication requirements. Knowledge of geographic customer preferences permits a company to modify or change its product offering. For example pizza, KFC, banks extending there business by opening different branches. The success of local and regional tourism depends upon creative geographical segmentation.2. Demographic segmentationDividing the market into groups based on demographic variables such as age, gender, family life cycle, income, occupation, education, religion, race and nationality. Major factors are:

a. Age and life-cycle stage consumer preferences change with age. Some companies offer different products or marketing strategies to penetrate various age and life-cycle segments.

b. Gender Gender marketing is by no means simplistic. Gender marketing is most effective when combined with lifestyle and demographic information.

c. Income the lodging industry is particularly effective in using income segmentation. Income does not always predict which customers will buy a given product or service. Income segmentation is commonly believed to be one of the primary variables affecting pricing strategies.3. Psychographic segmentationDivides buyers into different groups based on social class, lifestyle and personality characteristics.

a. Social class relatively permanent and ordered divisions in a society whose members share similar values, interests and behaviors.

b. Lifestyle profile a persons 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.

c. Personality marketers use personality variables to segment markets, endowing their products and personalities. Many companies within the hospitality industry have been developed as an extension of the founders personality

4. Behavior segmentationDivides buyers into groups based on their knowledge, attitude, use or response to a product

a. User status many markets can be segmented into non-users, former users, potential users, first-time users, and regular users of a product. Potential users and regular users often require different marketing appeals.

b. Usage rate markets can be segmented into light-, medium-, and heavy-user groups. Many hospitality firms spread their marketing resources evenly across all potential customers.

c. Loyalty status a market can also be segmented on the basis of consumer loyalty. In the hospitality and travel industries, marketers attempt to build brand loyalty through relationship marketing.

d. Buyer readiness stage (refer to chapter#9) at any given time, people are in different stages of readiness to buy a product. Some are unaware of the product; some are aware; some are informed; some want the product; and some intend to buy. The relative number in each stage makes a big difference in designing a marketing program.5. Special occasion segmentation

Special occasion segmentation buyers can be grouped according to occasions when they make a purchase or use a product. Occasion segmentation helps firms build product use. For example, air travel is triggered by occasions related to business, vacation, or family.

6. Benefits sought

Benefits sought buyers can also be grouped according to the product benefits they seek. Knowing the benefits sought by customers is useful in two ways:

a. Managers can develop products with features that provide the benefits their customers are seeking

b. Managers communicate more effectively with their customers if they know what benefits they seek

7. Positive segmentation

Positive - dividing the market into groups of individual markets with similar wants or needs that a company divides into distinct groups which have distinct needs, wants, behavior or which might want different products & services

8. Multivariable segmentationa. Use multiple Demographic Variables such as age,gender, income & education.

a. Use various Demographic, Psychographic,Geographic, and Behaviorist Variables

b. Geodemographic Segmentation (Combines Geographic and Demographic info)

c. Psychographics and Demographics Variables(VALS, based on values, attitudes, lifestyles,and demographic. Therefore, combines Psychographic and Demographic variables)Requirements for effective segmentation

Measurability - The degree to which the segments size and purchasing power can be measured. Certain segmentation variables are difficult to measure.

Accessibility - Segments can be accessed and served.

Substantiality - Segments are large or profitable enough to serve as markets. A segment should be the largest possible homogeneous group economically feasible to support a tailored marketing program.

Actionability - Effective programs can be designed for attracting and serving segments.

Differential - Segment must respond differently to different marketing mix elements and programs.

Evaluating market segmentsSegment size and growth

Companies will analyze the segment size and growth and choose the segment that provides the best opportunity. A company must first collect and analyze data on current segment sales growth rates and expected profitability for various segments. It will be interested in segments that have the right size and growth characteristics, but right size and growth is a relative matter.

Segment structural attractiveness

A company must examine major structural factors that affect long-run segment attractiveness. For example, a segment is less attractive if it already contains many strong and aggressive competitors. The relative power of buyers also affects segment attractiveness if the buyers in a segment possess strong bargaining power relative to sellers, they will force prices down, demand more quality services, and set competitors against one another. Finally, a segment may not be attractive if it contains powerful suppliers who control prices and reduce the quality of ordered goods and services.

Company objectives and resources

The company must consider its own objectives and resources in relation to a market segment. Some attractive segments can be dismissed quickly because they do not mesh with the companys long-run objectives. Although such segments might be tempting in themselves, they might divert a companys attention and energies away from its main goal. A company should enter segments only where it can gain sustainable advantages over competitors.

Selecting market segmentsSegmentation 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 alternatives1. Undifferentiated marketing strategy - Ignores market segmentation differences and goes after the whole market with one market offer

2. Differentiated marketing strategy - The firm targets several market segments and designs separate offers for each

3. Concentrated marketing strategy - 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

Choosing a market-coverage strategy

Companies need to consider several factors in choosing a market-coverage strategy:1. Company resources - When the companys resources are limited, concentrated marketing makes the most sense

2. Degree of product homogeneity - 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. 3. Market homogeneity - 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

4. Competitors strategies - 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.Market positioningA 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 productsThe positioning tasks consist 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

For example - A company can differentiate itself from competitors by bundling competitive advantage; it gains competitive advantage by offering consumers lower prices than competitors for similar products or by providing more benefits that justify higher prices

CHAPTER 6: DESIGNING AND MANAGING PRODUCT

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 levels1. Core product

Answers the question of what the buyer is really buying. Every product is a package of problem-solving services2. Facilitating product

Are those services or goods that must be present for the guest to use the core product3. Supporting product

Extra products offered to add value to the core product and to help to differentiate it from the competition4. Augmented product

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

Product classification: consumer products

1. Convenience - These refer to items that the consumer buys with minimum shopping effort. Essentially these are goods that are habitual with the consumers. They are bought frequently but not in large quantities because they are non-durable good. In other words they are used up goods. The buying decision of the consumers for convenience goods is ignited by habit and he knows all the retail outlets.2. Specialty - These refer to goods for which consumers are habitually willing to make a special purchasing effort. These categories of goods possess unique characteristics or high degree of brand identification. Examples include specific brands and types of fanny foods, cars, stereo components, photographic equipment and suits. Specialty goods do not involve buyer in making comparisons buyers invest time only to reach the dealers of the specialty goods.3. Shopping - These set of product are selected by consumers based on certain yardsticks such as suitability, quality, price and style. All, products that involve shopping comparison before selection fall into this category. Such goods are, furniture, rugs, dresses, computers, shoes and household appliances. Before a consumer makes up his mind to buy a shopping good, a lot of exercise must have been carried out to know the different prices of the various stores that sell the product.4. Unsought - These are goods that the consumer does not know about or know about but does not normally think of buying. Examples are insurance, cemetery plots, coffin and encyclopedia. For consumers to be attracted to these products substantial marketing effort is required in form of advertising and personal selling. Product considerations1. Accessibility - This refer to how accessible the product is in terms of location and hours of operation

2. Atmosphere (Note#1)3. Customer interactions with the service system (Note#2)4. Customer interactions with other customers (Note#3)5. Co-production - Involving the guest in service delivery; can increase capacity, improve customer satisfaction and reduce costsNote#1:Atmosphere: the physical environment

Atmosphere is appreciated through the senses sensory terms provide descriptions for the atmosphere of a particular set of surroundings:

The main visual dimensions of atmosphere are color, brightness, size and shape

The main aural dimensions of atmosphere are volume and pitch

The main olfactory dimensions of atmosphere are scent and freshness

The main tactile dimensions of atmosphere are softness, smoothness and temperature

Atmosphere can affect purchase behavior in at least four (4) ways:

Atmosphere may serve as an attention-creating medium

Atmosphere may serve as a message-creating medium to the potential customers

Atmosphere may serve as an effect-creating medium

Environment can be a mood-creating medium

Note#2:

Customer interaction with the service delivery system

The customer participates in the delivery of most hospitality and travel products. There are three (3) phases to this involvement:

Joining the customer makes the initial inquiry contact. When designing products, we must make it easy for people to learn about the new product. The joining phase is often enhanced through sampling.

Consumption takes place when the service is consumed. Designers of hospitality products must understand how guests will interact with the product. The employees, customers, and physical facilities are all part of the product.

Detachment when the customer is through using a product and departs

Note#3:

Customer interaction with other customers

An area that is drawing the interest of hospitality researchers is the interaction of customers with each other. The issue of customer interaction is a serious problem for hotels and resorts the independent non-tour guest consistently objects to the presence of large group-inclusive tours (GITs). This problem is magnified if the GIT guests represent a different culture, speak a foreign language, or are from an age group years different from that of independent, non-tour guests.

Many hotels provide free wine and cheese for guests during a set time period in the evening these hotels commonly report that this act of hospitality has an added benefit of bringing guests together; lasting friendships and business deals have resulted from the evening wine and cheese.

Individual product decision

1. Product attributesDeveloping a product/service involves defining the benefits that it will offer such as:

Product quality ability of a product to perform its functions; includes levels and consistency

Product features differentiates the product from from competitors pr