TASKASSES THE IMPORTANCE OF COMPONENTS OF THE MARKETING MIX

TO THE TRAVEL, TOURISM AND HOSPITALITY INDUSTRY AND ANALYZE THE PRICING STRATEGIES AND POLICIES IN RELATION TO

THE INDUSTRY

GROUP PRESENTATIONDone By:HND TTM & HM – Batch 001

• Marketing Mix strategy is choosing and implementing the best possible course of action to attain the organization’s long-term objectives and gain competitive edge.

• The Marketing Mix, more popularly referred to as the 8Ps of Marketing is a set of controllable and interrelated variables that a company assembles to satisfy a target group better than it’s competitor.

• The tourism product unlike a car or a computer that consists of a combination of tangible and intangible items and the potential customers “buy” the product before “acquiring” the product.

MARKETING MIX

PACKAGING

PEOPLE

PARTNERSHIP

PRICE

PROMOTION

PROGRAMMING

PLACE

PRODUCT

MARKETING MIX

• CORE PRODUCT :-EXAMPLE :- THE AIRCRAFT SEAT

• GENERIC PRODUCT :-EXAMPLE :- THE ECONOMY CLASS SEAT

• EXPECTED PRODUCT :-EXAMPLE :- LEG ROOM, SAFETY

• AUGMENTED PRODUCT :-EXAMPLE :- ONBOARD LOUNGE , FFP , CDS

• POTENTIAL PRODUCT :-EXAMPLE :- USE OF LEATHER FOR A/C SEATS

PRODUCT

The pricing strategies in introduction phase of the PLC were discussed in pricing new products. Other strategies are expected to be elaborated here.

PRODUCT LIFE CYCLE

Introduction Stage Pricing StrategyThe introduction stage of the product life cycle is where a new product is launched into a market. In the growth stage of the product life cycle, the market has accepted the product and sales begin to increase.Growth Stage Pricing StrategyHere, industrial marketers lower the product price as well as they focus on product differentiation, product line extension and building new market segments.Maturity Stage Pricing StrategyIn this, a company has to cut its competitors’ market share to increase its sales. The strategy is to lower prices to match the competitors’ pricesDecline Stage Pricing Strategies- If the company has a reputation on good product quality or dependable service, do not cut price but reduce costs to earn some profits. - Cutting prices to increase sales and using a product to help to sell other product. - Selective increases in prices in markets that are not price sensitive.

• Price refers to time, travel cost and lost opportunities that are spent on attending an event or purchasing a product. It may be defined as the value of product or service expressed in monetary terms which a consumer pays or is expected to pay in exchange of the expected or offered product or service.

• Price gives a product or service a perceived value in the eyes of the consumer

PRICE

• The airline, railways, taxi and bus companies charge you a fare for the service that they offer

• The price has to match the product, but good marketing makes the price seem more attractive. The operator can either add features to the product and keep the price the same or give a discount for the same features.

• It can be incredibly diverse and pricing strategies can evolve as a tourism business develops its brand and market share. Eg – Star Ratings of Hotels

• For tourism businesses that cater to the exclusive/luxury traveller pricing may not fluctuate much at all.  While those targeting the budget travel market may not have too much room to move on pricing and they will rely on volumes of bookings.

PRICE EVOLVING TOURISM & HOSPITALITY INDUSTRY

Lower

price

Lower perceived

value

Company fails to harvest potential profits

Higher

price

Lower perceived value

Company misses potential

profits

• Internal Factors 1. Marketing Objectives The 4 major marketing objectives are Survival, Profit Maximization, Market Share Leadership & Quality2. Other Marketing Mix elementsProduct Influences the price level.Eg- Higher the product quality, higher the price of the product.3. Costs (Direct & Indirect Costs)The cost of marketing and promoting the product will have direct impact on the price. The marketer should mark price to cover up the cost.4. Nature of Market Demand(i) Perfect Competition – Where many buyers and sellers exists. Usually in this companies should set their prices according to the competition.(ii) Monopoly – Here the market consists of only one seller. Therefore the seller can change any amount as the price of the product.Eg – Ceylon Tobacco Company

FACTORS AFFECTINGPRICING DECISIONS

• External Factors1. Competitors Price & OfferPrice is also determined by how intense the competition is in the industry,substitutes and etc.2. Environmental FactorsThese factors are also very crucial for the company’s price decisions.Eg – Government Laws and Regulations, Weather Conditions & etc…3. Consumer perceptions of price and valueThese factors will effect the pricing in long termEg – Expecting price of Consumers on Product or service (Iphone 7)4. Price Elasticity of DemandThis defines as, the percentage change in quantity demanded to the percentage change in price.(i) Inelastic demand – Easy to change the market price. (Eg – Fuel, Monopoly)(ii) Elastic demand – For a small percentage of price changes, there may be a significant change in quantity ordered. (Eg – Demanded Product)

FACTORS AFFECTINGPRICING DECISIONS

• Cost Based Products – Here the anticipated profit on product being sold is added to cost of production per unit of the product.

• Break even Pricing – Here the firm tries to determine the price that will produce the profit it is seeking. It is known as target pricing. Normally some companies keep 10% to 20% profit on its investment.

• Value Based Pricing – Value based pricing users buyers’ perceptions of value, not the seller’s cost, as the key to pricing. Eg – Fashion Based Products, BMW

• Competition based pricing – The price are set according to the competitors’ price

• Every day low pricing – Constantly low price. Eg – Cargills Food City

• High low pricing – This involves charging higher prices but running frequently promotions to lower the prices. Eg – Samsung Mobile Phones

• Destroyer pricing – Charging very low prices where competitors can’t survive. Eg - Monopoly

GENERAL PRICING APPROACHES

• Price Bidding – Winning a contract. In this approach, companies submit the quotation according to the tender calls.

• Psychological Pricing – According to this even small differences in prices can suggest product differences.Eg – Consider a product priced at LKR 4899.99 rather than 5000.00 LKR

• International Pricing – Companies that market their products internationally must decide the prices according to the countries.

• New Product Pricing Strategies1. Market Skimming Pricing - charging a high price for a relatively short period and lowered it when demand from “early adopters” falls.Eg – Samsung High End Mobile Phones2. Market Penetration Pricing – Set a low initial market price in order to enter the market quickly and attract a large number of buyers quickly and win a large market share.Eg – Samsung Low End Mobile Phones

GENERAL PRICING APPROACHES

• Rack Rates – This is the full rate before any discounts are applied and typically is what is provided to wholesalers and printed on brochures for the season ahead.  however accommodation operators – particularly those in the middle of the market will be changing pricing almost daily for the month or 2 months ahead to fill gaps.

• Seasonal Pricing - Using a mix of pricing throughout the year to cover low, high, and shoulder seasons is a standard way for tourism businesses to cater for differing levels of demand due to the time of year.

• Last Minute Pricing - A common method for accommodation suppliers to fill those last minute gaps in inventory availability, last minute pricing is basically discounting daily prices according to forward bookings and promoted on last minute booking websites.

PRICING APPROACHES IN TOURISM INDUSTRY

• Discounting - While discounting has its place, and often unavoidable in a competitive market such as tourism, be very wary about continually discounting your prices to stimulate demand.  Consider adding conditions to a discounted price like a minimum stay or number of travellers in the booking.

• Package Deals - Strike up deals with local businesses to provide a full package and share business with each other – you should be able to get their products or services at a “net” rate so the package pricing is better than if they had purchased each component separately.  This Packaging can also be used to target niche markets effectively. Eg - Golf weekend

• Commissions - Many bookings will come via some sort of third party who will charge you a commission such as a retail travel agent, wholesaler, inbound tour operator or online travel agent (OTA).  But this should actually be considered in the setting of your rack rates.

PRICING APPROACHES IN TOURISM INDUSTRY

1. Price ListIt is a base price of a product consisting various sizes and specifications. This is a published statement of basic prices and given to the customers.

2. Trade DiscountsTrade discounts are offered to marketing intermediaries, such as dealers and distributors. Further these trade discounts should be uniform to all industrial intermediaries.

3. Quantity DiscountsA quantity or volume discount is given to customers who buy in large quantities as well as this is a price reduction given by deducting the quantity discount from the list price of the product. This is to encourage customers to buy in larger quantities and maintain customer loyalty. The amount of quantity discounts depends on demand, costs and competition.

PRICING POLICIES

4. Cash Discounts

Cash discounts are given to encourage customers for prompt payments. This is applicable on gross amount (basic price + excise duty + sales tax) of the bill and this is granted to customers who pay bills within a stated period from the date of invoice.

5. Geographical Pricing

Pricing the company’s products based upon the different geographical locations of buyers. Mainly, this happens since the company has to undergo different transportation costs and transit insurance when delivering products or service to various locations.

PRICING POLICIES

PROMOTION

PROMOTIONAL MIX

• Advertising makes people aware of the product• Acts as a stimulation• Expands market when advertised in remote

locations• Will be effective if advertised on a repeat basis• Gives more employment

opportunities

ADVERTISING

• Has a psychological effect on people• Creates a want for the product even if not

really wanted• Increases curiosity in consumers• Attracting reluctant customers with samples• Increases customer loyalty

(example:- frequent flyer programs)

SALES PROMOTION

• More attention can be given to an individual

• Immediate feedback• More chances of customer being

persuaded• More interactive • People sometimes prefer the human

touch more than electronic based

PERSONAL SELLING

• Creates good image of the company

• More creditability than an advertisement

• Ability to reach the correct target market

PUBLIC RELATIONS

• Have a one to one conversation with customers so immediate response received

• Have a chance to close the sale in one go• Good service with clients leads to long

professional relationships• Increase in sales• Ability to measure your

sales and performance

DIRECT MARKETING

PLACE

• Place refers to the location where the customer buys the collection of services. Ideally, the operator uses it to encourage the potential customer to visit the operator's location and complete the purchase.

• Generally Hotels are located at either City Center area or Tourist Zones, and Airlines and Travel Agents are around Metro City areas, Malls and Office complex.

• Fast food restaurants and sales and service centers may be located in busy main streets to allow walk in customers, while a fine dining restaurant may be located in a quiet street to maintain exclusivity and privacy.

• The product or service must be available in the right place, at the right time and in the right quantity.

• As mentioned, the service is produced and consumed in the same place. It cannot be owned and taken away from the location.

EVOLVING TOURISM & HOSPITALITY INDUSTRY

• Since the product is a collection of services, the people who provide the services are a key to the success of the transaction and they are the ones who represent the company.

Employees• Physical appearance, behavior, knowledge, grooming and

attitude has a powerful impact on customers perception of the tourism & hospitality product.

• Ensure staff are trained to ensure the product or service is delivered in accordance with the marketing strategic plan.

PEOPLE

• When a service is being delivered, the person delivering it is not unique from the service itself.

• The level of hospitality given to the visitors will define and contribute to the level of satisfaction of their experience.

• Operators must have top-level service to initially complete the sale and to encourage repeat customers.

• When dining at a restaurant, if a rude waiter is encountered, the entire experience will be labeled as bad service.

• This is why companies prefer well trained employees – to be polite pleasant and positive

• Extent of training and knowledge of the product/service concerned

EVOLVING TOURISM & HOSPITALITY INDUSTRY

PARTNERSHIP

Partnership refers to the common partners, usually being governmental agencies. Where packages are jointly marketed, event managers and partners will have to modify their prices of each product to become more attractive and to therefore be able to sell well.

Partnership marketing is all about brands working together to reach new audiences through mutually beneficial campaigns.

It also known as cooperative marketing, increasing the reach and impact of marketing efforts.

WHAT IS PARTNERSHIP????

• Marketers believe partnership marketing is an excellent way of accessing consumers in a way that fits in with their lifestyle and behaviors.

EVOLVING CONSUMERS

Partnership marketing is now much more about true

collaboration, with partners working to achieve the same goals

of extended reach, maximizing budgets and driving acquisition,

rather than each individual organization working in isolation

EVOLVING TOURISM & HOSPITALITY INDUSTRY

• New technologies and mobile are also mentioned and recognized as platforms via which a partnership marketing strategy can stand out and cut through. Partnership marketing lends itself to communicating with customers across their lives and therefore over multiple touch points, matching the way consumers now interact with their world.

EVOLVING TECHNOLOGY IN PARTNERSHIP

Examples of Some Technological Partnership

• Effective use of budgetPartnerships are able to provide an effective and efficient use of companies’ budgets by enabling them to substitute purchasing assets with leveraged brand equity in mutually beneficial partnerships which require minimal financial investment from both parties.

• Expanding reachDomestic firm may wish to engage in a partnership for a variety of reasons; for example, Sri Lankan Airlines and Qatar Airways have agreed to make a code share partnership to flights to Europe and North America through Doha airport. Sri Lankan Airline's motivation is to give the connections to it’s passengers where they don’t fly.

BENEFITS OF PARTNERSHIP MARKETING

PROGRAMMING

 Programming within the event is also a marketing decision, especially by the way of creating targeted benefits. 

It involves the elements and the quality of style of the event. For the Kandy Esela Perahera, there were not much activity because it was an street performance where visitors are allowed to sit, relax and enjoy their performances. 

WHAT IS PROGRAMMING???

 Programming is basically customer-oriented activities designed to increase customer spending or length of stay, or to add to the appeal of packages…Example - special events, festivals, special activities or etc..

EVOLVING TOURISM & HOSPITALITY INDUSTRY

One way to add value to the standard product and to distinguish a particular offering from competitors is to offer exclusive programming.   Customers will purchase a product that cater to their particular interest. Special programming can address such preferences and draw in additional customers.Programming within the event is also a marketing decision, especially by the way of creating targeted benefits for the customers.

PACKAGING

• A package tour, package vacation, or package holiday comprises transport and accommodation advertised and sold together by directly or by a vendor known as a tour operator. Other services may be provided such a rental car, activities or outing during the holidays.

• Packaging and distribution defines that business can either package events with other attractions and services or offer them on their own.

WHAT IS PACKAGING?

• The distribution network is important for the sales of tickets. In this factor, intermediaries will be required for the sales, thus good relationship has to be cultivated with packaging partners and intermediaries.

• Packaging should never be considered a random part of the marketing mix, as it incorporates all other elements of your products and/or services.

• Your packaging is the signature you leave everywhere, and it has the ability to attract today’s customers much better than outdated sales and advertising tactics.

• Purchasing a package offers tourists convenience by reducing the amount of time they will need to spend researching what the city/destination has to offer.

EVOLVING TOURISM & HOSPITALITY INDUSTRY

• Cost Saving – The company offering you the holiday package is much more aware of the best air fares, hotel tariffs and rates of every other thing.

• Zero Headache – Everything will be done on your behalf by the tour operator and would simply be paying the charge.

• Complete Tour – Holiday packages are designed specially are major spots in a place so that customers get best value for their money.

• Best Service – By opting for an all inclusive holiday package you can enjoy the best of all services available at hotel/ destination.Eg – Swimming Pool, Spa and Sauna, Safari and etc..

• Safe Travelling – Companies that offer tour packages are completely aware of situations in a particular place, the risks and the safe zones. By planning a trip on your own, may fall in trouble at unknown place.

• Planning – Tailor Made tours allows you to make your own planning and inform the travel agent.

ADVANTAGEOUS OF CHOOSING A PACKAGE

• Traveling too quickly – May be it’s seems fun to see 5 cities in 7 days but in reality the pace of the tour might be too fast.

• Lack of flexibility – You have to stick on their schedule. This means you can’t decide where you go.

• Big Crowds – While on group tours, You’ll constantly be herded around in a big group with little time to be on your own.

• Limited interactions with locals – You’ll see the sights but no the personalities that make up the culture you’re exploring

• Communication – For any problem that is encountered, the first point is always the travel agent. This may cause inconvenience especially for those who travelling different countries.

DISADVANTAGEOUS OF CHOOSING A PACKAGE

SOURCE: INTERNET

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