Notes mkt

Marketing for Hospitality and Tourism

CHAPTER 1:
INTRODUCTION: MARKETING FOR HOSPITALITY AND TOURISM

Chapter objectives
• Understand the relationships between the hospitality and travel industry
• Define the role of marketing and discuss its core concepts
• Discuss how marketing managers go about developing profitable customer relationships
• Understand how the marketing concept calls for a customer orientation
• Explain marketing strategies that are useful in the hospitality and travel industries

Introduction

Today marketing isn’t simply a business function: it’s 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, today’s 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.

Marketing’s 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 Orientation

Successful 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 customer’s long-term value and take appropriate actions
to ensure a customer’s long-term support.

©2012 World-Point Academy of Tourism Sdn. Bhd. All Rights Reserved.


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

Marketing

In 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 mix

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

1. Product/service
A 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 people’s 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 marketing

The entrances of corporate giants into the hospitality market and the marketing skills these
companies have brought to the industry have increased the importance of marketing within the
industry. Analysts predict that the hotel industry will consolidate in much the same way as the
airline industry has, with five or six major chains dominating the market. Such consolidation will
create a market that is highly competitive. The firms that survive this consolidation will be the ones
that understand their customers. In response to growing competitive pressures, hotel chains are
relying on the expertise of the marketing director.

Understanding marketing

Core marketing concepts



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 customer’s 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 important

3. Value, satisfaction and quality
• Value: The consumer’s estimate of the product’s overall capacity to satisfy his or her
needs. Today’s 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 customer’s 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 today’s 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 standards

4. 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: Marketing’s 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 company’s
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 McDonald’s 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
firms

5. 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 management

Definition: The analysis, planning, implementation and control of programs designed to create,
build and maintain beneficial exchanges with target buyers for the purpose of achieving
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 company’s current output – but, it is too limited. The marketing manager is interested in shaping
the level, time, and composition of demand for the company’s 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 organization’s 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 company’s
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 consumer’s and society’s 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 Culture

The 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
organization’s 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 businesses

Service 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 marketing
All 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 effectiveness

Commonly 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

Chapter objectives
• Understand the processes involved in defining a company mission and setting goals and
objectives
• Discuss how to design business portfolios and growth strategies
• Explain the steps involved in the business strategy planning process
• Identify the micro- and macro-environment (PEST) factors in marketing

Strategic Planning

The 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 company’s 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 market’s
growth rate and the company’s position and fit
• Underlying strategic planning is that of strategy and developing a game plan for achieving
long-run objectives

Four 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 eliminate

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

3. Business level
Each business unit in turn develop its business unit’s strategic plan to carry that business
unit into profitable future

4. 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 company’s plan They are usually set by the top Marketing objectives define
for controlling and utilizing its management of the business. what you want to accomplish
resources - human, physical Corporate objectives tend to through your marketing
and financial capital, in an focus on the desired activities.
effort to promote and secure its performance and results of the SMART approach.
interests. business. Example; We aim to achieve
Example; efficient use of the Example; expected market 75% customer awareness of our
resources relative to the output share (12%) brand in our target markets.

Corporate Strategic Planning

Corporate 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 units

Strategic Business Units (SBUs):
• A single business or collection of related businesses that can be planned for separately from
the rest of the company
• Has its own set of competitors
• Has a manager who is responsible for strategic planning and profit performance

Boston Consulting Group Model:



Different types of business: Four alternatives objectives:

1. Question marks - Company business that 1. Build - To increase the SBUs market
operate in high-growth markets but have share, even foregoing short-term
relatively low market share earnings to achieve this objective
2. Stars - The market leader in a high- 2. Hold - To preserve the SBUs market
growth market share
3. Cash cows - Produces a lot of cash for 3. Harvest - To increase the SBUs short-
the company and enjoys economies of term cash flow regardless of the long-
scale and higher profit margins term effect
4. Dogs - Company businesses that have 4. Divest - To sell or liquidate the business
weak market shares in low-growth because resources can be better used
markets. elsewhere

Although 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 strategies

Beyond 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 other’s strengths.

SWOT Analysis

A 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 environment

The result of the analysis is a matrix of positive and negative factors for management to address:

Positive factors Negative factors
Internal factors Strengths Weaknesses
External factors Opportunities Threats

The key point to remember about SWOT is that:

Strengths and weaknesses: Opportunities and threats:
• Are internal to the business • Are external to the business
• Relate to the present situation • Relate to changes in the environment
which will impact the business

1. 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
objectives
2. 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 objectives
3. 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
Examples of Potential Business Strengths threats.Examples of Potential Business Weaknesses
operation in terms of the opportunities and Examples are technological innovation and
demographic change.
High market share Technological Low market share Cash flow problems
Achieving economies of leadership Inefficient plant Undifferentiated
scale Brand reputation Outdated technology products
High quality Protected IP Poor quality Inadequate distribution
Leadership & ©2012 Distribution network Tourism Sdn.of innovation Reserved.Low productivity
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management skills Employee skills Skills shortages
Financial resources


Potential Business Opportunities Potential Business Threats

Technological Higher economic New market entrants Economic downturn
innovation growth Change in customer Rise of low cost
New demand Trade liberalization tastes or needs production abroad
Market growth EU enlargement Demographic change Higher input prices
Demographic change Diversification Consolidation among New substitute products
Social or lifestyle opportunity buyers Competitive price
change Deregulation of the New regulations pressure
Government spending market
programs

PEST Analysis

PEST 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

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

The Marketing Information System (MIS)

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

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 intelligence

Marketing intelligence – marketing intelligence includes everyday information about developments
in the marketing environment that help managers to prepare and adjust marketing plans and short-
run tactics. Marketing intelligence can come from internal sources or external sources
1. Internal sources – include the company’s 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 process

Step 1: Problem Definition

The 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 Problem

Development 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 Formulation

A 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 analysis

Note#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 Telephone Surveys
Advantages: Advantages:
• Relatively inexpensive • More flexibility compared to mail surveys
• No interviewer bias • Quick and inexpensive
• Consistent questions (for all respondents) • High response rates
• Large number of respondents can be included
• Anonymity Disadvantages:
• Respondents can choose the most convenient • More obtrusive than mail


time to answer • Greater difficulties in rapport building
• Long-distance calls are expensive
Disadvantages:
• Low response rates (relative to other survey
types)
• Junk mail syndrome
• Impersonal nature
Personal Interviews Online Research
Advantages: Advantages:
• High response rate • Inexpensive
• Great flexibility (ability to adapt/explain • Fast
questions) • Accuracy of data, even for sensitive questions
• Can show or demonstrate items • Versatility
• Fuller explanations can be given
• Very timely data Disadvantages:
• Small samples
Disadvantages: • Skewed samples
• Relatively expensive • Technological problems
• Possibility of interviewer bias • Inconsistencies
• Personal nature of questions (e.g., age or
income)
• Respondents not relaxed (put on the spot)
• Time may not be convenient for respondents

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 Analysis

Data 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 Presentation



The 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
BEHAVIOR

Chapter objectives
• Name the elements of the stimulus-response model of consumer and organizational
behavior
• Outline the major characteristics affecting consumer and organizational behavior
• Explain the buyer and organizational decision process

Model of consumer behavior

The company that really understands how consumers will respond to different product features,
prices and advertising appeals has a great advantage over its competitors. 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 4P’s
• Other stimuli include major forces and events in the buyer’s environment: economic,
technological, political and cultural



• All these stimuli enter the buyer’s black box, where they are turned into a set of observable
buyer responses: product choice, brand choice, dealer choice, purchase timing and purchase
amount

Marketing Other Buyer’s
Buyer’s black box
Stimuli Stimuli Responses

Product choice
Product Economic
Brand choice
Price Technological
Buyer Dealer choice
Place Political Buyer Decision
Characteristics Process Purchase timing
Promotion Cultural
Purchase amount

Personal characteristics affecting consumer behavior

Cultural Social
Personal
Psychological
Age and life-
cycle stage
Culture Reference Motivation
Occupation
Groups
Perception
Economic
Circumstances Buyer
Subculture Family Learning
Lifestyle Beliefs and
Roles and attitudes
Personality and
Social class Status
Self-concept

Cultural factors

1. Culture



The most basic determinant of a person’s 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 person’s 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 person’s attitudes and self-concept
c. They create pressures to conform that may affect the person’s 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 individual’s 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 factors

1. 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 person’s occupation affects the goods and services bought. Marketers try to identify
occupational groups that have above-average interest in their products

3. Economic situation
A person’s 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 person’s 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 person’s personality influences his or her buying behavior. By personality we mean
distinguishing psychological characteristics that disclose a person’s 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 person’s 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 factors

1. 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 Maslow’s 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 consumer’s 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 person’s 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 person’s 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
person’s attitude fit into a pattern, and changing one may require making many difficult
adjustments.

Buyer decision process

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

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:

Attitude of
Others
Evaluation of Purchase Purchase
Alternatives Intention Decision
Unexpected
Situational
Factors

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 marketer’s 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 friends

Types of decision making processes

The decision process is used each time a good or service is bought, often subconsciously. There are
three ways in which the decision process may be used.

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 markets

Characteristics of business market

Market structure and demand

Organizational 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 process

The 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 buyers

Environmental 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 company’s 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 participant’s age, income, education, professional identification, personality and
attitude toward risk all influence the participants in the buying process.

The organizational buying process

1. 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 suppliers
5. 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 buyer’s specifications and if the buyer will purchase
from the company again

The group business markets

One 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)

Conventions

Conventions 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 meetings

Associations 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 meetings

A corporate meeting is a command performance for employees of a company – they are directed to
attend the meeting without choice. The corporation’s major concern is that the meeting be
productive and accomplish the company’s 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 chains

Incentive travel

Incentive 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 groups

Stands 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 group’s 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
planner’s 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 hotel’s 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 hotel’s brand by the company’s travelers
• Guaranteed availability of negotiated rate
• Location
• Reputation of the hotel’s brand
• Negotiated rate
• Flexibility on charges for late cancellation of room reservations

CHAPTER 5:
MARKET SEGMENTATION, TARGETING AND POSITIONING

Chapter objectives
• Explain market segmentation, and identify several possible bases for segmenting consumer
markets, business markets and international markets
• List and distinguish among the requirements for effective segmentation: measurability,
accessibility, substantially and actionability
• Outline the process of evaluating market segments and suggest some methods for selecting
market segments
• Illustrate the concept of positioning for competitive advantage by offering specific
examples
• Discuss choosing and implementing a positioning strategy and contrast positioning based
on product, service, personnel and image differentiation



Markets

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

Target 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 mixes

Market targeting
The process of evaluating each segment’s attractiveness and selecting one or more of the market
segments

Positioning
The process of developing a competitive positioning for the product and an appropriate marketing
mix

Steps in segmentation, targeting and positioning:
Identify bases for
Develop measures of Develop positioning for
segmenting the market
segment attractiveness each target segment
Develop profiles of
Select the target Develop marketing mix for
resulting segments
segment (s) each target segment
Market segmentation Market positioning
Market targeting

Market segmentation

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

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 segmentation

Dividing 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 segmentation

Divides 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 person’s 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 founder’s personality

4. Behavior segmentation

Divides buyers into groups based on their knowledge, attitude, use or response to a product
a. User status – many markets can be segmented into non-users, former users, potential
users, first-time users, and regular users of a product. 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 segmentation

a. 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 segment’s 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 segments

Segment 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

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