MARKETING IN PRACTICE

Marketing in Practice: Learning Outcomes

At the end of this module, you will Have a good understanding of the main concepts addressed within the module. Be able to apply these concepts in the hotel context. Be aware of both the strengths and limitations of different approaches to marketing in practice in the hotel industry.

TODAYS LEARNING
MARKETING INTRODUCTION, DEFINITIONS AND EXAMPLES MARKETING RESEARCH BASICS

MARKET SEGMENTATION/TARGETING AND POSITIONING

UNDERSTANDING YOUR MARKET- SWOT ANALYSIS, PEST ANALYSIS TRENDS AND UNCERTAINTIES

MARKETING INTRODUCTION, DEFINITIONS AND EXAMPLES

A social definition of marketing

A process in all societies by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others.

A management definition

It is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals.

EXERCISE: Marketing Hotels

Look at both the social and management definitions of marketing. From your experience, which is more like what you do to market your hotel or department?

Marketing Concept
The marketing concept is the philosophy that hotel firms should analyze the needs of their customers and then make decisions to satisfy those needs, better than the competition.

Marketing
Is applicable to hotel and restaurant businesses whether they are big and small. Involves the planning and implementation of most everything an hotel does to facilitate an exchange between itself and its guests.

Marketing
Is a continuous and dynamic strategic decision-making process.

Is a strategic process that matches the hotels strengths and resources to potential opportunities that exist within the marketing environment.

Marketing as a Business Philosophy

Four orientations or business philosophies:

1. Product Orientation a focus on making products widely available, affordable, and require little selling effort
Investment in hotel inventory without reference to demand

Marketing as a Business Philosophy 2

2. Sales Orientation - promotes the business philosophy of selling what we make Filling hotel rooms at whatever price we can get judging performance on occupancy rates rather than revenue or REVPAR Focus on volume rather than quality

Marketing as a Business Philosophy 3

3. Market Orientation involves Customer focus Coordinated marketing effort Long-term success
Knowing your guests and understanding their needs Taking a long-term view of occupancy, revenue and profit Using effective guest and yield management systems

Marketing as a Business Philosophy 4

4. Relationship Marketing Orientation creates and sustain mutually satisfying long-term relationships with not only its guests but with other key stakeholders such as employees, suppliers, distributors, retailers and the community Focus on repeat customers and customer loyalty Retaining price and brand integrity Use of internal marketing with staff Using socially responsible business practices

Are marketing and sales the same thing?

ABSOLUTELY NOT!!
Marketing is selling + + + - a lot more!! If you are good at sales you will not necessarily be good at marketing Marketing does involve sales but also includes research, product and service planning, promotion, distribution and pricing Famous guru Ted Levitt of Harvard says that selling focuses on the needs of the seller (filling rooms, meeting targets) while marketing focuses on the needs of the buyer (satisfaction)

Marketing and Selling

SALES 1. Emphasis is on the needs of the hotel 2. The company builds the hotel and then decides how best to sell rooms to the customer 3. Management is room sales volume focused 4. Planning is short-term and focused on todays products and markets MARKETING 1. Emphasis is on the needs of the guest 2. The company finds out what the guest wants and then works out how to meet those needs 3. Management is profit oriented 4. Planning is long-term and focuses on new products, tomorrows markets and future growth

EXERCISE: What market orientation?

A resort within the Beautiful Hotels Portfolio is faced with the aftermath of a terrorist outrage close to the property. The Executive Team meet and come up with a number of responses to the crisis. What would you say each of them represent in terms of the 4 marketing philosophies?

1. Cut prices by 50% in order to retain occupancy and market share 2. Offer all repeat visitors an automatic upgrade and complimentary champagne dinner for two 3. Invest in the training of all staff with the Were all marketeers programme 4. Cut staff and services drastically to reduce costs in the short-term
5. Sign up with a European low-cost carrier to offer value-for-money all inclusive packages

Do normal marketing rules apply to hotels?

Argument that services, including hotels, need a different approach to marketing Most marketing theory and ideas come from the marketing of products, things we can hold in our hands and buy in shops We can clearly see that most hotels (maybe not bottom of the range budget properties) are a lot more than the sum of their physical assets beds, TVs, showers, restaurant tables etc.

Difference between physical goods and services

Physical goods
Tangible
Homogeneous Production and distribution are separate from consumption

Services
Intangible
Heterogeneous Production, distribution and consumption are simultaneous processes

A thing Core value processed in factory

Customers do not participate in the production process Can be kept in stock Transfer of ownership

An activity or process Core value produced in the buyer-seller interaction

Customers participate in production Cannot be kept in stock or inventoried No transfer of ownership

Characteristics of Services

Intangibility Inseparability Perishability Variability

EXERCISE: Hotel marketing in practice

In groups of 3 or 4, select THREE of the hotel service characteristics and identify some of the their consequences for the marketing of a) a beach resort hotel b) an airport hotel

Hotel Service Characteristics

Hotel services cannot be inventoried Hotel services are time dependent Hotel services are place dependent Consumers are always involved in the production process Hotel services cannot be quality controlled at the factory gate There is a direct human role in hotel service mediation

MARKETING RESEARCH BASICS

What is Market Research?

Simply a matter of finding out as much as you can before committing yourself to an irretrievable step When you do not have answers through your own analysis of the environment within which your hotel operates

What to find out?

What does the customer need? Who is the target audience and how much can you find out about them? What is the competition? Are there any gaps in the market? Would your hotel and its services be able to fill that gap? Would your hotel and its services be acceptable in the market?

Market Research and the Hotel Manager

You dont really need to know HOW to undertake market research BUT It is important to understand the methods because You may be responsible for commissioning market research You need to know what you are buying You do need to read market research reports and interpret them and their limitations!

The Components of Market Research

Secondary Research

EXERCISE: What do I know about my hotel?

List all the formal INTERNAL sources of information you have available to you about your hotel or your company
Share the lists with your neighbour and consider why your lists are a) very similar, or b) have some clear differences

Internal Sources
Company accounts Internal reports and analysis Stock analysis Daily performance data (financial, occupancy, REVPAR) by market segment Guest loyalty cards Repeat visitation data Guest spending data Can you think of other sources?

External Sources
Government statistics Statistics from international agencies - UNWTO Hotel trade publications Commercial data and reports (generally expensive) Other hotel firms research Research documents publications, journals, etc.

Sampling Methods

Sampling Methods
Random Samples equal chance of anyone being picked May select those not in the target group indiscriminate Sample sizes may need to be large to be representative Can be very expensive

Sampling Methods 2
Stratified or Segment Random Sampling Samples on the basis of a representative strata or segment Still random but more focussed May give more relevant information May be more cost effective

Sampling Methods 3
Quota Sampling Again by segment Not randomly selected Specific number on each segment are interviewed, etc. May not be fully representative Cheaper method

Sampling Methods 4
Cluster Sampling Primarily based on geographical areas or clusters that can be seen as being representative of the whole population Multi-Stage Sampling Sample selected from multi-stage sub-groups Snowball Sampling Samples developed from contacts of existing customers word of mouth type approach!

Primary Research

Primary Research
First hand information Expensive to collect, analyse and evaluate especially in the international markets within which many hotels operate use of tourist board studies rather than hotelspecific research Can be highly focussed and relevant Care needs to be taken with the approach and methodology to ensure accuracy Types of question closed limited information gained; open useful information but difficult to analyse

Primary Research 2
Quantitative and Qualitative Information Quantitative based on numbers (56% of British holiday makers prefer allinclusive vacations) but does not always tell you why, when, how Qualitative more detail can tell you why, when and how!

Purpose

Advantages of Market Research

Helps focus attention on objectives Aids forecasting, planning and strategic development May help to reduce risk of new product development Communicates image, vision, etc. May identify new training needs (heath food trends, languages) Globalisation makes market information valuable

Disadvantages of Market Research

Information only as good as the methodology used Can be inaccurate or unreliable Results may not be what the business wants to hear! May stifle creativity, initiative and gut feeling Always a problem that we may never know enough to be sure!

MARKET SEGMENTATION, TARGETING AND POSITIONING

STP a three stage process

Segmenting dividing up the market into different groups

Targeting selecting a segment to target

Positioning developing a marketing strategy which positions the product in relation to rivals in order to appeal to market segments

What is Market Segmentation?

The breaking down or building up of potential buyers into groups called Market Segments

EXERCISE: Segmenting your market

Thinking about the market that uses your hotel is segmented How many major segments can you think of? What criteria did you use to segment them in your mind? Are there other criteria that you could have used

Segmenting your Market

Wide variety of criteria that you could have used: Age Gender Nationality (probably the most common in hotels) Purpose of visit (business, leisure and leisure interests)

Benefits of Market Segmentation

1. Identifies opportunities for new product development

2. Helps design marketing programmes most effective for reaching homogenous groups of buyers
3. Improves allocation of marketing resources

Market Segmentation Variables

Demographic

Behavioural

Market Segmentation Variables

Psychographic
Geographical

Fundamental Buyer Related Questions

Who are they? What do they want to buy? How do they want to buy? When do they want to buy? Where do they want to buy?

Why do they want to buy?

Geographic
Subdividing markets into segments based on location, the regions, countries, cities and towns where people live. The reason for this is simply that people from the same location have almost the same desire for product and its usage. Geographic characteristics are also measurable and accessible.

Geographic Segmentation
Region: by continent, country, state, or even neighbourhood Size of metropolitan area: segmented according to size of population Population density: often classified as urban, suburban, or rural Climate: according to weather patterns common to certain geographic regions

Demographic
The demographic are basically identifiable characteristics of individual's because people with different background generally have different purchase requirements. Demographics are the most common basis for segmenting consumer markets. They are frequently used because they are often strongly related to demand and relatively easy to measure. The demographic may be viewed single or combination.

Demographic Segmentation
Age Gender Family size Family lifecycle Generation: baby-boomers, generation X etc Income Occupation Education Ethnicity Nationality Religion Social class

Psychographic Segmentation
Groups customers according to their lifestyle Activities Interests Opinions Attitudes Values

Behavioural Segmentation
Is based on actual customer behavior toward products
Benefits sought Usage rate Brand loyalty User status: potential, first-time, regular, etc. Readiness to buy Occasions: holidays and events that stimulate purchases

Each Market Segment should be

Measurable

Differentiable

Substantial

Accessible

Criteria for Segmentation

Relatively homogenous group Distinctive and identifiable Accessible capable of being reached Actionable Measurable Sufficiently large to be profitable

Market Targeting
The process of evaluating each market segments attractiveness and selecting one or more segments to enter.

Develop measures of segment attractiveness. Identify which and how many segments should be targeted.

Why engage in segmentation?

To develop different strategies for different parts of the market To tailor marketing mix to meet the needs of distinct groups To increase sales and profits by serving particular segments To identify marketing opportunities To dominate niche segments To reflect differences in customer tastes To prioritise on those segments most likely to provide a higher return

Factors in choice of target segment

Size Growth potential Degree and intensity of competition Potential competition Business capabilities of the organisation
Resources available Corporate objectives and mission Accessibility Sustainability Is it defendable? Ability of the organisation to establish itself in the market

Target Market Strategy Specifying segments to pursue

Organization

Differentiated Marketing The organization pursues several different market segments simultaneously e.g. Ritz Carlton

Market

Target Market Strategy Specifying segments to pursue

Organization

Concentrated Marketing
The organization focuses on a single market segment

Market

Target Market Strategy Specifying segments to pursue

Organization

Undifferentiated Marketing
The organization ignore segments and treat all groups the same

Market

Choosing segments to target

Unattractive Average segment segment
Absence of competitive advantage Average in terms of competitive advantage Strong competitive advantage

Attractive segment
A possibility

Avoid

Avoid

Avoid

A possibility A secondary target

A possibility A secondary A prime target target

Benefits of targeting
Focus resources on the most profitable segments Provides a focus for analysing competitors Enables the organisation find a strategic fit between its marketing strategy and its longterm objectives Provides better understanding of a limited market Improved communication between seller and buyer Enables the business to focus attention on segments it understands

Market Positioning
The development of an offer within each segment that is most likely to appeal to a targeted group Arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the mind of target consumers A products position is the place the product occupies relative to competitors in consumers minds

The process of positioning

Understand consumer perceptions Positioning products in the minds of consumers Develop positioning for each market segment Design appropriate mix to communicate positioning

To remain competitive a business must

Separate the market into appropriate segments with a focus on those likely to deliver the best returns Target appropriate segments Position the product in the minds of potential customers Be prepared to reposition the product

UNDERSTANDING YOUR MARKETSWOT ANALYSIS, PEST ANALYSIS

SWOT Analysis
SWOT analysis is a tool for auditing an organization and its environment It is the first stage of planning and helps marketers to focus on key issues Is a simple framework for generating strategic alternatives from a situation analysis

 It concentrates on the issues that potentially have the most impact Is useful when a very limited amount of time is available to address a complex strategic situation, as is often the case in the hotel industry

A word of caution, SWOT analysis can be very subjective

SWOT Analysis
Looking at your hotel in terms of its Strengths (internal).to build on Weaknesses (internal).to cover Opportunities (external).to capture Threats (external).to defend against

SWOT Analysis
Source

Strengths

Weaknesses

Internal (controllable)

Opportunities

Threats

External (uncontrollable)

SWOT Analysis Example

Source

Strengths
Location

Weaknesses
Lack of marketing experience

Internal (controllable)

Opportunities
A developing market such as Internet

Threats
A new competitor in your home market

External (uncontrollable)

Internal Analysis
Company culture Company image Organizational structure Key staff Skills profile of staff Languages profile of staff Access to natural resources Position on the experience curve Operational efficiency Operational capacity Brand awareness Market share Financial resources Exclusive contracts

External Analysis
Customers Competitors Market trends Suppliers Travel intermediaries (travel agents, tour operators) Partners Natural Social changes New technology Economic environment Political and regulatory environment

Simple rules for successful SWOT analysis

Be realistic about the strengths and weaknesses of your organization when conducting SWOT analysis SWOT analysis should distinguish between where your organization is today, and where it could be in the future SWOT should always be specific. Avoid grey areas Always apply SWOT in relation to your competition i.e. better than or worse than your competition Keep your SWOT short and simple. Avoid complexity and over analysis

Once key issues have been identified with your SWOT analysis, they feed into marketing objectives. SWOT can be used in conjunction with other tools for audit and analysis, such as PEST analysis

PEST Analysis
Organizations operates in micro and macro environment which are changing time to time. Formulation of right strategies always needs scanning of internal and external environment to determine the level of impact of each factor on organization business. PEST is the best technique for scanning of macro level environment.

PEST Analysis
A PEST analysis is used to identify the external forces affecting an organization (which the organization does not have direct control over) Political factors Economic factors Sociocultural factors Technological factors Natural factors

Political/Legal

Monopolies legislation Environmental protection laws Taxation policy Employment laws Government policy Legislation Others?

Economic Factors
All businesses are affected by national and global economic factors. Inflation Employment Disposable income Business cycles Energy availability and cost Others?

Example
The global credit crunch originating in the USA contributed towards the credit crunch in the UK in 2007/08. An economy undergoing recession will have high unemployment, low spending power and low stakeholder confidence. A booming or growing economy will have low unemployment, high spending power and high stakeholder confidence.

Sociocultural Factors
These forces shape who we are as people, the way we behave and ultimately what we purchase.
Demographics Distribution of income Social mobility Lifestyle changes Consumerism Levels of education Others?

Example
Within the UK peoples attitudes are changing towards their diet and health. As a result the UK is seeing an increase in the number of people joining fitness clubs and a massive growth for the demand of organic food. Products such as Wii Fit attempt to deal with societys concern, about childrens lack of exercise. Organizations must be able to offer products and services that aim to complement and benefit peoples lifestyle and behaviour.

Technological
Technology has created a society which expects instant results. New discoveries and innovations Speed of technology transfer Rates of obsolescence Internet Information technology Others?

PEST analysis is particularly important within a hotel industry that is very vulnerable to external influences on its operating and marketing environments.

TRENDS AND UNCERTAINTIES

Changing Customer Profile

Changing demographics in major source markets (Europe is getting older!) Shifting consumption patterns (shorter and more?) Intensifying competition (destinations, hotel companies) Growing segmentation Dwindling differentiation (technology equalisation across brands)

Changing Customer Profile

Diminishing brand loyalty (price, location driving forces) Increasing value orientation Escalating concern for the environment Continuing consolidation between major companies Increasing influence of the Internet on information and distribution

Making sense of the future: an essential tool for marketing

Two uncertain but very important drivers for the tourism sector has been identified

1. The general economic development: continued economic growth and globalisation or, economic recession and nationalism 2. The development of certain consumer trends frugal/ thrifty or, escapism

Crossing Drivers of Change

Economic growth and globalisation The ongoing economic crisis is just a minor and short economic slow down. With such a positive economic development increased globalisation will follow.

Escapism

Frugal

Consumption is Consumers will typically driven by the develop a more frugal faster, better, bigger and spiritual approach ideology. Climate to consumption. The problems for example personal are not seen as a responsibility personal concerning for responsibility. The example health, escapists are environment, climate concerned about and fair trade is taken health and the fairness very serious. Saving of the world but tend Economic recession and nationalism before spending to escape via wellness becomes more and traditional luxury. A recession will influence the society for important. the next 10-12 years. It will result in increased nationalism and regionalism where regions and nations turn their back to global cooperation concentrating on their own lack of resources.

The Four Scenarios

Continued economic growth and globalisation
Scenario 1 The Marco Polo Scenario Scenario 3 The Body Shop Scenario

Escapism

Frugal

Scenario 2 The Sunny Beach Scenario

Scenario 4 The Asceticism Scenario

Economic recession and nationalism

Characteristics of the four visions in terms of future tourism

Continued economic growth and globalisation
The Marco Polo Scenario High individualisation
Some specialisation possibilities Polarisation of the market High growth in inbound tourism Wellness and traditional luxury

The Body Shop Scenario High individualisation

Many specialisation possibilities Segmentation of the market Healthy lifestyle and holidays Goodness: volunteering, fair trade, organic food, etc.

Escapism
The Sunny Beach Scenario Mass produce, economies of
scale Highly price driven market Conformity Comfort but no luxury Regionalisation of travelling

Puritanism
The Ascetism Scenario Basic living simple holidaying
Close-to-home tourism Experiences: healthy, sustainable and cheap Food: vegetarian, organic, local produce, simple

Economic recession and nationalism

EXERCISE: What do the scenarios mean for us?

Consider what each of the scenarios could mean for a) your hotel b) the tourism and hotel industry in Egypt

THE END