Module 2: HOSPITALITY MARKETING
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.
MARKETING IN THE HOSPITALITY INDUSTRY
• McDonald’s has a fast-food product. It uses quality ingredients and develops products
that it can sell at prices people expect to pay for fast food.
• Most people will not spend more than 15 minutes to travel to a McDonald’s restaurant.
As part of its distribution plan, McDonald’s must have restaurants that are conveniently
located to its target market.
• Finally, McDonald’s appeals to different market segments and has many units
throughout a city. This allows McDonald’s to make effective use of mass media, such as
television.
• The marketing mix must be just that—a mix of ingredients to create an effective
product/service package for the target market.
IMPORTANCE OF MARKETING
• We must understand our customers and we should develop a service delivery system to
deliver a product they want at a price they will view as being fair. And do all this while still
making a profit.
• In other ways marketing is ever changing and is changing very rapidly. Social media has
given the customer a powerful voice; dashboards track comments customers are making
about our product on social media; millennials are replacing baby boomers as the most
important travel segment, and their wants are very different than the boomers.
THE MARKETING PROCESS
STEP 1
UNDERSTANDING THE MARKETPLACE AND CUSTOMER NEEDS
• As a first step, marketers need to understand customer needs and wants and the
marketplace within which they operate. We now examine five core customer and
marketplace concepts:
(1) needs, wants, and demands;
(2) marketing offerings (tangible products, services, and experiences);
(3) value and satisfaction;
(4) exchanges and relationships; and
(5) markets
Customer Needs, Wants, and Demands
Needs
-The most basic concept underlying marketing is that of human needs.
- A human need is a state of felt deprivation. Included are the basic physical needs for food,
clothing, warmth, and safety, as well as social needs for belonging, affection, fun, and
relaxation.
Wants
Human wants are the form human needs take as they are shaped by culture and individual
personality. Wants are how people communicate their needs.
Demands
They choose products that produce the most satisfaction for their money. When backed by
buying power, wants become demands.
Market Offerings:
Tangible Products, Services, and Experiences
• Consumer needs and wants are fulfilled through a market offering: a product that is
some combination of tangible, services, information, or experiential product components
“In the hospitality industry, the intangible products, including customer service and experiences,
are more important than the tangible products. Managers of resorts realize that their guests will
be leaving with memories of their stay.”
CUSTOMER VALUE AND SATISFACTION
• Customer value is the difference between the benefits that the customer gains from
owning and/or using a product and the costs of obtaining the product.
• Costs can be both monetary and nonmonetary. One of the biggest nonmonetary costs
for hospitality customers is time.
To do this, managers must know their customers and understand what creates value for them.
This is an ongoing process, as customers and competition change over time.
• Customer expectations are based on past buying experiences, the opinions of friends,
and market information.
• If we meet customer expectations, they are satisfied. Marketers must be careful to set
the right level of expectations.
• If they set expectations too low, they may satisfy those who buy but fail to attract new
customers. If they raise expectations too high, buyers will be disappointed
Exchanges and Relationships
• Exchange is the act of obtaining a desired object from someone by offering something
in return.
• Marketing consists of actions taken to build and maintain desirable exchange
relationships with target markets.
• Beyond simply attracting new customers and creating transactions, the goal is to retain
customers and grow their business with the company.
STEP NO. 2:
DESIGNING CUSTOMER VALUE-DRIVEN MARKETING STRATEGY
• We define Marketing management as the art and science of choosing target markets
and building profitable relationships with them.
• The marketing manager’s aim is to find, attract, keep, and grow target customers by
creating, delivering, and communicating superior customer value.
What customers will we serve (what’s our target market)
How can we serve these customers best (what’s our value proposition)?
Selecting Customers to Serve
• The company must first decide who it will serve. It does this by dividing the market into
segments of customers (market segmentation) and selecting which segments it will go
after (target marketing).
Market segmentation is the process of dividing a market of potential customers into groups,
or segments, based on different characteristics
Choosing a Value Proposition
A company’s value proposition is the set of benefits or values it promises to deliver to
consumers to satisfy their needs. Such value propositions differentiate one brand from another.
They answer the customer’s question, “Why should I buy your brand rather than a
competitor’s?”
STEP NO. 3:
CONSTRUCT AN INTEGRATED MARKETING PLAN
How to prepare an
Integrated Marketing
Plan? The marketing program
builds customer
relationships by The major marketing
The company’s
Next, the marketer transforming the mix tools are
marketing strategy
develops an integrated marketing strategy classified into four
outlines which
marketing program that into action. It broad groups, called
customers the company
will actually deliver consists of the firm’s the four Ps of
will serve and how it
the intended value to marketing mix, the set marketing: product,
will create value for
target customers. of marketing tools the price, place, and
these customers.
firm uses to implement promotion.
its marketing
strategy.
• To deliver on its value proposition, the firm must first create a need-satisfying market
offering (product). It must decide how much it will charge for the offer (price) and how it
will make the offer available to target consumers (place). Finally, it must communicate
with target customers about the offer and persuade them of its merits (promotion).
STEP 4:
BUILDING CUSTOMER RELATIONSHIP MANAGEMENT
CUSTOMER VALUE
• A customer buys from the firm that offers the highest customer-perceived value—the
customer’s evaluation of the difference between all the benefits and all the costs of a
market offering relative to those of competing offers. Importantly, customers often do not
judge values and costs “accurately” or “objectively.” They act on perceived value.
“To some consumers, value might mean sensible products at affordable prices. To other
consumers, however, value might mean paying more to get more”
Customer relationship management (CRM)
CRM is the overall process of building and maintaining profitable customer relationships by
delivering superior customer value and satisfaction. It deals with all aspects of acquiring,
engaging, and growing customers.
STEP NO. 5:
CAPTURING VALUE FROM CUSTOMERS
• The final step involves capturing value in return in the form of current and future sales,
market share, and profits.
• By creating superior customer value, the firm creates highly satisfied customers who
stay loyal and buy more. This, in turn, means greater long-run returns for the firm.
• Here, we discuss the outcomes of creating customer value: customer loyalty and
retention, share of market and share of customer, and customer equity
Customer Loyalty and Retention
• Good CRM creates customer delight. In turn, delighted customers remain loyal and talk
favorably to others about the company and its products. Studies show big differences in
the loyalty of customers who are less satisfied, somewhat satisfied, and completely
satisfied. Even a slight drop from complete satisfaction can create an enormous drop in
loyalty. Thus, the aim of CRM is to create not only customer satisfaction but also
customer delight.
Note:
• Losing a customer means losing more than a single sale. It means losing the entire
stream of purchases that the customer would make over a lifetime of patronage.
• The LTV (lifetime value) of a customer is the stream of profits a customer will create over
the life of his or her relationship to a business.
Growing Share of Customer
• share of customer—the share they get of the customer’s purchasing in their product
categories. Thus, restaurants want to get more “share of stomach” and airlines want
greater “share of travel.” To increase share of customer, firms can offer greater variety to
current customers.
Building Customer Equity
What Is Customer Equity?
• The ultimate aim of CRM is to produce high customer equity
• Customer equity is the total combined customer LTVs of all of the company’s current and
potential customers.
• Therefore, it’s a measure of the future value of the company’s customer base. Clearly,
the more loyal the firm’s profitable customers, the higher its customer equity.
Customer equity may be a better measure of a firm’s performance than current sales or
market share. Although sales and market share reflect the past, customer equity
suggests the future.
Module 2.1: Characteristics of Service Marketing
1. Intangibility
Unlike physical products, intangible products cannot be seen, tasted, felt, heard, or
smelled before they are purchased.
Hospitality and travel industry products are experiential only, and we do not know the
quality of the product until after we have experienced it.
One implication of experiential products is that we take away only the memories of our
experiences.
1.1 Physical Evidence
Physical evidence that is not managed properly can hurt a business.
Negative messages communicated by poorly managed physical evidence include signs
that continue to advertise a holiday special two weeks after the holiday has passed,
signs with missing letters or burned-out lights, parking lots and grounds that are unkempt
and full of trash, and employees in dirty uniforms at messy workstations. Such signs
send negative messages to customers.
2. INSEPARABILITY
Physical goods are produced, then stored, later sold, and still later consumed.
In contrast, hospitality products are first sold and then produced and consumed
at the same time. In most hospitality services, both the service provider and the
customer must be present for the transaction to occur.
Inseparability means both the employee and the customer are often part of the
product.
The food in a restaurant may be outstanding, but if the employee serving the food to the
customer has a poor attitude or provides inattentive service, customers will not be
satisfied with their experience
Another implication of inseparability is that customers and employees must understand
the service-delivery system because they are coproducing the service.
3. VARIABILITY
Services are highly variable.
Their quality depends on who provides them and when and where they are provided.
There are several causes of service variability.
Services are produced and consumed simultaneously, which limits quality control.
Lack of communication and heterogeneity of guest expectations also lead to service
variability.
A restaurant customer ordering a medium steak may expect it to be cooked all the way
through, whereas the person working on the broiler may define medium as having a
warm pink center. The guest will be disappointed when he or she cuts into the steak and
sees pink meat.
Three steps hospitality firms can take to reduce variability and create consistency:
A. Invest in good hiring and training procedures. Recruiting the right employees and providing
them with excellent training is crucial, regardless of whether employees are highly skilled
professionals or low-skilled workers. Better-trained personnel exhibit six characteristics:
Competence—they possess the required skill and knowledge.
Courtesy—they are friendly, respectful, and considerate.
Credibility—they are trustworthy.
Reliability—they perform the service consistently and accurately.
Responsiveness—they respond quickly to customers’ requests and problems.
Communication—they make an effort to understand the customer and communicate
clearly.
B. Standardize the service-performance process throughout the organization.
Diagramming the service-delivery system in a service blueprint can simultaneously map
out the service process
C. Monitor customer satisfaction. Ex: customer satisfaction survey
4. PERISHABILITY
Services cannot be stored.
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 lost from not selling
those 40 rooms is gone forever
Because of service perishability, airlines and some hotels charge guests holding
guaranteed reservations when they fail to arrive. Restaurants are also starting to charge
a fee to customers who do not show up for a reservation. They, too, realize that is
someone does not show up for a reservation, the opportunity to sell that seat may be
lost.
Some hotels will often sell hotel rooms at a very low rate rather let them go unsold.
Because of inseparability, this can cause problems. Oftentimes, the discounted rate
brings in a different type of customer that is not compatible with the hotel’s normal
customer.
