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question:
Identify and discuss marketing tactics used by hospitality and tourism companies to manage the characteristics of services.
Has to be in by deadline but WOULD LIKE THIS ASAP!
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Transcript: Marketing Concepts
Definition of Marketing
The American Marketing Association defines marketing as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.
This new definition positions marketing as an activity instead of a function. It identifies marketing as a broader activity in a company or organization, and not just a department. The new definition also recognizes that marketing provides long-term value as well as the short-term benefit of exchange of money for the shareholder and the organization.
Concept of Exchange
The essence of marketing is an exchange between two parties, meaning one party is willing to give up something (often money) in exchange for something he or she would rather have. Exchange occurs when one social unit (person or organization) exchanges something of value with another social unit.
Conditions for Exchange
Six conditions must exist for an exchange to be able to occur:
· First, two or more social units must be involved.
· Second, the parties must be involved voluntarily—that is, each party must be free to accept or reject the other’s offer.
· Third, each must have needs that must be satisfied.
· Fourth, each party must have something of value to exchange.
· Fifth, the parties must believe that they will benefit from the exchange.
· And finally, the parties must be able to communicate with each other, and deliver the goods or services to be exchanged.
The Marketing Concept
The Marketing Concept is a philosophy that guides the firm in how it conducts its business.
The Marketing Concept suggests that an organization should aim all its efforts at identifying and satisfying consumer needs.
The Marketing Concept is based on three fundamental beliefs:
· First, all planning and operations should be customer-oriented.
· Second, all marketing activities in an organization should be coordinated.
· And third, customer orientation and coordination of activities are essential to achieve the organization’s performance objectives.
Strategic Marketing Concept
However, some observers have said that the focus of the Marketing Concept was too narrow, because it failed to account for the larger business and social environment. Consequently, there have been efforts to extend the Marketing Concept to create a philosophy more attuned to the realities of today’s business environment.
One such extension is the Strategic Marketing Concept.
Noting that the Marketing Concept does not adequately consider a firm’s competition, the Strategic Marketing Concept suggests that a firm must satisfy customer needs while sustaining a competitive advantage to ensure long-term profitability. That is, a firm must have dual goals: satisfying customers and outperforming the competition on one or more key factors.
For example, Tune Hotels is a rapidly growing lodging chain designed to provide real value to the large population at the base of the population pyramid. Tune Hotels’ business model embraces many of the efficient operating characteristics pioneered by low-cost carrier airlines such as Southwest Airlines, RyanAir, and Air Asia.
For Tune Hotels, this includes:
1. Internet distribution direct to customers,
2. Aggressive use of price to stimulate demand and maintain high occupancies,
3. “Opt-in/opt-out” amenities,
4. High operating efficiencies, and
5. A simple and consistent operating model that gives the customer a significant value proposition.
Using ten tiers of room rates, Tune can offer incredible value for guests willing to book months in advance; this represents a creative marketing opportunity for developing markets that have rapidly growing, large populations with limited disposable incomes. Guests can access a quality, compact, clean guest room for less than US$5.00 per night, including all fees, and pay only for the amenities they require. Prices are kept low because incremental revenue is generated in every way possible, including the selling of advertising space throughout the hotel’s physical structure.
Societal Marketing Concept
Another extension of the Marketing Concept is the Societal Marketing Concept, which addresses the criticism that although the Marketing Concept may lead to business success, it may encourage actions that conflict with a firm’s responsibility to society. Thus, the Societal Marketing Concept evolved to resolve what is known as “the micro-macro dilemma.” That is, what is good for some producers and consumers may not be good for society as a whole.
The Societal Marketing Concept recognizes that the market includes not only buyers of the firm’s products, but also other people affected by the firm’s operations. It also means the firm takes a long-term view of customer satisfaction.
For example, in one region of Cambodia, every tour bus company stops at a particular wat (a Cambodian temple) starting at 4:00 in the evening for the express purpose of letting tourists view the sunset from the top of the hill where the wat is located. Although including this scenic view increases the satisfaction of the tour bus companies’ customers, the vast number of tourists clambering around the hill are destroying the ancient wat, so future generations will be unable to enjoy it. If the tour companies were practicing the Societal Marketing Concept, they would identify another venue that would provide equal customer satisfaction and would also protect the wat from destruction, especially since the customers are there to view the sunset, not the wat.
Firms that practice corporate social responsibility are utilizing the philosophy of the Societal Marketing Concept.
Applying Marketing Concepts
So which of these marketing concepts is the most appropriate for your organization?
In their 2008 article on the relative merits of the different marketing concepts, Ward and Lewandowska indicate that in volatile, uncertain business environments, following the simpler Marketing Concept strategy of customer orientation seems to be most effective. In stable business environments, it is better to use the Societal Marketing Concept and competitive-based Strategic Marketing Concept.
All strategies come with caveats and marketing is no different. In very rare conditions, utilizing any form of marketing may waste resources. These limited conditions include:
· When the customers are satiated to the point they will not make any further purchases
· When a product that customers want will not be made available
· When the cost of gathering the information about customer needs exceeds the revenue it will generate
· When the firm is restricted in what it can exchange
Marketing Myopia
The Marketing Concept suggests that an organization should aim all its efforts at identifying and satisfying consumer needs.
Businesses that define themselves in terms of goods and services rather than consumer needs often find themselves engaging in narrow, short-term thinking, which is sometimes called “marketing myopia.”
The term “marketing myopia” was coined by Ted Levitt in a 1975 essay published in the Harvard Business Review. When an organization suffers from marketing myopia, it defines its business strategy too narrowly, to the point where it cannot adapt to evolving consumer needs.
Service-Profit Chain
Another critical concept in the hospitality industry is the service-profit chain.
The concept of the service-profit chain was originally introduced by Heskett and others in an essay published in theHarvard Business Review in March-April 1994. It has been widely embraced by the hospitality industry because the model contends that if the organization treats employees well, employees will be more satisfied and have greater loyalty and productivity. In turn, increased employee productivity will increase focus on providing an excellent customer experience, and increase customer value and satisfaction. Because satisfied customers are more loyal to the brand and more willing to shop with the firm, the internal service focus leads to improved firm financial performance.
Extended Service-Profit Chain Model
Most recently, in the March 2009 issue of Journal of Marketing, Christian Homburg, Jan Wieseke, and Wayne D. Hoyer published research that demonstrated that customer satisfaction resulted more from employee-company identification than from employee satisfaction. In this complementary model, employee-company identification leads through improved customer focus to customer-company identification. This directly influences customer loyalty and customer willingness to pay. As in the traditional service-profit chain, these factors lead to improved financial performance.
These two complementary models make up the extended service-profit chain.
Transcript: Marketing Mix: The Four Ps of Marketing
Product
Product means identifying and developing the goods and services that consumers want or need. Often this involves in-depth market research.
Place
Place is offering products in a location so that they are convenient to the guest. For example, the number one hotel attribute for which a customer selects a particular hotel over that of a competitor is the convenience of the hotel’s location.
Price
Setting the price is an essential step of the process. A price must serve many functions. It must yield a profit, it must provide value to the guest, and it has to take into account the price of competing goods and services.
Promotion
Promotion involves letting guests know about the product through advertising, personal selling, and other forms of marketing communications.
Transcript: Service Characteristics of Hospitality and Tourism Marketing
Service
At first glance, defining service as a product is not an easy task, because service is not a physical item that can be picked up and examined. But customers paying money for your organization’s services, come to conclusions regarding the value of those services. That is, they decide whether the service received has been worth its cost.
Christian Grönroos (a pioneer of modern service marketing) defines service as an intangible activity that takes place between the guest and a service organization’s service employees, physical resources, or systems—or some combination of those.
Characteristics of Services
Most products have components of both goods and services inherent to their purchase. This can be as simple as a mailing address to return a defective product, or a huge facility equipped to respond to varying needs, such as an auto dealership with an attached service department. Most services are performed in the context of a tangible good, and most goods are combined with some element of a service. In the restaurant business, for example, the product is a combination of the food (the “goods”) and everything associated with the way it is served (the service).
The relationship between goods and services can be illustrated by the Goods-Services Continuum. Most hospitality purchases fall to the right of this spectrum.
Characteristics of Services
In the hospitality industry, the key features of services include intangibility, inseparability, perishability, and the difficulty of standardization. Understanding each of these elements can help you define your tasks as a manager to improve the production and delivery of services.
Intangibility
The intangibility of service makes it difficult for hospitality organizations to differentiate themselves from the competition, and it makes it difficult for consumers to compare the quality of different services prior to consumption. When it comes to purchasing service, consumers simply do not have as much information to go on before they spend their money. That means it’s riskier for consumers to try a new service or a new service provider than it is to try a new good. At the same time, the risk associated with trying new services means that, given a positive experience, customers are more likely to purchase the same service again.
Managers in the hospitality industry try to minimize the risk associated with first-time service purchases by making the nature of those services as tangible as possible, so that customers know what they’re buying before they spend their money. Some of the strategies they use include:
· Requiring employees to wear uniforms
· Employing the same logo, building design, and façade on all buildings
· Making certain features (such as lobbies) visible, recognizable, and attractive
· Creating outward identifying signs and signifiers at every opportunity
Inseparability
Inseparability means that the production and consumption of services are tied together and often occur simultaneously. In the hospitality setting this often involves interactions between guest and clerk or guest and waiter; in such cases, there are usually several well-defined points of contact. These moments of personal contact between employees and guests are very important in the effectiveness of the service delivered. The interaction between the employee and the guest is part of the total product. Proper training and proper attention to detail are essential to ensure a successful interaction between guest and employee.
Perishability
When it comes to most tangible goods, items not sold today will keep their value and can be sold tomorrow. But certain goods are perishable–fruit, for example, ripens and has retail value for a limited window of time. The service-related efforts of your staff are similar in that they cannot be stored or saved. To manage a facility and staff profitably and ensure customer satisfaction, managers in the hospitality industry must be aware of such perishability and manage their capacity accordingly. The value of a room carried vacant tonight can never be realized in a future time period. To guard against this, hotels (and often airlines) frequently overbook their facility. If this is a regular business practice within your firm, then it’s important to develop a process for finding alternate accommodations when guests walk in and discover their rooms have been given away.
Difficulty of Standardization
It is difficult to ensure consistent quality in the service industries because of the human element involved in the service production. Highly standardized behavior is almost impossible and not always desirable. Still, employees must be managed so that they provide a level of service that meets customer expectations and is commensurate with the corporate image. There are a wide variety of tactics used by the hospitality and tourism industry to manage the difficulty of standardization including:
· Increasing automation of tasks (electronic check in/out)
· Training employees to make good decisions
· Empowering employees to make those decisions
Nonetheless, one of the more frustrating aspects of the service industry is that regardless of the employees’ best efforts, ill-natured guests will probably not have a good experience.
Transcript: The Marketing Process Continuum
Mission statement
The mission statement should answer the following questions about the business:
· Who am I?
· Type of hotel—product focus and need
· Quality level—luxury, first-class, budget
· Business mix
· What are the key market segments I serve?
· What makes me unique?
· Salience, determinance, and importance
· Who are the key competitors whose success directly affects my business?
· Who are my constituents—formal and informal groups (employees, unions, suppliers, regulators/inspectors, and so on)—whose efforts on my behalf may contribute to success?
· How will I improve over the next 3-5 years?
The answers to these questions help organizations define their target markets and their business mix.
Strategy
Strategy involves matching opportunities with corporate capability. The strategic window of opportunity is a limited period during which the combination of an opportunity and the firm’s ability to exploit it exists.
Breakthrough Opportunities are opportunities that help innovators develop hard-to-copy marketing strategies that will be very profitable for a long time. There must be a match or “fit” between the target market opportunity and the company’s resources.
Competitive Advantage means that a firm has a marketing mix which the target market sees as better than a competitor’s mix. The goal of strategic planning is to gain a sustainable competitive advantage.
An organization with a production orientation would focus on achieving a competitive advantage by increasing production efficiencies to develop a production cost advantage. A company with a sales orientation would develop a competitive advantage by having a more persuasive sales message. A firm with a marketing orientation would achieve a competitive advantage by satisfying consumers’ needs.
Unless the company has some overriding competitive advantage, the target market selected should be served by only a few, small competitors.
Analysis
There are two schools of thoughts regarding what happens after an opportunity is identified. The traditional belief is that marketers must conduct an environmental analysis to analyze the sociocultural, demographic, economic, technological, political and legal, competitive, and ecological environments. Marketers use the data they’ve gathered in an environmental analysis to conduct a SWOT analysis, identifying the strengths, weaknesses, opportunities, and threats associated with their enterprise. In concert with the identification of organizational resources, this enables organizations to define marketing objectives and a unique competitive advantage.
The opposing, and more nascent view, known as the Effectual Approach, is that analogical reasoning based on experience should be used to make marketing decisions, whereas predictive information should be ignored or given little weight. The goal is to control outcomes, co-create value through partnerships, and transform situations to achieve desired results.
Read, Stuart, Nicholas Dew, Saras D. Sarasvathy, Michael Song, and Robert Wiltbank (2009), “Marketing Under Uncertainty: The Logic of an Effectual Approach,” Journal of Marketing, 73 (3), 1-18.
Tactics
Under the traditional approach, organizations develop product, place, price, and product strategies for each target market based on resource and capability constraints; develop actionable tactics to implement strategy; and identify all resources needed for implementation.
As part of this stage, they also create a set of tools such as budget and pro-forma income statements for the next five years. These are used to perform a business analysis to ensure the direction the firm is taking will be a profitable one, to determine the actual cost of the business tactics, and to identify how much income the firm expects to generate. In addition, accountability controls and methods of evaluation are developed to assist with the review process that will follow at a later time.
Contingency plans are also created so that organizations are prepared to respond rapidly to minor changes in their situations.
Following the effectual approach, the belief is that markets and products can be broadly transformed when moving along the path from concept to acceptance. Thus, alternative markets are more likely to be considered, pricing is likely to follow a skimming strategy, and channel strategies are more likely to focus on partnerships serving a narrow customer segment. Succinctly, the effectual approach is focused on relationships, networking, equity, co-creation, humans, and operant resources.
Review
During this phase, marketers re-examine strategies to ensure their continued fit with the organization’s defined objectives as well as the prevailing environmental constraints. Further, they review and evaluate the effectiveness of their tactics based on the accountability controls, methods of evaluation, and contingency plans they established earlier.
Strategy
On the basis of their review, it may be necessary to revise strategies and even, in the most extreme circumstances, the mission statement. Such revisions lead to consequent revisions in tactical implementations, which are followed by another review cycle, another round of revisions, another review cycle, another round of revisions, and so on.
