Table of Contents
Chapter 1: Introduction: Marketing for Hospitality and Tourism .................................................. 5
Chapter Objectives ...................................................................................................................... 5
Teaching Suggestions ................................................................................................................. 5
Chapter Outline ........................................................................................................................... 6
Answers to Discussion Questions ............................................................................................. 10
Chapter 2: Service Characteristics of Hospitality and Tourism Marketing .................................. 13
Chapter Objectives .................................................................................................................... 13
Teaching Suggestions ............................................................................................................... 13
Chapter Outline ......................................................................................................................... 15
Answers to Discussion Questions ............................................................................................. 16
Chapter 3: The Role of Marketing in Strategic Planning ............................................................. 19
Chapter Objectives .................................................................................................................... 19
Teaching Suggestions ............................................................................................................... 19
Chapter Outline ......................................................................................................................... 22
Answers to Discussion Questions ............................................................................................. 25
Chapter 4: Developing Hospitality and Tourism Marketing Opportunities and Strategies .......... 27
Chapter Objectives .................................................................................................................... 27
Teaching Suggestions ............................................................................................................... 27
Chapter Outline ......................................................................................................................... 31
Answers to Discussion Questions ............................................................................................. 33
Chapter 5: Marketing Information Systems and Marketing Research.......................................... 36
Chapter Objectives .................................................................................................................... 36
Teaching Suggestions ............................................................................................................... 36
Chapter Outline ......................................................................................................................... 37
Answers to Discussion Questions ............................................................................................. 40
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Chapter 6: Consumer Markets and Consumer Buying Behavior.................................................. 45
Chapter Objectives .................................................................................................................... 45
Teaching Suggestions ............................................................................................................... 45
Chapter Outline ......................................................................................................................... 46
Answers to Discussion Questions ............................................................................................. 49
Chapter 7: Organizational Buyer Behavior of Group Market ...................................................... 52
Chapter Objectives .................................................................................................................... 52
Teaching Suggestions ............................................................................................................... 52
Chapter Outline ......................................................................................................................... 53
Answers to Discussion Questions ............................................................................................. 55
Chapter 8: Market Segmentation, Targeting, and Positioning ...................................................... 58
Chapter Objectives .................................................................................................................... 58
Teaching Suggestions ............................................................................................................... 58
Chapter Outline ......................................................................................................................... 60
Answers to Discussion Questions ............................................................................................. 62
Chapter 9: Designing and Managing Products ............................................................................. 65
Chapter Objectives .................................................................................................................... 65
Teaching Suggestions ............................................................................................................... 65
Chapter Outline ......................................................................................................................... 68
Answers to Discussion Questions ............................................................................................. 70
Chapter 10: Internal Marketing ..................................................................................................... 75
Chapter Objectives .................................................................................................................... 75
Teaching Suggestions ............................................................................................................... 75
Chapter Outline ......................................................................................................................... 76
Answers to Discussion Questions ............................................................................................. 77
Chapter 11: Pricing Products: Pricing Considerations, Approaches, and Strategy ...................... 80
Chapter Objectives .................................................................................................................... 80
Teaching Suggestions ............................................................................................................... 80
Chapter Outline ......................................................................................................................... 84
Answers to Discussion Questions ............................................................................................. 88
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Chapter 12: Distribution Channels................................................................................................ 91
Chapter Objectives .................................................................................................................... 91
Teaching Suggestions ............................................................................................................... 91
Chapter Outline ......................................................................................................................... 93
Answers to Discussion Questions ............................................................................................. 95
Chapter 13: Promoting Products: Communication and Promotion Policy and Advertising ........ 98
Chapter Objectives .................................................................................................................... 98
Teaching Suggestions ............................................................................................................... 98
Chapter Outline ....................................................................................................................... 101
Answers to Discussion Questions ........................................................................................... 106
Chapter 14: Promoting Products: Public Relations and Sales Promotion .................................. 108
Chapter Objectives .................................................................................................................. 108
Teaching Suggestions ............................................................................................................. 108
Chapter Outline ....................................................................................................................... 110
Answers to Discussion Questions ........................................................................................... 113
Chapter 15: Professional Sales.................................................................................................... 115
Chapter Objectives .................................................................................................................. 115
Teaching Suggestions ............................................................................................................. 115
Chapter Outline ....................................................................................................................... 118
Answers to Discussion Questions ........................................................................................... 118
Chapter 16: Direct and Online Marketing: Building Customer Relationships ........................... 124
Chapter Objectives .................................................................................................................. 124
Teaching Suggestions ............................................................................................................. 124
Chapter Outline ....................................................................................................................... 126
Answers to Discussion Questions ........................................................................................... 130
Chapter 17: Destination Marketing ............................................................................................. 132
Chapter Objectives .................................................................................................................. 132
Teaching Suggestions ............................................................................................................. 132
Chapter Outline ....................................................................................................................... 134
Answers to Discussion Questions ........................................................................................... 137
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Chapter 18: Next Year’s Marketing Plan.................................................................................... 139
Chapter Objectives .................................................................................................................. 139
Teaching Suggestions ............................................................................................................. 139
Chapter Outline ....................................................................................................................... 139
Answers to Discussion Questions ........................................................................................... 144
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Chapter 1: Introduction: Marketing for Hospitality and Tourism
Chapter Objectives
1. Understand the relationships between the world’s hospitality and travel industry.
2. Define marketing and outline the steps in the marketing process.
3. Explain the relationships between customer value and satisfaction.
4. Understand why the marketing concept calls for a customer orientation.
5. Understand the concept of the lifetime value of a customer and be able to relate it to
customer loyalty and retention.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Understand the relationships between the world’s hospitality and travel industry.
The hospitality industry is one of the world’s largest industries. The hospitality and travel
industry combine to form the foundation for tourism. Discuss the interrelatedness
between the hospitality and travel industry. Inspire class discussion by asking: What
types of hospitality operations do people visit when they are traveling? What happens to
the hospitality industry if travel declines?
2. Define marketing and outline the steps in the marketing process.
Ask students to define marketing (most will bring up advertising and sales). Lead them
towards the full definition of marketing by bringing up other aspects of marketing and
discussing what they all have in common (finding, retaining and growing profitable
customers). Marketing is making business decisions with the customer in mind. It evolves
from creating a customer service attitude among all employees. Thus, all managers need
to understand marketing. It is not a function that can be left up to a few people in the
marketing department.
Describe how each of the steps in the marketing process is supported by the different
aspects of marketing. Explain to the students that the marketing mix is composed of the
marketing variables managers can control. Companies must work to understand
consumers, create value and build relationships. This process in creating customer value
should, in turn, result in sales, profit and long-term customer equity.
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3. Explain the relationships between customer value and satisfaction.
Encourage students to discuss products or services that they feel have value. Find out if
they were satisfied by purchasing these products or services. Explain how their
perceptions of value contributed to their satisfaction. Value is the consumer’s estimate of
the product’s overall capacity to satisfy their needs. 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
4. Understand why the marketing concept calls for a customer orientation.
Discuss the different management philosophies and the drawbacks that can occur when
customer orientation is not the focus of the company. Discussing the success and failure
of companies adopting the different marketing management philosophies can help
students realize how many business decisions are actually marketing decisions and how
these decisions affect the overall business operation.
5. Understand the concept of the lifetime value of a customer and be able to relate it to
customer loyalty and retention.
Good customer relationship management creates customer delight. In turn, delighted
customers remain loyal and talk favorably to others about the company and its products.
Marketing management 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.
Companies are realizing that 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 benefits of customer loyalty come from continued patronage of loyal
customers, reduced marketing costs, decreased price sensitivity of loyal customers, and
partnership activities of loyal customers. The lifetime value of a customer is the stream of
profits a customer will create over the life of their relationship with a business.
Chapter Outline
I.
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. [Slide 1-4]
II.
What Is Hospitality Marketing? Marketing is the art and science of finding, retaining, and
growing profitable customers. [Slide 1-5]
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III.
Importance of Marketing
A. The entrance 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.
B. 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.
C. In response to growing competitive pressures, hotel chains are relying on the
expertise of the marketing director.
IV.
Travel Industry Marketing [Slide 1-7]
A. Successful hospitality marketing is highly dependent on the entire travel industry.
B. 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.
C. Few industries are as interdependent as the travel and hospitality industries.
V.
Understanding the Marketplace and Customer Needs
The marketing process is a five-step model of the marketing process. In the first four
steps, companies work to understand consumers, create customer value, and build strong
customer relationships. In the final step, companies reap the rewards of creating superior
customer value. By creating value for customers, they in turn capture value from
customers in the form of sales, profits, and long-term customer equity. [Slide 1-8]
A. Understand customers [Slide 1-9]
1.Needs. Human beings have many complex needs. These include basic
physical needs for food, clothing, warmth, and safety; social needs for
belonging, affection, fun, and relaxation; esteem needs for prestige,
recognition, and fame; and individual needs for knowledge and selfexpression.
2.Wants. Wants are how people communicate their needs.
3.Demands. 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. [Slide 1-10]
4.Market offerings. Some combination of tangible products, services,
information, or experiences that are offered to the market. [Slide 1-11]
5.Value, expectations, and satisfaction [Slide 1-12]
a. 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.
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b. Customer expectations are based on past buying experiences, the
opinions of friends, and market information.
c. Satisfaction. Satisfaction with a product is determined by how well
the product meets the customer’s expectations for that product.
B. Exchange and relationships [Slide 1-13]
1. Exchange. Exchange is the act of obtaining a desired object from
someone by offering something in return.
2. Relationship marketing. Relationship 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.
3. Designing customer-driven marketing strategy. Marketing management
is the art and science of choosing target markets and building profitable
relationships with them.
a. Selecting customers to serve. The company must select those
market segments it wishes to serve.
b. Choosing a value proposition. The company must also decide
how it will serve targeted customers—how it will differentiate
and position itself in the marketplace. A company’s value
proposition is the set of benefits or values it promises to deliver
to consumers to satisfy their needs.
VI.
Designing a Customer Value-Driven Marketing Strategy
A. Choosing a value proposition. The company must also decide how it will serve
targeted customers and how it will differentiate and position itself in the
marketplace.
B. Marketing management orientation [Slide 1-14]
1. Production concept. 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.
2. Product concept. The product concept holds that customers prefer existing
products and product forms, and the job of management is to develop good
versions of these products.
3. Selling concept. The selling concept holds that consumers will not buy enough
of the organization’s products unless the organization undertakes a large
selling and promotion effort.
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4. Marketing concept. The marketing concept holds that achieving
organizational goals depends on determining the needs and wants of target
markets and delivering the de-sired satisfaction more effectively and
efficiently than competitors.
5. Societal marketing concept. The societal marketing concept holds that the
organization should determine the needs, wants, and interests 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. [Slide 1-15]
VII.
VIII.
IX.
Preparing an Integrated Marketing Plan. The company’s marketing strategy outlines
which customers the company will serve and how it will create value for these customers.
Next, the marketer develops an integrated marketing program that will actually deliver
the intended value to target customers. The marketing program builds customer
relationships by transforming the marketing strategy into action. It consists of the firm’s
marketing mix, the set of marketing tools the firm uses to implement its marketing
strategy. The major marketing mix tools are classified into four broad groups, called the
four Ps of marketing: product, price, place, and promotion. [Slide 1-6]
Build Customer Relationships. Customer relationship management (CRM) involves
managing detailed information about individual customers and carefully managing
customer “touch points” in order to maximize customer loyalty. [Slides 1-16 to 1-17]
Capturing Value from Customers. We try to capture value from our customers 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. [Slides 118 to 1-19]
A. Customer loyalty and retention. The benefits of customer loyalty come from
continued patronage of loyal customers, reduced marketing costs, decreased price
sensitivity of loyal customers, and partnership activities of loyal customers. Loyal
customers purchase from the business they are loyal to more often than nonloyal
customers. They also purchase a broader variety of items. A manager who is loyal
to a hotel brand is more likely to place her company’s meetings with that hotel
chain. Reduced marketing costs are the result of requiring fewer marketing dollars
to maintain a customer than to create one and the creation of new customers
through the positive word-of-mouth of loyal customers.
B. Growing share of customer. Beyond simply retaining good customers to capture
customer lifetime value, good customer relationship management can help
marketers to increase their share of customer—the share they get of the
customer’s purchasing in their product categories.
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C. Building customer equity. Customer equity is the discounted lifetime values of all
the company’s current and potential customers. One builds customer equity by
delivering products that create high customer satisfaction and have high perceived
value.
X.
The Changing Marketing Landscape.
A. The digital age: online, mobile, and social media marketing. The explosive
growth in digital technology has fundamentally changed the way we live—how
we communicate, share information, access entertainment, and shop.
B. The changing economic environment. The new consumer spending values
emphasize simpler living and more value for the dollar. Despite their rebounding
means, consumers continue to buy less, clip more coupons, swipe their credit
cards less, and put more in the bank.
C. Rapid globalization. Today, almost every company, large or small, is touched in
some way by global competition.
D. Sustainable marketing. As the worldwide consumerism and environmentalism
movements mature, today’s marketers are being called on to develop sustainable
marketing practices.
E. Cocreation. Cocreation involves the hospitality or travel company interacting with
the guest to create experiences through this interaction.
F. The sharing economy. The recent surge in the sharing economy has been in part
to individuals sharing talents, time, and tangible assets they own to gain additional
income and the Internet enabling them to connect with customers.
Answers to Discussion Questions
1. Discuss why you should study marketing.
Marketing is making business decisions with the customer in mind. It evolves from
creating a customer service attitude among all employees. Thus, all managers need to
understand marketing. It is not a function that can be left up to a few people in the
marketing department. Successful hospitality companies know that if they take care of
their customers, market share and profits will follow.
2. Marketing can be defined in many ways. In your own words, describe marketing to
someone who has not read this chapter.
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. The task of marketing is never to fool the customer or endanger the company’s
image. Marketing’s task is to provide real value to targeted customers, motivate purchase,
and fulfill consumer needs.
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3. Many managers view the purpose of business as making a profit, whereas some view
the purpose as being able to create and maintain a customer. Explain how these
alternative viewpoints could affect a company’s interactions with its customers. If a
manager views the purpose as being able to create and maintain a customer, does
this mean that the manager is not concerned with profits?
This is an excellent topic for class discussion.
 Profit is a requisite for any for profit business, but it should not be the purpose of
the business. When profit becomes the purpose of the business, managers tend to
take a short-term view and try to maximize profits in the short term. For example,
when a hotel can sell out, managers might deny travel agent business. But the
business from these travel agents may be needed in the future and such action can
alienate the agents.
 A business should target customers that will create value for the business by
targeting customers that the business can serve profitability. If it concentrates on
serving these customers well and provides a product that is profitable to the
company, profits will flow. It is not essential to make a profit on every
transaction. Therefore, customer satisfaction and maintaining a customer’s longterm value is more important and can be more beneficial to long-term profit gains.
4. Talk to two people and ask them to think about a hotel they stayed in that was a
good value. Ask them what made the hotel a good value. Record a summary of their
comments.
Assign this project to your students. Have them present their findings to the class.
Discuss the implications of this assignment. What did they learn? Were the customers
satisfied with their stay?
5. A restaurant has a great reputation as the result of providing consistent food for
over 10 years. The restaurant is full every weekend and has above-average business
during the week. The manager claims that they do not practice marketing because
they do not need marketing; they have more than enough business now. Is it true
that this restaurant does not practice marketing?
Although this restaurant may not engage in advertising, perhaps they are so successful
because they have a customer-based philosophy of identifying customers’ needs and
wants and then supplying the customers with what they want. In this case, the restaurant
is supplying a good and consistent product, at the right price, in an accessible location
and its primary type of promotion appears to be word of mouth. Marketing goes beyond
advertising or sales.
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6. Look at Figure 1–2. Why do you think persons who give you 2 (a relatively high
score) out of 7 are not likely to return?
Ask your students to think of the last time they went to a restaurant and were just
satisfied. Would they go back? Would they recommend the restaurant to others? Probably
not. Then ask them to think of the last time they walked out of a restaurant and said,
“Wow, that was great!” Would they go back? Would they recommend the restaurant to
others?
7. What is customer equity? How can a company increase its customer equity?
Customer equity is the total combined customer lifetime values of all of the company's
current and potential customers. As such, 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. Whereas sales and market share reflect
the past, customer equity suggests the future. Companies should manage customer equity
carefully. They should view customers as assets that must be managed and maximized.
8. Give several examples you have found of hospitality companies being socially
responsible. Include in your discussion how being socially responsible helps the
company.
Have your students research the level of social responsibility for different hospitality
companies. How has their research changed their perception of these companies? How
will this impact the company?
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Chapter 2: Service Characteristics of Hospitality and Tourism Marketing
Chapter Objectives
1. Describe a service culture.
2. Identify four service characteristics that affect the marketing of a hospitality or travel
product.
3. Explain seven marketing strategies for service businesses.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Describe a service culture.
A service culture focuses on serving the customer and satisfying their needs. The service
culture must begin with top management and flow down. Present to your class different
hospitality companies that exemplify a service culture (Four Seasons, Ritz Carlton, etc.)
2. Identify four service characteristics that affect the marketing of a hospitality or
travel product.
 Intangibility: Purchasers of hospitality and tourism product usually have nothing
physical to show at the end of their experience. Because the product is intangible
it is difficult to evaluate the product before purchase. Discuss with your class that
most products are a mix of tangible products and intangible products.
o In a restaurant, the meal is tangible. In a fast food restaurant, it is a large
portion of the overall product. In an upscale restaurant, the service of the
food or intangible portion of the service becomes more important.
 Inseparability means all customer-contact employees become part of the product.
It also means customers become part of the product and we have to manage our
customer. You can ask students to give examples of when customers influenced
the satisfaction of other customers.
o For example, drunken conventioneers in a romantic restaurant, or someone
smoking next to a nonsmoker, influence the satisfaction of other guests.
 Variability: Lack of consistency. Ask students how many think McDonald’s
makes an excellent hamburger. Then ask them how many have been to
McDonald’s in the last year. More students will answer affirmatively on the
second question.
o One of the reasons for McDonald’s success is that they have been able to
master variability. When you stop at McDonald’s, you know what you
will receive.
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
Perishability: A restaurant which has a capacity of serving 400 customers and
only serves 100 on Monday night has lost the ability to serve those customers.
They cannot place the unserved 300 covers in inventory and sell them the next
night. A manufacturing company producing tangible goods can inventory goods,
thus they do not have to match capacity and demand in the short term.
o Most students understand perishability in a hotel or airplane, but some do
not understand it in a restaurant. Therefore, this is a good example to bring
up in class.
3. Explain seven marketing strategies for service businesses.
Today as competition and costs increase and as productivity and quality decrease, more
marketing sophistication is needed. The seven marketing strategies include:
 Managing Service Differentiation: Service companies can differentiate their
service delivery through the people that work for them, their physical
environment and their service delivery process. British Airways example.
 Managing Service Quality: Once customer expectations are determined, managers
need to develop a service delivery system that will deliver a service that meets the
guest’s expectations. Ritz-Carlton example.
 Managing Service Productivity: In attempting to improve service productivity,
companies must be mindful of how they create and deliver customer value.
McDonald’s example.
 Resolving Customer Complaints: A company cannot always prevent service
problems, but it can learn from them. Good service recovery can turn angry
customers into loyal ones. To have effective complaint resolution, managers must
empower frontline service employees. Marriott example.
 Managing Employees As Part Of The Product: The manager must hire friendly
and capable employees and formulate policies that support positive relations
between employees and guests. The job of the marketing department includes
encouraging everyone in the organization to practice customer-oriented thinking.
Four Seasons example.
 Managing Perceived Risk: Customers who buy hospitality products experience
some anxiety because they cannot experience the product beforehand. Crowne
Plaza example.
 Managing Capacity and Demand: Corporate management is responsible for
matching capacity with demand on a long-term basis; unit managers are
responsible for matching capacity with fluctuations in short-term demand.
Mother’s Day and New Year’s Eve examples.
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Chapter Outline
I.
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.
II.
Five Characteristics of Services [Slide 2-3]
A. Intangibility. Unlike physical products, 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.
B. Inseparability. In most hospitality services, both the service provider and the
customer must be present for the transaction to occur. Customer-contact
employees are part of the product. Inseparability also means that customers are
part of the product. The third implication of inseparability is that customers and
employees must understand the service delivery system.
C. Variability. Service quality depends on who provides the services and when and
where they are provided. Services are produced and consumed simultaneously.
Fluctuating demand makes it difficult to deliver consistent products during
periods of peak demand. The high degree of contact between the service provider
and the guest means that product consistency depends on the service provider’s
skills and performance at the time of the exchange. [Slide 2-4]
D. 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.
III.
Service Management Concepts
A. Service Profit Chain [Slide 2-5]
B. Types of Marketing [Slide 2-6]
1.Internal Marketing
2.External Marketing
3.Interactive Marketing
IV.
Management Strategies for Service Businesses [Slide 2-7]
A. Managing differentiation. The solution to price competition is to develop a
differentiated offering. The offer can include innovative features that set one
company’s offer apart from that of its competitors.
B. Managing service quality. With hospitality products, quality is measured by how
well customer expectations are met. [Slide 2-8]
C. Manage Service Productivity
D. Resolving customer complaints. Resolving customer complaints is a critical
component of customer retention.
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E. Managing employees as part of the product. In the hospitality industry, employees
are a critical part of the product and marketing mix. The human resource and
marketing department must work closely together. The task of internal marketing
to employees involves the effective training and motivation of customer-contact
employees and supporting service personnel.
F. Managing perceived risk. The high risk that people perceive when purchasing
hospitality products increases loyalty to companies that have provided them with
a consistent product in the past.
G. Managing capacity and demand. Because services are perishable, managing
capacity and demand is a key function of hospitality marketing. First, services
must adjust their operating systems to enable the business to operate at maximum
capacity. Second, they must remember that their goal is to create satisfied
customers. Research has shown that customer complaints increase when service
firms operate above 80 percent of their capacity. [Slides 2-9 to 2-10]
Answers to Discussion Questions
1. Illustrate how a hotel, restaurant, or theater can deal with the intangibility,
inseparability, variability, and perishability of the service it provides. Give specific
examples.
Assign students to four groups and have each group discus one of the service
characteristics. Ask each group to present their own interpretation of their assigned
service characteristic and provide examples.
 For example, a hotel can ensure that the product being offer is well maintained,
clean and is suitable for the image it is trying to project in its customers’ minds.
The inseparability and variability concerns are addressed by the continuous
training and development of the employees (both those who interact with
customers and those who don’t). The perishability concern is best addressed by
deploying suitable revenue management strategies
2. Do you use consumer-generated content from a site like TripAdvisor or Yelp, if so
explain why you think the information is credible. If not state how you choose a new
restaurant. If other consumers acquire information the same way you do, how
should managers attract new customers?
This can be an interesting assignment and/or class discussion. Ask students to plan
different types of trips; for example, ask them to plan a business trip and a vacation trip.
For each trip, have them choose the restaurants they will visit. See whether they used
consumer-generated content and particularly if this differs depending on which type of
trip they are planning.
16
3. Discuss how the service person in a restaurant is part of the product the customer
receives when purchasing a meal.
Lead students to answer this question by thinking about not only the technical quality (the
quality of the food) but also the functional quality (the service provided in the restaurant)
of the service.
 The service provider is the service. They provide the food product to the customer
and aid in the money transaction. If there is a problem, they must solve it. If there
is a need, they must try to fulfill it. In this respect, the service person is integral to
the process. This is illustrated by the inseparability and variability of the industry.
o Therefore, the evaluation of the service by the customer will be, in large
part, due to the server’s performance. If the person is not attentive, or is
obnoxiously so, this will be reflected in the customer’s perception of the
experience. In the hospitality and travel industries, the employee is the
product.
 Overall, the employees, atmosphere, and delivery of the service all have to be
delivered to the guest’s satisfaction. The food being served as well as the way it is
being served is part of the overall experience package that the customer is paying
for at a restaurant. The service person is responsible for playing their role to
perfection as provided for in the training.
4. Look up several hotels or restaurants on TripAdvisor and review customer
comments. Do you think the managers of the company responded to the comments
appropriately? Explain the reasons for your answer.
This is an excellent assignment and a good opportunity to explore how a company’s
responses to negative comments impacts both customer perception and intent to purchase.
5. What are internal and interactive marketing? Give an example of how a specific
firm or organization might use these concepts to increase the effectiveness of its
services. How might these concepts be linked to services differentiation?
 Internal marketing is directed toward the internal customers of the company, the
employees. Internal marketing means that the service firm must effectively train
and motivate its customer-contact employees and all the supporting service people
to work as a team to provide customer satisfaction.
17

o For example: Ritz-Carlton empowers its employees to handle problems on
the spot, without consulting higher-ups. Each employee can spend up to
$2,000 to redress a guest grievance and employees are allowed to break
from their routine for as long as needed to make a guest happy. At the
same time, Ritz-Carlton rewards and motivates its employees with events
such as Super Sports Day, an employee talent show, luncheons celebrating
employee anniversaries, a family picnic, and special themes in employee
dining rooms.
o Furthermore, Ritz-Carlton also recognizes and rewards employees who
perform outstanding feats. For example, the winners of its Five-Star
Awards program receive plaques at dinners celebrating their
achievements. The winners of on-the-spot recognition receive Gold
Standard Coupons which can be redeemed for items in the gift shop and
free weekend stays at their hotels.
Interactive marketing means that perceived service quality depends heavily on the
quality of the buyer–seller interaction during the service encounter. In product
marketing, customer perception of product quality rarely depends on how the
product is obtained. In services marketing, however, service quality depends on
both the service deliverer and the quality of the delivery. A firm may implement
proper policies, procedures and adequate training programs to address both
internal marketing and interactive marketing to increase the effectiveness of its
services. The standards set by these initiatives determine the level of service,
which acts as a natural differentiator with respect to other competitors.
o Ritz-Carlton trains its customer-contact people to greet guests by their
names warmly and sincerely. The contact employees are trained to use
proper language when speaking to guests with phrases like “Good
morning,” “Certainly,” “I’ll be happy to,” and “My pleasure.” They never
use “Hi” or “How’s it going?”
o Ritz-Carlton also trains employees to escort guests to another area of the
hotel rather than pointing out the directions, to answer the phone within
three rings and with a “smile,” and to take pride and care in their personal
appearance.
18
Chapter 3: The Role of Marketing in Strategic Planning
Chapter Objectives
1. Explain company-wide strategic planning.
2. Understand the concepts of stakeholders, processes, resources, and organization as they
relate to a high-performing business.
3. Explain the four planning activities of corporate strategic planning.
4. Understand the processes involved in defining a company’s mission and setting goals and
objectives.
5. Discuss how to design business portfolios and growth strategies.
6. Explain the steps involved in the business strategy planning process.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Explain company-wide strategic planning.
The aim of strategic planning is to help a company select and organize its business in a
way that keeps the company healthy despite unexpected upsets occurring in any of its
specific businesses or product lines. One of the main ideas students should learn from this
chapter is that the strategy of the business unit must be consistent with that of the
corporation. The director of marketing of a hotel chain that has a strategy of targeting the
business traveler with a first class product cannot go after a leisure market with
discounted rates. The strategy of going after the leisure traveler may be profitable but it is
not compatible with the overall corporate strategy.
The three ideas for strategic planning are:
 Managing business as an investment portfolio
 Assessing the future profit potential for each business segment by considering the
market segment’s growth rate and the company’s position and fit
 Developing a game plan for achieving a company’s long-run objectives.
2. Understand the concepts of stakeholders, processes, resources, and organization as
they relate to a high-performing business.
 Stakeholders can include stockholders, customers, employees, suppliers, and
distributors. There is a dynamic relationship connecting the stakeholder groups
and each must be sufficiently satisfied in order for the operation to remain viable.
19



Processes: Companies are increasingly refocusing their attention on the need to
manage processes even more than managing departments. Companies build crossfunctional teams that manage core business processes to be superior to
competitors. Las Vegas Hilton example.
Resources: Companies are commonly deciding to outsource or offshore
(international outsourcing) less critical resources. To do this, companies should
identify their core competencies and use these as the basis for their strategic
planning.
Organization: Companies align their organization's structure, policies, and culture
to the changing requirements of their business strategy. RockResorts example.
3. Explain the four planning activities of corporate strategic planning.
The four steps for corporate strategic planning are: defining the corporate mission,
establishing strategic business units, assigning resources to each SBU, and developing
growth strategies.
 A good class exercise is having students come up with their own hospitality
corporate mission statements to share with each other.
4. Understand the processes involved in defining a company’s mission and setting
goals and objectives.
A mission should define competitive scopes within which the company will operate. A
company’s mission should be clear at the beginning and should be motivating. Good
mission statements embody a number of characteristics. They should focus on a limited
number of goals. The following six scopes should be considered by managers when
defining missions, goals, and objectives: industry scope, products and applications scope,
competencies scope, market-segment scope, vertical scope, and geographical scope.
Disney, Ritz-Carlton and Culver’s examples.
 Have students come up with their own mission statements for various companies
and present these to the class
5. Discuss how to design business portfolios and growth strategies.
 Businesses are too often defined in terms of products. Companies are in the “hotel
business” or the “cruise line business.” However, market definitions of a business
are superior to product definitions. A business must be viewed as a customersatisfying process, not a product-producing process. Companies should define
their business in terms of customer needs, not products. Holiday Inn example.
20

The Ansoff product–market expansion grid (see Figure 3–2) offers a useful
framework for examining growth. By examining the following three intensive
growth strategies, management ideally will discover several ways to grow.
Hunter’s Head example.
o Market concentration strategy: Management first considers whether it
could gain more market share with its current products in their current
markets.
o Market development strategy: Management considers whether it can find
or develop new markets for its current products.
o Product development strategy: Management should consider offering
modified or new products to current markets.
6. Explain the steps involved in the business strategy planning process.
Managing the marketing process requires the four marketing management functions (see
Figure 3–4): analysis, planning, implementation, and control. The company should first
develop companywide strategic plans and then translate them into marketing and other
plans for each division, product, and brand. The company then turns the plans into
actions and asserts control by measuring and evaluating the results of marketing activities
and taking corrective action where needed. Finally, marketing analysis provides
information and evaluations needed for all of the other marketing activities.
Managing the marketing function begins with a complete analysis of the company’s
situation. The marketer should conduct a SWOT analysis, by which it evaluates the
company’s overall strengths (S), weaknesses (W), opportunities (0), and threats (T) (see
Figure 3–5).
 Strengths include internal capabilities, resources, and positive situational factors
that may help the company to serve its customers and achieve its objectives.
 Weaknesses include internal limitations and negative situational factors that may
interfere with the company’s performance.
 Opportunities are favorable factors or trends in the external environment that the
company may be able to exploit to its advantage.
 Threats are unfavorable external factors or trends that may present challenges to
performance.
o Class Activity Idea: Divide students into groups and have them develop
SWOT analyses for different local hospitality operations.
21
Chapter Outline
I.
Nature of High-Performance Business [Slide 3-3]
A. Stakeholder. The principle that a business must at least strive to satisfy the
minimum expectations of each stakeholder group.
B. Processes. Companies build cross-functional teams that manage core business
processes in order to be superior competitors.
C. Resources. Companies decide to outsource less critical resources. They identify
their core competencies and use them as the basis for their strategic planning.
D. Organization. Companies align their organization’s structure, policies, and culture
to the changing requirements of business strategy.
II.
Corporate Strategic Planning: Defining Marketing’s Role
A. Defining the Corporate Mission. A mission statement is a statement of the
organization’s purpose – what it wants to accomplish in the larger environment.
[Slide 3-4]
B. Setting Company Objectives and Goals. The company needs to turn its mission
into detailed supporting objectives for each level of management. Marketing
strategies and programs must be developed to support these marketing objectives.
C. Designing the Business Portfolio. Market definitions of a business are superior to
product definitions. A business must be viewed as a customer-satisfying process,
not a product-producing process. Companies should define their business in terms
of customer needs, not products.
1.Developing Strategies for Growth. Companies need growth if they are to
compete and attract top talent. [Slide 3-5]
a. Ansoff product–market expansion grid offers a useful framework
for examining growth.
2.Diversification Growth. Makes sense when good opportunities can be
found outside the present businesses. [Slide 3-6]
a. Concentric Diversification Strategy. The company could seek new
products that have technological or marketing synergies with
existing product lines, even though the products may appeal to a
new class of customers.
b. Horizontal Diversification Strategy. The company might search for
new products that could appeal to its current customers, although
technologically unrelated to its current product line.
c. Conglomerate Diversification Strategy. The company might seek
new businesses that have no relationship to the company’s current
technology, products, or markets.
22
3.Integrative Growth. Opportunities in diversification, market development,
and product development can be seized through integrating backward,
forward, or horizontally within that business’s industry. Downsizing can
also occur. [Slide 3-7]
a. Backward Integration. Acquiring a supplier.
b. Forward Integration. For example, a hotel might acquire tour
wholesalers or travel agents.
c. Horizontal Integration. Acquiring one or more competitors.
4.Downsizing. When a firm finds brands or businesses that are unprofitable
or that no longer fit its overall strategy. It must carefully prune, harvest, or
divest them.
III.
Partnering to Build Customer Relationships
A. Partnership with other company departments. The major functional departments
in each unit—marketing, finance, accounting, purchasing, operations, information
systems, human resources, and others—must work together to accomplish
strategic objectives.
B. Partnering with others in the marketing systems. Competition no longer takes
place only between individual competitors. Rather, it takes place between the
entire value delivery networks created by these competitors.
IV.
Marketing Strategy and the Marketing Mix
A. Customer Value-Driven Marketing Strategy. Before it can satisfy consumers, a
company must first understand their needs and wants. Thus sound marketing
requires a careful customer analysis. Each company must divide up the total
market, choose the best segments, and design strategies for profitably serving
chosen segments. [Slide 3-8]
1.Market Segmentation. The market consists of many types of customers,
products, and needs. The marketer must determine which segments offer
the best opportunities. Consumers can be grouped and served in various
ways based on geographic, demographic, psychographic, and behavioral
factors.
2.Market Targeting. Market targeting involves evaluating each market
segment’s attractiveness and selecting one or more segments to enter. A
company should target segments in which it can profitably generate the
greatest customer value and sustain it over time.
3.Market Differentiation and Positioning. After a company has decided
which market segments to enter, it must decide how it will differentiate its
market offering for each targeted segment and what positions it wants to
occupy in those segments.
23
B. Developing an Integrated Marketing Mix. The marketing mix is the set of
controllable, tactical marketing tools that the firm blends to produce the response
it wants in the target market. The marketing mix consists of everything the firm
can do to influence the demand for its product. [Slide 3-9]
1.Product. The goods-and-services combination the company offers to the
target market.
2.Price. The amount of money customers must pay to obtain the product.
3.Place. Company activities that make the product available to target
customers.
4.Promotion. Activities that communicate the merits of the product and
persuade target customers to buy it.
V.
Managing the Marketing Effort [Slide 3-10]
A. Marketing Analysis. Managing the marketing function begins with a complete
analysis of the company’s situation. The marketer should conduct a SWOT
analysis, by which it evaluates the company’s overall strengths (S), weaknesses
(W), opportunities (0), and threats (T). [Slide 3-11]
1.Internal Environmental Analysis (Strengths and Weaknesses Analysis)
a. Strengths. Internal capabilities, resources, and positive situational
factors that may help the company to serve its customers and
achieve its objectives.
b. Weaknesses. Internal limitations and negative situational factors
that may interfere with the company’s performance.
2.External Environmental Analysis (Opportunity and Threat Analysis)
a. Opportunities. Favorable factors or trends in the external
environment that the company may be able to exploit to its
advantage.
b. Threats. Unfavorable external factors or trends that may present
challenges to performance.
B. Goal Formulation. After the business unit has defined its mission and conducted a
SWOT analysis, it can proceed to develop specific objectives and goals. [Slide 312]
1.Overall cost leadership. The real key is for the firm to achieve the lowest
costs among those competitors adopting a similar differentiation or focus
strategy.
2.Differentiation. The business concentrates on achieving superior
performance in an important customer benefit area valued by a large part
of the market.
3.Focus. The business focuses on one or more narrow market segments
rather than going after a large market.
24
C. Marketing Planning. Marketing planning involves deciding on marketing
strategies that will help the company attain its overall strategic objectives. A
detailed marketing plan is needed for each business, product, or brand.
D. Implementation. To implement a strategy, the firm must have the required
resources, including employees with the necessary skills to carry out that strategy.
E. Feedback and Control. All companies need to track results and monitor new
developments in the environment. The environment will change. When it does,
the company will need to review its strategies or objectives.
VI.
Measuring and managing return on marketing investment. Marketing managers must
ensure that their marketing dollars are being well spent.
Answers to Discussion Questions
1. Conduct a SWOT analysis for a hospitality company near your college.
This is a good group project or individual assignment for your students. Ensure they fully
understand the differences between Strengths and Opportunities and between
Weaknesses and Threats. A good guideline to use is to explain that Strengths and
Weaknesses are generally internal in nature and short-term, whereas Opportunities and
Threats are generally external in nature and long-term.
2. From your analysis above, suggest a strategy from the product market expansion
grid and an appropriate marketing mix to implement the strategy
This builds on Question 1 above. Have your students use the Ansoff product-market grid
to determine how the hospitality company from Question 1 should expand. Ask them to
identify the appropriate 4 Ps for each expansion method they identify.
3. What is a marketing dashboard and how is it useful to hospitality marketers?
A company can assess marketing ROI in terms of standard marketing performance
measures, such as brand awareness, sales, or market share. Many companies are
assembling such measures into marketing dashboards—meaningful sets of marketing
performance measures in a single dis-play used to monitor strategic marketing
performance. Just as automobile dashboards present drivers with details on how their cars
are performing, the marketing dashboard gives marketers the detailed measures they need
to assess and adjust their marketing strategies.
A growing number of companies provide dashboards showing customer ratings of a
business across selected social media sites and comparing them with those of
competitors. These dash-boards enhance a manager’s ability to monitor user generated
content (UGC) and manage online branding.
25
4. Think about the shopping area near your campus. Assume that you wish to start a
business here and are looking for a promising opportunity for a restaurant. Is there
an opportunity to open a distinctive and promising business? Describe your target
market and how you would serve it differently than current businesses do.
Break students into small groups and have them come up with different restaurant
concepts. Ask them to define the target market for their concept and how their concept
will better serve these markets than the current restaurant offerings on or near campus.
Have them look at the marketing mix (4Ps) for their restaurant. Discuss each group’s
ideas as a class.
26
Chapter 4: The Marketing Environment
Chapter Objectives
1. List and discuss the importance of the elements of the company’s microenvironment,
including the company, suppliers, marketing intermediaries, customers, and public.
2. Describe the macroenvironmental forces that affect the company’s ability to serve its
customers.
3. Explain how changes in the demographic and economic environments affect marketing,
and describe the levels of competition.
4. Identify the major trends in the firm’s natural and technological environments.
5. Explain the key changes that occur in the political and cultural environments.
6. Discuss how companies can be proactive rather than reactive when responding to
environmental trends.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. List and discuss the importance of the elements of the company’s
microenvironment, including the company, suppliers, marketing intermediaries,
customers, and public.
Break students into groups and assign them different hospitality operations. Ask them to
map out the suppliers, marketing intermediaries and customers. This should help them
visualize the different elements of the microenvironment.
 The company: Marketing managers must work closely with top management and
the various company departments. All company departments will have some
impact on the success of marketing plans.
 Suppliers: Firms and individuals that provide the resources needed by the
company to produce its goods and services.
 Marketing intermediaries: A specialized group of suppliers that help the company
promote, sell, and distribute its goods to the final buyers. Additionally,
transportation systems, marketing services agencies and financial intermediaries
also impact the hospitality marketing environment.
2. Describe the macroenvironmental forces that affect the company’s ability to serve
its customers.
Macro environmental forces shape opportunities and pose threats to the company. These
environmental forces include:
 Competitors
o The entrance of future competitors is often difficult to predict and can
have a major effect on existing businesses.
27






Demographic Environment
o Demography is the study of human populations in terms of size, density,
location, age, gender, race, occupation, and other statistics.
o For example, Starbucks in China
Economic Environment
o The economic environment consists of factors that affect consumer
purchasing power and spending patterns.
Natural Environment
o The natural environment involves the natural resources that are needed as
inputs by marketers or that are affected by marketing activities.
o Environmental concerns have grown steadily during the past three
decades. Discuss how this has impacted marketing strategies; for example,
Starwood hotels rewarding customers with $5 gift cards to their food and
beverage outlets for being “green” by forgoing housekeeping.
Technological Environment
o The most dramatic force shaping our destiny is technology, which has
given us wireless access to the Internet. This has made it possible for
individuals to have interactions with others involving both audio and
visual connections using programs such as Sykpe.
o The end result is that speed at which business is occurring has increased
dramatically.
o Discuss the impact of social media, such as Facebook and YouTube. For
example, what should a company do when false rumors about the quality
of a company’s products go viral and impact customers’ perception of
quality?
Political Environment
o The political environment is made up of laws, government agencies, and
pressure groups that influence and limit the activities of various
organizations and individuals in society.
Cultural Environment
o The cultural environment includes institutions and other forces that affect
society’s basic values, perceptions, preferences, and behaviors. As a
collective entity, a society shapes the basic beliefs and values of its
members. They absorb a worldview that defines their relationship with
themselves and others.
28
3. Explain how changes in the demographic and economic environments affect
marketing, and describe the levels of competition.
Discuss some of the current demographic and economic trends, such as the changing age
structure of the population, increased diversity, global economic patterns and consumer
spending patterns. How have these different trends affected the hospitality industry? In
turn, how has this affected marketing for the hospitality industry? For example, discuss
how the demographic characteristics of representative customers have changed in
commercials to reflect increased diversity or the focus on value versus price during
economic recessions.
Keep students in the same groups from #1 above or assign new groups and hospitality
operations. Have students map out the competitors of these operations based on the four
levels of competition detailed below.
There are four levels of competition:
 All companies that offer similar products and services to the same customers at a
similar price.
o McDonald’s will view its competition as Burger King, Wendy’s, and
Hardee’s
 All companies making the same product or class of products.
o McDonald’s may see its competition as all fast food restaurants, including
Jamba Juice, Kentucky Fried Chicken, Taco Bell, and Arby’s
 All companies supplying the same service.
o McDonald’s would see itself competing with all restaurants and other
suppliers of prepared food, such as the deli section of a supermarket
 All companies that compete for the same consumer dollars.
o McDonald’s would see itself competing with grocery stores and the selfprovision of the meal by the consumer
4. Identify the major trends in the firm’s natural and technological environments.
Have students bring in articles that discuss natural and technological environments, such
as the implementation of green initiatives or new self-service technologies.
29
Marketers should be aware of several trends in the natural environment.
 The first involves growing shortages of raw materials.
 A second environmental trend is increased pollution.
o McDonald’s eliminated polystyrene cartons years ago and now uses
smaller recyclable paper wrappings and napkins. Beyond this, the
company has a long-standing rainforest policy and a commitment to
purchasing recycled products and energy-efficient restaurant construction
techniques.
 A third trend is increased government intervention in natural resource
management.
o Today, enlightened companies go beyond what government regulations
dictate. They are responding to consumer demands with more
environmentally responsible products.
Technology has affected the hospitality industry in many ways.
 For example Intelity has produced a product called ICE (Interactive Customer
Experience) that can be accessed from a number of web-enabled platforms,
including smart phones and tablets.
 One of the most powerful changes is from social media (see Chapter 14).
5. Explain the key changes that occur in the political and cultural environments.
Have students bring in articles that discuss political and cultural environments, such as
new laws or regulations or new societal causes or concerns.
As products become more complex, public concern about their safety increases.
Governmental agencies have become involved in the investigation and regulation of
everything from fire codes to foodhandling practices. Legislation and regulation affecting
business have been enacted for three reasons. Government legislation and regulation:
 Protects companies from each other.
 Aims at protecting consumers from unfair business practices.
 Aims to protect society’s interests against unrestrained business behavior.
The power of government is so great that the government can often dramatically affect a
hospitality business without ever enforcing a law (for example, 1993 American Airlines
strike). Additionally, the boom in Internet marketing has created a new set of social and
ethical issues. Critics worry most about online privacy issues.
30
Cultural norms and cultural prohibitions may affect their managerial roles in ways quite
different from in the United States and Canada (for example, keeping kosher in Israeli
hotels). To the extent that subcultural groups have specific wants and buying behavior,
marketers can choose subcultures as their target markets.
6. Discuss how companies can be proactive rather than reactive when responding to
environmental trends.
Companies should take an environmental management perspective. Rather than simply
watching and reacting, these firms take aggressive action to affect the publics and forces
in their marketing environment. In addition, companies should also use an environmental
scanning plan to be proactive. Furthermore, companies should acquire reliable and timely
information for their decisionmaking. For example:
 Companies or associations hire lobbyists to influence legislation.
 Companies run advertorials (ads expressing editorial points of view) to shape
public opinion.
Chapter Outline
I.
Microenvironment. The microenvironment consists of actors and forces close to the
company that can affect its ability to serve its customers. The actors in the
microenvironment include the company, suppliers, market intermediaries, customers, and
publics. [Slide 4-4]
A. The company. Marketing managers work closely with top management and the
various company departments.
B. Existing competitors are part of the microenvironment and must be monitored
closely. [Slides 4-5 to 4-6]
C. Suppliers. Firms and individuals that provide the resources needed by the
company to produce its goods and services.
D. Marketing intermediaries. Firms that help the company promote, sell, and
distribute its goods to the final buyers. [Slide 4-7]
E. Disintermediation. The elimination of intermediaries.
F. Marketing services agencies. Marketing research firms, advertising agencies,
media firms, and marketing consulting firms help companies to target and
promote their products to the right market.
G. Financial intermediaries. Includes banks, credit companies, insurance companies,
and other firms that help hospitality companies to finance their transactions or
insure risks associated with the buying and selling of goods and services.
H. Customers. Managers must understand the different types of customers:
consumers, business markets, government markets, resellers, and international
markets.
31
I. Publics. A public is any group that has an actual or potential interest in or impact
on an organization’s ability to achieve its objectives. [Slide 4-8]
II.
Macroenvironment. The macroenvironment consists of the larger societal forces that
affect the whole microenvironment: demographic, economic, natural, technological,
political, competitor, and cultural forces. Following are the seven major forces in a
company’s macroenvironment. [Slide 4-9]
A. Competitive environment. Each firm must consider its size and industry position
in relation to its competitors. A company must satisfy the needs and wants of
consumers better than its competitors do in order to survive.
B. Demographic environment. Demography is the study of human populations in
terms of size, density, location, age, sex, race, occupation, and other statistics. The
demographic environment is of major interest to marketers because markets are
made up of people. [Slides 4-10 to 4-11]
C. Economic environment. The economic environment consists of factors that affect
consumer purchasing power and spending patterns. Markets require both power as
well as people. Purchasing power depends on current income, price, saving, and
credit; marketers must be aware of major economic trends in income and
changing consumer spending patterns. [Slide 4-12]
D. Natural environment. The natural environment consists of natural resources
required by marketers or affected by marketing activities. [Slide 4-13]
E. Technological environment. The most dramatic force shaping our destiny today is
technology.
F. Political environment. The political environment is made up of laws, government
agencies, and pressure groups that influence and limit various organizations and
individuals in society. [Slide 4-14]
G. Cultural environment. The cultural environment includes institutions and other
forces that affect society’s basic values, perceptions, preferences, and behaviors.
[Slide 4-15]
III.
Linked Environmental Factors. The change in food consumption patterns relates to
economic, demographic, technological, cultural, and competitive trends.
IV.
Responding to the Marketing Environment. Many companies view the marketing
environment as an “uncontrollable” element to which they must adapt. Other companies
take an environmental management perspective. Rather than simply watching and
reacting, these firms take aggressive actions to affect the public and forces in their
marketing environment. These companies use environmental scanning to monitor the
environment. [Slide 4-16]
32
Answers to Discussion Questions
1. How has the McDonald’s concept changed since the 1960s? What environmental
forces were behind these changes? How will the McDonald’s concept change in the
next decade, given the new forces operating in the environment?
The instructor can lead students to answer this question by reminding students to focus on
the three environments that influence companies (internal environment,
microenvironment and macroenvironment) and how these have changed over time.
 For example, McDonald’s started as a fast food concept for America’s
increasingly on-the-go, time-squeezed, family-oriented lifestyles. McDonald’s
began operating with a limited menu, streamlined service and low prices. Over
time they increased their accessibility by offering drive-through, and sit-down as
well as take out service. They expanded their menu to include breakfast items,
low-fat items and children’s meals. Many have a playground for children.
 With changing market trends and preferences, McDonald’s halted rapid expansion
and instead focused on improving the food, service, atmosphere, and marketing at
existing outlets. McDonald's redecorated its restaurants with clean, simple,
modern interiors with live plants, wireless Internet access, and flatscreen TVs
showing cable news. Play areas in some new restaurants now feature video games
and even stationary bicycles with video screens. To make the customer experience
more convenient, McDonald's stores now extend breakfast items for all hours and
stay open longer to serve late-night diners—more than one-third of McDonald's
restaurants are now open 24 hours a day.
 McDonald’s has always been marketed to the family, but now there is a distinct
targeting to specific markets (such as their commercials targeting the gay market
in France). McDonald’s has recently expanded internationally. They have also
developed smaller units for malls, hospitals, and retail outlets such as Wal-Mart.
Overall, McDonald has positioned itself as a company that moves with the times
and listens to its customers.
2. What environmental trends will affect the success of a first-class hotel chain, such as
Hyatt or Sofitel, over the next ten years? If you were corporate director of
marketing for this type of hotel, what plans would you make to deal with these
trends?
Again, the instructor can lead students to answer this question by reminding students to
focus on the three environments that influence companies (internal environment,
microenvironment and macroenvironment) and how might change in the future. Break
students into groups and assign them different first-class hotel chains. Ask them to come
up with a ten year marketing plan that targets the possible environmental trends of the
future.
33
3. The 78 million members of the baby boom generation are aging, with the oldest
members in their early sixties. List some marketing opportunities and threats
associated with this demographic trend for the hospitality and travel industry.
The instructor can lead students to answer this question by reminding students about the
characteristics of baby boomers discussed in Demographic environments.
For example, opportunities associated with the aging of the baby boomers include the
increase in disposable income and leisure time as their children become older. This
means that they have more money to spend on hospitality products and the ability to
travel. Baby Boomers will spend billions of dollars on travel. They are going to look for
active vacations, as they do not feel old. Vacations where they can have adventure or
explore will be attractive. They look for value and research their vacations. Threats
include the cultural values of the boomers themselves, as community and family values
increase in importance, they may choose to spend more time at home.
4. How have environmental trends affected the design of hotels?
While there are avid debaters on both sides, the world is increasingly becoming aware of
climate change and its implications. Hotels have not been on the sidelines. Many have
started being green conscious by implementing simple programs of asking the guest to
reuse linen for the duration of the stay to something as complicated as recycling the
water. Nowadays everything related to a hotel – from construction, to launch, to
operation, to supplies, etc. has some sort of green option available. Everything from the
materials being used (such as self-cleaning carpets and linens) to technology is becoming
more and more environmentally friendly and this trend will continue with some hotels
soon to claim near zero carbon footprints.
5. Mobile marketing involves any type of marketing message—voice, text, image, or
video—delivered to a handheld device such as a cell phone, iPhone, or BlackBerry.
Although still in its infancy in the United States, mobile marketing has grown
rapidly in other countries. Learn more about mobile marketing and discuss the
current applications and the potential for future applications in the travel and
hospitality industries.
By establishing new technology while still focusing on political issues affecting usage
and messaging charges, mobile marketing can help organizations achieve sales and other
goals. Ask students to visit websites like http://chiefmarketer.com/promotional-marketing
to learn about recent marketing promotions involving mobile tactics.
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6. If we have little control over the macroenvironment, why should we be concerned
with it?
Lead students to answer this question by covering the concept of environmental
management perspective. Even though companies have little control over the macro
environment, companies should still be concerned with the macro environment.
Furthermore, smart marketing managers take a proactive rather than a reactive approach
to the publics and forces in their marketing environment. Companies should therefore
analyze environmental forces and design strategies that will help the company avoid the
threats and take advantage of the opportunities that the environment provides. Rather
than simply watching and reacting, proactive firms take aggressive action to affect the
publics and forces in their marketing environment. At the same time, astute marketers
will be able to assess and address any potential opportunities and threats that may arise.
While control may be limited, marketers must still be aware of and participate in
opportunities that are relevant and available.
7. What environmental trends will affect the success of the Walt Disney Company in
the first decade of the twenty-first century? If you were in charge of marketing at
Disney, what plans would you make to deal with these trends?
Lead students in a discussion of different environmental trends that they expect to see in
the near future. Ask them to address how these trends will specifically affect Disney.
For example, the main environmental trends affecting the success of Disney will be a
concern for the environment and the continued rapid development of technology. The
concern for the environment can be addressed (and communicated) in a variety of
activities at the theme parks. In terms of technology, the world is slowly but surely
moving into a cloud based streaming services environment rather than buying physical
DVDs. It may be worth the consideration to look at the theme park “Fast Pass” concept
and perhaps revise or add on the facility of knowing the current wait times of the various
rides through an app on a smartphone.
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Chapter 5: Managing Customer Information to Gain Customer Insights
Chapter Objectives
1. Explain the importance of information in gaining insights about the marketplace and
customers.
2. Explain the concept of the marketing information system.
3. Outline the marketing research process, including defining the problem and research
objectives, developing the research plan, implementing the research plan, and interpreting
and reporting the findings.
4. Explain how companies analyze and use marketing information.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Explain the importance of information in gaining insights about the marketplace
and customers.
In carrying out their marketing responsibilities, marketing managers need a great deal of
information. Information is power. Despite the importance and growing supply of
information, managers often lack enough of the right kind of information or have too
much of the wrong kind to make the critical decisions necessary to be successful in the
highly competitive global marketplace.
In fact, most marketing managers don’t need more information, they need better
information. To overcome these problems, many companies are taking steps to improve
their marketing information systems. A commitment to an information system is not just
a technological commitment but a corporate culture commitment as well.
Break students into groups and assign each group a specific hospitality operation. Ask
them to come up with what information they would want about their customers and the
marketplace. How would they gather this information?
2. Explain the concept of the marketing information system.
A marketing information system (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. The functions of
the MIS include:
 Assessing a company’s information needs.
 Developing needed information from internal company records, marketing
intelligence activities, and the marketing research process.
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
Distributing information to managers in the right form and at the right time to
help in marketing planning, implementation, and control.
3. Outline the marketing research process, including defining the problem and
research objectives, developing the research plan, implementing the research plan,
and interpreting and reporting the findings.
(1) Define the problem and research objectives: Managers and marketing researchers
must work closely to define the problem and the research objectives. Once the
problem is well defined, there are three types of objectives for a marketing research
project (exploratory, descriptive and causal).
(2) Develop the research plan: Determining the needed information and developing a
data collection plan.
(3) Implement the research plan: The researcher puts the plan into action by collecting,
processing, and analyzing the information.
(4) Interpret and present the findings: The researcher must now interpret the findings,
draw conclusions, and report them to management.
Have your students come up with their own illustration of the marketing research process
using a hospitality operation.
4. Explain how companies analyze and use marketing information.
Ask your students to look for articles that illustrate a company utilizing or acting upon
information it most likely found through the research process. You might also want to
discuss the “Research Problem Areas” presented in Marketing Highlight 5-4.
Chapter Outline
I.
Marketing Information and Customer Insights [Slide 5-3]
II.
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.
A. Assessing Information Needs. A good marketing information system balances
information that managers would like to have against that which they really need
and is feasible to obtain.
B. Developing Information. Information needed by marketing managers can be
obtained from internal company records, marketing intelligence, and marketing
research. The information analysis system processes this information and presents
it in a form that is useful to managers. [Slide 5-4]
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1.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.
2.Guest Information Management
C. 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. [Slide 5-5]
1.Internal sources. Internal sources include the company’s executives,
owners, and employees.
2.External sources. External sources include competitors, government
agencies, suppliers, trade magazines, newspapers, business magazines,
trade association newsletters and meetings, and databases available on the
Internet.
3.Sources of Competitive Information
III.
Marketing Research. Marketing research is a process that identifies and defines
marketing opportunities and problems, monitors and evaluates marketing actions and
performance, and communicates the findings and implication to management. Marketing
research is project oriented and has a beginning and an ending. It feeds information into
the marketing information system that is ongoing. The marketing research process
consists of four steps: defining the problem and research objectives, developing the
research plan, implementing the research plan, and interpreting and presenting the
findings. [Slides 5-6 to 5-7]
A. Defining the problem and research objectives. There are three types of objectives
for a marketing research project: [Slide 5-8]
1.Exploratory. To gather preliminary information that will help define the
problem and suggest hypotheses.
2.Descriptive. To describe the size and composition of the market.
3.Causal. To test hypotheses about cause-and-effect relationships.
B. Developing the research plan for collecting information [Slide 5-9]
1.Determining specific information needs. Research objectives must be
translated into specific information needs. To meet a manager’s
information needs, researchers can gather secondary data, primary data, or
both. Secondary data consist of information already in existence
somewhere, having been collected for another purpose. Primary data
consist of information collected for the specific purpose at hand.
2.Gather Secondary Information
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3.Research approaches. Three basic research approaches are observations,
surveys, and experiments. [Slide 5-10]
a. Observational research. Gathering of primary data by observing
relevant people, action, and situations.
b. Survey research (structured/ unstructured, direct/indirect). Best
suited to gathering descriptive information.
c. Experimental research. Best suited to gathering causal information.
4.Contact methods. Information can be collected by mail, telephone, or
personal interview. [Slide 5-11]
a. Sampling plan. Marketing researchers usually draw conclusions
about large consumer groups by taking a sample. A sample is a
segment of the population selected to represent the population as a
whole. Designing the sample calls for four decisions: [Slide 5-12]
 Who will be surveyed?
 How many people should be surveyed?
 How should the sample be chosen?
 When will the survey be given?
b. Ethnographic Research
c. Research instruments. In collecting primary data, marketing
researchers have a choice of primary research instruments: the
interview (structured and unstructured), mechanical devices, and
structured models such as a test market. Structured interviews
employ the use of a questionnaire. [Slide 5-13]
d. Presenting the research plan. At this stage the marketing researcher
should summarize the plan in a written proposal.
C. Implementing the research plan. The researcher puts the marketing research plan
into action by collecting, processing, and analyzing the information.
D. Interpreting and reporting the findings. The researcher must now interpret the
findings, draw conclusions, and report them to management.
1.Information analysis. Information gathered by the company’s marketing
intelligence and marketing research systems can often benefit from
additional analysis. This analysis helps to answer the questions related to
“what if” and “which is best.”
2.Distributing information. Marketing information has no value until
managers use it to make better decisions. The information that is gathered
must reach the appropriate marketing managers at the right time.
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IV.
International Marketing Research. International marketing researchers follow the same
steps as domestic researchers, from defining the research problem and developing a
research plan to interpreting and reporting the results. However, these researchers often
face more and different problems.
V.
Marketing Research in Smaller Organizations. Managers of small businesses can obtain
good marketing information by observing what occurs around them.
Answers to Discussion Questions
1. What role should marketing research play in helping a firm to implement the
marketing concept?
Marketing research should be able to generate business value by providing a knowledgebased ability to successfully influence decisions of the customers. Marketing research
helps a firm understand their customers. Without information on their customers, it is
almost impossible for a firm to implement the marketing concept. Ask your students to
think of examples where specific information can enable a company to better implement
the marketing concept.
2. You own an elegant, high-priced restaurant in your area and want to improve the
level of service offered by your 30-person staff. How could observational research
help you accomplish this goal?
Observational research can include studying the entire flow of operations – from the time
of customer arrival (when they enter the premises and step out of their transport to enter
the location) to their departure (when they are comfortably seated in their transport and
leave the premises). Clear unbiased observation will reveal where the customers are
facing potential bottlenecks and service quality issue, such as delay in seating or delay in
obtaining the menu upon seating. When the complete operational process is carefully
reviewed and monitored, it may reveal a number of quality control checkpoints, which
when rectified can significantly improve the level of service.
Additionally, by observing your employees during a variety of shifts, you will get an
accurate picture of the current level of skill and attitude towards service that your staff
possesses. By understanding how your staff currently performs and your guests’ reaction
to their work, you can determine the necessary elements of a training program to improve
the level of service.
40
Treat this question as an assignment for students (although you may want to allow them
to choose lower-priced restaurants depending on their budget). Ask them to visit a
restaurant and document their entire visit from the moment they enter the restaurant until
they leave. Have them analyze the results of their observational analysis. In fact, you may
want to assign groups of students to each of several different restaurants to demonstrate
the variability of observational research and the importance of conducting this type of
research over a period of time.
3. Compare and contrast internal databases, marketing intelligence, and marketing
research as a means for developing marketing information.
 Internal databases are strong only to the extent that they are populated with
correct information. They do not cover any additional potential sources of
customer bases.
 Internal and external sources of marketing intelligence contribute to formulating
an effective marketing plan. However, this is typically a slow process and takes
time to become useful and actionable.
 Marketing research is a process that identifies and defines marketing opportunities
and problems, monitors and evaluates marketing actions and performance, and
immediately communicates the findings and implications to management,
allowing them to act upon the information in a timely manner.
o The ten most common activities of marketing research are the
measurement of market potentials, market-share analysis, determination of
market characteristics, sales analysis, study of business trends, short-range
forecasting, competitive product studies, long-range forecasting,
marketing information systems studies, and testing of existing products.
4. Researchers usually start the data-gathering process by examining secondary data.
What secondary data sources would be available to the manager of a full-service
restaurant that wanted to research consumer trends?
Assign this task to your students. Encourage them to use the internet and other sources to
research consumer trends for a specific neighborhood or zip code near your campus.
Direct your students to research data from your CVB or tourism bureau or to use sites
like PRIZM (http://www.claritas.com/MyBestSegments/Default.jsp then select “Free
Report” tab and enter a zip code) to obtain consumer trend information.
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5. Discuss the advantages and disadvantages of using guest comment cards in a
restaurant.
Customers who fill out comment cards are usually very unhappy with some part of the
service or product and use these cards as a means to alert management. Occasionally the
response is for extraordinarily good service; but rarely is the card filled out for ordinary
events. Because the cards usually represent extremes, the sample is skewed and does not
represent the average guest.
 Ask students if they have ever filled out a comment card (or posted an online
review). Then ask why they took the time to fill the card out. Many students will
say they filled out the card because of a good or bad incident.
However, comment cards can be useful in identifying potential problems. For example, a
hotel may get several complaints about its buffet or a particular entrée or server,
indicating problems in those areas.
6. Which type of research would be most appropriate in the following situations, and
why?
This is an excellent discussion questions for your students. Break them into five groups,
assign a scenario to each group and have them present their answer and justification to
the class.
a. A fast food restaurant wants to investigate the effect that children have on
the purchase of its products.
Primary. In investigating the effect that young children have on parents’ purchase
decisions; a fast food restaurant might use focus groups, surveys, observation and
experiments. Experiments and observation would give the clearest results,
because parents may not realize (or not want to admit) how much their purchases
are influenced by their children. Surveying parents and children could be quicker
and less expensive, reveal children’s influence in a wider range of purchase
situations, and explain why parents respond as they do.
b. A business hotel wants to gather some preliminary information on how
business travelers feel about the menu variety, food, and service in its
restaurants.
Combination of primary and secondary. Focus groups can be used to provide this
information. The hotel managers can invite a group of business travelers to have a
free breakfast with them. During the breakfast the manager would get a chance to
meet the guests and discuss how they feel about the menu variety, food, and
services in the restaurant.
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c. A casual restaurant is considering locating a new outlet in a fast-growing
suburb.
Secondary followed by primary. In selecting a site for a new outlet, the casual
restaurant needs information on population density in different areas, income
levels, ages, ethnic characteristics, family sizes, location of competitors and traffic
patterns at various times of the day. In a dynamic suburb, census data might be
too outdated to be useful, but most of the information this restaurant needs could
still be obtained from secondary sources, such as the local chamber of commerce
or utility companies. Once several sites are selected, they should be visited by a
company representative who can corroborate the secondary research findings.
d. A fast food restaurant wants to test the effect of two new advertising themes
for its roast beef sandwich sales in two cities.
Primary. This is a good opportunity to test the advertising themes with focus
groups consisting of consumers of similar demographics to the target cities.
e. The director of tourism for your state wants to know how to use her
promotion dollars effectively.
Primary. Focus groups with visitors, visitor surveys and discussions with
employees working at welcome centers could provide information on how visitors
heard about the destination, and which sources of information they utilized in
making their travel decision.
7. Focus group interviewing is both a widely used and widely criticized research
technique in marketing. What are the advantages and disadvantages of focus
groups? What are some kinds of questions that are appropriate for focus groups to
investigate?
Ask your students to pick which side of this debate they stand on. Have each side prepare
and present the advantages or disadvantages of using focus groups.
Focus groups are advantageous in terms of being able to provide subjective feedback in a
relatively non-structured way as compared to a questionnaire or an interview. The
disadvantage is that if the members of a focus group are not selected carefully, the group
may not represent the “feelings” or feedback of a larger customer base the company
hopes to target through their product or service. Questions that are generally seeking
qualitative information rather than quantitative information are best suited for focus
groups.
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

Advantages: Focus groups are fast and cheap; they are good for generating
hypotheses when little is known about a situation; they reduce the distance
between the respondent and the marketer who uses the research; they are flexible
and can be adjusted while the discussion is underway, in response to an
interesting or unanticipated point; interview respondents stimulate each other to
say things they might not have revealed in a one-to-one interview; and the results
are in a form that non research-oriented people can understand.
Disadvantages: Focus groups should not be treated as representative of a
population, but careless marketers sometimes act as if this is the case; they are not
good for evaluating really new concepts that are outside the participants’
experience; the order of discussion can influence responses; and participants may
not want to say things that they feel could embarrass the interviewer, so the focus
group may give a one-sided view of what is being discussed.
8. What is Big Data and what opportunities and challenges does it provide for
marketers?
Far from lacking information, most marketing managers are overloaded with data and
often overwhelmed by it. This problem is summed up in the concept of Big Data. The
term Big Data refers to the huge and complex data sets generated by today's sophisticated
information generation, collection, storage, and analysis technologies. Every day, the
people and systems of the world generate an amazing 2.5 quintillion bytes of new dataabout a trillion gigabytes of information each year.
Big Data is characterized by three Vs:
 Volume: large amounts of information from hundreds of terabytes to petabytes
and beyond.
 Velocity: the increasing rate at which data flows into an organization including
real-time delivery.
 Variety: encompassing structured and unstructured formats, such as text from
social networks, data from apps, Web services, images, GPS signals, and readings
from sensors.
Most marketing managers are overloaded with data and often overwhelmed by it. Still,
despite this data glut, marketers frequently complain that they lack enough information of
the right kind. However, they don’t need more information, they need better information.
And they need to make better use of the information they already have.
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Chapter 6: Consumer Markets and Consumer Buying Behavior
Chapter Objectives
1. Explain the model of buyer behavior.
2. Outline the major characteristics affecting consumer behavior, and list some of the
specific cultural, social, personal, and psychological factors that influence consumers.
3. Explain the buyer decision process and discuss need recognition, information search,
evaluation of alternatives, the purchase decision, and postpurchase behavior.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Explain the model of buyer behavior.
Figure 6.1 illustrates the elements in the model of buyer behavior including marketing
stimuli, other stimuli, buyer’s black box, and buyer’s responses. Ask your students to
come up with their own model of buyer behavior based on the purchase of a specific
product or service.
2. Outline the major characteristics affecting consumer behavior, and list some of the
specific cultural, social, personal, and psychological factors that influence
consumers.
This is a good topic for class discussion. Cultural factors exert the broadest and deepest
influence on consumers and are the most basic determinant of a person's wants and needs
and their behavior. Consumer behavior is also influenced by social factors, including the
consumers’ reference groups, family, social roles, and status and by personal
characteristics such as age and lifecycle stage, occupation, economic situation, lifestyle,
personality, and self-concept. Consumer choices are further influenced by four major
psychological factors: motivation, perception, learning, beliefs and attitudes.
3. Explain the buyer decision process and discuss need recognition, information
search, evaluation of alternatives, the purchase decision, and postpurchase
behavior.
Ask your students to think about each of these processes as they engage in an ordinary
purchase (buying lunch or toothpaste, renting a movie, etc.). Have them detail their
thought process during each of these stages and any influences on their actual purchase
behavior.
45
The buying process starts when the buyer recognizes a problem or need. The buyer
senses a difference between their actual state and a desired state. An aroused consumer
may or may not search for more information. If the consumer’s drive is strong and a
satisfying product is near at hand, the consumer is likely to buy it at that moment. If not,
the consumer may simply store the need in memory and search for relevant information.
Consumers use information to evaluate the alternatives. In the evaluation stage, the
consumer ranks brands in their choice set and forms purchase intentions. Following a
purchase, the consumer will either be satisfied or dissatisfied.
Chapter Outline
I.
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 four Ps: product, price, place, and promotion. 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. [Slide 6-3]
II.
Personal Characteristics Affecting Consumer Behavior [Slide 6-4]
A. Cultural factors [Slide 6-5]
1.Culture. Culture is 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.
2.Subculture. Each culture contains smaller subcultures, groups of people
with shared value systems based on common experiences and situations.
3.Social classes. These are relatively permanent and ordered divisions in a
society whose members share similar values, interests, and behaviors.
Social class in newer nations such as the United States, Canada, Australia,
and New Zealand is not indicated by a single factor such as income but is
measured as a combination of occupation, source of income, education,
wealth, and other variables.
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B. Social factors [Slide 6-6]
1.Groups. Many small groups influence a person’s behavior. Groups that
have a direct influence and to which a person belongs are called
membership groups. In contrast, reference groups serve as direct (face-toface) or indirect points of comparison or reference in forming a person’s
attitudes or behavior. Over the past few years, a new type of social
interaction has exploded onto the scene—online social networking. Online
social networks are online communities where people socialize or exchange information and opinions. Social networking media range from
blogs (Consumerist, Giz-modo, Zenhabits) and message boards
(Craigslist) to social media sites (Facebook, Twitter, YouTube, Pinterest,
and Foursquare) and virtual worlds (Second Life and Everquest). This new
form of consumer-to-consumer and business-to-consumer dialog has big
implications for marketers.
2.Word-of-Mouth Influence and Buzz Marketing. The personal words and
recommendations of trusted friends, associates, and other consumers tend
to be more credible than those coming from commercial sources. Buzz
marketing involves enlisting or creating opinion leaders to serve as “brand
ambassadors,” who spread the word about a company’s products.
3.Online social networks. These networks are online communities where
people socialize or exchange information and opinions. Social networking
media range from blogs to social networking Web sites, such as
Facebook.com and YouTube, to entire virtual worlds, such as Second Life.
4.Family. Family members have a strong influence on buyer behavior. The
family remains the most important consumer-buying organization in
American society.
5.Roles 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.
C. Personal factors [Slide 6-7]
1.Age and lifecycle stage. The types of goods and services people buy
change during their lifetimes. As people grow older and mature, the
products they desire change. The makeup of the family also affects
purchasing behavior. For example, families with young children dine out
at fast food restaurants.
2.Occupation. A person’s occupation affects the goods and services bought.
3.Economic situation. A person’s economic situation greatly affects product
choice and the decision to purchase a particular product.
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4.Lifestyle. Lifestyles profile a person’s whole 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.
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. 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.
D. Psychological factors [Slide 6-8]
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.
2.Perception. Perception is the process by which a person selects, organizes,
and interprets information to create a meaningful picture of the world.
[Slide 6-9]
3.Learning. Learning describes changes in a person’s behavior arising from
experience.
4.Beliefs and attitudes. A belief is a descriptive thought that a person holds
about something. An attitude describes a person’s relatively consistent
evaluations, feelings, and tendencies toward an object or an idea.
III.
Buyer Decision Process [Slide 6-10]
A. Problem recognition. The buying process starts when the buyer recognizes a
problem or need.
B. 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.
C. Evaluation 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.
D. Purchase decision. In the evaluation stage, the consumer ranks brands in the
choice set and forms purchase intentions. Generally, the consumer buys the most
preferred brand.
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E. Postpurchase behavior. The marketer’s job does not end when the customer buys
a product. Following a purchase, the consumer will be satisfied or dissatisfied and
will engage in postpurchase actions of significant interest to the marketer.
Answers to Discussion Questions
1. Explain why marketers study buyer behavior and discuss characteristics affecting
consumer behavior. Which characteristics do you think would have the greatest
impact on your decision to select a restaurant to celebrate a special occasion, such as
a birthday or anniversary?
This is a good question for class discussion. Ask your students to prepare their answers
beforehand and explore the similarities and differences of the each person’s
characteristics.
Studying buyer behavior helps marketers understand the buyer decision process. This
understanding is crucial for marketers to effectively reach their customer base and to be
able to generate sales. Cultures, subcultures, social class and word of mouth influences
are some of the many characteristics affecting consumer behavior.
Selecting a restaurant for a special occasion might involve research into general feedback
about various restaurants and their ability to host such events as determined by online
reviews or comments received via word of mouth by family and friends. Sometimes it
could be a pre-determined choice of being a “favorite” restaurant for the concerned
individuals celebrating their special occasion.
2. Choose a restaurant concept that you would like to take overseas. How will the
factors shown in Figure 6–2 work for or against the success of this restaurant?
This question is designed to help students learn the different influencers of consumer
behavior. By placing the restaurant concept outside of the student’s culture, students are
forced to consider these effects more independently and contextually. The answers will
evolve around the types of restaurants discussed and the culture in which they are placed.
Some examples you might want to bring up to illustrate these differences could include
the problems McDonald’s faced in India when it was discovered that their fries contained
beef flavoring (as Hindus do not eat beef) or the perception of young Asian markets
towards American fast food brands as being places for dates or special occasions.
49
3. Discuss when the family can be a strong influence on buying behavior regarding the
choice of restaurants.
The purpose of this question is to have students recognize that roles differ substantially
depending upon the type of purchase being made. For example:
 If a family is driving in a car and decides to stop at a fast food restaurant, the
decision may be prompted by the parent or by a child saying they are hungry.
Thus, either one could be an initiator. Children will probably have a big influence
and may even be the decider. This is one the reasons McDonald’s markets to
children.
 For a casual dining restaurant, the parents will probably be the initiator. The
children will be less of an influence but they still may have some influence. The
restaurant may have children’s meals they like and activities for them to do at the
table while they are waiting. Thus, the parents could develop the choice set and
the children would influence which one of the restaurants was selected. The
decider will probably be the parent. The influence of the children will vary by
family.
4. Apply the five stages in the decision process to your selection of a destination for
your next vacation.
Ask students to prepare their answers before class. During class, put your students into
groups and ask them to find similarities and differences for each stage in the decision
process (or you may assign a single stage of the decision process to each group). What
are some commonalities they found for each of the stages? For example:
 Need recognition: A family reunion is coming up.
 Information search: Find out the best flight and hotel stay options available at
optimum prices.
 Evaluation of alternatives: Is it cheaper to fly to the “home” city or have the
family meet at a vacation-oriented location, such as a resort in a resort town or on
a cruise ship.
 Purchase decision: Based on available options and consideration of other
members of the family, a purchase decision is made to travel to a vacation hot
spot.
 Post purchase behavior: Depending on the experiences, promote the trip’s pros
and cons on the various social networks; this also shows whether a similar
vacation spot would be chosen again the future as well.
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5. An advertising agency president says, “Perception is reality.” What does he mean by
this? How is perception important to marketers?
Buying behavior is driven by customers’ perceptions of value. Such perceptions are built
over time by various contributing factors such as brand, word of mouth, personal past
experience with the product or service, etc. Hopefully, when the advertising agency
president is speaking such a sentence they do not mean that quality does not matter.
Rather, they mean that while quality is important, it should also be promoted and
understood by the customer base of interest for it to be of any profitable use.
Perception is the process by which a person selects, organizes, and interprets information
to create a meaningful picture of the world. It is the meaning that the person attributes to
incoming stimuli received through the five senses. People can form different perceptions
of the same stimuli because people not only perceive what there is to be perceived but
also perceive what they want to perceive through selective exposure, selective distortion
and selective retention. People are constantly both consciously and unconsciously
attaching meaning to the world; for them, perception IS reality.
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Chapter 7: Organizational Buyer Behavior
Chapter Objectives
1. Understand the organizational buying process.
2. Identify and discuss the importance of the participants in the organizational buying
process.
3. Identify the major influences on organizational buyers.
4. List the eight stages of the organizational buying process.
5. Identify and describe the group markets in the hospitality industry.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Understand the organizational buying process.
Compared with consumer purchases, a business purchase usually involves more buyers
and a more professional purchasing effort. The organizational buying process tends to be
more formalized than the consumer process and consists of a more professional
purchasing effort. The more complex the purchase, the more likely it is that several
people will participate in the decision-making process. A good example to bring up is the
Hong Kong Convention and Exhibition Centre discussed at the beginning of the chapter.
Ask your students to compare and contrast this example with consumer buying behavior.
2. Identify and discuss the importance of the participants in the organizational buying
process.
The decision-making unit of a buying organization, sometimes called the buying center,
is defined as “all those individuals and groups who participate in the purchasing decisionmaking process, who share common goals and the risks arising from the decisions.” Six
participants in the purchase decision process: users, influencers, deciders, approvers,
buyers, gatekeepers.
Assign your students different types of organizational events in your market area and ask
them to research these events and analyze the participants in the purchase decision
process. Ask them to answer the following questions:
 Who are the major decision participants?
 What decisions do they influence?
 What is their level of influence?
 What evaluation criteria does each participant use?
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3. Identify the major influences on organizational buyers.
Organizational buyers are subject to many influences as they make their buying
decisions, such as Environmental Factors, Organizational Factors, Interpersonal Factors,
and Individual Factors.
Continue with the organizational events from #2 above. Have your students explore and
evaluate the different factors that might influence their assigned event.
4. List the eight stages of the organizational buying process.
Problem recognition, general need description, product specification, supplier search,
proposal solicitation, supplier selection, order-routine specification, and performance
review.
Continuing with the organizational events from #2 and #3 above, ask your students to
draw a chart listing the specific steps their organizational buyers will go through based on
the eight stages of the organizational buying process.
5. Identify and describe the group markets in the hospitality industry.
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. There are four main categories of group business: conventions, association
meetings, corporate meetings and the SMERF (social, military, educational, religious,
and fraternal organizations) groups. Ask your students to research examples of each of
these types of group business in your market.
Chapter Outline
I.
The Nature of Organizational Buyers. Their purchases often involve large sums of
money; complex technical, economic considerations; and interactions among many
people at all levels of the organization. Buyer and seller are often very dependent on each
other. [Slide 7-3]
A. Market Structure and Demand
B. Types of Decisions and the Decision Process
II.
Participants in the Organizational Buying Process [Slide 7-4]
A. Users. Users are those who use the product or service.
B. Influencers. Influencers directly influence the buying decision but do not
themselves make the final decision.
C. Deciders. Deciders select product requirements and suppliers.
D. Approvers. Approvers authorize the proposed actions of deciders or buyers.
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E. Buyers. Buyers have formal authority for selecting suppliers and arranging the
terms of purchase.
F. Gatekeepers. Gatekeepers have the power to prevent sellers or information from
reaching members of the buying center.
III.
Major Influences on Organizational Buyers [Slide 7-5]
A. Environmental factors. Organizational buyers are heavily influenced by the
current and expected economic environment.
B. Organizational factors. Each organization has specific objectives, policies,
procedures, organizational structures, and systems related to buying.
C. Interpersonal factors. The buying center usually includes several participants with
differing levels of interest, authority, and persuasiveness.
D. 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 attitudes toward risk all
influence the participants in the buying process.
IV.
The Organizational Buying Process [Slide 7-6]
A. 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.
B. General needs description. The buyer goes on to determine the requirements of
the product.
C. Product specifications. Once the general requirements have been determined, the
specific requirements for the product can be developed.
D. Supplier search. The buyer now tries to identify the most appropriate suppliers.
E. Proposal solicitation. Qualified suppliers are invited to submit proposals. Skilled
research, writing, and presentation are required.
F. Supplier selection. Once the meeting planner has drawn up a short list of
suppliers, qualified hotels are invited to submit proposals.
G. Order-routine specification. The buyer writes the final order, listing the technical
specification. The supplier responds by offering the buyer a formal contract.
H. Performance review. The buyer does postpurchase evaluation of the product.
During this phase the buyer determines if the product meets the buyer’s
specifications and if the buyer will purchase from the company again.
V.
Group Markets [Slide 7-7]
A. Conventions. 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.
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B. Association meetings. Associations sponsor many types of meetings, including
regional, special-interest, educational, and board meetings.
C. Corporate meetings. A corporate meeting is a command performance for
employees of a company. The corporation’s major concern is that the meeting be
productive and accomplish the company’s objectives.
D. Small groups. Meetings of less than fifty rooms are gaining the attention of hotels
and hotel chains.
E. Incentive travel. Incentive travel, a unique subset of corporate group business, is a
reward participants receive for achieving or exceeding a goal.
F. SMERF groups. SMERF stands for social, military, educational, religious, and
fraternal organizations. This group of specialty markets has a common pricesensitive thread.
G. Segmentation of Group Markets by Purpose of Meeting
H. Restaurants as a Meeting Venue
VI.
VII.
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.
The Corporate Account and Travel Manager. A nongroup 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.
Answers to Discussion Questions
1. What is derived demand? Give an example of derived demand for a hotel in your
town.
Derived demand means that the demand for hospitality and travel products from
organizational buyers is dependent on the demand for the organizational buyers’
products. For example, if General Motors is having a good year, they will be able to send
their top dealers on incentive trips. However, if car sales are down and the company is
suffering a loss, GM will probably be more conservative in their spending on incentive
trips for dealers. Therefore, the demand for hospitality and travel products by GM is in
part dependent on car sales. Ask students to come up with examples of derived demand
for a hotel in your market.
55
2. The buying center consists of six roles. Why is it important for marketers to
understand these roles?
Marketers have to be able to successfully communicate with and service all of the buying
center roles, whether directly or indirectly. A clear understanding of each of these roles
and what motivates each one helps marketers to be better prepared to address the needs of
these individual roles and also be better able to negotiate any obstacles that might arise.
Each of these roles has a key part in the buying process. A good salesperson will
understand the part each role plays and work with people in each of these roles. For
example, a receptionist may not have any formal influence in the purchase decision, but if
a salesperson is rude to the receptionist, they can often block access to the decision
makers. In some organizations, the user may have little influence in the purchase decision
process, but if the user complains about the product it may not be reordered.
3. Discuss the major environmental influences that affect the purchase meeting space
by IBM (or another corporation of your choice) for its sales meetings.
This is a great topic for class discussion. Organizations such as IBM are heavily
influenced by the current and expected environmental influences. Leaders at IBM will be
aware of the environmental influences and adjust their purchase of hospitality and travel
products accordingly. For example, a breakthrough in technology may prompt sales
meetings to explain the benefits of the new technology to salespeople. A downturn in the
economy could mean less computer sales, leading IBM to cut down travel expenses to
help maintain profitability. A new product offered by the competition could cause IBM to
hold a regional meeting to discuss the implications of the new product, thus generating
lodging, restaurant, and travel business.
4. How would a catering sales manager handle a mother and daughter making
arrangements for the daughter’s wedding differently from a meeting planner from a
major corporation wishing to get a quote on a regional sales meeting, which he or
she has already done in five other cities?
This is also a good topic for class discussion. During the discussion, analyze the
similarities and differences in the sales approach for each of these customers. For
example, the mother and daughter planning the wedding most likely never have done this
before. They might want the catering sales manager to talk them through the entire
process and could depend greatly on the catering sales manager’s skills and knowledge to
assist them in planning the most memorable day in their lives. A meeting planner from a
major corporation who has planned similar meetings before knows exactly how they
should perform this task. They are often looking for the hotel that can best respond to
their needs and demands.
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5. How can a hotel sales representative identify who is responsible for purchasing
meeting space, banquets, and rooms for corporate travelers in the corporate
headquarters of an insurance company?
Often the salesperson can simply ask. Some companies have a dedicated in-house
position that coordinates bookings, meetings and events for the company. Finding this
person may be as easy as calling the company phone line and asking to be connected to
the relevant department. However, for some organizations, the salesperson may have to
observe the organization and get to know the people within the organization to really
understand the dynamics of the organization and identify the key decision-makers.
This could be a great homework assignment. Assign your students different insurance
companies and ask them to identify the person(s) responsible for purchasing rooms, etc.
for their corporate travelers.
57
Chapter 8: Customer-Driven Marketing Strategy: Creating Value for Target
Customers
Chapter Objectives
1. Define the major steps in designing a customer-driven marketing strategy: market
segmentation, targeting, and positioning.
2. List and distinguish among the requirements for effective segmentation: measurability,
accessibility, substantiality, and actionability.
3. Explain how companies identify attractive market segments and choose a markettargeting strategy.
4. Illustrate the concept of positioning for competitive advantage by offering specific
examples.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Define the major steps in designing a customer-driven marketing strategy: market
segmentation, targeting, and positioning.
(1) Market segmentation: dividing a market into distinct groups who might require
separate products and/or marketing mixes
a. Markets can be segmented based on geographic, demographic,
psychographic and behavioristic variables
(2) Market targeting: evaluating each segment’s attractiveness and selecting one or
more of the market segments
(3) Market positioning: developing competitive positioning for the product and an
appropriate marketing mix
A great way to introduce these steps is to discuss the Dunkin’ Donuts v. Starbucks
experiment presented at the beginning of the chapter. Why were the customers so
unhappy with switching? What does their dissatisfaction have to do with the market
segmentation, targeting and positioning engaged in by both Dunkin’ Donuts and
Starbucks?
2. List and distinguish among the requirements for effective segmentation:
measurability, accessibility, substantiality, and actionability.
Although there are many ways to segment a market, all are not equally effective. To be
useful, market segments must have the following characteristics:
 Measurability: the degree to which the segments' size and purchasing power can
be measured
 Accessibility: the degree to which segments can be accessed and served
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

Substantiality: the degree to which segments are large or profitable enough to
serve as markets
Actionability: the degree to which effective programs can be designed for
attracting and serving segments
Assign your students different hospitality operations. Ask them to identify the main
customer segments for each operation. How were they able to come up with these
segments? Encourage them to analyze whether the segments they came up with have the
characteristics of effective segmentation listed above.
3. Explain how companies identify attractive market segments and choose a markettargeting strategy.
A firm must look at three factors when evaluating market segments:
 Segment size and growth
 Segment structural attractiveness (ex. Supermarkets offering takeaway meals;
Airline requiring 50 hotel rooms per night)
 Company objectives and resources (ex. Joe’s Crab Shack)
When selecting market segments, a company can adopt one of three market-coverage
strategies:
 Undifferentiated marketing (ex. Public cafeterias)
 Differentiated marketing (ex. Accor, Starwood and Ritz-Carlton)
 Concentrated marketing (ex. Chuck E. Cheese)
4. Illustrate the concept of positioning for competitive advantage by offering specific
examples.
Marketers need to position their companies by creating value for the segments that are
chosen. In other words, the differentiating features of a company, product or service must
be of some importance to the consumer markets. Marketers can position their products
based on specific product attributes or on certain classes of users. Products can also be
positioned based on the needs they fill, the benefits they offer, against an existing
competitor or against another product class.
Present some of the examples from the book concerning positioning (Subway, the Marina
Bay Sands Singapore, etc.) to your class. Ask your students to research different
hospitality companies and evaluate their positioning efforts and analyze which
positioning strategies the company is using.
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Chapter Outline
I.
Market. A market is the set of all actual and potential buyers of a product.
II.
Three Steps of the Target Marketing Process [Slide 8-3]
A. Market segmentation is the process of dividing a market into distinct groups of
buyers who might require separate products and/or marketing mixes.
B. Market targeting is the process of evaluating each segment’s attractiveness and
selecting one or more of the market segments.
C. Positioning is the process of developing competitive positioning for the product
and an appropriate marketing mix.
III.
Market Segmentation [Slide 8-4]
A. Bases for segmenting a market. 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 calls for dividing the market into different
geographic units, such as nations, states, regions, counties, cities, or
neighborhoods.
2.Demographic segmentation consists of dividing the market into groups
based on demographic variables such as age, gender, family life cycle,
income, occupation, education, religion, race, and nationality. [Slide 8-5]
3.Psychographic segmentation divides buyers into different groups based on
social class, lifestyle, and personality characteristics.
4.Behavior segmentation divides buyers into groups based on their
knowledge, attitude, use, or response to a product. [Slide 8-6]
B. Requirements for Effective Segmentation [Slide 8-7]
1.Measurability. The degree to which the segment’s size and purchasing
power can be measured.
2.Accessibility. The degree to which segments can be accessed and served.
3.Substantiality. The degree to which segments are large or profitable
enough to serve as markets.
4.Actionability. The degree to which effective programs can be designed for
attracting and serving segments.
IV.
Evaluating Market Segments [Slide 8-8]
A. Segment size and growth. Companies analyze the segment size and growth and
choose the segment that provides the best opportunity.
B. Segment structural attractiveness. A company must examine major structural
factors that affect long-run segment attractiveness.
C. Company objectives and resources. The company must consider its own
objectives and resources in relation to a market segment.
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V.
Selecting Market Segments. Segmentation reveals market opportunities available to a
firm. The company then selects the most attractive segment or segments to serve as
targets for marketing strategies to achieve desired objectives. [Slide 8-9]
A. Market-coverage alternatives
1.Undifferentiated marketing strategy. An undifferentiated marketing
strategy ignores market segmentation differences and goes after the whole
market with one market offer.
2.Differentiated marketing strategy. The firm targets several market
segments and designs separate offers for each.
3.Concentrated marketing strategy. Concentrated marketing strategy is
especially appealing to companies with limited resources. Instead of going
for a small share of a large market, the firm pursues a large share of one or
more small markets.
4.Micromarketing. The practice of tailoring products and marketing
programs to suit the tastes of specific individuals and locations. Rather
than seeing a customer in every individual, micromarketers see the
individual in every customer.
5.Choosing a market-coverage strategy. Companies need to consider several
factors in choosing a market-coverage strategy.
a. Company resources. When the company’s resources are limited,
concentrated marketing makes the most sense.
b. Degree of product homogeneity. Undifferentiated marketing is
more suited for homogeneous products. Products that can vary in
design, such as restaurants and hotels, are more suited to
differentiation or concentration.
c. Market homogeneity. If buyers have the same tastes, buy a product
in the same amounts, and react the same way to marketing efforts,
undifferentiated marketing is appropriate.
6.Socially responsible target marketing. As marketers gain more information
on customers, they must use this information responsibly.
VI.
Market positioning. A product’s position is the way the product is defined by consumers
on important attributes – the place the product occupies in consumers’ minds relative to
competing products.
A. Positioning strategies [Slide 8-10]
1.Specific product attributes. Price and product features can be used to
position a product.
2.Needs products fill or benefits products offer. Marketers can position
products by the needs that they fill or the benefits that they offer. For
example, a restaurant can be positioned as a fun place.
61
B. Choosing and implementing a positioning strategy. The positioning task consists
of three steps: identifying a set of possible competitive advantages on which to
build a position, selecting the right competitive advantages, and effectively
communicating and delivering the chosen position to a carefully selected target
market.
C. Product differentiation [Slide 8-11]
1.Physical Attributes
2.Service
3.Personnel
4.Location
5.Image
D. Choosing the right competitive advantage
1.How many differences?
2.Which differences? [Slide 8-13]
E. Communicating and delivering the chosen position. Once having chosen
positioning characteristics and a positioning statement, a company must
communicate their position to targeted customers. All of a company’s marketing
mix efforts must support its positioning strategy.
F. Perceptual Mapping. [Slide 8-14] A map of consumer perceptions of competing
brands.
Answers to Discussion Questions
1. Explain the process of market segmentation, market targeting, and market
positioning.
Segmenting (or dividing) the general public into viable markets helps identify
opportunities for a firm. Segments may be grouped by geographic, demographic,
psychographic or behavioral variables. In developing the profiles of the resulting
segments, the company can assess the compatibility of the segment’s needs and the
company’s offerings.
From these segments, appropriate target markets are evaluated, then selected for their
attractiveness, financial potential or other reasons consistent with the objectives of the
firm. Developing measures of segment attractiveness is important in the target market
selection.
62
Finally, a product’s position is the complex set of perceptions, impressions and feelings
that consumers hold for the product compared with competing products. Consumers
position products with or without the help of marketers. Positioning is the process of
developing an image consistent with customer perception. Although company’s can try to
position themselves any way they desire, ultimately it is the customer who defines the
company’s actual position.
2. Choose a hospitality business, for example, a hotel or restaurant. Explain some of
the segments in their overall market (in this case, the hotel market or restaurant
market), one of these markets that it targeted, and how it differentiated itself from
its competitors to position itself in the market.
This is a great in-class activity. Divide your students into small groups and ask each
group to pick a hospitality business and answer the questions above.
3. Identify a restaurant or hotel market segment in your community that you feel
would be a good market segment to target. Explain the marketing mix you would
put together to go after this market segment.
This is another great in-class activity. For example, if a restaurant decided to target
students, some important elements of the marketing mix might be:
 Product: quantity of food may be more important than quality
 Price: must be affordable and offer good value for money
 Place: on campus delivery might be important
 Promotion: coupons in the university paper could attract students to make their
first visit
4. Some restaurateurs want to develop a restaurant with something for everyone. Why
is this idea a dangerous policy?
This is a good topic for class discussion. In an effort to please everyone, none of the
restaurant’s customers may be fully satisfied. Incompatible perceptions can create
confusion in the market, leading to distrust. The restaurateurs are better off selecting key
segments to target and then positioning themselves to satisfy these customers.
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5. What roles do product attributes and perceptions of attributes play in the
positioning of a product? Can an attribute common to several competing brands
contribute to a successful positioning strategy?
Ask your students to think of shared attributes among competitors. Are these companies
still able to use this attribute to contribute to a successful positioning strategy? A good
way to start this discussion is to point out how different quick-service restaurants have
positioned themselves based on the shared attribute of speedy delivery of hamburgers.
However, each brand has further refined their positioning strategy by focusing on key
differences between the attributes of the hamburgers themselves (Wendy’s square meat;
Burger King flame-broiled meat; etc.).
A product’s position is the way the product is defined by consumers. Therefore, product
attributes and their perceptions form the foundation for any positioning. An attribute may
be common among various competing brands but there can still be a successful
positioning strategy based on how this attribute is perceived by the customers for each
brand.
6. Provide an example (other than one given in this chapter) of the use of SoLoMo
marketing by a hospitality company.
Again, this is a good in-class activity or an assignment. Increasingly, location-based
marketing is going mobile, reaching on-the-go consumers as they come and go in key
local market areas. This is SoLoMo (social+local+mobile). For example, a local
restaurant can decide to implement SoLoMo marketing, using platforms such as Foursquare, Yelp, and Facebook to offer deals only to those located in your neighborhood or
city. There are also new sites being developed for SoLoMo marketing including Kapture,
SidewalkAd and LocalBox.
64
Chapter 9: Designing and Managing Products and Brands: Building
Customer Value
Chapter Objectives
1. Define the term product, including the core, facilitating, supporting, and augmented
product.
2. Explain how accessibility, atmosphere, customer interaction with the service delivery
system, customer interaction with other customers, and customer coproduction are all
critical elements to keep in mind when designing a product.
3. Understand branding and the conditions that support branding.
4. Discuss branding strategy and decisions companies make in building and managing their
brands.
5. Explain the new product development process.
6. Understand how the product life cycle can be applied to the hospitality industry.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Define the term product, including the core, facilitating, supporting, and augmented
product.
A product is anything that can be offered to a market for attention, acquisition, use, or
consumption that might satisfy a want or need. It includes physical objects, service,
places, organizations, and ideas.
 Core Product: the most basic level of a product – what the customer is actually
buying
 Facilitating Products: services or goods that must be present for the guest to use
the core product
 Supporting Products: extra products offered to add value to the core product
 Augmented Products: Elements such as accessibility, atmosphere, customer
interaction with the service organization, customer participation or customers’
interaction with each other combine with the core, facilitating and supporting
products to provide the augmented product
This is a good topic for class discussion. Ask your students to break down a meal in a
restaurant or stay in a hotel, etc. into each type of product.
65
2. Explain how accessibility, atmosphere, customer interaction with the service
delivery system, customer interaction with other customers, and customer
coproduction are all critical elements to keep in mind when designing a product.
From a managerial standpoint, the core product provides a focus for the business; it is the
reason for being. Facilitating products are those that are essential for providing the core
product to the target market. Supporting products can help position a product. The
augmented product combines what is offered with how it is delivered. Because guests
come to the service, atmosphere is an important part of the product. The augmented
product captures the key elements that must be managed when the customer comes to the
service factory.
This could be a good assignment. Ask your students to visit a hospitality operation and
analyze these elements of the augmented product for that operation.
3. Understand branding and the conditions that support branding.
A brand is a name, term, sign, symbol, design or a combination of these elements that is
intended to identify the goods or services of a seller and differentiate them from those of
competitors. There are five conditions that support branding:
 The product is easy to identify by brand or trademark
 The product is perceived as the best value for the price
 Quality and standards are easy to maintain
 The demand for the general product class is large enough to support a regional,
national, or international chain
 There are economies of scale
A fun class exercise is to show brand symbols and ask the class to identify the name of
the company or product based on the symbol.
4. Discuss branding strategy and decisions companies make in building and managing
their brands.
Brands are powerful assets that must be carefully developed and managed. Some analysts
see brands as the major enduring asset of a company, outlasting the company’s specific
products and facilities
Components of branding strategy include:
 Brand Equity. The differential effect that knowing the brand name has on
customer response to the product and its marketing. It's a measure of the brand's
ability to capture consumer preference and loyalty
 Brand Positioning. Marketers need to position their brands clearly in target
customers' minds.
66




Brand Name Selection. Desirable qualities for a brand name include the
following:
o (1) It should suggest some-thing about the product's benefits and qualities.
o (2) It should be easy to pronounce, recognize, and remember.
o (3) The brand name should be distinctive.
o (4) It should be extendable.
o (5) The name should translate easily into foreign languages.
o (6) It should be capable of registration and legal protection.
Leveraging Brands. Companies can leverage an existing brand by employing cobranding and ingredient branding. Co-branding, or dual branding, can take
advantage of the complementary strengths of two brands. Another form of cobranding is same-company or retail co-branding in which two retail
establishments use the same location to optimize space and profits.
Brand Portfolios. The brand portfolio is the set of all brands and brand particular
category or market segment. The hallmark of an optimal brand portfolio is the
ability of each brand in it to maximize equity in combination with all the other
brands in it. Marketers carefully monitor brand portfolios over time to identify
weak brands and kill unprofitable ones.
Managing Brands. Companies must manage their brands carefully. Companies
need to periodically audit their brands' strengths and weaknesses
5. Explain the new product development process.
The new product development process includes: idea generation, idea screening, concept
development and testing, marketing strategy development, business analysis, product
development, market testing and commercialization. This could be a great project for
your students. Have them come up with a new product and detail each of the stages of the
new product development process.
6. Understand how the product life cycle can be applied to the hospitality industry.
The product life cycle is marked by five distinct stages:
(1) Product development
(2) Introduction
(3) Growth
(4) Maturity
(5) Decline
Engage your students in discussion about various hospitality products and services.
Discuss which stage these products and services are in and how stages of the product life
cycle can be determined.
67
Chapter Outline
I.
What Is a Product? [Slide 9-4] A product is anything that can be offered to a market for
attention, acquisition, use, or consumption that might satisfy a want or need. It includes
physical objects, service, places, organizations, and ideas.
II.
Product Levels [Slide 9-5]
A. Core product. It answers the question of what the buyer is really buying. Every
product is a package of problem-solving services.
B. Facilitating products. These are services or goods that must be present for the
guest to use the core product.
C. Supporting products. These are extra products offered to add value to the core
product and to help differentiate it from the competition.
D. Augmented products. [Slide 9-6] These include accessibility (geographic location
and hours of operation), atmosphere (visual, aural, olfactory, and tactile
dimensions), customer interaction with the service organization (joining,
consumption, and detachment), customer participation, and customers’
interactions with one another.
1.Accessibility. This refers to how accessible the product is in terms of
location and hours of operation.
2.Atmosphere. [Slide 9-7] Atmosphere is a critical element in services. It is
appreciated through the senses. Sensory terms provide descriptions for the
atmosphere as a particular set of surroundings. The main sensory channels
for atmosphere are sight, sound, scent, and touch.
3.Customer interactions with the service system. [Slide 9-8] Managers must
think about how the customers use the product in the three phases of
involvement: joining, consumption, and detachment.
4.Customer interactions with other customers. Customers become part of the
product you are offering.
5.Coproduction. Involving the guest in service delivery can increase
capacity, improve customer satisfaction, and reduce costs.
III.
Branding Strategy. [Slide 9-9] Brand is a name, term, sign, symbol, design, or a
combination of these elements that is intended to identify the goods or services of a seller
and differentiate them from those of competitors.
A. Building strong brands. Brands are powerful assets that must be carefully
developed and managed. In this section, we examine the key strategies for
building and managing brands, see Table 9–1.
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B. Brand equity. It is the added value endowed on products and services. It may be
reflected in the way consumers think, feel, and act with respect to the brand, as
well as in the prices, market share, and profitability the brand commands for the
firm.
C. Brand positioning. [Slide 9-10] Companies can position brands at any of three
levels. At the lowest level, they can position the brand on product attributes. A
brand can be better positioned by associating its name with a desirable benefit.
The strongest brands go beyond attribute or benefit positioning. They are
positioned on strong beliefs and values.
D. Brand name selection. A good name can add greatly to a product's success.
However, finding the best brand name is a difficult task. It begins with a careful
review of the product and its benefits, the target market, and proposed marketing
strategies.
E. Leveraging Brands. Companies can leverage an existing brand by employing cobranding and ingredient branding.
F. Brand portfolios. The brand portfolio is the set of all brands and brand particular
category or market segment. Marketers often need multiple brands in order to
pursue these multiple segments.
G. Managing brands. Companies must manage their brands carefully. First, the
brand’s positioning must be continuously communicated to consumers. The
company should carry on internal brand building to help employees understand
and be enthusiastic about the brand promise. Finally, companies need to
periodically audit their brands’ strengths and weaknesses.
IV.
New-Product Development [Slide 9-11]
A. New-product development process
1.Idea generation. [Slide 9-12] Ideas are gained from internal sources,
customers, competitors, di-tributors, and suppliers.
2.Idea screening. The purpose of screening is to spot good ideas and drop
poor ones as soon as possible.
3.Concept development and testing. Surviving ideas must now be developed
into product concepts. These concepts are tested with target customers.
4.Marketing strategy development. There are three parts to the marketing
strategy statement. The first part describes the target market, the planned
product positioning, and the sales, market share, and profit goals for the
first two years. The second part outlines the product’s planned price,
distribution, and marketing budget for the first year. The third part
describes the planned long-run sales, profit, and the market mix strategy
over time.
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5.Business analysis. Business analysis involves a review of the sales, costs,
and profit projections to determine whether they satisfy the company’s
objectives.
6.Product development. Product development turns the concept into a
prototype of the product.
7.Market testing. Market testing is the stage in which the product and
marketing pro-gram are introduced into more realistic market settings.
8.Commercialization. [Slide 9-13] The product is brought into the
marketplace.
V.
Product Development Through Acquisition. Large companies such as McDonald’s sometimes buy a small restaurant chain such as Chipotle rather than develop their own new
concepts. Another technique is to purchase distressed chains. The mismanagement of a
chain and resulting poor performance can drive the market value of the chain down.
These chains be-come attractive targets for companies that believe they can turn them
around.
VI.
Product Life-Cycle Stages [Slides 9-14 to 9-15]
A. Product development. It begins when the company finds and develops a newproduct idea.
B. Introduction. It is a period of slow sales growth as the product is being introduced
into the market. Profits are nonexistent at this stage.
C. Growth. It is a period of rapid market acceptance and increasing profits.
D. Maturity. It is a period of slowdown in sales growth because the product has
achieved acceptance by most of its potential buyers.
E. Decline. It is the period when sales fall off quickly and profits drop.
Answers to Discussion Questions
1. Given all the changes in the branding strategy for Las Vegas over the years, has the
Vegas brand had a consistent meaning to consumers? Is this a benefit or a detriment
to the city as it moves forward?
This is a good topic for class discussion. Ask your students to research the different
branding strategies Las Vegas has used over the years. Which strategies do they think
were most effective or least effective and why? For example, Las Vegas branded itself
for a time as a family-friendly place to visit. After a time, Vegas changed their branding
strategy to focus on adult singles and couples looking for an experience (“What happens
in Vegas, stays in Vegas®”). Which strategy has been more successful? Why?
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2. Use a product from the hospitality or travel industries to explain the following terms
(provide an example in your explanation):
This is an excellent assignment for your students either individually or in groups.
For example: the demand of home delivery of fast food is growing due to changes in the
American lifestyle. The increased numbers of households headed by one parent leaves
little time to provide home-cooked meals. The increase in DINK households also means
that no one is home to cook dinner. Marketers can gain a competitive advantage by
providing effective facilitating, supporting and augmented products for these households.
a. Facilitating product
Home delivery requires keeping the items hot. Dominos advertises that it keeps its
pizza hotter due to a better insulation process.
b. Supporting product
Provide complete meals for one stop shopping. Does your restaurant provide
delivery of drinks, salads, appetizers, and desserts? What about paper plates and
plastic utensils for quick clean-up?
c. Augmented product
Do you have a phone number recognition system? Are customers greeted by name
and “would you like the usual?” Can customers order online? This use of
technology helps to quicken the process and personalize the service.
3. ARAMARK, a large-contract food-service company, is introducing branded food as
part of its campus feeding. Why would ARAMARK pay a royalty to Burger King
when it is capable of making its own hamburgers very efficiently?
This is a good topic for class discussion, particularly if your college or university has
both a contract foodservice company and branded outlets. Ask your students if they know
who provides the foodservice for your college or university. What are their perceptions of
the different food offerings?
While ARAMARK may have an efficient process for making hamburgers, it does not
have the same kind of brand recognition as Burger King. Burger King has tremendous
name recognition and customers know what to expect when purchasing a hamburger.
Interestingly, taste tests consistently indicate that many people’s taste perceptions are
more influenced by a brand name than by the actual product itself.
4. As a hotel or restaurant manager, how would you gain new product ideas?
Consider the implementation of a strong system, backed by top management to provide
adequate rewards, which would encourage employees’ ideas for new products and
services. Managers can also redesign the guest feedback system to specifically ask
customers which products or services they would like to have.
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5. Less than a third of new product ideas come from the customer. Does this
percentage conflict with the marketing concept’s philosophy of “find a need and fill
it”? Why or why not?
Certainly there is no conflict with the basic tenet of marketing. The “find a need and fill
it” philosophy does not say that needs can be identified only by asking customers.
Customers may be unable to describe their needs, so asking customers to suggest new
products or ways to fill their needs can be difficult. However, customer involvement
should be an integral part of concept testing. Customer participation benefits product
development at the early stages (about 28% of new product ideas come from watching
and listening to customers) and customer reactions to new product concepts become
especially important at the stage of determining which concepts to develop and which
ones to drop.
6. If you were the director of new product development for a national fast food chain,
what factors would you consider in choosing cities for test marketing a new
sandwich? Would the place where you live be a good test market? Why or why not?
To facilitate this discussion, first ask your students to define the demographic and
psychographic characteristics of different segments within their city. Which segments
would be best for test marketing a new fast food sandwich? Why?
A test market should have demographic and psychographic characteristics that are fairly
close to the final target market. For example, if the new product is fast food item, there
may be no point in testing it in an affluent neighborhood.
7. Give examples of co-branding and ingredient branding practices in hotel and
restaurant industry. What are the advantages and disadvantages of these practices?
This could be an interesting assignment for students to conduct outside of the classroom.
You could ask them to research via the web or visit different hospitality operations in
order to identify five different types of co-branding and/or ingredient branding in their
local hospitality operations. Common examples include McDonald’s placed inside of
Walmart stores or Starbucks “We Proudly Brew” outlets placed in Target stores or even
hospitals. Some examples of ingredient branding include Angus beef in restaurants and
Hershey’s chocolate used in Betty Crocker baking mixes.
8. Explain why many people are willing to pay more for branded products than for
unbranded products. What does this tell you about the value of branding?
Brand denotes an automatic level of quality and consistency that the customers have
experienced in the past or heard about through word of mouth or other sources of
information. An unknown brand or a product without a brand may be a quality product,
but it is not recognized as such (for example, store brand vitamins versus One A Day®).
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Most people seek value for their money and therefore would rather pay a bit more to
secure the satisfaction of an expected result rather than try and experiment with
something which may turn out to be unsatisfactory. This illustrates that while there are
many significant costs to launching a brand, the returns will more than recoup this initial
investment.
9. Apply the concept of the product life cycle to a hotel. How does a company keep its
products from going into the decline stage?
The product life-cycle (PLC) concept can describe a product class (fast-food restaurants),
a product form (fast-food hamburgers), or a brand (Popeyes). The PLC applies differently
in each case. Product classes have the longest life cycles. The PLC concept is a useful
framework for describing how products and markets work. Decline is the period when
sales fall off quickly and profits drop.
Sales of most product forms and brands eventually decline. The decline may be slow or
rapid. Sales may plunge to zero, or they may drop to a low level and continue there for
many years. Sales decline for many reasons, such as technological advances, shifts in
consumer tastes, and increased competition. Carrying a weak product can be very costly
to the firm and not just in terms of reduced profit, but also in terms of hidden costs such
as wasted management and sales force time and tarnished brand image in the future.
Companies must pay close attention to their aging products. Regularly reviewing sales,
market share, costs, and profit trends for each of its products will help identify products
in the decline stage.
A good hotel example is how Starwood redefined their luxury brands by doing a
thorough psychographic analysis of all of their customers. This helped them to truly
understand the wants and needs of the majority of customers that visited each hotel brand
and to refine the services and even servicescape aspects of their various brands to truly
fulfill the wants and needs of each main customer segment.
In the introductory stage, the owners or managers of the hotel will probably need to spend
money to increase the public’s awareness of the hotel. Many hotels decide to have a soft
opening in order to “work the bugs out”. The hotel will generally lose money during this
stage.
In the growth stage, occupancy and sometimes ADR are increasing rapidly. The benefits
of advertisements and other forms of promotion are being felt.
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In the maturity stage, more competitors have entered the market and sales are flat,
although still robust. It is important to keep the hotel in good repair and to update any
necessary design elements or technologies to keep the hotel in this stage.
In the decline stage, occupancy levels drop. The property is considered old and out of
date, or the location is no longer desirable. A company can keep its products from
reaching the decline stage by targeting new markets, by using careful pricing strategies,
by decreasing the number of product lines and by changing or increasing its distribution
channels.
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Chapter 10: Internal Marketing
Chapter Objectives
1. Understand why internal marketing is an important part of a marketing program.
2. Explain what a service culture is and why it is important to have a company where
everyone is focused on serving the customer.
3. Describe the three-step process involved in implementing an internal marketing program.
4. Explain why the management of nonroutine transactions can create the image of being an
excellent service provider.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Understand why internal marketing is an important part of a marketing program.
The hospitality industry is unique in that employees are part of the product. The hotel
must have a staff that will perform well during moments of truth. The service encounters
between contact employees and customers are part of hospitality products. In service
industries the line employees carry out a majority of the marketing function.
Ask students to discuss positive and negative experiences they have had with internal
marketing. How did these experiences impact their job performance?
2. Explain what a service culture is and why it is important to have a company where
everyone is focused on serving the customer.
A service culture is a culture that supports customer service through policies, procedures,
reward systems, and actions. An internal marketing program flows out of a service
culture, and therefore, in order to have a successful internal marketing program, the
organizational culture should be service-oriented and support serving the customer. A
good example is Ritz-Carlton’s motto: “We are Ladies and Gentlemen serving Ladies and
Gentlemen.”
3. Describe the three-step process involved in implementing an internal marketing
program.
Internal marketing is a process that involves the following three steps:
(1) Establishment of a service culture
(2) Development of a marketing approach to human resource management
(3) Dissemination of marketing information to employees
Ask students to design an internal marketing program for a hospitality operation. What
actions will they need to take during the three steps?
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4. Explain why the management of nonroutine transactions can create the image of
being an excellent service provider.
An advantage of a strong culture is that it prepares employees to handle nonroutine
transactions. A nonroutine transaction is a guest transaction that is unique and usually
experienced for the first time by employees. The number of possible nonroutine
transactions is so great that they cannot be covered in a training manual or in training
programs. One benefit of a service culture is that it provides employees with the right
attitude, knowledge, communication skills, and authority to deal with nonroutine
transactions. The ability to handle nonroutine transactions separates excellent hospitality
companies from mediocre ones.
Ask your students whether they have encountered nonroutine transactions, either as an
employee or a guest. What happened? How was it handled? What were the end results?
Chapter Outline
I.
Internal Marketing [Slide 10-3]
E. The hospitality industry is unique in that employees are part of the product.
F. Marketers must develop techniques and procedures to ensure that employees are
able and willing to deliver quality service.
G. Internal marketing is marketing aimed at the firm’s employees.
H. Employee satisfaction and customer satisfaction are correlated.
I. The behavior of employees can be monitored through reading reviews on social
media and Online Travel Agency (OTA) sites.
II.
The Internal Marketing Process [Slide 10-4]
F. Establishment of a service culture [Slide 10-5]
9.A service culture is an organizational culture that supports customer
service through policies, procedures, reward systems, and actions.
10.
An organizational culture is a pattern of shared values and beliefs
that gives members of an organization meaning, providing them with the
rules for behavior in the organization.
11.
Weak culture (not sure if this is a part of service/organization).
12.
Turning the organizational chart upside down. [Slide 10-6] Service
organizations should create an organization that supports those employees
who serve the customers.
13.
Empower and train employees to handle nonroutine transactions.
[Slide 10-7]
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G. Development of a marketing approach to human resources management [Slide 108]
14.
Create positions that attract good employees.
15.
Use a hiring process that identifies and results in hiring serviceoriented employees.
16.
Use hiring procedures that identify those employees who are team
players.
17.
Provide initial employee training designed to share the company’s
vision with the employee and supply the employee with product
knowledge.
18.
Provide continuous employee training programs.
19.
Make sure employees maintain a positive attitude. Managing
emotional labor helps maintain a good attitude.
20.
Reward and recognize customer service and satisfaction.
H. Dissemination of marketing information to employees
21.
Often, the most effective way of communicating with customers is
through customer-contact employees.
22.
Employees should hear about promotions and new products from
management, not from advertisements meant for external customers.
23.
Management at all levels must understand that employees are
watching them for cues about expected behavior.
24.
Hospitality organizations should use printed publications as part of
their internal communication.
25.
Hotels can use technology and training to provide employees with
product knowledge.
26.
Employees should receive information on new products and
product changes, marketing campaigns, and changes in the service
delivery process.
I. Employee involvement in uniform selection
Answers to Discussion Questions
1. Why are employees called internal customers?
Employees work and serve the organization from the inside. Companies must serve
employees’ needs as well as customers’ needs. Although employees are being
compensated for their efforts, they also seek satisfaction from their workplace. This could
be a combination of how well the company “serves” its employees in terms of job
training, development, career growth, recognition, regular feedback and other “internal”
reward mechanisms such as free room nights and outlet discounts.
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2. What is a service culture? Why is it a requirement for an internal marketing
program?
A service culture is an organizational culture that supports customer service throughout
its ranks. It focuses the attention of management on the moments of truth for the
customer and the attention of the employees on their essential part in the customer’s
experience.
A service culture exhibits a pattern of shared values and beliefs that gives members of an
organization meaning, providing them with the rules and expectations for behavior in the
organization. Service culture is manifested in policies, procedures, reward systems and
management actions, but it is more than just rules and regulations. Service culture is a
process that is developed over time, strengthening with practice and experience.
A service culture is necessary for an internal marketing program to be successful. A good
internal marketing program will begin at the first contact the prospective employee has
with the company and continue throughout their employment. Internal marketing is a
commitment on the part of the employer to support the employee and encourages the
employee to in turn support customers. Without a service culture, employees may be less
inclined to go the extra mile to help a guest.
3. Discuss the possible ways that marketing techniques can be used by human
resources managers.
This is an interesting question for class discussion. For example, a good marketer will
have a superior product, believe in the quality of their product and be comfortable with
recommending it to others. Likewise, HR managers will feel this way about their
employer – particularly if a service culture exists. Other comparisons can be drawn
between advertisements for products or for recruitment efforts and incentives to
customers to encourage purchase or incentives to employees to aid with retention or
increased skills and training.
4. What are the benefits of explaining advertising campaigns to employees before they
appear in the media?
If the employee is less informed than the customer, or uninformed, it reflects poorly on
the employee and the company. Good employees take pride in their work and prefer to be
good at their job. It is difficult to maintain morale when front line employees are unaware
of promotions that are occurring, especially when employees may have to implement
benefits promised in advertising campaigns. If they understand the campaign they will be
in a better position to do this and there is less of a chance for a Gap 4 to occur.
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5. The handling of nonroutine transactions separate excellent hospitality companies
from mediocre ones. Discuss this statement.
Most companies can perform routine transactions well. Problems usually occur when
something nonroutine occurs. For example, a guest complains because of noise in the
room next door, or a meeting planner wants a room set-up changed at 6:30 a.m. for a
meeting that starts in an hour. Many businesses fail to satisfy guests when nonroutine
transactions occur. Excellent companies handle nonroutine transactions well, and
therefore make positive impressions on their guests.
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Chapter 11: Pricing: Understanding and Capturing Customer Value
Chapter Objectives
1. Outline the internal factors affecting pricing decisions, especially marketing objectives,
marketing mix strategy, costs, and organizational considerations.
2. Identify and define the external factors affecting pricing decisions, including the effects
of the market and demand, competition, and other environmental elements.
3. Contrast the differences in general pricing approaches, and be able to distinguish among
cost-plus, target profit pricing, value-based pricing, and going rate.
4. Identify the new product pricing strategies of market-skimming pricing and marketpenetration pricing.
5. Understand how to apply pricing strategies for existing products, such as price bundling
and price adjustment strategies.
6. Understand and be able to implement a revenue management system.
7. Discuss the key issues related to price changes, including initiating price cuts and price
increases, buyer and competitor reactions to price changes, and responding to price
changes.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Outline the internal factors affecting pricing decisions, especially marketing
objectives, marketing mix strategy, costs, and organizational considerations.
This is a good topic for class discussion. Ask your students to think about how these
different factors might influence the pricing decision. An easy topic to start with is how
rising costs of fuel might impact the travel and tourism industry.
 Marketing objectives: Before establishing price, a company must select a product
strategy. If the company has selected a target market and positioned itself
carefully, its marketing mix strategy, including price, will be more precise (Ex.
Four Seasons, Motel 6 and Formula One).
 Marketing Mix Strategy: Price is only a component of the marketing mix and
must be coordinated with product design, distribution, and promotion decisions to
form a consistent and effective marketing program (Ex. Marriott).
 Costs: These set the floor for the price a company can charge for its product. A
company wants to charge a price that covers its costs for producing, distributing,
and promoting the product. Beyond covering these costs, the price has to be high
enough to deliver a fair rate of return to investors (Ex. McDonald’s and Embassy
Suites).
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
Organizational Considerations: Management must decide who within the
organization should set price. Companies handle pricing in a variety of ways. In
small companies, top management, rather than the marketing or sales department,
often sets the prices. In large companies, pricing is typically handled by a
corporate department or by regional or unit managers under guidelines established
by corporate management (Ex. Royal Caribbean).
2. Identify and define the external factors affecting pricing decisions, including the
effects of the market and demand, competition, and other external elements.
Again, this is a good topic for class discussion. A good starting place is with competition
– what happens to a business if one of their microcompetitors raises or lowers their
prices?
 Market and Demand: The market and demand set the upper limit (Ex. Rudy’s
versus La Colombe d’Or).
 Competition: Competitors’ prices and their possible reactions to a company’s own
pricing moves are other external factors affecting pricing decisions (Ex. Sheraton
in Singapore).
 Other external elements: When setting prices, the company must also consider
other factors in the external environment. Economic factors such as inflation,
boom, or recession and interest rates affect pricing decisions (Ex. Impact of high
gas prices on discretionary income).
3. Contrast the differences in general pricing approaches, and be able to distinguish
among cost-plus, target profit pricing, value-based pricing, and going rate.
Break students into groups and assign each group a hospitality product or service. Ask
the groups to come up with different prices based on the different approaches to pricing
(You could also assign all students the same hospitality product or service and have each
group look at a different approach to pricing). Discuss why each approach yields different
prices.
 Cost-Based Pricing: The simplest pricing method is cost-plus pricing, adding a
standard markup to the cost of the product.
 Target Profit Pricing: Another cost-oriented pricing approach is break-even
pricing, in which the firm tries to determine the price at which it will break even.
Some firms use a variation of break-even pricing called target profit pricing,
which targets a certain return on investment.
 Value-Based Pricing: This pricing approach uses the buyers’ perceptions of value,
not the seller’s cost, as the key to pricing. Price is considered along with other
marketing mix variables before the marketing program is set. The company uses
the non-price variables in the marketing mix to build perceived value in the
buyers’ minds, setting price to match the perceived value.
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
Going Rate Pricing: A strategy of going-rate pricing is the establishment of price
based largely on those of competitors, with less attention paid to costs or demand.
The firm might charge the same, more, or less than its major competitors.
4. Identify the new product pricing strategies of market-skimming pricing and
market-penetration pricing.
Ask students to think of different companies or products that use market-skimming and
market-penetration pricing. See if they can come up with hospitality examples.
 Marketing Skimming Pricing: When the market is price insensitive a firm will set
a high price, taking advantage of the market.
 Marketing Penetration Pricing: When companies set a low initial price to
penetrate the market quickly and deeply, they are attempting to attract many
buyers and a large market share.
5. Understand how to apply pricing strategies for existing products, such as price
bundling and price adjustment strategies.
Again, ask students to come up with examples of hospitality companies that use product
bundle pricing and pricing adjustment strategies (for example, hotel companies use
bundles and revenue management strategies).
 Product Bundle Pricing: Sellers use bundling to combine several of their products
and offer it at a reduced price. Price bundling can promote the sales of products
consumers might not otherwise buy, but the combined price must be low enough
to convince them to buy the bundle.
 Pricing Adjustment Strategies: Companies usually adjust their basic prices to
account for various customer differences and changing situations. These strategies
include:
o Discount Pricing and Allowances
o Discriminatory Pricing
o Revenue Management (Ex. Marketing Highlight 11-1)
6. Understand and be able to implement a revenue management system.
This is an excellent topic for bringing in a guest speaker. Revenue Management is still a
growing field in the hospitality industry and many hotels now have an in-house revenue
manager that might be able to speak to your students.
The concept behind revenue management is to manage revenue and inventory effectively
by pricing differences based on the elasticity of demand for selected customer segments.
Revenue management involves upselling, cross-selling, and analysis of profit margins
and sales volume for each product line. Revenue management system is used to
maximize a hospitality company’s yield or contribution margin.
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Revenue management systems must be based on sound marketing. They should be
developed with the long-term value of the customer in mind. Revenue management
programs should focus on long-term profitability, not just the maximization of one day’s
revenue. If used properly, revenue management systems can provide extra revenue. A
good revenue management system benefits both the hospitality company and the guest. It
opens low-rated rooms for the leisure traveler during times of low occupancy and saves
rooms during periods of peak demand for the business traveler willing to pay full rates.
The company gains because revenue management focuses on maximizing revenue, not
cutting costs.
7. Discuss the key issues related to price changes, including initiating price cuts and
price increases, buyer and competitor reactions to price changes, and responding to
price changes.
This is a good topic for class discussion. Start out by discussing buyer reactions to price
changes – particularly customer perceptions of quality based on prices. For example,
most students will have an opinion about how they would perceive a price change (either
increase or decrease) at their favorite restaurant.
 Initiating Price Cuts: Excess capacity or a drive to dominate the market or
increase market share may lead a company to cut prices. However, price cutting
to increase revenue must be carefully planned.
 Initiating Price Increases: Inevitably many companies must eventually raise
prices, often because of inflation. They do this knowing that price increases may
be resented by customers, dealers, and their own sales force. However, a
successful price increase can greatly increase profits. Regardless, it is best to
increase prices when customers perceive the price increase to be justified.
 Buyer Reactions to Price Changes: Whether the price is raised or lowered, the
action affects buyers, competitors, distributors, and suppliers. Price changes may
also interest the government. Customers do not always put a straightforward
interpretation on price changes.
 Competitor Reactions to Price Changes: Competitors are most likely to react
when the number of firms involved is small, when the product is uniform, and
when buyers are well informed (Ex. Southwest Airlines).
 Responding to Price Changes: Before responding to price changes of competitors,
companies must first explore why the competitor(s) changed their price(s) and
how these changes will affect them. Additionally, a company should evaluate its
own product’s stage in the life cycle, its importance in the company’s product
mix, the intentions and resources of the competitor and possible consumer
reactions to price changes (Ex. Fairfield Inns).
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Chapter Outline
I.
Price. [Slides 11-4] Simply defined, price is the amount of money charged for a good or
service. More broadly, price is the sum of the values consumers exchange for the benefits
of having or using the product or service.
II.
Factors to Consider When Setting Price [Slide 11-5]
J. Internal factors [Slide 11-6]
1.Marketing objectives [Slide 11-7]
a. Survival. It is used when the economy slumps or a recession is
going on. A manufacturing firm can reduce production to match
demand and a hotel can cut rates to create the best cash flow.
b. Current profit maximization. Companies may choose the price that
will produce the maximum current profit, cash flow, or ROI,
seeking financial outcomes rather than long-run performance.
c. Market-share leadership. When companies believe that a company
with the largest market share will eventually enjoy low costs and
high long-run profit, they set low opening rates and strive to be the
market-share leader.
d. Product-quality leadership. Hotels like the Ritz-Carlton chain
charge a high price for their high-cost products to capture the
luxury market.
e. Other objectives. Stabilize market, create excitement for new
product, and draw more attention.
2.Marketing mix strategy. Price must be coordinated with product design,
distribution, and promotion decision to form a consistent and effective
marketing program.
3.Costs
a. Fixed costs. Costs that do not vary with production or sales level.
b. Variable costs. Costs that vary directly with the level of
production.
4.Cost subsidization
5.Organization considerations. Management must decide who within the
organization should set prices. In small companies, this will be top
management; in large companies, pricing is typically handled by a
corporate department or by a regional or unit manager under guidelines
established by corporate management.
K. External factors [Slide 11-8]
1.Nature of the market and demand
a. Cross-selling. The company’s other products are sold to the guest.
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b. Upselling. Sales and reservation employees are trained to offer
continuously a higher-priced product that will better meet the
customer’s needs, rather than settling for the lowest price.
2.Consumer perception of price and value. It is the consumer who decides
whether a product’s price is right. The price must be buyer oriented. The
price decision requires a creative awareness of the target market and
recognition of the buyers’ differences.
3.Analyzing the price–demand relationship. [Slide 11-9] Demand and price
are inversely related; the higher the price, the lower the demand. Most
demand curves slope downward in either a straight or a curved line. The
prestige goods demand curve sometimes slopes upward.
4.Price elasticity of demand. [Slide 11-10] If demand hardly varies with a
small change in price, the demand is inelastic; if demand changes greatly,
the demand is elastic. Buyers are less price-sensitive when the product is
unique or when it is high in quality, prestige, or exclusiveness. Consumers
are also less price-sensitive when substitute products are hard to find. If
demand is elastic, sellers generally consider lowering their prices to
produce more total revenue. The following factors affect price sensitivity.
5.Factors Affecting Price–Demand Relations [Slide 11-11]
a. Unique value effect. Creating the perception that your offering is
different from those of your competitors avoids price competition.
b. Substitute awareness effect. Lack of the awareness of the existence
of alternatives reduces price sensitivity.
c. Business expenditure effect. When someone else pays the bill, the
customer is less price-sensitive.
d. End-benefit effect. Consumers are more price-sensitive when the
price of the product accounts for a large share of the total cost of
the end benefit.
e. Total expenditure effect. The more someone spends on a product,
the more sensitive he or she is to the product’s price.
f. Price quality effect. Consumers tend to equate price with quality,
especially when they lack any prior experience with the product.
6.Competitors’ price and offers. When a company is aware of its
competitors’ price and offers, it can use this information as a starting point
for deciding its own pricing.
a. Price-rate compression. This occurs when higher-priced hotels
lower these rates to maintain occupancy and become direct
competitors to lower-rated hotels.
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7.Other environmental factors. Other factors include inflation, boom or
recession, interest rates, government purchasing, and birth of new
technology.
III.
General Pricing Approaches [Slide 11-12]
J. Cost-based pricing. Cost-plus pricing: a standard markup is added to the cost of
the product.
K. Break-even analysis and target profit pricing. Price is set to break even on the
costs of making and marketing a product, or to make a desired profit.
L. Value-based pricing. Companies based their prices on the product’s perceived
value. Perceived-value pricing uses the buyers’ perceptions of value, not the
seller’s cost, as the key to pricing.
M. Competition-based pricing. Competition-based price is based on the establishment
of price largely against those of competitors, with less attention paid to costs or
demand.
IV.
Pricing Strategies
A. New product pricing strategies. [Slide 11-13] Pricing strategies usually change as
a product passes through its life cycle. The introductory stage is especially
challenging.
27.
Prestige pricing. Hotels or restaurants seeking to position
themselves as luxurious and elegant enter the market with a high price that
supports this position.
28.
Market-skimming pricing. Price skimming is setting a high price
when the market is price-insensitive. It is common in industries with high
research and development costs, such as pharmaceutical companies and
computer firms.
29.
Marketing-penetration pricing. Companies set a low initial price to
penetrate the market quickly and deeply, attracting many buyers and
winning a large market share.
30.
Product-bundle pricing. Sellers using product-bundle pricing
combine several of their products and offer the bundle at a reduced price.
Most used by cruise lines.
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B. Existing-product pricing strategies. [Slide 11-14] The strategies just described are
used primarily when introducing a new product. However, they can also be useful
with existing products. The following strategies are ones that can be used with
existing products.
1.Price-adjustment strategies. [Slide 11-15] Companies usually adjust their
basic prices to account for various customer differences and changing
situations.
a. Volume discounts. Hotels have special rates to attract customers
who are likely to purchase a large quantity of hotel rooms, either
for a single period or throughout the year.
b. Discounts based on time of purchase. A seasonal discount is a
price reduction to buyers who purchase services out of season
when the demand is lower. Seasonal discounts allow the hotel to
keep demand steady during the year.
c. Discriminatory pricing. Segmentation of the market and pricing
differences based on price elasticity characteristics of the
segments. In discriminatory pricing, the company sells a product or
service at two or more prices, although the differ-ence in price is
not based on differences in cost. It maximizes the amount that each
customer pays.
2.Revenue management. [Slide 11-16] A yield-management system is used
to maximize a hotel’s yield or contribution margin.
3.Psychological pricing. [Slide 11-17] Psychological aspects such as
prestige, reference prices, round figures, and ignoring end figures are used
in pricing.
4.Promotional pricing. Hotels temporarily price their products below list
price, and sometimes even below cost, for special occasions, such as
introduction or festivities. Promotional pricing gives guests a reason to
come and promotes a positive image for the hotel.
5.Value pricing. Value pricing means offering a price below competitors
permanently, which differs from promotional pricing, in which price may
be temporarily lowered during a special promotion.
V.
Price Changes [Slide 11-18]
A. Initiating price cuts. Reasons for a company to cut price are excess capacity,
inability to increase business through promotional efforts, product improvement,
follow-the-leader pricing, and desire to dominate the market.
B. Initiating price increases. Reasons for a company to increase price are cost
inflation or excess demand.
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C. Buyer reactions to price changes. Competitors, distributors, suppliers, and other
buyers associate price with quality when evaluating hospitality products they have
not experienced directly.
D. Competitor reactions to price changes. Competitors are most likely to react when
the number of firms involved is small, when the product is uniform, and when
buyers are well informed.
E. Responding to price changes. Issues to consider are reason, market share, excess
capacity, meeting changing cost conditions, leading an industry-wide program
change, temporary versus permanent.
Answers to Discussion Questions
1. One way of increasing revenue is through upselling. Give examples from the
hospitality or travel industries of when upselling can result in a more satisfied guest.
This is a great assignment for students. The key to enhancing customer satisfaction is to
be sure to consider the customer’s wants and needs and to manage expectations.
2. You have just been hired as the dining room manager at a local hotel. The manager
asks you to evaluate the menu prices to see if they need to be adjusted. How would
you go about this task?
This is a great topic for group discussion. Depending on where they are in your program,
many students might bring up analyzing the contribution margin of each item as a means
of evaluating menu prices. While this is definitely a big part of the process, the idea here
is to have students review the reasons that price adjustments occur and consider any
opportunities for improved pricing strategies.
For example, depending on the type of restaurant, one would need to understand the
original methods of pricing. Which pricing approach was used? Is this an appropriate
method for the current situation? Additionally, a discussion of the internal and external
factors affecting pricing might include some of the following questions:
 Internal factors: What are the objectives of the company? Is the strategy used in
the menu pricing supportive of these objectives? What is the range of product
costs? Does the menu try to be all things to all people at the expense of
consistency?
 External factors. What is the positioning of the restaurant in the area? Are there
trends that need to be addressed and compensated for? Should the restaurant
reposition itself in view of its competition?
 Other factors. Is there a pricing strategy that might be more appropriate to the
current situation? Are there opportunities for price bundling to attract different
customers or push different menu items?
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3. A number of factors affecting price sensitivity are discussed in this chapter. Provide
some examples of the application of these factors in the hospitality or travel
businesses.
This is a good assignment or class discussion topic. Following is an example to help get
students thinking about this question:
 End-Benefit Effect: People traveling to resort destinations these days are given an
option of booking their airport pickup and drops at the time of booking as well
along with a trip insurance (or weather insurance for resort destinations) for a
marginal price. While the add-on transportation rate may be equal to or even
above the market rates, people are still inclined to book the package together.
4. Give an example of an effective use of price discrimination. Support your reasons
for thinking that it is a good example.
Ask your students to come up with examples of price discrimination. As a starting point,
the book provides some examples of price discrimination. One looks at different airfare
categories for a flight from Detroit to Los Angeles. These might include a 14-day
advance excursion fare, a military fare, a senior citizen fares, etc.
5. Can a hotel or restaurant increase or maintain customer satisfaction after
implementing its first revenue management program? Explain your answer.
This is a great topic for class discussion. For example, revenue management is meant to
be a long-term approach to improve the overall profitability of the operation. As revenue
management is increasingly used by hospitality operations, it is becoming more
acceptable to customers. When set up properly, a revenue management program should
not interfere with customer satisfaction. As long as the products and services offered still
bring a sense of value for money to the customer, they will leave the establishment happy
and satisfied. In cases of overbooking, hospitality operations should have a clear and
thoughtful process for moving customers to different hotels or flights (often loyal
customers are the easiest and most willing to accommodate the needs of the hospitality
operation in return for some sort of consolation gift such as extra points or miles, etc.).
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6. Airlines and hotels give bonus frequent-flyer miles, gifts, and free companion tickets
to attract the business traveler. These promotions are often provided in lieu of a
price cut. The traveler benefits personally, although their company does not get the
benefit of lower rates. Is this ethical?
This is a great discussion topic designed to help students think about ethics. Here are
some examples of statements supporting each side of this question:
 Unethical: In most jobs it is considered unethical to take gifts from supplier
because it might unduly influence your decision to purchase from them. Why
should taking gifts from travel companies be any different? What if a business
traveler chooses the most expensive flight just because that airline offers them the
best rewards?

Ethical: Business travel is generally very taxing on people – typically such travel
does not accrue any vacation time for the traveling employee and they have to
spend time away from their families and comfort. These added accoutrements are
the only compensation these travelers receive for their efforts. Therefore, airlines
and hotels are actually helping other establishments keep their employees by
taking good care of them. Further, many businesses require their employees to
pick the lowest possible fare for their trip.
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Chapter 12: Distribution Channels Delivering Customer Value
Chapter Objectives
1. Describe the nature of distribution channels, and tell why marketing intermediaries are
used.
2. Understand the different marketing intermediaries available to the hospitality industry
and the benefits each of these intermediaries’ offers.
3. Discuss channel behavior and organization, explaining corporate, contractual, and
vertical marketing systems, including franchising.
4. Illustrate the channel management decisions of selecting, motivating, and evaluating
channel members.
5. Identify factors to consider when choosing a business location.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Describe the nature of distribution channels, and tell why marketing intermediaries
are used.
A good discussion topic to get your students thinking about distribution channels is to ask
them to think about the last time they planned a trip somewhere. Which websites (or
apps) did they visit during this process? Many students will have conducted some portion
of their research on OTA sites like Travelocity, Expedia or Hotels.com. Why did they
choose to conduct their research this way?
A distribution channel is a set of independent organizations involved in the process of
making a product or service available to the consumer or business user. Distribution
systems provide a steady flow of customers. A well-managed distribution system can
make the difference between a market-share leader and a company struggling for
survival. Competition, a global marketplace, electronic distribution techniques, and a
perishable product have increased the importance of distribution. Innovative ways of
approaching new and existing markets are needed (See Figure 12-1 and Shenago China
example).
2. Understand the different marketing intermediaries available to the hospitality
industry and the benefits each of these intermediaries’ offers.
Many specialized channels are available to hospitality and travel organizations. These
include: travel agents; tour wholesalers; specialists; hotel representatives; national, state,
and local tourist agencies; consortia and reservation systems; global distribution systems;
the Internet; and concierges. Table 12-1 illustrates the cost of different distribution
channels for hotels.
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Below is a list of some benefits associated with each of the key types of intermediaries:
 Direct booking: Managers often like to encourage direct booking because of the
low transaction costs
 Online Travel Agencies (OTA): Opaque sites reduce cannibalization of
brand.com by not disclosing the brand and specific hotel one is purchasing until it
is purchased in a nonrefundable transaction with the consumer. One important
feature of an OTA is people often search through hotel choices and then go to
brand.com to book the reservation
 Global Distribution Systems: Global distribution systems (GDSs) are
computerized reservation systems that serve as a product catalog for travel agents
and other distributors of hospitality products
 Travel Agents: One way of reaching a geographically diverse marketplace is
through travel agent
 Tour Wholesalers: Tour wholesalers assemble travel packages usually targeted at
the leisure market. These generally include transportation and accommodations
but may also include meals, ground transportation, and entertainment
3. Discuss channel behavior and organization, explaining corporate, contractual, and
vertical marketing systems, including franchising.
For the channel as a whole to perform well, each channel member's role must be
specified, and channel conflict must be managed. The channel will perform better if it
includes a firm, agency, or mechanism that provides leadership and has the power to
assign roles and manage conflict.
 Corporate VMS: Coordination and conflict management are attained through
common ownership at different levels in the channel
 Contractual VMS: Consists of independent firms at different levels of production
and distribution who join through contracts to obtain economies or sales impact
 Franchising: A method of doing business by which a franchisee is granted the
right to engage in offering, selling, or distributing goods or services under a
marketing format which is designed by the franchisor
4. Illustrate the channel management decisions of selecting, motivating, and evaluating
channel members.
Selecting channel members involves a number of factors, including customer needs, the
company’s ability to attract channel members, the economic feasibility of the channel
member, and the control that might be given up to gain a channel member. Additionally,
a company needs to continuously motivate its channel members by marketing to them,
keeping them informed about any developments in the companies, and providing
communication and support for them. Companies need to evaluate the quality of the
workforce of the channel members.
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5. Identify factors to consider when choosing a business location.
One of the most important aspects of distribution for hospitality organizations is location
(Ex. Carl’s Jr.). In general, there are four steps in choosing a location:
 Understanding the marketing strategy and target market of the company
 Conducting a regional analysis, which involves selecting geographic market areas
 Selecting an area within that region
 Choosing individual sites
Chapter Outline
I.
Supply Chains and the Value Delivery Network [Slide 12-3]
II.
III.
Nature and Importance of Distribution Systems. A distribution channel is a set of
independent organizations involved in the process of making a product or service
available to the consumer or business user.
L. Reasons that marketing intermediaries are used. The use of intermediaries
depends on their greater efficiency in marketing the goods available to target
markets. Through their contacts, experience, specialization, and scale of
operation, intermediaries normally offer more than a firm can on its own.
M. Distribution channel functions [Slide 12-4]
1.Information. Gathering and distributing marketing research and
intelligence information about the marketing environment.
2.Promotion. Developing and spreading persuasive communications about
an offer.
3.Contact. Finding and communicating with prospective buyers.
4.Matching. Shaping and fitting the offer to the buyers’ needs.
5.Negotiation. Agreeing on price and other terms of the offer so that
ownership or possession can be transferred.
6.Physical distribution. Transporting and storing goods.
7.Financing. Acquiring and using funds to cover the cost of channel work.
8.Risk taking. Assuming financial risks, such as the inability to sell
inventory at full margin.
N. Number of channel levels. The number of channel levels can vary from direct
marketing, through which the manufacturer sells directly to the consumer, to
complex distribution systems involving four or more channel members.
Hospitality Distribution Channels
F. Major hospitality distribution channels [Slide 12-5]
6.Direct booking
7.Online travel agencies
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8.Global distribution systems
9.Travel agents
10.
Travel wholesalers and Tour Operators
11.
Specialists: tour brokers, motivational houses, and junket reps
12.
Hotel representatives
13.
National, state, and local tourist agencies
14.
Consortia and reservation systems
15.
Restaurant distribution systems
a. Online reservation systems – OpenTable
b. Delivery, Take-Out, Drive-Through Window
c. Concierge
IV.
Channel Behavior
A. Channel conflict. Although channel members depend on each other, they often act
alone in their own short-run best interests. They frequently disagree on the roles
each should play on who should do what for which rewards.
1.Horizontal conflict. Conflict between firms at the same level.
2.Vertical conflict. Conflict between different levels of the same channel.
V.
Channel Organization. Distribution channels are shifting from loose collections of
independent companies to unified systems.
A. Conventional marketing system. A conventional marketing system consists of one
or more independent producers, wholesalers, and retailers. Each is a separate
business seeking to maximize its own profits, even at the expense of profits for
the system as a whole.
B. Vertical marketing system. [Slide 12-6] A vertical marketing system consists of
producers, wholesalers, and retailers acting as a unified system. VMSs were
developed to control channel behavior and manage channel conflict and its
economies through size, bargaining power, and elimination of duplicated services.
The three major types of VMSs are corporate, ad-ministered, and contractual.
1.Corporate. A corporate VMS combines successive stages of production
and distribution under single ownership.
2.Administered. An administered VMS coordinates successive stages of
production and distribution, not through common ownership or contractual
ties, but through the size and power of the parties.
3.Contractual. [Slide 12-7] A contractual VMS consists of independent
firms at different levels of production and distribution who join through
contracts to obtain economies or sales impact.
a. Franchising. [Slide 12-8] Franchising is a method of doing
business by which a franchisee is granted the right to engage in
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offering, selling, or distributing goods or services under a
marketing format that is designed by the franchisor. The franchisor
permits the franchisee to use its trademark, name, and advertising.
b. Alliances. Alliances are developed to allow two organizations to
benefit from each other’s strengths.
C. Horizontal marketing system. [Slide 12-9] Two or more companies at one level
join to follow new marketing opportunities. Companies can combine their capital,
production capabilities, or marketing resources to accomplish more than one
company working alone.
D. Multichannel marketing system. A single firm sets up two or more marketing
channels to reach one or more customer segments.
VI.
VII.
VIII.
Selecting Channel Members
A. Customer needs
B. Attracting channel members
C. Evaluating major channel alternatives [Slide 12-10]
1.Economic feasibility of channel member
2.Control criteria
Responsibilities of Channel Members and Suppliers. The company and its intermediaries
must agree on the terms and responsibilities of each channel member. According to the
services and clientele at hand, the responsibilities are formulated after careful
consideration.
Business Location. [Slide 12-11] There are four steps in choosing a location:
A. Understanding the marketing strategy. Know the target market of the company.
B. Regional analysis. Select the geographic market areas.
C. Choosing the area within the region. Demographic and psychographic
characteristics and competition are factors to consider.
D. Choosing the individual site. Compatible business, competitors, accessibility,
drainage, sewage, utilities, and size are factors to consider.
Answers to Discussion Questions
1. Discuss how you think technology will change distribution channels in the
hospitality and travel industries over the next five years.
This is an excellent topic for class discussion. For example, technology is continuing its
move toward the cloud-based computing model where more and more infrastructure is
based in remote data centers. This will continue to decrease the costs related with online
marketing, making it easier for independent hospitality operations such as food trucks to
access to the same level of technical expertise as is currently utilized by larger brands.
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2. Explain how international travel changed distribution channels in the hospitality
and travel industries.
Increased international travel has changed the makeup of the channel systems as well as
the process. Globalization has meant that many hotel companies must choose foreign
partners to help them market or distribute their products. Companies wishing to compete
in foreign markets are learning to accommodate different cultures. The advent of
technological advancements and improvements in the transportation infrastructure will
facilitate an increasing level of comfort and efficiency in worldwide travel. This will
continue to encourage movement of distribution channels toward a vertical marketing
system. However, it is important to recognize that channels of distributions within
countries vary greatly from nation to nation.
3. What are the major differences between a distribution channel for a business
making tangible products and a firm producing hospitality and travel products?
A distribution channel moves goods from producers to consumers. It overcomes the
major time, place, and possession gaps that separate goods and services from those who
would use them. The key difference will be the point of consumption. A business making
tangible products will have to continue to ship it to a location of customers’ choosing,
while a hospitality product or service has to be consumed by customers on site. A
tangible product is typically routed through a wholesaler and a retailer, while in the case
of a hospitality products and services, more specialized channels are deployed.
4. Can a business have too many channel members? Explain your answer.
This is another good topic for class discussion. Yes, a business can have too many
channel members. The chance of conflict increases with an increase in the number of
channels and it can be difficult for a business to service all of their channel members.
5. Explain the difference between a tour wholesaler and a travel agent.
This is a good assignment question. Ask your students to research the differences
between tour wholesalers and travel agents. For example, tour wholesalers assemble
travel packages usually targeted at the leisure market. These generally include
transportation and accommodations but may also include meals, ground transportation,
and entertainment. Retail travel agents sell these packages that are put together a tour
wholesaler. The tour wholesaler has to provide a commission for the travel agent and
give consumers a package that is perceived to be a better value than what they could
arrange on their own.
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6. Why is franchising such a fast-growing form of retail organization?
Ask your students to research the costs and benefits associated with buying a franchise.
Purchasing a franchise has a success rate of 90%. This is a big draw, as first time
investors want to reduce their risks to the extent possible. By obtaining a franchise, new
owners get pre-established quality benchmarks and specific procedures to follow in a
formulaic manner, which takes the guesswork out of the equation and provides a reliable
support network. Franchising also allows economies of scale in purchasing and in
promoting the total chain, to the benefit of each franchisee.
7. According to the International Franchising Association, between 30 and 50 percent
of all new franchise applicants are people who formerly worked in large
corporations and who lost their jobs as a result of corporate downsizing. How do
you think these midlevel, midcareer corporate executives will adapt to life as
franchise owners? How will their previous corporate experience help them? How
will it hurt them?
This is a good topic for class discussion. For example, former corporate experience will
help the executives getting into a franchise be cognizant of a macro level management
perspective. They will know the best route to secure financing and will be focused on
costs as well as ways to maximize profitability. However, having a macro perspective
may hurt as well if they do not pay attention to the day-to-day functioning of the
franchise.
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Chapter 13: Engaging Customers and Communicating Customer Value and
Advertising
Chapter Objectives
1. Discuss the process and advantages of integrated marketing communications in
communicating customer value.
2. Define the five promotion tools and discuss the factors that must be considered in shaping
the overall promotion mix.
3. Outline the steps in developing effective marketing communications.
4. Explain the methods for setting the promotion budget and factors that affect the design of
the promotion mix.
5. Define the roles of advertising in the promotion mix.
6. Describe the major decisions in advertising, including setting objectives and budget;
creating the advertising message; selecting advertising media; choosing media types,
vehicles, and timing; and evaluating advertising.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Discuss the process and advantages of integrated marketing communications in
communicating customer value.
Under this concept, the company carefully integrates its many communications channels
to deliver a clear, consistent and compelling message about the organization and its
brands (see Figure 13-1). Integrated marketing communications (IMC) calls for
recognizing all touchpoints where the customer may encounter the company and its
brands. IMC leads to a total marketing communications strategy aimed at building strong
customer relationships by showing how the company and its products can help customers
solve their problems.
A great example of the power of a well-integrated marketing communications effort is
Burger King's now-classic, award-winning, Whopper Freakout campaign
2. Define the five promotion tools and discuss the factors that must be considered in
shaping the overall promotion mix.
Break your students into groups and assign each group a specific hospitality company.
Ask them to identify the different elements of their company’s promotion mix. Which
element do they think is most effective? Which element do they think is least effective?
Why?
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A company’s total promotion mix – also called its marketing communications mix –
consists of the specific blend of advertising, public relations, personal selling, sales
promotion, and direct-marketing tools that the company uses to communicate customer
value and build customer relationships.
 Advertising: Any paid form of nonpersonal presentation and promotion of ideas,
goods, or services by an identified sponsor
 Sales promotion: Short-term incentives to encourage the purchase or sale of a
product or service
 Personal selling: Personal presentation by the firm’s sales force for the purpose of
making sales and building customer relationships
 Public relations: Building good relations with the company’s various publics by
obtaining favorable publicity, building up a good corporate image, and handling
or heading off unfavorable rumors, stories, and events
 Direct marketing: Direct connections with carefully targeted individual consumers
to both obtain an immediate response and cultivate lasting customer relationships
3. Outline the steps in developing effective marketing communications.
Have your students design a marketing communication for their hospitality company
from #2 above. Be sure to have them evaluate each step in this process.
 Identifying the Target Audience: The target audience heavily affects the
communicator’s decision on what will be said, how it will be said, when it will be
said, where it will be said, and who will say it
 Determining the Communication Objective: Once a target audience has been
defined, the marketing communicator must decide what response is sought – in
most cases this is purchase
 Designing the Message: Ideally, the message should get attention, hold interest,
arouse desire, and obtain action
 Selecting Communication Channels: The communicator must now select channels
of communication
 Selecting the Message Source: The message’s impact on the audience is also
affected by how the audience views the sender
 Collecting Feedback: This involves asking the target audience whether they
remember the message, how many times they saw it, what points they recall, how
they felt about the message, and their past and present attitudes toward the
product and company
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4. Explain the methods for setting the promotion budget and factors that affect the
design of the promotion mix.
 The Affordable Method: Setting a promotion budget at what a company thinks
they can afford
 Percentage of Sales Method: Setting a promotion budget at a certain percentage of
current or forecasted sales or a percentage of the sales price
 Competitive Parity Method: Setting a promotion budgets to match competitors’
budgets
 Objective and Task Method: Marketers develop their promotion budgets by
defining specific objectives, determining tasks that must be performed to achieve
these objectives and estimating the costs of performing them
5. Define the roles of advertising in the promotion mix.
Advertising is any paid form of nonpersonal presentation and promotion of ideas, goods
or services by an identified sponsor. Marketing management must make the following
five important decisions in developing an advertising program:
(1) Setting the objectives
(2) Setting the advertising budget
(3) Developing advertising strategy
(4) Creating the advertising message
(5) Choosing among major media steps
6. Describe the major decisions in advertising, including setting objectives and budget;
creating the advertising message; selecting advertising media; choosing media types,
vehicles, and timing; and evaluating advertising.
Marketing management must make five important decisions in developing an advertising
program:
(1) Setting the Objectives and Budget: Should be based on information about the
target market, positioning, and marketing mix [also see #4 above]
(2) Creating the Advertising Message: In putting the message together, the marketing
communicator must solve three problems: what to say (message content), how to
say it logically (message structure), and how to say it symbolically (message
format)
(3) Selecting Advertising Media: The major steps in media selection are deciding on
reach, frequency, and impact; choosing among major media types; selecting
specific media vehicles; and deciding on media timing
(4) Choosing Media Types, Vehicles and Timing: This includes understanding the
reach, frequency, and impact of each major media type, balancing media cost
measures against several media impact factors and determining how to schedule
advertising over the course of a year
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(5) Evaluating Advertising: This includes measuring the communication effect,
measuring the sales effect and measuring the awareness effect
Chapter Outline
I.
Promotion Mix [Slide 13-4]
O. Advertising. Any paid form of nonpersonal presentation and promotion of ideas,
goods, or services by an identified sponsor.
P. Sales promotion. Short-term incentives to encourage the purchase or sale of a
product or service.
Q. Personal selling. Personal presentation by the firm’s sales force for the purpose of
making sales and building customer relationships.
R. Public relations. Building good relations with the company’s various publics by
obtaining favorable publicity, building up a good corporate image, and handling
or heading off unfavorable rumors, stories, and events.
S. Direct and digital marketing. Engaging directly with carefully targeted individual
consumers and customer communities to both obtain an immediate response and
build lasting customer relationships.
II.
Integrated Marketing Communications. [Slide 13-5] The company carefully integrates its
many communications channels to deliver a clear, consistent, and compelling message
about the organization and its brands.
E. The new marketing communications landscape
The digital age has spawned a host of new information and
communication tools.
F. The Shifting Marketing Communications Model
3.Consumers are changing. Communication through digital, mobile and
social media are becoming more important.
4.Marketers are shifting away from mass marketing to targeted
communication.
5.The digital age has spawned new communication tools including
smartphones and tablets.
G. The need for Integrated Marketing Communications
1.Integrated marketing communications calls for recognizing all touch
points where the customer may encounter content about the company and
its brands.
2.As mass markets have fragmented, marketers are shifting away from mass
marketing to narrowly defined micromarkets.
3.The digital age has spawned a host of new information and
communication tools, from smartphones and tablets to the Internet, and
cable and satellite television systems.
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H. A View of the Communications Process [Slide 13-6]
1.IMC calls for recognizing all contact points where the customer may
encounter the company and its brands. The company wants to deliver a
consistent and positive message with each contact.
2.IMC ties together all the company’s messages and images. The company’s
television and print advertisements have the same message, look, and feel
as its e-mail and personal selling communications. And its public relations
materials project the same image as its Web site.
3.Four more are major communication functions—encoding, decoding,
response, and feedback. The last element is noise in the system.
III.
Steps in Developing Effective Communications [Slide 13-7]
A. Identify the target audience
B. Determine the communication objective. [Slide 13-8] The six buyer readiness
states are awareness, knowledge, liking, preference, conviction, and purchase.
C. Design a message [Slide 13-9]
1.AIDA model. The message should get attention, hold interest, arouse
desire, and obtain action.
2.Three problems that the marketing communicator must solve:
a. Message content (what to say). There are three types of appeals:
i.
Rational appeals relate to audience self-interest. They show
that the product will produce desired benefits.
ii. Emotional appeals attempt to provoke emotions that
motivate purchase.
iii. Moral appeal is directed to the audience’s sense of what is
right and proper.
b. Message structure (how to say it)
i.
Whether to draw a conclusion or leave it to the audience.
ii. Whether to present a one- or two-sided argument.
iii. Whether to present the strongest arguments first or last.
c. Message format (how to say it symbolically)
i.
Visual ad: using novelty and contrast, eye-catching pictures
and headlines, distinctive formats, message size and
position, color, shape, and movement.
ii. Audio ad: using words, sounds, and voices.
D. Select communication channels [Slide 13-10]
1.Personal communication channels. Used for products that are expensive
and complex. It can create opinion leaders to influence others to buy.
2.Nonpersonal communication channels. Include media (print, broadcast,
and display media), atmospheres, and events.
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E. Message source. Using attractive sources to achieve higher attention and recall,
such as using celebrities.
F. Measure the results of the communication. Evaluate the effects on the targeted
audience.
IV.
Setting the Total Promotion Budget and Mix
A. Setting the total promotional budget [Slide 13-11]
1.Affordable method. A budget is set based on what management thinks it
can afford.
2.Percentage of sales method. Companies set promotion budget at a certain
percentage of current or forecasted sales or a percentage of the sales price.
3.Competitive parity method. Companies set their promotion budgets to
match competitors.
4.Objective and task method. [Slide 13-12] Companies develop their
promotion budget by defining specific objectives, determining the tasks
that must be performed to achieve these objectives, and estimating the
costs of performing them.
B. Shaping the Overall Promotion Mix
C. The nature of each promotional tool
1.Advertising suggests that the advertised product is standard and
legitimate; it is used to build a long-term image for a product and to
stimulate quick sales. However, it is also considered impersonal one-way
communication. [Slide 13-13]
2.Personal selling builds personal relationships, keeps the customers’
interests at heart to build long-term relationships, and allows personal
interactions with customers. It is also considered the most expensive
promotion tool per contact. [Slide 13-14]
3.Sales promotion includes an assortment of tools: coupons, contests, centsoff deals, premiums, and others. It attracts consumer attention and
provides information. It creates a stronger and quicker response. It
dramatizes product offers and boosts sagging sales. It is also considered
short lived. [Slide 13-15]
4.Public relations has believability. It reaches prospective buyers and
dramatizes a company or product. [Slide 13-16]
D. Promotion mix strategies [Slide 13-17]
1.Type of product and market. The importance of different promotional
tools varies among consumers and commercial markets.
2.Push versus pull strategy
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a. Push strategy. The company directs its marketing activities at
channel members to induce them to order, carry, and promote the
product.
b. Pull strategy. A company directs its marketing activities toward
final consumers to induce them to buy the product.
c. Buyer readiness state. Promotional tools vary in their effects at
different stages of buyer readiness.
d. Product life-cycle stage. The effects of different promotion tools
also vary with stages of the product life cycle.
V.
VI.
Advertising. [Slide 13-18] We define advertising as any paid form of nonpersonal
presentation and promotion of ideas, goods, or services by an identified sponsor.
Major Decisions in Advertising
A. Setting objectives. [Slide 13-19] Objectives should be based on information about
the target market, positioning, and market mix. Advertising objectives can be
classified by their aim: to in-form, persuade, or remind.
1.Informative advertising. Used to introduce a new product category or
when the objective is to build primary demand.
2.Persuasive advertising. Used as competition increases and a company’s
objective be-comes building selective demand.
3.Reminder advertising. Used for mature products because it keeps the
consumers thinking about the product.
B. Setting the advertising budget. [Slide 13-20] Factors to consider in setting a
budget are the stage in the product life cycle, market share, competition and
clutter, advertising frequency, and product differentiation.
1.Strategic versus tactical budgets
2.Overall promotional budget
3.Consistency
4.Opportunity to stretch the budget
5.The final budget
C. Developing the advertising strategy
D. Creating the advertising message [Slide 13-21]
1.Breaking through the clutter
2.Merging Advertising and Entertainment
3.Message strategy
4.Message execution. [Slide 13-22] The impact of the message depends on
what is said and how it is said.
5.Consumer-generated messages
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6.Message evaluation and selection. Messages should be meaningful,
distinctive, and believable.
E. Selecting Advertising Media [Slide 13-23]
1.Deciding on reach, frequency, and impact
2.Choosing among major media types. Choose among newspapers,
television, direct mail, radio, magazines, and outdoor.
3.Selecting specific media vehicles. Costs should be balanced against the
media vehicles: audience quality, ability to gain attention, and editorial
quality.
4.Deciding on media timing. The advertiser must decide on how to schedule
advertising over the course of a year based on seasonal fluctuation in
demand, lead time in making reservations, and if they want to use
continuity in their scheduling or use a pulsing format.
5.Road blocking
F. Evaluating advertising effectiveness and the return on advertising investment.
[Slide 13-24] There are three major methods of advertising pretesting and two
popular methods of post-testing ads.
1.Measuring the communication effect—copy testing
a. Direct rating. The advertiser exposes a consumer panel to
alternative ads and asks them to rate the ads.
b. Portfolio tests. The interviewer asks the respondent to recall all ads
and their con-tests after letting the respondent listen to a portfolio
of advertisements.
c. Laboratory tests. Equipment is used to measure consumers’
physiological reactions to an ad.
2.Post-testing
3.Recall tests.
a. The advertiser asks people who have been exposed to magazines or
television programs to recall everything that they can about the
advertisers and products they saw.
b. Recognition tests. The researcher asks people exposed to media to
point out the advertisements they have seen.
c. Measuring the sales effect. The sales effect can be measured by
comparing past sales with past advertising expenditures and
through experiments.
d. Measuring the awareness effect. The target market’s awareness of
the brand or product is measured before and after the advertising.
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Answers to Discussion Questions
1. Explain the difference between promotion and advertising.
A promotion is typically a short term incentive offered by a company to attract customers
quickly within a short time span. Promotions are usually held occasionally and only for a
limited time. Advertising is part of the process of promotion.
2. Explain the concept of integrated marketing communications.
Under the concept of integrated marketing communications, a company carefully
integrates its many communications channels to deliver a clear, consistent, and
compelling message about the organization and its brands. This calls for recognizing all
touchpoints where the customer may encounter the company and its brands. Each brand
contact will deliver a message – whether good, bad, or indifferent. The company's goal is
to deliver a consistent and positive message to each contact.
This is a great assignment. Have your students visit a hospitality operation. How is the
company’s brand message communicated throughout their visit?
3. Recently, a number of restaurants have shifted some of their promotional budget
from advertising to public relations. What benefits does public relations offer that
would make the restaurants spend more?
Show your students an article or independent review about a restaurant and an
advertisement for the same restaurant. Start a class discussion about which message they
think is more credible and why. The article or review will almost always be viewed as
more believable, which is why many restaurants are switching more of their promotional
budget from advertising to public relations.
4. The percentage of sales method is one of the most common ways of setting a
promotional budget. What are some advantages and disadvantages of this method?
Many companies use the percentage of sales method because it is easy and provides a
control mechanism over the amount being spent on promotions. This method also forces
companies to address the relationship between promotional spending and the selling price
and profit of their products or services. However, the percentage of sales method wrongly
views sales as the cause of promotion rather than as the result, may prevent increased
spending and makes long-range planning difficult.
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5. Apply the five major tools in the marketing communication mix to a hospitality or
travel company by showing how a company can use all these tools.
This is a good topic for class discussion. For example, a hotel can advertise in prominent
newspapers and travel magazines. It can organize sales promotions, such as buy two
nights and get a third free. A hotel generally maintains a team of sales and marketing
professionals on staff to establish face to face relationships with key accounts (personal
selling). The marketing manager typically tries to ensure that there is a positive image of
the hotel in the local community, which is generally achieved through participation in
various social causes (public relations). The sales team also maintains a follow up contact
with the customers through direct marketing, such as sending a thank you note with
information on upcoming promotions and/or facility upgrades at the property, which the
customers are likely to notice and enjoy.
6. According to advertising expert Stuart Henderson Britt, good advertising objectives
spell out the intended audience, the advertising message, the desired effects, and the
criteria for determining whether the effects were achieved (e.g., not just “increase
awareness” but “increase awareness 20 percent”). Why should these components be
part of the advertising objective? What are some effects that an advertiser wants a
campaign to achieve?
This is also a good topic for class discussion. For example, these are essential
components of an advertising objective because they compel marketing managers to
think through the costs and benefits of a particular ad campaign. It forces them to
evaluate in advance whether a campaign is likely to be profitable and help advertisers
make changes to a campaign if things are not going as desired. Furthermore, the clearer
and more distinct the objectives are in the beginning, the better the evaluative efforts can
be in the end.
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Chapter 14: Promoting Products: Public Relations and Sales Promotions
Chapter Objectives
1. Understand the different public relations activities: press relations, product publicity,
corporate communications, lobbying, and counseling.
2. Understand the public relations process: research, establishing marketing objectives,
defining the target audience, choosing the PR message and vehicles, and evaluating PR
results.
3. Explain how companies use public relations to communicate and influence important
publics.
4. Explain how sales promotion campaigns are developed and implemented.
5. Implement a crisis management program in a hospitality business.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Understand the different public relations activities: press relations, product
publicity, corporate communications, lobbying, and counseling.
 Press Relations: The aim of press relations is to place newsworthy information
into the news media to attract attention to a person, product, or service
 Product Publicity: This involves various efforts to publicize specific products
 Corporate Communication: Covers internal and external communications and
promotes understanding of the organization
 Lobbying: Involves dealing with legislators and government officials to promote
or defeat legislation and regulation
 Counseling: Involves advising management about public issues and company
positions and image
2. Understand the public relations process: research, establishing marketing
objectives, defining the target audience, choosing the PR message and vehicles, and
evaluating PR results.
Effective Public Relations is the result of a process – a process that must be integrated
with the firm’s marketing strategy. The PR process consists of the following steps:
 Research: Before a company can develop a PR program, it must understand the
company’s mission, objectives, strategies, and culture
o Environmental scanning system is another important source of information
for the PR manager
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





Establishing the Marketing Objectives: Once the PR manager has identified
opportunities through product experiment and research, priorities can be
established and objectives set.
Defining the Target Audience: Effective PR practitioners carefully identify the
publics they wish to reach.
o They identify issues that will be important to the public and form the
message so it will seem natural and logical to the target audience
Choosing the PR Message and Vehicles: The PR practitioner is now ready to
identify or develop interesting stories about the product or service (Ex. Papa
John’s “Camaro Search” campaign using social media)
o Each event is an opportunity to develop a multitude of stories directed at
different audiences
Publications: Companies rely extensively on communication materials to reach
and influence their target markets
o These include annual reports, brochures, cards, articles, audiovisual
materials, and company newsletters and magazines
Implementing the Marketing PR Plan: Implementing publicity requires care and
consideration
Evaluating PR Results: Although the contribution of PR is difficult to measure
because it is used along with other promotion tools, this is still an important step
3. Explain how companies use public relations to communicate and influence
important publics.
 Publications: Annual reports, brochures, cards, articles, audiovisual material,
company newsletters and magazines are all effective forms of print that spread the
word and create reactions
 Events: Events can often be developed to offer companies opportunities to invite
and host “publics” as well as bring repeated attention to the company’s name and
products or services
 News: PR professionals need to find or create favorable news about the company,
its product, and its people
 Speeches are also another tool for creating product and company publicity
 Public service activities: Companies can improve public goodwill by contributing
money and time to good causes
 Identity media: A visual identity (or logo) that can be recognized by the public
immediately.
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4. Explain how sales promotion campaigns are developed and implemented.
Sales promotion consists of short-term incentives to encourage the purchase or sale of a
product or service and includes a variety of promotional tools designed to stimulate
earlier or stronger market response. In using sales promotions, a company must:
 Setting Sales Promotion Objectives: Consumer promotions can increase shortterm sales or they can be used to help build long-term market share
o Sales promotions should be consumer franchise building; that is, they
should promote the product’s positioning and include a sales message
 Selecting Sales Promotion Tools: The promotion planner should consider the type
of market, the sales promotion objectives, the competition, and the costs and
effectiveness of each tool
 Finding Creative Ideas: The Internet makes it possible to see what sales
promotion activities other companies are doing or consulting companies can also
give some ideas online as a way to attract potential clients
 Developing the Sales Promotion Program: First, they must decide on the size of
the incentive, then decide how to promote and distribute the promotion program
and finally decide on the sales-promotion budget
 Pretesting and Implementing the Plan: Whenever possible, sales promotion tools
should be pretested to determine if they are appropriate and of the right incentive
size
 Evaluating the Results: Many evaluation methods are available, the most common
of which is sales comparisons before, during, and after a promotion
5. Implement a crisis management program in a hospitality business.
Crisis management includes taking all possible precautions to prevent negative events
from occurring. However, if something does occur, an effective crisis management
program will reduce the negative effects of these events. A good activity for students
outside of class is to ask them to interview a hospitality owner and/or operator about the
crisis management program they utilize.
Chapter Outline
I.
Public Relations. [Slide 14-3] The process by which a positive image and customer
preference are created through third-party endorsement. Social media has become an
important tool for public relations.
II.
Major Activities of PR Departments [Slide 14-4]
T. Press relations. The aim of press relations is to place newsworthy information into
the news media to attract attention to a person, product, or service.
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U. Product publicity. Product publicity involves efforts to publicize specific
products.
V. Corporate communication. This activity covers internal and external
communications and promotes understanding of the organization.
W. Lobbying. Lobbying involves dealing with legislators and government officials to
promote or defeat legislation and regulation.
X. Counseling. Counseling involves advising management about public issues and
company positions and image.
III.
Publicity. Publicity is a direct function of PR. Publicity is the task of securing editorial
and news space, as opposed to paid space, in print and broadcast media to promote a
product or a service. Publicity is a popular PR tool used in the five activities described
earlier. Three other popular uses of publicity are new product launches, special events,
and crisis management.
IV.
The Public Relations Process [Slide 14-5]
E. Researching to understand the firm’s mission, culture, and target of the
communication.
F. Establishing marketing objectives [Slide 14-6]
1.Build awareness
2.Build credibility
3.Stimulate the sales force and channel intermediaries
4.Lower promotion costs
G. Defining the target audience
H. Choosing the PR message and vehicles
4.Publications. Companies can reach and influence their target market via
annual reports, brochures, cards, articles, audiovisual materials, and
company newsletters and magazines.
5.Events. Companies can draw attention to new products or other company
activities by arranging special events.
6.News. PR professionals cultivate the press to increase better coverage to
the company.
7.Speeches. Speeches create product and company publicity. The
possibility is accomplished by printing copies of the speech or excerpts for
distribution to the press, stockholders, employees, and other publics.
8.Public service activities. Companies can improve goodwill by
contributing money and time to good causes, such as supporting
community affairs.
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9.Identity media. Companies can create a visual identity that the public
immediately recognizes, such as with company’s logos, stationery, signs,
business forms, business cards, buildings, uniforms, dress code, and
rolling stock.
B. Implementing the marketing PR plan
C. Evaluating PR results [Slide 14-7]
1.Exposures
2.Awareness/comprehension/attitude change
3.Sales-and-profit contribution
VII.
VIII.
II.
PR Opportunities for the Hospitality Industry [Slide 14-8]
I. Individual properties. Public relations is by far the most important promotional
tool available to entrepreneurs and individual properties, such as a single
restaurant, tourist attraction, bed and breakfast (B&B), tour operator, or hotel.
Seldom can these enterprises afford costly advertising or other promotional
programs.
J. Build PR around the owner/operator
K. Build PR around the location. For instance, the isolation and obscurity of an
enterprise can be used as a PR tactic.
L. Build PR around a product or service
Crisis Management
M. Take all precautions to prevent negative events from occurring.
N. When a crisis does occur:
2.Appoint a spokesperson. This ensures that the company is giving a
consistent story based on facts.
3.Contact the firm’s public relations agency if it has one.
4.The company should notify the press when a crisis happens.
Sales Promotion [Slide 14-9]
A. Setting sales promotion objectives. Sales promotion objectives vary widely and
can include increasing short-term sales, increasing long-term sales, getting
consumers to try a new product, luring customers away from competitors, or
creating loyal customers.
B. Selecting sales promotion tools. [Slide 14-10] Many tools can be used to
accomplish sales promotion objectives. The promotion planner should consider
the type of market, the sales promotion objectives, the competition, and the costs
and effectiveness of each tool. Common sales promotion tools include samples,
coupons, premiums, patronage rewards, point-of-purchase (POP) displays,
contests, sweepstakes, and games.
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C. Finding creative ideas
D. Developing the sales promotion program. The following steps are involved in
developing a sales promotion program:
1.Decide on the size of the incentive
2.Set the conditions for participation
3.Decide how to promote and distribute the promotion program
4.Set promotion dates
5.Decide on the sales promotion budget
E. Pretesting and implementing the plan. The marketer should pretest to determine
if sales promotion tools are appropriate and the incentive size is efficient and
effective.
F. Evaluating the results. The company should evaluate the results against the
objectives of the program.
III.
Local Store Marketing. A good local store marketing campaign is an effective way for
both a chain and an individually owned restaurant or hotel to gain goodwill and exposure
in the community.
Answers to Discussion Questions
1. What is meant by the term public? Can a company have more than one public?
Assign your student different hospitality companies and ask them to identify the publics
for these companies. Publics are groups of individuals with certain common
characteristics. A company has many publics or audiences that it has to address; a few
examples include – stockholders, employees, legislators, community leaders, etc.
2. Why might it make sense for a hotel chain to shift some of its advertising dollars to
public relations?
Show your students an article or independent review about a hotel and an advertisement
for the same hotel. Start a class discussion about which message they think is more
credible and why. The article or review will almost always be viewed as more believable,
which is why it makes sense for a hotel chain to shift some of its advertising dollars to
public relations.
3. Give some examples of how a hospitality organization might be able to gain
publicity.
This is a great topic for class discussion and could include such things as:
 A favorable write-up of a restaurant in the local newspaper
 Press coverage of community efforts by a hotel or brand at a natural disaster site
 LEED certification of the operation’s building or other “green” efforts
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4. Is publicity free?
This is a good topic for class discussion to get your students thinking about the costs
associated with publicity. For example, although the organization may not pay for the
time or space of the publicity, they incur other costs such as the salary of their PR
manager, the cost of any publicity functions that are held to entertain or educate the
media and the investments of time and donation for charity and neighborhood events.
5. Compare and contrast publicity with advertising. What are the benefits and
drawbacks of each?
This is a good question to discuss while covering #2 (above). Elements of consideration
for public relations include credibility, cost and exposed audience. Furthermore, certain
types of PR help promote employee participation pride, and input in the organization that
might otherwise be lost. The drawback to publicity is the element of control. There is
considerably less control a company may exert over the media when the publicity is
“free”. Advertising, on the other hand, is more consumer-focused. The message itself is
picked by the company to project certain ideas to the public. The drawback to this is the
issue of credibility.
6. How can being socially responsible enhance a company’s position in the
community?
Have your class research different hospitality companies’ efforts to be socially
responsible (such as recycling programs, disaster aid relief efforts and local community
events). How have these different efforts been received on different social media
platforms?
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Chapter 15: Professional Sales
Chapter Objectives
1. Explain the role and nature of personal selling and the role of the sales force.
2. Describe the basics of managing the sales force, and explain how to set sales force
strategy, how to pick a structure—territorial, product, customer, or complex—and how to
ensure that sales force size is appropriate.
3. Identify the key issues in recruiting, selecting, training, and compensating salespeople.
4. Discuss supervising salespeople, including directing, motivation, and evaluating
performance.
5. Apply the principles of the personal selling process, and outline the steps in the selling
process: prospecting and qualifying, preapproach and approach, presentation and
demonstration, negotiation, overcoming objections, closing, and follow-up.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Explain the role and nature of personal selling and the role of the sales force.
Sales personnel serve as the company’s personal link to customers. The sales
representative is the company to many customers and in turn brings back much needed
customer intelligence. Personal selling is the most expensive contact and communication
tool used by the company. Sales representatives perform one or more of the following
tasks for their companies:
 Prospecting: Sales representatives find and cultivate new customers
 Targeting: Sales representatives decide how to allocate their scarce time among
prospects and customers
 Communicating: Sales representatives communicate information about the
company’s products and services
 Selling: Sales representatives know the art of salesmanship: approaching,
presenting, answering objections, and closing sales
 Servicing: Sales representatives provide various services to the customers—
consulting on their problems, rendering technical assistance, arranging financing,
and expediting delivery
 Information gathering: Sales representatives conduct market research and
intelligence work and fill in call reports
 Allocating: Sales representatives decide which customers to allocate scarce
products to during product shortages
 Maintaining strategic partnerships: Senior salespeople including the sales
manager provide valuable planning assistance to clients
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2. Describe the basics of managing the sales force, and explain how to set sales force
strategy, how to pick a structure–territorial, product, customer, or complex–and
how to ensure that sales force size is appropriate.
Hospitality companies typically establish objectives for the sales force. Sales objectives
are essential to ensure that corporate goals are met and to assist sales force members to
plan and execute their personal sales programs.
The diverse nature of the hospitality industry means that different types of sales force
structures have evolved. These include:
 Territorial-Structured Sales Force: This is the simplest sales organization. Each
sales representative is assigned an exclusive territory to represent the company’s
full line, which results in a clear definition of the salesperson’s responsibilities
 Market-Segment-Structured Sales Force: This is the most common type of
structure within the hotel industry
 Market-Channel-Structured Sales Force: The importance of marketing
intermediaries, such as wholesalers, tour operators, travel agencies, and junket
reps, to the hospitality industry has created sales force structures to serve different
marketing channels
 Customer-Structured Sales Force: This recognizes that specific customers exist
who are critical to the success of the organization and is usually organized to
serve these accounts through a key or national account structure
 Combination-Structured Sales Force: Proponents of this believe it encourages the
sales force to reach most available customers; Opponents of this system feel that
in many cases this sales force structure indicates the hotel is trying to be all things
to all people in the absence of long-run goals and strategies
After determining the type and number of desired customers, a workload approach can be
used to establish sales force size:
(1) Customers are grouped into size classes according to their annual sales volume
(2) The desirable call frequencies (number of sales calls on an account per year) are
established for each class
(3) The number of accounts in each size class is multiplied by the corresponding call
frequency to arrive at the total workload for the country in sales calls per year
(4) The average number of calls a sales representative can make per year is
determined
(5) The number of sales representatives needed is determined by dividing the total
annual calls required by the average calls made by a sales representative
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3. Identify the key issues in recruiting, selecting, training, and compensating
salespeople.
A good assignment for this topic could be having your students interview a salesperson
about the recruiting process they went through and any training they have undergone
(many salespeople might be reluctant to discuss their compensation).
 Recruiting: Careful selection is important. At the heart of a successful sales-force
operation is the selection of effective sales representatives. Most customers say
they want sales representatives to be honest, reliable, knowledgeable and helpful.
The company should look for these traits when selecting candidates.
 Training: The types of training required can include product/service training;
policies, procedure and planning training; and sales techniques training.
 Sales-Force Compensation: Sales representatives would like income regularity,
extra rewards for above-average performance and fair payment for experience and
longevity. The components of compensation can include a fixed amount, a
variable amount, expenses and fringe benefits.
4. Discuss supervising salespeople, including directing, motivation, and evaluating
performance.
The majority of sales representatives require encouragement and special incentives to
work at their best level. This can include sales force compensation and supplementary
motivators such as periodic sales meetings. When evaluating salespeople, managers
should set sales quotas and develop norms for salespeople. Managers should review how
the salespeople use their sales time and how they manage trade shows as well as assess
their performance of other control techniques such as sales reports. Finally, management
should conduct a formal performance evaluation.
5. Apply the principles of the personal selling process, and outline the steps in the
selling process: prospecting and qualifying, preapproach and approach,
presentation and demonstration, negotiation, overcoming objections, closing, and
follow-up.
A good class activity for this section is roleplaying the selling process. Break students
into groups of “buyers” and “sellers” and assign each group a specific product or service
to sell. Have each group act out the sale, being sure to focus on each of the key stages of
the personal selling process.
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Selling today is a profession that involves mastering and applying a set of principles,
including:
 Prospecting and Qualifying: Sales representatives need skill in screening out poor
leads
 Preapproach: The salesperson needs to learn as much as possible about the
prospect company (what it needs, who is involved in the purchase decision) and
its buyers (their personal characteristics and buying styles)
o Another task is to decide on the best approach, which might be a personal
visit, a phone call, or a letter
 Approach: This involves the salesperson’s appearance, the opening lines, and the
follow-up remarks
 Presentation and Demonstration: The salesperson now tells the product “story” to
the buyer, following the AIDA formula of gaining attention, holding interest,
arousing desire, and obtaining action
 Negotiation: Salespersons need to win the order without making deep concessions
that will hurt profitability
 Overcoming Objections: Customers almost always pose objections during the
presentation or when asked for the order
 Closing: Salespersons need to know how to recognize closing signals from the
buyer, including physical actions, statements or comments, and questions
 Follow-Up/Maintenance: This last step is necessary if the salesperson wants to
ensure customer satisfaction and repeat business
Chapter Outline
I.
Management of Professional Sales [Slide 15-4]
II.
III.
Nature of Hospitality Sales [Slide 15-5]
Y. Competitive analysis and competitive sets
Sales Force Objectives [Slide 15-6]
O. Sales volume [Slide 15-7]
1.Sales volume by selected segments
2.Sales volume and price/margin mix
Z. Upselling and second-chance selling. Excellent profit opportunities exist for
hospitality companies, particularly hotels and resorts, to upgrade price and profit
margins by selling higher-priced products such as suites through upselling. A
related concept is second-chance selling.
AA.
Market share or market penetration. These are two important objectives.
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BB.
Product-specific objectives. Occasionally, a sales force is charged with the
specific responsibility to improve sales volume for specific product lines.
IV.
Sales Force Structure and Size [Slides 15-8 to 15-9]
A. Territorial-structured sales force. Each sales representative is assigned an
exclusive territory in which to represent the company’s full line.
1.Territory size. Territories are designed to provide either equal sales
potential or equal workload.
2.Territory shape. Territories are formed by combining smaller units until
they add up to a territory of a given sales potential or workload.
B. Market-segment structured sales force. Company structures its sales force based
on market segments.
C. Market-channel structured sales force. The importance of marketing
intermediaries, such as wholesalers, tour operators, travel agencies, and junket
reps, to the hospitality industry has created sales force structures to serve different
marketing channels.
D. Customer-structured sales force. A sales force is organized by market segment,
such as the association market and the corporate market or by specific key
customers.
E. Combination-structured sales force. A large hotel might have a catering/banquet
sales force (product), a convention/meeting sales force (market segment), a tour
wholesales sales force (marketing intermediary), and a national accounts sales
force (customer).
F. Sales force size [Slide 15-9]
1.Customers are grouped into size classes according to their annual sales
volume.
2.The desirable call frequencies (number of sales calls on an account per
year) are established for each class.
3.The number of accounts in each size class is multiplied by the
corresponding call frequency to arrive at the total workload for the country
in sales calls per year.
4.The average number of calls a sales representative can make per year is
determined.
5.The number of sales representatives needed is determined by dividing the
total annual calls required by the average annual calls made by a sales
representative.
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V.
Organizing the Sales Department [Slide 15-10]
A. Inside sales force. The inside sales force includes technical support persons, sales
assistants, and telemarketers.
B. Field sales force. The field sales force includes commissioned reps, salaried reps,
and sales team.
C. Team sales
VI.
Relationship Marketing and Strategic Alliances. The art of creating a closer working
relationship and interdependence between the people in two organizations.
A. Strategic alliances. Alliances are relationships between independent parties that
agree to cooperate but still retain separate identities.
B. Why strategic alliances are necessary. Globalization, complicated customer needs,
large customers with multilocations, the need for technology, highly
interdependent vendor/buyer relationship, intensified competition, and low
profitability within the hospitality industry.
VII.
Recruiting and Selecting Sales Representatives. [Slide 15-11] The effective salesperson
has two basic qualities: (1) empathy, the ability to feel as the customer does, and (2) ego
drive, a strong personal need to make the sales.
A. Importance of careful selection. Effective salespeople have two basic qualities:
empathy, the ability to feel as the customer does; and ego drive, a strong personal
need to make the sale.
B. Establish a profile of desired characteristics matching the corporate culture.
C. Matching career acquisitions with corporate objectives.
D. Sales force training. [Slide 15-12] There are three types of training:
product/service training; policies, procedures, and planning training; and sales
techniques training.
VIII.
Managing the Sales Force [Slide 15-13]
A. Selecting sales strategies. The following are six general sales strategies:
4.Prevent erosion of key accounts
5.Grow key accounts
6.Grow selected marginal accounts
7.Eliminate selected marginal accounts
8.Retain selected marginal accounts, but provide lower-cost sales support
9.Obtain new business from selected prospects
B. Sales force tactics: principles of personal selling. [Slide 15-14] These are
prospecting and qualifying, preapproach, approach, presentation and
demonstration, negotiation, overcoming objections, closing, and followup/maintenance.
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C. Motivating a professional sales force [Slide 15-15]
1.Sales force compensation
2.Supplementary motivators
D. Evaluation and control of a professional sales force. [Slide 15-16] There are
several means of formal evaluation of performance: sales-to-salesperson
comparisons, customer satisfaction evaluation, qualitative evaluation of sales
representatives, peer-to-peer sales, networking, and salesmanship.
IX.
Social Selling: [Slide 15-17] Online, Mobile, and Social Media Tools. The use of online,
mobile, and social media to engage customers, build stronger customer relationships and
augment sales performance.
Answers to Discussion Questions
1. Why should companies be concerned about key or national accounts?
Key or national accounts are major accounts that provide a bulk of the business. While all
customer segments are good and important, it is the key accounts that are critical to the
fiscal success of the organization. These accounts are also important because they are
relatively fewer in number as compared to other low volume segments. Consolidation,
mergers, joint ventures, etc. among target companies or accounts is also narrowing the
playing field as it gives these accounts more bargaining power.
2. What are the most common methods of structuring a sales force?
This will depend on the type of operation and on any current trends. If you require your
students to interview a salesperson (see Teaching Suggestions #3 above), you can have
them include a question about sales force structure in their interview. Usually the most
common methods of structuring a sales force are territorial, product, or customer sales
force structured.
There are advantages to each type of sales force structure. The sales force structure
decision is simple if the company sells one product line to one industry with customers in
many locations. In that case the company would most likely use a territorial sales force
structure where the regions are divided up. Clearly this defines the salesperson’s job, and
because only one person works the territory, they get all the credit or blame for the
territory sales. If the company sells many products to many types of customers, it might
need either a product sales force structure, where the sales force sells along product lines,
or a customer sales force structure, whereby the sales force is organized along customer
or industry lines (the latter is most common in hotel sales departments).
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3. Discuss the importance of establishing sales objectives and the various kinds of sales
force objectives common to the hospitality industry.
Sales objectives are essential for two reasons: they ensure that corporate goals are met
and they assist sales force members to plan and execute their personal sales programs.
Although sales objectives are custom designed, there are general objectives commonly
employed by members of the hospitality industry:
 Sales Volume: Bring in as many customers as possible
 Upselling and Second-Chance Selling: Excellent profit opportunities exist for
hospitality companies, particularly hotels and resorts, to upgrade price and profit
margins by selling higher-priced products such as suites through upselling
 Market Share or Market Penetration: Airlines, cruise lines, major fast food chains,
and rental car companies are highly concerned with market share and market
penetration
 Product-Specific Objectives: Occasionally, a sales force is charged with the
specific responsibility to improve sales volume for specific product lines
4. Many people feel they do not have the ability to be successful salespeople. What role
does training play in helping someone to develop selling ability?
This is a great topic for class discussion. For example, training can provide someone with
the necessary selling tools and techniques, which may then allow that person to overcome
personal fears associated with the act of selling and allow the person to seek success in
selling. Typical fears usually revolve around a lack of knowledge about the product or
service being sold and around basic sales protocols and techniques. However, there might
be some discussion about whether there are a set of personal characteristics for highly
successful salespeople (such as being extroverted).
5. Discuss the process of negotiation and how sales force members can use it
effectively.
The process of negotiation requires a deep understanding of the customer and customer’s
preferences and position regarding a particular issue. It is the process by which a sales
force member can reach a common ground and effectively close a sale that benefits all
parties involved. The process involves seeking clarification on any objections posed by
the customer and then being able to mitigate the objection or even skillfully turn it around
into a reason for buying.
6. Good salespeople are familiar with their competitors’ products as well as their own.
What would you do if your company expected you to sell a product that you thought
was inferior to the competition’s? Why?
This is an excellent topic for class discussion and can evolve into a conversation about
personal ethics as well.
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7. It has been said there are two parts to every sale: the part performed by the
salesperson and the part performed for the salesperson by his or her organization.
What should the company provide for the salesperson to help increase total sales?
How does the sales manager’s job differ from the sales rep’s job?
This is another great topic for class discussion. It could also be an interesting question to
include if you require your students to interview a salesperson (see Teaching Suggestions
#3 above). A company should provide the salesperson with the necessary training and
support infrastructure to perform their various duties and responsibilities. The company
should also have the necessary facilities in place for the salesperson to deliver on the
promises made to the customer and secure customer satisfaction for the organization.
While a sales manager is actually responsible for the sales efforts of a company, the sales
reps are the ones who are prospecting, targeting, communicating, selling, servicing and
gathering information on and with the actual customers.
8. A district sales manager voiced the following complaint at a sales meeting: “The
average salesperson costs our company $40,000 in compensation and expenses. Why
can’t we buy a few less $40,000 full-page ads in Time magazine and use the money to
hire more people? Surely one individual working for a year can sell more products
than a one-page ad in one issue of Time.” Evaluate this argument.
This is yet another great topic for class discussion. You will most likely have students on
both sides of the debate. One way to think about advertisements versus a salaried
salesperson is the reach of magazines like Time. For example, if one of the overall goals
is to create awareness of the company, a Time ad with its enormous reach would better
accomplish this than an extra salesperson. However, if a major goal of the sales
department is to increase local business, the money would most likely be better spent on
an additional salesperson.
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Chapter 16: Direct, Online, Social Media, and Mobile Marketing
Chapter Objectives
1. Define direct marketing and discuss its benefits to customers and companies.
2. Identify and discuss the major forms of direct marketing.
3. Explain how companies have responded to the Internet and other powerful new
technologies with online marketing strategies.
4. Discuss how companies go about conducting online marketing to profitably deliver more
value to customers.
5. Understand how databases can be used to develop direct marketing campaigns.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Define direct marketing and discuss its benefits to customers and companies.
Many companies are adopting direct marketing as a primary marketing approach. Direct
Marketing consists of connecting directly with carefully targeted individual consumers to
both obtain an immediate response and cultivate lasting customer relationships.
 Benefits to Customers:
o For customers, direct marketing is convenient, easy, and private
o Direct marketing gives buyers ready access to a wealth of products
o Companies also use direct marketing to access guests and gain information
that will develop systems and products to better serve their guests
o Finally, direct marketing is interactive and immediate
 Benefits to Sellers:
o Direct marketing is a powerful tool for building customer relationships
o Marketers can target small groups or individual consumers and promote
their offers through personalized communications
o Companies can interact with customers by phone or online, learn more
about their needs, and tailor products and services to specific customer
tastes
o Direct marketing also offers sellers a low-cost, efficient, speedy
alternative for reaching their markets
2. Identify and discuss the major forms of direct marketing.
The traditional forms of direct marketing used in the hospitality industry are direct-mail
marketing, telephone marketing, and kiosk marketing.
 Direct-Mail Marketing: Involves sending an offer, announcement, reminder, or
other item to a person at a particular address
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


Telephone Marketing: Involves using the telephone to sell directly to consumers
and business customers
Kiosk Marketing: As consumers have become more and more comfortable with
computer and digital technologies, many companies are expanding their
placement of kiosks and have even started adding advanced vending machines in
stores, airports, and other locations
Interactive TV (iTV): Lets viewers interact with television programming and
advertising using their remote controls. iTV gives marketers an opportunity to
reach targeted audiences in an interactive, more involving way.
3. Explain how companies have responded to the Internet and other powerful new
technologies with online marketing strategies.
Today, thanks to a wealth of new digital technologies, direct marketers can reach and
interact with consumers just about anywhere, at any time, about almost anything.
 E-mail: One advantage of e-mail is that it is quick and thus a good way to get rid
of excess inventory
 Mobile Phone Marketing: With more than 285 million Americans now
subscribing to wireless services, many US marketers view mobile phones as the
next big direct marketing medium (this is already being done is Asian markets)
 Podcasts and Vodcasts: With podcasting, consumers can download audio files
(podcasts) or video files (vodcasts) via the Internet to a handheld device and then
listen to or view them whenever and wherever they wish
 Interactive TV: Interactive TV (iTV) lets viewers interact with television
programming and advertising using their remote controls
4. Discuss how companies go about conducting online marketing to profitably deliver
more value to customers.
In one way or another, most companies have now moved online.
 Creating a Website: For most companies, the first step in conducting online
marketing is to create a Website
o Corporate (or brand) Website: This is the most basic type of website and is
designed to build customer goodwill, collect customer feedback and
supplement other sales channels rather than sell the company's products
directly
o Marketing Website: These sites engage consumers in an interaction that
will move them closer to a direct purchase or other marketing outcome
 Placing Ads and Promotions Online: As consumers spend more and more time on
the Internet, companies are shifting more of their marketing dollars to online
advertising to build their brands or attract visitors to their Websites
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
Creating or Participating in Online Social Networks: Companies participating in
Web communities must learn how to add value for consumers to capture value in
return – listening to what your customers saying is good, but engaging in the
conversation is better
5. Understand how databases can be used to develop direct marketing campaigns.
Effective direct marketing begins with a good customer database. A customer database is
an organized collection of comprehensive data about individual customers or prospects,
including geographic, demographic, psychographic, and behavioral data. A good
customer database can be a potent relationship-building tool (Ex. Aruba).
Chapter Outline
I.
Direct And Digital Marketing [Slide 16-3] involves engaging directly with carefully
targeted individual consumers and customer communities to both obtain an immediate
response and build lasting customer relationships. Companies use direct marketing to
tailor their offers and content to the needs and interests of narrowly defined segments or
individual buyers. In this way, they build customer engagement, brand community, and
sales.
CC.
The New Direct Marketing Model. The spate of online social and mobile
media-direct marketing has undergone a dramatic transformation. Direct and
digital marketing are more than just supplementary channels or advertising media;
they constitute a complete model for doing business.
DD.
Rapid Growth of Direct and Digital Marketing. Direct and digital
marketing have be-come the fastest-growing form of marketing. Direct marketing
continues to become more Internet-based, and digital direct marketing is claiming
a surging share of marketing spending and sales.
EE. Benefits of Direct and Digital Marketing to Buyers and Sellers. For buyers, direct
and digital marketing are convenient, easy, and private. They give buyers
anywhere, anytime access to an almost unlimited assortment of goods and a
wealth of product and buying information. For sellers, direct marketing often
provides low-cost, efficient, speedy alternatives for reaching their markets as well
as greater flexibility. Especially in today’s digital environment, direct marketing
provides opportunities for real-time marketing that links brands to important
moments and trending events in customers' lives.
II.
Forms of Direct and Digital Marketing. Traditional direct marketing tools include faceto-face selling, direct-mail marketing, catalog marketing, telemarketing, direct-response
television marketing, and kiosk marketing. In recent years, however, a new set of digital
and direct marketing tools have emerged. These include Web sites, online ads,
promotional e-mail, online videos, blogs, social media marketing, and mobile marketing.
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III.
Digital and Social Media Marketing. [Slides 16-4 to 16-5] Digital marketing tools and
platforms directly engage consumers anywhere at any time via their computers,
smartphones, tablets, Internet-ready TVs and other digital devices. The use of the Internet
and digital technology impact both buyers and the marketers who serve them.
E. Marketing, the Internet, and the Digital Age. The digital age has fundamentally
changed customers' notions of convenience, speed, price, product information,
service, and brand interactions. As a result, it has given marketers a whole new
way to create customer value, engage customers, and build customer
relationships. Also, companies that have traditionally operated offline have now
created their own online sales, marketing, and brand community channels.
F. Online Marketing. [Slide 16-4] Online marketing refers to marketing via the
Internet using company Web sites, online advertising and promotions, e-mail
marketing, online video, and blogs.
1.Web Sites and Branded Web Communities. For most companies, the first
step in conducting online marketing is to create a Web site. Some websites
are designed to engage customers and move them closer to a direct
purchase or other marketing outcome, while others’ primary purpose is to
present brand content that engages consumers and creates customer-brand
community.
2.Online Advertising. Online advertising has become a major promotional
medium. The main forms of online advertising are display ads and searchrelated ads. Together, they account for the largest portion of firms' digital
marketing budgets.
3.E-Mail Marketing. E-mail can be the ultimate direct marketing medium.
Marketers can send highly targeted, tightly personalized, relationshipbuilding messages. Many companies also use configurable e-mail systems
that let customers choose what they want to get to steer clear of frustration
from spam emails.
4.Online Videos. Online videos engage consumers and are a form of
inexpensive marketing. Videos can go viral and harbor a vast amount of
attention.
5.Blogs and Other Online Forums. Blogs (or Web logs) are online journals
where people and companies post their thoughts and other content, usually
related to narrowly defined topics. They usually appeal to specific specialinterest groups.
G. Social Media Marketing. [Slide 16-5] For travel products, it can be argued that
social media entails a change from one-to-one recommendations from individuals
to many-to-many conversations. In the past, these personal sources often came
from talking with a friend, relative, or local res-ident. Social media has now
expanded the conversation, in terms of both breadth and depth.
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1.Using Social Media. Marketers can engage in social media in two ways:
They can use existing social media or they can set up their own. Using
existing social media seems the easiest. Thus, most brands, large and
small, have set up shop on a host of social media sites.
2.Social Media Marketing Advantages and Challenges. Social media are
targeted and personal-they allow marketers to create and share tailored
brand content with individual consumers and customer communities.
Social media are interactive, making them ideal for starting and
participating in customer conversations and listening to customer
feedback. Social media are also immediate and timely. Social media can
be very cost effective. Social media can be very cost effective. Social
media marketing also presents challenges. First, many companies are still
experimenting with how to use them effectively, and results are hard to
measure. Second, such social networks are largely user controlled.
3.Managing User Generated Social Media Content. User generated content
is valuable, whether it is positive or negative. The positive comments
create community and encourage others to use the product. The negative
comments provide feedback on what customers do not like and how we
did not meet their expectations. These comments help us improve the
service delivery system.
4.Listening to Customers on Social Media. One of the goals of a company’s
social media plan should be to engage its customers and create a
conversation.
5.International Social Media. Social media managers working
internationally will need to find out which sites are most effective as they
move around the world.
6.Integrated Social Media Marketing. Companies that use social media
successfully are integrating a broad range of diverse media to create
brand-related social sharing, engagement, and customer community.
H. Mobile Marketing. Mobile marketing features marketing messages, promotions,
and other marketing con- tent delivered to on-the-go consumers through their
mobile devices. Marketers use mobile marketing to engage customers anywhere,
anytime during the buying and relationship building processes.
IV.
Customer Databases and Traditional Direct Marketing. [Slide 16-6] Effective direct
marketing begins with a good customer database. A customer database is an organized
collection of comprehensive data about individual customers or prospects, including
geographic, demographic, psychographic, and behavioral data. A good customer database
can be a potent relationship-building tool.
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A. Database Uses. Companies use databases to locate good potential customers and
to generate sales leads. They can mine their databases to learn about customers in
detail and then fi-ne-tune their market offerings and communications to the
special preferences and behaviors of target segments or individuals. In all, a
company’s database can be an important tool for building stronger long-term
customer relationships.
V.
Relationship Marketing and Loyalty Programs. [Slide 16-7] Direct marketing allows
companies to develop a strong relationship with their customers, which helps prevent
them from switching to competitors. Relationship Marketing Has A Long-Term
Orientation. The goal is to deliver long-term value to customers, and the measure of
success is long-term customer satisfaction. Relationship marketing requires that all the
company’s departments work together with marketing as a team to serve the customer. It
involves building relationships at many levels: economic, social, technical, and legal,
resulting in high customer loyalty.
A. Benefits of Customer-Relationship Management. The benefits of customerrelationship management comes from building continued patronage of loyal
customers, reduced marketing costs, decreased price sensitivity of loyal
customers, and partnership activities of loyal customers.
B. Loyalty Programs. Loyalty programs were developed as way to attract and
maintain a company’s best customers. The biggest change for North American
hotel loyalty programs is the shift in the importance of generational trends, with
Millennials trending and Baby Boomers fading.
VI.
Traditional Forms of Direct Marketing. [Slide 16-8] The traditional forms of direct
marketing used in the hospitality industry are direct-mail marketing, telephone marketing,
kiosk marketing and interactive TV.
A. Direct-Mail Marketing. Involves sending an offer, announcement, reminder, or
other item to a person at a particular address. Using highly selective mailing lists,
direct marketers send out millions of mail pieces each year: letters, catalogs, ads,
brochures, samples, DVDs, and other “salespeople with wings.” Direct mail is by
far the largest direct-marketing medium.
B. Telephone Marketing. Involves using the telephone to sell directly to consumers
and business customers. Telephone marketing now accounts for 22 percent of all
direct marketing–driven sales.
C. Kiosk Marketing. As consumers become more and more comfortable with
computer and digital technologies, many companies are placing information and
ordering machines called kiosks (in contrast to vending machines, which dispense
actual products) in stores, airports, and other locations.
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D. Interactive TV. (iTV) lets viewers interact with television programming and
advertising using their remote controls.
VII.
Online Privacy and Security. Marketers have a responsibility to protect the privacy of
customer information and make sure personal information such as credit card numbers is
secure.
Answers to Discussion Questions
1. Discuss the benefits of direct marketing to both buyers and sellers.
For buyers, direct marketing is convenient, easy, private, and frequently something that
they can do from the comfort of their home or office. They can directly learn about new
products and services most suited to their needs without wasting resources on research or
middlemen. For sellers, it establishes a trustworthy channel directly to the most suitable
customer base who are likely to use their products and services. It also gives them an
opportunity to build a larger loyal customer base by offering customizations according to
customers needs.
2. Find an example of a video for a hospitality or travel company on YouTube. Why
do you feel it was effective?
This is a great assignment for your students and can lead to an interesting class
discussion.
3. Define data warehouse and explain why it is a popular data management tool.
Data warehouses store the information a company receives about its customers in a
central repository. Once the data is stored in such a system, companies can then use
relational database management systems to extract useful information on customer
preferences, micro and macro demand patterns, etc. These are popular because they also
help managers predict and manage periods of low and high demands with appropriate
strategies and tactics.
4. Discuss ways an Internet site can collect and use information from its visitors. For
reference purposes you may frame the question so you are referring to the site of a
hotel, restaurant, club, or a destination marketing organization.
This could be an interesting research topic for your students. For example, a hotel site can
use cookies on a user’s computer to track the usage patterns of the potential customer.
Taken as an aggregate, this information can provide geographical interest and demand
patterns. These demand pattern datasets can also be used to dig deeper and identify subpatterns based on day of the week, number of rooms, number of people staying, length of
stay, etc.
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5. Find an example of a hospitality of travel company effectively using social media.
Again, this is a great assignment for your students, as well as a good topic for class
discussion. Ask your students to also evaluate why the company’s methods are so
effective. You might also have them compare and contrast the effectiveness of the
different social media outlets used by the same company.
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Chapter 17: Destination Marketing
Chapter Objectives
1. Discuss destination marketing system.
2. Identify the components of tourism destination competitiveness.
3. Explain tourism development strategies and different options for creating and investing in
tourism attractions.
4. Understand how to segment and identify visitor segments.
5. Discuss the importance of destination image and branding and creating visitor
experiences.
6. Explain how central tourist agencies are organized.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Discuss destination marketing system.
Review Figure 17-1 in the text. This figure fully details the entire destination marketing
system.
Destination marketing is more challenging than marketing other products because a
destination is a bundle of highly diverse products, including geographic size, attractions,
accommodation, food and beverage, and entertainment. The complexity is augmented by
limited control by destination marketing organizations (DMOs) and the number of public
and private stakeholders involved in delivering a unified brand and destination
experience. This figure shows vital linkages between supply and demand in tourism to
understand the role of marketing. Destination marketing is systematically linking supply
(destination features and benefits) with demand (needs and wants of travelers) and
enhancing competitiveness of a destination in a sustainable manner.
2. Identify the components of tourism destination competitiveness.
Review Figure 17-2 in the text, which illustrates the Travel and Tourism Competitiveness
Index (TTCI).
Destinations have varying but similar resources and attractions. Destination
competitiveness requires an understanding of two important concepts: comparative and
competitive advantages. Comparative advantage is possession of resources, natural
and/or man-made, critical to tourism development. Competitive advantage is to make use
of these resources efficiently and effectively to enhance competitiveness of destination.
The TTCI “aims to measure the factors and policies that make it attractive to develop the
T&T sector in different countries.”
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3. Explain tourism development strategies and different options for creating and
investing in tourism attractions.
Have your students explore the strategies for different tourist hotspots throughout the
world. Compare and contrast these strategies in a class discussion or through class
presentations.
Attractions may be natural such as Niagara Falls or The Scottish Highlands or
manufactured such as The Shopping Areas of Buckingham Palace, Hong Kong, or the
Vatican. Throughout much of the world, cities and towns have finally realized the
tremendous value of their river, lake, and ocean waterfronts, as evidenced by waterfront
attractions. Casinos have also become attractions. From a tourism perspective, gaming
works best when it is part of several tourism attractions for the area, not the only tourism
attraction for the area. Finally, many visitor destinations are in fact only stopover
destinations for travelers on their way elsewhere.
4. Understand how to segment and identify visitor segments.
This can be tied into #3 above. Have your student research the visitor segments for
different tourist destinations (this can often be found on CVB or Tourism Board
websites).
There are three main steps in understanding how to segment and identify visitor
segments. First, collect information about current visitors: Where do they originate from?
What is their purpose while visiting? What are their demographic characteristics? How
many are repeat visitors? How much do they spend? Next, audit the destination’s
attractions and select segments that might logically have an interest in them. Tourist
segments are attracted by different features. Finally, conduct research to determine where
these tourists are found.
5. Discuss the importance of destination image and branding and creating visitor
experiences.
Destination images are heavily influenced by pictorial creations used in movies or
television, by music, and, in some cases, by popular entertainers and celebrities.
Tourist destinations increasingly embrace branding techniques to develop unique
positions, images, and personalities in a highly competitive environment. Destination
branding is creating a differentiated destination image that influences traveler’s decision
to visit a destination and conveys the promise of a memorable experience that is uniquely
associated with the destination.
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Attractions alone do not attract visitors. Most places seek to deepen the travel experience
by providing greater value and making the experience more significant and rewarding. A
destination is an amalgam of diverse products and environments generating a total
destination experience.
6. Explain how central tourist agencies are organized.
Making a destination tourist friendly is the task of a central tourist agency, which may be
public, quasi-public, nonprofit, or private. These agencies are referred to as national
tourist organizations (NTOs). Outside the United States, these agencies are often run by
the central government, state or province, together with local government officials.
Chapter Outline
I.
Globalization of the Tourist Industry. [Slide 17-3] The world has become a global
community. Regions such as Eastern Europe and countries such as China and India are
rapidly developing. They are now generators of tourists as well as destinations for
tourists.
II.
Marketing Tourism Destinations
A. Tourism destination
1.Destinations are places with some form of actual or perceived boundary.
2.Macrodestinations such as the United States contain thousands of
microdestinations, including regions, states, cities, towns, and visitor
destinations within a town.
B. Destination marketing system. [Slide 17-4] Destination marketing is
systematically linking supply (destination features and benefits) with demand
(needs and wants of travelers) and enhancing competitiveness of a destination in a
sustainable manner.
C. Destination Competitiveness [Slide 17-5]
1.Travel and Tourism Competitiveness Index (TTCI). It aims to measure the
factors and policies that make it attractive to develop the T&T sector in
different countries. Each country or economy is ranked on a set of
indexes.
2.Price competitiveness. Price competitiveness has a particular importance
for tourist destinations because lower costs increase the attractiveness of
some countries for many travelers.
D. Sustainable tourism. [Slide 17-6] It refers to tourism that minimizes the
environmental impacts and sociocultural changes, and sustains the longevity of a
destination, and creates economic opportunity for local communities.
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1.Economic effects of tourism. [Slide 17-7] They are direct employment in
hospitality and tourism industries, support for other industries, multiplier
effect, tax revenue, and exports of locally made products.
2.Social/cultural effects of tourism. Tourism growth affects the
social/cultural basis of destinations in both positive and negative ways.
3.Environmental effects of tourism. [Slide 17-8] Too often, tourism planners
focus mostly on tourism development without paying attention to retaining
and preserving the destination attributes.
III.
Tourism Development and Investments
A. Tourism events and attractions [Slide 17-9]
1.Events that attract a desired market and harmoniously fit with a
community’s culture can provide beneficial results, particularly if the
event regularly reoccurs over a period of years.
2.Attractions may be natural, such as Niagara Falls or the Scottish
Highlands or a beach. They can also be manufactured, such as the
shopping areas of Buckingham Palace, Hong Kong, the Vatican, or a
casino resort.
B. Attractions
1.UNESCO World Heritage Sites
2.Waterfront attractions
3.Casinos as attractions
4.Indian gaming
5.Stopover tourism. Many visitor destinations are in fact only stopover
destinations for travelers on their way elsewhere.
C. Destination life cycle. [Slide 17-10] Rejuvenating a destination Destinations will
experience a life cycle similar to the product life cycle and eventually go into
decline, or the destruction stage.
IV.
Segmenting and Monitoring the Tourist Market. [Slide 17-11] Tourism planners must
consider how many tourists are desired and which segments to attract. Travel
motivations, nationality, generational markets such as Millennials, and lifestyles are
effective segmentation base used by destinations.
A. Agritourism. Agriculture-based tourism that includes farms, ranches, and
wineries. It provides rural areas with a means to attract tourists.
B. Space tourism. As private companies provide vehicles to send tourists into space,
this form of tourism will develop. In the near term, it will just be for the very rich.
C. Multiday hiking and religious pilgrimages
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D. Medical tourism is one of the fastest-growing and most lucrative tourism markets.
Tourists spend a large amount on medical treatment, stay in top hotels, and often
travel around the country after their surgery. The aging baby boomers and the
growing cost of health care will ensure the growth of medical tourism in the
future.
E. Genealogical tourism.
F. Identifying target markets
1.Collect information about its current visitors.
2.Audit the destination’s attractions and select segments that might logically
have an interest in them
G. Classification of visitor segments [Slide 17-12]
1.Group-inclusive tour (GIT)
2.Independent traveler (IT; formerly FIT)
H. Monitoring the tourist markets. Tourist markets are dynamic and a marketing
information system is part of any well-run tourist organization.
V.
Communicating with the Tourist Market [Slide 17-13]
A. Competition for visitors requires image making. Tourist destinations largely
compete on images held by current and potential travelers.
B. Branding destinations Branding opportunities for destinations exist at
geographical levels such as country, city, and town (umbrella and sub-brands),
specific attractions such as museums and theme parks, events such as megaevents and festivals, and lifestyle travel packages.
C. Destination tourism slogans. Slogans are considered an essential element to build
brand awareness and image at country, state, and city levels.
D. Effectiveness of advertising/promotion In today’s digital age, savvy DMOs are
tapping social and mobile networks, smart phones and tablets, GPS apps,
ecommerce, and booking engines to economically reach consumers 24/7, and
globally. Their websites can now interactively deploy video, text, audio, booking
systems, photos and real time comments from customers
E. Developing packages of attractions and amenities. An effective way of
communicating with potential travelers is by offering packages. Tourist
organizations must develop a package of attractions and amenities.
F. Creating and managing visitor experiences Attractions alone do not attract
visitors. Most places seek to deepen the travel experience by providing greater
value and making the experience more significant and rewarding.
1.Co-Creation of Destination Experience and Social Media
2.Live-Like-A-Local Experience
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VI.
Organizing and Managing Tourism Marketing. [Slide 17-14] Making a destination tourist
friendly is the task of a central tourist agency, which may be public, quasi-public,
nonprofit, or private. These agencies are referred to as national tourist organizations
(NTOs), state tourist organizations (STOs), convention and visitors’ bureaus (CVBs), or
destination management organizations.
Answers to Discussion Questions
1. How does a tourism destination determine what to promote and to whom it should
be promoted?
A tourism destination needs to promote whatever is the unique selling proposition for the
destination. Determination criteria would include attributes such as special events,
attractions, festivals unique to the region, agricultural or floral seasons, nature hikes,
climatic seasons, etc. The promotion should be made to those target markets and
geographical regions from where desired visitor segments are most likely to come from.
This can be determined in terms of whether the target population has access to such
events, attractions, etc. closer to home and whether there is adequate travel infrastructure
in place.
2. What benefits and costs does tourism bring to your area?
This is an excellent topic for class discussion. Tourism brings direct employment in
hotels, restaurants, retail establishments and transportation. It supports ancillary
industries and professions. The economic impact of tourism extends further as the money
spent is recycled within the economy of the destination. The taxes levied on tourists using
various facilities shift the taxation burden away from the locals. And finally, tourism also
promotes any local production specialities and encourages exports.
3. Choose one of the psychological determinants of demand listed in Table 17–2 and
describe a tourism product that is based on the determinant you have chosen.
Break your students into groups and assign each group one of the psychological
determinants of demand from Table 17-2. Have each group describe a tourism product
that is based on their assigned determinant.
For example, in case of the “escape” as the determinant, tourists are looking for a way to
get away from their day-to-day routine by doing something different and perhaps more
peaceful. Resort destinations are ideally suited to appeal to travelers with such a
determinant. Busy individuals with a hectic routine-based daily life can then be the
optimal target customer.
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4. Choose what you believe to be a good tourism promotion for a city, region, state, or
country and explain why you think it is a good promotion. In your critique, discuss
the media used, target audience, and benefits the destination offers.
This is an excellent class assignment or project.
5. Choose a vistor experience in a destination. Discuss how you can make it a
memorable experience for visitors.
Again, this is an excellent class assignment or project and can be a good class activity.
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Chapter 18: Next Year’s Marketing Plan
Chapter Objectives
1. Understand why it is important to have a marketing plan and be able to explain the
purpose of a marketing plan.
2. Prepare a marketing plan following the process described in this chapter.
Teaching Suggestions
The following explanations and suggestions are outlined based on the Chapter Objectives.
1. Understand why it is important to have a marketing plan and be able to explain the
purpose of a marketing plan.
The marketing department should operate with direction and be proactive; therefore,
marketing plan must be written each year.
A marketing plan serves several purposes within any hospitality company:
 Provides a road map for all marketing activities of the firm for the next year
 Ensures that marketing activities are in agreement with the corporate strategic
plan
 Forces marketing managers to review and think through objectively all steps in
the marketing process
 Assists in the budgeting process to match resources with marketing objectives
 Creates a process to monitor actual against expected results
2. Prepare a marketing plan following the process described in this chapter.
This is an excellent final project for the course. Have students come up with a hospitality
operation concept and prepare a marketing plan according to the guidelines presented in
this chapter.
Chapter Outline
I.
Purpose of a Marketing Plan [Slide 18-3]
A. Serves as a road map for all marketing activities of the firm for the next year.
B. Ensures that marketing activities are in agreement with the corporate strategic
plan.
C. Forces marketing managers to review and think objectively through all steps in
the marketing process.
D. Assists in the budgeting process to match resources with marketing objectives.
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II.
Tips for Writing the Executive Summary [Slide 18-5]
A. Write it for top executives.
B. Limit the number of pages to between two and four.
C. Use short sentences and short paragraphs.
D. Organize the summary as follows: Describe next year’s objectives in quantitative
terms; briefly describe marketing strategies to meet goals and objectives; identify
the dollar costs necessary as well as key resources needed.
E. Read and reread before final submit.
III.
Corporate Connection [Slide 18-6]
A. Relationships to other plans
1.Corporate goals: profit, growth, and others
2.Desired market share
3.Positioning of the enterprise or of product lines
4.Vertical or horizontal integration
5.Strategic alliances
6.Product-line breadth and depth
B. Marketing-related plans also include the following:
1.Sales
2.Advertising and promotion
3.Marketing research
4.Pricing
5.Customer services
C. Corporate direction
1.Mission statement
2.Corporate philosophy
3.Corporate goals
IV.
Environmental Analysis and Forecasting [Slide 18-7]
A. Positioning statement (although it should be its own Roman numeral)
B. Analysis of major environmental factors [Slide 18-8]
1.Social
2.Political
3.Economic
C. Economic drivers of growth
1.The aerotropolis
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D. Competitive analysis
1.List the major existing competitors confronting your firm next year.
2.List new competitors.
3.Describe the major competitive strengths and weaknesses of each
competitor.
E. Marketing trends: Monitor visitor trends, competitive trends, related industry
trends. [Slide 18-9]
F. Market potential
1.Market potential should be viewed as the total available demand for a
firm’s product within a particular geographic market at a given price. It is
important not to mix different products into an estimate of market
potential.
2.Provide an estimate or guesstimate of market potential for each major
product line in monetary terms such as dollars and in units such as room
nights or passengers.
G. Marketing research
1.Macromarket information: Industry trends, socioeconomic and political
trends, competitive information, industry-wide customer data.
2.Micromarket information: Guest information, product/service information,
new-product analysis and testing, intermediary buyer data, pricing studies,
key account in-formation, and advertising/promotion effectiveness.
V.
VI.
Segmentation and Targeting. The selection of segments is the result of the following:
[Slide 18-10]
A. Understanding who the company is and what it wishes to be.
B. Studying available segments and determining if they fit the capabilities and
desires of the company to obtain and secure them.
Next Year’s Objectives and Quotas [Slides 18-11 to 18-12]
A. Objectives [Slide 18-11]
1.Quantitative objectives: Expressed in monetary terms, expressed in unit
measurements, time specific and profit/margin specific.
2.Other objectives: Corporate goals, corporate resources, environmental
factors, competitions, market trends, market potential, and available
market segments, and possible target markets.
3.Actions
a. List primary marketing/sales objectives for next year.
b. List sub-objectives for next year.
c. Break down objective by quarter, month, and week.
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B.
C.
D.
E.
F.
G.
H.
I.
J.
VII.
d. List other specific sub-objectives by marketing support area, such
as advertising/promotion objectives.
Rating system objectives
Quotas [Slide 18-12]
1.Based on next year’s objectives
2.Individualized
3.Realistic and obtainable
4.Broken down to small units, such as each salesperson’s quota per week
5.Understandable/measurable
Communicating the plan [Slide 18-13]
Top management
Board of directors or group of investors
Subordinates
Vendors
Other
Action quotas. Break down and list quotas for sales departments, sales territories,
all sales intermediaries, each sales intermediary, and each salesperson.
Action Plans: Strategies and Tactics [Slide 18-14]
A. Cluster marketing
B. Sales strategies
1.Prevent erosion of key accounts
2.Grow key accounts
3.Grow selected marginal accounts
4.Eliminate selected marginal accounts
5.Retain selected marginal accounts but provide lower-cost sales support
6.Obtain new business from selected prospects
7.Distribution strategies
C. Advertising/promotion strategies
1.Select a blend or mix or media.
2.Select or approve the message.
3.Design a media schedule showing when each medium, including
noncommissionable media, will be used.
4.Design a schedule of events.
5.Carefully transmit this information to management.
6.Supervise the development and implementation of advertising/promotion
programs, with particular care given to timetables and budget constraints.
7.Ensure responsibility for the outcome.
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D. Pricing strategy
1.Carefully review pricing objective with departments responsible for
pricing, planning, and implementation.
2.Refine pricing objectives to reflect sales and revenue forecasts.
3.Describe pricing strategies to be used throughout the year.
4.Make certain that price, sales, and promotion/advertising objectives are
synchronized and working in support of corporate objectives.
E. Product strategies
1.Describe the involvement of the marketing department in major strategic
product development.
2.Describe the role of marketing in new-product acquisition or product
development.
3.Describe ongoing or planned product development programs for which
marketing has responsibility.
VIII.
IX.
Resources Needed to Support Strategies and Meet Objectives [Slide 18-15]
A. Study and then list the need for new marketing/sales personnel, including
temporary help during the next year.
B. Study and list the type and amount of equipment and space that will be needed to
sup-port marketing/sales.
C. Study and list the amount of monetary support needed next year.
D. Study and list the amount and type of other costs necessary next year.
E. Study and list the amount of outside research, consulting, and training assistance
needed.
F. Prepare a marketing budget for approval by top management.
Marketing Control [Slide 18-16]
A. Sales force members often wish to protect themselves and give lower sales
estimates than are actually possible.
B. The company has certain sales objectives it expects based on the needs of the
company.
C. Management may have access to marketing research information not viewed by
the sales force.
D. Management may have a history of dealing with the sales force and realizes that
forecasts are generally too high or too low by x percent.
E. Management may be willing to provide the marketing/sales department with
additional resources.
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X.
XI.
Presenting and Selling the Plan [Slide 18-17]
A. Members of marketing/sales departments
B. Vendor/ad agencies and others
C. Top management
Preparing for the Future [Slide 18-18]
A. The participatory planning process allows people to understand the management
process.
B. People learn to become team players during the process.
C. People learn to establish objectives and set timetables to ensure they are met.
D. People learn the process of establishing realistic strategies and tactics to meet
objectives.
E. People who approach the planning process with a receptive mind and employ the
market-ing plan will usually find it enhances their professional career.
Answers to Discussion Questions
1. What is the purpose of a marketing plan?
This is a good topic for class discussion. For example, a marketing plan provides the road
map for all marketing activities of the firm. It is typically formulated on an annual basis.
It aligns all activities with the company’s overall strategic plan and assists in the
budgeting process to ensure adequate resource allocation toward planned activities as
well as limiting an activity from ranging too far out of the budget. A marketing plan also
serves as a process to monitor the actual results against planned or expected results.
2. What is the relevancy of environmental factors to an annual marketing plan?
Break students into groups and assign each group a hospitality operation. Ask them to
identify environmental factors that the company should consider when developing their
annual marketing plan.
Environmental factors become a crucial variable in the determinant of the overall success
of a marketing plan. Ignoring environmental factors could yield a disastrous outcome for
all concerned parties. While environmental factors cannot be physically controlled,
staying aware of these factors allows marketing managers to prepare the necessary
tactical response.
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3. Why is the determination of market potential so important?
This is another good topic for class discussion. For example, while the measure of true
market potential is impossible, the efforts to determine the market potential helps
hospitality professionals avoid mistakes such as overbuilding, unnecessary price cutting,
etc. By engaging in the process of trying to estimate market potential, marketers become
aware of important market conditions and can then adjust marketing strategies where
appropriate.
4. How should market segments and targets be described in a marketing plan?
This is a good section to include in your student’s marketing plan project, should you
desire to assign one. Market segments and targets should fit the capabilities of a business.
They should describe who is currently using the facilities as well as where the marketing
team can look for new customers.
5. Should marketing objectives be described in quantitative terms? Why or why not?
This is a good topic for class discussion and an opportunity to stress the importance of
quantifying marketing objectives. Quantifying marketing objectives provides marketing
managers with a tool to measure the performance of specific objectives. It also helps
managers create a marketing activity table whereby they can ensure that tasks are
completed on time, or if not, that adequate action is being taken to recognize and act upon
expected and unexpected delays.
6. What is the relationship, if any, between marketing strategies and marketing
objectives?
Marketing objectives provide direction for the rest of the marketing plan whereas the
purpose of marketing strategies and tactics is to support these objectives.
7. Is marketing control really necessary in a marketing plan or is it an optional
managerial exercise?
Marketing control is very much a part of marketing plans, at least for companies wishing
to be successful. Without a control mechanism, there is no real purpose to a marketing
plan because there will be no way to measure whether the plan has been successful.
Marketing controls also allow for reasonable forecasting mechanisms to be in place for
future marketing plans.
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