Vacation Planning Tourism and Hospitality Marketing I Marketing

“Vacation Planning” Tourism and Hospitality Marketing I Marketing Terminology Review ‘ Fall

Marketing Terminology Review

What is Marketing?

Marketing definition Process by which companies create, communicate, and deliver value for customers and society, resulting in strong customer relationships that capture value from the customers in return A social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others Deliver customer satisfaction at a profit

Customer Orientation – a Long Term Strategy 1. Customer 2. Profits

Cost of attracting a new customer versus retaining a loyal customer 5 x 5% increase in repeat customers leads to at least 25% profit gain 5% 25 -125%

Basic Marketing Process Understand marketplace and customer needs and wants Feedback Design a Customerdriven marketing strategy Construct an integrated marketing program that delivers superior value Capture value from customers to create profits and customer equity Build profitable relationships and create customer delight

Understand marketplace and customer needs and wants Markets Market: a set of actual and potential buyers of a product They share a particular need or want that can be satisfied through exchange relationships

1, 25 Billion 1, 250, 000 International Tourist arrivals 2016

$1. 33 trillion $1, 330, 000, 000 World Tourism Receipts in Dollars

Understand marketplace and customer needs and wants Human Need: a felt state of deprivation Maslow’s Hierarchy Self Actualization Esteem Social Safety / Security Physiological • Realization of potential, creativity, spontaneity, problem-solving • Respect, autonomy, recognition, status • Acceptance, affection, belonging, friendship • Protection from physical / emotional harm • Food, water,

Understand marketplace and customer needs and wants Human Want: articulation of a need A person may NEED food, but they WANT a hamburger, French fries, and a Coke Objectives that will satisfy needs An ever-evolving society means everexpanding wants Food, want restaurant to prepare it, want to eat there or want to pick it up or want to have delivery

Understand marketplace and customer needs and wants Demand: a want that is backed by buying power People have almost unlimited wants, but limited resources Consumers look for products that will bring the highest satisfaction for their money “Bang for the buck”

Understand marketplace and customer needs and wants Market Myopia Too much focus on the existing wants, and lose sight of actual customer needs What business are we really in? Kodak and film Railroads Publishers

Understand marketplace and customer needs and wants Market Offerings Consumer needs and wants are fulfilled by Market Offerings: product that is some combination of tangible, service, informational, or experiential components

Understand marketplace and customer needs and wants Customer Value The difference between the benefits that the customer gains from owning/using a product and the costs of obtaining the product Benefits > Costs Monetary or nonmonetary (time) Marriott provides a breakfast buffet Restaurants offer home delivery In order to add value must understand target audience and customers needs/wants/demands

Understand marketplace and customer needs and wants Customer expectations Based on past buying experiences, opinions of friends, market information Marketers must not set the level too high, or too low Easy to set high expectations in hospitality New restaurant is not going to advertise mediocrity…

Understand marketplace and customer needs and wants Beyond a transaction Creating an Exchange: obtaining something you desire from someone by offering something in return Creating Exchange relationships with lifelong customers Company Target Markets

Basic Marketing Process Understand marketplace and customer needs and wants Feedback Design a Customerdriven marketing strategy

Design a Customer-driven marketing strategy Marketers goal is to find, attract, keep, and grow target customers by creating, delivering, and communicating superior customer value 2 Key Questions Which customers to serve? How best to serve them?

Design a Customer-driven marketing strategy Which customers to serve? Cannot serve all customers in every way Use Market Segmentation to choose customers you can serve well, and profitably Choose a Value Proposition Set of benefits you promise to deliver to consumers to satisfy their needs Helps to differentiate and position company in marketplace Carnival: bang for your buck, value for your money. A unique combination of food, entertainment, travel, and accommodation all in one place for a low price

Design a Customer-driven marketing strategy How best to serve them? Choose 5 a Marketing Management Orientation of them Production Product Selling concept Marketing 3. 0

Design a Customer-driven marketing strategy Production Concept Consumers favor products that are available and highly affordable Management focus on production and distribution efficiency Goods-oriented, volume, economy of scale Not ideal for T/H Closing off sections of a restaurant when it is not busy

Design a Customer-driven marketing strategy Product Concept Consumers will favor existing products that offer most quality, performance, and innovative features Management focus on continuous product improvements Goods-oriented Important to improve products, but beware of Marketing Myopia Incomplete

Design a Customer-driven marketing strategy Selling Concept Consumers will not buy enough of company’s product unless they undertake large selling and promotional effort Management focus is on making every possible sale Customer satisfaction afterwards is less important Long-term relationships are never established “churn and burn” Try to get rid of inventory, not adapt to customer wants Overcapacity in hospitality Cruise ship or hotel has extra rooms sell, sell

Design a Customer-driven marketing strategy Marketing Concept Identifies the needs and wants of well-defined target markets and delivers the desired satisfactions more effectively and efficiently than competitors Management focus is to coordinate all activities that will affect customer satisfaction $$ made by maintaining customer

Design a Customer-driven marketing strategy Selling vs Marketing concepts Starting Point Selling Concept Marketing Concept Factory Market Focus Existing Products Customer Needs Means End Selling and Promoting Profits through Sales Volume Integrated Marketing Profits through customer satisfaction

The aim of marketing is to make selling superfluous. The aim is to know and understand customers so well that the product or service fits them and sells itself. - Peter Drucker

Design a Customer-driven marketing strategy Marketing 3. 0 / Societal Marketing Philip Kotler, Hermawan Kartajaya, and Iwan Satiawan Treat people as more than consumers; treat them as whole human beings with minds, hearts, and spirits Concerned with making world a better place, sustainability, doing the right thing, and being vocal about it Why? Participation and collaboration: social media and direct company communication Jet. Blue 10 th anniversary success Globalization: cost to travel lower, easier to experience other cultures Creative society: new ways to lower emissions, environmental dangers

Design a Customer-driven marketing strategy Marketing 3. 0 / Societal Marketing Sustainability study Reduction of food waste 34% never thought of taking food home 25% felt embarrassed to ask 24% thought it was not allowed Only 18% would not eat it at home or thought it was not hygenic Too Good to Waste: http: //www. toogood-towaste. co. uk/thecampaign/overview/

Basic Marketing Process Understand marketplace and customer needs and wants Feedback Design a Customerdriven marketing strategy Construct an integrated marketing program that delivers superior value

Construct an integrated marketing program that delivers superior value Transforming strategy and marketing orientation into action Marketing Product Price Place Promotion Mix: 4 P’s

4 P’s Product: create a need-satisfying market offering Price: decide how much to charge for the offering Place: how to make it available to customers Promotion: communicate offer and persuade customers of its merits

Basic Marketing Process Understand marketplace and customer needs and wants Feedback Design a Customerdriven marketing strategy Construct an integrated marketing program that delivers superior value Build profitable relationships and create customer delight

Build profitable relationships and create customer delight 3 main tools available to strengthen relationships: Add financial benefits Then add social benefits Then add structural ties Confidence benefits: uncertainty

Build profitable relationships and create customer delight Financial benefits Frequent Loyalty Earn flyer programs certain number of points to receive discounts High switching costs for long-time customers, but easily imitated by competitors Royal Caribbean Diamond guest

Build profitable relationships and create customer delight Financial + Social benefits Turn “customers” into “clients” Not just another number, feel special Customers: assisted by anyone available Clients: assisted by their assigned professional Servers, bartenders, front desk workers, salespeople all remember the names of their best guests

Build profitable relationships and create customer delight Financial + Social + Structural benefits First class lounges in airports Priority boarding lines and security check-in Special seating on planes Cruise lines do it well

Build profitable relationships and create customer delight CRM Customer Relationship Management Technology used to manage individualized customer data and “touch points” to maximize loyalty Touch point: any occasion in which customer encounters brand or product Check-in, check-out, reservation phone call, website, bar, gym From pre-purchase sales tracking, to instant analysis during consumption: Casino spend, restaurant spend, photos, frequency of purchases, who they travelled with, when the last time was, from where, and so on…

Build profitable relationships and create customer delight Changing Nature of Customer Relationships Death of Mass Marketing Don’t want a relationship with every customer Target One the profitable ones and pamper them method to separate the losing customers Bar, club, comedy club requiring a 2 drink minimum

Build profitable relationships and create customer delight Changing Nature of Customer Relationships Relating more deeply 2 -way, personalized communication Facilitated by technology Emails, websites, blogs, phone calls, texts, social network presence Marketing by attraction, no longer by intrusion Carnival Funville and Facebook and John Heald blog

Build profitable relationships and create customer delight Changing Nature of Customer Relationships Consumer-Generated Marketing New product suggestions or designs Advertising contests

Basic Marketing Process Understand marketplace and customer needs and wants Feedback Design a Customerdriven marketing strategy Construct an integrated marketing program that delivers superior value Capture value from customers to create profits and customer equity Build profitable relationships and create customer delight

Capture value from customers to create profits and customer equity Customer Loyalty and Retention Highly satisfied customers stay loyal, buy more, and tell their friends Lifetime Value (LTV) Supermarket Customer spends $100 week on groceries Shops 50 weeks of the year Usually lives in the area for about 10 years LTV= $50, 000 Dissatisfied guest is a loss of their LTV plus those they share the experience with Ritz-Carlton LTV = $120, 000, Dominos: $10, 000

Capture value from customers to create profits and customer equity Growing Share of Customer The share of a customer’s purchasing within a product category Limited amount available to spend on product type Restaurant’s want “share of stomach” Coffee Airlines Grow shop expand selection to pastries to sandwiches want “share of travel” from domestic to international routes Cruiselines offering shore excursions

Capture value from customers to create profits and customer equity Customer Equity Ultimate aim of CRM Combined LTV of current AND potential customers Measure of the Future Value of a company’s customer base But not all customers are profitable

Capture value from customers to create profits and customer equity Profitability Classification Strangers: little fit between company’s offering and their need Butterflies: potentially profitable but not loyal, offering fits need, but hunt around for best deals True Friends: profitable and loyal. Strong fit between offering and need. Invest heavily in delighting these customers Barnacles: loyal, but not profitable. Limited fit between offering and need. Create drag on the company. Take away: build right relationship with right customers Reinartz & Kumar 2009