“Marketing” Creating Customer Value and Satisfaction Objective: Defining what marketing is and introducing its basic concepts.

““Marketing”Marketing”Creating Customer Creating Customer

Value and Value and SatisfactionSatisfaction

ObjectiveObjective: Defining what marketing is and : Defining what marketing is and introducing its basic concepts.introducing its basic concepts.

What is Marketing?What is Marketing?

Marketing is not selling or advertising. Marketing is not selling or advertising. Marketing is the management of Marketing is the management of

creating and exchanging products and creating and exchanging products and value in order to satisfy the needs and value in order to satisfy the needs and wants of the customers.wants of the customers.

Marketing involves building profitable, Marketing involves building profitable, long-term relationships with customers. long-term relationships with customers.

The goal of marketing is to satisfy The goal of marketing is to satisfy customers at a profit.customers at a profit.

If the marketer does a good job of If the marketer does a good job of understanding consumer needs, develops understanding consumer needs, develops products that provide superior value, and products that provide superior value, and prices, distributes, and promotes them prices, distributes, and promotes them effectively, these products will sell easily.effectively, these products will sell easily.

Thus, selling and advertising are only Thus, selling and advertising are only part of a larger `marketing mix` - a set of part of a larger `marketing mix` - a set of marketing tools that work together to marketing tools that work together to affect the marketplace.affect the marketplace.

Marketing, more than any other business Marketing, more than any other business function, deals with customers. function, deals with customers. Creating Creating customer value and satisfaction are at the customer value and satisfaction are at the heart of hospitality and travel industry heart of hospitality and travel industry marketingmarketing. .

The Marketing ProcessThe Marketing Process

Managers must realize that they cannot Managers must realize that they cannot satisfy all customers; they have to satisfy all customers; they have to choosechoose their customers carefully. their customers carefully.

Companies work to (1) understand Companies work to (1) understand consumers, (2) construct marketing consumers, (2) construct marketing programs to create superior value for programs to create superior value for the customer, (3) build the customer, (3) build profitableprofitable relationships and create customer relationships and create customer delight, and in turn (4) capture value delight, and in turn (4) capture value from customers in the forms of sales, from customers in the forms of sales, profits and long-term customer equity. profits and long-term customer equity.

Core Marketing ConceptsCore Marketing Concepts

Customer needs, wants & demandsCustomer needs, wants & demands Marketing offers – products, services Marketing offers – products, services

and experiencesand experiences Customer value and satisfactionCustomer value and satisfaction Exchanges and relationshipsExchanges and relationships MarketsMarkets

Needs, Wants, and Needs, Wants, and DemandsDemands

Consumers have needs (physical, social, Consumers have needs (physical, social, individual etc.) wants, and demands to individual etc.) wants, and demands to be satisfied. Consumers view products be satisfied. Consumers view products as bundles of “benefits” and choose as bundles of “benefits” and choose products that give them the best value products that give them the best value for their money and most satisfaction. for their money and most satisfaction. E.g. Fairfield Inn → comfortable bed, E.g. Fairfield Inn → comfortable bed, clean room, low price; JW Marriott clean room, low price; JW Marriott Hotels & Resorts → fine dining, luxury, Hotels & Resorts → fine dining, luxury, comfort and productivity comfort and productivity

Understanding needs Understanding needs and wantsand wants

What are people looking for when they What are people looking for when they visit different destinations?visit different destinations?

Why would a tourist choose to holiday Why would a tourist choose to holiday in Florida rather than Spain – what in Florida rather than Spain – what variables are at work apart from cost?variables are at work apart from cost?

Why would he choose to travel with Why would he choose to travel with British Airways, but not with British Airways, but not with Lufthansa?Lufthansa?

Why would he buy an independent Why would he buy an independent inclusive tour, but not a group tour?inclusive tour, but not a group tour?

Need Satisfaction TheoryNeed Satisfaction Theory

All consumer purchases, including All consumer purchases, including choice of travel destination, are choice of travel destination, are made to satisfy made to satisfy aa need of the need of the consumer. The individual has a consumer. The individual has a desire for something?????desire for something?????

Do people travel just to travel?Do people travel just to travel? People do not travel just to travel. People do not travel just to travel.

Travel fills some need in each Travel fills some need in each consumer. Travelers’ needs differ.consumer. Travelers’ needs differ.

Do we really Do we really needneed??

Often people talk about what they need, Often people talk about what they need, say a new television set, a new dress, or say a new television set, a new dress, or a holiday. But do they really need these a holiday. But do they really need these things? Or are they just expressing a things? Or are they just expressing a desire for more?desire for more?

Due to today’s increased material Due to today’s increased material consumption patterns, it is becoming consumption patterns, it is becoming difficult to distinguish difficult to distinguish wants wants (e.g. (e.g. reference group influence)reference group influence) from needs. from needs.

Maslow’s hierarchy of Maslow’s hierarchy of needsneeds

Self-actualizationSelf-actualization(e.g. self-fulfillment, etc.)(e.g. self-fulfillment, etc.)

Ego needsEgo needs(e.g. self-respect, status, success, etc.)(e.g. self-respect, status, success, etc.)

Social needsSocial needs(e.g. affection, love, friendship, etc.)(e.g. affection, love, friendship, etc.)

Safety needsSafety needs(e.g. security, protection, etc.)(e.g. security, protection, etc.)

Physiological needsPhysiological needs(e.g. food, water, air, etc.)(e.g. food, water, air, etc.)

According to Maslow, the more basic According to Maslow, the more basic needs have to be satisfied (satisfied needs have to be satisfied (satisfied according to the needs of our cultural according to the needs of our cultural group) before our interest will focus on group) before our interest will focus on higher level needs.higher level needs.

However, according to Alderfer, and his However, according to Alderfer, and his ERG (existence, relatedness, and ERG (existence, relatedness, and growth needs) theory, (1) more than growth needs) theory, (1) more than one need may be operative at the same one need may be operative at the same time, (2) if the satisfaction of a higher time, (2) if the satisfaction of a higher level need is frustrated, the desire to level need is frustrated, the desire to satisfy a lower level need increases. satisfy a lower level need increases.

The Main Motives for The Main Motives for Travel and TourismTravel and Tourism

Motivation for travel and tourism Motivation for travel and tourism can be categorized as;can be categorized as; Physical motivationsPhysical motivations Cultural motivationsCultural motivations Personal motivationsPersonal motivations Prestige and Status motivationsPrestige and Status motivations

(Mathieson and (Mathieson and Wall, 1993)Wall, 1993)

Physical motivationsPhysical motivations

refreshment of body and mind (rest and refreshment of body and mind (rest and relaxation) – beach holidays, lakes and relaxation) – beach holidays, lakes and mountains, etc.;mountains, etc.;

for health purposes (i.e. either medically for health purposes (i.e. either medically prescribed or undertaken voluntarily) – prescribed or undertaken voluntarily) – spas, etc.;spas, etc.;

for participation in sports – skiing, for participation in sports – skiing, canoeing, safari parks, ponytrekking, etc.;canoeing, safari parks, ponytrekking, etc.;

pleasure, - fun, excitement, romance and pleasure, - fun, excitement, romance and entertainment, to shop. entertainment, to shop.

Cultural motivationsCultural motivations

curiosity about foreign countries, people curiosity about foreign countries, people and places;and places;

interests in art, music, architecture, interests in art, music, architecture, folklore – music festivals, theatre visits, folklore – music festivals, theatre visits, etc.;etc.;

interest in historical places (remains, interest in historical places (remains, monuments, churches);monuments, churches);

experiencing specific international and experiencing specific international and national events - Olympic Games, national events - Olympic Games, Oktoberfest, etc.Oktoberfest, etc.

Personal motivationsPersonal motivations

visiting relatives and friends;visiting relatives and friends; meeting new people and seeking new meeting new people and seeking new

friendships;friendships; seeking new and different experiences in seeking new and different experiences in

different environments – sailing etc.;different environments – sailing etc.; escaping from one’s own permanent social escaping from one’s own permanent social

environment (i.e. desire for a change)environment (i.e. desire for a change) personal excitement of traveling;personal excitement of traveling; visiting places and people for spiritual visiting places and people for spiritual

reasons (i.e. pilgrimages)reasons (i.e. pilgrimages) traveling for travel’s saketraveling for travel’s sake

Prestige and Status Prestige and Status motivationsmotivations pursuit of hobbies – craft or painting pursuit of hobbies – craft or painting

holidays etc.;holidays etc.; continuation of education or learning- continuation of education or learning-

study tours etc.;study tours etc.; seeking of business contacts and seeking of business contacts and

professional goals – fairs, etc.;professional goals – fairs, etc.; conference and meetings;conference and meetings; ego enhancement and sensual ego enhancement and sensual

indulgence;indulgence; fashion fashion

ProductsProducts A product (persons, places, organizations, A product (persons, places, organizations,

activities, ideas) is anything that can activities, ideas) is anything that can satisfy a need or want. Producers must satisfy a need or want. Producers must see themselves as see themselves as providing a solution to a providing a solution to a needneed (benefits) rather than just selling a (benefits) rather than just selling a product. Otherwise, when a new product product. Otherwise, when a new product satisfies the needs better or less satisfies the needs better or less expensively, they would not make money. expensively, they would not make money.

Research is a must to understand the Research is a must to understand the needs and wants of the customers to needs and wants of the customers to produce the right product.produce the right product. E.g. At Disney E.g. At Disney World, each manager spends a day in the park in World, each manager spends a day in the park in a Mickey costume or work on the front line - a Mickey costume or work on the front line -

taking tickets, selling pop-corn.taking tickets, selling pop-corn.

Disney World, Orlando

Customer Value and Customer Value and SatisfactionSatisfaction

How do customers choose among How do customers choose among these many products? Consumers these many products? Consumers make choices based on;make choices based on; ValueValue; is the difference between owning ; is the difference between owning

the product and the cost of obtaining the the product and the cost of obtaining the product, in a way “profit” to the product, in a way “profit” to the customer. Customers do not judge customer. Customers do not judge product values objectively, on the product values objectively, on the contrary they act on contrary they act on perceivedperceived value. E.g. value. E.g. Is Hilton really the best hotel company?Is Hilton really the best hotel company?

SatisfactionSatisfaction; is the difference between the ; is the difference between the product’s performance and buyer’s product’s performance and buyer’s expectations. If the product’s performance expectations. If the product’s performance falls short of expectations, the buyer is falls short of expectations, the buyer is dissatisfied. If the performance matches or dissatisfied. If the performance matches or exceeds expectations, the buyer is exceeds expectations, the buyer is satisfied. Smart companies aim to satisfy satisfied. Smart companies aim to satisfy customers by promising only what they can customers by promising only what they can give, then giving give, then giving moremore than they promise. than they promise. Benefits of satisfying customersBenefits of satisfying customers:: Customer satisfaction create an emotional Customer satisfaction create an emotional tie (customer loyalty) to a product. Highly tie (customer loyalty) to a product. Highly satisfied customers make (1) repeat satisfied customers make (1) repeat purchases, (2) are less price sensitive, (3) purchases, (2) are less price sensitive, (3) talk positively to their friends. talk positively to their friends.

QualityQuality; simply quality can be defined ; simply quality can be defined as “freedom from defects”. Today, as “freedom from defects”. Today, most companies define quality in terms most companies define quality in terms of of customer satisfactioncustomer satisfaction. E.g. . E.g. according to Motorola “if the customer according to Motorola “if the customer doesn’t like the product, it’s a defect”. doesn’t like the product, it’s a defect”. Quality starts with customer needs and Quality starts with customer needs and ends with customer satisfactionends with customer satisfaction. The . The concept of “total quality management” concept of “total quality management” is in a away “total customer is in a away “total customer satisfaction”. Improving the quality of satisfaction”. Improving the quality of a product that customers want a product that customers want increases customer satisfaction, increases customer satisfaction, therefore increases profit.therefore increases profit.

Exchanges and Exchanges and RelationshipsRelationships

Marketing occurs when people decide to Marketing occurs when people decide to satisfy needs and wants through exchange. satisfy needs and wants through exchange.

Exchange (transaction) is the act of getting Exchange (transaction) is the act of getting a desired object (product, service, idea …) a desired object (product, service, idea …) from someone by giving something in from someone by giving something in return. return.

Marketing should create mutually Marketing should create mutually beneficial relationships (good for both beneficial relationships (good for both parties) to generate profitable transactions. parties) to generate profitable transactions.

MarketsMarkets

A market is the set of actual and A market is the set of actual and potential buyers of a product. potential buyers of a product. These buyers share a particular These buyers share a particular need or want that can be satisfied need or want that can be satisfied through exchanges and through exchanges and relationships. relationships.

Marketing means managing Marketing means managing markets to bring about profitable markets to bring about profitable customer relationships. customer relationships.

Creating these relationships takes Creating these relationships takes work. Sellers must search for work. Sellers must search for buyers, identify their needs, design buyers, identify their needs, design right marketing offers (right marketing offers (products)products), , set right set right pricesprices, , promotepromote and and deliverdeliver (place) the products in the right (place) the products in the right ways (4Ps of Marketing). These are ways (4Ps of Marketing). These are the core marketing activities.the core marketing activities.

Marketing ManagementMarketing Management

Marketing management is the art Marketing management is the art and science of choosing target and science of choosing target markets and building profitable markets and building profitable relationships with them. relationships with them.

The marketing manager’s aim is to The marketing manager’s aim is to find, attract, keep, and grow target find, attract, keep, and grow target customers by creating, delivering, customers by creating, delivering, and communicating superior and communicating superior customer value.customer value.

Marketing management is in a way, Marketing management is in a way, demand (customer) management.demand (customer) management.

A company’s demand comes from two A company’s demand comes from two groups: new customers and repeat groups: new customers and repeat customers. Marketing management customers. Marketing management deals with finding ways (1) to attract deals with finding ways (1) to attract new customers and create transactions new customers and create transactions with them and also (2) to retain current with them and also (2) to retain current customers and build lasting customer customers and build lasting customer relationships.relationships.

To design a winning marketing To design a winning marketing strategy, the marketing manager strategy, the marketing manager must answer two important must answer two important questions: questions: What customers will we serve (what’s What customers will we serve (what’s

our target market)?our target market)? How can we serve these customers best How can we serve these customers best

(what’s our value proposition)?(what’s our value proposition)?

Selecting Customers to Selecting Customers to ServeServe

The company must first decide The company must first decide whowho it will serve. It does this by diving it will serve. It does this by diving the market into segments of the market into segments of customers (customers (market segmentationmarket segmentation) ) and selecting which segments it will and selecting which segments it will go after (go after (target marketingtarget marketing). ).

Some people think of marketing Some people think of marketing management as finding as many management as finding as many customers as possible and increasing customers as possible and increasing demand. But marketing managers demand. But marketing managers should know that they cannot serve all should know that they cannot serve all customers in every way. By trying to customers in every way. By trying to serve all customers, they may not serve serve all customers, they may not serve any customers well. Instead, the any customers well. Instead, the company wants to select only customers company wants to select only customers that it can serve well and profitably.that it can serve well and profitably.

Methods Used to Segment Methods Used to Segment Markets in Travel and Markets in Travel and

TourismTourism There are seven main ways of dividing There are seven main ways of dividing

up markets for segmentation purposes, up markets for segmentation purposes, all of which are used in practice in the all of which are used in practice in the travel and tourism industry. The main travel and tourism industry. The main methods of segmentation are:methods of segmentation are: Purpose of travelPurpose of travel Buyer needs, motivations, and benefits soughtBuyer needs, motivations, and benefits sought Buyer behavior (characteristics) of product usageBuyer behavior (characteristics) of product usage Demographic, economic, and geographic profileDemographic, economic, and geographic profile Psychographic profilePsychographic profile Geodemographic profileGeodemographic profile PricePrice

Segmentation by purpose of Segmentation by purpose of traveltravel

E.g. Conference markets require E.g. Conference markets require different products to those supplied to different products to those supplied to other business travelers and meetings other business travelers and meetings for groups of different sizes require for groups of different sizes require special provision.special provision.

For a tour operator, customer’s purpose For a tour operator, customer’s purpose and product needs will differ according and product needs will differ according to whether they are looking for; main to whether they are looking for; main summer holiday, additional holidays and summer holiday, additional holidays and short breaks, winter sun, winter sports. short breaks, winter sun, winter sports.

Within the broad categories of main Within the broad categories of main and additional holidays, typical and additional holidays, typical subsidiary purposes would include subsidiary purposes would include sea and beach holidays (with and sea and beach holidays (with and without children), cultural interests, without children), cultural interests, walking and other activity interests walking and other activity interests and an interest in exotic and an interest in exotic destinations. destinations.

Segmentation by buyer Segmentation by buyer needs and benefits soughtneeds and benefits sought

Within purpose of travel, the next logical Within purpose of travel, the next logical consideration for segmentation is to consideration for segmentation is to understand the needs, wants and understand the needs, wants and motivations of particular customer motivations of particular customer groups (as discussed).groups (as discussed).

The range and perceived importance of The range and perceived importance of benefits sought by customer segments benefits sought by customer segments are not easy to understand. They can only are not easy to understand. They can only be discovered by market research among be discovered by market research among identified target groups. identified target groups.

Segmentation by benefits, makes it Segmentation by benefits, makes it possible for marketing managers to possible for marketing managers to fine tune their products. fine tune their products.

Focusing on promoting the benefits Focusing on promoting the benefits sought is a logical objective for sought is a logical objective for brochures and other marketing brochures and other marketing communications. communications.

Segmentation by buyer Segmentation by buyer behaviorbehavior

Within purpose and benefits sought, Within purpose and benefits sought, there is scope for refining the there is scope for refining the segmentation process according to the segmentation process according to the types of behavior or characteristics of types of behavior or characteristics of use of products that customers exhibit. use of products that customers exhibit. E.g. frequency of usage of products.E.g. frequency of usage of products.

Frequent users (high frequency, high Frequent users (high frequency, high spending high loyal); may represent only spending high loyal); may represent only 10% of individual customers in a year 10% of individual customers in a year but up to 60% of revenue for some hotel but up to 60% of revenue for some hotel groups and airlines.groups and airlines.

Segmentation by demographic, Segmentation by demographic, economic, geographic and life-economic, geographic and life-

cycle characteristicscycle characteristics By using previous segmentation By using previous segmentation

processes, considerable knowledge can processes, considerable knowledge can be obtained. However, for the purposes be obtained. However, for the purposes of efficient promotion and distribution of of efficient promotion and distribution of products, especially to prospective new products, especially to prospective new customers rather than to existing ones, it customers rather than to existing ones, it is important to know the demographic is important to know the demographic profile (e.g. age, sex, occupation, income, profile (e.g. age, sex, occupation, income, place of residence) and other defining place of residence) and other defining characteristics (life-cycle) of their target characteristics (life-cycle) of their target customers, including potential users.customers, including potential users.

Segmentation by Segmentation by psychographic psychographic

characteristics and lifestylecharacteristics and lifestyle Dependent on sophisticated market Dependent on sophisticated market

research techniques.research techniques. Psychographics aims to define Psychographics aims to define

consumer on attitudinal or consumer on attitudinal or psychological rather than physical psychological rather than physical dimensions. dimensions.

Geodemographic Geodemographic segmentationsegmentation

A very powerful and productive A very powerful and productive segmentation tool; developed segmentation tool; developed through combining an analysis of through combining an analysis of census data with the postal area census data with the postal area (zip) codes that identify group of (zip) codes that identify group of households in the country.households in the country.

Segmentation by priceSegmentation by price

In leisure travel and tourism markets In leisure travel and tourism markets in all countries, buyers are highly in all countries, buyers are highly price-sensitive. price-sensitive.

It is not a segmentation variable of It is not a segmentation variable of the same kind as the others. the same kind as the others.

There are segments of customers to There are segments of customers to be identified and located who respond be identified and located who respond to different price bands. to different price bands.

Yield management; segment targeted Yield management; segment targeted tactical pricing.tactical pricing.

Choosing a Value Choosing a Value PropositionProposition

The company must also decide how it The company must also decide how it will serve targeted customers – how it will serve targeted customers – how it will will differentiate and positiondifferentiate and position itself in itself in the marketplace. the marketplace.

A company’s A company’s value propositionvalue proposition is the is the set of benefits or values it promises to set of benefits or values it promises to deliver to customers to satisfy their deliver to customers to satisfy their needs. E.g. Northwest Airlines punctual, needs. E.g. Northwest Airlines punctual, friendly, fun flight; Singapore Airlines friendly, fun flight; Singapore Airlines luxurious, prestigious, special flight luxurious, prestigious, special flight

Such value propositions differentiate Such value propositions differentiate one brand from another. one brand from another.

They answer the customer’s They answer the customer’s question “Why should I buy your question “Why should I buy your brand rather than a competitor’s?”brand rather than a competitor’s?”

Companies must design strong value Companies must design strong value propositions that give them the propositions that give them the greatest advantage in their target greatest advantage in their target markets. markets.

Marketing Management Marketing Management PhilosophiesPhilosophies

There are five alternative concepts under There are five alternative concepts under which organizations conduct their which organizations conduct their marketing activities: marketing activities: the production, the production, product, selling, marketing and societal product, selling, marketing and societal marketingmarketing concepts. concepts. The Production ConceptThe Production Concept; holds that consumers ; holds that consumers

will favor products that are available and will favor products that are available and highly affordable. Here, the management highly affordable. Here, the management focus on improving production and focus on improving production and distribution. This oldest philosophy is useful distribution. This oldest philosophy is useful in two types of in two types of

situation. (1) when the demand for a situation. (1) when the demand for a product exceeds the supply (2) when the product exceeds the supply (2) when the product’s cost is too high and improved product’s cost is too high and improved productivity is needed to bring it down. productivity is needed to bring it down. E.g. Henry Ford’s “Model T”, TI watches.E.g. Henry Ford’s “Model T”, TI watches.

The Product ConceptThe Product Concept; holds that ; holds that consumers favor products that offer the consumers favor products that offer the most quality, performance and innovative most quality, performance and innovative features. Here, the organization should features. Here, the organization should focus on making continuous product focus on making continuous product improvement. improvement.

The Selling ConceptThe Selling Concept; holds that ; holds that consumers do not buy enough products if consumers do not buy enough products if there are not large-scale selling and there are not large-scale selling and promotion effort. Mostpromotion effort. Most

companies use the selling concept when companies use the selling concept when they have overcapacity. This concept they have overcapacity. This concept focuses on creating sales transactions focuses on creating sales transactions rather than on building long-term, rather than on building long-term, profitable relationships with customers. profitable relationships with customers.

The Marketing ConceptThe Marketing Concept; holds that ; holds that achieving organizational goals (making achieving organizational goals (making profit) depends on profit) depends on understandingunderstanding the the needs and wants of target markets and needs and wants of target markets and delivering the desired satisfactions more delivering the desired satisfactions more effectively and efficiently than effectively and efficiently than competitors do. Relies heavily on competitors do. Relies heavily on researchresearch. E.g. Disney, McDonald’s, Ritz-. E.g. Disney, McDonald’s, Ritz-Carlton Hotels… are Carlton Hotels… are customer-drivencustomer-driven companies.companies.

The Societal Marketing ConceptThe Societal Marketing Concept; holds that ; holds that the organization should not only satisfy the the organization should not only satisfy the needs and wants but also improve both needs and wants but also improve both customer’s and society’s well-being. This customer’s and society’s well-being. This newest philosophy focus on customer long-newest philosophy focus on customer long-term welfare, since today we have term welfare, since today we have environmental problems, resource environmental problems, resource shortages, population growth etc. E.g. shortages, population growth etc. E.g. Critics against fast-food restaurants that Critics against fast-food restaurants that food has a lot of fat and salt harmful for food has a lot of fat and salt harmful for health, a lot of packaging increasing waste health, a lot of packaging increasing waste and pollution. Here, the companies try to and pollution. Here, the companies try to balance (1) company profits, (2) consumer balance (1) company profits, (2) consumer wants, (3) society’s interests. wants, (3) society’s interests.

Customer Relationship Customer Relationship ManagementManagement

CRM is perhaps the most important CRM is perhaps the most important concept of modern marketing. concept of modern marketing.

Until recently, CRM has been Until recently, CRM has been defined narrowly as a customer data defined narrowly as a customer data management activity. It involves management activity. It involves managing detailed information about managing detailed information about individual customers in order to individual customers in order to maximize customer loyalty. maximize customer loyalty.

More recently, CRM is defined as the More recently, CRM is defined as the overall process of building and overall process of building and maintaining profitable customer maintaining profitable customer relationships by delivering superior value relationships by delivering superior value and satisfaction. It deals with all aspects and satisfaction. It deals with all aspects of acquiring, keeping and growing of acquiring, keeping and growing customers. customers.

Relationship building blocks: customer Relationship building blocks: customer perceived value and satisfaction. perceived value and satisfaction.

A company can always increase customer A company can always increase customer satisfaction by lowering its price or satisfaction by lowering its price or increasing its services. But this may increasing its services. But this may result in lower profits. result in lower profits.

Companies can build customer Companies can build customer relationships at relationships at many levelsmany levels. E.g. . E.g. frequent-flier programs, club marketing frequent-flier programs, club marketing programs.programs.

Yesterday’s companies focused on mass Yesterday’s companies focused on mass marketing to all customers at arm’s marketing to all customers at arm’s length. Today’s companies are building length. Today’s companies are building more more directdirect and lasting relationships and lasting relationships with more carefully selected customers. with more carefully selected customers.

Today’s companies do not want Today’s companies do not want relationships with every customer. relationships with every customer. Companies are targeting fewer, more Companies are targeting fewer, more profitable customers. profitable customers.

Capturing Value from Capturing Value from CustomersCustomers

By creating superior customer value, the By creating superior customer value, the firms creates highly satisfied customers firms creates highly satisfied customers who stay loyal and buy more. This, in who stay loyal and buy more. This, in turn, means greater long-run returns for turn, means greater long-run returns for the firm. the firm.

Good customer relationship management Good customer relationship management creates customer delight. In turn, creates customer delight. In turn, delighted customers remain loyal and delighted customers remain loyal and talk favorable to others about the talk favorable to others about the company and its products.company and its products.

Customer life-time valueCustomer life-time value: the value of : the value of the entire stream of purchases that the the entire stream of purchases that the customer would make over a lifetime of customer would make over a lifetime of patronage. patronage.

Losing a customer means losing more Losing a customer means losing more than a single sale. It means losing than a single sale. It means losing tthe he entire stream of purchases that the entire stream of purchases that the customer would make over a lifetime of customer would make over a lifetime of patronage. patronage.

Customer equityCustomer equity: The total combined : The total combined customer lifetime values of all of the customer lifetime values of all of the company’s customers.company’s customers.

Product Product Formulation in Formulation in

TourismTourismObjectiveObjective: In response to the knowledge and : In response to the knowledge and forecasts on the customer’s needs and wants, forecasts on the customer’s needs and wants,

discussing how products are put together.discussing how products are put together.

Understanding Tourism Understanding Tourism Products Products

There are two different dimensions for There are two different dimensions for understanding tourism products;understanding tourism products; The overall tourism productThe overall tourism product; as far as the ; as far as the

tourist is concerned, the product covers tourist is concerned, the product covers the complete experience from the time he the complete experience from the time he leaves home to the time he returns to it.leaves home to the time he returns to it.

The product of individual tourism The product of individual tourism businessesbusinesses; organizations in the industry ; organizations in the industry have a much narrower view of the have a much narrower view of the products they sell, they focus primarily on products they sell, they focus primarily on their own services.their own services.

Components of the Overall Components of the Overall Tourism ProductTourism Product

From the standpoint of a potential From the standpoint of a potential customer, the product may be defined customer, the product may be defined as a bundle or package of tangible as a bundle or package of tangible and intangible components.and intangible components.

The packaged is perceived by the The packaged is perceived by the tourist as an experience. tourist as an experience. Destination attractions and environmentDestination attractions and environment Destination facilities and servicesDestination facilities and services Accessibility of the destinationAccessibility of the destination Images of the destinationImages of the destination Price to the customerPrice to the customer

Destination attractions and Destination attractions and environmentenvironment They determine customer choice and They determine customer choice and

influence prospective buyers’ influence prospective buyers’ motivations. motivations.

They include;They include; Natural attractionsNatural attractions Built attractions (Built attractions (e.g. e.g. The World)The World) Cultural attractionsCultural attractions Social attractionsSocial attractions

Destination facilities and Destination facilities and servicesservices They make it possible for visitors to stay They make it possible for visitors to stay

and in other ways enjoy and participate and in other ways enjoy and participate in attractions.in attractions.

They include;They include; Accommodation unitsAccommodation units Restaurants, bars and cafesRestaurants, bars and cafes Transport at the destinationTransport at the destination Sports (interest) activitySports (interest) activity Other facilities (e.g. language schools)Other facilities (e.g. language schools) Retail outletsRetail outlets Other services (e.g. information services)Other services (e.g. information services)

Accessibility of the destinationAccessibility of the destination

These are the private and public These are the private and public transport aspects of the product that transport aspects of the product that determine the cost, speed and determine the cost, speed and convenience.convenience.

They include;They include; Infrastructure (roads, airports etc)Infrastructure (roads, airports etc) Equipment (size, speed of transport etc)Equipment (size, speed of transport etc) Operational factors (routes, frequency etc) Operational factors (routes, frequency etc) Government regulations Government regulations

Images and perceptions of the Images and perceptions of the destinationdestination

The attitudes and images customers The attitudes and images customers have towards products strongly have towards products strongly influence their buyer decision.influence their buyer decision.

Destination images are not necessarily Destination images are not necessarily grounded in experience or facts but grounded in experience or facts but they are always powerful motivators they are always powerful motivators in leisure and travel and tourism. in leisure and travel and tourism.

Closely linked in prospective Closely linked in prospective customers’ minds.customers’ minds.

All destinations have images, often All destinations have images, often based on historic rather than current based on historic rather than current eventsevents

It is an essential objective of It is an essential objective of destination marketing to sustain, alter, destination marketing to sustain, alter, or develop images in order to influence or develop images in order to influence prospective buyers’ expectations.prospective buyers’ expectations.

The images of tourism businesses The images of tourism businesses within destinations are often closely within destinations are often closely related to the destination image (e.g. related to the destination image (e.g. Las Vegas) Las Vegas)

Price to the customerPrice to the customer

Most destinationMost destinationss offer a range of offer a range of products and appeal to a range of products and appeal to a range of segments, price in the travel and segments, price in the travel and tourism industry covers a very wide tourism industry covers a very wide range. range.

Price varies by season, by choice of Price varies by season, by choice of activities and internationally by activities and internationally by exchange rates as well as by distance exchange rates as well as by distance traveled, transport mode and choice of traveled, transport mode and choice of facilities and services. facilities and services.

Components of Specific Components of Specific Products Products

Core productCore product; essential service or ; essential service or benefit designed to satisfy the identified benefit designed to satisfy the identified needs of target customer segments.needs of target customer segments.

Tangible product; Tangible product; the specific offer for the specific offer for sale slating what a customer will receive sale slating what a customer will receive for his moneyfor his money..

Augmented product; Augmented product; comprises all the comprises all the forms of added value to the formal forms of added value to the formal product offers to make them more product offers to make them more attractiveattractive..

Branding and Product Branding and Product PositioningPositioning

Image, typically communicated by Image, typically communicated by branding, is identified as one of the branding, is identified as one of the components in the overall tourism product components in the overall tourism product and as a vital element within the and as a vital element within the augmented product development and augmented product development and marketed by individual businesses in the marketed by individual businesses in the industry. industry.

Tourism products are essentially intangible Tourism products are essentially intangible and need to be communicated in ways that and need to be communicated in ways that influence consumers’ perceptions.influence consumers’ perceptions.

Branding provides the core attributes Branding provides the core attributes of;of; Statement of ownership.Statement of ownership. Means of identifying a product or service Means of identifying a product or service

for purchasers and distinguishes it from for purchasers and distinguishes it from that of competitors.that of competitors.

Symbol of shorthand device to which Symbol of shorthand device to which expectations of quality could be attached.expectations of quality could be attached.

A brand is defined as “a name, symbol, A brand is defined as “a name, symbol, design or some combination, which design or some combination, which identifies the ‘product’ of a particular identifies the ‘product’ of a particular organization as having a sustainable organization as having a sustainable differential advantage”.differential advantage”.

In practice, a strong brand has to exist In practice, a strong brand has to exist in the minds of consumers as a fusion in the minds of consumers as a fusion of readily understood values and of readily understood values and benefits.benefits.

A brand offers the consumer relevant A brand offers the consumer relevant added added value, a superior proposition value, a superior proposition that is distinctive from competitors that is distinctive from competitors (competitive advantage). (competitive advantage).

Consumers are prepared to pay a Consumers are prepared to pay a price premium for strong brands.price premium for strong brands.

Forms the basis of the “positioning”.Forms the basis of the “positioning”.

Advantages of Branding for Travel and Advantages of Branding for Travel and TourismTourism

Helps reduce medium and long-term Helps reduce medium and long-term vulnerability to the unforeseen external vulnerability to the unforeseen external eventsevents

Reduces risk for the consumer, offers Reduces risk for the consumer, offers guarantee, signals expected quality and guarantee, signals expected quality and performance of an intangible productperformance of an intangible product

Provides a common understanding and Provides a common understanding and some unity of purpose for staff etcsome unity of purpose for staff etc

Branding is a strategic weapon for Branding is a strategic weapon for long-range planning in tourism long-range planning in tourism

Service Service Characteristics of Characteristics of

Hospitality and Hospitality and Tourism Tourism

MarketingMarketingObjectiveObjective: discussing four distinguishing : discussing four distinguishing characteristics of services and several things characteristics of services and several things

management of service firms can do to increase management of service firms can do to increase the effectiveness of their business.the effectiveness of their business.

Services MarketingServices Marketing

Service industries are quite varies: Service industries are quite varies: governmental servicesgovernmental services - courts, - courts, hospitals, police, fire departments, hospitals, police, fire departments, postal services, schools etc; postal services, schools etc; private private nonprofit organizationsnonprofit organizations - museums, - museums, colleges, hospitals etc; colleges, hospitals etc; business business organizationsorganizations - airlines, hotels, - airlines, hotels, restaurants, advertising, real estate restaurants, advertising, real estate etc.etc.

Satisfying the CustomersSatisfying the Customers

The aim of the service organizations is The aim of the service organizations is also serving and satisfying the also serving and satisfying the customer. customer.

The belief that customer comes first is The belief that customer comes first is reinforced in Four Seasons Hotels reinforced in Four Seasons Hotels where employees who go to where employees who go to extraordinary efforts to satisfy the extraordinary efforts to satisfy the customer are entitled to be the customer are entitled to be the “Employee of the Year”, story of Ron “Employee of the Year”, story of Ron Dyment, doorman in Toronto.Dyment, doorman in Toronto.

Nature and Nature and Characteristics of Characteristics of

Services Services There are four distinguishing There are four distinguishing characteristics of services. They characteristics of services. They are;are;

IntangibilityIntangibility InseparabilityInseparability VariabilityVariability PerishabilityPerishability

Service IntangibilityService Intangibility

means that unlike physical products, means that unlike physical products, services cannot be seen, tasted, felt, heard services cannot be seen, tasted, felt, heard or smelled before they are bought.or smelled before they are bought.

Buyers look for “signals” or “tangible Buyers look for “signals” or “tangible evidences” like the place, people, price, evidences” like the place, people, price, equipment and information about the equipment and information about the service in order to reduce uncertainty service in order to reduce uncertainty caused by intangibility before they pay the caused by intangibility before they pay the price. E.g. the cleanliness of the restaurant, price. E.g. the cleanliness of the restaurant, employee uniforms of the hotelemployee uniforms of the hotel, Heublein vs , Heublein vs Smirnoff.Smirnoff.

Service InseparabilityService Inseparability means that services cannot be separated from means that services cannot be separated from

their both (1) providers and (2) other their both (1) providers and (2) other customers.customers.

If a service employee provides the service, then If a service employee provides the service, then the employee is part of the service. E.g. the the employee is part of the service. E.g. the food in the restaurant may be outstanding, but food in the restaurant may be outstanding, but if the service person is rude, customers will if the service person is rude, customers will downrate the overall service of the restaurant. downrate the overall service of the restaurant.

the other customers affect the service outcome the other customers affect the service outcome as well. E.g. a couple may choose a restaurant as well. E.g. a couple may choose a restaurant but if a group of loud customers is seated next but if a group of loud customers is seated next to them, the couple will be disappointed.to them, the couple will be disappointed.

Service VariabilityService Variability means that the quality of services depends on means that the quality of services depends on

who provides them, plus, when, where, and how who provides them, plus, when, where, and how they are provided. E.g. within a given hotel they are provided. E.g. within a given hotel chain, one reception desk agent may be cheerful chain, one reception desk agent may be cheerful and efficient one day but would be unpleasant and efficient one day but would be unpleasant and slow the other day. and slow the other day.

Service providers’ service quality depends on Service providers’ service quality depends on his energy and his frame of mind at the time of his energy and his frame of mind at the time of each customer encounter.each customer encounter.

Fluctuating demand makes it difficult to deliver Fluctuating demand makes it difficult to deliver consistent services during periods of peak consistent services during periods of peak demand. demand.

Variability or lack of consistency is the major Variability or lack of consistency is the major cause of customer disappointment in the cause of customer disappointment in the industry.industry.

Service PerishabilityService Perishability means that services cannot be stored for later means that services cannot be stored for later

sale or use. E.g. if a 100 room hotel can sell sale or use. E.g. if a 100 room hotel can sell only 40 rooms today, selling the remaining 60 only 40 rooms today, selling the remaining 60 is gone forever.is gone forever.

If service providers are to maximize revenue, If service providers are to maximize revenue, they must they must manage capacity and demandmanage capacity and demand. E.g. . E.g. hotels charge lower rates in the off-season to hotels charge lower rates in the off-season to attract more guests; restaurants hire part-time attract more guests; restaurants hire part-time employees to serve during peak periods; tour employees to serve during peak periods; tour operators and airline companies have last-operators and airline companies have last-minute sales.minute sales.

Service perishability is a serious problem when Service perishability is a serious problem when demand fluctuates.demand fluctuates.

Management Strategies Management Strategies for Service Businessesfor Service Businesses

Services are different from tangible products, Services are different from tangible products, that is why, different marketing strategies are that is why, different marketing strategies are needed to market services. Those strategies needed to market services. Those strategies are;are; Managing DifferentiationManaging Differentiation Managing Service QualityManaging Service Quality Tangibilizing the ServiceTangibilizing the Service Managing EmployeesManaging Employees Managing RiskManaging Risk Managing Capacity and DemandManaging Capacity and Demand Managing Consistency Managing Consistency

Managing DifferentiationManaging Differentiation

If the customers view the services of If the customers view the services of different providers as similar, they care different providers as similar, they care less about the provider than the price.less about the provider than the price.

The solution to price competition is to The solution to price competition is to develop a differentiated offer, delivery develop a differentiated offer, delivery and image.and image.

Service companies can differentiate their Service companies can differentiate their service delivery in three ways, through;service delivery in three ways, through; People People Physical evidence Physical evidence ProcessProcess

Four Seasons, IstanbulRitz-

Carlton, Istanbul

Managing Service QualityManaging Service Quality

Service quality will always vary, depending on Service quality will always vary, depending on the interactions between employees and the interactions between employees and customers.customers.

Companies should take steps not only to Companies should take steps not only to provide good service every time but also to provide good service every time but also to recover from service mistakes when they do recover from service mistakes when they do occur. occur.

If a customer has a major complaint, 91% will If a customer has a major complaint, 91% will not buy again, if it is resolved quickly, 82% of not buy again, if it is resolved quickly, 82% of those customers will return (study by those customers will return (study by Technical Research Programs Institute). Technical Research Programs Institute).

““Complaint is a Gift”.Complaint is a Gift”.

Tangibilizing the ServiceTangibilizing the Service

TangTangible evidences such as promotional ible evidences such as promotional materials (e.g. brochures), employees’ materials (e.g. brochures), employees’ appearance, and the service firm’s physical appearance, and the service firm’s physical environment help tangibilize the services.environment help tangibilize the services.

trade dress;trade dress; is the distinctive nature of a is the distinctive nature of a hospitality industry’s total visual image and hospitality industry’s total visual image and overall appearance. For example, overall appearance. For example, McDonald’s golden arch, restaurant McDonald’s golden arch, restaurant décor… To compete effectively, marketing décor… To compete effectively, marketing managers must design a distinctive trade managers must design a distinctive trade dress. dress.

employee uniform and costumesemployee uniform and costumes; have an ; have an important and useful role in differentiating important and useful role in differentiating one hospitality firm from another and one hospitality firm from another and create pride in the employees. create pride in the employees.

physical surroundingsphysical surroundings; should be designed ; should be designed to reinforce the product’s position in the to reinforce the product’s position in the customer’s mind. For example, the customer’s mind. For example, the furniture in the lobby of a Four Seasons furniture in the lobby of a Four Seasons Hotel should be high quality and Hotel should be high quality and expensive looking. Every piece of tangible expensive looking. Every piece of tangible evidence must deliver the desired evidence must deliver the desired organization image to target customers. organization image to target customers.

Managing EmployeesManaging Employees

In service businesses, the customer and In service businesses, the customer and front-line service employees interact. front-line service employees interact. Service providers must interact effectively Service providers must interact effectively with customers to satisfy them. That is why, with customers to satisfy them. That is why, companies take care of their employees to companies take care of their employees to make profit. Because they believe that only make profit. Because they believe that only satisfied and productive service employees satisfied and productive service employees can create satisfied and loyal customers.can create satisfied and loyal customers. Internal marketingInternal marketing: means that the service firm : means that the service firm

must effectively train and motivate its customer-must effectively train and motivate its customer-contact employees to provide customer contact employees to provide customer satisfaction.satisfaction.

Managing RiskManaging Risk

People, who will stay in an X hotel or travel People, who will stay in an X hotel or travel with an X airline for the first time, perceive with an X airline for the first time, perceive high risk. Because they don’t have any idea high risk. Because they don’t have any idea about the service quality before they pay about the service quality before they pay the price. There is no guarantee that they the price. There is no guarantee that they will be satisfied. will be satisfied.

As a result, (1) “image” and reputation of As a result, (1) “image” and reputation of the organization,(2) “word-of-mouth the organization,(2) “word-of-mouth advertising ” and (3) advertising ” and (3) FAMFAM trips become trips become more important in hospitality and travel more important in hospitality and travel marketing.marketing.

Managing Capacity and Managing Capacity and DemandDemand

Since services are perishable and can not Since services are perishable and can not be reserved and sold in later sale, be reserved and sold in later sale, marketing managers must manage marketing managers must manage capacity and demand.capacity and demand.

If demand is less than capacity, hotel If demand is less than capacity, hotel rooms and restaurant seats are empty. If rooms and restaurant seats are empty. If demand is higher than capacity, there will demand is higher than capacity, there will be great difficulty in coping with customer be great difficulty in coping with customer numbers. For example, a restaurant must numbers. For example, a restaurant must manage its capacity when there is high manage its capacity when there is high demand on Mother’s Day.demand on Mother’s Day.

Managers have two major options for Managers have two major options for matching capacity with demandmatching capacity with demand: : cchange capacity or change demand. hange capacity or change demand. For example, an airline can change For example, an airline can change capacity on a heavily traveled route capacity on a heavily traveled route by assigning a larger plane to the by assigning a larger plane to the route. If a larger plane is not route. If a larger plane is not available, they can reduce demand by available, they can reduce demand by eliminating discounted fares. First eliminating discounted fares. First capacity then demand management capacity then demand management will be discussed in the coming will be discussed in the coming sections. sections.

In order to cope with high demand, In order to cope with high demand, organizations must operate at a organizations must operate at a maximum capacity and remember maximum capacity and remember that their goal is that their goal is to to create satisfied create satisfied customers. Here, the problem is customers. Here, the problem is that research has shown that that research has shown that customer complaints increase when customer complaints increase when service firms operate above 80% of service firms operate above 80% of their capacity. their capacity.

Managing CapacityManaging Capacity In order to manage capacity with In order to manage capacity with fluctuations in shortfluctuations in short term demand, the term demand, the following actions are available;following actions are available;Involve the customer in the service delivery Involve the customer in the service delivery systemsystemCross-train employeesCross-train employeesUse part-time employeesUse part-time employeesRent or share extra facilities and equipmentRent or share extra facilities and equipmentSchedule downtime during periods of low Schedule downtime during periods of low capacitycapacityExtend service hoursExtend service hoursUse technologyUse technologyUse priceUse price

Involve the Customer in theInvolve the Customer in the Service Delivery System Service Delivery System

Getting the customer involved in service Getting the customer involved in service operations increases the number of people that operations increases the number of people that one employee can serve, as a result, increasing one employee can serve, as a result, increasing the capacity of the operation. This method is the capacity of the operation. This method is very useful especially during busy periods.very useful especially during busy periods.

For example, some restaurants have self-For example, some restaurants have self-service salad bars and vending machines for service salad bars and vending machines for drinks e.g. Schlotzky Restaurant, or hotels drinks e.g. Schlotzky Restaurant, or hotels have computerized check-in and -out e.g. have computerized check-in and -out e.g. Sheraton Hotels which enable the customers to Sheraton Hotels which enable the customers to serve themselves and make it possible for serve themselves and make it possible for employees to handle more customers. employees to handle more customers.

Cross-train EmployeesCross-train Employees

Cross-training employees gives the Cross-training employees gives the operation flexibility, allowing the operation flexibility, allowing the business to increase capacity by business to increase capacity by shifting employees, and can help to shifting employees, and can help to prevent the organization from reducing prevent the organization from reducing capacity when an employee calls in capacity when an employee calls in sick. For example, front-desk staff or sick. For example, front-desk staff or banquet staff when cross-trained can banquet staff when cross-trained can be called on if demand is higher. be called on if demand is higher.

Use Part-time EmployeesUse Part-time Employees

Managers can use part-time employees Managers can use part-time employees to increase capacity during an to increase capacity during an unusually busy day or meal period or unusually busy day or meal period or during the busy months of the year for during the busy months of the year for seasonal businesses. For example, seasonal businesses. For example, summer resorts hire part-time staff to summer resorts hire part-time staff to work during the summer period. Part-work during the summer period. Part-time banquet waiters are called in time banquet waiters are called in when there is a large banquet when there is a large banquet operation.operation.

Rent or Share Extra Facilities Rent or Share Extra Facilities and Equipmentand Equipment

Businesses do not have to have space or Businesses do not have to have space or equipment limitations. When they have busy equipment limitations. When they have busy periods, they rent equipment or space. periods, they rent equipment or space.

In the hospitality industry, companies can In the hospitality industry, companies can work together and share their resources as work together and share their resources as well. For example, when X hotel does not well. For example, when X hotel does not have enough rooms, in order to prevent have enough rooms, in order to prevent losing customers, it may refer the customers losing customers, it may refer the customers to the sister property. Or when there is not to the sister property. Or when there is not space for a large group in the restaurant, in space for a large group in the restaurant, in Istanbul the alternative might be a dinner Istanbul the alternative might be a dinner cruise on Bosphorus. cruise on Bosphorus.

Schedule Downtime during Schedule Downtime during Periods of Low CapacityPeriods of Low Capacity

An organization also needs to An organization also needs to decrease capacity when there is low decrease capacity when there is low demand. One way to do this is to demand. One way to do this is to schedule repairs and maintenance schedule repairs and maintenance during the low season. Employees during the low season. Employees can take holidays or training can take holidays or training programs can be scheduled during programs can be scheduled during low demand. low demand.

Extend Service HoursExtend Service Hours

Restaurants and entertainment Restaurants and entertainment facilities can increase capacity by facilities can increase capacity by extending their hours. When there extending their hours. When there the demand is high, the restaurant the demand is high, the restaurant operations may decide to open one operations may decide to open one hour early. For example, nowadays hour early. For example, nowadays fast-food operations have extended fast-food operations have extended their capacity by opening for their capacity by opening for breakfast.breakfast.

Use TechnologyUse Technology

Technology can be used to increase Technology can be used to increase the capacity of systems. For the capacity of systems. For example, the automatic wake-up call example, the automatic wake-up call system in hotels that can make system in hotels that can make hundreds of wake-up calls in an hundreds of wake-up calls in an hour.hour.

Use PriceUse Price

Price can be used to adjust capacity Price can be used to adjust capacity in companies which especially have in companies which especially have mobile products such as car rental mobile products such as car rental companies. Rent-a-car companies companies. Rent-a-car companies may offer low or no drop-off rates to may offer low or no drop-off rates to areas where they need cars. areas where they need cars.

Managing DemandManaging Demand

For managing demand (when demand For managing demand (when demand exceeds capacity), the following exceeds capacity), the following strategies are available;strategies are available;

Use price to create or reduce demandUse price to create or reduce demandUse reservationsUse reservationsOverbookOverbookUse queuingUse queuingShift demandShift demandChange the salesperson’s assignmentChange the salesperson’s assignmentCreate promotional eventsCreate promotional events

Use PrUse Priice to Create or Reduce ce to Create or Reduce DemandDemand

Pricing is one method used to manage demand. Pricing is one method used to manage demand.

When demand is less than capacity, managers When demand is less than capacity, managers lower prices to create demand. For example, lower prices to create demand. For example, Pizza Hut offers “eat as much as you can” on Pizza Hut offers “eat as much as you can” on weekdays between 15:00 to 18:00. weekdays between 15:00 to 18:00.

When demand is more than capacity, managers When demand is more than capacity, managers raise prices to lower demand. For example, on raise prices to lower demand. For example, on New Year’s Eve, many restaurants and hotels New Year’s Eve, many restaurants and hotels offer set menus and packages that exceeds the offer set menus and packages that exceeds the normal prices. Higher prices decrease demand normal prices. Higher prices decrease demand but still be enough to fill the capacity. but still be enough to fill the capacity.

Use ReservationsUse Reservations

Hotels and restaurants use reservations to Hotels and restaurants use reservations to monitor demand. monitor demand.

When there will be more demand than When there will be more demand than capacity, managers can save capacity for capacity, managers can save capacity for the more profitable segments. For example, the more profitable segments. For example, hotels do not except reservation requests of hotels do not except reservation requests of travel agencies when they expect high travel agencies when they expect high demand from the individual travelers. demand from the individual travelers.

When capacity meets demand, reservations When capacity meets demand, reservations can also limit demand by letting managers can also limit demand by letting managers refuse any further reservations. refuse any further reservations.

OverbookOverbook

Not everyone who makes reservations comes – Not everyone who makes reservations comes – no show. As a result hotel rooms remain empty. no show. As a result hotel rooms remain empty. In order to prevent hotel rooms to remain In order to prevent hotel rooms to remain empty, managers overbook – accept more empty, managers overbook – accept more reservations than capacity. For example,reservations than capacity. For example, iif f in in an an X hotelX hotel 20% of the customers with reservations 20% of the customers with reservations do not come, 10 rooms will be empty out of 50 do not come, 10 rooms will be empty out of 50 reservations. If in this hotel, the average rate is reservations. If in this hotel, the average rate is $80, this means a potential loss of $292,000. $80, this means a potential loss of $292,000.

Overbooking must be carefully managed. Overbooking must be carefully managed. Otherwise, customers would be walked to Otherwise, customers would be walked to another hotel and this destroys the reputation of another hotel and this destroys the reputation of the hotel.the hotel.

Use QueuingUse Queuing

When capacity exceeds demand and When capacity exceeds demand and guests want to wait, queues will form.guests want to wait, queues will form.

Queues, such as waits at restaurants, are Queues, such as waits at restaurants, are an effective way of managing demand. an effective way of managing demand. Good management of queuing can make Good management of queuing can make the wait more tolerable for the guest. It is the wait more tolerable for the guest. It is better to overestimate the wait and tell better to overestimate the wait and tell guests it will take 35 minutes, when the guests it will take 35 minutes, when the estimated wait is 30 minutes.estimated wait is 30 minutes.

The following tips are useful for the The following tips are useful for the management of a waiting line; management of a waiting line;

Unoccupied Time Feels Longer Than Occupied Unoccupied Time Feels Longer Than Occupied TimeTime: Managers can create entertainment to : Managers can create entertainment to prevent their guests to get bored from waiting. prevent their guests to get bored from waiting. For example, Disney Land has employees who For example, Disney Land has employees who wear Mickey Mouse costumes talk to kids in wear Mickey Mouse costumes talk to kids in waiting lines, occupying time and making the waiting lines, occupying time and making the wait pass faster. wait pass faster.

Unfair Waits are Longer Than Equitable WaitsUnfair Waits are Longer Than Equitable Waits: : Guests can become upset with a wait if they feel Guests can become upset with a wait if they feel that they are being treated unfairly. For that they are being treated unfairly. For example, after waiting 20 minutes to check-in, example, after waiting 20 minutes to check-in, one guests may have to wait for another 10 one guests may have to wait for another 10 minutes because of a phone call which is minutes because of a phone call which is supposed to be answered by the front desk supposed to be answered by the front desk clerk. In order to eliminate this problem, clerk. In order to eliminate this problem, Marriott has started a policy of removing Marriott has started a policy of removing phones from the front desk.phones from the front desk.

Shift DemandShift Demand

It is possible to shift demand for It is possible to shift demand for banquets and meetings. For banquets and meetings. For example, if the date of a banquet or example, if the date of a banquet or meeting is flexible, managers may meeting is flexible, managers may offer to shift the date to a period offer to shift the date to a period (e.g. 3 days before or after the (e.g. 3 days before or after the stated date) when the hotel is not stated date) when the hotel is not forecasted to be full. forecasted to be full.

Change the Salesperson’s Change the Salesperson’s AssignmentAssignment

In hotels, the director of sales assigns In hotels, the director of sales assigns salespeople to specific segments. salespeople to specific segments.

If the hotel is trying to increase its If the hotel is trying to increase its short-term business, then the short-term business, then the manager should shimanager should shifft the salespersons t the salespersons from the association market (which from the association market (which books a year or more out) to the books a year or more out) to the corporate market (which can produce corporate market (which can produce bookings in a month or less).bookings in a month or less).

Create Promotional EventsCreate Promotional Events

During slow periods, creative During slow periods, creative promotions can be an effective way promotions can be an effective way of building business. For example, of building business. For example, hotels develop special packages and hotels develop special packages and nights, casinos have slot and table nights, casinos have slot and table game tournaments during their slow game tournaments during their slow periods to build business.periods to build business.

Managing ConsistencyManaging Consistency

Consistency means that customers will receive Consistency means that customers will receive the same level of services every time they the same level of services every time they come to the service organization. For come to the service organization. For example, a cream mushroom soup will taste example, a cream mushroom soup will taste the same way it tasted 2 weeks ago, a hotel the same way it tasted 2 weeks ago, a hotel room will look the same way it looked a month room will look the same way it looked a month ago. ago.

In order to manage consistency, a clear In order to manage consistency, a clear company policy must be established. Training company policy must be established. Training the employees the same way and standardizing the employees the same way and standardizing the production with equipment as in the production with equipment as in McDonald’s would be helpful to provide McDonald’s would be helpful to provide consistent service. consistent service.

Useful Links and Useful Links and SourcesSources

Kotler, P.; Bowen, J. and Makens, J. (1999). Kotler, P.; Bowen, J. and Makens, J. (1999). Marketing for Hospitality and Tourism (2nd Marketing for Hospitality and Tourism (2nd ed.). Prentice Hall. NJ.ed.). Prentice Hall. NJ.

Kotler, P. and Armstrong, G. (2006) Kotler, P. and Armstrong, G. (2006) Principles of Marketing (11th ed.). Prentice Principles of Marketing (11th ed.). Prentice Hall. NJ. Hall. NJ.

Middleton, V.T.C. (2004) Marketing in Middleton, V.T.C. (2004) Marketing in Travel and Tourism (3rd ed). Elsevier. Travel and Tourism (3rd ed). Elsevier. Oxford.Oxford.

http://www.hotelsmag.comhttp://www.hotelsmag.com http://www.tourism.bilkent.edu.tr/~edahttp://www.tourism.bilkent.edu.tr/~eda