This approach is suitable if the host country marketing strategies are targeting host country customers. Consumer responses to the physical environment There are three types of human responses to the physical environment: cognitive, emotional and physiological. They may run out of working capital. Adults dining out without children can afford the time and money to have a more sophisticated eating out experience. The most visible example of mass marketing in hospitality is the fast-food market, although even here it is possible to detect marketing responses to segmentation variables. Services are intangible goods or products that cannot be felt or examined before they are purchased and consumed. The cinema, hospital staff and visitors generate demand at normally low season periods, like early Saturday evening. Journal of Contemporary Hospitality Management, 11(4), 155–164. This is a personal conflict that individual employees need to resolve, or they may have to choose to leave the company. Voicers Unlike passive people, some consumers believe that actually complaining is a positive action for both the customer and the company. This process of identifying subsets of consumers who have distinct, homogenous demand characteristics is called market segmentation. Finally, customer-contact employees need to be aware of what is happening during the implementation of events and campaigns, in case customers ask them any questions. Taking the view that successful marketing demands focusing on the customer, this text concentrates on understanding and determining customer needs, relevant factors in consumer buying behaviour and the effectiveness of today's marketing ... The world’s major tourist cities have powerful images, which in tourism terms are represented by one or a series of iconic images easily recognizable by international tourists. Specialist collateral needs to provide all the essential information a customer wants to know. Some of these segmentation variables have already been discussed in the consumer behavior and customer expectations sections of this chapter. This can enable a hospitality company to gain a competitive advantage if its rivals are not carrying out similar primary research. Objectives should be Specific, Measurable, Achievable, Realistic, and carried out within a set Timetable (SMART). To standardise or not to standardise? Growth. An appropriate site will have the necessary characteristics to ensure strong demand for the business. Gateway locations Gateway locations are locations based at convenient destination access points, such as major airport terminals, key shipping ports and railway station termini. By definition these requests are unusual; indeed, they may even be contrary to the company’s Standard Operating Procedures. Ways to manage the problems of inseparability include: Ensuring that customer segments are compatible Ensuring that the operations system is suitable for the projected market demand Adopting appropriate booking policies Organizing effective queuing systems Training staff effectively. This helps marketers to identify trends and plan for the future. Employees such as kitchen crew and waiting staff need to be able to perform their jobs effectively and efficiently, but the needs of the customer must also be considered. An example is the convenience eating-out market, which competes against substitute convenient eat-at-home products marketed by supermarkets. Seven- and fourteen-day holiday packages are organized by tour operators in each target country for the hotel, and are generally booked through travel agents. Customers want competitive prices, and there are limits to how much customers are prepared to pay for higher levels of satisfaction. The marketing process refers to selecting target markets, developing a marketing mix for each target market, conducting marketing research, and scanning the external environment for opportunities and threats to the business. The design of service quality standards should match the customers’ expectations; however, less professional hospitality companies do not set formal service standards, and can have ambiguous, reactive approaches to service systems design. Hotels strive to encourage regular and repeat customers, and over time hoteliers can build strong, long-lasting, special relationships with their ‘regulars’. Mixing market segments A key issue for all hospitality operations is to ensure that the various target markets are compatible. 54 Hospitality Marketing Introduction In this chapter we will review the complex topics of consumer behavior and customer expectations, and then explore the principles and practice of market segmentation and target marketing. Journal of Retailing, 64(1), 5–7. Part D Post-encounter marketing Chapter 13 Managing customer satisfaction Chapter Objectives After working through this chapter, you should be able to: Define customer satisfaction Understand the importance of satisfying customers Evaluate customer satisfaction guarantees in hospitality Describe tools for measuring customer satisfaction in the hospitality industry. Delivering a memorable hospitality experience consistently is a major challenge for hotel and restaurant organizations. These alienated individuals publicize the service company’s failings in newspaper advertisements. The hotels have accommodation designed by Philippe Starck (pure white, all white décor and stainless steel bathrooms), fashionable restaurants and attractive staff (aspiring actors and models recruited from adverts in Variety). Time based services, like room service delivery or pizza home delivery, are good examples of explicit satisfaction guarantees. The small number of hospitality companies that introduced unconditional service guarantees have: Been forced to adopt a customer orientation, and to view customer satisfaction from the consumer’s perspective Had to review the entire customer experience to eradicate failure points (areas of customer dissatisfaction) Effectively used the service guarantee as a differentiator in marketing communication campaigns Increased brand awareness and market share Been able to monitor the cost of consumer dissatisfaction by the cost of refunds to dissatisfied customers Used customer complaints to identify and correct service and maintenance problems 288 Hospitality Marketing Given managers and employees measurable customer satisfaction performance goals Effectively used the concept of unconditional guarantees in employee teambuilding exercises Achieved significant reductions in employee turnover. Prentice Hall. Although cost-orientated objectives are widely used in hospitality operations, they fail to take in to account external competitor and customer factors. The last ten years have witnessed a dynamic building period, with massive investment in new Introduction to hospitality marketing 25 resorts, hotels, restaurants, cruise ships, leisure facilities and casino operations culminating in excess capacity in most sectors of the industry and in many parts of the world. Direct marketing Hospitality unit 2. Examples from the industry are provided to illustrate real-life practice and give you a better understanding of hospitality marketing. The Shangri-La program focuses on recognition and provides rewards linked to the hospitality offered by the hotel. By David Bowie, Francis Buttle, Maureen Brookes, Anastasia Mariussen. Pricing objectives to build market share quickly, a strategy known as penetration pricing, include a special offer encouraging potential customers to trial purchase. The impact of ICT and the Internet has transformed the distribution channel, and is changing relationships between hospitality providers and travel agents, tour operators, conference placement houses and incentive houses. An airline seat is a relatively simple, homogenous product, whilst most hotels offer a heterogeneous product with a wide range of room types, a more complex rate structure and different property characteristics. How valid are the criticisms of internal marketing in a hospitality company compared to your own experience? Main Responsibilities This discipline forces managers to decide precisely what information is needed. A typical cost-orientated pricing objective would be: ‘to set restaurant prices to achieve a food operating cost of 30 percent during the financial period from April to September’. This zone ranges around the customer’s judgment of what is a reasonable expectation of the supplier. (Source: Ski Olympic) The under- or over-utilization of capacity creates operational difficulties. Reich, A. In addition, the costs of managing a declining brand are disproportionate to the benefits generated. Since the product concept is proven, the key issue in expanding geographically is to ensure that the characteristics of the new target market are similar to those of existing successful markets. However, not all factors are equally influential, and some can be regarded as more important in achieving competitor advantage than others. Indeed, some frequent customers might even be extremely dissatisfied with the offer, and complain, but still have to stay because of the lack of alternatives. 102 Hospitality Marketing Over time, the company builds up greater expertise in serving its customers and in delivering customer satisfaction, as well as enjoying greater operational efficiency and potentially enhanced profitability. The importance of managing service processes In Chapter 1 we discussed the special characteristics of services (SIPIVISH) that present challenges in marketing the hospitality business and managing the service process. Researchers posing as customers check whether a unit is conforming to the brand standards, and evaluate the operation from a customer perspective. Effective public relations activity uses a wide range of different activities, events, and human interest stories that generate brand awareness and raise brand image. The business travel segment contains business trips that are unavoidable, like sales meetings with customers and technical visits to factories by engineers. The advantages of using costplus pricing are as follows: The selling price is based on factual costings Management judgment is not required; the calculations are easily computed It is the most simple pricing method to implement Similar costs for outlets within the same product category should follow similar pricing policies, thus avoiding competition based on price alone Table 7.2 Cost-plus Pricing Cost (C) (Purchase price) (£) Mark-up (f(C)) (%) Selling price (P) (£) Cost (% margin) Profit (% margin) 2.00 2.00 2.00 2.00 50 100 150 200 3.00 4.00 5.00 6.00 66.6 50 40 33.4 33.4 50 60 66.6 Pricing the offer 165 It helps management to forecast costs, and can be used as a control mechanism to monitor performance. Hospitality employees can – indeed they should – be involved in the situation audit. Table 6.1 provides a typical example of a European Development strategy for a major international hotel group. Continuous training and career development is a hallmark of the most successful hospitality companies. Employing Human Resource Strategies for Service Excellence. Transparent pricing Consumers searching hospitality and tourism Internet sites can easily compare the products offered and the published prices, making Internet prices transparent. The high cost of distribution forces principals to investigate more cost-effective distribution channels, like the Internet. Process – Travel Inn is a simple product, with minimum service levels (only reception and housekeeping); customers who want to eat visit the Whitbread restaurant or pub next door. In the extraordinary service company, heroes become the personification of what is best about the company. This local adaptation of the hospitality offer should provide enhanced customer satisfaction, but is not as cost-effective as standardizing the marketing offer. Loyalty We will now discuss the concept of loyalty, the relationship marketing ladder of loyalty, frequent guest programs in hospitality, and customer disloyalty. However, more complicated hospitality products – for example, major conference bookings from key corporate accounts, and intermediaries who can produce volume bookings – require more detailed discussions in face-toface meetings. These companies experiment and think Marketing planning 319 ‘out-of-the-box’. The surrounding environment, the external appearance of the building, landscaping, access routes, car parking facilities, signage and logos, and lighting are the shop window for the hospitality business. Inform communication strategies Companies need to ensure that potential customers are aware of their marketing offer. Unsustainable strategies Unfortunately, some hotels implement over-priced strategies, which are unsustainable as a long-term proposition. Exit surveys are held by virtually all major hotel chains and many independent hotels, which have questionnaires (often in the bedrooms) available for residents to complete. Product concepts are targeted at selected market segments with different needs and wants. The pub sponsoring a local children’s football team by buying their strip can generate huge goodwill and a positive brand image. Young adults have very different interests, tastes and income levels compared with people in their sixties and seventies. Hilton has agreements with more than 60 airlines, and encourages double dipping. Divisional marketing planning A divisional marketing plan focuses on the goals of a major division of a hospitality company. Skimming. In some instances, the corporate objectives very clearly dictate pricing objectives – a corporate objective to maximize profits in the short term leads to a marketing objective of setting prices designed to maximize current cash flow, regardless of the type or suitability of the sales generated. Intermediaries Intermediaries are those companies who advise, influence and make bookings for customers. Case study 6.2 Destination marketing at work The Seychelles Tourism Marketing Authority is responsible for marketing the Seychelles, a collection of 115 unspoilt islands in the Indian Ocean. The level of diversity refers to the degree of tolerance allowed in delivering the service process. The problem of customers abusing the unconditional guarantee is solved in the following way. Reference groups perform two functions: they set and enforce standards, and they act as points of reference for individuals to compare their behaviors. Examples of critical success factors in the hospitality sector include: Lowest cost base for chain budget hotels High brand image and high brand awareness for international hotel luxury chains Technical superiority in food production processes for fast-food chain restaurants Consistent standards of service in standardized hospitality branded concepts Easy to find locations and secure parking facilities for provincial business hotels competing in urban locations Superior service, provided by well-trained and highly motivated personnel, in luxury country house hotels. Societal marketing orientation In the 1980s, the marketing orientation was criticized for its narrow focus and lack of concern for environmental and social issues. When the surrounding environment does match the hospitality product, potential customers will be attracted to the physical environment. Now check your understanding of this chapter by answering the following questions: Review questions 1 Discuss the influences that impact on hospitality consumer behavior. People are, to varying degrees, comfortable in a physical environment or they are uncomfortable. If the company has a mark-up policy of 300 percent of the cost price, to provide a 25 percent cost margin and a 75 percent profit margin, then the selling price of £8.00 is calculated thus: P 2.00 300%(2.00) £8.00 Table 7.2 provides a range of possible selling prices for the bottle of wine, depending upon the company’s target cost/profit margin. In hotels, yield is measured by comparing the actual revenues generated by rooms with the potential revenues that could have been yielded at full occupancy (see Chapter 7 for more details). A distinction needs to be drawn here between those hotels catering for long stay, long haul holidays and those catering for short leisure breaks within a couple of hours traveling time of the customer’s home. Companies that stress product leadership nurture ideas, translate them into product–service concepts, and market them successfully. This increase in occupancy will also incur additional laundry, housekeeping, maintenance, energy and front desk costs, Current occupancy 50 52 54 56 58 60 62 64 66 68 70 72 74 76 80 88 90 Occupancy required to maintain sales revenue, following rate cuts of: 5% 10% 53 55 57 59 61 63 65 67 69 72 74 76 78 80 84 93 95 56 58 60 62 64 67 69 71 73 76 78 80 82 84 89 98 100 15% 59 62 64 66 68 71 73 75 78 80 82 85 87 89 94 104 106 20% 63 65 68 70 73 75 78 80 83 85 88 90 93 95 100 110 113 25% 67 69 72 75 77 80 83 85 88 91 93 96 99 101 107 117 120 Figure 7.2 The cost of cutting prices (source: Buttle, F., 1986, Hotel and Food Service Marketing, Cassell, p. 266, reproduced by kind permission) Pricing the offer 171 as well as possible marketing communication costs involved in the promotion of the new pricing policy. ... HRIM 201, Introduction to Management in the Hospitality Industry, 2011. However, when designing the hospitality product, music plays a key role in complementing the décor and creating atmosphere in public areas. For example, improving the customer retention rate from 75 percent to 80 percent grows average customer tenure from 10 years to 12.5 years. Some organizations, including government bodies and pressure groups, may deliberately manipulate data to present findings to pursue their own agendas. It is the manager’s task to make decisions based on the information available. The area analysis focuses on the characteristics of specific local areas within a region. In these circumstances, public health and safety are the most important issues, and price does not influence demand. One of the reasons why service firms (including hospitality companies) can increase the profitability significantly by reducing customer defection rates is due to the high fixed and semi-fixed cost structure of the industry. The physical environment and physiological response People have different physiological responses to environmental stimuli. Once consumers have 110 Hospitality Marketing experienced and liked a hospitality brand they will be more likely to use the other outlets in the chain, since the brand promises to reduce the risks for the customer when traveling away from home. We will now look at how the industry has evolved in these regions (Todd and Mather, 1998). Unfortunately, hospitality employees can suffer from sexual abuse and violence from customers and co-workers. The concept of providing international product standards with local adaptations – sometimes called globalization – combines the best of both approaches effectively. There are four main classes of error in marketing research: 1 Sampling errors. If there is a service problem, loyal customers are more likely to report it because they genuinely want to help. From a customer’s perspective, low-risk and low involvement hospitality products do not really need a detailed personalized explanation via a face-to-face meeting. We will now discuss the influences on consumer behavior and the hospitality buyer decision-making process. Osman, H. (2001). 1. In the matrix, cell I of the matrix represents a competitive strength – an area where the customer is satisfied with the company’s performance on important attributes. 56 Hospitality Marketing However, although culture is deeply rooted, it can and does change. In this sense, the physical environment acts as a tangible clue for consumers and helps them to categorize the firm’s marketing offer accordingly. Exchange rates Exchange rate fluctuations present unique pricing difficulties for hospitality operators catering for international group markets, as contracts between hotels and tour operators can be negotiated eighteen months in advance of customers actually taking a package holiday. The Internet and hospitality distribution Since the GDS is a closed network, information is only available to the users – the principals and the intermediaries. Goals can be developed for pre-encounter marketing (raise awareness, develop expectations, develop preference), encounter marketing (achieve revenue and average spend targets) or post-encounter marketing (satisfaction, intention to do repeat business, share of customer spend). This promise, which has a trademark copyright protection, is mainly promoted in the bedrooms. There are also examples of customers suing hospitality companies for damages caused by unsatisfactory service. Mass marketing Companies that adopt a mass marketing (or undifferentiated) strategy are responding to the similarities of consumers’ needs and wants in large markets. First, hospitality consumers are enormously varied in their expectations and requirements. For example, the rooms division manager may need to find a solution for an unexpected loss of business. We discussed the surrounding environment in Chapter 6, within the context of site selection criteria, and emphasized that the surrounding area must be compatible with the product concept. The way in which the hospitality corporations have introduced branding has varied. The major hospitality players use both strategies to influence intermediaries and end users. Customers attending unique events, like wedding receptions, sports matches and exhibitions, will stay at or near the venue, and may never have another reason to visit the area. Segmentation and targeting are based on two simple facts. Indirect methods included tracking actual sales and profit figures compared to forecast and previous period performances. There are three levels of spatial analysis in researching locations (Ghosh and McLafferty, 1987). The redecorating and ‘re-imaging’ program was brought forward and completed by September. The marketing communication campaigns for the major hospitality companies such as fast-food chains are part of a long-term, coordinated, planned and professional activity to support the company’s marketing objectives. Consumer behavior research into personality traits can explain why certain types of personality might respond to certain types of physical environment differently. What is relationship marketing? The UK Hotel Brands omnibus survey is carried out each year by BDRC (see Case study 2.1). The question now becomes: what volume of sales is needed to produce a net profit of $4 million? Price – each brand has one single price structure, and there are no discounts. A key feature of marketing orientated companies is that they have an external focus and are constantly researching their customer needs and wants, their competitors, and the environment in which they operate. Physical environment The physical environment (or physical evidence) consists of the tangible features of the hospitality offer – the external appearance of the premises (the landscaping, lighting and signage) and the internal layout (appropriate decor, furniture and furnishings). Case study 1.2 Ski Olympic – a seasonal business Ski Olympic, a British tour operator with a single product – skiing in the French Alps – owns chalet hotels like Les Avals in Courcheval. This unique book examines the internal and external drivers of innovation in the market place, the difference between innovative firms and those that merely follow trends, and explanations and examples of innovations in special areas of the ... The extraordinary service company ’ s Standard Operating Procedures a reasonable expectation of the corporations. And make bookings for customers be involved in the following way expectations and requirements décor. 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