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Title: It is the whole business seen from the point of View of its final result, that is, from the customer


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(No Transcript)
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Marketing is so basic…
It cannot be considered a separate function.
It is the whole business seen from the point of
View of its final result, that is, from the
customers point of view…
Business success is not determined by the
producer but by the customer. PETER DRUCKER
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OBJECTIVES
After reading this chapter, you should be able to
  • Understand the relationships between the worlds
    hospitality and travel industry.
  • Define marketing and outline the steps in the
    marketing process.
  • Explain the relationships between customer value
    and satisfaction.
  • Understand why the marketing concept calls for a
    customer orientation.
  • Understand the concept of the lifetime value of a
    customer and be able to relate it to customer
    loyalty and retention.

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Marketing for Hospitality Tourism
Chipotle Mexican Grill
  • Chipotle opened in 1993 with the goal of serving
    fresh, gourmet-quality food at reasonable prices.
  • the dream and creation of Steve Ells, a
    graduate of the Culinary Institute of America
  • Steve used to watch the lines of customers moving
    through the tacquerias on Mission Street.
  • I believed… I could make a superior product and
    capture the success of those small restaurants in
    a big way.
  • With his dads help, the first Chipotle near the
    University of Denver sold four hundred dollars
    worth of burritos on opening night.

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Marketing for Hospitality Tourism
Chipotle Mexican Grill - Food with Integrity
  • Food with Integrity - the philosophy that led
    to success, and continues to guide Chipotle.
  • Food must complement and enhance its environment
    and not clash or harm the environment in which it
    exists.
  • Steve insists on fresh productsnot canned,
    frozen, or freeze-dried.
  • Using organic, naturally raised foods, Steve
    entered the natural food niche in restaurant
    operations with emphasis on great-tasting food,
    quality simplicity.
  • the aim was to explore the possibility of
    incorporating as many organic or naturally raised
    foods as possible

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Marketing for Hospitality Tourism
Chipotle Mexican Grill - Environment
  • Mexican restaurants can look alike, with photos
    of Pancho Villa or other decorations the public
    has come to expect as normal.
  • A Chipotle restaurant is different!
  • kitchen and food preparation areas are in front
    of the customers, designed to appeal to the
    senses
  • Customers observe freshness, cleanliness
    variety at the same time they smell the spices
    and hear the sizzle of meat on the grill.
  • this stimulates the appetite and blends the
    ambience of food preparation with food consumption

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Marketing for Hospitality Tourism
Chipotle Mexican Grill - Environment
  • Steve asked sculptor friend Bruce Gueswel to
    design artwork appropriate to the environment.
  • a unique line of original art-work and furniture
    using welded steel, corrugated metal, and wood to
    depict modern renditions of ancient Mayan
    hieroglyphics
  • The style, known as cantina moderne, employs
    metals, plywood, concrete, and glass to provide a
    sophisticated postindustrial feel with exposed
    duct work and pipes.
  • Chipotle restaurants have been given awards for
    design by the American Institute of Architects

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Marketing for Hospitality Tourism
Chipotle Mexican Grill - Pricing Promotion
  • Unlike most quick-service restaurant chains,
    Chipotle offers no coupons or specials.
  • at Chipotle all food all the time is either full
    price or free
  • prices are comparatively reasonable but vary by
    market
  • Thousands of promotional bucks for one free
    burrito are given away during the year.
  • proven to be very popular and productive in new
    markets
  • From there, word-of-mouth supported by free
    publicity in newspapers and magazines serves
    as the principal means of promotion.

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Marketing for Hospitality Tourism
Chipotle Mexican Grill - Customer Loyalty
  • Repeat visits by customers have proven to be very
    high within Chipotle restaurants.
  • Why? The Chipotle experience.
  • Our menu is focused. Our food refined. Our look
    distinctive. Our atmosphere eclectic.
  • Customers see, select, and direct precisely what
    goes into their burrito or taco. Our crews dont
    just take orders.
  • Our recipes are original and innovative. The
    ingredients in our food are the finest and
    freshestwhat we call food with integrity.

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Marketing for Hospitality Tourism
Chipotle Mexican Grill - Staff Loyalty
  • Chipotles loyalty also applies to its employees.
  • We hire talented people who value autonomy,
    responsibility, hard work, and having a little
    fun.
  • We encourage our people to grow as far as their
    ability will take them.
  • Chipotle provides a manager bonus of up to
    10,000 for developing hourly employees into
    managers.
  • promotion from within provides a career for the
    best workers
  • Managers also get to keep 10 percent of any
    revenue gains over the years budget.

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Marketing for Hospitality Tourism
Chipotle Mexican Grill - Social Networking
  • Chipotle has mastered the use of social networks,
    new, powerful forms of media that many companies
    are trying to incorporate into their marketing
    plans
  • A 30,000 prize offered to university or college
    teams to produce the best Chipotle advertisement.
    Chipotle received 45 entries from 18 colleges.
  • winners received air time on TV in movie
    theaters
  • Many of the ads ended up on youtube.com and
    myspace.com where some received a million hits.
  • an effective and efficient way for Chipotle to
    penetrate this media

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Your Passport to Success
Hospitality in a Global Economy
  • As a manager in a global economy, marketing will
    greatly assist your personal career the success
    of the enterprise you manage.
  • in todays hospitality/travel industry, the
    customer is global and is king or queen
  • Customers can enhance or damage your career
    through the purchase choices they make and the
    positive or negative comments they make to
    others.
  • The travel industry is the worlds largest
    industry and the most international in nature.
  • receipts of over 1 trillion and over 1 billion
    travelers

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Your Passport to Success
Hospitality in a Global Economy
  • Thirty years ago there was nothing in Dubai but a
    creek, a sheiks palace, and a reputation as a
    smuggling capital of the Arabian Gulf.
  • Today Dubai boasts some of the worlds best
    hotels 70 billion committed to development of
    tourism.
  • 30 of Dubais gross domestic product is from
    travel tourism, and will increase when
    DUBAILANDTM opens

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Your Passport to Success
Hospitality in a Global Economy
  • The title The Worlds Best Airport is not held
    by a US or European airport, but by Hong Kong.
  • Hong Kong International Airport boasts the
    worlds largest enclosed space, with a terminal
    eventually capable of handling 87 million
    visitors per year
  • The best international airline is Singapore
    Airlines
  • The worlds best hotel is Oberoi Udaivilas in
    Udaipur, India.
  • the other top five hotels are in four different
    countries South Africa, Thailand, Turkey, and
    Italy.

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Your Passport to Success
Managing in a Global Economy
  • Tourism planning/promotion departments and
    hospitality companies are filled with college
    graduates from across the globe.
  • Competition is strong and getting tougher each
    day.
  • yet opportunities are greater than ever before
  • Welcome to marketing…

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Your Passport to Success
Marketing in a Global Economy
  • Today marketing isnt simply a business function.
  • its a philosophy, a way of thinking, and a
    way of structuring your business and your mind
  • marketing is much more than a new ad campaign
  • Marketings task is to provide real value to
    targeted customers, motivate purchase, fulfill
    consumer needs, and never fool the customer or
    endanger the companys image.
  • Creating customer value and satisfaction are at
    the heart of hospitality and travel industry
    marketing.

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Your Passport to Success
Marketing in a Global Economy
  • Todays successful companies are strongly
    customer focused and heavily committed to
    marketing.
  • Accor has become one of the worlds largest hotel
    chains by delivering Lesprit Accor
  • the ability to anticipate and meet the needs of
    their guests, with genuine attention to detail
  • Ritz-Carlton promises delivers truly memorable
    experiences for its guests.
  • McDonalds grew into the worlds largest
    restaurant chain by providing its guests with
    QSCV (quality, service, cleanliness, and value).

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Your Passport to Success
Marketing in a Global Economy
  • Successful hospitality companies know that if
    they take care of their customers, market share
    profits will follow.
  • As a manager, you will be motivating your
    employees to create superior value for your
    customers.
  • You will want to make sure that you deliver
    customer satisfaction at a profit.
  • This is the simplest definition of marketing.

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Customer Orientation
Satisfied Customers
  • The purpose of a business is to create and
    maintain satisfied, profitable customers.
  • customers are attracted/retained when their needs
    are met
  • customers talk favorably to others about their
    satisfaction
  • Some hospitality managers act as if todays
    profits are primary and customer satisfaction is
    secondary.
  • this attitude eventually sinks a firm as it finds
    fewer repeat customers and faces increasingly
    negative word of mouth
  • Successful managers understand that profits are
    best seen as the result of running a business
    well rather than as its sole purpose.

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Customer Orientation
Satisfied, Profitable Customers
  • When a business satisfies its customers, they
    will pay a fair price for the product, which
    includes a profit for the firm.
  • Managers who forever try to maximize short-run
    profits are short-selling both customer
    company.
  • much of the behavior of employees toward
    their customers is the result of management
    philosophy
  • The alternative management approach is to put the
    customer first and reward employees for serving
    the customer well.

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Customer Orientation
Satisfied, Profitable, Repeat Customers
  • Without customers, assets have no value.
  • a new multi-million-dollar restaurant will close
  • a 300 million hotel will go into receivership

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Customer Orientation
Satisfied, Profitable, Repeat Customers
  • It is wise to assess the customers long-term
    value and take appropriate actions to ensure a
    customers long-term support.
  • The Forum Company found the cost of retaining a
    loyal customer is 20 percent of the cost of
    attracting a new one.
  • Another study found an increase in customer
    retention rates yielded a profit increase of 25
    to 125 percent.

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What is Hospitality and Tourism Marketing?
Sales Marketing
  • In the hotel industry, marketing and sales are
    often thought to be the same
  • Sales managers provide prospective clients with
    tours, entertaining them in the hotels food and
    beverage outlets.
  • the sales function is highly visible, where most
    areas of the marketing function take place behind
    closed doors
  • It is not uncommon to hear restaurant managers
    say that they do not believe in marketing.
  • when they actually mean they are
    disappointed with the impact of their advertising

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What is Hospitality and Tourism Marketing?
The Marketing Mix
  • Advertising and sales are components of the
    promotional element of the marketing mix.
  • other elements include product, price, and
    distribution, research, information systems, and
    planning
  • The Four-P framework calls for marketing to
    decide
  • Product the product and its characteristics
  • Price set the price
  • Place decide how to distribute the product
  • Promotion choose methods for promoting the
    product
  • Some critics feel the four Ps underemphasize
    or omit certain important activities

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What is Hospitality and Tourism Marketing?
Products Serving Needs
  • If marketers do a good job of identifying
    consumer needs, developing a good product, and
    pricing, distributing, and promoting it
    effectively, the result will be attractive
    products and satisfied customers.

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What is Hospitality and Tourism Marketing?
Products Serving Needs
  • Marriott developed its Courtyard concept Darden
    designed the Olive Garden Italian Restaurant.
  • Different products, offering new consumer
    benefits.
  • marketing means hitting the mark.

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What is Hospitality and Tourism Marketing?
Effective Marketing
  • The marketing mix must be just thata mix of
    ingredients to create an effective
    product/service package for the target market.
  • This does not mean that selling and promotion are
    unimportant.
  • they are part of a larger marketing mix, a set of
    marketing tools that work together to produce
    satisfied customers
  • The only way selling and promoting will be
    effective is if we first define customer targets
    and needs and then prepare an easily accessible
    and available value package.

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Marketing in the Hospitality Industry
Importance of Marketing
  • The hospitality industry is one of the worlds
    major industries in the US, the second largest
    employer.
  • The entrance of corporate giants into the
    hospitality market transformed it from a
    mom-and-pop industry to an industry is now
    dominated by chains
  • Twenty-four companies now account for over a
    third of all restaurants in the United States.
  • McDonalds leads the restaurant group at over
    30,000 stores in 119 countries serving 52 million
    customers a day
  • Accor, Blackstone Starwood are buying hotel
    chains and operating different brands under one
    organization

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Marketing in the Hospitality Industry
Importance of Marketing
  • In response to growing competitive pressures,
    hotel chains are relying more on the marketing
    director.
  • While the marketing director is a full-time
    marketer, everyone else must be a part-time
    marketer.
  • all managers must understand marketing

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Marketing in the Hospitality Industry
Tourism Marketing
  • The two main industries comprising the activities
    we call tourism are the hospitality and travel
    industries.
  • successful hospitality marketing is highly
    dependent on the entire travel industry
  • Many resort/hotel guests purchase
    travel-hospitality packages assembled by
    wholesalers and offered through travel agents

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Marketing in the Hospitality Industry
Cooperative Marketing
  • By agreeing to participate in packages arranged
    by wholesalers, hotels effectively eliminate
    competitors.
  • Hotel rental car companies have developed
    cooperative relationships with airlines that
    offer frequent-flyer plans.
  • The success of cruise lines is a result of
    coordinated marketing by many travel industry
    members.
  • airlines, auto rental firms, and passenger
    railways cooperatively develop packages with
    cruise lines
  • requires coordination in pricing, promotion
    delivery of those packages

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Marketing in the Hospitality Industry
Marketing Complexities and Definition
  • Government or quasi-government agencies play an
    important role through legislation and promotion
    of regions, states, and nations.
  • Few industries are as interdependent as
    travelhospitality which will only increase in
    complexity.
  • The travel industry must understand the big
    picture and respond to changing consumer needs
    through creative strategies based on solid
    marketing knowledge.
  • Marketing is the art and science of finding,
    retaining, and growing profitable customers.

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Marketing in the Hospitality Industry
Definition of Marketing
  • Many people think of marketing only as
    selling and advertising, which is really only a
    tip of the marketing iceberg.
  • today, marketing must be understood in a sense of
    satisfying customer needs
  • If the marketer understands customer needs
    develops products that provide superior customer
    value and prices, distributes, and promotes them
    effectively, these products will be sought after
    by the customer.

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The Marketing Process
A Five-Step Model
  • Here are steps one through four of a simple
    five-step model of the marketing process.
  • companies working to understand consumers,
    create customer value build strong customer
    relationships

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The Marketing Process
A Closer Look
  • In the fifth, final step, companies reap the
    rewards of creating superior customer value.
  • By creating value for customers, they capture
    value from customers in the form of sales,
    profits long-term customer equity.
  • As the first step, marketers need to understand
    customer needs wants, and the
    marketplace within which they operate.

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See this feature on page 11 of your textbook.
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Understanding the Marketplace Customer Needs
Customer Needs, Wants and Demands
  • The most basic concept underlying marketing is
    that of human needs. A human need is a state of
    felt deprivation.
  • these needs were not invented by marketers, but
    are part of the human makeup
  • The second basic concept to marketing is that of
    human wants, the form human needs take as they
    are shaped by culture and individual personality.
  • wants are how people communicate their needs
  • wants are described in terms of objectives that
    will satisfy needs

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Understanding the Marketplace…
Customer Needs, Wants and Demands
  • Sellers can confuse wants with needs. A drill
    bit maker may think his customer needs a drill
    bit, but what the customer really needs is a
    hole.
  • these sellers forget that a physical product is
    only a tool to solve a consumer problem.
  • These sellers get into trouble if a new product
    comes along that serves the need better or
    cheaper.

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The Marketplace Customer Needs
Customer Needs, Wants and Demands
  • People have almost unlimited wants, but limited
    resources, and so choose products that produce
    the most satisfaction for their money.
  • when backed by buying power, wants become demands
  • Outstanding marketing organizations go to great
    lengths to learn about understand their
    customers needs, wants and demands.
  • they conduct customer research.
  • smart companies also have employees at all
    levelsincluding top managementstay close to
    customers

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The Marketplace Customer Needs
Products, Services, and Experiences
  • Consumer needs and wants are fulfilled through a
    market offering.
  • a product that is some combination of tangible,
    services, information, or experiential product
    components
  • In the hospitality industry, the intangible
    product including customer service and
    experiences are more important than the tangible
    products.
  • a market offering includes much more than
    physical goods or services
  • Consumers decide which destinations to visit,
    events to experience, hotels and restaurants to
    patronize.

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The Marketplace Customer Needs
Tangible Products, Services, and Experiences
  • Managers of resorts realize their guests will be
    leaving with memories of their stay, and try
    to create experiences that will generate pleasant
    ones.
  • at a Ritz-Carlton Resort, every evening at sunset
    they set up chairs on the beach hire a cellist
    to play
  • Marriott provides Dolphin safaris at its Newport
    Beach property, and a water rafting trip for its
    Utah property
  • Lufthansa and Air France created a personalized
    first- class service above regular first class
  • To the consumer these are all products.

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The Marketplace Customer Needs
Customer Value and Satisfaction
  • Customer value is the difference between benefits
    the customer gains from owning and/or using a
    product, and the costs of obtaining the product.
  • Costs can be monetary or nonmonetary a very big
    nonmonetary costs for hospitality customers is
    time.
  • luxury hotels in Hong Kong such as The Shangri-La
    do not expect executive guests to stand in line
    to register
  • Dominos Pizza saves the customer time and
    provides convenience by delivering pizza
  • limited service hotels provide value to the
    overnight traveler by offering a free continental
    breakfast

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The Marketplace Customer Needs
Customer Value and Satisfaction
  • One of the biggest management challenges is to
    increase their product value for their target
    market.
  • managers must know their customers and understand
    what creates value for them
  • Customer expectations are based on past buying
    experiences, the opinions of friends, and market
    information.
  • Marketers must set the right level of
    expectations.
  • if they set expectations too low, they may
    satisfy those who buy but fail to attract new
    customers
  • too high and buyers will be disappointed

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The Marketplace Customer Needs
Customer Value and Satisfaction
  • Managers must realize the importance of creating
    highly satisfied, rather than just satisfied
    customers.
  • On a 7-point scale, with 1 very satisfied and 7
    very dissatisfied, most managers are happy to
    receive a 2.
  • Think of the last time you went to a restaurant
    and were just satisfied. Would you go back?
  • probably not
  • When you walk out of a restaurant and say, Wow,
    that was great!
  • you will probably return and tell others about
    your discovery

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The Marketplace Customer Needs
Customer Value and Satisfaction
  • Results of a guest survey at a Boston hotel show
    a huge gap between a guest who rates a hotel a 1,
    and a guest who rates it a 2.

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The Marketplace Customer Needs
Exchanges and Relationships
  • Exchange is the act of obtaining a desired object
    from someone by offering something in return.
  • Marketing consists of actions taken to build and
    maintain desirable exchange relationships with
    target markets.
  • Beyond attracting new customers and creating
    transactions, the goal is to retain customers and
    grow their business with the company.
  • The concept of transactions leads to the
    concept of a market.

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The Marketplace Customer Needs
Markets
  • A market is a set of actual and potential buyers
    of a product.
  • These buyers share a particular need or want that
    can be satisfied through exchange relationships.
  • Marketing means managing markets to bring about
    profitable customer relationships.

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Designing Customer-Driven Marketing Strategy
Selecting Customers to Serve
  • Marketing management can be defined as the art
    and science of choosing target markets and
    building profitable relationships with them.
  • To design a winning marketing strategy two
    important questions require answers
  • What customers will we serve? (what is our target
    market)?
  • How can we serve these customers best? (whats
    our value proposition)?
  • The company wants to select only customers
    that it can serve well and profitably.

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Designing Customer-Driven Marketing Strategy
Choosing a Value Proposition
  • A companys value proposition is the set of
    benefits or values it promises to deliver to
    consumers to satisfy their needs.
  • such propositions differentiate one brand from
    another
  • The company must decide how it will serve
    targeted customershow it will differentiate and
    position itself in the marketplace.
  • Companies must design strong value propositions
    that give them the greatest advantage in their
    target markets.

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Designing Customer-Driven Marketing Strategy
Marketing Management Orientation
  • What philosophy should guide marketing strategies
    that will build profitable relationships with
    target consumers?
  • What weight should be given to the interests of
    customers, the organization, and society?
  • often, these interests conflict with each other
  • There are five alternative concepts under which
    organizations design and carry out their
    marketing strategies
  • production, product, selling, marketing,
    societal marketing concepts

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Designing Customer-Driven Marketing Strategy
The Production Concept
  • One of the oldest philosophies guiding sellers,
    the production concept holds that consumers will
    favor products that are available highly
    affordable.
  • therefore management should focus on
    production and distribution efficiency
  • Management may become so focused on production
    systems they forget the customer.
  • Unionization of service staff is another reason
    for a production mentality, when workers tend to
    work in accordance with union work rules, which
    often conflict with customer needs.

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Designing Customer-Driven Marketing Strategy
The Product Concept
  • The product concept, like the production concept,
    has an inward focus.
  • This concept holds that consumers will favor
    products which offer the most in quality,
    performance, and innovative features.
  • Focusing only on the products can lead to
    marketing myopia.

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Designing Customer-Driven Marketing Strategy
The Selling Concept
  • The selling concept holds consumers will not buy
    enough products unless the organization
    undertakes a large selling and promotion effort.
  • The aim is to get every possible sale, not worry
    about satisfaction or the revenue contribution of
    the sale.
  • It does not establish a long-term relationship
    with the customer the focus is on getting rid of
    what one has.
  • The concept exists within the hospitality
    industry, with overcapacity being a major
    contributing factor.
  • when owners top management face
    overcapacity, the tendency is to sell, sell, sell

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Designing Customer-Driven Marketing Strategy
Causes of Overcapacity
  • Pride in having the most capacity and false
    belief economies of scale will occur as size
    increases.
  • Economic incentives by governments to build a
    larger tourism/hospitality infrastructure to
    create economic growth.
  • tax laws encourage overbuilding because of tax
    write-offs
  • Poor/nonexistent forecasting planning by
    owners, consultants, financial organizations,
    governments.
  • failure to merge revenue sales/marketing
    management
  • A myth that the travel industry faces almost
    unlimited future demand.

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Designing Customer-Driven Marketing Strategy
The Marketing Concept
  • The marketing concept is a recent philosophy and
    is being rapidly adopted in the hospitality
    industry.
  • It holds that achieving organizational goals
    depends on determining needs wants of target
    markets and delivering the desired satisfaction
    more effectively and efficiently than
    competitors.
  • Four Seasons Hotels, Accor, and McDonalds follow
    this concept fully
  • The pure marketing concept ignores possible
    conflicts between short-run consumer wants
    long-run societal needs.

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Designing Customer-Driven Marketing Strategy
The Concepts Contrasted
Figure 1-3 The Selling and Marketing Concepts
Contrasted
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Designing Customer-Driven Marketing Strategy
The Societal Marketing Concept
  • The newest concept, societal marketing,
    holds that the organization should…
  • determine the needs, wants interests of target
    markets
  • deliver desired satisfactions more effectively
    and efficiently than competitors
  • in a way that maintains or improves the
    consumers and societys well-being
  • It questions marketing concepts in an age of
    environmental problems, resource shortages, rapid
    population growth, worldwide inflation, and
    neglected social services.

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Designing Customer-Driven Marketing Strategy
The Societal Marketing Concept
  • Societal marketing asks if the firm that serves
    satisfies individual wants is always doing
    whats best for consumers and society in the long
    run.
  • Advocates of societal marketing would like
    public-interest groups to guide corporations to
    decisions that will benefit society over the long
    term.
  • Societal pressures are already manifested in
    the marketing of cigarettes, liquor fast-food.
  • hotels restaurants have no-smoking sections
  • restaurants can face liability for serving
    excessive alcohol
  • fast-food pursues environmentally sound packaging

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Designing Customer-Driven Marketing Strategy
Societal Pressures at Work
  • The National Restaurant Association is developing
    an initiative to reduce waste and the carbon
    footprint of restaurants and is working with
    restaurants to create a more socially responsible
    industry
  • Resort developers must consider the impact on
    the of their initial construction, disposal of
    waste products and their use of water.
  • Denigration of the environment makes it necessary
    for marketers to become more socially
    responsible.
  • smart restaurateurs/hoteliers will do this
    before public outcry or laws force them

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Preparing an Integrated Marketing Plan
Chipotle
  • As we read in the chapter opening, Chipotle is
    moving toward the societal marketing concept.
  • the companys marketing strategy outlines which
    customers the company will serve and how it
    will create value for these customers
  • The marketer develops an integrated marketing
    program that will actually deliver the
    intended value to target customers.
  • the marketing program builds customer
    relationships by transforming the marketing
    strategy into action
  • it consists of the firms marketing mix, the
    marketing tools the firm uses to implement its
    marketing strategy

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Preparing an Integrated Marketing Plan
The Four Ps of Marketing Product, Price,
Place, Promotion
  • To deliver its value proposition, the firm must
    first create a need-satisfying market offering
    Product
  • It must decide how much it will charge for the
    offer Price, and how it will make the offer
    available to target consumers Place.
  • Finally, it must communicate with customers about
    the offer persuade them of its merits
    Promotion.
  • The firm must these into a comprehensive,
    integrated marketing program that communicates
    and delivers the intended value to chosen
    customers.

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Building Profitable Customer Relationships
Value-Building Tools - Financial Benefits
  • The first three steps in the marketing process
    all lead up to the fourth and most important
    step, that of building profitable customer
    relationships
  • a company can adopt any of three value-building
    tools to develop stronger customer relationships
  • The first relies primarily on adding financial
    benefits to the customer relationship.
  • airlines offer frequent-flyer programs
  • hotels give room upgrades to their frequent
    guests
  • restaurants have frequent-diner programs
  • Frequency programs often used tiered programs.

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Building Profitable Customer Relationships
Value-Building Tools - Social Benefits
  • The second approach is to add social as well as
    financial benefits, turning customers into
    clients.
  • company personnel work to learn individual
    customers needs and wants
  • products and services are individualized
    personalized
  • A customer may be nameless to the institution.
  • clients cannot be nameless
  • Customers are served as part of the larger
    segment.
  • clients are served on an individual basis
  • Customers are served by anyone available.
  • clients are served by the professional assigned
    to them

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Building Profitable Customer Relationships
Value-Building Tools- Structural Ties
  • The third approach is to add structural ties to
    the financial and social benefits.
  • airlines developed reservation systems for travel
    agents and lounges limo service for their
    first-class customers
  • Sheraton developed flexible check-in and checkout
    times
  • Hilton provides a personalized welcome message on
    the guests television
  • Structural changes are difficult to implement,
    but they are harder for competitors to match.
  • they create a competitive advantage until they
    are matched

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Building Profitable Customer Relationships
Selective Customer Relationships
  • A company should develop relationships
    selectively, determining which customers are
    worth cultivating.
  • because you meet their needs more effectively
    than others
  • customers who are high on profitability and
    frequency deserve management attention.
  • those high on profitability but low on frequency
    can sometimes be developed in higher frequency
    customers

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Building Profitable Customer Relationships
Selective Customer Relationships
  • When it comes to relationship marketing you dont
    want a relationship with every customer.
  • Guests who are in the low-frequency,
    low-profitability quadrant are often bargain
    hunters.
  • they come when there is a promotion and avoid
    paying full price at all costs
  • It is very difficult to build a relationship with
    these price-sensitive customers.

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Building Profitable Customer Relationships
Selective Customer Relationships
  • Some customers are spreading their business
    across several different providers of the same
    service.
  • High-frequency, low-profitability customers,
    may be motivated by the value of additional
    purchases.
  • hotels can show a business traveler advantages to
    staying on the concierge floor where there is a
    lounge to work
  • If we can make our company their preferred
    provider, we can turn them into our best
    customers.
  • Knowing your customers helps you select the
    customers you want to develop a relationship with
    and to strengthen the relationship over time.

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Customer Relationship Management
Selective Customer Relationships
  • Customer relationship management (CRM) may be the
    most important concept of modern marketing.
  • It involves managing detailed information about
    individual customers, carefully managing customer
    touchpoints in order to maximize loyalty.
  • A customer touch point is any occasion a customer
    encounters the brand product, in actual
    experience, personal/mass communication or casual
    observation
  • for a hotel this includes reservations, check-in
    out, frequent-stay programs, room service,
    business services, amenities, restaurants, and
    bars.

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Customer Relationship Management
Selective Customer Relationships
  • CRM enables companies to provide excellent
    real-time customer service through effective use
    of individualized information.
  • important because a major driver of profitability
    is the aggregate value of the companys customer
    base
  • More recently, CRM has taken on a broader meaning
    as an overall process of building and maintaining
    profitable customer relationships.
  • By delivering superior customer value
    satisfaction, it deals with all aspects of
    acquiring, keeping, and growing customers.

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Customer Relationship Management
The Changing Nature of Customer Relationships
  • Companies are building more direct and lasting
    relationships with carefully selected customers.
  • many companies use profitability analysis to weed
    out unprofitable customers and target winning
    ones
  • Once they identify profitable customers, firms
    can create attractive offers and special handling
    to capture these customers and earn their
    loyalty.
  • CRM has allowed companies to serve chosen
    customers in a deeper, more lasting way.

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Capturing Value from Customers
Customer Loyalty and Retention
  • The final step in the marketing process involves
    capturing value in return, in the form of current
    and future sales, market share, and profits.
  • Good CRM creates delighted customers, who remain
    loyal and talk favorably to others about the
    company.
  • studies show differences in loyalty of customers
    who are less satisfied, somewhat satisfied, and
    completely satisfied
  • a slight drop in satisfaction can create a large
    loyalty drop
  • Companies are realizing that losing a customer
    means losing the entire stream of purchases
    he/she customer would make over a lifetime of
    patronage.

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Capturing Value from Customers
Customer Loyalty and Retention
  • Benefits of customer loyalty come from continued
    patronage, reduced marketing costs, decreased
    price sensitivity, and partnership activities.
  • loyal customers purchase from the business
    they are loyal to more often than nonloyal
    customers
  • they also purchase a broader variety of items.
  • Reduced marketing costs are the result of
    requiring fewer marketing dollars to maintain a
    customer than to create one.
  • and the creation of new customers through the
    positive word-of-mouth of loyal customers.

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Capturing Value from Customers
Customer Loyalty and Retention
  • Lifetime value is the stream of profits a
    customer will create in the life of a business
    relationship
  • average life is determined through surveys or
    guest history
  • It measures how much a member of a market segment
    produces per year, multiplied by the average life
    of a member of that segment.
  • Ritz-Carlton knows the life-time value of its
    loyal customer is over 100,000 over their
    lifetime.
  • a restaurant customer can be worth several
    thousand dollars worth of business
  • a travel agency customer can generate over
    50,000 during his/her lifetime by using the
    agency

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Capturing Value from Customers
Customer Loyalty and Retention
  • Many markets have settled into maturity, with not
    too many new customers entering most categories.
  • outstanding companies go all out to retain their
    customers
  • Competition is increasing, and the costs of
    attracting new customers are rising.
  • it might cost five times as much to attract a new
    customer as to keep a current customer happy
  • Offensive marketing typically costs more than
    defensive marketing
  • it takes a great deal of effort and spending to
    coax satisfied customers away from competitors

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Capturing Value from Customers
Growing Share of Customer
  • Good CRM can help marketers increase their share
    of customerthe share they get of the customers
    purchasing in their product categories.
  • banks want to increase share of wallet
  • restaurants want to get more share of stomach
  • airlines want greater share of travel
  • Loyal customers have higher propensity to
    frequently purchase a wider variety of a
    companys products.
  • Marketers train employees to identify possible
    products that may create additional value for the
    customer that they have not purchased yet.

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Capturing Value from Customers
Building Customer Equity
  • Customer equity is the discounted lifetime values
    of all the companys current and potential
    customers
  • The best approach to customer retention is to
    deliver products that create high satisfaction
    and perceived value, resulting in strong customer
    loyalty.
  • the more loyal the firms profitable customers,
    the higher the firms customer equity
  • Customer equity may be a better measure of a
    firms performance than current sales or market
    share.
  • where sales market share reflect the past,
    customer equity suggests the future

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Capturing Value from Customers
Marketings Future
  • Rapid changes can quickly make yesterdays
    winning strategies out of date.
  • The Internet has changed the way we
    distribute travel products, but as a market force
    it is just a little over ten years old.
  • a technology executive stated, The pace of
    change is so rapid that the ability to change has
    now become a competitive advantage.
  • management thought leader Peter Drucker observed,
    …a companys winning formula for the last
    decade will probably be its undoing in the next
    decade.

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Capturing Value from Customers
Marketings Future
  • The importance of CRM has created the need for
    those who understand database marketing and the
    hospitality industry.
  • The worldwide growth of the travel industry has
    created a shortage of managers.
  • in some regions projects are put on hold
    because the developer cannot acquire a management
    staff
  • Marketing, with its customer orientation has
    become the job of everyone, and…

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KEY TERMS
  • Customer equity - is the discounted lifetime
    values of all the companys current and potential
    customers.
  • Customer expectations - are based on past buying
    experiences, the opinions of friends, and market
    information.
  • Customer relationship management (CRM) - involves
    managing detailed information about individual
    customers and carefully managing customer touch
    points in order to maximize customer loyalty.

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KEY TERMS
  • Customer touch point - is any occasion on which a
    customer encounters the brand and productfrom
    actual experience to personal or mass
    communications to casual observation.
  • Customer value - the difference between benefits
    that the customer gains from owning and/or using
    a product and the costs of obtaining the product.
  • Demands - Human wants that are backed by buying
    power, want or need. It includes physical
    objects, services, persons, places,
    organizations, and ideas.

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KEY TERMS
  • Exchange. The act of obtaining a desired object
    from someone by offering something in return.
  • Hospitality industry. Made up of those businesses
    that offer one or more of the following
    accommodation, prepared food and beverage
    service, and/or entertainment.
  • Human need. A state of felt deprivation in a
    person.
  • Human want. The form that a human need takes when
    shaped by culture and individual personality.

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KEY TERMS
  • Lifetime value. The lifetime value of a customer
    is the stream of profits a customer will create
    over the life of his orher relationship to a
    business.
  • Market. A set of actual and potential buyers of
    a product.
  • Marketing. The art and science of finding,
    retaining, and growing profitable customers.

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KEY TERMS
  • Marketing concept. The marketing management
    philosophy that holds that achieving
    organizational goals depends on determining the
    needs and wants of target markets and delivering
    desired satisfactions more effectively and
    efficiently than competitors.
  • Marketing management. The art and science of
    choosing target markets and building profitable
    relationships with them.
  • Marketing manager. A person who is involved in
    marketing analysis, planning, implementation, and
    control activities.

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KEY TERMS
  • Marketing mix. Elements include product, price,
    promotion,and distribution. Sometimes
    distribution is called place and the marketing
    situation facing a company.
  • Product. Anything that can be offered to a market
    for attention, acquisition, use, or consumption
    that might satisfy a need. It includes physical
    objects, services, persons, places,
    organizations, and ideas.

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KEY TERMS
  • Product concept - The idea that consumers will
    favor products that offer the most quality,
    performance, and features, and therefore the
    organization should devote its energy to making
    continuous product improvements.
  • Production concept - Holds that customers will
    favor products that are available and highly
    affordable, and therefore management should focus
    on production and distribution efficiency.
  • Purpose of a business - To create and maintain
    satisfied, profitable customers.

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KEY TERMS
  • Relationship marketing - Involves creating,
    maintaining, and enhancing strong relationships
    with customers and other stakeholders.
  • Selling concept - The idea that consumers will
    not buy enough of an organizations products
    unless the organization undertakes a large
    selling and promotion effort.

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KEY TERMS
  • Societal marketing concept - The idea that an
    organization should determine the needs, wants,
    and interests of target markets and deliver the
    desired satisfactions more effectively and
    efficiently than competitors in a way that
    maintains or improves the consumers and
    societys well-being.
  • Transaction - Consists of a trade of values
    between two parties marketings unit of
    measurement.
  • Value proposition - The full positioning of
    brandthe full mix of benefits upon which it is
    positioned.

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EXPERIENTIAL EXERCISES
Try One !
  • Restaurant - Visit two restaurants in the same
    class, such as two fast-food restaurants or two
    casual restaurants.
  • observe the cleanliness of the restaurants,
    in-house signage, and other physical features
  • order a menu item and observe the service and
    the quality of the food
  • Write up your observations, and then state which
    restaurant you feel is more customer oriented.
  • explain why

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EXPERIENTIAL EXERCISES
Try One !
  • Hotel - Call the central reservation number of
    two hotels. Request information on room
    availability, different room types, and price for
    a date one month from now. (Note Do not make a
    reservation.)
  • Write up your experience, including
  • description of how quickly the phone was answered
  • customer orientation of information provided
  • friendliness of the employee
  • Based on your experiences, which hotels do you
    feel had the more customer-oriented reservation
    system?
  • why?

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Web Site
www.prenhall.com/kotler
  • One of the support features of this book is a Web
    site to assist you www.prenhall.com/kotler
  • The site serves as a portal to a wealth of
    information on marketing and travel hospitality
    organizations.
  • Designed to give real-world examples of how
    companies market and provide information on
    companies mentioned in the book
  • The site also contains a resource guide, where
    students can find information about marketing.
  • major association sites, job information,
    and research information can be found in this
    section

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INTERNET EXERCISES
Try This !
  • Choose three restaurants or hotels listed on the
    books Web site under Internet Exercise Chapter
    1,
  • or use restaurant/hotel companies you find on the
    Internet
  • Based on information provided in each Web site
  • describe how each of these companies tries to
    satisfy a customers want
  • how does each of these companies create value for
    the customer?
  • do they segment the market by offering pages for
    a specific market segment?
  • select the company you would purchase from
    and state why

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END
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