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  1. MARKETING - PLANNING Presented by Dr. Ben Dewald The Collins School of Hospitality Management The Collins School of Hospitality Management

  2. Outline • Marketing • The 4 P’s • The 7 P’s • Promotion strategy • People strategy • Physical evidence strategy • Process strategy The Collins School of Hospitality Management

  3. Marketing • Organizations use marketing to develop and sell their products and services. • Most firms have a marketing department that carries out the functions of marketing. • How to market products and services. • The main emphasis is on the marketing mix which is the specific combination of interrelated and interdependent marketing activities that an organization does to achieve its objectives. • When we think of the marketing mix we often think of the four P’s. • These are sometimes called the controllable variables because they can be manipulated by marketers. The Collins School of Hospitality Management

  4. Source: Adapted from McDonald (1999) The 4P’s The Collins School of Hospitality Management

  5. The 7P’s • However the 4Ps have been much debated and extended to include other elements. We shall follow Cowell's (1984) approach which is to consider services to have seven elements in the marketing mix (i.e. 7Ps). • Product • Price • Place • Promotion • People • Physical evidence • Process The Collins School of Hospitality Management

  6. Source: Adapted from McDonald (1999) & Cowell (1993) The Additional P’s The Collins School of Hospitality Management

  7. Marketing Mix • Remember that by adapting the marketing mix elements, you can develop a marketing program that achieves your objectives. • The marketing mix elements will often alter as a product-market changes, and a business continues to look for ways to be successful. • Here we will look at promotion, people, physical evidence and process. The Collins School of Hospitality Management

  8. Topic 1 : Promotion Strategy • Examine the communications process and describe the two parties that are involved, the sender (usually the business) and the audience (the customers). • 6 promotional tools that restaurants can use in a promotion strategy: advertising, publicity, direct marketing communications, sales promotion, personal selling and public relations, Topic 2: People Strategy • Employees of service businesses • The service encounter and the role of internal marketing. • Customers and their 3 roles: as producers of services, as users of services, and as an influence on other customers. Topic 3: Physical Evidence Strategy • We look at how a servicescape includes the physical environment and the atmosphere of an organization. • 3 ways that buyer behavior is affected by the look and feel of the environment and image a business creates. Topic 4: Process Strategy • We examine what a service process is and at why managers need to think about complexity and divergence in service processes. The Collins School of Hospitality Management

  9. Your Objectives • Distinguish between the six promotional tools that can be used in a promotion strategy. Comment on how each can be used by hospitality/tourism businesses to communicate with customers (and potential customers). • Define the term 'service encounter' and explain why service personnel are particularly important in restaurant businesses. • Describe the purpose of internal marketing for hospitality businesses and how this relates to the development of a people strategy. • Briefly explain the three levels that marketing professionals can use to consider customers when they develop a people strategy. • Define the term 'servicescape' and describe three ways that buyer behavior is affected by physical evidence and atmosphere. Comment on why hospitality/tourism businesses should develop a physical evidence strategy. • Explain how operations management and marketing management come together to develop a process strategy for hospitality/tourism businesses. • Distinguish between process complexity and process divergence and explain briefly how they relate to improving service quality as part of a process strategy. The Collins School of Hospitality Management

  10. University related Business Pleasure Tourist Age group Income … Track reservations & walk-ins. Share information (by email) with other Groups. See where you are up or down. Who is your Customer? The Collins School of Hospitality Management

  11. 4. Promotion Strategy As Cravens et al (2000) forcefully tell us: "Marketing communications are essential to marketing strategy. Without … it, sales would not be transacted, prospective buyers may not ever become aware of, let alone sufficiently interested to search out and buy, the goods and services that we have to offer them." (Cravens et al. 2000 p227) The Collins School of Hospitality Management

  12. The Communication Process • The objective of communication is to get a response from the audience. • In marketing this usually means getting customers to try, and then repurchase the brand (to become adopters): Regulars • Marketing communications can also be used to build customer loyalty. The Collins School of Hospitality Management

  13. Promotional Tools • Your challenge is determining who is the target audience, deciding what needs to be communicated and formulating the mixture of tools that will best suit these objectives. • You than have to plan a promotional strategy and budget each component before launching their campaign The Collins School of Hospitality Management

  14. Advertising • Defined as any non-personal form of communication through a designated paid medium with an identifiable sponsor. Media included but limited to television and radio broadcasting, newspaper and magazine, transits, outdoors and others. • Most advertisements aim to persuade customers that the product or service will meet their needs and offer them value. The Collins School of Hospitality Management

  15. Advertising 2 • It is important to be clear about the objectives of advertising (as it can be very expensive) and to develop an appropriate message. It is also important to have a carefully calculated budget. • Then it is necessary to select the media to be used. Typically the choice is between television, radio, press, magazines or outdoor billboards. Recently the Internet has offered another media option - banner advertising. Each of the different broad choices of media have different characteristics (coverage, frequency and impact). The Collins School of Hospitality Management

  16. Publicity • Publicity is free advertising. • A business may have to do something to attract attention, but they do not pay for the media exposure they receive. It can be very beneficial (and cost effective) and has the benefit of enhanced credibility because it does not appear to be advertising. • Publicity can be negative as well as positive. • It is also less controllable than other aspects of marketing communication. The Collins School of Hospitality Management

  17. Public Relations • Public relations are activities that the business undertakes to communicate to the public which are not paid for directly. • The public can include customers, the trade, shareholders, government bodies, local communities and employees. • According to Doyle (1994) the major public relations activities are: • achieving positive coverage in the media; • creating and reinforcing the corporate image; . sponsoring special events; • lobbying politicians and officials; and • advising management about key public issues. The Collins School of Hospitality Management

  18. Public Relations • Large businesses find public relations a useful marketing tool, and one that is cheaper and more effective than advertising. • Public relations can create product awareness and interest. It can influence specific target market segments and enhance corporate image. It can be useful when dealing with crises (such as food contamination scares). The Collins School of Hospitality Management

  19. Direct Marketing Communications • Direct mail and telesales are examples of direct marketing communications. • They are sometimes called direct marketing or direct response marketing. • Direct mail (brochures, letters and catalogues) is usually received through the post, whereas telesales are received via the telephone. • More recently fax and e-mail have been used to send direct communications. Will you do you do any of these? The Collins School of Hospitality Management

  20. Direct Communications vs. Advertising • It usually targets named individual customers, rather than operating indirectly through a mass medium (like newspapers or television). • It normally aims at an immediate response, rather than an increase in awareness of positive feelings about a brand. • Customers buy direct rather than through an intermediary (a salesperson or agent). The Collins School of Hospitality Management

  21. Database • Direct communications rely on a good database of customers that should be targeted. Some companies buy databases from research agencies. • With technology advances it is becoming increasingly common for businesses to build their own from their records of the activities of existing customers. • For a business it is relatively low cost and efforts can be precisely targeted. It may also allow for some degree of customization. The Collins School of Hospitality Management

  22. Sales Promotion • Sales promotions give customers an economic incentive to buy. • These incentives are often in the form of price reductions, free goods or the chance to win prizes. The Collins School of Hospitality Management

  23. 3 Types of Sales Promotions • Consumer promotions - price reductions, coupons, vouchers, competitions, free goods, premium offers, trade-in offers, stamps, guarantees, events and displays. • Trade promotions - dealer loaders, loyalty bonuses, sale or return, range bonuses, credit, delayed invoicing, new product offers, competitions, trade-in offers, free services, training and reciprocal buying. • Sales force promotions - bonuses, commissions, coupons, free gifts, competitions, vouchers, free services, points and money equivalents. Doyle (1994) The Collins School of Hospitality Management

  24. Sales Promotions • Sales promotions can be targeted quite carefully and can be used flexibly. • They can be used to manipulate or shift demand, to encourage greater volume or frequency of purchasing, to add value to a product or service offering and to reward customer loyalty. • Sales promotions are popular with businesses but are usually used to support other promotional tools. • Sales promotion campaigns may have a limited life-span, and not be re-used. The development costs must therefore be carefully assessed. The Collins School of Hospitality Management

  25. Coupons and Discount Cards • McDonalds - coupon campaign in May 2000 offering 85 food combinations for $16. • Watsons Wine Cellar - coupon offer in May 2000 with $3 discount on selected wines with purchases over $30. • Tony Romas - ongoing lucky draw promotions and other privileges to diners such as a appetizer coupon and a $5 cash coupon. • Koublai's group - privilege card offering 25% discount for cash at lunchtime and 15% at dinner. Credit card purchases discounts of 20% and 10% respectively. The Collins School of Hospitality Management

  26. Your Thoughts • Think about your own use of coupons and discount cards. • Do they tempt you to try new places/new products? • Do they encourage your loyalty? The Collins School of Hospitality Management

  27. What About: • RKR-Club-Card for a price allowing the customer to eat for free with another guest for a specified time period. • Cards for Concierges and/or other hotel/tourism personnel who assist guests in making restaurant reservations. • Take away menus. • Sales Blitzes using Cal Poly Students • ... The Collins School of Hospitality Management

  28. Personal Selling • Personal selling deals with customers on a direct or face-to-face basis. • Personal selling allows two-way communication between buyers and sellers. • The business can investigate the needs of the buyer. • It generally has more flexibility in adjusting its offer and can alter the way its products/services are presented to meet those needs. • Relationship Marketing vs. Hard sell. The Collins School of Hospitality Management

  29. Promotion Summary • Promotion (marketing communications) is essential to marketing strategy. • In the promotion strategy, there is an integrated mix of promotional tools that are designed to be effective at reaching the target market(s), that sustain the positioning strategy and that are cost effective. • Objectives must be set carefully for the whole promotional campaign, and for each component of the mix. The Collins School of Hospitality Management

  30. 5. People Strategy • Employees are service personnel. • Service encounter and the role of internal marketing. • Customers have three roles: • Producers of services, • Users of services, • Influence on other customers. The Collins School of Hospitality Management

  31. Service Personnel • In the foodservice industry we are aware of the importance of good service personnel and how they 'sell' the products/services as much as formal sales staff do. • Service personnel are trained to do their job efficiently and effectively - they are usually also trained to have a strong customer orientation. • This in turn reflects the image of your restaurant. The Collins School of Hospitality Management

  32. Internal Marketing • The success of marketing a service is tied closely to the selection, training, motivation and management of people. • "an important activity in, contributing to the people element of the marketing mix and in developing a customer-focused organization." (Payne 1993 p167) The Collins School of Hospitality Management

  33. Customers as Producers of Services • Because customers go to the service facility, many service businesses develop multi-site operations. Each site has a limited geographic area from which to draw customers. • This can result in difficulties achieving uniform service standards. • For example chain restaurants may have identical menus but customers may use whichever is most convenient (in terms of location) at the time. They may have different meal experiences according to which of the chain restaurants they use. • This is called called this heterogeneity The Collins School of Hospitality Management

  34. Customers as Users of Services The customer needs are translated into a set of desired attributes like: • Security (e.g. service reliability); • Consistency (e.g. reliability of reactions); • Attitude (e.g. interpersonal reactions); • Completeness (e.g. array of services provided); • Condition (e.g. 'atmosphere' of the service environment); • Availability (e.g. the ease of access in terms of time or location); and • Timing (e.g. length of time required for service). The Collins School of Hospitality Management

  35. Customers as Users of Services • Competitors also offer services with a range of attributes, all of which are communicated in a variety of ways. • They are perceived and judged by consumers who then make a choice about what to buy. • You have to consider the message you give and the complex buying behavior of your target customers. The Collins School of Hospitality Management

  36. Customers as an Influence on other Customers • Cowell (1984) comments that this is an area that is often overlooked by marketing professionals. • He notices that particularly during group services the interaction between customers may be significant in affecting their perceptions of product/service quality. • At present the nature of these interactions is only implicitly recognized by marketing professionals. The Collins School of Hospitality Management

  37. Define People Strategy • A people strategy is deciding how staff behavior, attitudes and interpersonal skills are to be directed to sustain the positioning of the business. • This may involve consideration of customer behavior. The Collins School of Hospitality Management

  38. Consider when developing a People Strategy • Recognize whether the service business has high- or low-contact service encounters • Understand the value of internal marketing and work w/ HR • Have clear view about how the service element of the product contributes to a sustainable competitive advantage. The Collins School of Hospitality Management

  39. 6. Physical Evidence Strategy • A physical evidence strategy is used to shape the image of a business and its services. • There are things that managers can control that have a direct impact on customer perceptions. • Physical evidence relates to buildings, furnishings, layout, color and lighting. • It also includes the goods associated with the service like tickets and brochures. The Collins School of Hospitality Management

  40. Physical Evidence • The physical environment includes the furnishings, color, layout and noise level. • The facilitating goods are things that enable the service to be provided - for example, the chinaware used in your grill rooms. • Other tangible clues are the 'packaging' of take-away food. The Collins School of Hospitality Management

  41. Servicescape • Lovelock and Wright (1999) use the term servicescape to mean the “Impressions created by the design of the physical environment where service is delivered”. • They suggest that servicescapes can create positive or negative impressions and that care should be taken to design appropriate environments. The Collins School of Hospitality Management

  42. Restaurant Pétrus The Collins School of Hospitality Management

  43. Affecting Buyer's Behavior Lovelock and Wright (1999) suggest that physical evidence and atmosphere affect buyer's behavior in three ways. 1.Attention grabbing - to make the business stand out from competing businesses and to attract customers from target segments. 2. Message creation - to use symbolic clues to communicate with the intended audience about the distinctive nature and quality of the service experience. 3. Effect creation - using colors, textures, sounds, scents, and spatial design to create or heighten an appetite for certain goods, services or experiences. The Collins School of Hospitality Management

  44. 7. Process Strategy • A process strategy is all about the linkages between marketing management and operations management. • A process strategy looks at the processes, mechanisms and routines used to create and deliver service. The Collins School of Hospitality Management

  45. Processes • These are the procedures, mechanisms and routines by which a service is created and delivered to a customer. (These are a separate issue from the behavior of people such as service staff). • Process management is a key aspect of service quality improvement. • You must therefore be involved in how these processes operate, because customers' perceptions of satisfaction with services are a major concern and are often tied up with their experience of a process. The Collins School of Hospitality Management

  46. Reliable Service Systems • Customers want service systems that run to time, require little effort on the part of the customer, are reliable and deliver what they promise. • These are operational issues that marketing professionals can use in their marketing programs. The Collins School of Hospitality Management

  47. Service Delivery & Process • Service personnel can look after customers whose table is not ready • The inter-personal skills and concern they show may make the system breakdown less worrying for customers. • Similarly a pleasant waiting area may mean that the delay passes more comfortably. • Neither will entirely compensate for the system inefficiencies and breakdown. The Collins School of Hospitality Management

  48. Improve Service Quality To improve service quality it is necessary to • design or redesign processes – • it is not enough purely to focus on service skills. The Collins School of Hospitality Management

  49. Reduce or Increase Service • Reduce - moving towards greater standardization. This can reduce costs, improve productivity and make distribution easier. • Produces more uniform service quality and improved service availability. • Negative effects may be a perception of limited choice and a rejection of the highly standardized service. • Increase - moving towards greater customization and flexibility. This may lead to being able to charge higher prices and achieving greater profit margins. This suggests a niche positioning strategy where volume is less important than margins. This is often used to gain higher levels of penetration in a market by adding more services. The Collins School of Hospitality Management

  50. Advantages and Disadvantages • They provide opportunities for a business to alter customer’s perceptions about the services they are buying. They also provide opportunities to alter the positioning of the product/service by appealing to new market segments or more people within the existing target market. The Collins School of Hospitality Management