Hospitality Marketing, Sales and Advertizing Day 7 7 - mix.pdf · 2 S&M 7 Prof. Dr. P. Zamaros 2014 DAY 7 15. Behavioral base 1 – choice of product & service Purpose: account for

S&M 7 Prof. Dr. P. Zamaros 2014 1

Hospitality Marketing, Sales and Advertizing

Day 7

2 S&M 7 Prof. Dr. P. Zamaros 2014

DAY 7

15. Behavioral base 1 – choice of product & service

Purpose: account for the various hospitality products

16. Behavioral base 2 – distribution channel

Purpose: account ways hospitality products are offered

17. Behavioral base 3 – points of sale

Purpose: detail hospitality outlets as points-of-sale

18. Behavioral base 4 – product price

Purpose: discuss prices and price-setting methods

A fist distinction:

• Products refer to anything that can be offered to a market for

attention, acquisition, use or consumption. Their key

characteristic is ownership.

• Services refer to a set of activities which do not result on

ownership

The mix products/services form a total product or an offer.

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A) Principles

S&M 7 Prof. Dr. P. Zamaros 2014

In addition to the offer there are product benefits, that is, the

perceived added value, or the surplus that guests get from the

acquisition, use and consumption of the product.

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A) Principles


Total product decisions

represent the most

important ingredient of

the marketing mix as

they have the most

direct and long lasting

influence on the degree

of success which a

hotelier enjoys.

5


B) Decisions


Decisions about

products/services should

not be made in isolation:

products which may have

considerable market

potential may fail because

of poor promotional,

pricing and distribution

decisions

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B) Decisions


Product life-cycle derives

from the idea that most

products tend to follow a

particular pattern over

time in terms of sales and

profits a product has four

distinct stages:



C) Life-cycle

Phase 1: Introduction

• Producers have an organized production

• Producers promote the product

• Consumers are made aware of the product’s existence,

• Consumers are convinced that this is a worthwhile purchase

Marketing implications:

• Sales growth is relatively slow

• No profits at this stage, and heavy launch costs can often mean a

large financial deficit.



C) Life-cycle

Phase 2: Growth

• Consumer slow acceptance

Marketing implications

• Escalating sales

• Word-of-mouth and

advertising begin to take

effect

• Small profits are made.



C) Life-cycle

Phase 3: Maturity

• Market begins to become saturated

• Few new buyers are attracted to the product


• Growth of sales begins to slow

• High proportion of repeat sales

• Possible presence of competitors

• Profits having peaked, begin to decline.



C) Life-cycle

Phase 4: Decline

• Consumers have begun to become bored with

the product and are attracted by newer ones


• Sales begin to fall

• Profit margins are depressed even further

• Creation of new or improved products



C) Life-cycle

Product life-cycle implications:

• Even the most successful product has a finite life.

• Intensifying competition shortens product life-cycles.

• Rapid technological change shortens product life-cycles.

• Different marketing and sales strategies are appropriate

to each stage.



C) Life-cycle

• Quality – performance level and consistency

• Features – functionality and purpose

• Style and design – appearance

• Brand – symbolic importance

• Package – producing containers

• Label – attaching tags

Marketing implications:

• Product differentiation

• Brand equity (value)

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D) Product mix


Using the key attributes to compose a

product mix in terms of:

Product width: number of different

product lines

Example: starters, main dishes etc.

Product depth: number of versions in

the line

Example: starters: salads, soups, cold

dishes etc. 14


D) Product mix


Distribution is a downstream channel (as opposed to upstream which is

the supply chain). It refers to intermediary paths through which products

get to consumers.

For hoteliers, however, distribution is different: since the guest comes to

the hotel or restaurant there is no distribution of the hospitality product.

What gets distributed is the offer. Thus distribution in the hospitality

industry is a marketing activity (as opposed to other industries where it

is a transportation/logistics concern that can be, at times, separate

from marketing)



A) Definition



B) Process



B) Process



B) Process



B) Process

The role of distribution intermediaries is to transform the assortment

of products and services into assortments wanted by consumers.

This is the channel added value. Such intermediaries perform the

following functions:

• Information: gathering information about consumer desires

• Promotion: spreading persuasive communications about offers

• Contact: finding prospective consumers

• Matching: fitting the offer to buyer desires and budget

• Negotiation: reaching to agreements



C) Intermediaries

The relationship consumer-

producer without

intermediaries is a direct

channel; with

intermediaries, indirect,

hence the number of

channel levels as to the

number of intermediaries

which determines the

channel length.



C) Intermediaries

Multichannel or hybrid channels involve a number of marketing

channels to reach different consumer segments.



C) Intermediaries

Instead of traditional marketing

channels which are linear in terms

of their relationship – based on

demand and supply mechanisms,

the vertical marketing systems

(VMS) are holistic as the actors

act in a unified manner.



D) Synergies

VMS can be:

• Corporate: integrating activities under a single ownership –

example Giant Food Stores integrating ice-cube processing,

bottling, bakery …

• Contractual: contracting out some activities, notably through

franchise – example: Burger King

• Administered: coordination of successive stages but there is no

single ownership – example: Kraft Foods



D) Synergies

Horizontal marketing systems (HMS) are formed when two or more

enterprises join forces to follow a business opportunity – example:

Migros and Shell; MacDonald’s and Sinopec.



D) Synergies

Channel design decisions involve:

• Analyzing consumer needs

• Setting channel objectives

• Identifying major alternatives

• Evaluating major alternatives

• Getting to know channel members

• Identifying channel motivating techniques



E) Building channels

Channel management is

facilitated by the use of

software:

• Internet distribution

systems (IDS) –

Pegasus network

• Central booking

systems – Galileo,

Amadeus, Worldspan



E) Building channels

Place refers to the physical space where products and services are

made available to consumers after distribution.

Points of sale are the particular places where commodities are made

available for purchase – hence hotel POS

Points of sale are closed environments wherein relationship

marketing/selling can develop whereby hoteliers seek to build long-

lasting relationships with their guests.



A) Definitions

In relationship marketing/selling the following point of sale factors

influence consumer perception of the hotel

Environmental

• Furnishings

• Colors

• Layout

• Noise

• Smells

• Ambiance



B) Aspects

Facilities

• Equipments

• Tools

• Uniforms

• Paperwork



B) Aspects

Symbolic

• Labels

• Tickets

• Logos

• Packaging



B) Aspects

Software

Various systems operate as

property management system

interfaces that allows to settle

checks directly to guest folios and

thus tracking guest charges.



B) Aspects

Points of sale are also places where unique selling points (USP)

or unique sales propositions can be made.

USP is a feature or benefit that separates the hotel’s offer from its

competitors.

This includes a lower price, a smaller version of the product,

offering extra functions, or offering a standard product in a range

of colors or designs.



B) Aspects

Hospitality firms can adopt either a sales/selling orientation that puts

emphasis on seller needs, or a marketing orientation that puts

emphasis on guest needs.

Therefore, marketing and sales

are different yet related activities.



C) Sales

Types of sales

• Inside order-takers

e.g. service

• Delivery salespeople

e.g. suppliers

• Outside order-takers

e.g. supplier

representatives



C) Sales

Sales-force tasks

Primary: concluding a sale successfully

Secondary:

• Prospecting

• Maintaining guest records

• Self-management

• Handling complaints

• Providing services



C) Sales

Conditions for effective sales:

• Know own products, services and benefits

• Look at own products & services from the guest’s point of

view

• Know what the competitors offer and how they are different

from own products

• Have ready-made ways to present own products & services

• Set sales targets and objectives

• Assess the balance of power in sales negotiations



C) Sales

The sales/selling process generally involves:

• Opening: getting the relationship with the guest going

• Identifying needs : understanding what the guest needs

• Presenting/demonstrating: showing the guest what products and

services best respond to guest needs

• Giving guaranties/reassurances: making claims of quality

• Dealing with objections



C) Sales

• Negotiating

• Closing the sale

• Following up



C) Sales

Success factors for Sales Lead Management

The following suggestions can help organizations close more deals in

the same market, with a similar product and a similar value

proposition:

• Sales-force has instant access to online guest information,

industry data and socioeconomic data.

• Effective collaborations between sales-force and marketing .

• Clear definition of what constitutes a prospect.



C) Sales

Success factors for Sales Lead Management (cont.)

• Segment customer base since focused attention yields better

results.

• Lead nurturing campaigns by educating prospects through

Webinars, invitations to regional events, invitations to social

media groups on Facebook or LinkedIn, invitations to follow your

company on Twitter, and guest comments.

• Track prospects' footprints on own website, offer live chat, and

follow up immediately.



C) Sales

Success factors for Sales Lead Management (cont.)

• Share best sales practices across the organization.

• Leverage information to boost sales performance by knowing the

important ratios between qualified leads and closed sales.



C) Sales

43

1. Cost-plus pricing : adding a markup to min P

2. Break-even pricing: establishing the price and quantity at

which the business can break even i.e. where TC = TR



A) Approaches

44

3. Value-based pricing : according to consumer perceptions

of pricing

4. Competition-based pricing - benchmarking : according to

the prices of competitors



A) Approaches

45

Pricing strategies refer to the set

of prices a hospitality enterprise

sets on an array of products –

pricing structure. These include:

New-product pricing

• Market-skimming: offering products with high mark-up when

competition cannot follow immediately

• Market-penetration: offering low prices to attract consumers



B) Strategies

46

Product mix pricing

• Product line: offering a variety of products at different prices

• Optional-product: pricing accessories

• Captive-product – two-part pricing: fixed price + variable price

according to services

• By-product: pricing secondary products



B) Strategies

47

Price-adjustments

• Seasonal

• Geographical

• International

• Discounts : as per price or quantity

• Segmented : according to market segments



B) Strategies

48

Price-adjustments (cont.)

• Psychological : according to consumer perceptions: rule of 3

where guest chooses middle price because of extremeness

aversion: min P below which the guest will not pay and max P

above which the guest will not pay

• Promotional : to push sales



B) Strategies

http://www.psychologytoday.com/blog/priceless/200912/decoding-fast-food-menus

49

Principle 1

Disperse the price over a range of products i.e. low, middle,

high range

The number of articles in the middle price range should be

equal to more than the low range + high range; thus

• Popular restaurants: lower price range has more items than

higher range

• Luxury restaurants: lower price range has less items than

high price range S&M 7 Prof. Dr. P. Zamaros 2014


C) Principles

50

Principle 2

The difference between

the lowest and highest

price in one range should

not exceed 2.5 times

With large ranges use

multipliers (e.g. 3.2 for

wine)



A) Approaches

51

Principle 3

The offer and demand (quality-price) ratio = 1

Average price asked / average price sold = 1

Average price asked = R / Q sold

Average price sold = Sales price / number of items

Note: average price sold = ASP (fnb), ARR (rd)



A) Approaches

52

Principle 4

Anticipate guest needs

Promotional efforts should

favor the items in the middle

of each range.



A) Approaches

Example:

To use the pricing principles to analyze the following offer

53

item Low range Middle range High range

A 0.90 2.10 3.00

B 1.10 2.30 3.35

C 1.25 2.60 3.65

D 1.85 3.80

E 3.95



A) Approaches

Example (cont.)

Principle 1: price dispersion is poor since there are 3 items

only in the middle range

Principle 2: difference between 0.90 and 3.95 = 4.38 is too

high



A) Approaches

Example (cont.)

Principle 3:

Average offer price: 29.75 / 12 = 2.48

To respect the ratio = 1, the average asking price must be

around 2.00; but since there are only a few items in the middle

range, the revenue might be low i.e. the average asking price

might be < 2.00; then the ratio = 1 is not respected.



A) Approaches

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Hospitality Marketing, Sales and Advertizing Day 7 7 - mix.pdf · 2 S&M 7 Prof. Dr. P. Zamaros 2014 DAY 7 15. Behavioral base 1 – choice of product & service Purpose: account for