Hospitality Service Marketing: Course Notes Essay

Hospitality Service Marketing This is a basic course in service marketing and vital for any hospitality industry programme. Synopsis: The subject discusses on service marketing, market planning, market segmentation, service marketing and relationship marketing, developing in effective service mission, positioning and differentiation of services, marketing plans, customer – focused service and market research. Objectives: At the end of the course, the student will be able to: 1. Understand the concepts of marketing for service. 2.

Comprehend the role of marketing as a strategic technique. 3. Explore the nature of services and key concepts in services marketing and relationship marketing. 4. Review the assembling service marketing mix. 5. Analyze the challenges that face service marketer – creation of integrated marketing plans and the development of customer focused service culture. Learning Outcomes: At the end of the course, the student will be able to: 1. Identify the nature and role of service marketing. 2. Apply the service mission statement and market segmentation. 3.

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Examine the evolution of positioning, service marketing mix elements and marketing plan process. 4. Formulate the market research procedure, based on customer service, quality and marketing. Transferable Skills: This course provides the customer service skills that can be used not only within the managerial situation but also for personal enrichment. Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— TABLE OF CONTENTS

CHAPTER 1: NATURE OF SERVICE MARKETING 1. 1 1. 2 1. 3 1. 4 1. 5 1. 6 LEARNING OBJECTIVES ABSTRACT INTRODUCTION OVERVIEW OF THE SERVICE ECONOMY NATURE OF SERVICES SERVICES IN MANUFACTURING CHAPTER 2: SERVICE MARKETING & RELATIONSHIP MARKETING 2. 1 2. 2 2. 3 2. 4 2. 5 2. 6 2. 7 2. 8 LEARNING OBJECTIVES ABSTRACT ROLE OF MARKETING SERVICES & THE MARKETING MIX THE EVOLUTION OF SERVICE MARKETING RELATIONSHIP MARKETING DETERMINATION MARKET EMPHASIS IN RELATIONSHIP MARKETING ESSENCE OF SERVICE MARKETING CHAPTER 3: DEVELOPING IN EFFECTIVE SERVICE MISSION 3. 1 3. 2 3. 3 3. 4 3. 5 3. LEARNING OBJECTIVES ABSTRACT MISSION FOR SERVICE CORPORATE MISSION SERVICE MISSION STATEMENT DEVELOPING A SERVICE MISSION CHAPTER 4: MARKET SEGMENTATION 4. 1 4. 2 4. 3 4. 4 4. 5 LEARNING OBJECTIVES ABSTRACT PROCESS DEFINITION OF THE RELEVANT MARKET IDENTIFYING ALTERNATIVE BASES Universiti Tun Abdul Razak 6 6 6 7 8 9 10 10 10 11 13 14 15 16 17 17 17 17 18 19 21 21 21 22 23 -2- Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— . 6 4. 7 4. 8 SELECTION OF BEST BASED FOR SEGMENTATION IDENTIFY & SELECT TARGET MARKET SEGMENTS SEGMENTATION, POSITIONING & MARKETING MIX STRATEGY CHAPTER 5: POSITIONING & DIFFERENTIATION OF SERVICES 23 24 25 5. 1 5. 2 5. 3 5. 4 5. 5 5. 6 5. 7 LEARNING OBJECTIVES ABSTRACT EVOLUTION OF POSITIONING COMPETITIVE DIFFERENTIATION OF SERVICES POSITIONING & SERVICES THE LEVEL OF POSITIONING THE IMPORTANCE OF POSITIONING CHAPTER 6: MARKETING MIX 28 28 28 29 32 33 35 6. 1 6. 2 6. 3 6. 4 6. 5 6. 6 6. 7 6. 8 6. 6. 10 6. 11 LEARNING OBJECTIVES ABSTRACT MARKETING MIX ELEMENTS SERVICE PRODUCT PRICING THE SERVICE PLACE: SERVICE LOCATION & CHANNELS PROMOTION & COMMUNICATION PEOPLE IN SERVICES PROCESSES CUSTOMER SERVICE DEVELOPING A MARKETING MIX STRATEGY CHAPTER 7: MARKETING PLANS 36 36 36 37 40 42 43 45 46 46 47 7. 1 7. 2 7. 3 7. 4 7. 5 7. 6 LEARNING OBJECTIVES ABSTRACT MARKETING PLAN PROCESS STRATEGIC CONTEXT SITUATIONAL REVIEW MARKETING STRATEGY FORMULATION 49 49 49 51 54 55 Universiti Tun Abdul Razak -3-

Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— 7. 7 7. 8 RESOURCES ALLOCATION & MONITORING MARKETING PLANNING & SERVICES CHAPTER 8: CUSTOMER FOCUSED SERVICE 62 63 8. 1 8. 2 8. 3 8. 4 8. 5 8. 6 LEARNING OBJECTIVES ABSTRACT CUSTOMER SERVICE, QUALITY & MARKETING SERVICE QUALITY CUSTOMER RETENTION RELATIONSHIP MARKETING PROGRAMME CHAPTER 9: MARKET RESEARCH 65 65 65 68 69 70 9. 1 9. 2 9. 3 9. 4 LEARNING OBJECTIVES ABSTRACT OBJECTIVE MARKET RESEARCH PROCEDURE SUMMARY & DISCUSSION 2 72 72 73 CHAPTER 1: NATURE OF SERVICE MARKETING CHAPTER 2: SERVICE MARKETING & RELATIONSHIP MARKETING CHAPTER 3: DEVELOPING IN EFFECTIVE SERVICE MISSION CHAPTER 4: MARKET SEGMENTATION CHAPTER 5: POSITIONING & DIFFERENTIATION OF SERVICES CHAPTER 6: MARKETING MIX CHAPTER 7: MARKETING PLANS CHAPTER 8: CUSTOMER FOCUSED SERVICE CHAPTER 9: MARKET RESEARCH ADDITIONAL RESOURCES CASE STUDY FORD CARS GO IN FOR A SERVICE NEW LINE IN MOBILE PHONES MARKETING INWARD TOURISM – AN ORGANIZATION CHALLENGE FOR LOCAL AUTHORITIES SUPERMARKETS GET READY FOR A NEW GENERATION OF YABS Universiti Tun Abdul Razak 0 80 81 81 82 82 83 83 84 87 88 89 90 -4- Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— CORDLESS PHONE SERVICE LAUNCH ENDS IN A TANGLE INFORMATION DRIES UP IN THE KNOWLEDGE SOCIETY MARKETING MIX GOOGLE RYANAIR SWOT ANALYSIS AMAZON APPLE BHARTI AIRTEL CHINA MOBILE DELL EBAY INDIAN PREMIER LEAGUE MCDONALD’S NIKE STARBUCKS YAHOO! TOYS “R” US 91 93 95 98 101 102 103 105 106 107 109 110 112 113 114 116 Universiti Tun Abdul Razak -5-

Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— CHAPTER 1: NATURE OF SERVICE MARKETING 1. 1 LEARNING OBJECTIVES At the end of this chapter, the student will be able to: Identify marketing and examine its service economy. Review the nature of services heading in manufacturing. 1. 2 ABSTRACT Occasionally, marketing has been a term applied to the craft of linking the producers (potential producers) of a product/service with customers; both existing and potential.

This general definition fails to provide any direction to someone hoping to market their products/services efficiently. Marketing methods are informed by many of the social sciences; particularly psychology, sociology and economics. Marketing research underpins these activities. Through advertising, it is also related to many of the creative arts. 1. 3 INTRODUCTION Service marketing is marketing based on relationship and value. It may be used to market a service/product. Marketing a service-bases business is different from marketing a product-base business. There are several major differences, including: 1. 2. 3. . The buyer purchases an intangible. The service may be based on the reputation of a single person. It is more difficult to compare the quality of similar services. The buyer cannot return the service. When one markets a service business, one must keep in mind that reputation, value, delivery of service and follow-through are keys to a successful venture. Managing the evidence refers to the act of informing a customer that the services encounter has been performed successfully. It is best done in simple ways like providing examples or descriptions of good and poor service that can be used as a basis of comparison.

The underlying basis is that a customer might not appreciate the full worth of the service if they do not have a good benchmark for comparisons. Universiti Tun Abdul Razak -6- Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— 1. 4 OVERVIEW OF THE SERVICE ECONOMY Service economy can refer to one or both of two recent economic developments. One is the increased importance of the service sector in industrialized economies.

Services now account for a higher percentage of GDP than just 20 years ago. If you look at the current list of Fortune 500 companies, more of them are service companies and fewer are manufacturers than in previous decades. The term is also used to refer the relative importance of service in a product offering. That is, products today have a higher service component than in previous decades. In the management literature this is referred to as the servitization of products. Virtually every product today has a service component to it.

The old phrase between product and service has been replaced by a service-product continuum. Many products are being transformed into services. This is a servicecentric view of the economy: everything purchased has a significant service component. For example IBM treats its business as a service business. Although it still manufactures computers, it sees the physical goods as a small part of the business solutions industry. They have found that the price elasticity of demand for business solutions is much less elastic than for hardware. There has been a corresponding shift to a subscription pricing model.

Rather than receiving a single payment for a piece of manufactured equipment, many manufacturers are now receiving a firm flow of revenue for ongoing contracts. Full cost accounting and most accounting reform and monetary reform measures are usually thought to be impossible to achieve without a good model of the service economy. Environmental Effects of the Service Economy This is seen, especially in green economics and more specific theories within it such as Natural Capitalism, as having these benefits: Much easier integration with accounting for nature services.

Much easier integration with condition services under globalization, i. e. meat inspection is a service that is assumed within a product price, but which can vary quite radically with authority, with some serious effects. Association of goods movements in commodity markets with negative commodity (representing emissions or other pollution, bio-diversity loss, bio-security risk) public so that no commodity can be traded without assuming responsibility for damage done by its extraction, processing, shipping, trading and sale – its comprehensive outcome.

Easier integration with urban ecology and industrial ecology modeling. Making it easier to relate to the Experience Economy of actual quality of life decisions made by human beings based on assumptions about service, and integrating economics better with marketing theory about brand value i. e. products are purchased for their assumed reliability in some known process. This assumes that the user’s experience with the brand (implying a service they expect) is far more important than its technical characteristics.

Product stewardship or product take-back are words for a specific requirement or measure in which the service of waste disposal is included in the distribution chain of an industrial product and is paid for at time of purchase. That is, paying for the safe and proper disposal when you pay for the product, and relying on those who sold it to you, to dispose of it. Those who advocate it are concerned with the later phases of product lifecycle and the comprehensive outcome of the whole production process.

It is considered a pre-requisite to a severe service economy interpretation of (fictional, national, legal) commodity and product relationships. Universiti Tun Abdul Razak -7- Faculty of Hospitality ; Tourism Management —————————————————————————————————————————————————————— 1. 5 NATURE OF SERVICES A service is the action of doing something for someone or something. It is largely intangible (i. e. not material). A product is tangible (i. e. aterial) since you can touch it and own it. A service tends to be an experience that is consumed at the point where it is purchased, and cannot be owned since is quickly perishes. A person could go to a cafe one day and have excellent service, and then return the next day and have a poor experience. To market services successfully, first we need to understand the nature of services. So often marketers talk about the nature of a service as: Intangible Services are intangible and insubstantial: they cannot be touched, gripped, handled, looked at, smelled, tasted or heard.

Thus, there is neither potential nor need for transport, storage or stocking of services. Furthermore, a service cannot be sold or owned by somebody, neither can it be turned over from the service provider to the service consumer nor returned from the service consumer to the service provider. Solely, the service delivery can be commissioned to a service provider who must generate and deliver the service at the distinct request of an authorized service consumer. Perishable Services are perishable in two regards: 1.

The service relevant resources, processes and systems are assigned for service delivery during a definite period in time. If the designated or scheduled service consumer does not request and consume the service during this period, the service cannot be performed for him. From the perspective of the service provider, this is a lost business opportunity as he cannot charge any service delivery; potentially, he can assign the resources, processes and systems to another service consumer who requests a service. Examples: The hair dresser serves another client when the scheduled starting time or time slot is over.

An empty seat on a plane never can be utilized and charged after departure. 2. When the service has been completely rendered to the requesting service consumer, this particular service forever evaporates as it has been consumed by the service consumer. Example: the passenger has been transported to the destination and cannot be transported again to this location at this point in time. Indispensable The service provider is indispensable for service delivery as it must promptly generate and render the service to the requesting service consumer.

In many cases the service delivery is executed automatically but the service provider must prepare to assign resources and systems and actively keep up appropriate service delivery readiness and capabilities. Additionally, the service consumer is inseparable from service delivery because involved in it from requesting it up to consuming the rendered benefits. Examples: The service consumer must sit in the hair dresser’s shop and chair or in the plane and seat; correspondingly, the hair dresser or the pilot must be in the same shop or plane, respectively, for delivering the service.

Variability Each service is unique. It is one-time generated, rendered and consumed and can never be exactly repeated as the point in time, location, circumstances, conditions, current configurations and/or assigned resources are different for the next delivery, even if the same service consumer requests the same service. Many services are regarded as heterogeneous or lacking Universiti Tun Abdul Razak -8- Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— omogeneity and are typically modified for each service consumer or each new situation. Example: The taxi service which transports the service consumer from his home to the opera is different from the taxi service which transports the same service consumer from the opera to his home – another point in time, the other direction, maybe another route, probably another taxi driver and cab. Simultaneity Services are rendered and consumed during the same period of time.

As soon as the service consumer has requested the service (delivery), the particular service must be generated from scratch without any delay and the service consumer instantaneously consumes the rendered benefits for executing his upcoming activity or task. Each of these characteristics is their expected coincidence complicates the consistent service conception and makes service delivery a challenge in each and every case. Proper service marketing requires creative visualization to effectively remind a concrete image in the service consumer’s mind.

From the service consumer’s point of view, these characteristics make it difficult, or even impossible, to evaluate or compare services prior to experiencing the service delivery. 1. 6 SERVICES IN MANUFACTURING The industrialization of services business model is a business model used in strategic management and services marketing that treats service provision as an industrial process, subject to industrial optimization procedures. It originated in the early 1970s at a time when various quality control techniques were being successfully implemented on production assembly lines.

Theodore Levitt (1972) argued that the service sector suffered from inefficiency and wide variations in quality were that it was based on the craft model. Each service encounter was performed as if it was an isolated event. He felt that this irregular approach could be systematized through the use of planning, optimal processes, consistency and capital intensive investments. This model was the foundation of the success of McDonalds and many other mass service providers from 1970s to 1990s. Unfortunately, the application of assembly line techniques to service provision had several undesirable consequences.

Employees found working under these conditions disempowering, resulting in low morale, high staff turnover and reduced service quality. One of the most difficult aspects of this model for employees to deal with was the smile incentives. Employees were instructed to put a smile on their face during the service encounter. This manufacturing and commercialization of clear happiness has been criticized by many commentators, particularly Mundie (1987). Also many customers prefer the personal touch. By the early 1990s most service providers turned their attention back to the human element and personalized their services.

Employees were empowered to customize the service encounter to the individual characteristics of customers. Universiti Tun Abdul Razak -9- Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— CHAPTER 2: SERVICE MARKETING & RELATIONSHIP MARKETING 2. 1 LEARNING OBJECTIVES At the end of this chapter, the student will be able to: Apply the role of marketing. Examine services and the marketing mix. Review the relationship marketing. Explore the essence of service marketing. . 2 ABSTRACT Marketing a service is that the customer will perceive as valuable or necessary. The principles regarding people, process and physical evidence center on what is needed to provide a positive customer experience. The people aspect has to do with providing the necessary employee training to ensure the proper delivery of the service. The way a company’s employees interact with customers is an important part of service marketing. The process principle involves the systems that are in place to deliver the service and requires developing procedures that equivalent the service being provided.

An example of this would be the scripts provided to customer service agents within call centers. A greeting, a series of questions and a series of action steps are provided to ensure a quick, cordial, solution-based interaction between the caller and the service representative. 2. 3 ROLE OF MARKETING As we have seen the key objective of an organization‘s marketing efforts is to develop satisfying relationships with customers that benefit both the customer and the organization. These efforts pilot marketing to serve an important role within most organizations and within society.

At the organizational level, marketing is a vital business function that is necessary in nearly all industries as a for-profit or as a not-for-profit. For the for-profit organization, marketing is responsible for most tasks that bring revenue to an organization. For the not-for-profit organization, marketing is responsible for attracting customers needed to support the not-forprofit‘s mission, such as raising donations or supporting a cause. For both types of organizations, it is unlikely they can survive without a strong marketing effort. Marketing is also the organizational business area hat interacts most frequently with the public, consequently, what the public knows about an organization is determined by their interactions with marketers. For example, customers may believe a company is dynamic and creative based on its advertising message. Universiti Tun Abdul Razak – 10 – Faculty of Hospitality ; Tourism Management —————————————————————————————————————————————————————— At a broader level marketing offers significant benefits to society.

These benefits include: Developing products that satisfy needs, including products that enhance society‘s quality of life. Creating a competitive environment that helps lower product prices. Developing product distribution systems that offer access to products to a large number of customers and many geographic regions. Building demand for products that require organizations to expand their labor force. Offering techniques that have the ability to convey messages that change societal behavior in a positive way (i. e. anti-smoking advertising). 2. 4 SERVICES ; THE MARKETING MIX

Service marketing is often a poorly resourced and unhappily under-funded function. If resourced at all, the focus is usually limited to security describing service offerings. With such insufficient resources and attention from the marketing department, service organizations are grateful when they get such basic guarantee as datasheets and customer presentations. The executives need to have discussions with their marketing counterparts to think in terms of a balanced marketing mix to ensure their limited budgets are being spent wisely. A mix that is different from a product approach to marketing.

For an organization, an effective marketing mix will address four key of marketing activities: 1. 2. 3. 4. Content Creation Market Analysis Demand Generation Market Awareness Table 2. 1: Marketing Mix Categories Universiti Tun Abdul Razak – 11 – Faculty of Hospitality ; Tourism Management —————————————————————————————————————————————————————— Content Creation With service marketing, content is a king. Without content for the internal or external audiences, services will go nowhere.

It is marketing‘s job to educate both audiences on the value that the services bring. Unlike products, service marketing is required for internal audiences. Persuading its own colleagues that services are feasible option and that the organization can deliver value to the sale may require that 25-50 percent of the marketing dollars go to internal promotion. Internal content falls into three categories: 1. Articulating Value – clearly articulates to the sales and delivery team on how to sell or position the service, business benefit, value proposition, etc. 2. Competitive Analysis – how to position services in regard to the competition? . Promotional – programs to motivate sales to sell services, keeping awareness of the services organization at a level comparable to the product. External content falls into sequential categories. It is developed with the goal of systematically moving the prospect through the sales cycle. Developing content that is relevant to each phase of the sales cycle is critical. External content falls into four categories: 1. Building Awareness – independent research is the only content a prospect will accept to establish credibility that there is a legitimate problem and potential solutions.

It should provide an exploration of the issues and trends by respected industry experts. This is not company material. 2. Developing Interest – a business perspective of topic-specific trends, the challenges and opportunities they present. 3. Consideration – hands-on tools that put information into action. It is a strategy development template to help a prospect assess, plan or measure their problem and possible solution. 4. Trial or Purchase – customer references and required in almost all service sales. Market Analysis The second category in the marketing mix is market analysis.

This is an area where some dollars may be allocated from a corporate marketing budget mix. Marketing analysis consists of: 1. 2. 3. 4. 5. 6. Competitive analysis or analyst interviews. Overall services positioning document. Practices positioning document. Actual service positioning document. Market segmentation. Customer interviews. Demand Generation The third category in the marketing mix is demand generation. All marketing activities must be used to support the ultimate goal of demand generation. Each should be used to continually promote the services and to actively engage with prospects.

The key to successful demand generation is systematic, continuous, relevant follow-up to all inquires and responses to the services marketing programs. If a prospect engages, marketing must have a plan to continue nurturing and offering valuable, relevant content to that prospect Universiti Tun Abdul Razak – 12 – Faculty of Hospitality ; Tourism Management —————————————————————————————————————————————————————— throughout the research cycle; otherwise, valuable marketing dollars were just wasted.

Depending on the prospect in the research cycle, planned follow-up should not necessarily send the prospect to the sales team, because early sales intervention can discourage the prospect. With sales cycles ranging from three to eighteen months, an effective follow-up campaign should be in place that can foster the prospects for at least six months. Otherwise, company may spend the marketing dollars educating the prospect, but leave the door open for the competition when that prospect is ready to make a buying decision.

By continuing to nurture the prospects, company is building credibility and thought-leadership, and when ready to buy; the company will be top-of-mind. Market Awareness The final category in the marketing mix is market awareness. This can run the extent from: Advertising Newsletters Tradeshows Press releases Sponsorships Speeches Trade press Industry analysts Industry Analyst Briefings and Speaking Engagements are two of the most effective awareness vehicles available, allowing to articulate Professional Services strategy and business.

Establishing an ongoing dialogue with analysts keeps the organization top-of-mind and can help encourage a favorable rating in the rankings. When identifying potential service providers, IT professionals rely heavily on recommendations from industry analysts. Speaking at conferences, trade shows and other venues also lends credibility to the business. These speaking opportunities position as an industry thought leader in the eyes of prospects and potential clients. Engage the marketing organization to find speaking and educational venues for Subject Matter Experts. 2. THE EVOLUTION OF SERVICE MARKETING Marketing as we know it today began in the 1970s with the birth of the marketing orientation. During the first stage of capitalism business had a production orientation. Business was concerned with production, manufacturing and efficiency issues. By the mid 1950s a second stage emerged, the sales orientation stage. Business prime concern was to sell what it produced. By the early 1970s a third stage, the marketing orientation stage emerged as businesses came to realize that consumer needs and wants drove the whole process. Marketing research became important.

Businesses realized it was ineffective putting a lot of production and sales effort into products that people did not want. Some commentators claim that we are now on the limit of a fourth stage, one of a personal marketing orientation. They believe that the technology is available today to market to people on an individual basis: Universiti Tun Abdul Razak – 13 – Faculty of Hospitality ; Tourism Management —————————————————————————————————————————————————————— 1.

Personalized Marketing Personalized marketing (also called one-to-one marketing) is an extreme form of product differentiation. Whereas product differentiation tries to differentiate the product from competing ones, personalization tries to make a unique product offering for each customer. Personalized marketing is most practical in interactive media such as the internet. A web site can track the interests and make suggestions for the future. Many sites help customers make choices by organizing information and prioritizing it based on the individuals‘ preferences. In some cases, the product itself can be customized. . Permission Marketing Permission marketing is a term used in e-marketing. Marketers will ask permission before they send advertisements to prospective customers. It is used by some internet marketers, email marketers and telephone marketers. It requires that people first opt-in, rather than allowing people to opt-out only after the advertising have been sent. Marketers feel that this is a more efficient use of their resources because advertising are not sent to people that are not interested in the product. This is one technique used by marketers that have a personal marketing orientation.

They feel that marketing should be done on a one-to-one basis rather than using broad aggregated concepts like market segment or target market. 3. Mass customization Mass customization, in marketing, manufacturing and management is the use of flexible computer-aided manufacturing systems to produce custom output. These systems combine the low unit costs of mass production processes with the flexibility of individual customization. Service marketing has become an academic discipline in itself, with tertiary degrees in the field now routinely awarded.

Masters and Doctoral degrees can be obtained in numerous subcategories of marketing including: Marketing Research, Consumer Behavior, International Marketing, Industrial Marketing (also called b-to-b marketing), Consumer Marketing (also called b-to-c marketing), Product Management and e-Marketing. 2. 6 RELATIONSHIP MARKETING Relationship marketing is a form of marketing that emerged in the 1980s, in which emphasis is placed on building longer term relationships with customers rather than on individual transactions. It involves understanding the customers’ needs as they go through their life cycles.

It emphasizes providing a range of products/services to existing customers as they need them. Relationship marketing and transactional marketing are not mutually exclusive and there is no need for a conflict between them. But one approach may be more suitable in some situations than in others. Transactional marketing is most appropriate when marketing relatively low value consumer products, when the product is a commodity, when switching costs are low, when customers prefer single transactions to relationships, and when customer involvement in production is low.

When the reverse of all the above is true, as in typical industrial and service markets, then relationship marketing can be more appropriate. Most firms should be blending the two approaches to match their portfolio of products/services. Virtually all products have a service component to them and this service component has been getting larger in recent decades. Universiti Tun Abdul Razak – 14 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— . 7 DETERMINATION MARKET EMPHASIS IN RELATIONSHIP MARKETING Relationship marketing has been strongly influenced by reengineering. According to reengineering theory, organizations should be structured according to complete tasks and processes rather than functions. Cross-functional teams should be responsible for a whole process, from beginning to end, rather than having the work go from one functional department to another. Traditional marketing is said to use the functional department approach. Adrian Payne (1991) from Cranfield University goes further.

He identifies five markets which he claims are central to relationship marketing: 1. Internal Markets This refers to use marketing techniques within the organization itself. It is claimed that many of the traditional marketing concepts can be used to determine what the needs of internal customers. According to this theory, every employee, team or department in the company is simultaneously a supplier and a customer of services/products. An employee obtains a service at a point in the value chain and then provides a service to another employee further along the value chain.

If internal marketing is effective, every employee will both provide and receive exceptional service from and to other employees. It also helps employees understand the significance of their roles and how their roles relate to others. If implemented well, it can also encourage every employee to see the process in terms of the customer’s perception of value added and the organization’s strategic mission. 2. Supplier Markets Marketing to suppliers is aimed at ensuring a long-term conflict-free relationship in which all parties understand the needs and exceed expectations.

Such a strategy can reduce costs and improve quality. 3. Referral Markets Referral marketing is developing and implementing a marketing plan to stimulate referrals. Although it may take months before the effect of referral marketing, this is often the most effective part of an overall marketing plan and the best use of resources. 4. Influence Markets Influence markets involve a wide range of sub-markets including: government regulators, standards bodies, lobbyists, stockholders, bankers, venture capitalists, financial analysts, stockbrokers, consumer associations, environmental associations, and labor associations.

These activities are typically carried out by the public relations department, but relationship marketers feel that marketing to all six markets is the responsibility of everyone in the organization. 5. Customer Markets At times Payne sub-divides customer markets into existing customers and potential customer, yielding seven rather than six markets. He claims that each market will require its own strategies and recommends separate marketing mixes for each of the seven. Universiti Tun Abdul Razak – 15 –

Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— 2. 8 ESSENCE OF SERVICE MARKETING Traditionally, marketing has been a term applied to the process or act of bringing together buyers and sellers. Despite the common misconception, marketing is more than advertising and promotion. In the past, companies were product focused and employed a team of salespersons to push their products into or onto the market, regardless of market desire.

A market focused or customer focused first determines what its potential customer‘s desire, and then builds the product. The essence of service marketing is the understanding that customers use a service because they have a need or because of perceived value, not because they want to spend their hard earned dollar. Two major aspects of service marketing are the recruitment of new customers (acquisition) and the retention of relationships with existing customers (base management). Acquisition marketing is a four step process that begins with analyzing and defining a qualified universe of potential users or buyers.

After this first phase in the marketing process, a true marketing effort succeeds in capturing the attention of the intended buyers within the targeted universe. Third, systematic effort must be put into getting the prospects to accept the propositions being offered via the marketing effort. Finally, with all three of the previous steps achieved, the marketer must convert prospective buyers into an actual buyers by getting them to take the desired action (purchase, rent, call, download, subscribe, refer, sell, follow the law, become a member, etc. ).

Once a customer has converted the perspective buyer, base management marketing takes over. The process for base management shifts the marketer to build a relationship, nurturing the links, enhancing the benefits that sold the buyer in the first place and improving the product/service continuously to protect the business from competitive encroachment. Marketing methods are informed by many of the social sciences, particularly psychology, sociology and economics. Marketing research underpins these activities. Through advertising, it is also related to many of the creative arts.

Universiti Tun Abdul Razak – 16 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— CHAPTER 3: DEVELOPING IN EFFECTIVE SERVICE MISSION 3. 1 LEARNING OBJECTIVES At the end of this chapter, the student will be able to: Analyze the service mission statement. 3. 2 ABSTRACT A service mission is a brief description of a company’s fundamental purpose. A mission answers the question, “Why do we exist? It articulates the company’s purpose both for those in the organization and for the public. The difference between a mission statement and a vision statement is that a mission statement focuses on a company‘s present state while a vision statement focuses on a company‘s future. Every business should have a mission statement, both as a way of ensuring that everyone in the organization is on the same page and to serve as a baseline for effective business planning. 3. 3 MISSION FOR SERVICE The mission statement of Canadian Tire reads (in part): ?

Canadian Tire is a growing network of interrelated businesses. Canadian Tire continuously strives to meet the needs of its customers for total value by offering a unique package of location, price, service and assortment?. The mission statement of Rivercorp, business development consultants in Campbell River, B. C. , is: ? To provide one stop progressive economic development services through partnerships on behalf of shareholders and the community?. As you see from these two mission statement samples, mission statements are as varied as the companies they describe.

However, all mission statements will broadly describe an organization’s present capabilities, customer focus, activities, and business makeup (Glossary, Strategic Management: Concepts and Cases by Fred David). 3. 4 CORPORATE MISSION Corporate mission should not just be words that look well printed in script and hung on the wall in a fancy gold frame. It should state the purpose and reason of the business. It should reflect the reason that the business opens its doors every day. It is the passion behind the company, the reason why you would be doing the same thing you are doing even if it did not present you with your daily bank deposit.

That is the purpose; the corporate mission. Universiti Tun Abdul Razak – 17 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— When the corporate mission statement represents and reflects the purpose, it will attract the clientele, bring inspiration and drive to the employees and produce measurable results. With that in mind, ask yourself to these questions: What is the purpose of your business? Who do you serve?

Who are your customers? What needs do you fulfill? How do you fulfill those needs? What values represent your business? Now that you have the questions, it is time to gather your core team for a brainstorming session. Sit down with your team discuss, debate and answer the questions above. Really find out what it is that creates the excitement and the drive in your business. Spend time and determine who it is that you serve every day. Talk about your values and the philosophy of your company. When you have finished answering the questions, it is time to put the pieces together.

This process will not be easy and you will have to spend time into this process. The good news is that the end result will be a mission statement that will represent and reflect your purpose for keeping the lights on. That is marketing value. 3. 5 SERVICE MISSION STATEMENT The strategic experts will state a mission statement is mandatory for the company direction and fund raising. Other advisors suggest writing a mission statement becomes a meaningless few sentences collecting a dust somewhere in the office. Is a personal and corporate mission statement necessary for success in today hostile business climate?

Do you need a mission statement? The answer depends on whether or not the mission statement has significant meaning to you or is just another corporate exercise in futility. A mission statement can guide the company in good times and bad. A meaningful mission can act as a moral and corporate compass. It can help to make decisions aligning with values and goals. It is the key to find path in life and identifying the mission to be followed. Having a clearly articulated mission statement gives one a template of purpose that can be used to initiate, evaluate and refine all of one’s activities.

The three keys to a meaningful service mission statement are: 1. Pass the Mother Test A mission statement must be a brief paragraph describing what the company does and for whom. Show your mission to your mother, if she does not understand it, start again. 2. Self-Igniting Your mission is for you and your business. It does not have to be an earth moving statement. It can be whatever inspires you. 3. Value Alignment Forget the money. A meaningful mission goes beyond the dollars and cents. If your small business is creative, focus your mission on creativity. Try to be what your core competency is.

Universiti Tun Abdul Razak – 18 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— Sample Mission Statements: The Elephant Sanctuary “A natural-habitat refuge where sick, old and needy elephants can once again walk the earth in peace and dignity”. The powerful statement that evokes emotion and instant attachment to the cause of this organization. Sun Microsystems “Solve complex network computing problems for governments, enterprises and service providers”.

A simple mission statement identifying who their market is and what they do. Ben & Jerry’s Ice Cream “To make, distribute and sell the finest quality all natural ice cream and euphoric concoctions with a continued commitment to incorporating wholesome, natural ingredients and promoting business practices that respect the earth and the environment”. This mission inspired Ben and Jerry to build a cause-related company. Joe Boxer “JOE BOXER is dedicated to bringing new and creative ideas to the market place, both in our product offerings as well as our marketing events.

We will continue to develop our unique brand positioning, to maintain and grow our solid brand recognition, and to adhere to high quality design standards. Because everyone wants to have fun every day, JOE BOXER will continue to offer something for everyone with fun always in mind”. Each sample mission statement conveys the business founder’s core beliefs and values. Anyone who knows or has met, Nicholas Graham of Joe Boxer, knows his company is about being fun. What CEO would call him the ? Chief Underpants Officer? ‘ It is all about your mission expressed through your business. . 6 DEVELOPING A SERVICE MISSION A service mission is a short written document that uses positive language to communicate a company’s values, goals and ideologies to its clients, employees or both. As a marketing tool, the service mission is often posted in highly visible areas around the office building, such as at the reception desk, in hallways and in lounge areas. Below are the five steps in developing a service mission: 1. Step 1 Define the company’s goals and values; then select several key words and phrases to describe them.

Some common key words and phrases used in mission statements include: helping, communication, integrity, honesty, ethical, valuable, professional, teamwork, responsibility, increasing productivity and positive thinking. Key words and phrases will depend on a company’s objectives. Universiti Tun Abdul Razak – 19 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— 2. Step 2 Determine which points about the company are most important to communicate.

For example, the mission statement of a customer service-related business should highlight aspects of the business that will continue to widen its client base. 3. Step 3 Use the selected key words and phrases to write a strong mission sentence. The mission sentence is the main heading of the mission statement that sets the foundation for the rest of the mission statement. For example, a customer service-related business might have a mission sentence similar to the following: “We use honesty and teamwork in a family-oriented environment to provide the best customer service in the industry at the most competitive rates”. . Step 4 Break out the mission sentence into individual paragraphs by key word or phrase; then write a few sentences that further clarify each of the points in keeping with the company’s overall goals. In the mission sentence used above, for example, the following key words and phrases could be broken into separate sections: honesty and teamwork, family-oriented environment, best customer service in the business and competitive rates. 5. Step 5 Solicit feedback from the company’s executives and managers to determine if the mission statement meets all of the desired goals.

Use the feedback to refine the language and edit the document before making the mission statement official. Universiti Tun Abdul Razak – 20 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— CHAPTER 4: MARKET SEGMENTATION 4. 1 LEARNING OBJECTIVES At the end of this chapter, the student will be able to: Understand the market segmentation. Identify alternative based for segmentation. . 2 ABSTRACT Market segmentation is the process of grouping a market into smaller sub-groups. This is not something that is randomly imposed on society: it is derived from the recognition that the total market is often made up of sub-markets (called segments). These segments are homogeneous within (i. e. people in the segment are similar to each other in their attitudes about certain variables). Because of this intra-group similarity, they are likely to respond somewhat similarly to a given marketing strategy.

That is, they are likely to have similar feelings about a marketing mix comprised of a given product, sold at a given price, distributed in a certain way and promoted in a certain way. 4. 3 PROCESS Hiam and Schewe (1992) have identified six steps that companies should take in the market segmentation process: 1. First Step It is to determine the limitations of the market. In completing this step, a marketer should use a formal business plan to develop a broad definition of their business and consider the offerings of either direct or indirect competitors to gain information about the basic needs of consumers in the market. . Second Step It is to decide which variables to use in segmenting the market. Many companies fall into the trap of collecting data on as many variables as possible and attempting to draw meaningful conclusions. Instead, Hiam and Schewe (1992) recommend that marketers use their knowledge of the market to select a few relevant variables in advance. This approach is generally less expensive and will likely provide more useful results. 3. Third Step It is actually collecting and analyzing data, which involves applying market research tools.

The goal in analyzing the data is to identify market segments that are internally homogeneous, yet are distinctly heterogeneous with respect to other segments. 4. Fourth Step It is to develop a detailed profile of each market segment, which involves selecting those variables that are most closely related to consumers’ actual buying behavior. Universiti Tun Abdul Razak – 21 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— 5.

Fifth Step It is to decide which segment to serve. In targeting a particular segment, a marketer should look for opportunities (i. e. customers with unsatisfied wants and needs) that provide a good match for the organization and its resources. It is important that the marketer consider not only the size and potential profitability of a market segment, but also the company’s skills, technologies and objectives would enable it to meet the needs of that segment better than its competitors. 6. Sixth Step It is to develop a product and marketing plan that will appeal to the selected market segment.

This involves identifying the product attributes that are most important to consumers in the segment and developing a marketing strategy that will attract their attention. In fact, market segmentation can be usefully applied during the earliest stages of product design, when a company first identifies who its target customer will be in terms of demographic, geographic and behavioral characteristics. In general, customers are willing to pay a premium for a product that meets their needs more specifically than does a competing product.

Thus marketers who successfully segment the overall market and adapt their products to the needs of one or more smaller segments stand to gain in terms of increased profit margins and reduced competitive pressures. Small businesses may find market segmentation to be a key in enabling them to compete with larger firms. Many management consulting firms offer assistance with market segmentation to small businesses. But the potential gains offered by market segmentation must be measured against the costs may include increased production and marketing expenses. 4. 4 DEFINITION OF THE RELEVANT MARKET

Though mass marketing (also known as market aggregation or undifferentiated marketing) cannot fully satisfy every customer in a market, many companies still employ this strategy. It is commonly used in the marketing of standardized goods and services (including sugar, gasoline, rubber bands or dry cleaning services). Mass marketing offers some advantages to businesses, such as reduced production and marketing costs. Due to the efficiency of large production runs and a single marketing program, businesses that mass market their goods/services may be able to provide consumers with more value for their money.

Some producers of mass market goods employ a marketing strategy known as product differentiation to make their offering seem distinct from that of competitors, even though the products are largely the same. For example, a producer of bath towels might elaborate its brand name on its towels and sell them only through upscale department stores as a form of product differentiation. Consumers might tend to perceive these towels as somehow better than other brands, and thus worthy of a premium price. But changing consumer perceptions in this way can be very expensive in terms of promotion and packaging.

A product differentiation strategy is most likely to be effective when consumers care about the product and there are identifiable differences between brands. Despite the cost advantages mass marketing offers to businesses, this strategy has several drawbacks. A single product offering cannot fully satisfy the diverse needs of all consumers in a market and consumers with unsatisfied needs expose businesses to challenges by competitors who are able to identify and fulfill consumer needs more precisely.

In fact, markets for new products typically begin with one competitor offering a single product, and then gradually splinter into segments as competitors enter the market with products and marketing messages targeted at groups of consumers the original producer may have missed. These new competitors are able to enter a market apparently controlled by an established competitor because they can identify Universiti Tun Abdul Razak – 22 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— nd meet the needs of unsatisfied customer segments. In recent times, the rise of computerized customer databases has worked to drive marketing toward ever-more-narrowly focused market segments. Applying a market segmentation strategy is most effective when an overall market consists of many smaller segments whose members have certain characteristics or needs in common. Through segmentation, businesses can divide such a market into several homogeneous groups and develop a separate product and marketing program to more exactly fit the needs of one or more segments.

Though this approach can provide significant benefits to consumers and a profitable sales volume (rather than a maximum sales volume) to businesses, it can be costly to implement. For example, identifying homogeneous market segments requires significant amounts of market research, which can be expensive. Also, businesses may experience a rise in production costs as they forfeit the efficiency of mass production in support of smaller production runs that meet the needs of a separation of the market.

Finally, a company may find that sales of a product developed for one segment invade upon the sales of another product intended for another segment. Nonetheless, market segmentation is vital to success in many industries where consumers have diverse and specific needs, such as homebuilding, furniture upholstery and tailoring. 4. 5 IDENTIFYING ALTERNATIVE BASES The market can be divided into segments by using four segmentation bases: 1. Psychographic Base includes personality traits such as consumer attitudes, lifestyles and interests. 2.

Behavioristic Base includes attitude towards products such as the frequency of use, brand loyalty, benefits sought in a product and readiness to purchase the product (geographic and demographic) bases. 3. Geographic Base focuses on preferences contingent on regional factors, such as region (e. g. , North or South), country, population density, urban or rural location and climate. 4. Demographic Base includes personal characteristics such as gender, age, marital status, social attributes (such as ethnicity and religion) and income level. Other bases for segmentation include occasions and consumer knowledge of and interest in particular brands.

Marketers can use various occasions such as marriage, graduation, anniversaries, birthdays and holidays to promote products. Marketers can advertise a variety of products including candy, cards and flowers to various segments based on occasions. In addition, marketers can create segments based on consumer knowledge and interest, targeting novices and veterans with different promotions for their products or brands. But whatever segmentation bases marketers use, they analyze their data and group consumers in order to determine consumer behavior. 4. SELECTION OF BEST BASED FOR SEGMENTATION In order to successfully implement a market segmentation strategy, a business must employ market research techniques to find patterns of similarity among customer preferences in a market. Ideally, customer preferences will fall into distinct groups based upon identifiable characteristics of the population. This means that if customer requirements were plotted on a graph using certain characteristics or segmentation bases, along the axes and the points would tend to form clusters. Universiti Tun Abdul Razak – 23 –

Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— To be pursued by a marketer, according to Hiam and Schewe (1992), the customer segments should be: Identifiable and measurable Large enough to be profitable Reached effectively (for example, its members must tend to view the same television programs, read the same publications or shop in the same places) Responsive to marketing Constant and not expected to change quickly.

A company might elect to serve a single market segment or attempt to meet the needs of several segments. Determining how to segment a market is one of the most important questions a marketer must face. Creative and effective market segmentation can lead to the development of popular new products, but unsuccessful segmentation can cost a great deal of money and still not yield the desired results. There are three main types of segmentation bases for businesses to consider: 1. Descriptive Base This includes a variety of factors that describe the demographic and geographic situation of the customers in a market.

They are the most commonly used segmentation bases because they are easy to measure. Some of the demographic variables that are used as descriptive bases in market segmentation might include age, gender, religion, income and family size; while some of the geographic variables might include region of the country, climate and population of the surrounding area. 2. Behavioral Base There are generally more difficult to measure than descriptive bases, but they are often considered to be more powerful determinants of consumer purchases.

They include those underlying factors that help motivate consumers to make certain buying decisions, such as personality, lifestyle and social class. Behavioral bases also include factors that are directly related to consumer purchases of certain goods, such as their degree of brand loyalty, the rate at which they use the product and need to replace it and their readiness to buy at a particular time. 3. Benefit Base Businesses that segment a market based on benefits hope to identify the primary benefit that consumers seek in buying a certain product and then supply a product that provides the benefit.

This segmentation approach is based upon the idea that market segments exist primarily because consumers seek different benefits from products, rather than because of various other differences between consumers. One potential consequence to this approach is that consumers do not always know or cannot always identify a single benefit that influences them to make a purchase decision. Many marketers use a combination of bases that seem most appropriate when segmenting a market. Using a single variable is undoubtedly easier, but it often turns out to be less precise. . 7 IDENTIFY & SELECT TARGET MARKET SEGMENTS A target market is a group of customers with similar needs that forms the focus of a company’s marketing efforts. Similarly, target marketing involves tailoring the company’s marketing efforts to appeal to a specific group of customers. Selecting target markets is part of the process of market segmentation (dividing an overall market into key customer subsets, or segments, whose members share similar demographic characteristics and needs).

Demographic characteristics that are analyzed for target marketing purposes include age, income, geographic origins and Universiti Tun Abdul Razak – 24 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— current location, ethnicity, marital status, education, interests, level of discretionary income, net worth, home ownership, and a host of other factors. The company then selects from among these segments the particular markets it wishes to target.

Target marketing can be a particularly valuable tool for small businesses, which often lack the resources to appeal to large aggregate markets or to maintain a wide range of differentiated products for varied markets. Target marketing allows a small business to develop a product and a marketing mix that fit a relatively homogenous part of the total market. By focusing its resources on a specific customer base in this way, a small business may be able to carve out a market niche that it can serve well than its larger competitors.

Identifying specific target markets (and then delivering products and promotions that ultimately maximize the profit potential of those targeted markets) is the primary function of marketing management for many smaller companies. For instance, a manufacturer of fishing equipment would not randomly market its product to the entire U. S. population. Instead, it would conduct market research, using such tools as demographic reports, market surveys and trade shows to determine which customers would be most likely to purchase its offerings.

It could then more efficiently spend its limited resources in an effort to persuade members of its target group(s) to buy. Advertisements and promotions could then be tailored for each segment of the target market. There are infinite ways to address the wants and needs of a target market. For example, product packaging can be designed in different sizes and colors, or the product itself can be altered to appeal to different personality types or age groups. Producers can also change the warranty or durability of the good or provide different levels of follow-up service.

Other influences, such as distribution and sales methods, licensing strategies and advertising media, also play an important role. It is the responsibility of the marketing manager to take all of these factors into account and to devise a consistent marketing program that will appeal to the target customer. 4. 8 SEGMENTATION, POSITIONING & MARKETING MIX STRATEGY When it comes to marketing strategies, most people spontaneously think about the 4P (Product, Price, Place, Promotion) and extended by three more Ps for marketing services (People, Processes, Physical Evidence).

The importance of market segmentation results from the fact that the buyers of a product/service are no homogenous group. Actually, every buyer has individual needs, preferences, resources and behaviors. Since it is virtually impossible to cater for every customer‘s individual characteristics, marketers group customers to market segments by variables they have in common. These common characteristics allow developing a standardized marketing mix for all customers in this segment. As already stated, segmentation is the basis for developing targeted and effective marketing plans.

Furthermore, analysis of market segments enables decisions about intensity of marketing activities in particular segments. A segment-orientated marketing approach generally offers a range of advantages for both, businesses and customers. Market segmentation and the identification of target markets, however, are an important element of each marketing strategy. They are the basis for determining any particular marketing mix. Literature suggests the following steps: Universiti Tun Abdul Razak – 25 –

Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— Better Serving Customers Needs and Wants It is possible to satisfy a variety of customer needs with a limited product range by using different forms, bundles, incentives and promotional activities. The computer manufacturer Dell, for instance, does not organize its website by product groups (desktops, notebooks, servers, printers etc), but by customer groups (privates, small businesses, large businesses, public/state organizations).

They offer the same products to all customer groups. Nevertheless, they suggest product bundles and supporting services that are individually tailored for the needs of each particular group. As an example, Dell offers to take on all IT-administration for companies. This service provides a huge potential for savings for corporate customers. However, it would be absolutely useless for private customers. Thus, segment-specific product bundles increase chances for cross selling. Higher Profits It is often difficult to increase prices for the whole market.

Nevertheless, it is possible to develop premium segments in which customers accept a higher price level. Such segments could be distinguished from the mass market by features like additional services, exclusive points of sale, product variations and the like. A typical segment-based price variation is by region. The generally higher price level in big cities is evidence for this. When differentiating prices by segments, organizations have to take care that there is no chance for cannibalization between high-priced products with high margins and budget offers in different segments.

This risk is the higher, the less distinguished the segments are. Opportunities for Growth Targeted marketing plans for particular segments allow to individually approach customer groups that otherwise would look out for specialized niche players. By segmenting markets, organizations can create their own niche products and thus attract additional customer groups. Moreover, a segmentation strategy that is based on customer loyalty offers the chance to attract new customers with starter products and to move these customers on to premium products.

Universiti Tun Abdul Razak – 26 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— Sustainable Customer Relationships in All Phases of Customer Life Cycle Customers change their preferences and patterns of behavior over time. Organizations that serve different segments along a customer‘s life cycle can guide their customers from stage to stage by always offering them a special solution for their particular needs.

For example, many car manufacturers offer a product range that caters for the needs of all phases of a customer life cycle: fun-car for young professionals, family car for young families, etc. Skin care cosmetics brands often offer special series for babies, teens, normal skin and elder skin. Targeted Communication It is necessary to communicate in a segment-specific way even if product features and brand identity are identical in all market segments. Such a targeted communications allows stressing those criteria that are most relevant for each particular segment (i. e. price vs. reliability vs. restige). Stimulating Innovation An undifferentiated marketing strategy that targets at all customers in the total market necessarily reduces customers‘ preferences to the smallest common basis. Segmentations provide information about smaller units in the total market that share particular needs. Only the identification of these needs enables a planned development of new or improved products that better meet the wishes of these customer groups. If a product meets and exceeds a customer‘s expectations by adding superior value, the customers normally is willing to pay a higher price for that product.

Thus, profit margins and profitability of the innovating organizations increase. Higher Market Shares In contrast to an undifferentiated marketing strategy, segmentation supports the development of niche strategies. Thus marketing activities can be targeted at highly attractive market segments in the beginning. Market leadership in selected segments improves the competitive position of the whole organization in its relationship with suppliers, channel partners and customers. It strengthens the brand and ensures profitability.

On that basis, organizations have better chances to increase their market shares in the overall market. Universiti Tun Abdul Razak – 27 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— CHAPTER 5: POSITIONING & DIFFERENTIATION OF SERVICES 5. 1 LEARNING OBJECTIVES At the end of this chapter, the student will be able to: Identify the evolution of positioning.

Examine the level and the importance of positioning. 5. 2 ABSTRACT After the logical step of segmenting and targeting the market, a company should position itself in the minds of customers for its unique attributes, as compared to its competitors. Positioning a service is difficult as compared to products because services are intangible in nature. However, a company should identify a competitive position for itself in the market, by differentiating itself from the competitors.

Further, a company should add value to its services by improving either its primary activities which consist of inbound logistics, operations, outbound logistics, marketing and sales, and service or its support activities which include the procurement processes, infrastructure of a firm, its human resource management and the technology development. 5. 3 EVOLUTION OF POSITIONING Positioning involves analyzing each market segment as defined by research activities and developing a distinct position for each segment. Ask yourself: how you want to appear to that segment? hat you must do for that segment to ensure that it buys your product/service? This will state different media and advertising appeals for each segment. Beer, for example, is sold on tap and in seven-ounce bottles, twelve-ounce cans and bottles, six-packs, twelve-packs, cases, and quart bottles and kegs of several sizes. The beer is the same but each package size may appeal to a separate market segment and have to be sold with a totally different appeal and through different retail outlets. Marketing position can change to meet the current conditions of the market for the product.

The ability of the company to adjust will be enhanced greatly by an up-to-date knowledge of the marketplace gained through continual monitoring. By having good data about the customers, the segments fit into and the buying motives of those segments, the company can select the position that makes the most sense. While there are many possible marketing positions, most would fit into one of the following categories: 1. Positioning on Specific Product Features It is a very common approach, especially for industrial products. If the product/service has some unique features that have obvious value this may be the way to go. . Positioning on Benefits It is strongly related to positioning on product features. Generally, this is more effective because you can communicate to your customers about what your product/service can do for Universiti Tun Abdul Razak – 28 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— them. The features may be nice, but unless customers can be made to understand why the product will benefit them, you may not get the sale. . Positioning for a Specific Use It is related to benefit positioning. Consider Campbell’s positioning of soups for cooking. An interesting extension is mood positioning: Have a Coke and a smile. This works well when you can teach your customers how to use your product or when you use a promotional medium that allows a demonstration. 4. Positioning for User Category A few examples: You’ve Come a Long Way Baby, The Pepsi Generation and Breakfast of Champions. Be sure you show your product being used by models with whom your customers can identify. 5.

Positioning Against Another Product or a Competing Business It is a strategy that ranges from implicit to explicit comparison. Implicit comparisons can be quite pointed; for example, Avis never mentions Hertz, but the message is clear. Explicit comparisons can take two major forms. The first form makes a comparison with a direct competitor and is aimed at attracting customers from the compared brand, which is usually the category leader. The second type does not attempt to attract the customers of the compared product, but rather uses the comparison as a reference point.

Consider, for example, the positioning of the Volkswagen Dasher, which picks up speed faster than a Mercedes and has a bigger trunk than a Rolls Royce. This usually works to the advantage of the smaller business if you can capitalize on the American tradition of cheering for the underdog. You can gain stature by comparing yourself to a larger competitor just as long as your customers remain convinced that you are trying harder. 6. Product Class Disassociation It is a less common type of positioning. It is particularly effective when used to introduce a new product that differs from traditional products.

Lead-free gasoline and tubeless tires were new product classes positioned against older products. Space-age technology may help you here. People have become accustomed to change and new products and are more willing to experiment than was true ten years ago. Even so, some people are more adventuresome and trusting than others and more apt to try a revolutionary product. The trick is to find out who are the potential brand switchers or experimenters and find out what it would take to get them to try your product/service.

The obvious disadvantage of dealing with those who try new products is that they may move on to another brand just as easily. Brand loyalty is great as long as it is to your brand. 7. Hybrid Bases It is incorporates elements from several types of positioning. Given the variety of possible bases for positioning, small business owners should consider the possibility of a hybrid approach. This is particularly true in smaller towns where there are not enough customers in any segment to justify the expense of separate marketing approaches. . 4 COMPETITIVE DIFFERENTIATION OF SERVICES Many firms strive for a competitive advantage, but few truly understand what it is or how to achieve and keep it. A competitive advantage can be gained by offering the consumer a greater value than the competitors, such as by offering lower prices or providing quality services or other benefits that justify a higher price. The strongest competitive advantage is a strategy that cannot be imitated by other companies. Universiti Tun Abdul Razak – 29 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————– Competitive advantage can be also viewed as any activity that creates superior value above its rivals. A company wants the gap between perceived value and cost of the product to be greater than the competition. Michael Porter defines three generic strategies that firm’s may use to gain competitive advantage: cost leadership, differentiation and focus. A firm utilizing a cost leadership strategy seeks to be the low-cost producer relative to its competitors.

A differentiation strategy requires that the firm possess a non-price attribute that distinguishes the firm as superior to its peers. Firms following a focus approach direct their attention to narrow product lines, buyer segments or geographic markets. Focused firms will use cost or differentiation to gain advantage, but only within a narrow target market. Product Differentiation It is achieved by offering a valued variation of the physical product. The ability to differentiate a product varies greatly along a continuum depending on the specific product.

There are some products that do not lend themselves too much differentiation, such as beef, lumber and notebook paper. Some products, on the other hand, can be highly differentiated. Appliances, restaurants, automobiles and even batteries can all be customized and highly differentiated to meet various consumer needs. In Principles of Marketing (1999), authors Gary Armstrong and Philip Kotler note that differentiation can occur by manipulating many characteristics, including features, performance, style, design, consistency, durability, reliability or reparability.

Differentiation allows a company to target specific populations. It is easy to think of companies that have used these characteristics to promote their products. Maytag has differentiated itself by presenting Old Reliable, the Maytag repairman who never has any work to do because Maytag’s products purportedly function without any problems and do not require repairs. The Eveready Battery Co. (Energizer) has promoted their products’ performance with the Energizer Bunny® that keeps going and going. Many chain restaurants differentiate themselves with consistency and style.

If a consumer has a favorite dish at her local Applebee’s restaurant, she can be assured it will look and taste the same at any Applebee’s restaurant anywhere in the country. And, the style of theme restaurants is the key to some establishments. Planet Hollywood and Hard Rock Cafe profit from their themes. Service Differentiation Companies can also differentiate the services that accompany the physical product. Two companies can offer a similar physical product, but the company that offers additional services can charge a premium for the product.

Mary Kay cosmetics offers skin-care and glamour cosmetics that are very similar to those offered by many other cosmetic companies; but these products are usually accompanied with an informational, instructional training session provided by the consultant. This additional service allows Mary Kay to charge more for their product than if they sold the product through more traditional channels. In the personal computer business, Dell and Gateway claim to provide excellent technical support services to handle any glitches that may occur once a consumer has bought their product.

This 24-hour-a-day tech support provides a very important advantage over other PC makers, who may be perceived as less reliable when a customer needs immediate assistance with a problem. People Differentiation Hiring and training better people than the competitor can become an immeasurable competitive advantage for a company. A company’s employees are often overlooked, but should be given careful consideration. This human resource-based advantage is difficult for a competitor to imitate Universiti Tun Abdul Razak – 30 –

Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— because the source of the advantage may not be very apparent to an outsider. As a Money magazine article reported, Herb Kelleher, CEO of Southwest Airlines, explains that the culture, attitudes, beliefs, and actions of his employees constitute his strongest competitive advantage: The intangibles are more important than the tangibles because you can always imitate the angibles; you can buy the airplane, you can rent the ticket counter space. But the hardest thing for someone to emulate is the spirit of your people. This competitive advantage can encompass many areas. Employers who pay attention to employees, monitoring their performance and commitment, may find themselves with a very strong competitive advantage. A well-trained production staff will generate a better quality product. Yet, a competitor may not be able to distinguish if the advantage is due to superior materials, equipment or employees.

People differentiation is important when consumers deal directly with employees. Employees are the frontline defense against waning customer satisfaction. The associate at Wal-Mart who helps a customer locate a product may result in the customer returning numerous times, generating hundreds of dollars in revenue. Home Depot prides itself on having a knowledgeable sales staff in their home improvement warehouses. The consumer knows that the staff will be helpful and courteous, and this is very important to the consumer who may be trying a new home improvement technique with limited knowledge on the subject.

Another way a company can differentiate itself through people is by having a recognizable person at the top of the company. A recognizable CEO can make a company stand out. Some CEOs are such charismatic public figures that to the consumer, the CEO is the company. If the CEO is considered reputable and is well-liked, it speaks very well for the company, and consumers pay attention. National media coverage of CEOs has increased tremendously, jumping 21 percent between 1992 and 1997 (Gaines-Ross).

Image Differentiation Armstrong and Kotler pointed out in Principles of Marketing that when competing products/services are similar, buyers may perceive a difference based on company or brand image. Thus companies should work to establish images that differentiate them from competitors. A favorable brand image takes a significant amount of time to build. Unfortunately, one negative impression can kill the image practically overnight. Everything that a company does must support their image. Ford Motor Co. s former Quality is Job 1 slogan needed to be supported in every aspect, including advertisements, production, sales floor presentation and customer service. Often, a company will try giving a product a personality. It can be done through a story, symbol, or other identifying means. Most consumers are familiar with the Keebler Elves and the magic tree where they do all of the Keebler baking. This story of the elves and the tree gives Keebler cookies a personality. When consumers purchase Keebler cookies, they are not just purchasing cookies, but the story of the elves and the magic tree as well.

A symbol can be an easily recognizable trademark of a company that reminds the consumer of the brand image. The Nike swoosh is a symbol that carries prestige and makes the Nike label recognizable. Quality Differentiation Quality is the idea that something is reliable in the sense that it does the job it is designed to do. When considering competitive advantage, one cannot just view quality as it relates to the product. The quality of the material going into the product and the quality of production operations should also be scrutinized.

Materials quality is very important. The manufacturer that can get the best material at a given price will widen the gap between perceived quality and cost. Greater quality materials decrease the number of returns, reworks, and repairs necessary. Quality labor also reduces the costs associated with these three expenses. Universiti Tun Abdul Razak – 31 – Faculty of Hospitality & Tourism Management ——————————————————————————————————————————————————————

Innovation Differentiation When people think of innovation, they usually have a narrow view that encompasses only product innovation. Product innovation is very important to remain competitive, but just as important is process innovation. Process innovation is anything new or novel about the way a company operates. Process innovations are important because they often reduce costs, it may take competitors a significant amount of time to discover and imitate them. Some process innovations can completely revolutionize the way a product is produced.

When the assembly line was first gaining popularity in the early twentieth century, it was an innovation that significantly reduced costs. The first companies to use this innovation had a competitive advantage over the companies that were slow or reluctant to change. As one of the first Internet service providers, America Online offered a unique innovation for accessing the nascent Internet – its unique and user-friendly interface. The company grew at a massive rate, leading the rapidly developing Internet sector as a force in American business.

While most innovations are not going to revolutionize the way that all firms operate, the small innovations can reduce costs by thousands or even millions of dollars and large innovations may save billions over time. 5. 5 POSITIONING & SERVICES Falling in love! As entrepreneurs, we do it every day. Our passionate belief in and commitment to our service makes all things seem possible. The most successful entrepreneurs learn to transform their passion into position. It is a perceptual location. It is where your service fits into the marketplace. Effective positioning puts you first in line in the minds of potential customers.

As individuals, we continually position ourselves. The responsible older sibling, the class clown, a number cruncher, a super genius are all examples of positioning. These identifiers help us define ourselves and distinguish our abilities as unique and different from other people. Positioning is a powerful tool that allows you to create an image. And image is the outward representation of being who you want to be, doing what you want to do, and having what you want to have. Positioning yourself can lead to personal fulfillment. Being positioned by someone else restricts your choices and limits your opportunities.

It is so important for entrepreneurs to transform their passion into a market position. If you do not define your service, a competitor will do it for you. Your position in the market place evolves from the defining characteristics of your service. The primary elements of positioning are: 1. Pricing Is your product a luxury item, somewhere in the middle, or cheap, cheap, cheap? 2. Quality Total quality is a much used and abused phrase. But is your product well produced? What controls are in place to assure consistency? Do you back your quality claim with customerfriendly guarantees, warranties, and return policies? . Service Do you offer the added value of customer service and support? Is your product customized and personalized? 4. Distribution How do customers obtain your product? The channel or distribution is part of positioning. Universiti Tun Abdul Razak – 32 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— 5. Packaging Packaging makes a strong statement. Make sure it is delivering the message you intend. Positioning is your competitive strategy.

What is the one thing you do best? What is unique about your service? Identify your strongest strength and use it to position your service. 5. 6 THE LEVEL OF POSITIONING Positioning is undoubtedly one of the simplest and most useful tools to marketers. After segmenting a market and then targeting a consumer, you would proceed to position a service within that market. Remember this important point. Positioning is all about perception. As perception differs from person to person, so do the results of the positioning map e. g. what you perceive as quality, value for money, etc, is different to my perception.

However, there will be similarities. Services are mapped together on a positioning map. This allows them to be compared and contrasted in relation to each other. This is the main strength of this tool. Marketers decide upon a competitive position which enables them to distinguish their own services from the offerings of their competition (hence the term positioning strategy). Take a look at the basic positioning map template below: The marketer would draw out the map and decide upon a label for each axis. The individual companies are then mapped out next to each other.

Any gaps could be regarded as possible areas for new products. The term positioning refers to the consumer’s perception of a service in relation to its competitors. You need to ask yourself, what is the position of the service in the mind of the consumer? Universiti Tun Abdul Razak – 33 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— Below are the six-step question frameworks for successful positioning: 1. 2. 3. 4. 5. 6.

What position do you currently own? What position do you want to own? Whom you have to defeat to own the position you want? Do you have the resources to do it? Can you persist until you get there? Are your tactics supporting the positioning objective you set? Example: UK Grocery Retail Plot the following organization onto a positioning map. UK grocery retailers have been chosen for the purpose of this exercise. If you have no knowledge of them, list seven grocery retailers of whom you have some knowledge or opinion. Tesco Sainsbury Asda (Wal-Mart) Aldi Spar Marks and Spencer Fortnum and Mason

The seven UK grocery retailers are plotted upon the positioning map. Is your answer similar? Remember, if we disagree slightly that’s because we have a different perception. Universiti Tun Abdul Razak – 34 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— 5. 7 THE IMPORTANCE OF POSITIONING Positioning is no doubt the single most important aspect of marketing in the globally competitive market place.

With capitalism gaining popularity in most countries of the world, competition has increased greatly. A company not only needs to fight rivals in the local market. It also has to equip itself to compete against the world‘s best. Since positioning has more to do with the customer‘s perception, a marketer should take care about how effectively the positioning message is communicated to the end user or the prospective user. Positioning has to be managed at every point where the customer comes in contact with the company, from personal sales to online communication to telephonic interaction.

This is the only effective way of avoiding any confusion about the product in the mind of the customer. Positioning starts with the company deciding about how many ideas to stress in order to formulate a positioning message. A company could aspire to be the service leader, the customer intimate firm or operationally excellent firm. To form a successful positioning strategy a company must aspire to be best at one or all of the three value disciplines. Once a company decides what ideas to stress in positioning, it must start to communicate the message to the customer at every contact point.

At every stage of positioning the customers‘ view point is critical. Asking customers about their expectations from your service can prove beneficial in formulating a successful positioning strategy. It may be different from what the internal sources in the company think or perceive. Taking inputs from outsiders gives new insights to the marketer and enables him to have a holistic view of the subject. A company also needs to know it well before it starts telling others what it has to offer. This means developing core competencies. Positioning helps companies to give a direction to their marketing plan.

It gives the customer a central idea of what the product is all about. However positioning is only the beginning of the marketing cycle. Once a company has decided what image it wants its product to convey, it has to be followed up by similar practices. A company has to live the image created by its positioning statement throughout its life cycle. Universiti Tun Abdul Razak – 35 – Faculty of Hospitality & Tourism Management ——————————————————————————————————————————————————————

CHAPTER 6: MARKETING MIX 6. 1 LEARNING OBJECTIVES At the end of this chapter, the student will be able to: Explore the marketing mix elements. Identify the service product. Comprehend the 7Ps in services. Review a marketing mix strategy. 6. 2 ABSTRACT There has been a lot of debate in identifying the list of marketing mix elements. The traditional marketing mix has comprised to four elements of product, price, promotion and place. A number of researchers have additionally suggested adding people, process and physical evidence decisions (Booms and Bitner, 1981; Fifield and Gilligan, 1996). . 3 MARKETING MIX ELEMENTS Marketing mix is the set of the marketing tools that the firm uses to pursue its marketing objectives in the target market. Theories of marketing management and strategy need to develop and to keep pace with changes in the marketplace. Central to marketing management is the concept of the marketing mix. The marketing mix is not a theory of management that has been derived from scientific analysis, but a conceptual framework which highlights the principal decisions that marketing manager makes in configuring their offerings to suit customers‘ needs.

The tools can be used to develop both long term strategies and short term tactical programmes. Universiti Tun Abdul Razak – 36 – Faculty of Hospitality & Tourism Management —————————————————————————————————————————————————————— In the context of services marketing, Booms and Bitner (1981) has suggested another extra 3Ps that contain people, physical evidence and process. People refer to all people directly or indirectly involved in the consumption of a service, example employees or other consumers.

Process is all about the procedure, mechanisms and flow of activities by which services are consumed. Finally, physical evidence, that related to the environment in which the service is delivered. Product Quality Brand Name Service Line Warranty Capabilities Facilitating Goods Tangible Clues Price Personnel Physical Environment Process of Service Delivery Price Level Discounts & Allowances Payment Terms Customer‘s Own Perceived Value Quality/Price Interaction Differentiation Place Location Accessibility Distribution Channel Distribution Coverage Promotion

Advertising Personal Selling Sales Promotion Publicity Personnel Physical Environment Facilitating Goods Tangible Clues Process of Service Delivery People Personnel Training Discretion Commitment Incentives Appearance Interpersonal Behavior Attitudes Other Customers: Behavior Degree of Involvement Customer Contact Process Policies Procedures Merchandization Employee Discretion Customer Involvement Customer Direction Flow of Activities Physical Evidence Environment: Furnishings Color Layout Noise Level Facilitating Goods Tangible Clues The concept is simple.

Think about another common mix – a cake mix. All cakes contain eggs, milk, flour, and sugar. However, you can alter the final cake by altering the amounts of mix elements contained in it. So for a sweet cake add more sugar! 6. 4 SERVICE PRODUCT For many a product is simply the tangible, physical being that they may be buying or selling. You buy a new car and that is the product – simple! When you buy a car, is the product more complex than you first thought? In order to actively explore the nature of a product further, let consider it as three different products: 1.

The Core Product It is not the tangible, physical product. You cannot touch it. That is because the core product is the benefit of the product that makes it valuable to you. So with the car example, the benefit is convenience i. e. the ease at which you can go where you like, when you want to. Another core benefit is speed since you can travel around relatively quickly. Universiti Tun Abdul Razak – 37 – Faculty of Hospitality & Tourism Management ——————————————————————————————————————————————————————