CH2 - Service Characteristics of Hospitality and Tourism Marketing - PDF

Chapter 2 Service Characteristic s of Hospitality and Tourism Marketing Learning Outcomes -To identify the relationship between service culture, the characteristics of tourism and hospitality, and the service profit chain in the context of tourism and hospitality service marketing and quality. “M...

Chapter 2 Service Characteristic s of Hospitality and Tourism Marketing Learning Outcomes -To identify the relationship between service culture, the characteristics of tourism and hospitality, and the service profit chain in the context of tourism and hospitality service marketing and quality. “Managers do not control the quality of the product when the product is a service... The quality of the service is in a precarious state --- it is in the hands of the service workers who produce and deliver it” - Karl Albrecht The Service Culture The service culture focuses on serving and satisfying the customer Creation of service culture must start from top management and flow down. CHARACTERISTICS OF TOURISM AND HOSPITALITY SERVICE MARKETING ❖Tourism and hospitality is part of the service industry. Therefore, a different approach is required for its implementation. The special features of the service marketing in relation to the tourism and hospitality are: Characteristics of Service Marketing INTANGIBILITY Services are described as intangible products, meaning that they cannot be experiences, heard, seen, smell, tasted, or touched prior to being purchased. ✔ Marketing intangibles crate difficult INTANGIBILITY ✔Physical Evidence ▪Mismanaged physical evidence could harm any business. Often times poorly managed physical evidence can be source of miscommunication to customers.  PERISHABILITY Unlike manufactured products, which can be stored in warehouses, services cannot be stored. The difficulty for hospitality companies is how to manage their capacity or the inventory with an unstable demand pattern The main principle is to guarantee that the price at peak demand times is set to provide the highest return to the company. In low season periods, the aim is to make extra sales by developing attractive promotions. VARIABILITY The quality of services depends when, where and by whom are they provided. The synchronized production and consumption of services makes it tough to maintain their uniformity, especial during peak periods. This is described as when experiences may be triggered by location, time, topography, season, the environment, amenities, events, and service providers. Every service performance is a distinctive event. Human interaction cannot be identical. Service-Profit Chain Service Profit Chain – which link service firm profits with employee and customer satisfaction. It consists of five links: 1. Internal Service Quality 2. Satisfied and productive service employees 3. Greater service values 4. Satisfied and loyal customers 5. Healthy service profits and growth Three Types of Marketing in Service Industries Internal Marketing Means that the service firm must effectively train and motivate its customer contact employees and all the supporting service people to work as a team provide customer satisfaction. External Marketing This is the traditional form of business marketing, showing customers how the services provided by your business benefit them. External marketing includes advertising, your website and your company's social media efforts. Interactive Marketing Service firm that recognizes perceived service quality depends heavily on the quality of the buyer-seller interaction.  Management Strategies for Service Businesses  Management Strategies for Service Business A.Managing Differentiation Solution to price competition is to develop a differentiated offering. The offer can include innovative features that set one company’s offer apart from that of its competitors. Management Strategies for Service Business B. Managing Service Quality With hospitality products, quality is measured by how well customers expectations are met. Management Strategies for Service Business C. Manage Service Productivity Service firms are under great pressure to increase service productivity How can you increase productivity with lesser cost? Cross-Train current.employees Harness the power of technology Management Strategies for Service Business D. Resolving Customer Complaints Resolving customer complaints is a critical component of customer retention. Management Strategies for Service Business E. Managing Employees as Part of the Product The human resource and marketing department must work closely together. The task of internal marketing to employees involves the effective training and motivation of customer- contact employees and supporting service personnel Management Strategies for Service Business F. Managing Perceived Risk The high risk that people perceive when purchasing hospitality products increases loyalty to companies that have provided them with a consistent product in the past, Management Strategies for Service Business G. Managing Capacity and Demand First Service must adjust their operating system to enable business to operate at a maximum capacity Second their must remember that their goal is to create satisfied customers. DELIVERING SERVICE QUALITY Quality in the tourism and hospitality industry is defined as the reliable delivery of products and guest services based on anticipated standards. The importance of managing quality for tourism organizations has intensely increased in the last years due to the high level of competition in the industry produced by the globalization and fewer obstacles for entering into the industry. MEASURING SERVICE QUALITY SERVQUAL Technique It compares customer perceptions of quality against customer expectations. Under the SERVQUAL model, the five dimensions of service are: 1. Reliability – it is where the promised quality and level of services is delivered in a consistent and accurate manner 2. Assurance – it is the knowledge and politeness of the employees and their ability to create trust and confidence. 3. Tangibles – the organization’s physical facilities such as the building, websites, equipment and appearance of employees 4. Empathy – it is the degree of caring individual attention that the organization’s employees provide to its customers. 5. Responsiveness – this is the willingness of employees to help customers and offer a speedy service. MEASURING SERVICE QUALITY SERVQUAL Technique When these 5 dimensions are constantly satisfied, a company is very well on its direction to becoming customer oriented. These concepts can form a part of a customer relationship management (CRM) Customer relationship management (CRM) – are tools used by businesses to select customers and continue relationships with them to grow their lifetime value to the business. MEASURING SERVICE QUALITY SERVQUAL Technique Customer relationship management (CRM) – are tools used by businesses to select customers and continue relationships with them to grow their lifetime value to the business. There are a number of touch points in time where this relationship is maintained. For example: 1. The first time possible guests visit a website and give their email address to receive more information. 2. The time a reservation is made and the company gets their personal details. 3. The in-person service meetings from the front desk to the parking lot. 4. Welcome notes, personalized menus, friendly hellos, and other touches during the interactions. 5. Background messages together with clean facilities and equipment in good repair, pleasant décor and ambiance 6. Follow up communications like newsletter 7. More interactions on social media MEASURING SERVICE QUALITY Mystery Shopping ▪ It entails hiring an “undercover customer” to examine the company's service quality MEASURING SERVICE QUALITY Post Service Rating ▪ This is the practice of asking customers to rate the service right after it has been provided MEASURING SERVICE QUALITY Follow-up Survey ▪ With this technique a company asks customers to rate the service quality through an email survey such as Google Forms ▪ It has a twosome advantages over the post-service rating. It offers a customer the time and space for more comprehensive responses MEASURING SERVICE QUALITY Social Media Monitoring ▪ This method has been gaining force with the increase of social media. ▪ For many people, social media serve as a channel. This is a place where they can release their frustrations and be heard.  Chapter 2 The Marketing Environment Learning Outcomes -Analyze and evaluate the impact of macro and micro environmental factors on marketing strategies and decision-making within a competitive market context. “It is useless to tell a river to stop running; the best thing is to learn how to swim in the direction.” -Anonymous  Examining and Responding to the TheMarketing marketingEnvironment environment consists of external forces that directly and indirectly influence an organization’s acquisition of inputs (human, financial, natural resources, and raw materials and information) and creation of outputs (goods, services, or ideas).  Environmental Scanning To monitor changes in the marketing environment, marketers engage in environmental scanning and analysis. Environmental scanning is the process of collecting information about forces in the marketing environment. Scanning involves observation; secondary sources such as business, trade, government, and general- interest publications; marketing research. Environmental scanning gives companies an edge over competitors in allowing them to take advantage of current trends. However, simply gathering information about competitors and customers is not enough; companies must know how to use that information in the strategic planning process.  Environmental Analysis Environmental Analysis is the process of assessing and interpreting the information gathered through environmental scanning. In particular, environmental analysis can help marketing managers assess the performance of current marketing efforts and develop future marketing strategies. Marketing Environment - Consists of actors and forces outside marketing that affect a company’s ability to build and maintain successful relationships with its target customers  THE MICRO ENVIRONMENT Involves factors of resources availability and usage that impact individuals and businesses. Six microeconomic business factors that affect almost any business are the following: Customers ✔May be an individual or household, an organization that purchases a product for use in the production of other products, or an organization that purchases a product for resale at a profit.  THE MICRO ENVIRONMENT Involves factors of resources availability and usage that impact individuals and businesses. Six microeconomic business factors that affect almost any business are the following: Customers ✔May be an individual or household, an organization that purchases a product for use in the production of other products, or an organization that purchases a product for resale at a profit.  THE MICRO ENVIRONMENT Customers Five types of general customer markets namely: 1. Consumer markets – these consist of individuals and households that buy hospitality services for the purpose of leisure, medical needs and gatherings like reunions, weddings and debuts. 2. Business markets – these groups purchase hospitality services to facilitate their businesses. 3. Resellers – usually these groups buy a product and resell them. 4. Government markets – these are made up of government entities that buy hospitality services for individual travelers or meetings. 5. International markets – these consist of buyers from other countries such as consumers, businesses, resellers and governments.  THE MICRO ENVIRONMENT Employees ✔Produces, sell or service the goods and service that drive the business. Suppliers ✔Are individuals and companies that provide the resources required by the business to produce its goods and services Marketing Intermediaries ✔Are those companies who advise, influence and make bookings for customers. Public ✔This can exert considerable influence on a hospitality business.  The Company’s Microenvironment ⮚ Consist of factors close to the company that affects it ability to serve its customers.  The Company’s Microenvironment MICROENVIRONMENT A. The Company ❑Marketing managers must work with all departments of a company. ❑All Departments have an impact on the marketing department’s plans and actions. MICROENVIRONMENT B. Existing Competitors ❑To be successful, a company must satisfy needs and wants of consumers better than competitors ❑A company should monitor three variables when analyzing each of its competitors ❑Share of Market ❑Share of Mind ❑Share of Heart  LEVELS OF COMPETITION 1.Product Form Competition (Brand) Budget Competitio Companies that are offering similar products and n services at similar prices. General Competitio 2. Product Category Competition n (Industry) Companies offering the same class of products. Product Category 3. General Competition (Form) Companies offering a product to serve the same service. Product 4. Budget Competition (Generic) Form All companies that are competing for the customers' money.  MICROENVIRONMENT C. Suppliers ❑Suppliers are firms and individuals that provide the resources needed by the company to produce its goods and services ❑Suppliers can seriously affect marketing plans MICROENVIRONMENT D. Marketing Intermediaries ❑Marketing intermediaries help the company promote, sell, and distribute its goods to the final buyers MICROENVIRONMENT E. Disintermediation The elimination of intermediaries  MICROENVIRONMENT F. Marketing Services Agencies ❑Marketing service agencies help formulate and implement marketing strategies ❑Marketing Consulting firms ❑Advertising agencies MICROENVIRONMENT G. Financial intermediaries ❑Financial intermediaries help hospitality companies finance their transactions  MICROENVIRONMENT H. Customers 1. Consumer 2. Business market ❑Consist of the individuals and ❑Business markets buy household that purchase hospitality services to facilitate hospitality services. their business. ❑Reunions ❑Sales meeting ❑Leisure activities ❑Annual conventions ❑Gatherings ❑Seminars  MICROENVIRONMENT H. Customers 3. Resellers 4. Government markets ❑Purchase the product and resell it. ❑Includes government agencies ❑Tour operators purchase that like business purchases airline seats, hotel rooms, hospitality services for ground transportation and individual, group travelers and restaurant meal to make a meetings. package tour which will be sold to a customer.  MICROENVIRONMENT H. Customers 5. International markets ❑Consist of those buyers from other countries , consumers, business, resellers and governments.  MICROENVIRONMENT I. Publics ❑Any group that has an actual or potential interest or impact on an organization’s to achieve its objectives. ❑Financial Publics ❑Media Publics ❑Government Publics ❑Citizen-action Publics ❑Local Publics ❑General Publics ❑Internal Publics THE MACRO ENVIRONMENT ❑It is the general environment within the economy that influences the working performance, decision making and strategy of all business groups at the same time. ❑It constitutes those outside forces that are not under the control of the firm but have a power impact on the company’s functioning. THE MACRO ENVIRONMENT How does this environmental factors affects hospitality and tourism industry? THE MACRO ENVIRONMENT Political ✔Is made up of laws, government agencies, and pressure groups influence and limit the activities of various organizations and individuals in society. ✔Government regulations affect many industries by setting tariffs and quotas for imports and exports and by regulating taxes. THE MACRO ENVIRONMENT Legal / Regulatory ✔The regulation environment protects companies from each other. While most businesses praise competition, they try to neutralize it when it affects them. ✔Regulation also aims at protecting consumer from unfair business practices. ✔If unregulated, companies might make unsafe or low quality product and services, be untruthful in their advertising, or deceive through packaging and pricing. THE MACRO ENVIRONMENT Economic ✔Economic factors have remained a major factor behind the high demand in the tourism sector globally in 2016. ✔The labor market has continued to grow stronger and with it consumer spending. Not just this, disposable personal income as well as average hourly income have also risen THE MACRO ENVIRONMENT Economic However, economic environment could be included by the following elements: 1. Wage inflation – the wage labor might not be increased, it would depend on the decisions are decided to cut the wage or increase the wage by manager. 2. Price inflation – because of recession, if economic decline, the commodity price will rise. It will influence the decision customer make to travel or not. 3. Gross domestic product per capita – the most important economical element are the customer purchasing power and spending patterns. GDP can indicate these elements, because total purchasing power depend on current income, price, savings and credit. THE MACRO ENVIRONMENT Economic However, economic environment could be included by the following elements: 4. Exchange rate – the exchange from peso to dollar is decreasing and therefore, customers might choose domestic tourism rather than abroad for their holidays 5. Disposable income – This represents the amount of income left after the consumer pays his taxes and other required deductions. 6. Spending patterns – willingness of consumers to spend their discretionary income and incur debt identifies them as good prospects for hospitality and travel services.  The Company’s Macroenvironment ⮚ Consists of the larger societal forces that affect the entire microenvironment..  The Company’s Macroenvironment A. Competitors ❑The entrance of future competitors is often difficult to predict and can have a major effect on existing business.  The Company’s Macroenvironment A. Competitors ❑It is dynamic and what makes this industry so competitive is that every player needs to be ahead of the game. ❑The aim of the industry is to satisfy every tourist and guarantee they have a comfortable stay. ❑Any business in the industry needs to be able to provide to the different needs of each tourist and be understanding of them. ❑Being able to think of innovative ideas will place a player ahead of its competitors.  The Company’s Macroenvironment A. Competitors The competition in the tourism and hospitality industry is a result of two aspects: 1. Technological Adaptation o A mobile-first approach o Connectivity o Machine learning, big data and analytics 2. Changing customer Profiles and Brand Experience  The Company’s Macroenvironment A. Competitors Porter Five Forces ✔ The structure of the industry strongly affects the competition between the companies, while deciding the strategies which are used by companies. Therefore, Porter’s five Forces analysis can be used to investigate the hotel industry.  The Company’s Macroenvironment A. Competitors Porter Five Forces Here are factors in measuring how much new entrants threaten an industry: 1. Economies of scale: Industries where large-scale production leads to lower costs face less of a threat from new entrants. New firms would need to achieve a similar size to compete on price, which might be difficult or costly. 2. Product differentiation: When existing firms have strong brand identities or customer loyalty, it's harder for new entrants to gain market share, reducing the threat of entry. 3. Capital requirements: High startup costs for equipment, facilities, etc., can deter new entrants. 4. Access to distribution channels: If existing firms control the distribution channels—retail stores, online platforms, cable infrastructure, etc.—then new entrants would need to find a way to replicate that structure while competing with the established firms on price, a tricky proposition. 5. Regulations: Licenses, safety standards, and other regulatory standards can create barriers, making it too ungainly or costly for new firms to enter the market.  The Company’s Macroenvironment A. Competitors Porter Five Forces Here are factors in measuring how much new entrants threaten an industry: 1.The number of suppliers: When few firms can give a company something it needs to stay in business, each has greater negotiating power. They can raise prices or reduce quality without fear of losing business. 2.Uniqueness: If a supplier provides a unique product or it's not easy to find a substitute, it is more dominant. Businesses can't easily switch to another supplier. 3.Switching costs: If it's costly or time-consuming to switch suppliers, then they have more power. Businesses are less likely to switch, even if prices increase. 4.Forward integration: If suppliers can move into the buyer's industry, they have more power. They already have access to the necessary supplies, making it difficult for their former buyers to compete once they decide to enter the market themselves. 5.Industry importance: Some sectors are tightly intertwined, such as automotive suppliers and the major auto companies or the  The Company’s Macroenvironment A. Competitors Porter Five Forces Here are factors in measuring how much new entrants threaten an industry: Buyers This force intensifies under certain conditions: The number of buyers: The fewer the buyers, the more they have power. In sectors like aerospace manufacturing, each major airline, the industry's customers, has significant leverage in negotiations and can demand favorable terms because the sellers depend on their business. Purchase size: Just like you head off to the big box stores to buy in bulk for a cheaper per-unit cost on whatever now fills up your garage, major retail chains like Walmart Inc. (WMT) buy in large volumes and can negotiate better terms and discounts. Switching costs: In industries like telecommunications, where it's easy for consumers to switch providers, companies such as Verizon Communications, Inc. (VZ) and AT&T Inc. (T) have to offer competitive terms. Price sensitivity: In the fast-fashion industry, where customers are highly price-sensitive, brands must keep their prices low to attract cost-conscious consumers.  The Company’s Macroenvironment A. Competitors Porter Five Forces Here are factors in measuring how much new entrants threaten an industry: Competitors Several factors contribute to the intensity of competitive rivalry in an industry: 1. The number of competitors: The more competitors in an industry, the more fierce the rivalry, each fighting for scraps of market share. 2. Industry growth: In an expanding industry, competition is usually less dramatic because the market is growing so fast that competitors have little need to fight for customers 3. Similarities in what's offered: When the products or services in a market are awfully similar, competition tends to be intense because customers can easily switch. However, if a company offers a unique product or service or has earned brand loyalty, this can reduce competitive rivalry 4. Exit barriers: When it's difficult or costly for companies to leave the industry due to specialized assets, contractual obligations, or emotional attachment, they may choose to stay and compete, even if the market's prospects grow dimmer by the day. The airline industry is a classic example. Airlines have high costs for their assets, contractual obligations (leasing agreements and labor contracts), and regulatory requirements, which means that when airlines face a shrinking market—  The Company’s Macroenvironment A. Competitors Porter Five Forces Here are factors in measuring how much new entrants threaten an industry: Substitutes Here are some ways that this threat can be magnified: 1. Relative price performance: If the cost of a substitute is lower and its performance is comparable or better, customers are likely to switch to the substitute. 2. Customer willingness to go elsewhere: The threat is high if buyers find it easy to switch to a substitute. 3. The sense that products are similar: If buyers perceive that there are few differences between your product and a substitute, even if there are, they may be more likely to switch. 4. Availability of close substitutes: Though this sounds the same as the last bullet point, you have to strategize differently around it. There are times when potential substitutes are very different  The Company’s Macroenvironment B. Demographic Environment Demography ❑Demography is the study of human populations in terms of size, density, location, age, gender, race, occupation, and other statistics ❑Demographics change over time and companies must keep up with them Changing Age Structure of the Population Baby boomers Generation X ❑ Generation X – 49 million born ❑ Produced 78 Million post-World between 1965-1976, the “birth dearth” War II babies born between 1946-1964. ❑They lie in the shadow of boomers and lack distinguish ❑ Boomers constitute a lucrative characteristics market for travel and other ❑63% of boomers will research leisure activities. products before they consider to purchase. ❑ Baby boomers do not feel old, ❑Parents family comes first they look for active vacation second career where they can have adventure ❑They love environment and explore. Changing Age Structure of the Population Generation Y (echo boomers) ❑ 72 million born between 1977-2000 ❑ One thing that millennial’s have in common is their utter fluency and comfort with computer, digital and internal technology.  The Company’s Macroenvironment C. Economic Environment ❑The economic environment consists of factors that affect consumer purchasing power and spending patterns ❑It is not enough to have people, the people must have buying power  The Company’s Macroenvironment Economic Environment The Global Economy ❑Global economic dealings, such as currency exchange rates, have a large impact on travel and tourism across the world  The Company’s Macroenvironment D. Natural Environment ❑The natural environment consists of natural resources required by marketers or affected by marketing activities ❑Anyone involved in tourism is responsible for protecting the environment and ensuring sustainability  The Company’s Macroenvironment E. Technological Environment ❑The hospitality industry is greatly affected by changes in technology ❑The Internet, computerized systems, key cards, etc. ❑The most dramatic force affecting tourism  The Company’s Macroenvironment F. Political Environment ❑Made up of laws , government agencies and pressure groups that influence the and limit the activities of various organizations and individuals in the society. ❑Increased legislation and regulation affecting business ❑Changing government Agency Enforcement ❑Increased emphasis on socially responsible actions and ethics e.g. MADD and PETA  The Company’s Macroenvironment G. Cultural Environment ❑The cultural environment includes institutions and other forces that affect society’s basic values, perceptions, preferences, and behaviors ❑Persistence of cultural values ❑Subcultures