Marketing II PDF

UNIT 1: INTRODUCTION AND REVIEW What is marketing? “Marketing is the process by which companies create value for customers and build strong customer relationships to capture value from the customers in return.” (Kotler e...

UNIT 1: INTRODUCTION AND REVIEW What is marketing? “Marketing is the process by which companies create value for customers and build strong customer relationships to capture value from the customers in return.” (Kotler et al., 2017; long) “ The art and science of finding, retaining, and growing profitable customers.” (Kotler et al., 2017; short) “ -Need A state of felt deprivation in a person. -Wan: The form a need takes when shaped by culture and individual personality. -Demand: A want that is backed by buying power WHAT DIFFERENT TYPES OF DEMANDS DO YOU KNOW? HOW DOES IT IMPACT THE ROLE OF MARKETING? Types of demand 1. Negative demand: Consumers dislike the product and may even pay to avoid it. 2. Non-existent demand: Consumers may need to be made aware of or uninterested in the product. 3. Latent demand: Consumers may share a strong need that cannot be satisfied by an existing product. 4. Declining demand: In this case, the market for a product is declining and this decline represents something more serious than a temporary drop in sales. 5. Irregular demand: Consumer purchases vary on a seasonal, monthly, weekly, daily, or even hourly basis. 6. Full demand: Demand is currently at a desirable level and one that is consistent with the existing corporate and marketing objectives. 7. Over FulDemandnd: Some organizations face a demand level that is higher than they can or want to handle. 8. 8. Unwholesome demand: Consumers may be attracted to products that have undesirable qualities or consequences. What is marketed? Products (“goods and services”) Experiences Events Properties Organizations Information Places People A simple marketing system Some Core Marketing Concepts Marketing Channels 1. Communication channels Firms communicate through the look of their physical stores, websites, etc. 2. Distribution channels Firms display, sell, or deliver the physical product or service to the buyer or user. a. Direct: Internet, mail, or phone  b. Indirect: with distributors, wholesalers, retailers, and agents as intermediaries. 3. Service channels Types of service channels include banks, warehouses, insurers and transportation companies. Marketing Mix The Four Ps of the Marketing Mix Marketing and Strategy Stakeholders Mission & Vision Mission → Companies write mission and vision statements to clearly and concisely articulate their purpose, goals, and aspirations. Marketing and Strategy Ansoff Matrix The Ansoff Matrix also called the Product/Market Expansion Grid, is a tool used by firms to analyze and plan their strategies for growth. The matrix shows four strategies that can be used to help a firm grow and analyzes the risk associated with each strategy. Market penetration: Hotels discount Product Development: Loyalty points New Room Categories Resort Package Deals Restaurant Menu Expansion Spa and Wellness Services Digital Check-In Online Booking Incentives (free breakfast) Artificial intelligence Anything that helps the business in increasing its market share. Digital Payment Solutions MARKET SEGMENTATION, TARGETING, AND POSITIONING Consumers are diverse - We cannot appeal to all customers in the marketplace, or at least not all customers the same way. - Consumers are too numerous, too widely scattered, too varied in their needs & buying processes WHY SEGMENTATION IS IMPORTANT Understanding Consumer Behavior: gain insights into why and when consumers make purchasing decisions.  Tailoring Products and Promotions: Firms can develop products and promotions specifically designed for different types of consumers Enhancing Customer Experience: By recognizing and catering to specific needs Personalization: It allows for personalized marketing messages and recommendations. Market Expansion: It can open up opportunities for firms to expand into new markets or product categories. For example, a beverage company might introduce special holiday-themed flavours or packaging. Market segmentation Buyers have unique needs & wants, each is potentially a separate market. As most companies are unable to attend to all due costs, companies look for broad classes of buyers who differ in their product needs or buying responses. The restaurant industry offers many examples of segmentation by a variety of variables. They identified one or more segments within the market and concentrate their efforts on their needs. There is no single way to segment a market. A marketer must explore different segmentation variables. Major segmentation variables: Geographic Demographic Psychographic Behavioural Nations Age & Life-Cycle Psychographic segmentation divides For behavioural Regions Gender buyers based on social class, segmentation, buyers Cities Income lifestyle, and personality are divided into groups Neighbourhoods characteristics. based on knowledge, Etc. Social class has a strong effect on attitude, and use or preferences for cars, clothes, home response to a product. furnishings, leisure activities, reading For example, Frequent habits, and retailers. Business Travelers vs. afternoon tea at the Ritz-Carlton is Occasional Leisure aimed at the upper-middle & upper Travelers classes many First class (Airlines) marketers Marketers are increasingly believe segmenting the markets by behavioural consumer lifestyles. variables are the best starting point for building market segments Occasion segmentation helps firms build product use, as buyers can be grouped according to occasions when they make a purchase or use a product. BEHAVIOURAL BEHAVIOURAL - BENEFITS SOUGHT Buyers can also be grouped according to the product benefits they seek. Knowing the benefits sought by customers is useful in two ways. – features the benefits their customers are seeking – communicate more effectively with their customers if they know what benefits they seek BEHAVIOURAL- USER STATUS Many markets can be segmented into nonusers, former users, potential users, first-time users, and regular users of a product. High-market-share companies such as major airlines are particularly interested in keeping regular users and attracting potential users. Potential users and regular users often require different marketing appeals BEHAVIOURAL- USAGE RATES Markets can be segmented into light-, medium-, and heavy-user groups. heavy users are often a small percentage of the market but account for a high percentage of total buying For example, the frequent flyer or frequent guest program. many experts question the long-run value of these programs They question the “competitive advantage” they create because most airlines have similar programs Though many hotel chains offer a frequent guest program, they realize that most look alike, thus reducing their effectiveness. Guests may indeed collect points to enjoy a free stay but point accumulation may not build loyalty. A study on this topic concluded, “…loyalty is an emotional bond that cannot be bought by points or free stays.” Marketers need to find ways to enhance emotional and social ties between the consumer and the hotel brands. An outcome of loyalty is increased usage of the product BEHAVIOURAL- LOYALTY STATUS A market can be segmented by consumer loyalty. A study of hotel brand extensions showed that brand extensions are helpful in increasing customer loyalty and in promoting repeat buying. Customers who like a main-line, name-brand hotel are likely to patronize other hotels owned by that company. Building brand loyalty through relationship marketing. Marketing strategies for resorts suggest the first, most basic strategy is “to keep and expand the current market base” EFFECTIVE SEGMENTATION Not all segmentation methods are equally effective. To be useful, market segments must have the following characteristics: Measurability; the degree to which the segmanet’s size and purchasing power can be measured. Accessibility; the degree to which segments can be assessed and served.  Substantiality; the degree to which segments are large or profitable enough to serve as markets. Actionability; the degree to which effective programs can be designed for attracting and serving segments. Evaluating Market Segments When evaluating different market segments, a firm must consider segment size and growth, segment structure attractiveness, and company objectives and resources. “Right size and growth” is a relative matter. The largest, fastest-growing segments are not always the most attractive ones for every company. At times smaller segments are potentially more profitable Segment Structural Attractiveness A segment might have desirable size & growth and still not offer attractive profits, so a company must examine several major structural factors that affect long-run segment attractiveness. A segment is less attractive if it contains many strong & aggressive competitors, and the existence of many actual or potential substitute products may limit prices and profits. The relative power of buyers affects the attractiveness If buyers possess strong bargaining power relative to sellers, they will force prices down, demand more quality services & set competitors against one another. Company Objectives & Resources Some attractive segments can be dismissed because they do not align with long-run objectives. Although tempting, they might divert a company from its main goal. - They might be a poor choice from an environmental, political, or social responsibility viewpoint. f the company lacks the strengths needed to compete successfully in a segment and cannot readily obtain them, it should not enter the segment. A company should enter segments only where it can gain sustainable advantages over competitors. Selecting Market Segments After evaluating different segments, the company must decide which and how many segments to serve. A firm can adopt one of three market-coverage strategies: undifferentiated marketing differentiated marketing concentrated marketing UNDIFERENTIATED MARKETING The company ignores market segmentation differences and goes after the entire market with one market offer. It focuses common needs of consumers. It designs a marketing plan that will reach the greatest number of buyers. Mass distribution & advertising Relative lower cost in terms of advertising, marketing research, and product development. It can be difficult to develop a product & brand to satisfy all or even most consumers. When several competitors aim at the largest segments, the inevitable result is heavy competition. Small companies generally find it impossible to compete are forced to adopt market-niche strategies. Larger segments may become less profitable because of heavy marketing costs, including the possibility of price cutting and price wars. DIFFERENTIATED MARKETING The company targets several market segments and designs separate offers for each. Accor Hotels, a French company, operates under twelve trade names and manages several brands & types of hotels. CONCENTRATED MARKETING Instead of going for a small share of a large market, the firm pursues a large share of one or few small markets. If well chosen, the company can earn a high rate of return on investment. Risky strategy due to lack of diversification. CHOOSING A MARKET-COVERAGE STRATEGY Companies need to consider several factors in choosing a market-coverage strategy. Company’s resources Product homogeneity Product novelty Market homogeneity Strategies of competitors MARKET POSITIONING Once market segments are chosen, a company must decide what positions to occupy in those segments. A product’s position is the way the product is defined by consumers on important attributes. You can think of it as the place the product occupies in consumers’ minds relative to competing products. Consumers are overloaded with information about products and services. They do not reevaluate products every time they make a buying decision. Product attribute positioning Price or product features can be used to position a product. Careful! → Consumer preferences change and competitors blunt the effort of specific product attributes. Products can be positioned against another product class. 1. Identify a set of differentiating competitive advantages. 2. Choose a subset of those. 3. Choose an overall positioning strategy. 1. Identify a set of differentiating competitive advantages. Physical attribute Service Personel  Location Image 2. Choose a subset of those. Selection A company is fortunate enough to discover several potential competitive advantages must choose the ones on which it will build its positioning strategy. Many marketers think companies should promote only one benefit to the target market, picking an attribute & touting itself as #1 on that attribute. buyers tend to remember number one better, especially in an overcommunicated society Major number-one positions to promote are best quality, best service, lowest price, best value, and best location. How many differences? In general, a company needs to avoid three major positioning errors. underpositioning, or failing to position the company at all. overpositioning, or giving buyers too narrow a picture of the company. confused positioning, leaving buyers with a confused image of a company Which differences? A difference is worth establishing to the extent that it satisfies the following criteria: Important: delivers highly valued benefits to target buyers. Distinctive - competitors do not offer the difference, or the company can offer it more distinctively. Superior: the difference is superior to other ways that customers might obtain the same benefit. Communicable: and visible to buyers. Preemptive: competitors can’t easily copy the difference. Affordable: buyers can afford to pay for the difference. Profitable: the company can introduce the different profitability 3. Choose an overall positioning strategy Overall Strategy The full mix of benefits on which a brand is differentiated and positions→ the value proposition. Perceptual Mapping A diagram that is used by businesses to map out how their customers perceive different items, products, or brands. 2. DESIGNING AND MANAGING PRODUCTS AND SERVICES PRODUCT LEVELS What is a product? → “good and services” but in reality is anything that can be offered to a market for attention acquisition, use, or consumption that might satisfy a want or need. It includes physical objects, services, places, organizations, and ideas. It has two major components: planned & unplanned.  Sometimes the product might depend on the client. For that reason, the product has some levels to describe it ( or layers). Core product: exactly what the client wants. More basic level, which answers, what is the buyer really buying? Hotel → place to sleep, Renting a car→ transportation Facilitating products are services or goods which must be present for the guest to use the core product. Core products require facilitating products but do not require supporting products. (ex. A first-class hotel must have check-in and check-out services (accessibility), telephone, restaurant and valet service) Supporting products: extra products offered to add value to the core product and help to differentiate it from the competition. Is something that is not necessary, but it adds extra ✨✨✨. They are free of charge, otherwise it would be adding an extra product on top of the other one. Augmented product: Additional consumer services and benefits built around the core and the actual products. Accessibility: If a product is not accessible it has no value. Two barriers to accessibility are hours of operation & lack of knowledge. Products must be accessible when the guest wants to use them. Adapting hours of operation to the needs of the market segment. Atmosphere: This is appreciated via the senses and can be a customer’s reason for choosing an establishment. The main visual dimensions of the atmosphere are colour, brightness, size, and shape. The main aura dimensions of the atmosphere are volume and pitch. The main olfactory dimensions of the atmosphere are scent and freshness. The main tactile dimensions of the atmosphere are softness, smoothness, and temperature. Interaction with the delivery system: Different stages: Joining stage (this one is important for the experience itself) Consumption stage Detachment stage (stop using the service or good) ( but this stage is the one that matters for the long term, is the one yacht last in our memory) Thinking through these different stages from the consumer's perspective helps to make it fit their needs better. Interaction with other clients: interaction of customers with each other. The issue is a serious problem for hotels and resorts. Hospitality organizations must manage the interaction of customers to ensure that some do not negatively affect the experience of others. Customers as Employees: Can increase capacity, improve guest satisfaction & reduce costs. Processes given to the customer to perform can be a win-win situation for the customers and the business. Self-service technologies (SSTs) are a rapidly growing means for increasing customer coproduction in food-service experiences. 2. BRANDING Definition: The process of endowing products and services with the power of a brand. Brand: A name, term, sign, symbol, design, or a combination of these elements that identifies the goods or services of a seller and differentiates them from competitors. The brand adds value to the product/service: behind the name, there is a story about the qualities of the product and the company's reputation. → BRAND EQUITY: the added value that a product or service gets from being associated with a certain brand (e,g. Starbucks, you are willing to pay more just for the logo on it) Helps the consumers to identify products that are relevant for them: The brand offers consumers the guarantee that they will enjoy the same features, benefits and quality. They are a key element in the company’s relationships with consumers.  Trust Consistency Emotional Connection Adaptation and Innovation Desirable qualities of the name: Suggestive of the product’s benefits and qualities ( maybe in the fact of the name in other languages) Easy to remember, recognize, and remember Distinctive Extendable ( Carrefour- Carrefour BIO- Carrefour express) Translatable (Multi-Branding!) Legally protectect Brand Personality Brands often exhibit human-like qualities and characteristics. These traits help consumers relate to and connect with the brand on a personal level. Brand Protection The legal role of a brand involves protecting its identity through trademarks and copyrights. Co-branding That worked That didn’t work: Versace + H&M → Versace was more known, to people who A new taste of Coca-Cola didn’t work now they need to make usually cannot have access to know what Versace is. sure people know they used the original taste again. Blackberry+ Porsche Colgate → selling frozen food Nike + Apple Lego and shell New-Product development A company must develop new products and manage them in the face of changing tastes, tech, and competition. Two major challenges : All products eventually decline, thus a firm must develop new products. A firm must understand how its products age and change marketing strategies as products pass through the stages. A company can obtain new products in 2 ways: 1. Acquisition Buying a company, patent or license to produce someone else’s product. As the cost of creating new products rises, many companies buy existing brands. 2. Development By selecting its own research and development department. Original products, product improvements and modifications, and new brands develop through their own research and development. Product Acquisition Large companies such as McDonald’s sometimes buy a small restaurant chain such as Chipotle. First, they observe the chain grow, its customer base, the volume of sales, etc. When they are convinced that the new chain looks like a winner and makes a good strategic fit with their organisations, the large company buys the chain. Distressed chains can also make attractive targets for companies that believe they can turn them around. New-product development Why do new products fail? → An exclusive might push a favorite idea despite poor market research findings market size is small or incorrectly positioned, priced too high, or advertised poorly, cost of product development is higher, or competitors fight back more than expected. And many many more. All hospitality companies & tourist destinations must be alert to trends and ready to try new products. Awareness of the external environment All members of the hospitality industry are highly dependent on the external environment. Recessions, inflation, eco growth, etc. Ideas for new products need to account for what is happening in the world. Idea Generation Refers to the systematic search for new ideas. They should be aligned with the company’s objectives ( high cash flow, market share, etc. ) To obtain a flow of new product ideas the company must tap several idea sources. Idea Sources Employees ( especially sales staff → they are the ones that know the customer more as they are the ones that talk to them) Consumers Distributors and suppliers → dist might be really useful as you know what is most asked or sold or what is not asked at all. Competitors Research, fairs, etc. Idea Screening Idea generation usually generates a large number of ideas Imperative to spot good ones and drop poor ones as quickly as possible. Cost rises greatly in later stages, so the company wants to proceed only with ideas that will turn into profitable products. Concept development Surviving ideas are developed into product concepts. It is important to distinguish between a product idea, a product concept, and a product image. A product idea envisions a possible product that company managers might offer to the market. A product concept is a detailed version of the idea stated in meaningful consumer terms. A product image is the way that consumers picture an actual or potential product (→ positioning) CD and testing A clear product concept greatly assists branding, trade and positioning Concept testing occurs within a target group and may be presented through word or picture descriptions. - Small chains and businesses often pass over this stage and move directly to implementation. Marketing strategy  Main parts of the marketing strategy: 1. Planning: setting goals and creating a plan to reach them. 2. Management: organizing people and resources to execute the plan. 3. offline organization: using traditional methodsà events or print ads. 4. Traffic building: attracting visitors to your website or store. 5. Social media: connecting with people on platforms like Instagram. 6. Optimization process: improving efforts à get better results. 7. Conversion analysis: check how well visitors turn into customers. 8. Web design: good and easy to use. Business Analysis To estimate future sales, a company can review the sales history of similar products ar survey market opinion. Range estimates are preferred to have also an estimate of the related market risk. Analyze similar products or services Expected cost and profits Estimated marketing costs Product development If the product concept passes the business test, it moves into product development. Menu items as specials Guest room prototypes Test Marketing Gaining real-market experience marketing the product: Potential problems Further information needed Commercialization If the company goes ahead with commercialization, it may have to spend several million dollars for advertising and sales promotion alone in the first year. Launching a new product means four decisions: When? is it the right time to introduce the new product? Where? a single location, a region, several regions, the national market, or the international market To whom? the company must target its promotion to the best prospect groups. How? an action plan for introducing the product into the selected markets Product life-cycle Strategies 1. Development 2. Introduction a. Sales typically start low as the product gains awareness and marketing efforts focus on creating demand and awareness. b. Profits are often minimal during this stage due to the high costs associated with product development and market entry. 3. Growth  a. The product begins to gain market acceptance, and sales start to increase rapidly. Competitors may enter the market. b. Marketing focuses on persuasion. i.Low prices to attract different segments ii.Customer Loyalty Programs iii.Customer Feedback and Adaptation 4. Maturity a. Slowing sales growth. The market becomes saturated. b. Competitors are plentiful, and price competition intensifies. c. Marketing efforts may shift toward maintaining market share. i.Price Differentiation ii.Weak competitors fail iii.Quality improvement iv.Change, and improve elements in the marketing mix. 5. Decline a. Gradual decline in sales and market interest b. At some point, the product is deleted: i.Phase-out ii.Run-out iii.Immediate drop UNIT 3. PRICING PRODUCTS What is the price? → Amount of money charged for a good or service. - Charging too much scares away potential customers - Charging too little can leave a company without enough revenue to maintain the operation properly. - A firm that needs to produce more revenue to maintain its operation eventually goes out of business. Common pricing mistakes - Pricing that is too cost-oriented - Prices that are not revised to reflect market changes - Pricing that doesn’t take the rest of the marketing mix into account - Prices that are not varied enough for different product items and market segments. Internal factors: - Marketing objectives o Survival → cutting prices to increase demand and cash flows. ( we need the money right now (discounts )) o Current profit maximisation → Estimate demand and cost at different prices, then choose the price that will produce the maximum current profit. ( if they want to sell the business) o Market share Leadership → maximise market share in a given market. o Market skimming → charging an initial high price that is lowered over time ( Tesla or Apple for example) o Product—Quality Leadership à high price o Others → prevent competition, stabilise the market, or create excitement for a new product. - Marketing- Mix o Coordination with product design, distribution and promotion decisions. - Cost o A company wants to charge a price that covers the cost of production, distributing and promoting the product. o Remember total cost = fixed + variable cost. o Effective low-cost producers achieve cost savings through efficiency rather than cutting quality. o Cost subsidisation might be needed. ( la empresa no saca el suficiente provecho operating so the goverment gives subusides or someone le da dinero) - Organizational Considerations o Management must decide who in the organization should set prices, and companies handle pricing in a variety of ways. o In small companies, this is often the top management, rather than marketing or sales.  o In large companies, pricing is typically handled by a corporate department, by regional or unit managers, under guidelines established by corporate management. External factors: - Market and demand o While cost sets the lower limits of price, the market and demand set the upper limit. o Before setting prices, a marketer must understand the relationship between price and demand for a product. - Cross-sell vs Upsell Cross-sell: - What it is: Offering a customer a related product or service in addition to what they're already buying. - Example: If you're buying a laptop, the salesperson suggests adding a mouse or a laptop case. - Goal: To increase the total value of the purchase by suggesting complementary products. Upsell: - What it is: Encouraging the customer to buy a more expensive or premium version of the product they’re considering. - Example: If you're looking at a basic smartphone, the salesperson suggests upgrading to the latest model with better features. - Goal: To get the customer to spend more by purchasing a higher-end product. Summary: Cross-sell = "Would you like fries with your burger?" (related product). Upsell = "Would you like to supersize your meal?" (higher-value version). Both strategies aim to increase sales, but one focuses on adding extra items, while the other focuses on improving the quality or value of the item being purchased. CONSUMER PERCEPTION Buyer-oriented pricing implies that pricing begins with an analysis of consumer needs and price perceptions. This image illustrates two different types of consumer demand curves related to price perception, comparing "most goods" (left side) with "prestige goods" (right side). A. Most Goods (Left Graph): Standard Demand Curve: The graph shows a typical downward-sloping demand curve, which reflects how most goods behave. o Price Decreases (P2 to P1): As the price decreases (from P2 to P1), the quantity demanded increases (from Q2 to Q1). o Price Increases (P1 to P2): Conversely, as the price rises, the quantity demanded falls. o This follows the basic law of demand: consumers buy more when prices are lower and less when prices are higher. B. Prestige Goods (Right Graph): Prestige Demand Curve: This graph shows the demand curve for luxury or prestige goods, which behave differently. o Initial Price Drop (P3 to P2): When the price of prestige goods is reduced from P3 to P2, demand increases (from Q1 to Q2), similar to most goods. o Further Price Drop (P2 to P1): However, when the price drops too much (from P2 to P1), the quantity demanded decreases (from Q2 back to Q1).  o Consumer Perception: This is because prestige goods are often associated with status or exclusivity. A price that is too low may make the product seem less desirable or of lower quality, leading to a drop in demand. Consumers may perceive that the good has lost its "prestige." Summary: - For most goods, lower prices lead to higher demand. - For prestige goods, moderate price decreases increase demand, but excessive price decreases can reduce demand, as the product loses its premium status. This concept is essential in pricing strategies for luxury brands, where maintaining a perception of exclusivity is critical. PRICE SENSITIVE METHODS Unique value effect - The phenomenon where customers are willing to pay a higher price for a product or service that they perceive as unique or offering value that can’t be easily found elsewhere - More distinct and valuable ➔ lower price-sensitivity Substitute awareness effect/ignorance effect - The extent to which customers are aware of alternative products or services that can meet the same need. - More awareness → Higher price-sensitivity Bussines expenditure effect - Individuals or organisations are less price-sensitive when the cost of a product or service is not paid out of their own pocket but is instead covered by an employer or a business. End-benefit effect - Customer’s sensitivity to price decreases when they perceive that the product or service contributes to achieving a larger, more valuable goal. o E.g, more sustainable products Price quality effect - The common perception is that higher prices indicate higher quality. - In the tourism industry, this effect is particularly significant as travellers often rely on price as a heuristic or signal to gauge the quality of services and experiences. o E,g. Free tours, some experiences( it cannot be that good, 1€ for a beer and a tapa must be worse than a place that charges you 6€) Other environmental factors 1. New regulations might cause higher costs. 2. Consumers might be affected by other pricing decisions in the environment: such as tourist tax , transportation cost, etc. GENERAL PRICING APPROACHES Cost-based pricing The price of a product or service is determined primarily by adding a markup to the cost of producing or delivering that product or service. ADVANTAGES DISADVANTAGES Simplicity Ignores market demand Cost coverage Limited flexibility Predictability Potential for misalignment Value-based pricing Prices are primarily based on the perceived or estimated value of a product or service to the customer. ADVANTAGES DISADVANTAGES Higher profit margin Complexity Customer-centric Subjectivit Competitive Risk of overpricing advantage Competition-based pricing Prices are primarily based on the prices of competing products or services. ADVANTAGES DISADVANTAGES Market responsiveness - Potential for price wars Simplicity - Neglecting value Focus on market share - Lack of differentiation Psychological pricing This approach aims to encourage customers to purchase by using psychological price points. Example: o Price/charm pricing o Reference pricing o Prestige → real diamond vs fake one ADVANTAGES DISADVANTAGES Competitive edge consumer scepticism Limitations on pricing UNIT4: DISTRIBUTION CHANNELS What is distribution? Producing a product or service and making it available to buyers, it requires building relationships with key suppliers and resellers in the company’s supply chain. Two types: - Upstream from the company are firms that supply raw materials, components, parts, information, finances, and expertise. - Downstream marketing channel partners, such as wholesalers and retailers, form a vital connection between the firm and its customers. Marketers have traditionally focused on downstream partners. Both upstream and downstream partners may also be part of other firms’ supply chains. An individual firm’s success depends not only on how well it performs but on how well the supply chain and marketing channels compete with competitors. Classically referred to as supply chain, nowadays it is often referred to as the value delivery network of the company: suppliers, distributors, and customers who “partner” with each other to improve the performance of the entire system. A distribution channel is a set of independent organizations involved in making a product or service available to the consumer or business user. Distribution networks in the hospitality industry consist of contractual agreements and alliances between independent organizations. Like: booking, Airbnb, Uber Eats, Star Alliance, etc. WHY ARE MARKETING INTERMEDIARIES USED? The number of channels (que pueden ser directos o indirectos dependiendo de si hay intermediarios) : A greater number of intermediaries in the channel means less control, more complexity, and more cost( porque cada uno quiere sacar un % de beneficio así que el precio se va encarenciendo, cuantos más intermediarios más caro puede ser para nuestros clientes y afectar a cuanta gente nos compre) Payments can be really crucial. All institutions in the channel are connected by several types of flows: - The physical flow of products - Ownership - Payment - Information - Promotion IN HOSPITALITY/ TOURISM, THEY ARE THE TRAVEL AGENTS AND THE TOUR WHOLESALERS. 1. Tour wholesalers assemble travel packages usually targeted at the leisure market. 2. In developing a package, a tour wholesaler contracts with airlines and hotels for a specified number of seats and rooms, receiving a quantity discount. 3. Retail travel agents sell these packages. 4. The wholesaler has to provide a commission for the travel agent & give consumers a package perceived as a better value than they could arrange by themselves (plus make a profit for themselves), such that the margin is usually quite low. Generally, wholesalers must sell 85% of packages available to break even Hospitality providers must check the history of the tour operator, receive a deposit and get paid promptly. With the increased number of international resorts, tour wholesalers are becoming powerful member of the distribution channel. CHANNEL BEHAVIOUR: Channel conflict in marketing refers to disagreements or clashes between different members of a distribution channel. There are two main types of channel conflict: vertical and horizontal. Vertical Channel Conflict Occurs between members at different levels of the distribution channel For example: - A manufacturer and a retailer disagreeing over pricing strategies - A wholesaler and a distributor having disputes over product allocation This type of conflict often arises due to: - Misaligned goals and interests - Direct-to-consumer sales by manufacturers - Pricing discrepancies across different channel levels  - Disputes over territories or customer segments Horizontal Channel Conflict This happens between members at the same level of the distribution channel For instance: - Two retailers competing for the same customers - Multiple distributors vying for the same market share Common causes of horizontal conflict include: - Competition for limited resources or customers - Overlapping sales territories - Price undercutting - Aggressive marketing tactics Both types of channel conflict can impact the efficiency and profitability of the distribution network. However, when managed properly, some level of conflict can lead to healthy competition and innovation within the channel. VERTICAL MARKETING SYSTEMS A vertical marketing system (VMS) is a collaborative approach to distribution where different levels of the channel work together as a unified system to meet consumer needs efficiently. This system contrasts with traditional marketing channels where each member operates independently. Key Components of VMS A vertical marketing system typically includes three primary stakeholders: 1. Manufacturers 2. Wholesalers 3. Retailers These channel members collaborate as a single unit to streamline operations, reduce conflicts, and improve overall efficiency FRANCHISING Franchising has been the fastest growing retailing form in recent years. Franchised hotels account for more than 65% of the existing US hotel-room supply. A reason for the popularity of franchising is that it is a relatively safe way to start a new business. Some popular hotel franchises: Hyatt Palace, Holiday Inn Express, Hilton Garden Inn. ADVANTAGES DISADVANTAGES - Fees and royalties FRANCHISEE - Brand Recognition - Restrictions - Advertising - Other franchisees - Support (Site, supply, systems, etc.) - Local vs. global - Monitoring FRANCHISOR - Expansion - Resistance to change - Fees and royalties - Shared decision making - Negotiation power ALLIANCES They are another form of contractual agreement, are developed to allow two organizations to benefit from each other’s strengths. Restaurants are expanding their locations through alliances with hotel chains, providing the restaurant with a good location and access to the hotel’s guests. Many resorts have food courts like those in malls, featuring branded fast-food outlets. UNIT 5: PROMOTING PRODUCTS: COMMUNICATION Role of promotion Communication can happen at different stages: - Presale. - Sale - Consumption. - post-consumption. Communication objectives: Ultimately, we want to stimulate demand by: - Raising awareness of the product (benefits and needs), - Persuading the buyer of the benefits of the product, - Reminding them of our product’s existence (relative to competitors). Massmedia THE PROMOTION MIX 1. Advertising - Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor. 2. Sales promotion - Short-term incentives encouraging the purchase or sale of a product or service. 3. Personal selling - Personal presentation by the firm’s sales force for the purpose of making sales and building customer relationships. 4. Public relations - Building good relations with the various publics by obtaining favourable publicity. 5. Direct marketing - Direct connections with targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships. INTEGRATED MARKETING COMMUNICATIONS Cocacola ads. It asked people for vote for something and the results where: 8.200.000 online and social media interactions but only 910.000 votes. Was it worth it?, Impact on actual consume? Communication process How messages are transmitted and received: 1. Sender: individual/ organization that starts the communication. 2. Encoding: convert sender ideas à message 3. Message: actual content being communicated. 4. Media: channel on which the message is transmitted 5. Noise: anything that disrupts the message. 6. Decoding: interpretation of the message 7. Receiver: individual/ group to whom the message is intended. 8. Response: reaction of the receiver. 9. Feedback: information sent to the sender based on the response. 10. Sender’s and receiver’s fields of experience a. Shared knowledge and experience between both affect understanding. b. If they differ significantly, it may result in miscommunication. Effective communications Identify the target Audience: It starts with a clear target audience in mind ( e.g., potential buyers or current users) Target audience heavily affects: what will be said, who will say it, how, when,where it will be said. Creating a meaningful message requires “ matching the audience” Determining the communication objective: awareness → knowledge → liking → preferences → conviction → purchase. Designing the Message: The message should get Attention, hold Interest, arouse Desire, and obtain Action- also known as AIDA mode. The marketing communicator must solve three problems: - What to say (message content) - How to say it logically ( message structure) - How to say it symbolically (message format) AIDA model: - Attention: how to attract the attention of customers - Interest: Increasing the potential customer’s interest level. - Desire: From “ I like it” to “ I want it”. - Action: take action, i.e., click, buy, email, call… Effective Communications Message content: - Rational appeals relate to audience self-interest. - Emotional appeals attempt to provoke emotions that motivate purchase. - Moral appeals are directed at the audience’s sense of right and proper. Message Structure: Three main decisions: § Provide conclusions or leave it to the audience § One-or-two sided argument § Strongest arguments first or last Message format: - To attract attention: Novelty & contrast, eye-catching pictures, distinctive formats, colour, shape, and movement. - In a print ad: Headline, copy, illustration, and colour. - Over the radio: Words, sounds, voices. - On television: All of these elements, plus body language. On the product or its package: Texture, scent, colour, size, and shape. Selecting communications channels - At least two people interacting - Personal or non-personal? - Work of mouth. Social leaders/ influencers. - Trustworthy. Selecting the message source  - Expertise → the degree to which the communicator appears to have the authority needed to back the claim - Trustworthiness → how objective and honest the source appears to be - Likability → is how attractive the source is to the audience Social media influencers? Measuring the result of the communication Evaluation of the message's effect on the audience. - Whether they remember the message - How many times they saw it - What points do they recall - How they felt about the message - Past & present attitudes towards the product and the company. Evaluating behaviour resulting from the message: How many people bought a product, talked to others about it, visited the store, etc. TOTAL PROMOTION BUDGET. John Wanamaker, the department store magnate, once said. “I know that half of my advertisement is wasted, but I don’t know which half”. Large budgets are not necessary for good communications. Four common methodsare used to set the total budget for advertising: Affordable method. “Why, it’s simple. First, I go upstairs to the controller and ask how much they can afford to give this year. He says a million and a half. Later, the boss comes to me and asks how much should we spend and I say ‘Oh, about a million and a half” Ignores the effect of promotion sales. Uncertain, making long-range marketing planning difficult. Percentage of sales method Promotion budget is a percentage of the sales Setting the promotion budget at a certain percentage of current or forecasted sales. Supposed advantages: what the company can “afford” Clarifies relationship between promotion spending, selling price, and profit per unit. Creates competitive stability because competing firms tend to spend about the same. Wrongly views sales as the cause of promotion rather than as the result. Long-range planning is difficult The method does not provide a basis for choosing a specific percentage. Competitive parity method If we follow our competitors we can benefit from what they have invested and use it or if we spend as much as them they will increase and we will end in a marketing spending war. Watch competitor advertising or get promotion spending estimates from publications or trade associations. Then set your promotion budget to match. Supposed advantages: Collective industry wisdom It helps prevent promotion wars There are no grounds for believing competition has a better idea of what a company should be spending. Companies differ, each with special promotion needs No evidence indicates parity prevents promotion wars Objective and task method The most logical budget setting method, marketers develop their promotio budgets by: Defining specific objectives Determining tasks needed to achieve these objectives Estimating the cost of performing them. Forces management to spell out assumptions about the relationship between dollars spent and results. It can be hard to determine which tasks will achieve specific objectives. With this method, the company sets its promotion budget based on what it wants to accomplish How to choose a promotion mix? Type of product and market à ads or tourism fairs Push versuspull strtegy Buyer readiness state. Push vs pull strategy Push: provide the retailer with the right “tools” and incentives to sell products. More related to the retailer, helping them to sell more product ( via merch, promotions, etc.) Pull: Driving consumers to buy instore, online or via mobile by using a buyer behaviour insight. More related to consumers, driving them to purchase by understanding their motivatiins & preferences. Ejemplo de clase: Para un centro comercial: § Push: discounts or sales promotions, loyalty programs § Pull: exclusive collaborations, social media engagement ( sharing things to attract new consumers or more people) Buyer readiness state Advertising Objectives setting: - Informative advertising - Persuasive advertising → the business (the firms) uses it to make you believe they are better than the rest. - Reminder advertising → usually the marketing is just reminding you that they are there. Like “Hey, I’m here” Setting objectives - You must be sure the property can live up to promises - If your property or service is inconsistent with the claims made, you will probably do little more than increase the number of dissatisfied guests. Budget decisions The company wants to spend the amount needed to achieve the sales goal, and specific factors should be considered when setting budget. - stage in the product life cycle: new products need large ad. - competition: in a market with many competitors, we’ll need heavy ad support to be heard above the noise of the market. - market share: high-market-share brand need more advertising Expenditure as % of sales. - product differentiation: lower diff requires more ad to set apart. - ad frequency: larger ad budgets are required when many repetitions are needed to spread the brand message. Message decisions A large advertising budget does not guarantee a successful advertising campaign. Creative advertising messages can be more important than the number of euros spent. To gain & hold attention, today’s ad messages must be better planned, more imaginative, entertaining, and rewarding to consumers. Product placement, strategic product placement in advertisements, films, series, etc. So that the consumer sees them but almost without realising it, just enough so that it remains in their subconscious and is remembered when making a purchase. The advertiser must put the message across in a way that wins the target market’s attention and interest. Message impact depends on message execution. - what is said and how it is said - Authenticity is a key Message execution is associated with different styles: - Slice of life (they show a normal day or a moment with that product) - Lifestyle (they try to show the type of life of the people that consume or use that) - Fantasy - Mood or image - Personality - Scientific evidence (even though sometimes it can be not so true)  - Testimonial evidence (use someone that “uses that or is related to it” as a reference, usually relevant people, but they probably don’t use it) Media Decision Reach, frequency, impact - Reach - % of target market who is exposed to the message during a given amount of time. - Frequency – how many times an average person in the target market is exposed to the message - Impact – a qualitative value of message exposure. Major media types: Medium: newspaper, television, direct mail, radio, magazines, outdoor, digital and social media. Media Timing. It’s crucial to know the reach. Continuity vs. Pulsing. Campaign evaluation The sales effect of advertising is often harder to measure than the communication effect. If the objective of the advertising is to inform, then conducting a pre-and post-test of the target market’s awareness of the product or brand is often used. A process called copy testing can be performed before or after an ad is printed or broadcast and reveals whether an ad is communicating well. Three major methods of advertising pretesting: - direct rating - in which the advertiser exposes a consumer panel to alternative ads and asks them to rate the ads - portfolio tests – a portfolio of different versions of a particular advertisement, respondents chosen from the target market are asked to recall in detail those which they can remember - laboratory tests - equipment measures physiological reactions to an ad: heartbeat, blood pressure, pupil dilation, and perspiration Two popular methods of post-testing ads: - Recall tests - the advertiser asks people exposed to magazines or TV programs to recall everything they can about the advertisers and products that they saw. - Recognition tests - researchers ask readers of an issue of a magazine to point out what they have seen. UNIT 6: PROMOTING PRODUCTS: PUBLIC RELATIONS AND SALES PROMOTION PUBLIC RELATIONS (PR) Is the strategic communication process that builds and maintains a positive image for a tourism brand, destination, or company. PR focuses on managing the perceptions of stakeholders (e.g., travellers, media, and the public). Key Concepts: Media Relation – Influencer Partnership – Press Release Role of PR in Tourism: - Brand Image and Reputation o PR shapes how destinations or brands are perceived. It’s about building a consistent narrative that aligns with the audience's expectations. § Revitalization of New York City à I