Tourism and Hospitality Marketing PDF

***Chapter 3*** **HOSPITALITY MARKETING MIX** **Objectives:** At the end of the chapter, the student should be able to: - Define marketing mix; - Enumerate the 4P's of marketing; and - Know the expansion of marketing mix (7P's). **LESSON 3 CONTENT** **HOSPITALITY MARKETING MIX** ![](m...

***Chapter 3*** **HOSPITALITY MARKETING MIX** **Objectives:** At the end of the chapter, the student should be able to: - Define marketing mix; - Enumerate the 4P's of marketing; and - Know the expansion of marketing mix (7P's). **LESSON 3 CONTENT** **HOSPITALITY MARKETING MIX**  The Marketing Mix is a term used to describe the combination of tactics used by a business to achieve its objectives by marketing its product or services effectively to a particular target group. **Marketing Mix** is an integral part pf business which needs to make sure that they are marketing. - The Right Product to - The Right Person to - The Right Price in - The Right Place and at - The Right Time The Marketing Mix originally developed by Prof. Neil Borden of Harvard University has six elements - product, planning, pricing, distribution, promotion, servicing, and market research. These were later reduced to four elements by McCarthy - product, price, place and promotion, **Marketing Mix-** is the totality of a hospitality company's offerings to the market to satisfy guests wants and needs. **Marketing Mix-** is the controllable marketing variables that the firm uses to pursue the sought level of sales in the target market. **Target Market-** are the buyers of the goods. They can be the present product users or they can be the prospective buyers being targeted by the marketing organizations.  **Example:**   The **Marketing Mix** comprises the tools available to a business to gain the reaction it is seeking from target market in relation to its marketing objectives. It is the blend or the compound of all marketing efforts hovering round the four ingredients namely product, price, place and promotion. The **Marketing Mix** is the ultimate outcome of the company\'s philosophy and mission statement, and the final delivery of the company\'s offering to the marketplace. It is based or should be based on the needs, wants, and problems of the customers. **4 P\'s of Marketing Mix** For marketing products, the four elements of Marketing Mix are product, price, promotion and place, which are used in a specific combination to arrive at the marketing strategy. **Product** The actual item that a consumer purchases, including the packaging, image, guarantee and after sales service Product indicates that the consumers are not really buying a set of attributes, but rather benefits that satisfy their needs. Thus, product in a very broader term includes goods, services, place, persons, and ideas. **Price** One of the most important elements in marketing mix as it is the only element of the marketing mix, which generates a turnover of the organization. The amount of money or goods for which a thing is bought or sold. Sometimes it reflects the nature of relationship between customer and provider. **Promotion** A tool of communication used to inform the target market customers about the goods and services to facilitate the exchange process. It is concerned with informing, educating, persuading, and reminding customers. Supporting activity includes displays, trade shows, some advertising materials, contests, trade promotions, coupons, samples and premiums. **Place** It refers to contact between the service provider and the person who gets the benefits of the service, i.e., the consumer. All such channels that are available between the firm and the target market to increase the profitability of getting the customer to the product are referred to as place. **Extension of 4 P\'s - 7 P\'s** According to Stevie Langford (2021), as marketers, we know that it\'s foolish to underestimate the power of planning. For most of us, it means it is necessary to create a suitable and effective marketing strategy. The 4 P\'s paved the way for two modern academics, Booms and Bitner, who in 1981 saw 3 additional factors that serve a great purpose: physical evidence, people, and process. This formed the extended marketing mix that we know today as the 7 P\'s of marketing mix. Once we are aware of the extended marketing, it quickly becomes apparent that the three elements that form the extended framework really make a difference. 1. **People** - It refers to anyone directly or indirectly involved in the business side of enterprise. People are also the heart of every business, because without people, you have no one to market to; no one is there to buy your product or make use of your services. 2. **Process** - involves how your business runs, how the service is delivered, how the product is packaged, how your customers move down, etc. It describes the series of actions or elements that are involved in delivering product or service to the customer. **3. Physical Evidence** - is the last extension of marketing mix (7Ps). Physical evidence is about proof of purchase. This is an important aspect because it encompasses the overall existence of your brand. Think of website, branding, social media, the logo on your building, your restaurant store\'s décor, the packaging of your products and the post purchase thank-you email. All of these elements that we can offer to your customer is the physical evidence they need to be certain that your business is viable, reliable and legitimate. **LESSON 3.1 CONTENT** **PRODUCT SERVICE MIX**  One of the most important issues in the service marketing is understanding what benefits and satisfaction the consumer is seeking from the service. Let us take the case of restaurant service viewpoint of a restaurant manager- the restaurant in providing food but the customer coming to the restaurant might be seeking an "outing"- an atmosphere- different from home, relaxation, entertainment or even status. Therefore, it is very important that the service product matched both from the customers\' and the suppliers\' viewpoint. Product is the sum total of physical and psychological satisfactions it provides to the buyer. Product service mix is the composite of the products and services offered by a firm. Product mix is made up of many product or service variables like product line and range (for example a hotel has various facilities like rooms, restaurants, casinos, coffee shops, banquet halls, etc.), product design (like the physical appearance, capacity, uses of the product, etc.), packaging, quality; labelling, branding etc. **According to Philip Kotler, a product is made up of three parts:** 1. **Tangible Product** - materials and construction 2. **Extended Product Part** - services and 3. **Generic Product** - the benefits **Basic Hospitality Product** The basic hospitality product is a combination of goods, services and environment. 1. **Goods** a. This refers to the physical things that a hospitality marketer offers to its customers provided by the hotel such as food, drinks, beds, furnishings, room, air condition and all tangible things. b. Customers also perceive price as a tangible component that\'s why many marketers try to add prices as an element in order to add tangibility to the services. 2. **Services** a. 3. **Environment** **Components of Hospitality Products** The hospitality products are a combination of products and services, whether free or for sale, aimed at satisfying the needs of the target market. There are five different components for a hospitality product. 1. **The Core Product** a. It refers to the fundamental benefit that the customer receives from a hospitality service. Hospitality products provides different core benefits to the consumers. b\. For example, a pool resort delivers a place to swim and play in the water, while night bars satisfy the need to drink, sing and dance. 2. **Facilitating Products** a. Facilitating products are those goods or service that must be present for the guest to use core product. b. For example, in case of pool resort, it is the swimming pool which guest needs, and in case of the bar, it could be the drinks. 3. **The Tangible Product** a. Tangible product is the physical translation of the basic product. b. For example, in the resort industry the tangible products could be 10 x 20 meter swimming pool and a small cottage priced at P 3,500.00 per night. 4. **Supporting Product** a. Supporting products are extra products offered to add value to the core product and to help to differentiate it from the competition.\ b. For example, in the resort place, the supporting product could be a grill in the cottage. 5. **Augmented** a. These are the support items that complete the total product offering such as after sales service, warranty, delivery and installation. b. A complete product and full service offering such as courtesy of the staff, transportation from point to point from delivery services and troubleshooting assistance from a capable company. **What the Hospitality Customer Seeks from a Hospitality Product/Service?** **Satisfactions** These satisfactions could be physiological, economic, social, or psychological. 1. **Physiological Satisfactions** a. The physiological satisfactions are the basic satisfaction which a customer is trying to obtain from a hospitality product. b. This could be a satiated appetite, quenched thirst, comfortable bed and room, pleasant environment etc. a. b. 2. **Psychological Satisfactions** a. Psychological satisfaction is a perceived notion. **Dissatisfactions/Satisfactions** According to Medilik, the following are the basic components of hotels, which contribute to these satisfactions/dissatisfactions: 1. **Location** a. It is the geographical placement of a hotel in a particular village, town, city, or country. b. It comprises access and convenience, freedom from noise and other disturbances, and attractiveness of surroundings. 2. **Facilities** a. 3. **Service** a. b. c. 4. **Image** a. b. c. 5. **Price** a. **Satisfactory Services** The following are the various factors to be analyzed to provide satisfactory services to the guests in a hotel based on the needs, wants, and desires of the target market: 1. What does the customer perceive in a product or service? 2. How does it satisfy the customer needs? 3. What benefits does it offer? 4. How does it satisfy demand? 5. Who uses it? Why? **Levels of Service Delivery** 1. **The Customer Benefit Concept** a. This is the first level in the conceptualization of a service product. b. Sometimes the customer who is buying a service product may not have clear idea of what he is seeking. At times he may find it difficult to express what benefits he is looking for from a hospitality product or service. 2. **Service Concept** a. This is the second in the conceptualization of a service product. b. The service product is the specific benefits with the service offers. c\. For example, a hotel may provide accommodation facility in the general sense, but it has to be more specific as to what kind of accommodations they have for different segments of customers like deluxe, executive, premiums, etc. 3. **The Service Offer** a. This is the third level in the service delivery. b. b\. Here the service provider has to give a shape and form to the basic service concept. c. For example, in case of a hotel, explain the features of each type of rooms in details making it more tangible to the customer. Once the service provider gives shape and form to the service concept, the next level of service delivery develops. 4. **The Service Forms** a. Here the service provider has to give the details of the service product in which way and how the service product will be delivered to the customer. b. For example, in case of hotel accommodation, details about packages available can be given to the guests. 5. **The Service Delivery System** a. The two main elements in a delivery system are the people and the physical evidence. b. In a restaurant, the waiters are the elements of the delivery system. The physical evidence components are the facilitating goods and support goods. **Product Planning and Product Development** **Product Planning** This is the ongoing process of identifying and articulating market requirements that define a product\'s feature set. Product planning serves as the basis for decisions about price, distribution and promotion. **Product Development** Creation of products with new or different characteristics that offer new or additional benefits to the customer. **Product Features & Modification** Introduction of new sizes, colors, shapes, flavors or creating several quality levels to better satisfy the present market. **Steps in the Development Process** 1. **Idea Generation** Product ideas may come from external sources or internal sources. 2. **Screening of Ideas** This step chooses the best ideas by considering whether they are compatible with resources, objectives, demand, cost and above all, profitability. 3. **Formal Business Economic Analysis** Product development features Sales and profit forecast for new product development Program for marketing strategies 4. **Product Development** Distribution of new or improved products for the present market. 5. **Test Marketing** Involves placing a product for sale in one or more selected areas and observing its actual performance under the proposed marketing plan. 6. **Commercialization** Is the process by which a new product or service is introduced into the general market. **Product Life Cycle** is the cycle through which every product goes through from introduction to withdrawal or eventual demise. **Stages in the Product Life Cycle** 1. **Introduction Stage** This is the stage when the product is launched in the market. Informative promotion is needed to tell potential customers about the advantages and uses of the newly introduced product. a. To tell consumers about the new product; b. To encourage consumers to try the new product; c. To convince middlemen to distribute the new products. 2. **Growth Stage** Also known as the \"market acceptance\" stage, this is when sales and profits increase at an increasing rate. Competitors are now reacting, so the marketing organization must develop selective demand. 3. **Maturity Stage** During this stage, sales and profits start to decline. More competitors enter the market with more advanced product development. **Three Phases of Maturity Stages** a. **Growth Maturity -**The sales growth rate to decline and there are no new distribution channels. **b. Stable Maturity-** Sales become level off or at break-even because of market saturation; unwillingness of market to buy due to loss of interest on the product. **c. Decaying Maturity-** Sales continue to decline; customers shift to other brands or available substitute. 4. **Decline and Possible Abandonment** **Stage** New products or brands eventually enter the industry. Obsolescence of the company\'s product sets in. As new concepts come in, they replace the old ones. Continuous decline in sales can be attributed to technical development, changes in fashion or tastes of consumers or lower cost of substitute brands. **Reasons Why New Products Fail** 1. **Inadequate Market Analysis-** Inability to determine market demand, buying motives and overestimation of potential sales 2. **Product Deficiencies-** Poor quality of new products 3. **Lack of Effective Marketing Effort-** Insufficient marketing strategies as follow up after introductory marketing programs. 4. **Higher Costs than Anticipated** Possible presence of inflation rate where prices of raw materials had increased from idea generation to commercialization periods. 5. **Competitive Strength and Reaction-** Ease of competitive entry where other companies may simultaneously beat timing of introduction. 6. **Poor Timing of Introduction-** This can be a premature or post mature product introduction. 7. **Technical or Production Problems-** Inability to supply the quantity demanded **Possible Solutions to Avoid Product Failure** 1. Better marketing research to evaluate market needs and prospects 2. Organizational changes aimed at strengthening new product planning 3. Improved screening and evaluation of ideas and products **To be successful in employing the solutions mentioned, the company should have at least one of these three advantages.** 1. **Product Advantage** -Emphasizing that the new product is of better quality and has a more reasonable price than products of competitors. 2. **Marketing Advantage-** Using greater number of distribution outlets or intensive distribution, as applicable to the new product, compared to competitors. 3. **Advertising Advantage-** Greater number of mass media usage or effective advertising copy structure **Product Line and Product Mix** **Product Line** A group of products closely related to each other. They are intended for same uses as they function in similar manner. Examples: Men\'s accessories, home furnishings and appliances **Product Mix** Also known as product assortment The complete list of all products offered for sale or produced by a company Examples: Dining table, Nike sells a wide variety of items under one brand. **Major Product Line Strategies** 1. **Expansion of Product Mix** Increasing the number of product lines Example: Dairy Queen Ice Cream added new products like ice cream cake; Hanes for men added a new line Hanes for Ladies. 2. **Positioning of the Product** This is the consumers\' perception of a product its image against competitors\' products and other products being sold by the same company. Improved product position is achieved simply by shifting promotional theme or target market. *Examples:* a. Perla detergent soap originally was promoted as laundry detergent. Now it emphasizes its effects on the skin, thereby some consumers even use it as facial cleanser. b. Pan desal to malungay pan desal emphasizes its effects in our body. 3. **Contraction of Product Mix** Eliminating and phasing out a \"deadwood\" product line This strategy is implemented if market demand is very low and cannot even offset maintenance cost. 4. **Alteration of Existing Product** Redesigning of industrial product or new packaging design for consumer products. 5. **Product Differentiation and Market Segmentation** a. **Product Differentiation** involves creation of consumer awareness about the different features of a product. b. **Market Segmentation** is the process of knowing the overview of the entire target market. c. **Brand** is a word, mark, symbol, or a combination of them used to identify the marketers product or service. d. **Brand Nam**e is something which can be vocalized or spoken. e. **Brand mark** is a non-registered design, symbol or product logo. f. **Trade name** is a registered company name. g. **Trade Mark** is a brand registered under the intellectual property office (IPO) and therefore given legal protection. **Trademarks can be recognized with presence of any of the following words or symbols on product labels or package:** 1. **Keg. Phil. Pat Off** - Meaning registered under the Philippine Patent Office 2. **R -** Means registered 3. \***Asterisk Mark** 4. **C-** Copyright under **Classification of Brands are Classified as follows:** 1. **Manufacturers' Brands** Those brands owned by the producer or manufacturer. *Example:* Max's Group Commissary, Best Foods - California Manufacturing Company 2. **Distributors or Middlemen's Brands** Those brands owned by wholesalers or retailers *Example:* Restaurant Branches in Malls 3. **National Brands** Those sold in the entire Philippine archipelago or internationally and are advertised. *Example:* McDonalds, Dunkin Donuts, and Pizza Hut 4. **Private Bands** They are not advertised. *Examples:* Pancake House, TGI Fridays, and Italian Restaurants 5. **Individual or Separate Name Brands** A name or brand intended for one product. *Examples:* Max' Group composed of Max's Restaurant, Pancake HOuse, Yellow Cab, Sissling Pepper, Teriyaki Boy, Dencios, Kabisera and Maple 6. **Generic Brands** Products which do not carry official brand names at all other than identification of their contents, manufacturer, or middleman's name. *Examples:* Generic products may be common for staple goods like food products and drug items. **Importance of Branding for Sellers** 1. **Branding simplifies sales promotion.** A simple name for a product makes advertising effective and simple. 2. **Branding encourages repeat sales.** Easier for consumers to repurchase a product which has been proven satisfactorily. 3. **Branding provides protection against substitution.** 4. **Branded merchandise is preferred by many middleman.** This can be due to high level of customer acceptance as assurance of sales and profits. 5. **Branding minimizes comparison.** Two brands may not have exactly same quality, so exact price comparison can be far. **Characteristics of Good Brand Names** 1. **It must be easy to remember.** It is advisable to create one to three-syllable brand names. It will be easier to remember, pronounce and spell for consumer retention of the terms. 2. **It must suggest something about product benefits or use.** 3. **It must be distinctive.** Symbols, colors must be easily recognized and not too confusing for consumers. 4. **It must be legally protected.** Therefore, it must not be an imitation of any patented brands by competitors and must be registered under the patent office. **Packaging** 1. A group of activities in product planning which involve designing and producing container or wrapper for a product. 2. Containers like tin can, glasses are for liquid-based products while wrappers like tin foil, paper, and carton are for solid based products. **The following are some reasons for packaging products** 1. For product protection during its route form producer, manufacturer to the final user, and protection during storing period before consumption. 2. It implements a company's marketing program through product differentiation by customers. 3. It increases profit possibilities, particularly when other customers buy the product primarily because of the package. **Packaging strategies** Packaging may utilize the following methods: 1. **Family Packaging** Involves making the package for all products using common feature on all package. 2. **Reuse Packaging** Designing and promoting package can serve other purposes when contents are consumed. 3. **Multiple Packaging** Is placing several units of a product in a single container. **Label** 1. Label is a part of a product which carries verbal information about the products or the sellers. 2. Label's primary purpose should be to inform buyers by fairly representing the contents of the package. **Types of Labels** 1. **Brand Label-** Brand alone applied to the product or package. 2. **Grade Label-** Identifies product quality by letter, number or word. A or 1 may mean premium quality. Premium means first class quality. 3. **Descriptive Labels-** Written or illustrative information about the product, use, construction, care or performance. **LESSON 3.2 CONTENT** **PRICE MIX** [] IMG\_256 **Price** This is one of the most important elements of the marketing mix, as it is the only mix which generates a turnover for the organization. The amount of money charged for a product or a service. **Pricing Objectives** Like other areas of marketing planning, pricing, or services begins with setting objectives. Pricing objectives are the foundations for price policies and strategies to be framed, and implemented in due course by the firm. Though, these pricing objectives differ widely from firm to firm, the following can be noted as the most common pricing objectives. 1. **Profit Oriented Objectives** +-----------------------------------+-----------------------------------+ | 2. **Target Return Objectives** | Sets s specific level of profit | | | as an objective. This amount is | |  | often stated as percentage of | | | sales or investment. | | | | | | **For Example:** | | | | | | A manufacturer may aim for 25% | | | return-on-investment. | +===================================+===================================+ | 1. **Profit Maximization** | Seeks to get as much as possible. | | | Some managers believe that profit | | [] | maximization objective can be | | | achieved by charging higher | | | prices. | | | | | | **For Example:** | | | | | | Highway Hotel are properties that | | | are located in isolated areas, | | | where there is no competition | | | wherein, they can charge higher | | | rates. | +-----------------------------------+-----------------------------------+ 2. **Sales Oriented Objective** +-----------------------------------+-----------------------------------+ |  | Seek higher level of sales volume | | | , peso sales or market share | | **EBI TEMPURA ORIGINAL PRICE** | without primary reference to | | | profit. | | **P130.00- 3pcs** | | | | They sell at lower prices to | | Eat-All-You-Can -Tempura P199.00 | increase size of the market. But | | is now available across the JP's | a largest market share if gained | | restaurant stores, guests may | at a very low price may also lead | | avail of the "Tempura all you can | to profitless success. | | " for 199.00. Promo inclusive of | | | unlimited rice and tempura. | | +-----------------------------------+-----------------------------------+ **3. Status Quo Objective** +-----------------------------------+-----------------------------------+ | **Donut A- The Price of Donut is | This objective is adopted by | | P20.00** | managers who are satisfied with | | | their present profits under | |  | market share. Pricing strategy | | | copies the price levels of its | | **Donut B- The price of Donut is | competitors or maintains the | | P25.00** | current price levels of similar | | | products or services in the | | | market. | +-----------------------------------+-----------------------------------+ **Hospitality Pricing Objectives** Taking into account the characteristics feature of hospitality services such as intangibility, perishability, and heterogeneity, etc. The hospitality marketer has to keep the following objectives in mind, while fixing for hospitality products and services. **Following are some hospitality pricing objectives (Lazer and Layton):** 1. Increase market share by a certain percent 2. Realized by a specified profit level 3. Achieve a specified rate of return 4. Maintain an exclusive image 5. Appeal to new market segments 6. Use facilities on off-hours and seasons 7. Exercise price leadership 8. Gain competitive advantage 9. Increase sales of specific items 10. Generate guest loyalty **Factors Influencing the Pricing Decisions of Service** **Internal and External Factors** 1. **Internal Factors** The internal factors are controllable in nature, which are discussed below: a. **Organizational Policies** - As price decision is an outcome of production and marketing, the pricing takes at the top level and the lower level of an organization. b. **Service Differentiation** - In order to differentiate own services from that of the competitor, the service provider has to price the services differently. c. **Service Cost** - It is necessary to assure that the price charged for a service, covers the fixed variable and semi variable cost incurred in providing that service. d. **Marketing Mix** - The price of a product or service varies depending upon whether the product or service idea is new or an established one, whether the service provider is an agent or a sub-agent, or the main provider (distribution channels) and also the various pricing objectives. 2. **External Factors** On the other hand, external factors are uncontrollable in nature, such as: a. **Different Groups of Users** - In order to obtain maximum value from each segment of users, different prices can be charged for offering the same service. Depending on the user\'s demand for the product or service like heavy user, medium user, or low user, the pricing variations are made. b. **Different Points of Consumption** - On the basis of the point of production and consumption, service organizations charge different prices at different service locations. Depending on the place where the consumption takes place, the prices are to be varied. For example, Taj group of hotels will not charge the same price for its deluxe room in Delhi, Mumbai, Chennai and Bangalore. c. **Different Time of Production** - Owing to the perishability characteristic of the services priced discriminatorily, depending upon the time at which are offered. For example, hotel in Goa follow a different price package during the monsoon season as compared to the peak season of the October-May. d. **Competition** - Competition plays a significant role in pricing, due to similarity in the service offered and the satisfaction enjoyed by a customer. Unless the products and services provided by the hotelier are unique in nature, the marketer cannot price the products and services higher than the competitor. e. **Governmental Control -** Government policy regulations affect the pricing decisions of various services. For example, change in the luxury tax, sales tax etc. imposed from the government from time to time, affect the pricing decision of a hotel or restaurant business. **Methods and Strategies of Pricing in Hospitality Services** +-----------------------------------+-----------------------------------+ | 4. **Market Skimming Price** | Initially the products will be | | | introduced in a high price and | | | subsequently settled down for a | | | lower price. | | | | | | *For example:* | | | | | | Bakeshop introduced a regular | | | price of freshly baked bread and | | | subsequently settled down for a | | | lower price. | +===================================+===================================+ | 1. **Mark | Initially introduced at a lower | | et | price and increase its price as | | Penetration\ | its demand in the market | | ** | increases. | | | | | Before\...\...\.....P10.00 | Good to capture new market | | After\...\...\....P18.00 | | | | Opposite of skimming | +-----------------------------------+-----------------------------------+ | 2. **Prestige** | It is a physiological pricing | | | strategy that sets prices of | |  | luxury products to the | | | expectations of a niche class of | |  | customers who associate higher | | | prices with superior quality. | +-----------------------------------+-----------------------------------+ | 3. **Price Lining** | It is a marketing process wherein | | | products or service within a | | | specific group are set different | | | price points. The higher prices, | | | the higher, the perceived quality | | | to the consumer. | +-----------------------------------+-----------------------------------+ +-----------------------------------+-----------------------------------+ | 17. **Odd Even Pricing** | A type of psychological pricing | | | where price is set based on | |  | customer's perception of a | | | significant difference in cost | | | between products priced at a | | | whole number value and products | | | priced slightly below this whole | | | number. | +===================================+===================================+ | 5. **Bundle Pricing** | Combining of several products and | | | offering the bundle at a reduced | | | price. | | | | | | *Example:* | | | | | | Common example include value | | | meals at restaurants. | | | | | | Hotel quotes a rate for an | | | overnight stay that includes | | | breakfast the next morning. | +-----------------------------------+-----------------------------------+ | 6. **Bait Pricing** | Advertising a low-priced product | | | but then trying to persuade | |  | customers to buy a higher priced | | | one. | | **\ | | | ** | | | | | | **P7,999.00 P8,999.00** | | +-----------------------------------+-----------------------------------+ | 7. **Price Leadership** | Competitors follow the leader by | | | establishing their price based on | |  | the price set by the price | | | leader. | +-----------------------------------+-----------------------------------+ | 8. **Captive Product Pricing** | Where products have complements, | | | companies will charge a premium | | | price when the consumer is | | | captured. | | | | | | For example, a restaurant will | | | charge a low price and recoup its | | | margin solely from the sale of | | | its only specialty. | +-----------------------------------+-----------------------------------+ | 9. **Price Discrimination** | Different prices to different | | | buyers for the same products. | +-----------------------------------+-----------------------------------+ | 10. **Comp | Setting a price in comparison | | etition | with competitor's. | | Pricing** | | | | | | **Donut A- The Price of Donut is | | | P20.00** | | | | | | **Donut B- The price of Donut is | | | P25.00** | | +-----------------------------------+-----------------------------------+ | 11. **Optional Product Pricing** | Companies will attempt to | | | increase the amount customers | |  | spend, once they start to buy. | | | Optional "extras" increase the | | | overall price of the product or | | | service. | | | | | | Example, airlines will charge for | | | optional extras such as | | | guaranteeing a window seat or | | | reserving seats next. | +-----------------------------------+-----------------------------------+ | 12. **Premium Pricing** | The price is high to reflect the | | | exclusiveness of the product. A | | | high price is used where there is | | | uniqueness about the product or | | | service. | +-----------------------------------+-----------------------------------+ | 13. **Economy Pricing** | This is no-frills low price. The | | | cost of marketing and manufacture | |  | are kept at a minimum. | | | | | | Supermarkets often have economy | | | brands for soups, spaghetti, etc. | +-----------------------------------+-----------------------------------+ | 14. **Geographical Pricing\ | Geographical pricing is evident | | ** | where there are variations in | | | price in different parts of the | | | world. | | | | | | For example, rarity value of | | | shipping costs increases price. | +-----------------------------------+-----------------------------------+ | 15. **Value Pricing** | This approach is used where | | | external factors such as | |  | recession or increased | | | competition, force companies to | | | provide "value" products and | | | services to retain sales e.g., | | | Value Meals at McDonalds. | +-----------------------------------+-----------------------------------+ | 16. **Stay-out Pricing** | Under this method, the marketer | | | sets low price that they | | | discourage new competitors from | | | entering the market. | +-----------------------------------+-----------------------------------+ **LESSON 3.3 CONTENT** **PROMOTION MIX**  **Promotion** It is the element of marketing mix that includes all forms of marketing communications Promotion has its own mix which traditionally includes advertising, sales promotion, personal selling, public relations and direct marketing. **Five (5) Elements of Promotional Mix** +-----------------------------------+-----------------------------------+ | 1. **ADVERTISING** | Any paid form of non-personal | | | presentation and promotion ideas | |  | goods or services by an | | | identified sponsor. | | | | | | **Message can be delivered by:** | | | | | | - Television | | | | | | - Radio | | | | | | - Newspaper | | | | | | - Magazines | +-----------------------------------+-----------------------------------+ **Different Types of Advertising** 1. **Brand Advertising-** The process of making the public aware of a particular brand and its features so that they will continue to buy it. 2. **Promotional Advertising-** Aims to inform prospects about promotional activities such as special sale. 3. **Advocacy Advertising-** It is the use of marketing to support a particular message or cause. Aims to convince regarding a particular cause. 4. **Classified Advertising-** Aims to inform prospect regarding opportunities such as buy and sell events and employment. 5. **Comparative Advertising-** Compares the brand to one or more other brands. 6. **Institutional Advertising-** Aims to develop good will of a particular company. Campaign collects donations in-store to fund meals for less fortunate children. **Advertising Objectives** **To Inform Target Customers about:** 1. New Product 2. Product Function 3. New Uses and Correct Usage 4. New Distribution 5. Price Adjustment **To Persuade Target Customers about:** 1. Brand Preference 2. Brand Switching 3. Urgency to Buy Now +-----------------------------------+-----------------------------------+ | 2. **PERSONAL SELLING** | It is an activity of informing | | | and persuading a market on a | |  | person-to-person basis to buy the | | | merchandise offered for sale. | +-----------------------------------+-----------------------------------+ **Classification of Personal Selling Jobs** 1. **Across the Counter Selling-** Across the counter selling or in-store selling is employed by retail stores. 2. **House-to-House Selling-** House-to-House selling or outdoor selling, where salesmen visit prospects in their offices or houses. 3. **Dealer-** Salesman employed by wholesalers to call upon retailers. +-----------------------------------+-----------------------------------+ | 3. **SALES PROMOTION** | Refers to those sales activities | | | which supplement both personal | |  | selling and advertising, | | | coordinate them and help make | | | them more effective. | | | | | | It includes techniques intended | | | for broad consumer participation | | | which contain promises of gain | | | such as prizes, in cash or in | | | kind, as a reward for the | | | purchase of a product, security, | | | service or wining in a contest's | | | games. | +-----------------------------------+-----------------------------------+ **Promotional Tools** 1. **Prizes, Contests, Sweepstakes and Games-** Are offers of the chance to win cash, trips, or merchandise as a result of purchasing something. A contest calls for consumers to submit an entry to be examined by a panel of judges who will select the best entries. 2. **Cross Promotion-** Using one brand to advertise another noncompeting brand. 3. **Patronage Awards-** Values in cash or in other forms are proportional to patronage of a certain vendor or group of vendors. 4. **Free Trials-** Inviting prospective purchasers to try the product without cost in the hope that they will buy. 5. **Product Warranties-** Explicit or implicit promises by sellers that the product will perform as specified or that the seller will fix it or refund the customer's money during a specified period. 6. **Tie in Promotions-** Two or more brand or companies team up on coupons, refunds and contest to increase pulling power. 7. **Point of Purchase-** Displays and demonstrates take place at the point of purchase sale. +-----------------------------------+-----------------------------------+ | 4. **PUBLIC RELATIONS** | The activities involved in | | | actively seeking to manage the | |  | nature of the publicity an | | | organization receives. | +-----------------------------------+-----------------------------------+ **Public Relation Tools** 1. **Press Conference-** It is a meeting organized for the purpose of officially distributing information to the media and answering questions form reporters. 2. **Community Involvement-** Is the process of engaging in dialogue and collaboration with community members. The goal of Superfund community involvement is to advocate and strengthen early and meaningful community participation. 3. **Exclusive Interview-** This would mean being the only one interview is doing it with. An interview may be extended, exclusive, or regular, i.e. done with more than one interviewer and all sessions having the same length and depth. +-----------------------------------+-----------------------------------+ | 4. **DIRECT MARKETING** | The business of selling products | | | or services directly to the | | | public, e.g., by mail order or | | | telephone selling, rather than | | | through retailers. | +-----------------------------------+-----------------------------------+ **Direct Marketing Tools** 1. **Internet-** Online advertising, also called online marketing or Internet advertising or web advertising, is a form of marketing and advertising which uses the Internet to deliver promotional marketing messages to consumers. 2. **E-mail Marketing-** It is the act of sending a commercial message, typically to a group of people, using email. In its broadest sens, every email sent to a potential or current customer could be considered email marketing. 3. **Text Brigade-Text Blast Marketing-** A text blast is an SMS text message sent from a single source to a large group of people simultaneously, most often used in the retail industry. Text blast marketing has been identified as the most effective way for businesses to connect with customers, raise brand awareness and increase purchasing intent. **LESSON 3.4 CONTENT** **PLACE MIX- CHANNEL OF DISTRIBUTION**  **Place** This refers to the point of interaction between the product and potential customers. Effectively, it relates to how the marketer distributes the product and provides information about it. **Channel of Distribution** A **channel of distribution** comprises a set of institutions, which perform all the activities required to move a product and its title, from production to consumption. - "Bucklin" The word channel has its origin from a French word which means "canal."It consists of the physical access point where the product is provided to customers and the methods of transporting or storing goods before making them available to clients.   **Supplier- Commissary- Cafe France- Customer (Consumer)** **Middlemen** Under product trade channels, middlemen play a vital role. Middlemen are independent business concern that operate as links between producers and ultimate consumers or industries users.   **Traveller Travel Agent Staycation** **Travel Agency** **Two Types of Middlemen** 1. **Merchant Middlemen** Those who actually take title to the goods they handle. *Examples:* wholesalers and retailers 2. **Agent Middlemen** Those who do not take title to the goods but do actually assist in the transfer of title. *Examples* are real estate brokers. **Market** A place where sellers and buyers come together to enter to buying and selling transaction. **Four Types of Market Structure** 1. **Monopoly** A market structure characterized by a single seller, selling a unique product in the market. In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute. *Example:* Highway Hotel are properties that are located in isolated areas, where there is no competition wherein they can charge higher rates. 2. **Monopolistic Competition** Monopolistic competition refers to a market where many firms sell differentiated products. Differentiated products can arise from characteristics of the good or service, location from which the product is sold, intangible aspects of the product, and perceptions of the product. *Example:* Restaurants in mall offer same product which is food but different specialties, Pancake House is American casual dining, Max\'s Restaurant, a Filipino family dining restaurant etc. 3. **Oligopoly Competition** a. It refers to a market situation where there are few sellers in a market, selling homogenous or differentiated. b. *Example:* Restaurants in Manila Polo Club c. PLDT is an example of Oligopoly. The telecom industry has now been transformed to an oligopoly with major players Globe and Bayantel. d. Coca Cola is also an example of oligopoly with one major player which is PEPSI. 4. **Pure Competition** a. It is a market situation where there is large number of independent sellers offering identical products. *b. Example:* hotels in Malate **Marketing Channels** 1. **From Producer Direct to Consumer** a. This is the simplest. This is important particularly for highly perishable goods like fruits and vegetables. b. Direct selling of goods from producer to consumer can be accomplished in several ways, such as: 1. **Roadside Stands** **-**These sellers are commonly found in highways where common products are seasonal fruits or vegetables. 2. **Retail Public Markets -** Some farmers may decide to bring their harvest to public markets in their areas than maintaining a roadside stand. 3. **Huckstering -** These are \"hucksters\" or peddlers in public areas, who go from one house to another. This is common in bus terminals, railroad stations or trains, in public areas in some towns or cities. 4. **Direct Orders** Some customers require custom-made products. A home builder may need exact sizes of doors or windows or grills of his preference or specifications. 2. **From Producer to Retailer to Consumer** This channel makes use of only one middleman, the retailer. They serve as the link between the producer and the consumer.    **Producer Retailer Consumer** 3. **From Producer to Wholesaler to Retailer** This is the traditional channel of distribution for consumer goods. 4. **From Producer to Agent/Broker to Wholesaler to Retailer to Consumer** This distribution channel involves more than one intermediary before the product gets into the hands of the consumer. This middleman, known as the agent, assists with the negotiation between the manufacturer and the seller. Agents come into play when the producers need to get their product into the market as quickly as possible. **Types of Market Exposure for Products** 1. **Convenience Store -** A market exposure where products is available in almost all outlet. 2. **Selective Distribution -** A market exposure where product is available in several outlets but not all. 3. **Exclusive Distribution -** A market exposure where product is sold by one middleman in a given geographic area. Highly selective choice of outlets. Specialty goods like signature items for bags, shoes and dresses use exclusive distribution at a standard manufacturer's price. **Retailing** This includes all activities involved in selling goods and services directly to final consumer for personal or for non-business use. **Classification of Retailers** **According to Size of Store** 1. **Large-Scale Retailers** 2. **Small-Scale Retailer** **According to Product Lines Carried** 1. **General Merchandise Stores** These are outlets which carry variety of product lines and assortment in each line. *Example*: SM Dept. Store, Dads, Kamayan, Saisaki, and Vikings 2. **Limited Line Stores** Carry only one product with few related items. We identify these stores by the names of the individual products they feature like food stores, shoe store, hardware stores. Limited line category includes specialty stores. * Example:* Simply Shoes, Julie\'s Bakeshop **According to form of Ownership** 1. **Corporate Chain Stores** Stores have two or more retail outlets, which may have the same name centrally owned and managed and generally handle the same lines of products. *Example:* Mercury Drug 2. **Independent Retailers** This franchise system is a contractual agreement between franchisers and the company. The franchisee grants the right to sell certain goods or services in geographic market providing equipment, products or services for sale and managerial know how. **Franchising** 1. It is an agreement by an owner to allow use of name or business format by another business for the purpose of selling the product or service. 2\. Franchising is the granting of rights to another person or institution to exploit a trade name, trademark or product in return for a lump- sum payment or royalty. 3\. Major international restaurant chains like McDonalds, Pizza Hut, Dominos, etc. have franchised their names to local restaurant operators in different countries. **Characteristics of Franchising** 1. Ownership by one person of a name, an idea, a secret process or a specialized piece of equipment and the goodwill associated with it. 2. The grant of a license by that person to another permitting the exploitation of such name, idea process or equipment and the goodwill associated with it. 3. The inclusion in the license agreement of regulations relating to the operation of business, in the conduct of which the license exploits his rights. 4. The payment by the licenses of a royalty or some other consideration for the rights that are obtained. **According to Method of Operation** 1. **Full-Service Retailing** This is also known as over-the-counter selling (OTC) where consumers simply tell what products they want OTC and seller will deliver the produc wanted over the counter. 2. **Supermarket Retailing** A supermarket offers major product line like groceries, meats, and produce and dairy products. These stores operate on self-service basis, thereby known as supermarket retailing. No sales clerk or salespeople will assist them in their buying decision. Commonly people around can be inventory clerks or stockmen. 3. **Department Store Retailing** Offers the extreme of supermarket retailing. Sales clerk are present to assist customers in buying decisions. 4. **Non-Store Retailing** Outdoor selling or in-house personal selling * Examples:* Door-to-door selling, telephone ordering like recent marketing strategy of food chain strategy. **Wholesaling** Basically a business that buys goods directly from manufacturer and sells them to retailers or other wholesalers. A. **Full-Service Wholesalers** 1. **General Merchandise -** Wholesalers who carry non-perishable items like hardware, electrical supplies, furniture and automobile equipment. 2. **Single Line Wholesalers -** Wholesalers who carry only limited or narrower product line like groceries. 3. **Specialty Wholesalers -** Instead of carrying full line of groceries they might carry only health foods. B. **Limited Function Wholesalers** 1. **Cash and Carry Wholesalers** - Cash and Carry is a term that refers to products or items that are sold for cash and typically without any sort of delivery service. **Electronic Channels of Distribution** **Internet** 1. The internet has a geographically dispersed market. 2. There are low barriers to entry as set up costs are low. 3. Use of e-commerce technology (for payment, shopping software, etc.). **Trends in Electronic Distribution of Hospitality Services** 1. Hotel chains will continue to invest in their own websites and offer direct links to selected customers and wholesalers. 2. Hotels will continue to be successful at building business on their websites; growth will not come at the expense of online travel agencies. Leisure travellers prefer having a wide property selection that is available through a third-party online retailer. 3\. Hotel commission payments to intermediaries will give way to pay for performance programs aimed at shifting market share and providing other value-added services. **Electronic Commerce (E-Commerce)** A process of buying and selling, transferring, or exchanging, products, services, and or information via electronic networks and computers.