TIM 304 Midterm #2

What is the basis of differentiation?

* Minor product features can serve as the basis for differentiation, when they: 1. cannot be easily duplicated 2. appeal to a particular need and/or want 3. create an image or impression that goes beyond the specific difference itself • Must instill an image of those products in the minds of customers that distinguishes them and causes the customer to react more favorably

What are some strategies in determining price?

* One of the most direct methods of determining price is to base it on what competitors charge, sometimes called the "going rate" • One has little choice but to stay in line with other properties offering the same product in the same product class • Without valued differentiation, it is difficult to get higher prices, and lower prices will probably be met by competitors • Competitors' prices are readily available, at least the stated prices, making it easy to use them as a benchmark * Price leader: has some competitive advantage, competition must be priced below this to remain competitive. * Match pricing: competitive pricing • It is viable as long as there is no customer perception of significant differences among the entities, as long as one's cost structure allows pricing at that level, and assuming competitors' prices are set right at the beginning • These are all very big assumptions, which are usually not met • Means that the market must be willing and able to buy at that level. It means that the customer is totally concerned about price. * The other side of competitive pricing is that the augmented product is rarely ever the same, even in the same product class • This will make little difference - unless the customer perceives it to be so • Create the perception is with pricing as a tangible aspect of the presentation mix. • When one prices above the direct competition, a statement is made that a better product is being offered • Foolish to attempt to bait the customer with pricing if the product is not there to support it. • In restaurants, there is far more variation in the product relative to the same product class • Atmospherics are probably important, along with menu items, the chef's preparation, quality of food and drinks • Must maintain a strong pricing relationship with competitors • Restaurants should have more opportunity to differentiate their product and should price accordingly, provided the market perceives that differentiation and is willing and able to pay for it * Both restaurants and hotels will sometimes use penetration prices initially to create awareness and trial, steal customers, and build volume • Once the business is established, it is normal for prices to be increased • Sometimes this works and sometimes it backfires and business is lost, at which point it is far more difficult to lower prices and recapture the business • Image of being overpriced or having poor price value is an enduring one with the customer • In setting prices, marketer must always make conscious predictions about competitive reactions • Will they meet the prices? What will be the effect if they do or don't? • Must carefully focus on the markets and segments it serves * Neutral pricing: management decides not to use price to gain market share; rather, they use other market variables • Believe the customer wants a coherent pricing strategy • They may or may not be concerned with competition and may or may not understand costs * Decisions of whether to practice penetration, skim, neutral, or match pricing are usually situation specific • Marketer must conduct a thorough analysis of the complete situation before establishing pricing strategies

Describe mature travelers

* The mature traveler market, actually a subsegment of the pleasure market, is another important growth segment for both the hotel and restaurant marketer • Ages 55 and over • This market's size is on the increase because people tend to live longer and better • They travel extensively spending over 50% more of their time away form home than the younger pleasure segments • Members of this market today live longer, healthier, and more vigorous lives; are better educated; and have wider interests and activities than previous generations at their age. • Their children are grown' their mortgages are paid; and they have the time, energy, and inclination to travel. * The needs and wants of the mature market • "To visit new places" was the number one reason for trips taken, followed by "to visit friends and family" • Price sensitive, and getting a discount is an important attraction • Have the flexibility to plan trips any time, they take advantage of the lowest prices • Use hotels of all price ranges • Hotels must be able to provide those attributes that are important to this segment: increased security, well-lit public areas, legible signage, no-smoking rooms, easily maneuverable door handles, grab-bars and supports in bathrooms, and wide doorways to accommodate wheelchairs and walkers. • Market can be segmented in a variety of ways: • Retirement status • Traveler's life stage as they grow older and encounter physical restrictions • Prefer to travel as part of a group or in pairs • Many hotel chains are aggressively pursuing this market through senior discounts * Active senior citizens spend a large proportion of their food budgets on food away form home • Most prefer midscale restaurants • Many are bargain hunters who are conservative in their eating habits • Restaurants should have good lighting to avoid safety hazards • Menus should be easily readable with enough variety to satisfy senior citizens' nutritional needs • Service staff should be trained to recognize changes in vision and hearing so people with special needs can be provided better service without calling attention to their impairments • Fill seats early because seniors tend to eat dinner earlier; "sunset dinners" or "early-bird specials" * Senior citizen's basic needs: • Not, as a group, demanding • Want rooms close to the lobby, they want help with luggage, and they want information • They want clean rooms, convenient location, and value • They do not want to be publicly singled out for service, but we must recognize their special needs and provide them in a subtle way • Tend not to rush through their stays • Senior citizens tends to travel outside traditional patterns • As the baby-boom generation matures, the needs of this market will further evolve and change. We must research these needs so that the market can be better served.

What are 5 common mistakes in pricing?

1. Prices are too cost oriented. They are increased to cover increased costs and don't allow for demand intensity and customer psychology. 2. Price policies are not adapted to changing market conditions. Once established, they become "cast in cement." 3. Prices are set independent of the product mix rather than as an element of positioning strategy. Integration of all elements of the marketing mix is essential. 4. Prices ignore the customer psychology of experience, perception of value, and the total product. These are the true elements of price perception that will influence the choice process. 5. Prices are a decision of management, rather than of marketing.

What are 10 pieces of information necessary for pricing strategies?

1. The customer's value analysis of the product or service 2. The price level of acceptance in each major market 3. The price the market expects and the differences in different markets 4. The product's position on the life cycle curve 5. Seasonal and cyclical characteristics of the industry 6. Economic conditions now and in the foreseeable future 7. Customer relationship 8. Channel cost to figure in calculations and the mark up at each level 9. Advertising and promotion requirements and costs 10. The product differentiation that is needed

What are the five types of cost-based pricing?

• Cost-based pricing comes in a number of versions: • Cost-plus pricing • Cost percentage or markup pricing • Break-even pricing • Contribution margin pricing • $1 per thousand pricing 1. Cost-Plus Pricing • Cost-plus pricing: involves establishing the total cost of a product, including a share of the overhead, plus a predetermined profit margin • Common in F&B to relate the profit margin to the selling price • Each product is allocated an appropriate share of every type of expense as well as its own variable cost • Every product should be profit generating • Ignores the notion that total income is a combined effort in which some products will not generate as much profit as others but will contribute to the whole • Subject to misallocation of costs such as depreciation, maintenance • Does not allow for flexibility in pricing decisions nor does it take into consideration customers' perception of a product's value • Cost oriented and ignores demand • Does not take into consideration customers' perceptions of a product's value • Attempts to apply different gross margin percentages to different menu items to account for different labor costs have done little to overcome the deficiencies of this method 2. Cost Percentage or Markup Pricing • Cost percentage or markup pricing: features either a dollar markup on the variable ingredient cost of the item, a percentage markup based on the desired ingredient cost percentage, or a combination of both • Also heavily favored by the restaurant industry • Food cost and liquor cost percentages become the standard by which results are measured • Three major fallacies of this method: 1. It is totally cost oriented 2. It ignores customer perceptions of value, particularly in times of widely fluctuating costs 3. It tends to price high-cost items up to a level that customers are unwilling to pay 3. Break-Even Pricing • Break-even pricing: used to determine at what sales volume and price a product will break even or where costs are equal to sales • Distinguishes between fixed costs and variable costs • Break-even = fixed costs s Price - Variable cost • Price-sensitive restaurants: fixed costs are relatively low and unit variable costs are relatively low and unit variable costs are relatively high • Sales quickly pass the fixed cost line, but the profit margin remains relatively narrow regardless of the quantity sold • Leaves relatively little room for discounting for purposes of increasing volume • If demand at a certain price is equal to or greater than the break-even point, then that price would be profitable • Volume-sensitive hotels: fixed cost line is higher, takes longer for the sales line to pass • Profit margin widens quickly as variable costs remain a relatively small percentage of unit sales • More room for discounting to increase volume once the fixed and variable cost lines have been passed by the sales line • Break-even analysis is an efficient method of determining profit margins at various price levels if sales volume can be accurately predicted at the different price levels. • Knowledge of customer perception and demand is needed to predict sales volume 4. Contribution Margin Pricing • Contribution margin pricing: occurs when pricing is used to help cover costs • Variable cost line is interjected into the plot at the same place as the sales line, starting at the zero intersection • If product sells at a higher price than its variable cost, it makes a contribution to fixed cost even when sales are not high enough to make profit • Useful for hotels in soft periods of demand • Room prices can be discounted substantially if that's what it takes to have them occupied; no profits result, but portion of fixed cost is covered • Assessed by examining the fewer rooms at higher price. Selling more rooms at discounted prices have the same effect as selling fewer rooms at higher prices. Consider the cost of occupancy; that is, the cost of wear and tear on fixed assets, cost of staff burnout, cost of trying to raise prices once consumers have been trained to get the room for less. • Contribution margin pricing is another version of markup pricing that can be used to overcome the problem of overly high prices on high-cost items when pricing F&B • "You bank dollars, not percentages" 5. $1 Per Thousand Pricing • $1 per thousand pricing method for establishing the selling price of hotel rooms is no longer used. • Average room rate should be $1 per every $1,000 of construction cost per room • "Rule of thumb"

What are the benefits of revenue management?

• Hotels can reach the same, a better, or a poorer yield through different combinations of average rates and occupancies * Effective revenue management requires hotels to have access to demand forecasting o Must be able to forecast demand for each rooms category from each of its market segments, for any date in the (near) future o Customer purchase behavior must be well understood—especially the lead time for purchase and price elasticity * Revenue management allows a hotel to manage its limited inventory better to maximize revenues * Short-term gains must not substitute for long-term profits o Loyal and repeat customers will not appreciate lack of room availability or special rates o Interested in price stability, honor long-term customer's request for usual rate * Hotel employees affected by revenue management (reservations, sales, front office) must be involved so they understand that it is still important to keep loyal customers

Describe the package market

• Increasingly popular method of attracting customers during low-demand periods is becoming more crowded with offerings every day • Hotel package market is defined as the offering of a combination of room and amenities to customers for an inclusive price • Designed to boost occupancy during low-demand time periods, such as weekends and off-seasons • Sometimes packages are used to maximize revenues at all times • Three-night stay with breakfast • Ensure food and beverage facilities are used • Three nights are sold at once, ensuring occupancy over the period & one night won't sell out before the others • Must forecast some significant demand to be able to force the customer to purchase that type of package * Package: bundling of goods and services (e.g. F&B, coupons, welcome gift) • Sometimes misused to describe blatant discounting • In developing packages, the needs and problems of the customer must be first understood in order to succeed in developing the target package market. • What works in one section of the country may be completely foreign in another • Once the needs of the target package customer have been identified, the competition needs to be analyzed • The key is differentiation of the product to the target market. Creation must clearly be better from an offering or price standpoint in order to capture the market. * From the customer's point of view, there are four different advantages to packages: 1. Package prices imply that the sum is cheaper than the individual parts. Many people may not know that a package could have been cheaper individually. Even when the price is not less, there is a perception of value in packages. 2. Packages offer something that people want but probably would not request by itself—for example, breakfast in bed. Packages remove the worry of "how to" and make it easier for the customer to do whatever it is. 3. Packages should be hassle-free. Customer doesn't have to make decisions about where to eat, how to get there. This is particularly true for the inexperienced traveler. It is also why carefully thought-out packages can be priced at more than the sum of their parts. Customers will pay for removing the hassles and think they are getting it cheaper. Packages make the multiple-purchase decision much simpler 4. Buyers get something they would not get without the package. That something appeals to a particular interest. Example: murder weekend packages. Other packages of this type are designed for "buffs;" special activities are planned for them and they know they will be sharing the experience with others of like interest. • Warning: provide what you promise in the package! • Hotels may not plan for packages and consider them secondary, low-rated business. This is self-defeating and results in extremely negative word of mouth. • Disproportionate number of complaints about package "promises" • Tour group package that includes airfare and accommodations

What does research method include?

• Research method: includes defining the population and corresponding sample, the sample size, the method of data collection, the questions asked, and the type of analysis that will be applied 1. Population • Population: consists of all those individuals who display the characteristics or behavior of interest (e.g. present customers, potential customers, both) • Consists of all people who display some criterion measure of behavior • Should be as homogenous as possible - its members should display similar characteristics along the dimensions we wish to measure. 2. Sample • Sample is derived from the population • Too expensive and time consuming to survey everyone, survey only a sample of the entire population; learn the characteristics of many from a few • Probability sample: one in which every member of the population (or the sample frame, which is a subset of the population when the population is very large) has an equal chance of being drawn into the sample • Sample is collected randomly without any bias • Can state with confidence that what we learned could not have occurred by chance • The larger the sample, the smaller the possible margin of error • Only with probability samples can one use inferential analysis • Nonprobability sample: everyone in the population does not have an equal chance of being drawn into the sample. • Convenience sample: selected simply because they are convenient • Judgmental or quota sample: decided that some specified variation is needed • Represent certain characteristics • Often used for focus group selection • Common method is mall intercepts: ask one question, if they don't give the right answer, you move on. Can happen anywhere. • Biased "Default Sample": people who fill out guest comment cards • No means of controlling the probability of any one guest completing and returning the comment card • Represent only people who are prone to fill out card (those who had a delightful or dreadful experience) • May differ drastically from people who have never filled out a comment card 3. Data Collection • Should clearly be in mind when the sample was selected because the two are closely related and must be coordinated (decide whether qualitative, quantitative, or both) • Some written preparation is required beforehand • In quantitative research, a questionnaire (survey instrument) is prepared • Will require more care in its preparation to induce respondents to complete it and make it easier for them to do • Data collected must be easy to tabulate or feed into the computer for analysis • Questions must be clear and unambiguous • Each question should have the same meaning for all respondents. If an abstract term is used, it should be defined so everyone interprets it in the same way. • Decisions whether to use personal interviews, focus groups, or probability samples, as well as the actual method of implementation (e.g. mail, web, phone) • Each has its trade-offs in terms of time and money • Most important criterion is the method that will provide the most valid and reliable data for the problem at each hand • Issue of increasing concern: • The extent to which consumers are willing to participate in primary research • Provide respondents with more attractive incentives, which has contributed to an increase in cost of research • Locating prospects who qualify for inclusion in a qualified sample has become increasingly difficult because of the fragmentation of society • Researchers purchase access to regional/national "panels" of consumers who reflect the general population and participate in research in exchange for compensation • Arrival of the internet provide a much faster and cheaper way to capture/analyze data 4. Analysis • Data must be analyzed carefully • Method of analysis will have been decided beforehand, since it affects the way questions are asked, type of response solicited, and scale used to measure the results • Inferential data used in multivariate analysis require responses to be collected on an interval or ratio scale (1 to 7) instead of a nominal scale (yes/no) or ordinal scale (rank-ordered data) • Also requires a dependent variable—that is, a measurement such as likelihood to return—that can be used as an overall scale to measure the impact of the other (independent variables)

What is important to keep in mind when pricing across multiple distribution channels?

• There must be rate parity as this is the only way to stop brand price erosion • As more and more reservations come through alternative channels, rate parity becomes more important

How can a company find marketing opportunities?

* All marketing opportunities begin with the identification and quantification of customers' problems o "Incongruities": discrepancies between what is and what ought to be o To customer: discrepancies between expectation and reality; what the customer would like it to be and what is available * Opportunity solutions, to be effective, have to be simple, easily understandable by the customer, and avoid increased customer risk o Opportunities call for innovation, leadership, and a constant awareness that there out to be a better way o Opportunities are out there, but innovation to fulfill them does not fall in your lap o Takes hard work, common sense, great timing, and good luck. * Search for opportunity begins with knowing your market, knowing your customers, and understanding your customer's problems o First rule of marketing: Will it create or keep a customer? o Then ask what it will cost to develop and implement and whether you can afford it. * All opportunities to create and keep a customer are not "great ideas"

What are sources of external information and public domain research?

• External information flows through distribution channels; competitors; suppliers' and various local, state, and national agencies and associations, as well as the marketplace 1. Distribution channels that can provide information include travel agencies, reservation systems, credit card systems (e.g. American Express can provide info about people who use AmEx), tour brokers, wholesalers, TravelCLICK, Smith Travel Research, the Daily Bench, and so forth. 2. Competitors themselves are a source of information • Hoteliers may read boards, call for rates, book rooms at competitor properties • Determine price-value relationship for each competitor; develop pricing and positioning strategies • The more you know about your competitors, the more you know about your own customers and potential new customers • Customers can reveal a great deal of information about the competition 3. Suppliers are also a great source of information (especially in restaurants) • But remember what they are telling you they are also telling you competition 4. Government agencies and trade associations also provide sources of information * Municipal, state, federal governments and tourism boards all collect readily available information in the form of the following: • Restaurant or hotel expenditures • Tax receipts • Lists of airport arrivals • Out-of-state visitors • Countries of origin • Purpose of travel • Length of stay * In the US, these government agencies and trade associations include: • The U.S. Department of Transportation • Travel Industry Association of America (a private organization) • Local destination promotion boards or convention and visitors bureaus (CVBs) • Chambers of commerce • Local hotel associations • Local restaurant associations 5. Accounting firms (e.g. Ernst & Young and Pannell Kerr Forster) publish annual reports drawn from their clients on trends and financial data 6. Some organizations provide secondary research information free of charge • Media research (the who, where, and why of those reading and/or viewing specific media) is also available through the marketing departments of individual media outlets and media research companies 7. Information from government agencies and trade associations, as well as information generated by private firms that do research for open publication is broad and may or may not be useful. • Excellent sources of insight: • Smith Travel Research: records and reports on occupancy trends for hotels in US and Canada • D.K Shiftlet: analyzes and reports on the travel habits and brand preferences of a large sample of U.S. Travelers • Yesawich, Pepperdine, Brown & Russell: tracks lifestyles and motivations of business and leisure travelers • Daily Bench Limited: records and reports occupancy trends for hotels outside US and Canada * Data is not necessarily information; research it only as good as its interpretation • Purpose of business research is to provide info to make decisions • May not be able to reasonably base a local business decision on the info • May not portend a trend • Averages can be dangerous to interpret unless they come from homogenous groups or market segments * Research conducted by trade journals, by trade associations, and even by noted research firms such as Gallup for the public domain is of little use for decision-making purposes or even for drawing specific conclusions • Generalized research data that is collected and analyzed without proper controls can be very misleading • Not likely to be situation specific • May be useful in environmental scanning when one wishes to observe broad trends * Concern for the representativeness of the data collected for analysis • Appropriate controls must be in place to ensure that the observations are taken from individuals who have been properly prequalified and are drawn to reflected the presumed random distribution of attitudes and behaviors across the population under study • I.e. make sure it is not biased

Which comes first - differentiation or segmentation?

• Firms do not undertake each strategy separately. Rather, firms undertake a combination of both at different times. • Differentiation can lead to market segmentation, and market segmentation can lead to product differentiation • Know how people differ, and then develop the specific products to meet their needs/wants • Both market segmentation and differentiation strategies are art of the marketing concept • A major reason for studying consumer behavior is to aid in the development of segmentation and differentiation strategies

What is cognitive dissonance?

• Follow up with customers, find out why they are (not) satisfied * Cognitive dissonance: a state of mind in which attitudes and behaviors don't mesh; when what we did is not the same as our present attitude towards it • State causes us to have second thoughts or doubts about the choice we made • Especially true when choice was an important one psychologically or financially and when there were alternative choices with a number of favorable features. • Most people try to reduce their own cognitive dissonance. We cannot change the behavior, so we try to change our attitude to feel better about it. • Marketers can help customers reduce cognitive dissonance by convincing them that they did make the right choice. • People try to reduce dissonance by seeking or choosing to perceive info that supports the correctness of the decision, by finding fault with the alternatives so that they look less favorable, and by downplaying the negative aspects of the choice and enhancing the positive elements. • Advertising that supports the choice or personal communication that commends the wisdom of the choice reduces dissonance and increases loyalty • Decision making process is so complex that only one's own mind can process it for oneself because it is full of many different variables

Why does revenue management work?

• Rather than setting prices by segment, firms should set prices by individual customers • When you set one price, those who had higher reservation prices are able to buy it at a lower price, creating a consumer surplus. Those who had lower reservation prices do not buy. The challenge is to transfer revenue from both sides into the firm. The firm does this by having more than one price. o Have different prices through different classes of services and restrictions (e.g. pricing different room types) • More prices, more revenue is captured • The key: each price must represent a different product and that those who have a high reservation price will not be able to buy a lower-priced product • Use fences to keep those with high reservation prices from buying less expensive products o Fences must make sense to consumers, they must believe that the rate they are paying is based on their choices, not on greed by the firm o "I need to pay more because flexibility is more important than price" • Potential fences o Advance purchase • 3-day: nonrefundable; no changes o Advance reservation • 7-day: partially refundable; change to dates of stay, but not number of rooms • 14-day: partially refundable; changes, but pay fee, meet rules • 21-day: fully refundable; full changes; nonrefundable • 30-day: full refundable; full changes allowed o "Loyalty fence": fence for frequent and loyal customers • Firms that offer multiple prices must be careful that the pricing decision does not destroy loyal customers' trust in the organization and their loyalty • Loyal guests must be treated differently

What is the consumer's prior product knowledge comprised of?

• Travelers are likely to go through a decision-making process, which includes a prepurchase information search • Information acquisition is necessary in selecting a destination and for on-site decisions, such as selecting accommodations, transportation, activities, and tours • Understanding the info search behavior of key markets can help in developing effective communications • Using travelers' info source utilization patterns as either a segmentation base or descriptor can enable focused positioning and media selection * Consumer's prior product knowledge comprises two components: familiarity and expertise 1. Familiarity: represents the early stages of learning 2. Expertise: represents the later stages of learning o As familiarity with product increases, expertise with the product increases as well 1. Familiarity • Familiarity with a product category is an important factor in decision making • Consumers' familiarity with a product category is measured as a continuous variable that reflects their direct and indirect knowledge of a product category • Familiarity: the consumer's perception of how much he or she knows about the attributes of various choice alternatives being considered o What people think they know and what they actually know often do not correspond because familiarity represents a traveler's subjective knowledge of the destination, whereas the traveler's expertise represents his objective knowledge • Familiarity represents early stages of learning. Knowledge and familiarity gained through an ongoing info search such as reading guidebooks, seeing ads and articles in newspapers, on TV/radio, and talking to friends and relatives • Product familiarity impacts consumers' information search behavior o In both familiar and unfamiliar product categories, consumers first search their memory for some info to help guide them to make decisions o Consumers' familiarity with a product category is likely to lead to direct acquisition of available info from memory o If consumer has sufficient info, they may be no need to search for additional info and consumer can make decision based on internal info 2. Expertise • Expertise can be defined as product-related experiences such as advertising exposures, information search, interactions with salespersons, choice and decision making, purchasing, and product usage in various situations • Consumer expertise: used in a very broad sense to include both the cognitive structures (e.g., beliefs about product attributes) and cognitive processes (decision rules for acting on those beliefs) required to perform product-related tasks successfully o Type of expertise varies because different tasks require different types of expertise o More than one type of knowledge is required for successful performance of a task • At the most basic level, exposure to a brand name may result in perceptual enhancement of it during visual search o Repeated exposure to a single brand or attribute may lead to easy retrieval of info about that single brand or attribute o Wider experience results in the accumulation of more info, which enables consumers to include more brands in their memory-based evoked sets and to recall and use more attributes during internal information-based decision making o When decisions are based on internal info, knowledge may offer an expert consumer an opportunity to use processing decision strategies that are very different from the ones used by the consumer who is low in expertise o When a consumer who is high in expertise and a consumer who is low in expertise learn the same info and later must make a decision, the expert consumer may rely on memory, whereas the consumer who is low in expertise may again need to engage in external search to avoid making a bad decision • Understanding external information source utilization helps marketers effectively tailor promotional mix o Understanding similarities and differences in familiar travelers' and expert travelers' external info search behavior and identifying which sources are most likely to be used can help design effective marketing programs and communication strategies * Variables that are likely to influence external info searches o Environment (e.g. difficulty of the choice task, the number of alternatives, complexity of the alternatives) o Situational variables (E.g. previous satisfaction, time constrains, perceived risk, and the composition of the traveling party) o Consumer characteristics (e.g. education, prior product knowledge, involvement, family life cycle, and socioeconomic status) o Product characteristics (e.g. purpose of the trip and mode of travel) • Prepurchase information search: information search activities that are related to a recognized and immediate purchase intention o For immediate prepurchase information needs, consumer uses either internal or external info sources, or both o Prepurchase information search is influenced directly by the perceived cost of internal and external info searches and level of travelers' involvement o Travelers' familiarity and expertise (prior product knowledge), learning, and previous visits influence their info search indirectly o Influence of travelers' familiarity and expertise is mediated by the cost of internal and external info searches o Cost of external info search includes financial and time costs, whereas cost of internal search includes the cognitive effort required and expected outcome of the search. Increase in the cost of either type of search decreases level of search activity. • Increase in familiarity decreases cost of an internal search and increase the cost of an external search • Increase in expertise decreases cost of both external and internal info search • Travelers' involvement has a positive effect on familiarity and expertise o Highly involved travelers are more likely to be more familiar with product and remember product info, develop better category structures, analyze info in more detail, elaborate, and make automatic decisions o Involvement may also positively influence intentional learning. Traveler who is highly involved pays more attention to incoming information such as commercials about the destination. • Traveler who has been to the destination before is more likely to have more familiarity and expertise on the destination than a traveler who has never been to the destination o Previous visits may also have a positive influence on a traveler's involvement o As the number of previous visits to a specific destination increases, a traveler's involvement is likely to increase as well * Learning influences a traveler's information search behavior. There are two learning dimensions: intentional learning and incidental learning o Intentional learning: increase a traveler's expertise and familiarity; pay more attention to incoming info and process it thoroughly and increase objective knowledge and expertise o Incidental learning: increases a traveler's familiarity • Not likely to process info thoroughly • Incidental learners have some info about the destination and its attractions, their learning is likely to increase their subjective knowledge and their familiarity with the destination and its attractions • Negative relationship between perceived costs of external information and amount of information received o Make external searches as inexpensive and time efficient as possible o Often not the case in travel marketing o More info available, more likely to increase both incidental and intentional learning, which leads to increased familiarity and expertise, which decrease info search costs, reduce necessity for an extensive external search, and help focus search on specific attributes rather than general info • Unfamiliar travelers have a hard time examining external info because of their limited processing ability o Provide simple info about the overall destination o Include comparison of destination with other destinations that target the same market to make it easier for traveler to digest the info; clearly identify unique selling propositions to differentiate from competitors and make positioning of destination easier for unfamiliar travelers • Low familiarity is associated with higher perceived importance of, and receptivity to, new info o Communicate through word of mouth with friends/family • Unfamiliar travelers have a hard time comprehending and evaluating product-related facts • Give special attention to customer satisfaction and complaint handling • Communication materials for expert travelers should include detailed info about attributes that are important to the target market o Identify important attributes through formal or informal research (e.g. surveys, focus groups, customers; ask right questions to right audience) o Monitor changing consumer needs and wants o Develop communication materials that provide detailed info about destination and its important attributes; modify as needs and wants change • Different travelers have different information needs; use travelers' level of prior product knowledge as a segmentation tool to provide appropriate communications • Have an overall picture of how travelers acquire info, how the major components of the search process fit together. Design communication strategies aimed at different stages in the info search process, which leads to efficient use of resources and more success in attracting tourists

Define differentiation

* Differentiation: distinguishing your product from that of the competition in ways that are both identifiable and meaningful for the customer, so that customers will choose your product over that of the competition o Customer will perceive greater utility, better price value, and/or better problem solution in your product o Key word is perceive; does not actually have to be a difference, but customer must perceive one, conversely, if the market does not perceive a difference, then the difference does not exist o It is the role of the marketer to convince the customer that a difference exists, it is the role of operations to deliver the difference

What are the tenets of consumer behavior?

1. The behavior of the consumer is purposeful and goal oriented. May appear irrational but is viewed by the individual as most appropriate. Do not underestimate the customer. 2. Consumer has free choice. Messages and choices are processed selectively. The frequency of these messages is increasing; those not pertinent are ignored. 3. The behavior of the consumer is a process. The act of buying is only an intermediate stage in that process. There are many influences on consumer behavior before and after the purchase. Purchase may be a culmination of the marketing effort and its influence on the process. 4. Consumer behavior can be influenced, but only if we address perceived problems and potential needs and wants, a task of marketing. 5. There is a need for consumer education. Consumers sometimes behave unwisely, against their own interests. Marketers have a responsibility in this effort.

Define price.

• Customer's viewpoint: what the customer must give up to purchase the product or service; may include money, time, a product/service (rooms for advertising), mental or cognitive effort, and transaction cost (steps necessary to take actual procession of product or service, e.g. minibar) • Manufacturer's perspective: the products and services that they give to the customers versus what they receive in return

Define prospect theory

• Increase perceptions of price value is to frame the offer in the best possible light • Prospect theory argues that when people make decisions, they do so by examining changes relative to a reference point. • Menu items with detailed descriptions and high prices

What should be considered when testing for segmentation?

• Is it homogeneous? • Can it be identified? • Can it be measured? • Can it be reached economically? • Can a differential in competitive advantage be maximized and preserved? • Is it compatible with others segments we may have at the same time? • Is the segment large enough and/or profitable enough?

Define microcompetition

• Microcompetition: any business that competes for the same customers in the same product class at the same point in time • A business that is a direct competitor with a similar product in a similar context • Fast food vs. fast food • An alternative in a different product class can become a competitor if the one product class is not fulfilling customers' needs • A greater failing may be to consider as competition properties that actually represent different product classes

Describe the prices of selective choice.

• Process of selective choice represents a hierarchy; the steps are taken in sequence or dropped at any point: 1. Selective Attention: We attend only to what is of interest to us. Advertisers may use graphics or headlines to get this attention. 2. Selective Comprehension: We try to comprehend what is still of interest. 3. Select Acceptance: We accept or reject what we comprehend. 4. Selective Retention: We retain in memory what we want to remember. • Be aware that much of what we direct at customers does not sink in o Be certain that what we want them to select is directed in a manner that appeals to their needs, wants, and problems o This is not just in advertising but also in personal selling, in-house merchandising, public relations, etc.

What is the behavior primacy theory?

• We may satisfy the same need in different ways, depending on the occasion, the availability and the appropriateness at the time • Leads to a second-level theory called behavior primacy theory: behavior is a reaction to the environment

Define tourism. What is its importance?

* Tourism comprises the activities of persons traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business, and other purposes * Tourism: the processes, activities, and outcomes arising from the relationships and interactions among tourists, tourism suppliers, host governments, host communities, and surrounding environments that are involved in the attracting and hosting of visitors * Tourism is made up of a number of tangible and intangible components, including the tourist, the tourist-generating region, the transportation system, the tourist destination, hospitality services, and the tourism industry • All of these components are highly interrelated and are very sensitive to changes in macro and micro environmental trends • Small changes may influence one component, which affects the others • Whole industry is very volatile and susceptible to external influences • Many countries and destinations heavily depend on travel expenditures by domestic and international travelers as a source of taxation and a source of income for the companies that provide hospitality services to these travelers • It affects the economy of every country and of every city and local community in the world • Tourism is the number one industry in many countries and the fastest-growing economic sector in terms of foreign exchange earnings and job creation • International tourism became the world's largest export earner and an important factor in the balance of payments of most nations • One of the most important sources of employment and an enormous stimulant for investment in infrastructure and superstructure • In 2001-2003, the worldwide tourism industry contracted as the result of a series of events • Attacks on September 11, 2001 and subsequent tightening of travel restrictions, the SARS outbreak in Asia, expanded military operations in the Middle East, and an increase in terrorist attacks worldwide further weakened the global economy and contributed to an overall decrease in international travel • 2004 experienced a dramatic turnaround in international arrivals • The fastest-growing destinations in recent years have been outside the traditionally economically stronger continents of North America • Europe and Americas have lost tourism market share, Asia, the Pacific, and the Middle East have grown. • Explanations for the rapid growth include: • Robust economic growth • Relatively stable political environments • Relaxed visitation regulations • Ability to finance infrastructure development • Aggressive marketing efforts by national tourism organizations (NTOs) of host countries • Increase of tourism demand worldwide • Communities that are planning on developing tourist destinations and existing tourist destinations need to understand that competition among the destinations is fierce, travelers needs and wants constantly change, and tourism is susceptible to changes in the macro environment • Tourist destinations must thoroughly know their situation, local residents' attitudes toward tourism, the type and level of tourism products and services offered, their competitors, and the changing needs and wants of the current and prospective markets and their characteristics

What is proprietary research? What are the two categories?

* Proprietary Research • Proprietary research: research conducted on behalf of a particular organization for the particular use of that organization - as opposed to a general use • May be conducted by the organization itself or by an outside supplier (firm commissioned to do data collection) • Absolute rigor and control are necessary for the findings to have validity and reliability * Two broad categories of researching: qualitative and quantitative 1. Qualitative Research * Qualitative research: consists of "directional" information on consumer attitudes and behavior that is typically gathered from small samples of respondents • Explanatory in nature and findings cannot be generalized to a larger population with any degree of confidence • Purpose: to learn more about a subject, to understanding how consumers use a product, to test a new product concept, or to provide information for developing further quantitative research • Most common form is the focus group: consists of 8-10 people who represent the type of people expected to use the product. Brought together in a room where a skilled moderator leads the discussion. • Relationship moderator and group is important because a reluctant group will not provide thorough info • Audiotape or videotape focus groups; sit behind one-way mirror • Another common form is the personal interview. Constitutes a structured in which interviewer probes for specific comments and reactions * Pragmatic reasons for qualitative research • Can be executed quickly in a short period of time • Relatively economical • Environment can be tightly controlled • Permits direct contact with consumers • Permits greater depth by probing for responses • Permits customers to open up • Develops new creative ideas • Establishes consumer vocabulary • Uncovers basic consumer needs and attitudes • Establishes new product concepts • Interprets previously obtained quantitative data • Help develop survey items for a quantitative data * Major deficiency with qualitative research is that you cannot generalize from it • Best you can say is that this is what these particular people say • Help in providing some directional insights on consumers' attitudes and intentions • Helps to define problems and forms the basis for quantitative research to follow • Sometimes we think we understand the problem but really do not; we are unable to put ourselves in the consumer's perspective • Other times we simply don't know what the problem is • Qualitative probing uncovers some problems that otherwise would never reveal themselves 2. Quantitative Research * Quantitative research consists of information that is collected in such a manner that the corresponding conclusions may be "projected" to the entire population under study with a certain degree of confidence * Descriptive quantitative research tells us how many, how often, whether they like or dislike something, and the demography of the respondents. • Helps to determine whether any differences by gender or age grouping are likely to have occurred by chance • Does not tell us why these differences occur, nor does it identify the real reasons consumers behave as they do and make the decisions they make • Frequency of consumers' citing an attribute does not necessarily indicate its relative importance in the selection process, especially when subjects are allowed multiple responses • Allowing multiple responses on limited choice questions introduces a bias problem that is particularly common and diminishes validity * Inferential quantitative research: unlike descriptive quantitative research, allows us to generalize to a larger population based on the findings from a probability sample, in which each person in population being studied has an equal chance of being selected • Rarely feasible to survey everyone, we have to select a few people (sample) • Possible to draw conclusions about the population based on the sample, as long as the sample is representative of the population • Enable the multivariate analysis of interaction effects among the data collected, and this, in turn, assumes probability sampling • Multivariate analysis: each attribute interacts with the others. Analysis reveals relative weights - respective influence of each attribute in decision. This would reveal both the relative relationship of the various attributes and their predictive capability in decisions • Inferential date is far more powerful and useful than descriptive data • More complex, take more skill to obtain, require more computer analysis, and are more expensive both in collection and analysis • More susceptible to misinterpretation

Describe yield

* Yield: the ratio between actual and potential room revenue o Actual revenue: received from room sales o Potential revenue: what a hotel would have received if their rooms were sold at full price or rack rates o To be realistic, full price rates must be realistic. o Hotel will have any number of different rates, which must be taken into account o Hotels cannot ignore incremental F&B revenue, o Yield takes into account both occupancy and room rates.

What are the 7 ways to change price?

1. Change the quantity of money or goods and services to be paid by the buyer 2. Change the quantity of goods and services provided by the seller 3. Change the quality of goods and services provided by the seller 4. Change the premiums or discounts to be applied for quantity variations 5. Change the time and place of transfer of ownership 6. Change the time and place of payment 7. Change the acceptable form of payment

Describe 10 metrics of competitive intelligence

1. Market Share • In some areas, hotels exchange occupancy percentages and average rates • Firms such as Smith Travel Research, TravelCLICK, and the Daily Bench provide competitive information on a daily basis • Refusing to share this information or lying to each other is self-defeating • Market share figures: comparison figures of occupancy and restaurant covers • Used to compare actual market share with fair market share as a measure of ho well you are doing relative to the competition. • Fair market share: that amount of business you could expect if you received your proportional share of the total business conducted by the properties that comprise the competitive set • Compare only with properties in the same competitive set (those in the same product class competing for the same customers) • To calculate, divide your capacity by total capacity in the product class. This is the share you should should get if every competitor is performing equally well • Actual market share: divide your actual occupancy by total competitive set occupancy • May do this several time for various markets; management must be realistic about identifying the proper competitive set • Goal is for actual market share to exceed fair share; if it doesn't, reevaluate. 2. REVPAR • Revenue per available room = room revenue divided by the number of rooms available for sale or multiply the average daily rate by occupancy • Competitor can gain market share by reducing rates • REVPAR measures revenue generated per available room and essentially controls for pricing decisions • Most widely used in the industry • Accurately measures the balance of marketing efforts • Trends are more valuable than single day calculations 3. Yield Index • Yield index = property REVPAR divided by market REVPAR • Alternative: share of revenue divided by share of supply in the market • Index of greater than 1 indicates hotel is outperforming the market, whereas less than 1 indicates the hotel is underperforming 4. REVPOR • Revenue per occupied room includes all revenue attributed toe ach occupied room such as F&B, telephone and minibar, room service. • Less widely used, but gaining in popularity • Can look at the type of guest (market segment) to reveal who your most valuable customers are in terms of how much they spend in total • New idea is total revenue per available room, but has not come yet due to complications with guests paying cash and not charging to room, etc. 5. REVPAC • Revenue per available customer measures total yield per available customer, somewhat referring to the lifetime value of a customer • Requires advanced technology in a fully integrated system tying reservations to the PMS across all units of the company including all strategic business units • In a lesser form, REVPAC is used today primarily by resorts to measure total spending of the customer including golf, skiing, spa, tennis, etc. • Used in the casino industry, considering average bet, house advantage, length of playing time, and number of bets made 6. Internet REVPAR • Internet is becoming a more significant channel of distribution and source of business • Internet REVPAR = revenue generated by Internet sources (local website, brand website, third party sites) divided by the number of available rooms in the hotel • Calculation measured against competitive hotels 7. Purchased Data • More sophisticated operators use third party services to gain market share data and avoid possible antitrust violations • Smith Travel Research (STR) is the primary daily provider of this info in the U.S. • Other types of data include: TravelCLICK, which offers competitive data from GDS channels, and The Daily Bench, a firm based in UK, similar to STR. 8. Restaurant Comparisons • Revenue per square foot • Revenue per available seat • Two very new market share methods developed 9. Customer Satisfaction Index • Customer satisfaction index (CS): a weighted average of the importance and performance scores that are generated when conducting customer research • Only relevant if correct features are measured • The higher the CSI, the more the property meets customers' needs on an overall basis • Because it is weighted, influence of individual variables is minimized • Steps 1. For each attribute, multiply the importance score by the performance. Often calculated using averages. CSI must be calculated by customer segment 2. Sum the importance ratings for all features. Multiply this sum by the number of scale points. 3. Sum all resulting numbers. Multiply this sum by the number of scale points. 4. Calculate the CSI for each brand. 5. Interpretation: The higher the number, the greater the overall satisfaction. CSI is best used to compare one property against a multiple of other properties. 10. Perceptual Mapping • Perceptual maps: plot customers' perceptions of your property versus those of your competitors • May involve simple plotting or sophistical statistical methods known as multidimensional scaling or discriminant analysis • May be used to evaluate a single property or multiple properties • Determines what is important and their perceived performance • Virtually displays where management should be spending their money to better take care of the customer • Perceived price is equal to what is important • A second way to visually display how firm is doing is to plot both CSI scores and prices charged. Your hotel's CSI score and price is plotted in the center of the map. • Discriminant analysis enables the researcher to categorize the different perceptions • Net effect of this is to see how it is perceived, but also who represents true competition

What are the three pricing objectives?

1. Financial Objectives • Financial objectives are the most dominant, widespread, and enduring pricing objectives in the hospitality industry • Absolutely essential to success or even survival, the heavy emphasis on financial objectives tends to overwhelm all other considerations • It can lead to the inability to maximize potential or failure • Financial objectives take different forms, all of which are interrelated • Profit is the one that usually comes to mind first • Pricing for profit maximization: whether the emphasis is on gross profit or net profit * Problems with financial objectives • Firms tend to ignore many other considerations, especially the customer. • Built-in profit determination may be hard to achieve in the hospitality industry, as the relationship among cost, price, and profit is more indirect and vague. • Fixed costs exist regardless of if rooms/seats are not sold and they cannot be sold again later. • Higher the price, the greater the profit, if price has no effect on patronage. * High prices alone reduce volume in most cases. • After setting high rack rates, hotels discount to get volumes back at a lower price. • From a marketing point of view, something else occurs in the process - the hotel loses customers who are turned off by the high prices, don't know how to negotiate a discount, or don't like feeling that they are being taken advantage of. • Even in times of high demand, too high prices force man travelers to seek alternatives, such as OTA's • Customers won't come back and often tell others about the high prices • Pricing for profit maximization by maximizing prices ignores marketing forces * Other financial objectives in pricing are target return on investment (ROI), stabilization of prices and profit margins, and cash flow pricing (to maximize short-run sales in order to generate cash) • Each objective has its place in pricing and is necessary. • Problems arise when one of them becomes the sole pricing objective. 2. Volume Objectives • A second set of pricing objectives that take a number of forms • Prevalent in hotels because it's a highly volume-sensitive business • Fixed costs are high but variable costs per room are low • Once fixed costs have been surpassed, a small gain in volume supports a large increase in process. • Same with airlines • Restaurants are a price-sensitive business (a small increase in price supports a large increase in profit) and variable costs run high. • Lower variable costs provide hotels with ability to discount deeper to promote volume • Hotel restaurants are in the unique position of "paying no rent" * Volume objectives 1. Market share: major and commonly used measure of volume; percentage of units sold (e.g. occupancy) or dollar volume share of the total business that an individual business is able to obtain within a competitive group. • Market share has been shown in other industries to be a leading indicator of profit. • It also measures how well one is doing vis-a-vis the competition and also how well in terms of one's own fair share. • To increase market share, a property has to do something better than the competition (e.g. location, service, product, value, lower prices) • When hotels lower prices to increase market share, it forces everyone to lower prices, thus hurting all 2. Build business by increasing the customer base • Prices are usually lowered, either temporarily or in special promotions, to attract more customers with the hope that they will become permanent customers • May backfire if customers who take advantage of the promotion never return when they have to pay regular price 3. Increase occupancy or seat turnover • Increasing sales by lowering price • Higher occupancy or seat turnover helps to cover relatively fixed labor costs and overhead • For hotels, this can mean more customers in F&B outlets • Hotel management personnel is often judged on their occupancy ratios and often rewarded accordingly, so there was a high incentive to price with the objective of increasing occupancy • More frequently, hotel managers are awarded on their REVPAR 4. Contribution to fixed costs that is made by any incremental business, called a contribution margin • If variable costs are $3 and you sell it to $4, that's $1 to go toward contribution margin, whereas if you sold it for $8, you may get no sales • High fixed costs and volume sensitivity of hotels make this objective even more viable and are the reason for contracting with low-rated airline crews or other low-rated business in off-peak hours • Volume and profit objectives in pricing often go hand in hand, but this is not always the case. Volume objectives tend to be more long term oriented and toward building the customer base. 3. Customer Objectives • Customer objectives: influence of the customer in a favorable way • The marketing objective of pricing • Many ways pricing can do this because it is most visible part of the presentation mix * Customer objectives 1. Instill confidence in the customer by price stability • Rise of the Internet and other multiple channels of distribution made firms aware of the need for some price stability • We can also think of price stability in terms of: • Rate parity: the uniformity of retail rates across different channels of distribution that provide the same product • Rate integrity: the trust in the fair price of a hospitality product. Usually achieved when customers believe they would not find lower prices for a given product through other channels. (e.g. guaranteeing lowest fares) • Rate transparency: perfect knowledge of the price for a specific hospitality product, due to the customer's ability to shop for rates across channels. The concept of rate transparency is similar to the concept of perfect information in economic theory. • Rate cannibalization: a dilution in rates due to an increased rate transparency and a lack of rate parity. It occurs when customers shop the same product through different channels and book at the lowest rate encountered, even though they would have booked at higher rates. In other words, demand for higher price levels. Rate cannibalization causes a decrease in revenues without increasing demand. • Hotel companies have negotiated rates with corporations that remain constant for some period of time. Rates are usually based on the guarantee of a certain number of room nights during the same period. Allows corporations to better budget their travel expenses when they are confident of a stable price 2. "Inducement to try." • Restaurants run loss leaders: items which they take a loss or lower margin with hope of making up the profit on other items (e.g. individual and new menu items may be priced lower; weekend and off-peak packages) • Opening specials or price penetration: capturing as much of the mark as possible ASAP • Goal is to generate sales volume even at the expense of high margin • Does not mean prices are cheap, but low relative to normal price • Works well if: • A large share of the market are willing to change suppliers in response to the price differential • Customers only really look at price and not the other features that would make them ignore the low price offer • Price is not a trivial expenditure to customers • In most marketplaces, where there is greater supply, new demand is not created because a new hotel is opened. The idea is to get existing customers in competitors' hotels to try the new product. 3. Price skimming: prestige pricing; attempt to make property appear so special, new, and different that it is worth the higher price • Skimming the cream off the top, before the competition comes in and forces prices down • Can be profitable when a company introduces a new product into the market • Capture high margins at the expense of high sales volume • Works well when: • Customers are price insensitive • Customers place a high value on a product's differentiating attributes • There is value attached to prestige and exclusivity 4. Desensitize the customer to the price • Bundle items together and charge just one price (e.g. all-inclusive resorts and fixed price menus with one inclusive price - menu degustation or prix fixe) • A good price-value relationship; image enhancement 5. Two other customer objectives are worth mentioning • Use pricing to differentiate the product, usually with higher prices • Introduce or promote added services or facilities (e.g. concierge floors). Sometimes difficult to justify the price differences for these services in the formal product, other core elements, such as "prestige," may justify the cost to the buyer.

What are the steps in obtaining and using competitive intelligence?

A. Setting up the process (identify competitors, target, unique characteristics of customers, determine what specific info you'll need, sources of the data, develop research strategies and techniques) B. Collecting the raw data (determine performance record of competitors, the offerings of each competitors, and construct a profile of each competitor's marketing strategy) C. Evaluating and analyzing the data (where competitors are most vulnerable, predict any future strategies and tactics and evaluate the impact of those on the property) D. Drawing conclusions and using data (are the data reliable? Develop strategies and tactics to counter or lead to a competitive advantage)

What should be considered when analyzing your customer database?

• Analysis of the information contained in your existing customer database should be governed by three considerations: 1. The criterion unit under study (e.g. registrants or room nights) • Most use room nights because the distribution of room nights bears a specific relationship to the number of registrants over time • Classification of registrants to mutually exclusive market segments is critical to meaningful customer analysis 2. Mutually exclusive market segment classifications • All segments are defined with reference to two criteria: 1. The customer's primary reason for the trip (business or pleasure) 2. Whether the customer is traveling individually or part of a formal group for which the accommodations have been reserved by a third party • Four mutually exclusive lodging market segments: 1. Individual business travelers 2. Individual pleasure travelers • Subsegments: weekend package guests, honeymooners, golfers 3. Group business travelers • Subsegments: corporate meeting planners, association meeting planners 4. Group pleasure travelers • Must establish appropriate criteria for identification of individual market segments because "purchaser" may not be the "consumer" 3. The media markets from which the customers originate • Cannot make decisions based solely on aggregate distribution of room nights by origin market without delving further into individual market segment analysis • Difference in the markets from which "registrants" and "reservations" originate; especially true for commercial hotels that enjoy a significant volume of business from "local" referrals, typically the case for city center commercial hotels • Define geographic boundaries of origin markets with respect to media coverage, not political boundaries • Designated market area (DMA), tracked by Nielson Media Research, is the geographic area within which the majority of households consume media that emanate from a central source • Each DMA has specific zip code correlates, which change over time to reflect population migration patterns and changes in media coverage • Currently 210 DMAs in the US • Frequency distributions and cross tabulations should provide most info • May also evaluate relationship between variables (multivariate analysis) * Analyze database to reveal trends: • Over time (monthly and quarterly) • By market segment (individual vs. group) • By media market • By any relevant combination of attributes that would sharpen the focus of future product development and marketing communication strategy * Acquisition of comprehensive info of demography, travel habits, and media habits entails direct customer contact and surveys that obtain representative data • Comment cards is typically skewed to reflect an extreme • Survey instrument should capture relevant info on the following: • Demography (age, income, household size, marital status, education) • Behavioral information • Product evaluations where appropriate • Travel habits • Media habits • Distribution should be random or systematic • A modest incentive may be required, but should have little effect on survey results • May have to conduct parallel survey of nonrespondents

What are NTOs and what is its role?

• At the national level, governments promote their countries in the international tourism market through national tourism organizations (NTOs) • In some countries (Mexico and Canada), the status of the NTO has been elevated to cabinet level. * Promote their countries through the following: • Publicity campaigns • Research • Plans for destinations • NTOs spend much more on their tourism marketing budget than at any other time • Publicize a country as a destination, through outlets in major source countries, to create public awareness and to promote positive images * United States Travel and Tourism Administration (USTTA) • Function under the Department of Commerce, as the NTO until 1996 • Funding was cut, leaving the U.S. as the only major country without a federally funded NTO • The Travel Industry Association of America (TIA) established in 1941 as a consortium of industry trade organizations and private companies, has attempted to fill this gap by promoting and facilitating increased travel to and within the United States • In 2005, TIA teamed up with the Travel Business Roundtable to further strengthen its influence with government lawmakers and to promote travel-friendly regulation in the United States * Historically, principal marketing roles of NTOs have been fairly narrow in scope—creating and communicating overall appealing destination images and messages to the target market • NTO functions are changing as today's industry becomes more competitive and tourists are more sophisticated in their destination choice behavior • Importance of collaboration between the public and private sectors * Marketing activities of an NTO are centered on the promotion of the country as a whole • Subsets are common • States, provinces, regions, areas, cities, and other small parts of a country participate in similar activities to promote their unique destinations * NTOs also play a facilitation role that typically includes the following: • Collecting, analyzing, and decimating market research data • Establishing a representation in the markets of origin • Participating in trade shows • Organizing and coordinating familiarization trips • Supporting the private sector in the production and distribution of literature * Important characteristics that relate to the volume of travel and associated spending (in terms of pleasure travel market potential of various countries): • Total number of potential travelers • Incidence rate of long-haul adult pleasure travelers • Actual number of visitors • Potential for more visitors • Potential for additional market penetration • Current receipts from pleasure travelers • Per capita pleasure traveler receipts • Total potential receipts • Potential for additional pleasure travel receipts * A growing economy is one of the strongest indicators of tourism growth • China, India, Russia, and Poland • Affluent populations with growing middle-class segments that have the resources for international travel • Traditional U.S. markets—the UK and Japan • Nevada is now the only state tourism office in China, putting it in a unique position

What are contrary needs?

• Contrary needs: things they do not want; needs that are not being satisfied (e.g. standing in line, waiting too long, hearing housekeepers yell

Describe business travelers

• Business traveler market segment is the largest major segment, but is also considered the least price-sensitive market available • Business traveler: a customer who is using the product because of a need to conduct business in a particular destination area • Purposes: company-related business, consulting, sales trips, personal business, and trips required to fulfill managerial functions • Although the hotel facility or restaurant may be used, the facility is not the sole reason for the buy • Typically spend between two and three nights away from home on each trip • The business traveler group contains the greatest "demanders" as they would rather be home, may have had a bad flight or business dealing, they are quickly in and out, and want everything to go like clockwork * Business Traveler Needs • First, business travelers consider location, and many hotels emphasize it in their ads • Many hotels try to circumvent the location by emphasizing other amenities • Second, business travelers look at rate ranges impacted by any company mandates or personal limitations • A determination by product class (upscale, middle tier, or budget) • Price is rarely an important factor because it is a decision made by the company • Price is a factor only relative to what is available. If the product class desired is middle tier and the only other available choice is upscale, then price may be the single most important factor in the decision • Most hotels have corporate rates • Not necessarily the lowest rates, but often are better rooms, better furnished for the business traveler at a discount from the rack rate • Some are on concierge floors with special services, a lounge, and complimentary continental breakfast are available • Business traveler will pay more for less hassle • Corporate rates may apply to specific corporations that book so many room nights a year, either at a particular hotel or any hotel of a chain • Understand the role of price - its role lies in designating a price range • Once that price range is determined, price is a minor factor unless, the same or better value can be found at a lower price. • Cleanliness is almost never given as a reason for choosing a particular hotel, but it is important when they get there. • What they want to know is the reputation of the hotel or the chain; this comes from personal experiences or from conversations with others • Each hotel should research service aspects because these will often be the determining factors in choosing among competitors in similar locations at similar rates • Most of these will be based on reputation and previous experience • If these are unknown, the first two items, general location and price, will prevail • Service aspects • Will they have what I ordered and have it on time? • Includes: floor level, exposure, bedroom configuration, type of bed, working space, telephone location, lighting • Other concerns: check-in lines, employee attitudes, deferential treatment, lighting, skirt hangers, mirrors, security, type of clientele, coffee makers, business services, noise (some business travelers avoid convention, atrium-lobby hotels and prefer more boutique, smaller properties), operational efficiency, hotel "rules," limousine service to the airport, etc. • Business travelers do not consider bathroom amenities, shoepolishers, bathrobes, turn-down service, chocolates on pillow, unless expected • They expect certain amenities, such as a decent size bar of soap. • Concerned with how the shower works • Superfluous amenities have become a cost they can no longer afford at the prices travelers are willing to pay • Provide amenities only when really needed • Most business travelers visiting cities do not consider hotels' restaurants as a determinant factor, because there are numerous alternatives available * Dealing with the Business Segment • If a hotel is significantly higher or lower in price than its competition, a choice may be made on price, but this alone is not the answer • Know the appropriate price range for existing market conditions. • Often conflict between local sales department and corporate office of hotel chains • September 11 caused a huge decrease in the amount of travelers, but eventually business travel increased as the public regained its trust in air travel, and the luxury hotels slowly regained the patronage of business travelers • If a hotel is providing what the customers want at a reasonable price, then market share will be obtained • Restaurants need to adjust menus and prices with more creativity to charge lower prices, create greater value perception, or both. • Must truly understand the needs, wants, and problems of this market. Cannot win it through giveaways and gimmicks. • The business traveler segment is not homogenous • All want convenience of location and cleanliness • Some wants service, some want price, etc. • Separating the business travels based on their wants is the essence of target marketing

Describe psychographic segmentation. What are some psychographic segmentation methods? What are the advantages and disadvantages?

• Psychographic segments are segments based on activities, interests, and opinions (AI), self-concepts, and lifestyle behaviors • AIOs are personality traits • Psychographic means "the measurement of personality traits" • Lifestyle as used in lifestyle segmentation measures people's activities in terms of: • How they spend their time (e.g. work, hobbies, social events, vacation, entertainment, clubs, community, shopping sports) • Their interests, what they place importance on in their immediate surroundings (e.g. family, home, job, community, recreation, fashion, food, media, achievements) • Their opinions in terms of their view of themselves and the world around them (eg. Social issues, politics, business, economics, education, products, future, culture) • Demographic/geographic (e.g. stage in life cycle, income, education, where they live) • Lifestyle patterns combine the virtues of demographics with the way people live, think, and behave in their everyday lives • Attempt to correlate these factors into relatively homogeneous categories using descriptive classification terms (e.g. socialites, homebodies) • Classifications are then correlated with product usage, desired product attributes, and media readership and viewing • Psychographic segmentation methods: 1. VALS system have proven to be effective tools for categorizing American, Japanese, and British consumers into various segments based on psychological characteristics and four key demographics • U.S. system categorizes American customers into eight segments using dimensions of primary motivation (ideals, achievement, and self-expression) and level of resources (high or low) • Ideals: thinkers (high) and believers (low) • Achievement: achievers (high) and strivers (low) • Self-expression: experiencers (high) and makers (low) • High resources: high innovation (innovators); low resources: low innovation (survivors) • Customers are thought to be driven to buy products and services by those three main motivations: ideals, achievement, and self-expression • Customers who are motivated by ideals are guided by knowledge and principles • Customers motivated by achievement look for products/services that demonstrate success to their peers • Customers motivated by self-expression seek social and physical activity, variety, and risk. • Resources include education, income, health, eagerness to buy, energy level, and self-confidence 2. Cohorts is another company that provides psychographic segmentation • Cohorts' database is broken into 31 segments using first names to make segments more real • Behavioral data categories include: retail shopping behavior, radio and TV behavior, credit cards used, travel behavior, cable networks watched, sports watched on TV, telephone services used, newspaper sections read, attitudes and opinions 3. PRIZM NE: Potential Rating Index Zip Code Markets • People choose to live near people who are similar to themselves • Best place to find new customers is in the same zip code as their current customers • There are 66 zip code clusters in the U.S. • Assumption about psychographic segmentation techniques is that product attributes can be tailored to psychographic segments and that the product will thus have special appeal to those segments • Greatest proponents and users are advertising agencies, use strategies to communicate via lifestyle factors • Lifestyle research reveal the type and appearance of the characters, the music, the tone, self-perceived roles, and the rewards people seek * Problems with psychographics 1. Concern about whether these variables can be defined, are valid, and are stable 2. Lifestyle variables are difficult to define and overlap greatly 3. There is considerable room for error variance in establishing the classifications 4. People change rapidly in today's society - today's lifestyle may not be tomorrow's • Psychographic research can tell us a great deal about what the customer wants and how to build and market to those wants

What are the various methods of usage segmentation?

• Usage segmentation: a broad umbrella that covers a wide range of categories that apply more specifically to hospitality than any other type • We accept these categories as givens, but some are not always well used in market segmentation • Basic question: how do customers use the product or service? * Purpose • Purpose of a purchase is a common segment category • Major categories: • Business purpose can be broken down into submarkets such as conventions, corporate meetings, expense account, non-expense-account, and so forth • Subcategories are important because each one has different needs/wants • Social, pleasure, or leisure (nonbusiness or personal) • Represents a larger proportion for restaurants than hotels * Frequency • Regularity of usage • Repeat business is highly desirable and frequent traveler plans are geared toward this • Subsegments: high frequency vs. low frequency • Low frequency can be important especially if it occurs with regularity (birthdays) * Monetary Value • How much the customer is worth to the organization • In casinos, "theoretical value" takes into account the length of time a person plays a game and the amount being bet for each decision - "big spenders" or "whales" • Also consider low spenders who may not be desirable customers * Recency • Recency refers to how recently the customer consumed the product or service • Used quite often in direct mail promotions (reminder marketing) * RFM: Recency, frequency, and monetary • Used to identify groups of customers in the database • Database is sorted by each specific measure • Database is divided into five equal parts labeled 5 to 1 • Use RFM score to direct targeted mailings • Person with 555 score would get a different offer than a person with 333 * Timing • Timing deals with days, months, or seasonal periods of the calendar (or even time of day depending on which business) • Also can be based on when the customer buys (may book years ina dvance) * Nature of Purchase • Convenience: buy a particular product because its convenient to do so (e.g. room service, in-room refrigerator bars) • Impulse: buy products on impulse without much forethought (e.g. menu clip-ons, wine cards, dessert suggestions, higher-priced room with a view) • Rational: buy only careful consideration (descriptions on wine lists, in-room collateral, ads and brochures with information) * Where They Go • May go to certain destinations on a regular basis • Some might always go someplace different * Purchase Occasion • Represents special occasion segments (e.g. birthdays, anniversaries) • May use hotels only for visiting relatives or when going to the theatre • May take a trip to go site-seeing, others just want to relax * Heavy, Medium, and Light Users • 80% of purchases are made by 20% of those who consume the product or service • Pay special attention to separating these categories • Marketing research needs to pay attention to separating these categories • Changes made to please heavy users, might alienate light users • Heavy concentration in marketing circles on the heavy user • Advisable, but should not distract from the light user, who still make up 20% • RFM analysis is a method of classifying usage • Can suggest even more user segments than those mentioned. Each of these segments has some different needs and wants. Catering to the different special needs and wants is what creates and keeps customers. • To maximize its potential, hotels cannot treat all people the same • User segments have an advantage over geographic, demographic, and psychographic • Because of their nature and narrowness, they are more predictable • If we know what influences them, they can be influenced.

What are the 7 types of environments that should be concerned in marketing a destination?

• Before a destination can begin to formulate a marketing strategy, management must understand the external environment to identify possible opportunities and threats • Managers must be aware of major environmental factors likely to affect the industry, the destination, and current and future markets to consider their possible impact on marketing • Must be ready to respond quickly and intelligently to new events and trends 1. Macro Environment • Destination manager must understand the broad macro environmental trends that may affect their ability to attract visitors to their destinations and the potential market worth of their products and services • Consists of several major forces including demographic, economic, natural, technological, political/legal, social/cultural, and competitive forces • Organization has limited or no control over these forces, so they must monitor and respond to these forces • Managers should engage in environmental scanning by monitoring for weak as well as strong environmental signals • Managers should be able to identify the factors in each environment that are likely to influence the way they run their business, their ability to attract visitors, and the potential market worth of services and products offered in the destination in the future • Brief review of major forces such as market acceptance, social perceptions, saturation levels, consumer trends, economic changes, competitive activity, or technology advancements 2. Economic Environment • Consumption patterns in international tourism, including total visitor volume, are largely dependent on the economic conditions in the market of the countries or regions in which prospective visitors live • Developed and growing economies sustain large numbers of trips away from home for business purposes of all kinds (e.g.. meetings, conferences and trade shows, government business) • Influence of economic conditions is more obvious in leisure travel, where, in many counties with advanced and developed economies, average disposable income per capita has grown to a size large enough to enable a majority of the population to take vacation trips in foreign language • Expanding middle class has the means and desire to travel, making an impact on destinations world wide • Economic growth in newly industrialized countries also makes it possible for these countries to fund infrastructure development, thus increasing their capacity to accommodate international tourists • China will replace US as the largest originator of world tourists. Russian outbound tourism has increased. • Expenditures of international travelers can have a tremendous effect on host country economies • Impact is not limited to direct traveler spending • The "multiplier effect," whereby a tourist dollar is spent and respent throughout the economy, plays an important role in measuring tourism's contribution to GDP 3. Technological Environment • Technology and travel are natural partners • The rapid growth of travel and tourism has been fostered by technological developments - principally in air transport through the development and refinement of the jet engine, more sophisticated aircraft design, and improved infrastructure that permits more landings and takeoffs per hour and better control of planes in the sky • Wide use of computer technology has facilitated another leap forward by the travel industry • Computer software has been designed to cover a wide range of activities undertaken by the travel trade (e.g. information retrieval, reservations, ticketing, invoicing, etc.) • The advent of the Internet and the World Wide Web has further fueled growth in international travel by making distribution channels directly and quickly accessible to the consumer. • Destination marketers are able to tap into these sophisticated technologies, enabling international travelers to "experience" the destination via virtual tours, interactive discussions, and even live webcams. 4. Political/Legal Environment • Government interest in tourism has stemmed primarily from its economic significance, particularly employment earnings and tax potential • Tourism demand is also largely influenced by legislative actions at various levels of government and intergovernment agencies (e.g., the World Tourism Organization [UNWTO] and the International Air Transport Association [IATA]). • International politics also play a significant role in the volume of travel and tourism (e.g. September 11) • Air-transport industry was liberalized in most tourist-generating countries in the 1980s • The deregulation of the airline industry in North America generated a significant increase in intercontinental flights, which positively contributed to the growth of world tourism • Adoption of "open sky" policy in Asian countries resulted in a substantial increase in air traffic within Asia and fostered the introduction of new carriers. • Advent of low-cost carriers in Europe have contributed to the increase in tourism • Relaxed travel restrictions and increasing leisure time and income of residents in newly industrialized countries contributed significantly to a growth of tourism within and from Asia • With rapid economic growth and an increase in consumer disposable income, the concept of leisure travel became widespread in these countries, and their governments gradually lifted overseas travel bans • Examples: passport restrictions, limiting overseas travels, Chinese government increasing number of "approved" countries 5. Sociocultural Environment • Involves the beliefs, values, attitudes, opinions, and lifestyles of those in the market environment, as developed from their cultural, ecological, demographic, religious, educational, and ethnic conditioning • Key element in the tourism marketing process is the significant demographic shifts affecting the population, particularly in selecting target markets (e.g. baby boomers, mature travelers) • As social attitudes change, so too do the leisure patterns of consumers (e.g. ecotourism) 6. Ecological Environment • Growing awareness of planet Earth's finite resources and the impact of travel on a destination's ecology have spurred new consciousness on the part of some international travelers and host communities • Host governments of popular tourism destinations have taken steps to manage the carrying capacities of these destinations • Measures such as limiting the number of tour operators and increasing visitor fees will minimize the ecological impact of tourism 7. Demographic Environment • Demographic change is a constant process • Seen as one of the important drivers for new trends in consumer behavior • Global demographic trends are likely to have far-reaching consequences for the future of destinations • One of the major demographic trends that is likely to have a significant impact on tourism and the future of destinations is the rapidly aging population of the developed world (e.g. baby boomers) • Baby boomers are at the peaks of their career and possess the highest earning power of their lives, resulting in the highest level of discretionary income • People do not change their travel behavior just because they turn 60 or 65 or because they retire. They will stick to the travel patterns acquired until the middle of their lives. • Effects of demographic change (more and bigger share of older people) and consumer behavior patterns (sticking to learned travel patterns) • Cultural and heritage increases through middle age, peaks between 45 and 65, and falls off. Bet target market for health, spa, and keeping fit. Have older children and want to expose them to enriching educational experiences • Shrinking population of the developed world as a result of lower fertility rates in many industrial countries combined with dissolution of traditional family patterns • Destinations must develop products and marketing strategies that will attract visitors from developing countries • Rising education levels • Results in consumers with unprecedented sophistication and depth • Must develop products that can satisfy sophisticated needs and wants • Increasing economic role of women worldwide • Women are working, earning more money, controlling more discretionary income • Women typically make the decisions regarding the educational experiences of their children and set vacation plans • Account for a large majority of bus tour passengers, trip planners, and elementary schoolteachers who make decisions on field trip destinations for their students • Account for 60-65% of museum attendance • More likely to support and participate in heritage and cultural activities • As more women move into positions of power and influence, funding for these interests will tend to increase • Tourism will have the largest, wealthiest, & best-educated market for the next 20 years

What are the 8 components of value?

• Role of management is to increase the perceptions of price value so consumers will be willing to spend more money • Accomplish this by focusing on one or more of the six components of value • Financial (e.g. save money on future transactions, reimbursement, discount) • Temporal (e.g. saving time by priority check-in) • Functional (e.g. availability of check cashing) • Experiential (e.g. active participation in the service • Emotional (e.g.. more recognition) • Social (e.g. interpersonal link with service provider) • Trust (e.g. organization does what it says it will) • Identification with the organization (e.g. affinity with a sports team) 1. Financial Value • More price sensitive customers are, the more difficult it will be for the firm to get them to pay more for the product or service • Role of the firms is to make customers less price sensitive * Factors that impact financial value * Perceived Substitute Effect: Buyers are more price sensitive the higher the product's price relative to prices of perceived substitutes * Unique Value Effect: Buyers are less sensitive to a product's price the more they value any unique attributes that differentiate the offering from competing products * Switching Cost Effect: The greater the product-specific investment that a buyer must make to switch suppliers, the less price sensitive that buyer is (e.g. loyalty programs) * Difficult Comparison Effect: Buyers are less price sensitive to the price of a known or reputable supplier when they have difficulty comparing alternatives * Price Quality Effect: Buyers are less sensitive to a product's price to the extent that a higher price signals better quality * Expenditure Effect: Buyers are more price sensitive when the expenditure is larger, either in dollar terms or as a percentage of household income * End-Benefit Effect: This is broken into two parts: • Derived demand (the relationship between the desired end benefit and the buyer's price sensitivity for something that contributes to achieving that benefit) (e.g. asking why guests are staying at a hotel) • Share of total cost (the cost specific item to the total cost of the product) (e.g. hoteliers used to believe business travel was inelastic) • Fairness effect: Based on the price previously paid, prices of similar products (includes location or situation), and if item is to avoid a loss versus achieve a gain 2. Temporal Value • Business travelers consider their time to be worth $150 per hour • Customers seem to have less and less time 3. Functional Value • Pertains to the belief that the product or service does what it is designed to do • Main components of functional value are the RATER system (reliability, assurance, tangibility, empathy, and responsiveness) • Ensure every interaction with customers includes one or more of these components to convey to customers that they are receiving quality • Customers' perceived quality is a result of customer experiences; so they need to be managed by the organization • Bad service may change a "fair" objective price to an "unfair" perceived price • If product or service does what it was designed to do, customer will pay more 4. Experiential Value • Experiential value occurs when guests are active participants in the service as compared to passive observers. • "Being in the heart of the action" (chef's table in the kitchen) 5. Emotional Value • Pertains to customers' need to be considered special; cater to needs • Extensive use of database systems to keep track of customers' needs and wants 6. Social Value • Most customers like to celebrate special occasions with friends and family • Consumers dine out to celebrate the following: birthdays, Mother's Day, Father's Day, Valentine's Day, New Year's Eve, Easter • Vacation same week every year to spend time with friends they met previously • Spend time with family and friends spend more money 7. Trust • Major antecedent of loyalty • Customers who are loyal to an organization are willing to pay more to stay with them • Services are intangible and one cannot evaluate the service prior to purchase, customers pay more to purchase services from firms they trust and know to be reliable 8. Identification with the Organization • The final component of value occurs when customers identify so strongly that price is removed from the equation • An example of this affiliation is relationship customers have with favorite sports team • Firms can increase customers' feelings of affiliation by incorporating any of the following tactics in their marketing plans: • Providing opportunities for public displays of association, such as logo apparel and sponsorship of community activities • Actively aligning with and supporting social causes • Providing opportunities for contact by creating a dialogue with customers through direct mail and e-mail • Having distinctive human resources policies (i.e. Starbucks)

What are attitudes? What role do they play in marketing?

* Attitudes: the affective component of the belief, attitude, intention trilogy that customers often follow • Affective: the subjective and emotional feelings toward the belief • Attitudes are tendencies to respond toward beliefs. This is the application of our beliefs; how we judge our beliefs and how we react to them. • Example: expensive restaurant. Belief might be that it's "too expensive." We must change attitude and affect. We must persuade people that the restaurant is expensive, but worth the price. If we succeed, we will have changed consumers' attitude towards the restaurant, while maintaining the same belief. • Cannot measure beliefs and ignore attitudes (e.g. People believed new Coke was better, but attitude toward change was negative)

What are beliefs? What role do they play in marketing?

* Beliefs: things we actually think are fact; they derive from perceptions • We attach a belief to an object (restaurant is expensive) • Beliefs are cognitive; they exist in the mind regardless of where/whom they come * Sometimes marketers want to change or create beliefs • Solution lies in the definition of their target market. What are their beliefs? When we learn this, we decide whether we want to change their beliefs • People change their beliefs frequently without any effort on the part of marketers or maybe because of lack of effort • Creating beliefs is much easier tan changing them, because essentially what exists already is a vacuum and all we have to do is fill it. • We must get rid of the old belief and replace it with a new one • Problem sometimes isn't attitudes, its beliefs (attitude is against dirty restaurants, but must change the belief that the restaurant is dirty)

Describe veblen effects

* Conspicuous consumption: human tendency to use purchasing as a way of raising social status • Modem corporation creates customer desires with advertising and needless brand proliferation • Materialistic race no one can win • Growth in customer spending as a sign of rising living standards * Viewing consumption as status seeking has considerable implications • Potential advantages to maintaining high hotel rates and restaurant prices and lowering them would be counterproductive • What looks conspicuous to one person may be a good value to another

Describe demand analysis. What are some demand pricing considerations?

* Demand analysis: asking whether there is a market sufficient in size that is willing and able to buy this product • Able to buy: have the means to buy • Willing to buy: have the means and the desire * If there is not sufficient market willingness and ability to buy, the product is doomed to fail. What is the market acceptance level of price? • Many don't find the answer until after the product has been marketed * Demand or price elasticity • High elasticity means the higher the price, the lower the demand, and vice versa. • Concept must be applied to the appropriate target market • Especially when there are numerous alternatives. Alternative options increase the elasticity of the product. * Demand pricing considerations • Usage: How is the product used? What are the users lifestyles? Is it the main usage in this area or an alternative? Are there different target markets? • Alternatives: What are the competitive options? What are nonprice alternatives such as staying with friends or staying home? • Demand generators: Where are demand generators? How much do they generate? • Demand satisfaction: Is there unfulfilled demand or is the market saturated? Are the available product/service mixes appropriate? How many customers are in the market? Do demand differentials reflect differential costs? • Economic conditions: How are economic conditions? Is promotional and discount pricing in vogue? • Other questions: Are there special events/groups you can win? What portions of the year show opportunity? Does rate and mix strategy make sense given how the year looks? Does the information gathered suggest room nights in each segment will be up? Are there sources of business entering/leaving the market?

How can differentiation be used as a marketing tool?

* Differentiation of Intangibles • Differentiation in traditional marketing centers largely on "tangibilizing the intangible" * Differentiation as a Marketing Tool • Differentiation helps to create awareness and trial by the customer • Differentiating factors are both tangible and intangible • Sometimes the only thing we can do to compete is to differentiate the product. • It is a world of limited opportunities, when the product approaches commodity status, and differentiation may occur only in marketing • If differential advantage is lost, cost may still remain high • Go back to focusing on the customer and what they want • Food service establishments actually have greater opportunity to differentiate their product as it is much easier to be creative, economically, with a menu and décor in a restaurant • Hotel management needs to differentiate restaurants and develop more creative concepts • If a hotel restaurant is going to compete with a free-standing restaurant, management has to think, look, and act like its freestanding competition • Examples: "fast-break bars," lounges, bars * Differentiation - of Anything • Goods manufacturers seek competitive differences through features that may be seen and measured or sometimes just implied • Product differentiation may be defined as any perceived difference in a product when compared with competitive products • Marketer seeks differentiation whether perceived or real • Differentiation may be product specific, message specific, and even brand specific • Brand specific is difficult to achieve because of the heterogeneity of services, but that makes it even more desirable for chain operations • To attract a customer, you are asking him to do something different from what he would have done in the absence of the programs you direct at him. He has to change his minds and actions. The customer must shift his behavior in the direction advocated by the seller. Know what drives and attracts customers. Know how customers differ from one another and how to cluster them into meaningful segments. • Differentiation also separates product classes • Within product class, differentiation separates the competition • In traditional marketing, differentiation is essentially a promotional or advertising strategy that attempts to control demand • In nontraditional marketing, it is an internal strategy that attempts to create demand • Best differentiation may be in marketing itself, such as relationship marketing • Differentiation provides an opportunity to strengthen competitive strategy and it forms the basis of positioning strategy

What are the essential rules of revenue management for hotels? What are some revenue management practices?

* Essential rules of revenue management for hotels: • Set the most effective pricing structure • Limit the number of reservations accepted for any given night or room type, based on profit potential • Negotiate volume discounts with groups • Match market segments with room type and price needs • Enable reservations agents to be effective sales agents rather than merely order takers • Provide reasons for lower rates, such as advance purchase time, payment in advance, nonrefundability, length of stay, and so on, for a variety of market segments. Put the trade-off decision in the hands of the customer. Called "fences." • Be consistent across central reservation system (CRS), property reservationists, travel agents, and other intermediaries so that quoted rates are the same. Rate parity. * Inventory "nesting": high value rates are never closed for sale when lower value rates are available. Any rooms allocated to lower rates can also be sold at higher prices; if you know how to bargain, you win; if you don't, you get suck. * "Continuous nesting": instead of allocating a certain number of rooms to each rate program, a minimum rate for acceptance is established • Each reservation request is compared to the minimum rate, called the hurdle rate; any request below the hurdle rate is rejected. A hurdle rate is set for each future date by room category. • Total price for a multiday stay is compared to the sum of the hurdle rates across those days. If the total price does not exceed the sum of the hurdle rates, it is rejected. • All this leads to a variety of acceptances and rejections of room requests by various segments. The length of stay and the rates they are willing to pay are useful facts in accepting or rejecting a discounted group booking. * Marketing approach needs to be employed in conjunction with revenue management. • An operations approach to revenue management would be to offer the same room at different rates to the customer depending on what the market will bear. • Should be set up to offer different categories of rooms for different prices. A hotel has an opportunity to create many different types of guest rooms, some more desirable than others. Open and close categories of rooms, giving the customer greater value for higher pricing.

Describe feasibility studies

* Feasibility studies evaluates the belief in a quantitative manner to prove that it is viable o Someone already believes there is an opportunity and wants to verify whether an opportunity exists o Measurement of market potential or feasibility offers knowledge of market size, market growth, market segments, profitability, demand and types of buying decisions, and chance. * Should ask the questions: o Is there a market for this property in this location? Where is it? How large is it? What are its needs? o How is the market currently served by the competition o What market share can be captured? At what rate? At what REVPAR? At what cost? o Will customers use our property? * Feasibility studies focus on the proposed financial performance of a proposed business and rely on an evaluation of marketing opportunities and competitive analysis o Studying customers or consumer groups and how they will respond to a given offering o Are there customers who are ready, willing, and able to buy? * Marketing opportunity depends on the customer's responsiveness. * Purpose of market feasibility study is to evaluate the opportunity to attract customers who are willing to pay a specific price over a sustained period of time o This is the hard part o The easier part follows as you evaluate the financial opportunity: estimate revenue, subtract cost, predict net and cash flow, and determine whether the project is "feasible" * A true market feasibility study depends totally on the predispositions and behaviors of customers, whether they will come and what they will be. o Real opportunities depend on the ability to create paying customers

What is the purpose of environmental scanning?

* Forecast the future in order to anticipate changes such as: • Consumer behavior • Distribution systems • Product and brand preferences • Evolving preferences for specific product and service features • Typically conducted over multiple points in time and the results are reviewed to assess emerging shifts in customer preferences or buying behavior • Environmental scanning information is published by a number of national trade organizations in the US, including the TIAA, the NRA, and the American Resort Development Association. Private sector firms such as Ernst & Young; PricewaterhouseCoopers; and Yessawich, Pepperdine, Browne & Russell

Describe the search process

* Once customers have identified their problem, they begin the search for a solution • They may search their memories, ask others, look in the newspaper or telephone directory, search the web, etc. to find new information. • This may happen in a few seconds or a year • They may give the task to someone else * Once the problem has been recognized, marketing can begin to take an active role • Where customers go for information, what they read or hear there, whether the information was already in their memory * Problem may arise through identification • Customers are unaware that they have a problem until it is presented to them and identified for them (e.g. an ad for a nice quiet restaurant) • Wants and problem have been identified for them • Marketing has not created a need - that was already there. Marketing has created a want and caused a problem that needs a solution. * Process may be totally subconscious or parts of it may be skipped * Process could end in a decision not to purchase * If marketers want to affect the process at this stage, they must be aware of the complexities of the decision and the influences that will modify it.

What is the purpose of competitive advantage? How can barriers be raised? What are the components of a competitive intelligence?

* Purpose of competitive intelligence is to use it to your best advantage o If you are behind, you must overcome barriers to seek and increase competitive advantage o If you are ahead, you must erect barriers to stay ahead and sustain and increase competitive advantage * Barriers may be raised on: o Size of the targeted market, better access to resources or customers, and limitations on what competitors can do (e.g. scale economies, technology); helps explain the consolidation stage we're in o Cost differentials or on price and service differentials o National advertising o Wide product line, large sales and service forces, and systems capabilities (effective against smaller competitors who are attempting to overcome the leader but have less volume to spread the costs) o Successful barriers return higher margins if it sustainable and unreachable by the competition (costs competition more to overcome it than it costs the firm to defend it) o These reasons are why companies grow larger and develop sustainable advantages as they do so * Components of a competitive analysis o What drives the competitor: future goals at all levels of management and in multiple dimensions o What the competitor is doing and can do: current strategy (how the business is currently competing) o Assumptions: held about itself and the industry o Capabilities: both strengths and weaknesses • Many hospitality customers make their choices based on the individual properties rather than entirely on chains

When does sustainable competitive advantage happen?

* Sustainable competitive advantage happens only when: 1. Customers perceive a consistent difference in important attributes between one firm or property and its competition 2. The difference is the result of a capability gap between the firm and its competitors 3. Both the difference in important attributes and the capability gap can endure over time * Essence of opportunity is beating the competition. o Competitive objective is to find the most vulnerable position that, if broken, would eliminate a competitive barrier or one that would enable you to erect the best defense barrier. o Find what makes competition vulnerable and attack it. This may be in the product line, in positioning, in value, in segmentation and target markets, in capacity, in resources, in cost disadvantages, in product differentiation, in customer loyalty, or in distribution channels. o Avoid strengths until you are strong enough and have the resources to challenge them with meaningful differentiation

What does a good marketing information system encompass? How can you design one?

* The first steps in developing a marketing information system are to define the goals and critical success factors of the particular organization, then identify the information needed to make the decisions to reach those goals • Think about the critical factors affecting the business. Determine what information is needed to reach the desired goals and determine the method for collecting that information * A good information system should encompass the following: • The information provided should satisfy user needs • The information must be accurate and objective • The information must be summarized to be relevant and to be reduced in volume. One way to do this is to report variance from forecast or exception from expectation, rather than a massive set of all-inclusive data • The information must flow quickly and smoothly within the organization and be routed only to those to whom it is pertinent • The system must be flexible and capable of being changed as critical factors change * Seven-step program for accomplishing this: 1. Establish a project team and steering committee. In a small organization this could be one person 2. Document business plans and goals 3. Define the critical success factors of the business 4. Analyze the information that will be necessary to bring about and measure the critical success factors 5. Define the system necessary to provide those information needs 6. Install the system to be efficient and effective 7. Monitor the system and its fulfillment and performance and update as needs require

Describe pleasure travelers

* The leisure market is composed of travelers that individually, in couples, in families, or in small groups visit a hotel or restaurant for nonbusiness purposes • They may be traveling on vacation, but often are not • Many are weekend or package users • Others travel to cities for shopping, visiting friends, going to the theater, "just for a change," personal business, etc. * Increasingly, many pleasure travelers and business travelers are becoming the same • Businesspeople often spend extra time in a business destination to see the sights of a destination or to relax • The same individual has different needs at different times * In the restaurant business, there is a very large market of those who eat out just for pleasure • This is a powerful segment with many diverse needs and wants • More relaxed and causal, they have more time to be critically conscious of the product/service delivery * Growing trend toward short pleasure trips and frequent dining out at less expensive properties by those with limited budgets * Many destinations have recognized the value and significance of tourism and there is intense competition among countries and states to attract the pleasure traveler • Advertising campaigns have raised the awareness of customers of their many vacation choices • Demand for hospitality service is being created and spurred on by foreign, state, and local governments, which reap their share from taxes levied on visitors • The international tourism market has grown huge and is still growing with many different needs and wants * The pleasure market is a high-growth-potential market • A large portion of the pleasure market stays home and has yet to be developed * A major part of the pleasure market is made up of family travelers • A family vacation has become essential • This market is more price sensitive and is more fickle about choices of destinations and hotels • Must determine underlying needs of pleasure traveler • Overlooked and underserved niches: grandparent/grandchild travel, multigenerational travel and single parent travel. • Emerging trends: gay/lesbian travel, extended family member travel, pet travel * Another important pleasure market is made up of people traveling to visit friends and relatives • May seek out lodging accommodations along the way • Value-conscious market that is attracted to budget hotels and eating places such as McDonald's and family restaurants • In lower-tier markets, pleasure travelers are actually less demanding than customers in almost any other market because of lack of experience • Travelers may not realize just what is available or may simply not know how to demand • They have long memories. Prone to walk out of a bad experience without complaining, never to return. Prone to spread negative word of mouth. • They become more demanding as their travel experience increases

What are the three criteria that should be used to determine whether a specific property is directly competitive with you?

* Three criteria should be used to determine whether a specific property is directly competitive with the subject property: 1. Geographic Proximity • All other things being equal, competition is located in same geographic proximity • Will guest be significantly inconvenienced by having to stay in one of the other properties if subject property is not available? 2. Substitutability: subjective assessment of wheter prospective guests view the other properties as acceptable alternatives when subject property is unavailable 3. Price: properties priced within +/- 15% of the subject property will be directly competitive if they meet the other two criteria referenced previously • *Not all properties that meet these three criteria will be 100% competitive within each individual market segment; conduct analysis on a segment-by-segment basis • After determining competition, apply same checklist to your strengths and weaknesses compared to others. • Develop a comparative matrix to discern distinctive characteristics that can be the foundation of your strategy. • Analyze by individual market segments, then rank each property's attributes in terms of their perceived importance to the targeted segments • Highlight differences to emphasize in communications

Describe value-added service pricing

* Value added services: added to the basic product or service that the customer buys to enhance the perception of value • Worth evaluating because they may not add true value, but just increase the cost base or may eventually be passed on to the customer who doesn't really want them * Developing a product or service for customers' specific needs that augments the standard product is a part of loyalty marketing • E.g. business services in a guest room for an additional charge or turndown service • Many hotels instead of tailoring added services to individual needs, sometimes provide customers with more services than they want or need at prices that don't' reflect the value or cost. • Management does not even know which services customers with similar needs really want, which should be offered as part of the standard product, or which should be value options someone would pay extra for • Because of the intangibility of services, they don't know the cost • Hotels rely almost solely on measures of customer satisfaction • They are often misled because customers are always happy to get something for nothing, but the property must absorb the costs of something that may not have even created real value. * The solution is flexible service offerings: particular services valued by individual customers • Hotels should inventory services to find out what is being provided to whom and on what basis • Then apply activity-based costing on a segment-by-segment or customer-by-customer basis. • This applies especially to group bookings when services are often added just to get the booking. • Customers need to be asked the value of the service to them; this leads to activity-based pricing. The following options are available: 1. Do not offer the service 2. Give the service away at no additional charge 3. Raise the price equal to the cost of providing the service 4. Raise the price less than the cost of providing the service 5. Raise the price slightly higher than the cost of providing the service to camouflage a price increase on the standard product • Allows hotels to fit the service to customers needs, as well as notify customers that they do not have to pay for something they don't want. • Allow customers to choose the price they want and the value added service options

Define value-based pricing. What are the advantages of it?

* Value-based pricing can be considered the antithesis of cost-based pricing. Involves choosing a price after developing estimates of market demand based on how potential customers perceive the value of the product or service • Has nothing to do with the cost to produce the item • Perceived value: what one receives divided by the price one paid * Value-based pricing has the advantage that it forces managers to: 1. Review the objectives they have when marketing their product or service 2. Keep in touch with the needs and preferences of customers • Perceived price-value relationship

What are the types of costs?

* Variable costs 1. Direct variable costs: traced directly to the level of activity; higher the activity, the higher the variable costs. Also known as out-of-pocket costs. • Test: whether it is readily discontinued/exist if product were not made. • Includes costs that the product incurs unit by unit (e.g. productive labor, energy required, sales commissions, raw materials, royalties, shipping costs) • Is it traceably and tangibly generated by and identified with, the making and selling or product 2. Semivariable costs: kitchen staples (e.g. salt, pepper, baking soda) and staff required to run the operation at a minimum. • Needed regardless of the level of activity, but unlike fixed costs, these costs rise markedly with an increase in activity * Fixed costs: costs that exist regardless of the level of activity (e.g. rent/mortgage, insurance, taxes, overhead, general administration)

What are the advantages of segmenting and target marketing in terms of the marketing concept?

1. We are better able to identify and evaluate opportunities in the marketplace. • By knowing our target market, we can track it, identify what is missing, find niches, and discover customers' problems. 2. We can better mesh our product with the needs of the market. • Be more specific about which customers comprise the market and better identify who those people are. • Better idea of the acceptance of any innovation. 3. We can optimally allocate and direct our resources. 4. We can use relevant market intelligence to sense change and to change strategies. • We now have a smaller market and are closer to it, so we can keep in touch with it better. • There are more opportunities to talk to the customer. • We are better able to determine cultural and reference group influences, to understand beliefs and attitudes, to recognize and influence perceptions, to use tangible evidence of intangible constructs, to understand the information processing of the customer, and to give more "control" to both customers and employees. 5. We have greater availability to tailor our behavior, promotion, logistics, distribution channels, and marketing mix to the market. • We are better able to reach customers by knowing where they are, what appeals to them, what they pay attention to, what they react to, and what media they use 6. We are better able to be unique and to differentiate from the competition. • We can determine what the competition is doing for this segment • We know what to copy, what not to copy, what will be copied • More opportunity to find competitive advantage and exploit the weaknesses of the competition 7. We are better able to determine strategies to develop and enlarge the core market • After finding an opportunity, we can expand this market (selling to nonguests)

Explain the process of marketing segmentation.

• Assumption is that the marketplace is heterogeneous; customers have different needs and wants • If we are to establish a more precise definition of the needs and wants of the marketplace, it is clear that we need to break the market down into smaller homogeneous segments Step 1: Needs and Wants of the Marketplace • Must understand constraints such as the context of the purchase (business/pleasure), the time element (do we have lots of time/little time), and the target (what type of hotel and at what price), so we must set parameters. • Maybe a restaurant isn't as successful as it looks or maybe it is successful because there is no alternatives Step 2: Projecting Wants and Needs into Potential Markets • Also called demand analysis: includes an evaluation of needs and wants plus willingness and ability to pay and projecting it into a potential market • Willingness and ability to pay is critical and we cannot afford to overlook them Step 3: Matching the Market and Capabilities • Once we found the effective level of demand, do we have the capabilities to meet that? • Must consider dollar resources and all the financial implications • Must consider the expertise in the firm (who will manage it, what is their experience, is this our philosophy, does it fit, do we need outside help) Step 4: Segmenting the Market • Further segment the heterogeneous market (gourmet food → gourmet French food) Step 5: Selecting Target Markets from Identified Segments • Select specific target markets from the broader market segment (e.g. income, age, business entertaining, etc).

Describe benefit segmentation

• Benefit segments are based on the benefits that people seek when buying a product • Very akin to need satisfaction • Benefits sought in a hospitality purchase: comfort, prestige, low price, recognition, attention, romance, quiet, safety • Benefit segments may be the most basic reasons for true market segments and the most predictable of all segments • Knowing what benefits people seek provides a basis for predicting what they'll do • Benefit segmentation is a market-oriented approach consistent with the marketing concept • From these segments other characteristics can be derived (e.g. demographics) • Also concerned with total satisfaction from a service rather than simply individual benefits (benefit bundle) and is a significant factor in segmenting markets by benefits. * Important distinctions between benefit segmentation and others 1. Benefits are the needs and wants of the customer. They are what the product or service does for the customer. Other segmentation strategies only assume a relationship between the segment variables and customer needs and wants. 2. Understanding benefits enables marketers to influence behaviors. • Other segmentation variables are often merely descriptive. Marketer can only try to appeal to what exists and its assumed relationship

Describe the resort market

• Business travelers stay at a hotel/resort because they have business to do or conference to attend • The resort leisure market travels to resorts because it wants to be there and to get away from it all • Upscale and downscale resorts and quiet country inns • Resort leisure guests need to fulfill their idea of a vacation and relaxation • Two-third may be pleasure travelers, while the rest are attending a conference, participating in an incentive junket, or on business, depending on hotel and location * Varied market poses problems, especially when it comes together at the same time (which should be avoided when possible) • Hotel staff must be trained to deal with the diverse needs of the leisure traveler on vacation, while executing complicated conferences with infinite details • Needs of the meeting planner and the leisure resort market can conflict, but hotel must serve both • Must understand the needs of both customers, develop operating standards for both, and sell the facility so that revenues will be maximized without losing guests * Weekend escape travel is another part of the pleasure market • Dual-income households make scheduling harder • Trend toward shorter, more frequent vacations taken by travelers who will be demanding during the use of their precious vacation time • Much of this is part of the package market

What are some strategies in choosing the right competition?

• Choosing the right competition has tremendous bearing on the marketing strategy and tactics of any hospitality operation • Conceptitis: firms that concentrate on the concept rather than the customer and the competition when designing their product or service. • Deliberately choose with whom you want, and can, compete • Rarely do markets appear out of nowhere; most times you have to entice them away from a competitor • First decision is which customer need/problem we are trying to fill/solve, then select the competition • Ask customers where they would be if they were not at your property • Easy to do when checking in • Research the market: investigate what problems customers have and their needs. Then investigate where they go now to solve their problems/needs. This will reveal who the market perceives to be your competition, as well as what you have to compete against in terms of attributes and services. • Your perception may differ from the market's • First must choose with whom you will compete, then determine the weapons you will need to compete before concept development begins.

What are the types and objectives of competitive intelligence?

• Competitive intelligence involves close observation of competitors to learn what they do best and why, and where they are weak and why * Three major types of intelligence: 1. Defensive intelligence: keeps track of competitors' moves to avoid being caught off guard (e.g. are neighbors doing early bird specials?) 2. Passive intelligence: obtained to make specific decisions (what markets do competitors cover? What discounts do they offer?) 3. Offensive intelligence: sought for the purpose of identifying new opportunities (have salespeople spend nights in competitors hotels) * Three major objectives: 1. To understand your position of competitive advantage and disadvantage 2. To understand competitors' strategies and tactics 3. To help you develop your own strategies and tactics that may create a competitive advantage • The management that obtains the most information ill be the one that moves around, keeps its eyes and ears open, and uses good intuitive judgment • Close observation an tell you a lot about what the competition does best and why, where they are off the mark and why, what their strengths and weaknesses are, and what they plan next. • Good marketing intelligence will help you develop your marketing strategy

Describe competitive intensity and factors that contribute to it.

• Competitive intensity in a marketplace is the fierceness with which competing companies do battle with each other • Level of intensity will often dictate the way a firm does business • Competitive intensity is very high in the hospitality industry, which can lead to poor decisions • Services that can be easily duplicated offer only short-term advantage, if that, when you have aggressive competitors • When those services are not perceived as a determinative advantage by customers and instead end up costing them more for the core product, such services become a negative factor for the entire product class. • When introducing an additional service, you need to anticipate how your competitors will react • Competitive tactics should be based on to the needs of the customer and not on the competition, unless this is necessary for the firm's self-protection • Competitors may have different strategies, ownership structures, and cost structures that may allow them to do things that your firm cannot do • Blindly copying them may be a financial catastrophe. • Just because one firm does something doesn't mean that your guests want it • Introducing services that are easily duplicated are necessary for growth and improvement • Still good if company did it first • Consider intensity of competition before making decision • Go back to the customer. Does it create or keep customers? At what cost? Does it increase the price-value relationship? If competition follows suit, do we retain an advantage or just an additional cost? • When the needs of the market are similar, the intensity of competition is much greater as many entries in the market are competing for the same customer • Small competitive advantages can become larger ones if they can be sustained • It may be mandatory for one firm to copy another that is aggressively seeking an advantageous position in order to eliminate the advantage. • However, this may still have solved a need/problem and added value. * Factors Contributing to Competitive intensity • Opportunity potential (a promising market) • Ease of entry • Nature of product (are product similar?) • Exit barriers • Homogeneity of the market (segments) • Industry structure (how many active firms?) • Commitment to the industry • Technological innovations • Scale economies • Economic climate • Diversity of firms

What are two ways to identify the target market of a destination?

• Destinations cannot be everything to everyone o Travel markets consists of travelers who differ in their wants, needs, resources, locations, buying attitudes, and buying processes o Each traveler can potentially be classified as an individual market, but this is not feasible. • Identify groups of travelers who have common interests and share common values • Identify target market in two ways: 1. Gather information about current visitors to develop profiles of the current market segments (factors that affect decisions, demographics) 2. Inventory the kind of attractions, services, and facilities the destination offers and then identify market segments that may be interested in what the destination has to offer • Enables a destination to identify underused attractions, services, and facilities and provides opportunity to increase visitation levels by going after segments that may be interested • Identify variables, or internal strategic factors, within their destination that may be important to the operation. Internal strategic factors determine whether a destination can take advantage of external opportunities such as the changing needs and wants of its current target market or opportunities offered by emerging market segments. • Differences in destinations' capabilities and resources and their application is what differentiates destinations • Ensure operation uses capabilities and resources better than competitors * To identify capabilities and resources, list and describe the services the destination offers. Identify the main points, including what the attraction, service, facilities are; how much they cost; what sorts of customers make purchases; and why o Think in terms of customer needs and benefits o Then determine what the destination does better than its competitors; these are its distinctive or core competencies o May result in in discovering new needs to fill and new market segments to target * After identifying the current and prospective market segment, conduct marketing research to find out who those people are, where they are located, and so on. Know who comes to the destination and why. Include the location of the segment and reasons they travel. * Financially more feasible to go after market segments that are heavily concentrated in fewer locations o Develop cost-effective localized promotion strategies o May be cost prohibitive to go after market if members are located all over the country

What does the assessment of area-wide demand entail?

• Determining the market area's sources of demand for lodging accommodations or related services entails: 1. Quantifying total demand for accommodations by both type and source 2. Calculating the subject property's share of total demand (market share) in aggregate and by individual market segment 3. Identifying any anticipated changes in demand generators that may affect both short- and long-term demand for accommodations and services * Area-wide demand is typically expressed in aggregate by number of occupied rooms • Of particular interest is the number of occupied rooms in a defined "competitive set" of properties • First step in marketing strategy is to quantify the demand for accommodations by market segment within the defined competitive set of properties under study, followed by an examination of the demand generators responsible for this business • Demand generators include: • Local manufacturing, retail, and service establishments • Tourist attractions • Convention centers • Special entertainment or cultural events • Specific demand estimates may be established by determining how many room nights are produced by each demand generator in a typical 12-month period • Estimates on transient visitation may be constructed through historical trends in air, auto, bus, and rail arrivals • Once aggregate demand has been determined for the competitive set, calculate the subject property's share of the total demand as a percentage of occupied room nights and indexed with reference to the average achieved by all properties that are part of the analysis.

What is market segmentation?

• Differentiation and market segmentation are complementary strategies • Differences need to be identifiable and meaningful to the target audience • Segmentation starts with the customer; the market is made up of customers whose needs and wants are different • The total market is divided into smaller markets that are comprised of people who are in some way alike (same needs/wants) • Product is defined for specific market segments based on the differences within each segment

What does product (property) research entail?

• Entails identification and quantification of the subject property's most marketable features; may be classified as either tangible or intangible; once inventoried, will enable a comparative analysis revealing competitive strengths and weaknesses * Assess the two different but equally important sets of attributes 1. Tangible features: those for which you can prepare a physical inventory • Number and configuration of guest rooms • Number and configuration of seats in a restaurant • Number and size of meeting rooms • Size and configuration of public space • Number and type of food and beverage outlets • Number and quality of recreational facilities, etc. 2. Intangible features: those subjective assessments that are ascribed to various aspects of your operation by guests • Perceived quality of guest service • Cleanliness • Friendliness of the staff • Reputation of the facility • Popularity of the destination in which the subject property is located • *Although difficult to quantify, often more important than tangible features * Simplest way to profile marketable attributes it through standardized checklists completed by appropriate department heads or employees who make a contribution to annual marketing program • Observations should be compiled to create an overall "property profile" that may be used to compare the subject property with the other properties that comprise your competitive set • Identify properties which you compete directly and subsequently inventory their strengths and weaknesses along same attributes

What is the final stage of the belief, attitude, and intention trilogy?

• Final stage of the belief, attitude, and intention trilogy is called the conative stage, covering what people intend to do • This is not behavior, but it may be as close to behavior as we can get. • No way we can positively be assured of behavior until after it happens • We want to know what people intend to do • Context can change intended behavior • Asking people what they intend to do can be very misleading without also measuring belief, attitude, time, and context.

What are perceptions and what influences them?

• For the customer, perception is reality • We cannot think that what we perceive is what the customer perceives • If the customer does not perceive it, it does not exist • If you want customers to perceive something, you need to change their perceptions so they believe it to be true • Perceptions are meanings we assign to what we see, hear, and sense around us * Our perceptions are heavily influenced by sociocultural and psychological forces • Sociocultural forces include: the culture of society, social class, and small reference groups • Reference groups: people who influence a person's attitudes, opinions, and values such as family, friends, or business associates. Especially important in the purchase of hospitality services where word-of-mouth recommendations play a major role in the buying decisions • Psychological forces that influence consumer behavior generally come from within a person and include learning experiences, personality, and self-image * Expectations arise from initial perceptions and may be disconfirmed by subsequent perceptions • Initial perceptions depend on stimulus factors; this is the area of traditional marketing (e.g. white beach, remote setting, elegant dining) • Actual perception depends on personal factors: needs, moods, experiences, values, and most of all, expectation. • Now reality is perception; your expectations were not fulfilled, and your perceptions are negative. *Reality is Perception • The differences in customers' perceptions create many problems for service marketers • Perception is selective: we cannot possibly perceive all the stimulus objects that are presented to us, so we select what we want to perceive (if you are looking for a honeymoon, you perceive the beach; if you are looking for a meeting, you perceive meeting room) • Perceptions are images, and images influence purchase behavior • Marketers must deal very acutely with perceptions • Marketers must create images with the stimuli pertinent to the specific target market they are trying to attract • Use stimuli that are relevant to that market, and be certain that reality equals (or almost equals) expectation so that reality doesn't negatively influence perception • Failure to do this will create a dissatisfied customer and negative word of mouth; it is not just important to create a customer, but must keep the customer

What data should be used to profile existing guests to gather internal information?

• Hospitality industry has access to more info about its customers than any other industry as guests are required to disclose a great deal of info (name, contact, travel preferences) before and while they consume the product • Decrease in cost of memory enables firms to keep track to cater to needs • Creation of a comprehensive customer profile is fundamental in an effective marketing strategy * Profile of existing customers is easy to construct from historical registration and/or consumption information • Two sources of data that should be tracked to profile existing customers: 1. The information they provide at the time of reservation ("transaction data") • Correct spelling of customer's name • Source of reservation (e.g. website, CRO, travel agency) • Date of reservation • Type of guest (e.g. purpose of trip/method of travel) • Any special rate or package plan information • Primary "snail mail:" address, including zip code of origin market • Primary e-mail address • Intended date of arrival • Intended length of stay • Expected number of people in the party (including adults/children) • Preferred accommodations • Any special requests 2. The information they yield throughout the course of their stay • First time or repeat guest (typically discerned at registration) • Food and beverage charges • Recreational amenity charges • Total of all room, food, beverage and miscellaneous charges • Method of payment • * Verify data for accuracy after checkout and store in a master database for use in the identification of customer travel patterns and subsequent direct marketing programs • Profile of prospective customers is more difficult to construct and typically requires some form of primary marketing research (direct interaction with individuals who meet the targeted market profile)

How do customers compare alternative choices?

• Hospitality purchase choices often include many elements • Obvious elements: price, location, accessibility, reputation and quality • Less obvious/anticipated elements are service, ambience, attitude, newness, and other clientele * How customers compare alternative choices: • Customers will make trade-offs of one attribute for another (a weakness in one attribute can be made up for by a strength in another; e.g. location vs. price) • Customer establishes a minimum level on only one or a few attributes (e.g. price). These choice models and others require customer research to determine the target market's choice process

Describe reference pricing

• Increase the perceptions of price value • Customers purchase problem solutions based on expectations * Reference price: price for which consumers believe the product should sell • Reactions to prices will vary around this reference or expected price, based on some kind of prior experience or knowledge * Formed when consumers consider such things as the following: • Price last paid • Price of similar items • Price considering the brand name • Real or imagined cost to produce the item • Perceived cost of product failure • Reflects consumers' imaginations of what could go wrong. • Reference price for a birthday dinner is higher than a casual dinner, even if it's at the same restaurant; risk of failure is more critical in first case * Reservation price: the maximum price the customer will pay for a product • Firms that price exactly reservation price are said to extract the entire consumer surplus • Firms that price less than the reservation price are said to be leaving money on the table, which firms do not want to do • Price sensitive measurement (PSM) puts a value on a product as determined by the perception of the target market. Used to set reference price and reservation price. • Through PSM, Taco Bell learned to bundle its products in a way and at a price where customer perceived value • Research can demonstrate the way customers establish an upper price level at which they deem the product to be too expensive and a lower price level below which the quality of the product would be suspect • Between these two is the indifference price: the price perceived as normal for that product in a given market, given one's expectations • May become irate when surprised by an unexpected price. Responsibility of the price setter to educate the customer about prices. * Expectations should be built into the pricing decision • Research can determine what the market thinks the product should cost • Especially useful in the pricing of services where a cost basis is lacking for developing an expectation • Lower-than-expected price may offer competitive advantage • Knowledge of price expectation can help avoid overpricing and underpricing

What are the advantages and disadvantages of fine-tuning segments?

• It can be a mistake to segment on very broad geographical or cultural areas • Some international hotel companies are beginning to fine-tune their segmentation strategies with a global perspective • For example, focusing on business executives regardless of geographic origin. This diverse segment is more difficult and expensive to reach, but increasingly, global communication media and distribution channels are easing the task. * Fine-tuning follows the pattern of good segmentation strategy - that is, complementary target markets • One way to fine-tune is to look at the business market as something other than one vast market and segment on benefits and usage * The pitfalls of concentrated segmentation are more severe with international markets • Some geographic markets collapse overnight • There is no way to foresee these types of events, but being forewarned means not depending on one segment too heavily

What is the purpose of customer satisfaction research?

• Maintain a contemporary perspective on precisely how customers feel about the business and its delivery of the services • Simplest form: comment cards • Be cautious about the interpretation of info gleaned in this manner because of the lack of control exercised over the way respondents have been sampled • More sophisticated customer satisfaction measurement programs entail the discipline of sampling respondents on some regular frequency (both while they are "consuming" the product and postdeparture), the analysis of the results against some predetermined standard of success, or against the normative ratings of other properties that may belong to the same chain/franchise

Describe what pricing decisions should be based on. What are the three deadly business sins?

• Marketing discipline grew out of the economic discipline (the economy responds to the customer); the customer calls the shots * Pricing decisions should be based on market research and thorough understanding of the economics of price changes, not intuition of what the market will bear * Three deadly business sins: • Most common: the worship of high profit margins and of "premium pricing" • Mispricing a new product by charging "what the market will bear" • Cost-driven pricing: what works is price-driven costing; charge what the market will pay and what the competition will charge * Consider in developing pricing strategies: • An understanding of what price is and how to change prices • An understanding of costs, cost-based pricing, value pricing, objectives of the firm, competitive pricing, market demand pricing, and customer pricing * Role of pricing must be established with the long-term customer in mind • Cost and profit considerations follow under "Can we afford to do it?" • Profit is the test of decisions, not the cause

Describe program measurement and its purpose.

• Marketing research may be used to yield one or more metrics to measure entire marketing program • If marketing program is intended solely to increase revenues, evaluate standard metrics of occupied rooms, business mix, room rate, REVPAR, and total revenue • Plan may be to change image, communicate news, or enhance reputation • May supplement measures with surrogate measures of market awareness, image, and intention to act • Requires some form of qualitative research, but may prove invaluable in overall evaluation of campaign performance when combined with traditional metrics

How can markets be described?

• Markets can be described in terms of geographic, demographic, psychographic, and behavior attributes o Categorize the people one wants and identify/confirm opportunities 1. Market geographies; address where the members of each segment are physically located. Identify regions and cities where most customers are located in order to develop cost-effective promotion strategies and communication materials 2. Market demographics: travelers' wants and preferences and the frequency of their purchases, which are associated with demographics. • Includes info about their age, gender, nationality, education level, household composition, occupation, and income. • Travelers with common demographics are likely to be in the same market segment • Ensure demographics lead to behavior and that these segments with common characteristics also describe visitors whom they expect to be potential visitors 3. Market psychographics: market segments in terms of psychographic information. • Less quantifiable and more subjective • Based on lifestyle or personality attributes 4. Market behaviors: categorizes based on their knowledge, attitude, use, motivation, or response to an attraction, facility, or service • May include occasions that simulate a visit, benefits they realize, status of users, their usage rate, their loyalty, their buyer-readiness stage, and their attitude toward the attractions, facilities, and services a destination offers • Identify segments that are likely to yield the highest return on each marketing dollar, then develop promotional campaigns and communications materials to communicate with segments

Define mass customization

• Modern technology is bring us closer to target markets of one, sometimes referred to as mass customization • Due to computer databases that contain vast amounts of guest information • Goal of such databases is to look at the customer not as a segment of many, but as a segment of one • Talk to customers as individuals and then reconstruct the product/service to aim at target groups and to reward loyal customers • Marketers use databases to measure what the customer actually does • Drives the entire marketing strategy • Based on the heavy user segment that accounts for a large proportion of sales • Databases are rich sources when they combine demographics with buying habits • Relationship marketing • Economic logic behind mass customization is inevitable and irresistible • Marketers will have to think in terms of share of customer, rather than market share • Will result in keeping a satisfied, loyal, long-term customer • Ultimate form of customer differentiation to capture the greatest possible share of every single individual's business • Key to success in tomorrow's hospitality business • Once target markets have been determined, the next step is to tailor the marketing effort to the needs and wants of each market

Describe the hierarchy of needs

• Motivations are based on different needs in different contexts • Maslow's theory of motivation is the "hierarchy of needs" 1. Physiological needs (hunger, thirst) 2. Safety needs (security, protection) 3. Social needs (sense of belonging, love) 4. Esteem needs (self-esteem, recognition, status) 5. Self-actualization needs (self-development and realization) • Lower-level needs have to be met before the higher-level needs become important • All of us will not act exactly in the same manner, but in a general sense, the order prevails • The hierarchy is not completely rigid or necessarily exclusive • We may seek to satisfy two or more diverse needs at the same time (e.g. reserving a suite instead of just a room) • Two categories of cognitive needs that are not on the hierarchy, but belong fairly high on the scale; certainly apply to hospitality • The need to know and understand • Aesthetic needs • Understanding "why" certain behaviors occur. May fulfill multiple needs (basic needs, self-esteem needs) • Some "needs" can be better described as wants (wi-fi, good lighting) or problems (wake up call to make it to meeting). They are willing to pay for solutions to those problems. • In the luxury segment, loyalty-inducing emotions include feeling pampered, feeling relaxed, and appearing sophisticated • In economy hotels, loyalty-inducing emotions are feeling comfortable, feeling welcome, and being practical • Contrary needs: things they do not want; needs that are not being satisfied (e.g. standing in line, waiting too long, hearing housekeepers yell) • Basic needs are the same, but wants and problems change (business vs. pleasure) • Understand the needs hierarchy, the wants that go with each level of the hierarchy, the "problems" of given individuals, and the context or environment in which the hospitality product will be purchased • Needs and wants cannot be generalized across the entire population, and especially, the international market • Maslow's hierarchy of needs is a critical foundation of human behavior, which we must build on • Motives activate people's behavior, but perceptions determine the course of that behavior

What are some segmentation strategies?

• No segments exist in isolation, and there is considerable overlap of the variables • Few hotels can survive on only one market segment • Foundation of any segmentation strategy is behavioral differences • No segment is meaningful if it does not behave differently from another • This sometimes causes conflicts between segments (families vs. romance) • As customer behaviors change, segments also change over time • Through segmentation, you can stay closer to customers and understand better • Be constantly alert for changing, merging, or dividing segments • Too much segmentation can lead to too many markets and an inability to serve anyone well or profitably • Market segmentation is a scientific procedure requiring analysis. • Cannot be casual or haphazard • Seek the "ideal business mix" • Necessity of market segmentation is because of the intense competition in hospitality • Market segmentation may be a prerequisite to growth • Large or major segments may have reached their peak, but smaller segments, unimportant individually but critical in the aggregate, may be the next wave. • Product differentiation as a singular market strategy may have seen its day • As product classes become more crowded, however, it will remain as a key competitive strategy within the same product classes

Describe formal marketing research

• Objective and empirical collection of information about the consumers • Primary data as opposed to secondary data (those collected from some other source, typically in the public domain) • NOT comment cards • Primary data are collected for a specific purpose

Describe competitive intelligence and what you can do to obtain it.

• One always wants to know what the enemy is doing, their position and intentions, strengths and weaknesses, where they are most vulnerable and least vulnerable, and where the best place is to attack 1. Public information: media (especially the internet), trade articles, info through trade associations, annual reports for publicly traded firms, company brochures, flyers and ads, publicity releases, mission statements, trade gossips (e.g. from vendors, consulting/accounting firms, universities, local convention/visitors bureaus, and local hotel and restaurant associations) 2. Talk to your competitors: one on one or at industry conferences and trade shows 3. Talk to your customers, who might have been your competitors' customers 4. Talk to your employees, who might know/have been your competitors' employees 5. Visiting or using the competitor's product

What are 10 common faults of research projects?

• Other common faults of research projects, presented in order of the frequency of occurrence and importance: 1. Lack of construct validity 2. Failure to control for intervening variables 3. Unwarranted conceptual leaps, unsupported conclusions, and presumptive judgments 4. Failure to apply tests of statistical significance 5. Errors in sample size and selection 6. Failure to identify the issue, problem, or purpose of the research 7. Failure to capture the richness of the data (whether because of poor research instruments or poor statistical analysis) 8. Failure to define or limit variables 9. Poor writing 10. Failure to notice spurious relationships

Describe 3 competitive marketing strategies

• Porter suggested three strategies for beating the competition: 1. Positioning to provide the best defense 2. Influencing the balance by taking the offense 3. Exploiting industry change • Defensive positioning means matching strengths and weaknesses against the competition by finding positions where it is the weakest and developing strengths where the company is least vulnerable • Influencing the balance by taking the offensive or being proactive means attempting to alter the industry structure and its causes o Calls for marketing innovation, establishing brand identity, or otherwise differentiating the product. • Exploiting industry change means anticipating shifts in the environment, forecasting the effect, constructing a composite of the future, and positioning accordingly • Must look beyond today's competitors to those that may become competitors tomorrow o Watch out for new entries in the race and the threat of substitute products • The key to growth is to obtain a position that is less vulnerable to direct attack, old or new, and less vulnerable to customer manipulation and substitute products o May be done through relationship marketing, actual or psychological product differentiation, and constant and foresighted competitive awareness and analysis

Why is pricing so important?

• Price is used by the firm to represent the value of the offering and the value of what is received • Pricing is the most flexible part of the presentation mix, so it requires constant evaluation. * Price is of unique importance because: 1. It is the only revenue-producing part of the marketing mix 2. Used to match supply to demand so financial objectives of the firm can be achieved 3. It is a powerful force in attracting attention and increasing sales 4. It establishes the market positioning of the product 5. The pricing practice can have a major impact on customer loyalty • Price must communicate the worth of the total offering - a worth that is consistent with the market's perception of the offering's value • Can damage the product • If price is too high, customers will not pay; if too low, customers may perceive service as too cheap and worry about quality • Product-driven pricing: find the target market that will accept a given product at a given price, rather than set the price to the target market; customer who will determine the acceptable price • Pricing is often more art than science, includes psychological and subtle factors that may essential rest on gut feeling • Main drivers of profit are sales revenue and costs • Sales revenue = sales volume x price; marketing must ensure pricing strategies yield the optimum sales volume

Describe price segmentation

• Price segmentation is a form of benefit segmentation, only more visible and tangible * Two ways to look at price segments: between product classes or within a product class 1. Price segments within a product class are limited • Customers will generally not make major trade-offs for a small gain in price • Price segmentation is nearly nonexistent in these cases 2. Segmentation between product classes is different as one product class does not truly compete with another on the same occasion, given the same circumstances • Markets are segmented within broad price ranges • Five segments based on average room rates: luxury, upper upscale, upscale, midscale with F&B, midscale without F&B, economy • The physical product is not all that different within ranges, and in some cases, neither is the price • As one mores up, the furniture gets better, bathroom gets larger • Even in motels, basic needs are still fulfilled * Customers are willing to pay more largely because of the intangibles and tangibles they receive in return: service, prestige, professionalism, larger, higher quality • These are benefits and the result is benefit segmentation, not price. * Why customers will pay more for relatively little is somewhat ambiguous because price is a major consideration and varying price sensitivities stratify the market • In the final analysis, within the same product class, it is rarely price alone that determines the segment • Price is only the risk that the willing and able buyer will take based on the intensity of the problem and the perceived value and expectation of the solution

What is psychological pricing and what are some examples?

• Prices cause psychological reactions on the part of customers just as atmospherics do • High prices may imply quality and low prices may imply inferiority • Especially true for services because of their intangibility • Higher-priced services may sell better, whereas lower-priced services may sell poorly; contrary to standard economic model • Psychological reactions do not necessarily correspond to reality; customers may feel that they have made a mistake • "Visibility" factor: being "seen" at an upscale restaurant or hotel is very important to some customers; he wants to be seen with the product that offers the highest affordable visibility factor • Buyers and nonbuyers of products also have different perceptions of price (i.e. upscale restaurants may be perceived to be more expensive than they are) * Examples: • Price lining: clumps prices together so that a perception of substantially increased quality is created (e.g. clumping groups of wine by price to show an increase in quality) • Odd-numbered pricing: creates perception of lower price ($6.99 vs. $7.00) • Differences in customers' perception might be why firms ignore customers • Target marketing allows us to select relatively homogeneous markets for which the product and the price are designed • Marketer should be aware of how customer uses price to differentiate competing products and services • Key to positioning with price • Value perception is always relative to the competition, whether the value perceived is real or imagined

What are the challenges of international pricing?

• Pricing is more complex in the international marketplace o Monetary exchange rates fluctuate on a daily basis. Rates fluctuate radically during either national or international economic cycles and affect every international visitor as well as local guests o Pricing tactics by locally owned competitors can send rate structures into a tailspin • One of the greatest problems in the international hotel company business is pricing both for the native of a host country and for the international traveler, each of whom have different perspectives of the price-value relationship • Various practices also occur in different countries o In France, hotels quote rack rate, rarely do they bargain. May be a bargain or costly depending on the exchange rate. • When the market mix of the hotel is from many different countries, each with its own rate of exchange against the currency of the host country. The rate of exchange is also affected by the prevailing inflation rate in that country. • Pricing tactics by locally owned competitors in developing countries can send rate structures into a tailspin o Owners are primarily profit driven. When business is good everyone gets top price. When business is bad, local owners and some foreign chains will cut rates to get business. With deep pockets for survival, these hotels discount to a level which their international counterparts, who need to show a profit, cannot compete. • Foreign country destination hotels compete on currency exchange rates over which they have no control.

Describe international segmentation and its challenges

• Segmentation takes on a different perspective for companies in the international arena • Potential market is so diverse, special care must be taken in customer mix • Restaurants must segment market by native, international, or both (i.e. hotel restaurants must segment by in-house and local market) • In the United States, relatively few hotels segment on the international market a all. However, as international tourism and business travel in the US continues to grow rapidly, many hotels in gateway cities actively seek out foreign visitors • When a hotel company targets business from foreign lands, the picture changes • Company must first seek geographic and cultural definition of its markets • First make conscious decisions about the geographic segments they wish to attract • Japanese, Taiwanese, Australian, German, European, and North American market have significance for hotels in Southeast Asian Nations countries (Philippines, Singapore, Malaysia, Thailand, Indonesia, and Brunei) • Many hotels try to avoid the stigma of being a one-origin hotel, but hotel cannot spread resources to concentrate efforts on 20 countries • Focusing too narrowly on a major share of just one market can be misleading and counterproductive when you consider that no one geographic market is large enough to maintain necessary occupancy, in spite of the potential of obtaining a major share of that market

What's the difference between hotel room pricing practices and restaurant pricing practices?

• Pricing practices evolve as sophisticated computer models estimate demand, revenue management, and the importance of increasing revenue instead of cutting costs • Pricing is now a part of marketing 1. Hotel Room Pricing • Profitably increases and pricing becomes less tactical and more strategic • Initially, hotel pricing involved changing rates every season; demand forecasting pertained to examining occupancy the year before • Revenue management: sophisticated mathematical models estimated demand by room type and rate (revenue per available room) • In 2005, pricing between revenue per available customer and value-based pricing (revPAC includes F&B, Internet, etc); Harrah's assigns rooms according to which guest provides the most long-term economic value • Internet firms are bundling and packaging to hide cost of each individual component 2. Restaurant Pricing • Traditionally used cost-based pricing • Was affected by inflation, responded by increasing prices, customers responded by turning to other alternatives, including staying home • Eventually industry caught on and found new ways to do things, new menu items, new ways to prepare and serve them to cut labor costs • Must do research to ensure changes do not negatively impact customer • Customer reaction to price is swift because it is easy for others to enter the market • Restaurants are experimenting with revenue management

What is the significance of alternative solutions in marketing?

• Rarely is there one solution; often the customer must evaluate alternative solutions • Reference groups and other evaluative criteria have strong impact at this stage • The higher the involvement, the lengthier and more deliberate the process and the greater the search for more information • The marketer's most critical impact is at this stage (at least for medium- to high-involvement purchases) • The level of involvement will vary with the individual • As the price gets higher and, in the hospitality industry, as the service element becomes more important, the level of involvement increases • The involvement level in choosing a hotel or upscale restaurant is always relatively high because the product is consumed as purchased and cannot be "returned" • Bad experiences affects the user personally • Alternative evaluation is the point at which the total marketing effort, especially internal and relationship marketing, will pay off.

What are the four steps in research design?

• Research design may be the most important part of all research • Guides the research from beginning to end • Include: specifying the research purpose, defining the research problem, establishing the research objectives, and determining what we expect to find out. 1. Research Purpose • Research purpose: what you intend to do with the finding, what kinds of business decisions you plan to make after you have the results • E.g. develop ad campaign, change menu, redecorate, run promotion • Flows from the management problem • Knowing your purpose leads to obtaining the info you need to fulfill that purpose 2. Research Problem • Research problem: how to provide the info that addresses the management problem • Research purpose: Gather info to stop business from declining • Research problem: What is causing business to decline? • State in the form of a question 3. Research Objectives • Research objectives: what we want to find out • What are people's present eating-out habits? • What are people's perceptions of our restaurant? • From the objectives flow the answers to the question, What do we expect to know after the research is completed? 4. What We Expect to Know • The pieces of info that are necessary to fulfill the objectives, for instance: • Where do they go now? How often? Why? How much do they spend? • Why do they dine out? • Each step must flow from the previous one. Each step narrows the parameters of the research so that it focuses directly on what is needed to make management decisions • First four parameters will establish: • Who the population is; the sample that is needed • The questions that need to be asked • Whether the research should be qualitative, descriptive, inferential, or a combination

What's the difference between reliability and validity?

• Research design, the sampling, the data collection, and the data analysis must be all rigorously controlled when doing research • Two supreme tests: reliability and validity 1. Reliability • Reliability: refers to the consistency of the measurement over different points in time • A reliable measure is one that will produce consistent results over different samples taken from the same population over time • Data may be reliable, but not necessarily valid 2. Validity • Validity: whether the data represent true/accurate measures of the variables studied • Do the data really measure what they purport to measure? • Valid data will always be reliable • Critical forms of validity: • Face validity: Is the instrument (questionnaire) measuring everything it is supposed to? Is the sample representative of the behavior or trait being measured? • Construct validity: Is the construct being measured the one we think we are measuring? (i.e. formal product vs. core product) • Internal validity: Are the findings free from bias? Are they true, or are they an artifact of the research design? • Always verify validity first

What are Porter's five forces?

• Scanning the environment also means looking for threats • Threats are the other side of opportunities • Occurs when environmental trends endanger the competitive advantage of a firm • Competition is only one threat in the environment, but a powerful one • Competitive threats mean that the enemy got there first, will get there first, or will soon follow • React quickly to turn a threat into an opportunity * Porter's five forces that shape competition with in an industry • A company's ability to raise prices and achieve greater profits is limited by the strength of these forces • A strong force is a threat; a weak force is an opportunity 1. Rivalry among established firms: central and first force and is largely a function of three factors: a. Industry competitive structure (fragmented vs. consolidated): fragmented industry is a threat because others can enter easily. A consolidated one may be an opportunity for those already in the industry, but may also be a threat because the action of one company threatens the market share of its rivals. This can lead to price wars, so companies must compete on other features. b. Demand conditions (declining vs. increasing): declining demand is a threat; increasing demand is an opportunity. c. Exit barriers (how easy it is to get out): exit barriers are a threat when there is no other use for the facilities, which isn't a problem in hospitality. 2. Risk of entry by potential competitors who are not already in the industry. There are three main barriers: a. Brand loyalty b. Absolute cost advantages c. Economies of scale 3. Bargaining power of buyers is a threat when buyers can force prices down or demand higher quality or better service or when there are numerous other choices or substitute products and witching costs are low, which is generally the case with hotels and restaurants. 4. Bargaining power of suppliers is a threat when they are able to force up the prices a company must pay for its supplies or reduce quality as a result of strong demand. 5. The threat of substitute products can threaten an industry.

What are FITs?

• Somewhat of a catchall for everyone that is leftover • In many hotels, this may be quite a substantial proportion * Free independent traveler (FIT): a "nonorganized" visitor who does not belong to a group • May participate in tours during their visit, they come on their own and do as they please • Unidentified business travelers will be lumped here • Hotels catering to the FIT market will usually set aside a block of rooms a year in advance and fill them in as reservations are made. • Lead time may be three to six months in advance • Hotel releases the unused blocked space according to its buy-time schedule * Both wholesalers and retail agents handle the FIT • FITs are normally willing to pay higher rates than group customers • Conflict arises: FIT is willing to pay a higher rate because of a lack of volume, the wholesaler and retailer are able to negotiate large discounts as a result of aggregate FIT bookings • Resulting savings are not always passed on to the traveler • Guest may pay a high price, while the hotel receives a relatively low room rate • FIT booked by an intermediary may get the poorest room in the house based on the rate being paid to the hotel • Traveler is at a disadvantage in these situations and is surprised at the accommodations • This can hurt the hotel that is caught in the middle • FIT is also used by some to designate "free individual traveler" or "free international traveler."

What is revenue management?

• Started in the hotel industry in 1988 • Prices are opened and closed based on fluctuating demand and advance bookings. Hotel customers pay different prices for the same room depending on when and how their reservation is made. • Through the sophistication of computer technology, different prices are set depending on demand, day by day, or hour by hour. • Make reservations available to market segments based on value of each segment. • Market segments are determined by their willingness to pay a specific rate • When demand is soft, lower rates requiring advance booking remain available or are reopened for sale shortly before the dates that are not fully booked. When demand builds, the lower rates are removed so customers then booking will pay higher rates. All levels of pricing are controlled by opening and closing them almost at will, with an variation in demand. • Revenue management can increase revenues; maximize profits; greatly improve the effectiveness of market segmentation; open new market segments; strengthen product portfolio strategy; instantly improve cash flow; spread demand throughout seasons and times of day; and allow management to price according to market segment demand. * What Revenue Management Is • Revenue management: a systematic approach to matching demand for services with an appropriate supply in order to maximize revenues through juggling books and rate quotations • Plans the ideal business mix for each day of the upcoming year and prices the rooms accordingly • Adjusts the mix and prices on an ongoing basis as reservations do or do not develop * Why revenue management is suitable to the hotel industry • Hotel room is a perishable product, so it is better to sell it at a lower price than not at all because of low marginal production costs and high marginal capacity costs • Capacity is fixed and cannot increase to meet more demand • Hotel demand is widely fluctuating and uncertain • Different market segments have different lead times for purchase • Hotels have great flexibility in varying their prices at any given time • *Similar to airline industry * Revenue management requires hotels to be market oriented as knowledge of market segments, their buying behavior, and the prices they are willing to pay is essential for maximum success.

What determines the degree of impact of the search process?

• Stimuli may affect the process at some stage. The degree of impact, as well as the intensity of the entire search process, is determined by the level of involvement the customer has with the purchase decision • The impact and intensity is greater in cases of high involvement, in which the decision has high personal importance or relevance to the customer, such as high cost, high risk, or high effect on self-image. • When low involvement exists (choosing a fast food restaurant), the process proceeds far more quickly, and some stages may be skipped, especially when information is readily at hand. • Customers are affected only by stimuli that they selectively choose

What are three strategies for target marketing

• Target markets are drawn from segments • Might be called subsegments, but the word target has a more active connotation • Once we have segmented the market and examined the market potential, we must select those specific markets that we can best serve by designing our products and services to appeal directly to them • Many of the same segmentation rules apply; we just refine them more • Three strategies for selecting target markets: 1. Undifferentiated targeting strategy assumes that customers within a segment have similar needs so only one type of product/service is offered to that segment. This is common practice in hospitality; e.g. business traveler 2. Concentrated targeting strategy is when a firm selects a target group within one market segment and pursues it aggressively (e.g. Ritz-Carlton targets executives) 3. Differentiated multitarget market. Marriott has different brands, all serving distinct target markets within the business segment and doing so without confusion. Hotels with concierge floors or all-suite towers. • Concentrated or differential target marketing means aiming specifically at one or more portions of a market • Vacation market segment could be broken down into 10 target markets. Each one represents an isolation of interests and behavior based on benefits, usage, demographics, and psychographics. • Each one has different needs and wants and requires a different package, a different positioning, and different communications • Criteria for choosing target markets. They overlap the segmentation criteria, but are a little more precise: • What is the potential revenue and market share? • What are the demand characteristics? • Are they able and willing to buy? • How are they currently being served by the competition? • Are they compatible with the objectives of the firm? • Are they compatible with each other? • Do they fit the resources of the firm? • Do they fit the tastes and values of the firm? • What is the feasibility of exploiting them? • Target marketing is practiced at the unit level also. • A property may use concentrated targeting, select one market, and service it well. • The risk of concentrated targeting is that of putting all your eggs into one basket. IF environmental or other changes negatively affect the demand, you may not have any market left to serve. • A hotel may select several markets to serve, but these markets must be compatible and seek similar benefits from the establishment.

What are the advantages and disadvantages of geographic segmentation?

• The original segmentation variable and one of the most widely used in the lodging and restaurant industries • Country, city, media market, town, part of city, or even neighborhood • Certain geographic locations are the major sources of our business * Advantages: 1. If geographic segments can be pinpointed, then the problem of reaching those segments is greatly facilitated, especially if they are in concentrated areas 2. Direct mail and media forms of communication are more easily specified 3. Use available resources to learn more about the denizens of the area 4. Easiest segmentation to define * The U.S. federal government defines large metropolitan areas in terms of supposed economic boundaries called metropolitan statistical areas (MSAs) • Government produces reams of data on those areas - population, ethnic mix, growth, income, discretionary spending, household size, occupations • Use of MSAs in marketing is limited, but of greatest value when the market is being segmented on certain demographic variables • MSAs can be analyzed for the existence of these variables * Designated market area (DMA) used by AC Nielsen media research • Defined by specific zip code correlates and reflect the geographic areas served by television stations located in a central geographic point • Data includes demographic characteristics that can be used for reaching specific audiences by television • Most sophisticated advertisers use these designations • Primary purpose of DMA analysis is to aid firms in planning media coverage (see which TV stations reach this area) * Problems with geographic segmentations 1. Most fallible for hospitality because it doesn't necessarily reflect the locus of the "buy decision" 2. Markets from which the registrants come from may not necessarily be where the reservation came from; may not reflect where the actual buy decision is made (e.g. business travelers) 3. Individual restaurants cater to numerous small segments that are difficult and prohibitively expensive to reach through traditional advertising media 4. May help us to reach the market, but not of much assistance in determining he needs and wants of the market because geographic segments are very heterogeneous in terms of customer profiles, needs, and wants

What is the significance of competition among destinations? How can a destination identify its competitors?

• To maintain a competitive position in the market, the destination must be able to accurately evaluate its competition o Destination management must have a sound understanding of the market in which they operate: their customers, market boundaries, market conditions, and competitors • Destinations are mutually dependent o A competitive move by one destination has a noticeable effect on its competitors, such as retaliation or counter efforts (e.g. discount packages) • Identifying competitors influences all marketing decisions such as pricing, promotion, distribution, products development, attraction design, and positioning o Provides the basis for competitive analysis, which assesses the industry structure, market scope, and focus of competitive advantage o Destination must understand on what dimensions they compete * Two approaches in identifying competitors: industry/supply-based approach or a market/demand-based approach 1. Industry/supply-based approach approach: defines competitors as those brands that operate in the same industry offering similar products and services to similar customers. Requires identifying competitive destinations through the similarity of their offerings, resources, and strategies 2. Market/demand-based approach: classifies competitive destinations as those satisfying the same customer need. Requires identifying competitors by the similarity of their customers (i.e. their attitudes, behaviors, and motivations) o Managers tend to use an industry approach more often than a market approach because of its ease • Ignores the fact that customers choose between competitive brands. Competition takes place in the mind of customers, so must create and communicate a strong image that is able to distinguish itself and promote its superiority and relevance to target customers. • Provide a point of distinction to entice target customer to choose them * The context and situation in which destinations are considered as travel options can be influenced by factors such as customer's cultural orientation, knowledge level, available time, discretionary income, perception of safety, major catastrophic events, terrorism, etc.

What does marketing intelligence typical include?

• Today's world is far more competitive, and accordingly, the depth of insight required to make the best decisions requires access to the "intelligence" that can help guide these decisions. • Marketers need better intelligence today because the consumer is changing and has a seemingly endless array of choices • Choices mean decisions, and making more decisions means acquiring more information, even if only to verify intuition • No business makes a decision without acquiring market intelligence about the consumer • Marketing intelligence guides decision making at every level, thus enhancing the overall quality of customer service while ensuring the ongoing creation and evaluation of products and services that meet emerging customer needs * Market intelligence typically includes: • Analysis of the general economic environment in which the hospitality enterprise operations • Creation of customer profiles (both existing and prospective) • Assessment of new market opportunities • Pretesting of new product(s) • Pricing and communication strategies • Overall measurement of the impact of the marketing plan * Restaurant firms require the same type of information, but also determine: • Changes in menu offerings • Sales opportunities • Hours of operation • Changes in design, décor, and atmosphere • Market position strategies * Outside expertise is frequently commissioned to assist with the capture and analysis of research info • Outside data may be purchased (e.g. STAR, the Daily Bench) • Large restaurant chains are more prone to subscribe to data services that track consumer trends (e.g. CREST - Consumer Reports in Eating Share Trends): reports on expenditures and behavior in foodservice by type and classification of restaurant and by meal period. These reports track broad trends, but also specific info for individual companies. • Foodservice Europe and Middle East • National Travel MONITOR: survey of travel habits, preferences, and intentions of Americans. Vertical market studies on affluent travelers, family travelers, meeting planners, and American gamblers

Describe international travelers

• Travel between nations is expected to grow • Canada and Mexico provide the most tourists to United States, and vice versa, because of their contiguous borders • Overseas visitors are led by the Japanese, followed by Europeans from the UK, Germany, France and Italy • Growth markets in the future are visitors from Argentina and South Korea. • Must be sensitive to the cultural differences of visitors from different nations • Because it is expensive and risky to try to directly market to individual international visitors, seek out an intermediary, such as a consortium, reservation system, referral network, or tour operator with which to establish marketing relationships • International trade shows are essential fro reaching this market. Brings together tour operators from all over the world who meet with hospitality industry representatives to conduct business. • Tour operators account for over 70% of all international tourist arrivals to the US * Foreign visitors to the United States can go to only a few select hotels in major cities and expect to find someone who speaks their language and exchanges their money, not to mention understanding their needs. • This situation is even worse in restaurants; best chance is to go to a purely ethnic restaurant or hope to have an immigrant server • Americans can travel almost anywhere and find hotels and restaurants where someone will speak English or at least attempt it • Problem goes far beyond language, it extends into the area of basic customer needs and wants. * Basic principles of marketing to the international traveler are no different where you go - they always involve the needs and wants and solutions of problems of customers. Understand the changes in customers, there are no changes in market concepts. • Customers are looking for the same things: to establish relationships and be sure that they will be taken care of on arrival • Vagaries are nice to have, but without trust and relationship, they become nonissues

Define macrocompetition

• Two broad forms of competition • Macrocompetition: within the industry • Microcompetition: within the product class * In a macro sense, competition is any other organization that competes for the same customer's dollar • Any hotel is competition for any other hotel (at least in the same area) • Every supermarket is competition for restaurants • A new car is competition for a two week cruise • May be satisfying different needs and solving different problems * Changes that take place in the competitive environment as an industry becomes mature • Competition for market share becomes more intense as firms are forced to achieve sales growth at one another's expense • Firms are selling increasingly to experienced, repeat buyers who are making choices from known alternatives • Competition has become more oriented to value in relation to cost and service as knowledgeable buyers expect similar price and product and service features • New products, services, and applications are harder to come by • Brand recognition and clarity become more powerful forces in customer selection • Fragmented industries begin to consolidate, creating bigger and more powerful competition • Substitute products become more prevalent * Services often readily substitute for another, often at a much lower price. • Can satisfy the same needs or solve the same problem, albeit in a different way. • The customer wants it more cheaply, quickly, easily, or conveniently. * Environmental changes should not be confused with fads, although you may convert a fad into an opportunity • Fads are short lived • Environmental changes are longer-term shifts in the environment and society • The point at which a fad ends and a shift or trend begins can be problematic • Risk lies in making a substantial investment in what turns out to be a fad • Take advantage of opportunities that can be easily reversed. *Find opportunities/niches in the marketplace left void by competition as environment changes

What is the importance of image promotion?

• Understanding how travelers acquire info is important for making marketing decision, designing effective marketing communications campaigns, and delivering services • During info search, marketers provide info and influence travelers' decisions • Understand what kind of image the destination travelers have in their mind because this image is most likely to influence travelers' destination selection * Importance of Image Promotion • Every communication related to a destination helps consumers form an image of that place (websites, books, movies, tv, postcards, songs, photos, news stories, ads) • Favorable images greatly improve the chance of increasing tourism traffic • Negative images can have a profound impact by increasing challenge for NTO marketers to promote a country's tourism overseas (e.g. poverty, danger, natural disasters) • A tourist makes a destination choice based on a previously held image of the destination. The tourist's actual experience in the destination provides comparison with the previous image - a "reality check": and determines the tourist's level of satisfaction or dissatisfaction with the overall experience o Depending on level of (dis)satisfaction, tourist determines if they want to return and will spread word of mouth about destination

What is the significance of local residents' attitudes toward tourism?

• Understanding local residents' attitudes toward tourism development is crucial for local governments, policy makers, and businesses because the success and sustainability of any sort of tourism development depends on the goodwill of the local residents and their active support • The quality of life of local residents is affected by the consequences of tourism development, including an increased number of people, increased use of roads, and various economic and employment-based effects. • Successful tourism requires the hospitality of local residents • Active opposition can lead to delays, legal action, and abandonment of projects if they become financially unfeasible • Factors that affect the level of local residents' support for tourism development • Residents are likely to support tourism development as long as they believe that the expected benefits of development exceed the cost of the development • Most visible benefits are its contribution to the local economy and the employment opportunities created. • Some perceive tourism as having negative social and cultural impacts • Some view tourism as having positive economic, social, and cultural impacts • If residents believe tourism creates more benefits than costs for the community, they tend to have a favorable view of tourism. • Factors that influence how locals view tourism and their support for tourism: • State of the local economy: many primary industries, which communities have depended, have departed. Many of these communities faced with a narrow resource base, embraced tourism. • In economically depressed communities, residents underestimate the cost of tourism development and overestimate the economic gains • Perception of the state of local economy has a significant impact on both the perceived costs and benefits of tourism and on the support for tourism. They may support tourism development even though they are aware of the potential for tourism to result in negative impacts. • Destination managers need to make sure they have local residents' support and endorsement. They must also know their situation and must be in tune with their external environment and changing customer needs and wants. • Must be a strategic fit between what the market wants and what the destination has to offer, as well as between what the destination needs and what the market can provide. • Requires a marketing strategy that is endorsed and supported by all stakeholders to guide the product development and all marketing activities • Public agencies such as national tourism organizations (NTOs) and convention and visitors bureaus (CVBs) promote the tourist business for the whole destination or country while the private businesses promote themselves.

What are the advantages and disadvantages of demographic segmentation?

• Widely used in almost all industries • Easily measured and classified • Based on income, race, age, nationality, religion, gender, education, culture, and so forth • May be somewhat moot • In a demographic, there may be many people with different needs, seeking different benefits • Demographic profile of the users will not distinguish among them • Demographic lines have become very fuzzy (plumbers may have higher incomes than MBAs) • One of the most useful demographic parameters may be age • Family life cycle: emotional and intellectual stages you pass through from childhood to retirement; childhood, independence, coupling or marriage, parenting: babies through adolescents, launching adult children and retirement or senior stage of life • Lifestyle segments • DINK: dual income, no kids • DEWK: dual employed, with kids • Echo boomers: children of the baby boomers • Demographic market segments are largely nonpredictive • Must know why; what needs and wants of these people are being satisfied or not • Serve as gross market definition parameters within which are found more specific subsegments