“Marketing”Creating Customer Value and Satisfaction Objective: Defining what marketing is and introducing its basic concepts.
What is Marketing? • Marketing is not selling or advertising. • Marketing is the management of creating and exchanging products and value in order to satisfy the needs and wants of the customers. • Marketing involves building profitable, long-term relationships with customers. • The goal of marketing is to satisfy customers at a profit.
If the marketer does a good job of understanding consumer needs, develops products that provide superior value, and prices, distributes, and promotes them effectively, these products will sell easily. • Thus, selling and advertising are only part of a larger `marketing mix` - a set of marketing tools that work together to affect the marketplace. • Marketing, more than any other business function, deals with customers. Creating customer value and satisfaction are at the heart of hospitality and travel industry marketing.
The Marketing Process • Managers must realize that they cannot satisfy all customers; they have to choose their customers carefully. • Companies work to (1) understand consumers, (2) construct marketing programs to create superior value for the customer, (3) build profitable relationships and create customer delight, and in turn (4) capture value from customers in the forms of sales, profits and long-term customer equity.
Core Marketing Concepts • Customer needs, wants & demands • Marketing offers – products, services and experiences • Customer value and satisfaction • Exchanges and relationships • Markets
Needs, Wants, and Demands • Consumers have needs (physical, social, individual etc.) wants, and demands to be satisfied. Consumers view products as bundles of “benefits” and choose products that give them the best value for their money and most satisfaction. E.g. Fairfield Inn → comfortable bed, clean room, low price; JW Marriott Hotels & Resorts → fine dining, luxury, comfort and productivity
Understanding needs and wants • What are people looking for when they visit different destinations? • Why would a tourist choose to holiday in Florida rather than Spain – what variables are at work apart from cost? • Why would he choose to travel with British Airways, but not with Lufthansa? • Why would he buy an independent inclusive tour, but not a group tour?
Need Satisfaction Theory • All consumer purchases, including choice of travel destination, are made to satisfy aneed of the consumer. The individual has a desire for something????? • Do people travel just to travel? • People do not travel just to travel. Travel fills some need in each consumer. Travelers’ needs differ.
Do we really need? • Often people talk about what they need, say a new television set, a new dress, or a holiday. But do they really need these things? Or are they just expressing a desire for more? • Due to today’s increased material consumption patterns, it is becoming difficult to distinguish wants (e.g. reference group influence)from needs.
Maslow’s hierarchy of needs Self-actualization (e.g. self-fulfillment, etc.) Ego needs (e.g. self-respect, status, success, etc.) Social needs (e.g. affection, love, friendship, etc.) Safety needs (e.g. security, protection, etc.) Physiological needs (e.g. food, water, air, etc.)
According to Maslow, the more basic needs have to be satisfied (satisfied according to the needs of our cultural group) before our interest will focus on higher level needs. • However, according to Alderfer, and his ERG (existence, relatedness, and growth needs) theory, (1) more than one need may be operative at the same time, (2) if the satisfaction of a higher level need is frustrated, the desire to satisfy a lower level need increases.
The Main Motives for Travel and Tourism • Motivation for travel and tourism can be categorized as; • Physical motivations • Cultural motivations • Personal motivations • Prestige and Status motivations (Mathieson and Wall, 1993)
Physical motivations • refreshment of body and mind (rest and relaxation) – beach holidays, lakes and mountains, etc.; • for health purposes (i.e. either medically prescribed or undertaken voluntarily) – spas, etc.; • for participation in sports – skiing, canoeing, safari parks, ponytrekking, etc.; • pleasure, - fun, excitement, romance and entertainment, to shop.
Cultural motivations • curiosity about foreign countries, people and places; • interests in art, music, architecture, folklore – music festivals, theatre visits, etc.; • interest in historical places (remains, monuments, churches); • experiencing specific international and national events - Olympic Games, Oktoberfest, etc.
Personal motivations • visiting relatives and friends; • meeting new people and seeking new friendships; • seeking new and different experiences in different environments – sailing etc.; • escaping from one’s own permanent social environment (i.e. desire for a change) • personal excitement of traveling; • visiting places and people for spiritual reasons (i.e. pilgrimages) • traveling for travel’s sake
Prestige and Status motivations • pursuit of hobbies – craft or painting holidays etc.; • continuation of education or learning- study tours etc.; • seeking of business contacts and professional goals – fairs, etc.; • conference and meetings; • ego enhancement and sensual indulgence; • fashion
Products • A product (persons, places, organizations, activities, ideas) is anything that can satisfy a need or want. Producers must see themselves as providing a solution to a need (benefits) rather than just selling a product. Otherwise, when a new product satisfies the needs better or less expensively, they would not make money. • Research is a must to understand the needs and wants of the customers to produce the right product.E.g. At Disney World, each manager spends a day in the park in a Mickey costume or work on the front line - taking tickets, selling pop-corn.
Customer Value and Satisfaction • How do customers choose among these many products? Consumers make choices based on; • Value; is the difference between owning the product and the cost of obtaining the product, in a way “profit” to the customer. Customers do not judge product values objectively, on the contrary they act on perceived value. E.g. Is Hilton really the best hotel company?
Satisfaction; is the difference between the product’s performance and buyer’s expectations. If the product’s performance falls short of expectations, the buyer is dissatisfied. If the performance matches or exceeds expectations, the buyer is satisfied. Smart companies aim to satisfy customers by promising only what they can give, then giving more than they promise. Benefits of satisfying customers: Customer satisfaction create an emotional tie (customer loyalty) to a product. Highly satisfied customers make (1) repeat purchases, (2) are less price sensitive, (3) talk positively to their friends.
Quality; simply quality can be defined as “freedom from defects”. Today, most companies define quality in terms of customer satisfaction. E.g. according to Motorola “if the customer doesn’t like the product, it’s a defect”. Quality starts with customer needs and ends with customer satisfaction. The concept of “total quality management” is in a away “total customer satisfaction”. Improving the quality of a product that customers want increases customer satisfaction, therefore increases profit.
Exchanges and Relationships • Marketing occurs when people decide to satisfy needs and wants through exchange. • Exchange (transaction) is the act of getting a desired object (product, service, idea …) from someone by giving something in return. • Marketing should create mutually beneficial relationships (good for both parties) to generate profitable transactions.
Markets • A market is the set of actual and potential buyers of a product. These buyers share a particular need or want that can be satisfied through exchanges and relationships. • Marketing means managing markets to bring about profitable customer relationships.
Creating these relationships takes work. Sellers must search for buyers, identify their needs, design right marketing offers (products), set right prices, promote and deliver (place) the products in the right ways (4Ps of Marketing). These are the core marketing activities.
Marketing Management • Marketing management is the art and science of choosing target markets and building profitable relationships with them. • The marketing manager’s aim is to find, attract, keep, and grow target customers by creating, delivering, and communicating superior customer value.
Marketing management is in a way, demand (customer) management. • A company’s demand comes from two groups: new customers and repeat customers. Marketing management deals with finding ways (1) to attract new customers and create transactions with them and also (2) to retain current customers and build lasting customer relationships.
To design a winning marketing strategy, the marketing manager must answer two important questions: • What customers will we serve (what’s our target market)? • How can we serve these customers best (what’s our value proposition)?
Selecting Customers to Serve • The company must first decide who it will serve. It does this by diving the market into segments of customers (market segmentation) and selecting which segments it will go after (target marketing).
Some people think of marketing management as finding as many customers as possible and increasing demand. But marketing managers should know that they cannot serve all customers in every way. By trying to serve all customers, they may not serve any customers well. Instead, the company wants to select only customers that it can serve well and profitably.
Methods Used to Segment Markets in Travel and Tourism • There are seven main ways of dividing up markets for segmentation purposes, all of which are used in practice in the travel and tourism industry. The main methods of segmentation are: • Purpose of travel • Buyer needs, motivations, and benefits sought • Buyer behavior (characteristics) of product usage • Demographic, economic, and geographic profile • Psychographic profile • Geodemographic profile • Price
Segmentation by purpose of travel • E.g. Conference markets require different products to those supplied to other business travelers and meetings for groups of different sizes require special provision. • For a tour operator, customer’s purpose and product needs will differ according to whether they are looking for; main summer holiday, additional holidays and short breaks, winter sun, winter sports.
Within the broad categories of main and additional holidays, typical subsidiary purposes would include sea and beach holidays (with and without children), cultural interests, walking and other activity interests and an interest in exotic destinations.
Segmentation by buyer needs and benefits sought • Within purpose of travel, the next logical consideration for segmentation is to understand the needs, wants and motivations of particular customer groups (as discussed). • The range and perceived importance of benefits sought by customer segments are not easy to understand. They can only be discovered by market research among identified target groups.
Segmentation by benefits, makes it possible for marketing managers to fine tune their products. • Focusing on promoting the benefits sought is a logical objective for brochures and other marketing communications.
Segmentation by buyer behavior • Within purpose and benefits sought, there is scope for refining the segmentation process according to the types of behavior or characteristics of use of products that customers exhibit. E.g. frequency of usage of products. • Frequent users (high frequency, high spending high loyal); may represent only 10% of individual customers in a year but up to 60% of revenue for some hotel groups and airlines.
Segmentation by demographic, economic, geographic and life-cycle characteristics • By using previous segmentation processes, considerable knowledge can be obtained. However, for the purposes of efficient promotion and distribution of products, especially to prospective new customers rather than to existing ones, it is important to know the demographic profile (e.g. age, sex, occupation, income, place of residence) and other defining characteristics (life-cycle) of their target customers, including potential users.
Segmentation by psychographic characteristics and lifestyle • Dependent on sophisticated market research techniques. • Psychographics aims to define consumer on attitudinal or psychological rather than physical dimensions.
Geodemographic segmentation • A very powerful and productive segmentation tool; developed through combining an analysis of census data with the postal area (zip) codes that identify group of households in the country.
Segmentation by price • In leisure travel and tourism markets in all countries, buyers are highly price-sensitive. • It is not a segmentation variable of the same kind as the others. • There are segments of customers to be identified and located who respond to different price bands. • Yield management; segment targeted tactical pricing.
Choosing a Value Proposition • The company must also decide how it will serve targeted customers – how it will differentiate and position itself in the marketplace. • A company’s value proposition is the set of benefits or values it promises to deliver to customers to satisfy their needs. E.g. Northwest Airlines punctual, friendly, fun flight; Singapore Airlines luxurious, prestigious, special flight
Such value propositions differentiate one brand from another. • They answer the customer’s question “Why should I buy your brand rather than a competitor’s?” • Companies must design strong value propositions that give them the greatest advantage in their target markets.