Marketing in Service Industry Context - Case Study Example

New Project Table of Contents Introduction 3 Concepts of marketing in service industry context 4 Concepts of Service Marketing 4 Intangibility 4 Heterogeneity 4 Inseparability 5 Perishability 5 Impacts of marketing on the hotel industry 5 Seasonality 5 Fixed Costs 5 Relevance of consumer markets in the hotel industry 6 Rationale for developing different consumer segments 7 Understanding the role of marketing mix 7 Different components of the marketing mix in the hotel industry 7 Analysis of Pricing Strategies 10 Captive pricing 10 Optional pricing 10 By product pricing strategy 10 Ability to use promotional mix 11 Role of promotional mix 11 Detailed advertising campaign 11 Role of sales promotion and public relations in promotional efforts 12 Understanding the marketing cycle 13 Relevance of market research 13 Market Research for Hotel’s Services 13 Types of media for promotion 14 Recommendations for implementing the marketing plan 14 Reference 16 Introduction The world of the 21st century is a highly intense business environment, which is moving ahead on the lines of growing demand of products and services along with continuous change and development. The tremendous development of the telecommunication technology and high speed internet connectivity since the beginning of this century has helped in the transformation of the globe into a well connected single entity. The steady development of various domains of technology has resulted in the free flow of information across various geographical borders, thereby facilitating international trade and business. It also has to be said that the free flow of information across various geographies has helped in spreading awareness among the masses for various kinds of products and services and has naturally made them more demanding in nature. Because of the growing consumer awareness and demands, new opportunities of businesses are arising in various markets around the world, which are being increasingly tapped by domestic as well as international product and service based organizations. With the rise in competition in the marketplace, because of the presence of multiple firms offering similar kinds of products and services, the consumers are having a high range of choices to choose from. To make the most of the highly competitive marketplace, the consumers of any market are enjoying a high amount of buyer’s power and are focusing on acquiring the product or service which has consistency in quality and provides the perfect value for money. In this particular assignment, the focus is on the Hilton Hotels & Resorts, which offers hospitality services to customers around the world. This assignment aims to understand the various aspects of marketing that is existent in a service based industry like the hospitality sector, as well as make some valid recommendations for the marketing of this particular five star property of Hilton Hotels, from the perspective of the Director of Sales and Marketing. Concepts of marketing in service industry context While marketing the Hilton Hotels & Resorts, it has to be said that the international hotel chain falls into the hospitality sector and hence the marketing efforts that are needed are of service marketing category. Concepts of Service Marketing In explaining the concepts of service marketing, focus has to be given on the multiple characteristics that are associated with it as well as the marketing challenges that are associated with these characteristics. Intangibility The first characteristic is that services are intangible in nature as they are often actions or performances provided by a set of people with varying levels of skills, knowledge as well as designation. The services are often felt but cannot be directly touched or seen by the customers to whom they are provided. For examples, medical services provided by the doctors, surgeons can be felt by the patients, but they cannot directly see or touch it. Because of the intangible nature of the services, the marketing becomes difficult as the marketers cannot display or communicate a tangible outcome to the target audience which has consistency in terms of quality. Heterogeneity The second characteristic is the factor of heterogeneity. Since the services are often provided by individuals, hence the quality of services are bound to vary to some extent from employee to employee (Gilmore, 2003, p. 11). Even the quality of services provided by an employee belonging to the service industry may vary in terms of his or her job satisfaction as well as fatigue and exhaustion. Also, from the customer’s perspective, the factor of heterogeneity exists because of the varying service based demands and differing levels of perception in terms service quality and customer satisfaction. The marketing challenge associated with the factor of heterogeneity of services is that it becomes very difficult to communicate consistency in service quality as it is dependent on the moods of the employee as well as the customers’ service demand and their ability to communicate it. Inseparability A very important characteristic of services is that they are inseparable in nature and have to be produced and consumed at the same time. The difficulty for the marketing team is that since the services cannot be produced and offered in bulk, the variation in terms of quality might render a negative impact in regards to brand image and customer satisfaction. Perishability Since, the services of the hotel cannot be resold at a later stage; the services are often perishable with regards to a particular time frame. Hence, the process of demand forecasting as well as capacity planning plays a highly critical role as it helps in producing the optimized amount of services that are required to cater to the demand of the consumers (Zeithaml and et.al, 2011, p. 21 -23). Impacts of marketing on the hotel industry While discussing about the marketing impacts on the hotel industry as well as Hilton Hotels & Resorts, focus has to be given on the two important characteristics. Seasonality A very important characteristic of the hotel industry is the factor of seasonality. Since the hotels mostly cater to business travelers as well as tourists, hence, the seasonal peaks and troughs plays a major role in influencing the marketing efforts of the hotel industry. Fixed Costs An important characteristic of the hotel industry is the high fixed costs, which gets generated because of rents, leases, maintenance charges, and insurance as well as manpower costs. To recover the high fixed costs, the hotel industry often has to engage in aggressive marketing efforts so as to achieve the maximum profits by fulfilling its demand capacity (Singh, 2008, p. 54). Relevance of consumer markets in the hotel industry In order to attain the maximum demand capacity, the hotel industry often targets various consumer markets which range from backpackers, couples, families as well as business travelers. Discussing in details, it has to be said that each of the consumer markets, has varying needs, consumer behaviour as well as disposable income. The business travelers segment is the most important segment targeted by the hotel industry. This group basically has different corporate and business oriented needs and prefers technology friendly services. The business travelers generally stay indoors and as a result prefer excellent room service and other room specific amenities. This group often has high disposable income since the room charges are often handled by the various business organizations they belong to. The couples are another very important consumer market often targeted by the hotels. A majority of the couples belong to the newly married category, who are looking forward to their honeymoon experience. The couples generally have mostly romantic needs, and as a result give preference to quiet premises, exotic restaurants, as well as high quality bedding in the hotels. The couple consumer segment spends varying amounts of time in the hotel premises as well as outdoor, which varies mostly in regards to their personal preferences and choices. Since the particular category of consumers is looking for good experiences, they often have a high disposable income and avail luxury goods and services The family consumer segment has specific needs. Because of the presence of kids, this particular segment prefers kid friendly entertainment areas as well as inexpensive restaurants. This group often has needs for additional amenities. Generally, the disposable income of this segment is moderate in nature. Talking about the backpackers who are mostly solo travelers, it can be said that they are mostly keen in spending time in exploring the interests, attractions and culture of a particular place. The key focus of the solo travelers or backpackers is mostly to acquire a great deal adventure and experience. The solo travelers often spend very little time at the hotel and often focus on low prices in regards to hotel amenities and services (Capozzi, n.d.). Rationale for developing different consumer segments The reason for categorizing the target audience into different consumer segments is because each of the consumer segments has very specific, yet diversifying needs along with varying purchasing power capacities. By designing different market segments, the hotel will be able to identify the desired consumer market which matches its brand positioning. This will help in providing the right services that are sought by the target audience and will greatly help in enhancing customer satisfaction. Understanding the role of marketing mix Different components of the marketing mix in the hotel industry The different components of the marketing mix in regards to the service industry comprises of product, place, promotion, price, people, process and physical evidence. Source: Rao, 2007, p. 63 The product in the case of hotel marketing is the service, which is intangible in nature. In order to make the service tangible to the customers, various features are offered together in the form of a bundle (Rao, 2007, p. 62). For example, in the hotel industry, in order to make the services tangible to the customers, the hotels often provide bundled offering of services like free Wi-Fi, stunning view of the surrounding, free passes to the hotel pubs and lounges as well as complimentary breakfast. The place represents the point of distribution. In this case, the hotel premises acts as the platform for distribution since the services of a hotel are increasingly intangible and inseparable in nature. Promotion represents value communication to the target audience. In this context, the focus lies on spreading awareness about the services of the hotel to the desired target audience. Also, in this particular industry, the promotion is being conducted to educate the target audience in regards to ways of having a better consumer experience. The price represents value capture. In the service marketing industry, the price factor is very sensitive, as consumers often place a direct correlation between the quality of service offered and the price tag. In the hotel industry, the prices often act as a tool in luring customers. It is a normal trend to increase the room prices during peak season and reduce them during the lean season. For examples, hotels in London expecting a peak season during the 2012 Olympic Games raised their room prices by over 4% on a year on year basis (HRS, 2013). The people component plays a very vital role in the service marketing domain. In the hotels, the employees are the ones who are facing the customers at all times. Hence, a standardized highly impressive performance by every single employee of a hotel will help in developing a strong brand image. For example, to develop the people factor of the hotel, the international hotel chain Ritz Carlton provides high quality training to all its employees so as to integrate them strongly with the culture of the organization (Regan, 2013). The process factor is important in this context, since it helps in streamlining the ways and methods of rendering the services. It is important to highlight that a standardized process helps in great way in offering quality services and building customer satisfaction. For examples, to maintain the desired level of efficiency in the employees, the Ritz Carlton follows a daily meeting of employees in every department across the world and share ‘wow’ stories, which helps in generating employee motivation as well as developing customer satisfaction (Gallo, 2008). The physical evidence factor of the service marketing domain helps in associating a tangible factor to the services offered by a particular organization. The stunning views provided by the presidential suite of a five star hotel, high speed internet connectivity are examples of physical evidence in the hotel industry (Kumar, 2010, p. 173). Analysis of Pricing Strategies While deciding the pricing strategies for the services offered by Hilton Hotels & Resorts, it is important to keep in mind, that the property belongs to the luxury category and is a highly popular international brand. Also, it is relevant to highlight that the hotel is looking forward to target multiple consumer segments like business travelers, couples and families. In order to lure the multiple consumer segments, it is very important to apply multiple pricing strategies. Captive pricing For targeting the business travelers, who prefer high quality room services and other indoor amenities, the hotel can opt for the captive pricing technique. Under this pricing strategy, the rooms and the services that will be offered to the business travelers will be similar in nature and will be priced at the same rate. The prices for the rooms will be of the premium range and will comprise of multiple high tech indoor amenities. It can be expected that the captive pricing technique will help in generating the maximum revenue for the hotel Optional pricing In order to lure the couples segment, the optional pricing strategy can be implemented. The prices will be fixed and moderate in range, while additional features like better view, indoor mini bar, and access to exotic spa treatments can be charged separately. This kind of pricing tactic will offer the perfect fit for the couples segment since they are on the lookout for exotic experiences and often have high disposable income. By product pricing strategy This kind of a pricing strategy can be used to appeal to the family segment. While basic services will be provided at attractive rates, for add on services, extra charges will be levied to the customers (Andrews, 2009, p. 129). Ability to use promotional mix Role of promotional mix The promotional mix helps in communication of the values of a firm’s services to the desired target audience (Lamb and et.al, 2009, p. 396). Generally the promotional mix includes multiple promotion methods like advertising, personal selling as well as promotion via usage of various tools. Normally the usage of the promotional methods is dependent on multiple factors like geographical nature of the market, target audience, service features as well as budget (Longenecker and et.al, 2009, p. 170). In this case, it can be said that since Hilton Hotels & Resorts is an international luxury chain, hence, the target audience will be mostly high profile customers who are spread in different global markets. Hence, in this case, the usage of advertising tactic of the promotional mix will help in generating sales for the hotel’s services. Detailed advertising campaign While planning a detailed advertising campaign for Hilton Hotels and Resorts, it needs to be considered that the hotel chain belongs to the luxury hospitality category. So, naturally the target audience will be mostly elite and affluent people, present in various global markets. For designing the advertising campaign for the hotel, it is important to have a central theme. The theme for the Hilton Hotels & Resorts advertising campaign will be ‘Providing the best of luxury memories’. The estimated budget for this campaign will be around 6 - 8 million USD. Discussing in details, it can be said that the advertising campaign will highlight the amazing exotic experiences that the hotel offers. Since the business travelers form a considerable chunk of the audience, the campaign will feature the high tech rooms of the hotel which provides video conferencing facilities with business clients. Also, the campaign will highlight the hotel’s option of providing business travelers with air transportation facilities, right from the hotel premises. The campaign will also be featuring the amazing luxury experiences that the hotel offers to romantic couples who are looking forward to having a memorable experience. Stunning views, sumptuous delicacies along with a dedicated concierge service as well as customized experiences like a meal from Paris, snorkeling in moonlight, a romantic evening in the calm waters will be the feature of the campaign. The campaign will be aired in various lifestyle channels in the leading markets around the world. Also, print media promotions in various luxury magazines will be executed for this particular campaign. In the online arena, the multiple vides of the advertising campaign will be promoted in YouTube. Also, a dedicated page for this campaign will be created in multiple popular social networking sites around the world. Role of sales promotion and public relations in promotional efforts While discussing about the role of sales promotion and public relation in promotional efforts, it is important to highlight that the main purpose of promotion is to communicate the value of a firm’s services. Talking about the sales promotion, it can be said that it helps in generating sales for the services of a firm in an aggressive fashion (Pride and et.al, 2012, p. 445). While the application of a sales promotion technique for a particular service helps in triggering an increase in sales, the usage of public relations tactic helps in spreading awareness among the audience in regards to the offering of a particular service by a firm. In the case of Hilton Hotels and Resorts, it can be stated that the coordinated usage of both sales promotion as well as public relations along with advertising often helps in spreading awareness as well as increasing the demand and sales for the services of a firm (Ferrell and Hartline, 2011, p. 295). Understanding the marketing cycle Relevance of market research While discussing about market research in the hospitality industry, it needs to be highlighted that the hospitality industry also comprises of buyers as well as sellers. While the sellers are hotels, the buyers are increasingly the customers, who are being targeted by the hotels in order to generate their sales. In order to generate a continuous demand for the services of a particular hotel, it is very important for the top management of the hotel to keep a pulse on the customer centric issues like satisfaction and loyalty. Also, an in-depth market research conducted for the hotel helps in evaluating the performance of various in-house factors like room appeal, cleanliness, food quality, serving time, staff friendliness as well as overall guest experience. Here in lies the relevance of market research. It can also be said that to measure the performance of the various critical factors associated with the hotel service, conduction of a quantitative research using the five point rating scale will be highly effective (Kotler and et.al, 2006, p. 188). Market Research for Hotel’s Services The market research for the services provided by the Hilton Hotels & Resorts can be best measured using a survey instrument like a questionnaire. The questionnaire has to be designed using a five point rating scale. The usage of the five point rating scale will help in the mapping of consumer responses which might range from high positive to high negative. The questionnaire for the Hilton Hotels and Resorts will comprise of two sections. The first section will cover the general demographic questions like age, sex, level of income, nature of visit as well as frequency of visits to the hotel. The second section will ask on feedback about the cleanliness, room facilities, quality of room service, quality of food, quality of beverage, responsiveness of the staff. The questionnaire will also probe the respondents in regards to their perceived level of satisfaction, overall experience, as well as the likeliness of making another visit to the hotel in the future. Types of media for promotion While discussing about the type of media that can be used for the promotion of Hilton Hotels & Resorts, the focus has to be given on the fact that the target audience are mostly elite as well as highly affluent consumers who understand the value of luxury services, but are currently spread in multiple emerging as well as developed markets around the world. To communicate the values of the services of the luxury hotel chain to the global target audience, a mix of traditional as well as online media has to be used. On the traditional arena, the hotel can start with promoting its well designed service focused advertising campaign in the various lifestyle channels across the world. The sustainability factor is that lifestyle television channels with high TRPs will help in providing high viewership of the advertising campaign. Also, the advertising campaign can be promoted by using the print media, like various lifestyle magazines which high circulation among the effective target audience. On the online front, the advertising campaign can be promoted using the multiple networking as well as video blogging sites. The sustainability factor associated with the online promotion is that it will help in increased consumer awareness about the hotel’s services among the consumers across multiple global markets. Recommendations for implementing the marketing plan While providing the recommendations, a holistic approach has to be followed. The recommendations are as follows: Since the hotel services are the central part of the marketing efforts, the consistency in service quality is very necessary so as to meet the customer expectations along with reducing the service quality gap. A well defined set of service standards has to be defined so that it will standardize the quality of service and match consumer expectations. Since the hotel is targeting different consumer segments, multiple pricing tactics has to be adopted as well. A balance of service features and pricing will help in generating a better response from the multiple categories of the target audience. Because of the global target audience, the value communication of the hotel’s services has to be done by designing a global advertising campaign, which will cover multiple markets. For promoting the advertising campaign across global target audience, a mix of both traditional as well as online media. The balanced approach on the various promotion channels will actually help in increasing the effectiveness of the global advertising campaign. Reference Gilmore, A., 2003. Services Marketing and Management. New Delhi: Sage Publications. Zeithaml, V.A., and et.al, 2011. Services Marketing. 5th ed. India: Tata McGraw Hill Ferrell, O.C., and Hartline, M., 2011. Marketing Strategy. 5th Ed. USA: Cengage Learning. Capozzi, C., n.d. Consumer Segments in the Hotel Industry. [Online]. Available at: http://smallbusiness.chron.com/consumer-segments-hotel-industry-13764.html [Accessed 11 March 2014]. Rao, K.R. M., 2007. Services Marketing. India: Dorling Kindersley Pvt. Ltd. HRS, 2013. Hotel room rates soared in 2012: price trends show worldwide increase in room rates. [Online]. 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