Foundations of Marketing Theory: of Contiki Company - Case Study Example

 Foundations of Marketing Theory Executive Summary Contiki Holidays is a leading coach tour operator company based in Australia and offering transport services to close to 100,000 travellers annually on up to 2,000 tour excursions. Contiki’s excursions are intended solely for individuals aged between 18 and 35 years. Contiki target the Y generation (people born between 1977 and 1994), because majority of them have grown up in two income-households, in an era of economic prosperity that allows them significant discretionary income and many opportunities to spend it. Some of the many benefits it offers its Y generation customers include reasonable pricing, mix of nationalities on every tour departure and programmed on and off coach activities, including more nightlife entertainment and tour guides of the same age (Pierre & Pendergast 2010, pp119). This paper seek to analyse the Contiki Company, its background, marketing theories and the way company deals with competitors in the market. The analysis will focus on Contiki’s Australian market for international holidays. This tour operator has implemented a focused marketing approach in distinguishing market fragments. The approach implies that Contiki has decided to concentrate its marketing drive at attaining a bigger proportion of a definite fragment of the market (that is 18-35 year olds). The strength of this approach lies in its capacity to permit specialisation that may possibly generate economies in production, distribution and promotion (Kolb 2008, pp 103). Nevertheless, such a strategy bellies a number of weaknesses, one of which being alterations in the market requirements or new tour operator companies joining the market segment. Porters’ five forces model is used to evaluate the strengths and weaknesses of this approach. Lastly, this report re-examines areas of its business where Contiki should focus on more closely to further enhance its competitive advantage in the holiday tour market and consolidate its grip as the premier tour operator for youth travel. Such recommendations include taking full advantage of the Internet in online bookings, and intensifying market research on use of pricing as marketing strategy (Kurtz & Snow 2009, pp91). Background Contiki Holidays is a tour operator company initially founded in Europe at the beginning of 60s’. Today the company boasts of having about more than 70,000 tour patrons every year and having departures which number up to 3,000. The success of Contiki Company is attributed to the concentration of its numerous tours to the famous countries and regions like Canada, the United States and the Middle East. The introduction of its tours in Africa in 1995 also saw a new beginning and more growth of its market. Today the company has its markets concentrated in more than thirty countries in the world. The organization of Contiki Company tours consists of about twenty to fifty people who are drawn from several countries. So as to appeal to this diverse clientele, the Company does a very intensive marketing. The target group consists of individuals who are between the age of 18 and 35 since they are more productive and creative. On average therefore, the number of people working in the company have an average age of 24 (Mylne & Llewellyn 2009, pp 69). As a way of maintaining value and achieving a competitive advantage over the other companies, Contiki Company has an organized and well equipped fleet of coaches which are maintained regularly. These coaches are equipped with the electronic facilities which appeals to the young people, like VCRs and big Television screens, panoramic windows, aircraft-style reclining seats, bathrooms and mega stereo systems. Apart from the normal day programs, there are also off programs like after dusk entertainment which also appeals to scores of the young travellers. The tour operators are given three options to choose from including “budget” tours which utilise a shared accommodation in more budget-quality lodging and “Superior” tours which use superior-quality accommodation. Contiki Company has further set reasonable prices for its tours so as to be able to appeal to many clients. Their rates range from US $58 to $100 per day. The daily rates are also inclusive of other services like lodging, as well as a complete meal that includes breakfast. Introduction Travel is a high involvement activity. For some, the tourism experience is made more memorable and enjoyable as a result of the social interaction that the consumer has with other tourists. People rely on specific brands to reduce the risk and time associated with selecting the right kind of holiday. Travel plays a role in the individual’s self-concept-an individual’s perception of him/herself that is in part derived from the product and services consumed. Contiki tours are aimed at the Youth market- in particular, Generation Y. The company has a very clear idea what drives, motivates and inspires young travellers-connectedness. Generation Y is the internet generation. The internet offers them social connectedness on a global scale (Pierre & Pendergast, 2010 pp 123). Analysis of marketing theories Contiki offers unparalleled model of market partitioning and aligning by consumer group. The company uses various marketing theories in the segment they serve. Contiki’s trips are devised solely for travellers between the ages of 18 to 35 years-a variety of sectionalization founded on demographics. Such marketing theories used in the company include Value Innovation and the Value Curve and porter’s five forces of competition model. This theories emphasis on the needs of the customer, what customer values and the things which the customers expect to get from the product or the services they buy (Pierre & Pendergast 2010, pp121). 1. Value Innovation: The company added tours to Africa in 1995. Tour groups consists young people from a variety of countries. Contiki Company has been able to obtain value due to the improvement of its services like performing of major renovations in its mega stereo systems, VCRs and TV Screens, reclining sets, panoramic windows and good maintenance of bathrooms. The company further has its program being done on and off and therefore the company has improved to offering more entertainment than other tours. So as to improve the service quality, travel patrons have been given the opportunity to choose what they want ranging from executions to other optional activities (Bennett 2001, p84). 2. Porter's Five Forces of Competition Framework: They use this theory when analysing industry competitiveness and when designing defensive strategies to counter new market entrants. The four forces applied include: 2.1 The threat of substitute products or services: Contiki Company faces a threat from young people and professionals who obtain better services from other companies in countries like Australia, Europe and New Zealand. With the increasing use of technology and consequently and improvement of companies, this company foresees that it is able to appeal to a large group of people especially the young and talented professionals. The company also boasts of 40 years in the filed, therefore it is able to obtain a competitive advantage over the others. To face up to the threat of substitute products or services Contiki is an affiliate of the United States Tour Operator Association and participates in its $1 Million Consumer Protection program (Saunders & Armstrong 2008, p 83). 2.2 The threat of the entry of new competitors: All of Contiki’s business is booked through retail travel agents, and it organizes numerous agents training workshops every year to explain its tour programs. These training workshops enable its agents to better understand Contiki’s products and position them to effectively sell to its target group (Saunders & Armstrong 2008, p 83). 2.3 The threat of the entry of new competitors: Although Contiki has number of tour operators which go up to about 20 markets in the world, the company is still focused at ensuring that it serves a greater population all over the world. The diverse number of individuals who work within the organization of Contiki is one that has enabled the organized to achieve its success since they bring in a lot of abilities. This has therefore created a competitive advantage for the company. The company boasts of more than 15different nationalities whom they represent in every trip (Ellingham & Garvey 2009, p 50). 2.4 The bargaining power of customers: The company has been able to contain this power because the company has a very clear idea what drives, motivates and inspires young travellers-social connectedness (Oja and Parsons 2009, pp 79). Marketing Strategies such as the Contiki kickback on fortifies its stranglehold on the customers (Solomon et al 2009, pp 102). Situational analysis Contiki tour company has maturated to become the foremost expedition operative for youth tours. Contiki promotes its excursions in 30 different nations. Contiki deliberately focuses on trade promotions by utilizing professionals who are young and talented, college and university students and also parents of these youngsters. Because of their strong primary values comprising individual tailored customer service, training of employees, offering services in a consistent professional manner and high quality products, the company is popular with its niche market (Oliveira and Senivongse 2009, p 165). Evaluation of alternative course of action From the above situation analysis, the company can increase its market segment by introducing some more effective strategies. Since its main target segment of the market is the Y generation, the company should introduce the latest advanced technology such as PocketSmith to enable the customers to know the calendar of people who are going for holidays so that they can join in on tour. They should also increase the use of ekit software (http://www.contiki.ekit.com) so that customers can used to communicate and keep in touch with one another. This software can accommodate all kinds of communication devices across the world (Mooij anf Marieke 2008, pp 94). The third thing that Contiki ought to do is changing their focus and attention to online advertising and avoids overusing the traditional methods. While maintaining this internet marketing, Contiki Company ought to focus on promotions through travel agents and personal selling. This step will involve use of ads placed in strategic positions and also in magazines like The Maxim, Cosmopolitan and the men’s journal. The company can also utilize the use of radio commercials by placing their advertisements on popular stations which can appeal to a greater number of people (Saunders and Armstrong 2008, pp 90). Recommendations Contiki should adopt a multifaceted approach, where it would incorporate Information technology in its bid to reach its target market (Solomon et al 2009, pp 45). Secondly, the company needs to use pricing as a marketing tool whereby they vary the prices differently depending on the season. This will attract many students thereby increasing the number of its customers in their market (Kolb 2008, p 104). Lastly, the company should encourage customers to offer suggestions about the kind of products they expect to receive from the company. Bibliography Bennett, A. J. 2001. Introduction to travel and tourism marketing. Juta and Company Ltd, (7), Pp 83-86 Ellingham, M & Garvey, G. 2009. Andalucía. Rough Guides (6). Pp 49-52 Kolb, B. 2008 Marketing Research: A Practical Approach. SAGE Publications Ltd. (4), Pp 103-105 Kurtz, L. D. & Snow, K. 2009. Contemporary Marketing. Cengage Learning, (2), Pp 88-91 Mooij, K. & Marieke, D. 2008. Global marketing and advertising: understanding cultural paradoxes. SAGE, (2),Pp 92-94 Mylne, L. & Llewellyn, M. 2009. Frommer's Australia 2010 FROMMER'S AUSTRALIA. Frommer's, (5), Pp 69-71 Oja, D. & Parsons, J. 2009. New Perspectives Computer Concepts 2010. Cengage Learning, (12), Pp 78-80 Oliveira, R. & Senivongse, T. 2009. Distributed Applications and Interoperable Systems. Springer, (2), Pp 162-166 Pierre, B. & Pendergast, D. 2010. Tourism and Generation Y. CAB International, (4). Pp 119-129 Saunders, J. and Armstrong, G. 2008. Principles of marketing. Financial Times Prentice Hall, (5), Pp 82-98 Solomon, M., Hughes, A., Chitty, B., Fripp, G., Marshall, G., Stuart, E., (2009), Marketing, Real People, Real Choices, Pearson Education Australia pp 32-119 Read More