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Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
© 2010 Pearson Higher Education, Inc.
Pearson Prentice Hall - Upper Saddle River, NJ 07458
Introduction: Marketing for Hospitality and Tourism
Foreword:
“Marketing is so basic that it cannot be
considered a separate function. It is
the whole of business seen from the
point of view of its final result, that is,
from the customers point of
view…Business success is not
determined by the producer, but by the
customer.”
- Peter DruckerMarketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
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© 2010 Pearson Higher Education, Inc.
Pearson Prentice Hall - Upper Saddle River, NJ 07458
OBJECTIVES
After reading this chapter, you should be able to:
• Understand the relationships between the world’s
hospitality and travel industry.
• Define marketing and outline the steps in the
marketing process.
• Explain the relationships between customer value
and satisfaction.
• Understand why the marketing concept calls for a
customer orientation.
• Understand the concept of the lifetime value of a
customer and be able to relate it to customer loyalty
and retention.
Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
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© 2010 Pearson Higher Education, Inc.
Pearson Prentice Hall - Upper Saddle River, NJ 07458
Marketing for Hospitality & Tourism
Chipotle Mexican Grill
• Chipotle opened in 1993 with the goal of serving fresh,
gourmet-quality food at reasonable prices.
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– the dream and creation of Steve Ells, a graduate
of the Culinary Institute of America
• Steve used to watch the lines of customers moving
through the tacquerias on Mission Street.
– “I believed… I could make a superior product and capture the
success of those small restaurants in a big way.”
• With his dad’s help, the first Chipotle near the University
of Denver sold four hundred dollars’ worth of burritos on
opening night.
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By Philip Kotler, John Bowen and James Makens
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© 2010 Pearson Higher Education, Inc.
Pearson Prentice Hall - Upper Saddle River, NJ 07458
Marketing for Hospitality & Tourism
Chipotle Mexican Grill - Food with Integrity
• “Food with Integrity” - the philosophy that led to
success, and continues to guide Chipotle.
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– “Food must complement and enhance its environment and not
clash or harm the environment in which it exists.”
• Steve insists on fresh products—not canned, frozen, or
freeze-dried.
• Using organic, naturally raised foods, Steve entered the
natural food niche in restaurant operations with
emphasis on great-tasting food, quality & simplicity.
– the aim was to explore the possibility of incorporating
as many organic or naturally raised foods as possible
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Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
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© 2010 Pearson Higher Education, Inc.
Pearson Prentice Hall - Upper Saddle River, NJ 07458
Marketing for Hospitality & Tourism
Chipotle Mexican Grill - Environment
• Mexican restaurants can look alike, with photos of
Pancho Villa or other decorations the public has
come to expect as normal.
• A Chipotle restaurant is different!
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– kitchen and food preparation areas are in front of the
customers, designed to appeal to the senses
• Customers observe freshness, cleanliness & variety
at the same time they smell the spices and hear the
sizzle of meat on the grill.
– this stimulates the appetite and blends the ambience
of food preparation with food consumption
Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
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Marketing for Hospitality & Tourism
Chipotle Mexican Grill - Environment
• Steve asked sculptor friend Bruce Gueswel to design
artwork appropriate to the environment.
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– a unique line of original art-work and furniture using
welded steel, corrugated metal, and wood to depict
modern renditions of ancient Mayan hieroglyphics
• The style, known as “cantina moderne,” employs
metals, plywood, concrete, and glass to provide a
sophisticated postindustrial feel with exposed duct
work and pipes.
– Chipotle restaurants have been given awards for design
by the American Institute of Architects
Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
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Marketing for Hospitality & Tourism
Chipotle Mexican Grill - Pricing & Promotion
• Unlike most quick-service restaurant chains, Chipotle
offers no coupons or specials.
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– at Chipotle all food all the time is either full price or free
– prices are comparatively reasonable but vary by market
• Thousands of promotional “bucks” for one free
burrito are given away during the year.
– proven to be very popular and productive in new markets
• From there, word-of-mouth supported by free
publicity in newspapers and magazines serves as
the principal means of promotion.
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Marketing for Hospitality & Tourism
Chipotle Mexican Grill - Customer Loyalty
• Repeat visits by customers have proven to be very
high within Chipotle restaurants.
• Why? The Chipotle experience.
– “Our menu is focused. Our food refined. Our look
distinctive. Our atmosphere eclectic.”
– “Customers see, select, and direct precisely what goes
into their burrito or taco. Our crews don’t just take
orders.”
– “Our recipes are original and innovative. The ingredients
in our food are the finest and freshest—what we call food
with integrity.”
Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
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Marketing for Hospitality & Tourism
Chipotle Mexican Grill - Staff Loyalty
• Chipotle’s loyalty also applies to its employees.
– “We hire talented people who value autonomy,
responsibility, hard work, and having a little fun.”
– “We encourage our people to grow as far as their ability
will take them.”
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• Chipotle provides a manager bonus of up to $10,000
for developing hourly employees into managers.
– promotion from within provides a career for the best
workers
• Managers also get to keep 10 percent of any revenue
gains over the year’s budget.
Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
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Marketing for Hospitality & Tourism
Chipotle Mexican Grill - Social Networking
• Chipotle has mastered the use of social networks,
new, powerful forms of media that many companies
are trying to incorporate into their marketing plans
• A $30,000 prize offered to university or college
teams to produce the best Chipotle advertisement.
Chipotle received 45 entries from 18 colleges.
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– winners received air time on TV & in movie theaters
• Many of the ads ended up on youtube.com and
myspace.com where some received a million hits.
– an effective and efficient way for Chipotle to penetrate
this media
Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
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Your Passport to Success
Hospitality in a Global Economy
• As a manager in a global economy, marketing will
greatly assist your personal career & the success of
the enterprise you manage.
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– in today’s hospitality/travel industry, the customer is
global and is king or queen
• Customers can enhance or damage your career
through the purchase choices they make and the
positive or negative comments they make to others.
• The travel industry is the world’s largest industry
and the most international in nature.
– receipts of over $1 trillion and over 1 billion travelers
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Your Passport to Success
Hospitality in a Global Economy
• Thirty years ago there
was nothing in Dubai
but a creek, a sheik’s
palace, and a reputation
as a smuggling capital
of the Arabian Gulf.
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• Today Dubai boasts some of the world’s best hotels
& $70 billion committed to development of tourism.
– 30% of Dubai’s gross domestic product is from travel &
tourism, and will increase when DUBAILANDTM opens
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Your Passport to Success
Hospitality in a Global Economy
• The title “The World’s Best Airport” is not held by
a US or European airport, but by Hong Kong.
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– Hong Kong International Airport boasts the world’s
largest enclosed space, with a terminal eventually
capable of handling 87 million visitors per year
• The best international airline is Singapore Airlines
• The world’s best hotel is Oberoi Udaivilas in
Udaipur, India.
– the other top five hotels are in four different countries:
South Africa, Thailand, Turkey, and Italy.
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Marketing for Hospitality and Tourism, Fifth Edition
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© 2010 Pearson Higher Education, Inc.
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Your Passport to Success
Managing in a Global Economy
• Tourism planning/promotion departments and
hospitality companies are filled with college
graduates from across the globe.
• Competition is strong and getting tougher each day.
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– yet opportunities are greater than ever before
• Welcome to marketing…
Your passport
to success!
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Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
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© 2010 Pearson Higher Education, Inc.
Pearson Prentice Hall - Upper Saddle River, NJ 07458
Your Passport to Success
Marketing in a Global Economy
• Today marketing isn’t simply a business function.
– it’s a philosophy, a way of thinking, and a way
of structuring your business and your mind
– marketing is much more than a new ad campaign
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• Marketing’s task is to provide real value to targeted
customers, motivate purchase, fulfill consumer
needs, and never fool the customer or endanger
the company’s image.
• Creating customer value and satisfaction are at the
heart of hospitality and travel industry marketing.
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Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
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© 2010 Pearson Higher Education, Inc.
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Your Passport to Success
Marketing in a Global Economy
• Today’s successful companies are strongly customer
focused and heavily committed to marketing.
• Accor has become one of the world’s largest hotel
chains by delivering L’esprit Accor
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– the ability to anticipate and meet the needs of their
guests, with genuine attention to detail
• Ritz-Carlton promises & delivers truly “memorable
experiences” for its guests.
• McDonald’s® grew into the world’s largest
restaurant chain by providing its guests with
QSC&V (quality, service, cleanliness, and value).
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Your Passport to Success
Marketing in a Global Economy
• Successful hospitality companies know that if they
take care of their customers, market share & profits
will follow.
• As a manager, you will be motivating your
employees to create superior value for your
customers.
• You will want to make sure that you deliver
customer satisfaction at a profit.
• This is the simplest definition of marketing.
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By Philip Kotler, John Bowen and James Makens
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Customer Orientation
Satisfied Customers
• The purpose of a business is to create and maintain
satisfied, profitable customers.
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– customers are attracted/retained when their needs are met
– customers talk favorably to others about their satisfaction
• Some hospitality managers act as if today’s profits
are primary and customer satisfaction is secondary.
– this attitude eventually sinks a firm as it finds fewer repeat
customers and faces increasingly negative word of mouth
• Successful managers understand that profits are best
seen as the result of running a business well rather
than as its sole purpose.
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By Philip Kotler, John Bowen and James Makens
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Customer Orientation
Satisfied, Profitable Customers
• When a business satisfies its customers, they will pay
a fair price for the product, which includes a profit
for the firm.
• Managers who forever try to maximize short-run
profits are short-selling both customer & company.
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– much of the behavior of employees toward their
customers is the result of management philosophy
• The alternative management approach is to put the
customer first and reward employees for serving the
customer well.
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By Philip Kotler, John Bowen and James Makens
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© 2010 Pearson Higher Education, Inc.
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Customer Orientation
Satisfied, Profitable, Repeat Customers
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• Without customers,
assets have no value.
– a new multi-million-dollar
restaurant will close
– a $300 million hotel will
go into receivership
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By Philip Kotler, John Bowen and James Makens
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© 2010 Pearson Higher Education, Inc.
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Customer Orientation
Satisfied, Profitable, Repeat Customers
• It is wise to assess the customer’s long-term value
and take appropriate actions to ensure a customer’s
long-term support.
• The Forum Company found the cost of retaining a
loyal customer is 20 percent of the cost of attracting
a new one.
• Another study found an increase in customer
retention rates yielded a profit increase of 25 to
125 percent.
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Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
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© 2010 Pearson Higher Education, Inc.
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What is Hospitality and Tourism Marketing?
Sales & Marketing
• In the hotel industry, marketing and sales are often
thought to be the same
• Sales managers provide prospective clients with
tours, entertaining them in the hotel’s food and
beverage outlets.
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– the sales function is highly visible, where most areas of
the marketing function take place behind closed doors
• It is not uncommon to hear restaurant managers say
that they “do not believe in marketing”.
– when they actually mean they are disappointed
with the impact of their advertising
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By Philip Kotler, John Bowen and James Makens
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What is Hospitality and Tourism Marketing?
The Marketing Mix
• Advertising and sales are components of the
promotional element of the marketing mix.
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– other elements include product, price, and distribution,
research, information systems, and planning
• The Four-P framework calls for marketing to decide:
–
–
–
–
Product: the product and its characteristics
Price: set the price
Place: decide how to distribute the product
Promotion: choose methods for promoting the product
• Some critics feel the four Ps underemphasize or
omit certain important activities
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What is Hospitality and Tourism Marketing?
Products Serving Needs
• If marketers do a good job of identifying consumer
needs, developing a good product, and pricing,
distributing, and promoting it effectively, the result
will be attractive products and satisfied customers.
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Starbucks Coffee has created customer
loyalty, allowing it to open shops around the
world. In this photo, Starbucks customers sit
in an outdoor café in Singapore. © Jonathan
Drake.
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© 2010 Pearson Higher Education, Inc.
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What is Hospitality and Tourism Marketing?
Products Serving Needs
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Companies such as Sonic have brought
marketing skills to the restaurant industry.
Courtesy of Sonic Corporation and
Subsidiaries.
• Marriott developed its Courtyard concept; Darden
designed the Olive Garden Italian Restaurant.
• Different products, offering new consumer benefits.
– marketing means “hitting the mark.” -P. DruckerMarketing for Hospitality and Tourism, Fifth Edition
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What is Hospitality and Tourism Marketing?
Effective Marketing
• The marketing mix must be just that—a mix of
ingredients to create an effective
product/service package for the target market.
• This does not mean that selling and promotion are
unimportant.
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– they are part of a larger marketing mix, a set of marketing
tools that work together to produce satisfied customers
• The only way selling and promoting will be
effective is if we first define customer targets and
needs and then prepare an easily accessible and
available value package.
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Marketing in the Hospitality Industry
Importance of Marketing
• The hospitality industry is one of the world’s major
industries & in the US, the second largest employer.
• The entrance of corporate giants into the hospitality
market transformed it from a mom-and-pop industry
to an industry is now dominated by chains
• Twenty-four companies now account for over a third
of all restaurants in the United States.
– McDonald’s leads the restaurant group at over 30,000
stores in 119 countries serving 52 million customers a day
– Accor, Blackstone & Starwood are buying hotel chains
and operating different brands under one organization
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Marketing in the Hospitality Industry
Importance of Marketing
• In response to growing competitive pressures, hotel
chains are relying more on the marketing director.
• While the marketing director is a full-time marketer,
everyone else must be a part-time marketer.
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– all managers must understand marketing
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© 2010 Pearson Higher Education, Inc.
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Marketing in the Hospitality Industry
Tourism Marketing
• The two main industries comprising the activities we
call tourism are the hospitality and travel industries.
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– successful hospitality marketing is highly dependent on
the entire travel industry
• Many resort/hotel guests
purchase travel-hospitality
packages assembled by
wholesalers and offered
through travel agents
Visitors to international destinations, such as these tourists on the Brazilian side of Iguacu Falls, often
purchase packages that include international airfare, ground transportation, and hotel
accommodations. Courtesy of Demetrio Carrasco © Dorling Kindersley.
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Marketing in the Hospitality Industry
Cooperative Marketing
• By agreeing to participate in packages arranged by
wholesalers, hotels effectively eliminate competitors.
• Hotel & rental car companies have developed
cooperative relationships with airlines that offer
frequent-flyer plans.
• The success of cruise lines is a result of coordinated
marketing by many travel industry members.
– airlines, auto rental firms, and passenger railways
cooperatively develop packages with cruise lines
– requires coordination in pricing, promotion &
delivery of those packages
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Marketing in the Hospitality Industry
Marketing Complexities and Definition
• Government or quasi-government agencies play an
important role through legislation and promotion of
regions, states, and nations.
• Few industries are as interdependent as travel–
hospitality which will only increase in complexity.
• The travel industry must understand the big picture and
respond to changing consumer needs through creative
strategies based on solid marketing knowledge.
• Marketing is the art and science of finding, retaining, and
growing profitable customers.
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© 2010 Pearson Higher Education, Inc.
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Marketing in the Hospitality Industry
Definition of Marketing
• Many people think of marketing only as selling
and advertising, which is really only a tip of the
marketing iceberg.
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– today, marketing must be understood in a sense
of satisfying customer needs
• If the marketer understands customer needs;
develops products that provide superior customer
value; and prices, distributes, and promotes them
effectively, these products will be sought after by
the customer.
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© 2010 Pearson Higher Education, Inc.
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The Marketing Process
A Five-Step Model
• Here are steps one through four of a simple five-step
model of the marketing process.
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– companies working to understand consumers, create
customer value & build strong customer relationships
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Figure 1-1
A simple model
of the marketing
process.
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3
5
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By Philip Kotler, John Bowen and James Makens
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The Marketing Process
A Closer Look
• In the fifth, final step, companies reap the rewards
of creating superior customer value.
• By creating value for
customers, they capture
value from customers
in the form of sales,
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profits & long-term
customer equity.
Figure 1-1
• As the first step, marketers need to understand
customer needs & wants, and the marketplace
within which they operate.
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See this feature on page 11 of your textbook.
Marketing for Hospitality and Tourism, Fifth Edition
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Understanding the Marketplace & Customer Needs
Core Marketing Concept
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Tangible products
Services
Experiences
Value,
Satisfaction
Exchange and
relationships
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Understanding the Marketplace & Customer Needs
Customer Needs, Wants and Demands
• The most basic concept underlying marketing is that
of human needs. A human need is a state of felt
deprivation.
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– these needs were not invented by marketers, but
are part of the human makeup
• The second basic concept to marketing is that of
human wants, the form human needs take as they
are shaped by culture and individual personality.
– wants are how people communicate their needs
– wants are described in terms of objectives that will
satisfy needs
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Understanding the Marketplace…
Customer Needs, Wants and Demands
• Sellers can confuse wants with needs. A drill bit
maker may think his customer needs a drill bit,
but what the customer really needs is a hole.
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– these sellers forget that a physical product is only a
tool to solve a consumer problem.
• These sellers get into trouble if a new product comes
along that serves the need better or cheaper.
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The Marketplace & Customer Needs
Customer Needs, Wants and Demands
• People have almost unlimited wants, but limited
resources, and so choose products that
produce the most satisfaction for their money.
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– when backed by buying power, wants become
demands
• Outstanding marketing organizations go to great
lengths to learn about & understand their
customer’s needs, wants and demands.
– they conduct customer research.
– smart companies also have employees at all levels—
including top management—stay close to customers
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The Marketplace & Customer Needs
Products, Services, and Experiences
• Consumer needs and wants are fulfilled through a
market offering.
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– a product that is some combination of tangible, services,
information, or experiential product components
• In the hospitality industry, the intangible product
including customer service and experiences are
more important than the tangible products.
– a market offering includes much more than physical
goods or services
• Consumers decide which destinations to visit, events
to experience, hotels and restaurants to patronize.
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The Marketplace & Customer Needs
Tangible Products, Services, and Experiences
• Managers of resorts realize their guests will be
leaving with memories of their stay, and try to
create experiences that will generate pleasant ones.
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– at a Ritz-Carlton Resort, every evening at sunset they set
up chairs on the beach & hire a cellist to play
– Marriott provides Dolphin safaris at its Newport Beach
property, and a water rafting trip for its Utah property
– Lufthansa and Air France created a personalized firstclass service above regular first class
• To the consumer these are all products.
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The Marketplace & Customer Needs
Customer Value and Satisfaction
• Customer value is the difference between benefits
the customer gains from owning and/or using a
product, and the costs of obtaining the product.
• Costs can be monetary or nonmonetary & a very big
nonmonetary costs for hospitality customers is time.
– luxury hotels in Hong Kong such as The Shangri-La do
not expect “executive guests” to stand in line to register
– Domino’s Pizza saves the customer time and provides
convenience by delivering pizza
– limited service hotels provide value to the overnight
traveler by offering a free continental breakfast
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The Marketplace & Customer Needs
Customer Value and Satisfaction
• One of the biggest management challenges is to
increase their product value for their target market.
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– managers must know their customers and
understand what creates value for them
• Customer expectations are based on past buying
experiences, the opinions of friends, and market
information.
• Marketers must set the right level of expectations.
– if they set expectations too low, they may satisfy
those who buy but fail to attract new customers
– too high and buyers will be disappointed
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The Marketplace & Customer Needs
Customer Value and Satisfaction
• Managers must realize the importance of creating
highly satisfied, rather than just satisfied customers.
• On a 7-point scale, with 1 very satisfied and 7 very
dissatisfied, most managers are happy to receive a 2.
• Think of the last time you went to a restaurant and
were just satisfied. Would you go back?
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– probably not
• When you walk out of a restaurant and say,
“Wow, that was great!”
– you will probably return and tell others about your discovery
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The Marketplace & Customer Needs
Customer Value and Satisfaction
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Results of a guest survey at
a Boston hotel show a huge
gap between a guest who
rates a hotel a 1, and a
guest who rates it a 2.
Figure 1-2 Scores of 1, 2, and 3 are all on the satisfaction side of the scale; that is, they are all better
than a score of 4, which is “neither satisfied nor dissatisfied.” You can see that satisfying
the guest is not enough. Only when guests leave very satisfied are they likely to come back.
As a manager, your goal is to have all guests leave very satisfied.
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The Marketplace & Customer Needs
Exchanges and Relationships
• Exchange is the act of obtaining a desired object
from someone by offering something in return.
• Marketing consists of actions taken to build and
maintain desirable exchange relationships with
target markets.
• Beyond attracting new customers and creating
transactions, the goal is to retain customers and
grow their business with the company.
• The concept of transactions leads to the concept
of a market.
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The Marketplace & Customer Needs
Markets
• A market is a set of actual and
potential buyers of a product.
• These buyers share a particular need
or want that can be satisfied through
exchange relationships.
• Marketing means managing markets
to bring about profitable customer
relationships.
This advertisement for The Point Hilton Resorts communicates the
variety of activities that the resorts offer. These activities will increase
the value of the resort to those customers who perceive them as
benefits. Courtesy of The Pointe Hilton Resorts, Phoenix, Arizona.
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Designing Customer-Driven Marketing Strategy
Selecting Customers to Serve
• Marketing management can be defined as the art
and science of choosing target markets and building
profitable relationships with them.
• To design a winning marketing strategy two
important questions require answers:
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– What customers will we serve?
(what is our target market)?
– How can we serve these customers best?
(what’s our value proposition)?
• The company wants to select only customers that
it can serve well and profitably.
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Designing Customer-Driven Marketing Strategy
Choosing a Value Proposition
• A company’s value proposition is the set of benefits
or values it promises to deliver to consumers to
satisfy their needs.
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– such propositions differentiate one brand from another
• The company must decide how it will serve targeted
customers—how it will differentiate and position
itself in the marketplace.
• Companies must design strong value propositions
that give them the greatest advantage in their target
markets.
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Designing Customer-Driven Marketing Strategy
Marketing Management Orientation
• What philosophy should guide marketing strategies
that will build profitable relationships with target
consumers?
• What weight should be given to the interests of
customers, the organization, and society?
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– often, these interests conflict with each other
• There are five alternative concepts under which
organizations design and carry out their marketing
strategies:
– production, product, selling, marketing, &societal
marketing concepts
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Designing Customer-Driven Marketing Strategy
The Production Concept
• One of the oldest philosophies guiding sellers, the
production concept holds that consumers will favor
products that are available & highly affordable.
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– therefore management should focus on production
and distribution efficiency
• Management may become so focused on production
systems they forget the customer.
• Unionization of service staff is another reason for
a production mentality, when workers tend to work
in accordance with union work rules, which often
conflict with customer needs.
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Designing Customer-Driven Marketing Strategy
The Product Concept
• The product concept, like the production concept,
has an inward focus.
• This concept holds that consumers
will favor products which offer
the most in quality, performance,
and innovative features.
• Focusing only on the products
can lead to marketing myopia.
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One way that Olive Garden Italian Restaurants differentiates itself
is by freshly grating cheese for the guest. Courtesy of Jeff
Greenberg/Alamy Images.
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Designing Customer-Driven Marketing Strategy
The Selling Concept
• The selling concept holds consumers will not buy
enough products unless the organization undertakes
a large selling and promotion effort.
• The aim is to get every possible sale, not worry about
satisfaction or the revenue contribution of the sale.
• It does not establish a long-term relationship with the
customer; the focus is on getting rid of what one has.
• The concept exists within the hospitality industry,
with overcapacity being a major contributing factor.
– when owners & top management face overcapacity,
the tendency is to sell, sell, sell
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Designing Customer-Driven Marketing Strategy
Causes of Overcapacity
• Pride in having the most capacity and false belief
economies of scale will occur as size increases.
• Economic incentives by governments to build a
larger tourism/hospitality infrastructure to create
economic growth.
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– tax laws encourage overbuilding because of tax write-offs
• Poor/nonexistent forecasting & planning by owners,
consultants, financial organizations, governments.
– failure to merge revenue & sales/marketing management
• A myth that the travel industry faces almost
unlimited future demand.
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Designing Customer-Driven Marketing Strategy
The Marketing Concept
• The marketing concept is a recent philosophy and
is being rapidly adopted in the hospitality industry.
• It holds that achieving organizational goals depends
on determining needs & wants of target markets and
delivering the desired satisfaction more effectively
and efficiently than competitors.
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– Four Seasons Hotels, Accor, and McDonald’s follow
this concept fully
• The pure marketing concept ignores possible
conflicts between short-run consumer wants &
long-run societal needs.
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Designing Customer-Driven Marketing Strategy
The Concepts Contrasted
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Figure 1-3 The Selling and Marketing Concepts Contrasted
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Designing Customer-Driven Marketing Strategy
The Societal Marketing Concept
• The newest concept, societal marketing, holds
that the organization should…
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– determine the needs, wants & interests of target markets
– deliver desired satisfactions more effectively and
efficiently than competitors
– in a way that maintains or improves the consumer’s
and society’s well-being - LOHAS
• It questions marketing concepts in an age of
environmental problems, resource shortages,
rapid population growth, worldwide inflation,
and neglected social services.
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Designing Customer-Driven Marketing Strategy
The Societal Marketing Concept
• Societal marketing asks if the firm that serves &
satisfies individual wants is always doing what’s
best for consumers and society in the long run.
• Advocates of societal marketing would like publicinterest groups to guide corporations to decisions
that will benefit society over the long term.
• Societal pressures are already manifested in the
marketing of cigarettes, liquor & fast-food.
– hotels & restaurants have no-smoking sections
– restaurants can face liability for serving excessive alcohol
– fast-food pursues environmentally sound packaging
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Designing Customer-Driven Marketing Strategy
Societal Pressures at Work
• The National Restaurant Association is developing
an initiative to reduce waste and the carbon footprint
of restaurants and is working with restaurants to
create a more socially responsible industry
• Resort developers must consider the impact on the
of their initial construction, disposal of waste
products and their use of water.
• Denigration of the environment makes it necessary
for marketers to become more socially responsible.
– smart restaurateurs/hoteliers will do this before
public outcry or laws force them
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Preparing an Integrated Marketing Plan
Chipotle
• As we read in the chapter opening, Chipotle is
moving toward the societal marketing concept.
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– the company’s marketing strategy outlines which
customers the company will serve and how it will
create value for these customers
• The marketer develops an integrated marketing
program that will actually deliver the intended
value to target customers.
– the marketing program builds customer relationships
by transforming the marketing strategy into action
– it consists of the firm’s marketing mix, the marketing
tools the firm uses to implement its marketing strategy
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Preparing an Integrated Marketing Plan
The Four P’s of Marketing: Product, Price, Place, Promotion
• To deliver its value proposition, the firm must first
create a need-satisfying market offering: Product
• It must decide how much it will charge for the offer:
Price, and how it will make the offer available to
target consumers: Place.
• Finally, it must communicate with customers about
the offer & persuade them of its merits: Promotion.
• The firm must these into a comprehensive, integrated
marketing program that communicates and delivers
the intended value to chosen customers.
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Building Profitable Customer Relationships
Value-Building Tools - Financial Benefits
• The first three steps in the marketing process all
lead up to the fourth and most important step, that
of building profitable customer relationships
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– a company can adopt any of three value-building tools
to develop stronger customer relationships
• The first relies primarily on adding financial benefits
to the customer relationship.
– airlines offer frequent-flyer programs
– hotels give room upgrades to their frequent guests
– restaurants have frequent-diner programs
• Frequency programs often used tiered programs.
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Building Profitable Customer Relationships
Value-Building Tools - Social Benefits
• The second approach is to add social as well as
financial benefits, turning customers into clients.
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– company personnel work to learn individual customers’
needs and wants
– products and services are individualized & personalized
• A customer may be nameless to the institution.
– clients cannot be nameless
• Customers are served as part of the larger segment.
– clients are served on an individual basis
• Customers are served by anyone available.
– clients are served by the professional assigned to them
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Building Profitable Customer Relationships
Value-Building Tools- Structural Ties
• The third approach is to add structural ties to the
financial and social benefits.
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– airlines developed reservation systems for travel agents
and lounges & limo service for their first-class customers
– Sheraton developed flexible check-in and checkout times
– Hilton provides a personalized welcome message on the
guest’s television
• Structural changes are difficult to implement, but
they are harder for competitors to match.
– they create a competitive advantage until they are matched
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Building Profitable Customer Relationships
Selective Customer Relationships
• A company should develop relationships selectively,
determining which customers are worth cultivating.
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– because you meet their needs more effectively than others
Table 1-1 Types of customers.
– customers who are high on profitability and frequency
deserve management attention.
– those high on profitability but low on frequency can
sometimes be developed in higher frequency customers
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Building Profitable Customer Relationships
Selective Customer Relationships
• When it comes to relationship marketing you
don’t want a relationship with every customer.
• Guests who are in the low-frequency, lowprofitability quadrant are often bargain hunters.
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– they come when there is a promotion and avoid paying
full price at all costs
• It is very difficult to build a relationship with these
price-sensitive customers.
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Building Profitable Customer Relationships
Selective Customer Relationships
• Some customers are spreading their business across
several different providers of the same service.
• High-frequency, low-profitability customers, may
be motivated by the value of additional purchases.
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– hotels can show a business traveler advantages to staying
on the concierge floor where there is a lounge to work
• If we can make our company their preferred provider,
we can turn them into our best customers.
• Knowing your customers helps you select the
customers you want to develop a relationship with
and to strengthen the relationship over time.
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Customer Relationship Management
Selective Customer Relationships
• Customer relationship management (CRM) may
be the most important concept of modern marketing.
• It involves managing detailed information about
individual customers, carefully managing customer
“touchpoints” in order to maximize loyalty.
• A customer touch point is any occasion a customer
encounters the brand & product, in actual experience,
personal/mass communication or casual observation
– for a hotel this includes reservations, check-in & out,
frequent-stay programs, room service, business services,
amenities, restaurants, and bars.
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Customer Relationship Management
Selective Customer Relationships
• CRM enables companies to provide excellent realtime customer service through effective use of
individualized information.
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– important because a major driver of profitability is
the aggregate value of the company’s customer base
• More recently, CRM has taken on a broader meaning
as an overall process of building and maintaining
profitable customer relationships.
• By delivering superior customer value &
satisfaction, it deals with all aspects of acquiring,
keeping, and growing customers.
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Customer Relationship Management
The Changing Nature of Customer Relationships
• Companies are building more direct and lasting
relationships with carefully selected customers.
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– many companies use profitability analysis to weed out
unprofitable customers and target winning ones
• Once they identify profitable customers, firms can
create attractive offers and special handling to
capture these customers and earn their loyalty.
• CRM has allowed companies to serve chosen
customers in a deeper, more lasting way.
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Capturing Value from Customers
Customer Loyalty and Retention
• The final step in the marketing process involves
capturing value in return, in the form of current and
future sales, market share, and profits.
• Good CRM creates delighted customers, who remain
loyal and talk favorably to others about the company.
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– studies show differences in loyalty of customers who are
less satisfied, somewhat satisfied, and completely satisfied
– a slight drop in satisfaction can create a large loyalty drop
• Companies are realizing that losing a customer
means losing the entire stream of purchases he/she
customer would make over a lifetime of patronage.
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Capturing Value from Customers
Customer Loyalty and Retention
• Benefits of customer loyalty come from continued
patronage, reduced marketing costs, decreased price
sensitivity, and partnership activities.
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– loyal customers purchase from the business they
are loyal to more often than nonloyal customers
– they also purchase a broader variety of items.
• Reduced marketing costs are the result of requiring
fewer marketing dollars to maintain a customer than
to create one.
– and the creation of new customers through the positive
word-of-mouth of loyal customers.
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Capturing Value from Customers
Customer Loyalty and Retention
• Lifetime value is the stream of profits a customer
will create in the life of a business relationship
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– average life is determined through surveys or guest history
• It measures how much a member of a market
segment produces per year, multiplied by the
average life of a member of that segment.
– Ritz-Carlton knows the life-time value of its loyal
customer is over $100,000 over their lifetime.
– a restaurant customer can be worth several thousand
dollars’ worth of business
– a travel agency customer can generate over $50,000
during his/her lifetime by using the agency
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Capturing Value from Customers
Customer Loyalty and Retention
• Many markets have settled into maturity, with not
too many new customers entering most categories.
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– outstanding companies go all out to retain their customers
• Competition is increasing, and the costs of attracting
new customers are rising.
– it might cost five times as much to attract a new customer
as to keep a current customer happy
• Offensive marketing typically costs more than
defensive marketing
– it takes a great deal of effort and spending to coax
satisfied customers away from competitors
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Capturing Value from Customers
Growing Share of Customer
• Good CRM can help marketers increase their share
of customer—the share they get of the customer’s
purchasing in their product categories.
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– banks want to increase “share of wallet”
– restaurants want to get more “share of stomach”
– airlines want greater “share of travel”
• Loyal customers have higher propensity to frequently
purchase a wider variety of a company’s products.
• Marketers train employees to identify possible
products that may create additional value for the
customer that they have not purchased yet.
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Capturing Value from Customers
Building Customer Equity
• Customer equity is the discounted lifetime values of
all the company’s current and potential customers
• The best approach to customer retention is to deliver
products that create high satisfaction and perceived
value, resulting in strong customer loyalty.
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– the more loyal the firm’s profitable customers, the
higher the firm’s customer equity
• Customer equity may be a better measure of a firm’s
performance than current sales or market share.
– where sales & market share reflect the past, customer
equity suggests the future
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Capturing Value from Customers
Marketing’s Future
• Rapid changes can quickly make yesterday’s
winning strategies out of date.
• The Internet has changed the way we distribute
travel products, but as a market force it is just a
little over ten years old.
– a technology executive stated, “The pace of change is
so rapid that the ability to change has now become a
competitive advantage.”
– management thought leader Peter Drucker observed,
“…a company’s winning formula for the last decade
will probably be its undoing in the next decade.”
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Capturing Value from Customers
Marketing’s Future
• The importance of CRM has created the need for
those who understand database marketing and the
hospitality industry.
• The worldwide growth of the travel industry has
created a shortage of managers.
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– in some regions projects are put on hold because
the developer cannot acquire a management staff
• Marketing, with its customer
orientation has become the
job of everyone, and…
Your passport
to success!
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KEY TERMS
• Customer equity - is the discounted lifetime values
of all the company’s current and potential customers.
• Customer expectations - are based on past buying
experiences, the opinions of friends, and market
information.
• Customer relationship management (CRM) involves managing detailed information about
individual customers and carefully managing
customer “touch points” in order to maximize
customer loyalty.
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KEY TERMS
• Customer touch point - is any occasion on which a
customer encounters the brand and product—from
actual experience to personal or mass communications
to casual observation.
• Customer value - the difference between benefits that
the customer gains from owning and/or using a product
and the costs of obtaining the product.
• Demands - Human wants that are backed by buying
power, want or need. It includes physical objects,
services, persons, places, organizations, and ideas.
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KEY TERMS
• Exchange. The act of obtaining a desired object from
someone by offering something in return.
• Hospitality industry. Made up of those businesses that
offer one or more of the following: accommodation,
prepared food and beverage service, and/or
entertainment.
• Human need. A state of felt deprivation in a person.
• Human want. The form that a human need takes when
shaped by culture and individual personality.
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KEY TERMS
• Lifetime value. The lifetime value of a
customer is the stream of profits a customer will
create over the life of his or her relationship to a
business.
• Market. A set of actual and potential buyers of
a product.
• Marketing. The art and science of finding,
retaining, and growing profitable customers.
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KEY TERMS
• Marketing concept. The marketing management
philosophy that holds that achieving organizational
goals depends on determining the needs and wants of
target markets and delivering desired satisfactions
more effectively and efficiently than competitors.
• Marketing management. The art and science of
choosing target markets and building profitable
relationships with them.
• Marketing manager. A person who is involved in
marketing analysis, planning, implementation, and
control activities.
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KEY TERMS
• Marketing mix. Elements include product,
price, promotion,and distribution. Sometimes
distribution is called place and the marketing
situation facing a company.
• Product. Anything that can be offered to a
market for attention, acquisition, use, or
consumption that might satisfy a need. It
includes physical objects, services, persons,
places, organizations, and ideas.
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KEY TERMS
• Product concept - The idea that consumers
will favor products that offer the most quality,
performance, and features, and therefore the
organization should devote its energy to making
continuous product improvements.
• Production concept - Holds that customers
will favor products that are available and highly
affordable, and therefore management should
focus on production and distribution efficiency.
• Purpose of a business - To create and
maintain satisfied, profitable customers.
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KEY TERMS
• Relationship marketing - Involves creating,
maintaining, and enhancing strong
relationships with customers and other
stakeholders.
• Selling concept - The idea that consumers will
not buy enough of an organization’s products
unless the organization undertakes a large
selling and promotion effort.
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KEY TERMS
• Societal marketing concept - The idea that an
organization should determine the needs, wants, and
interests of target markets and deliver the desired
satisfactions more effectively and efficiently than
competitors in a way that maintains or improves
the consumer’s and society’s well-being.
• Transaction - Consists of a trade of values between
two parties; marketing’s unit of measurement.
• Value proposition - The full positioning of brand—the
full mix of benefits upon which it is positioned.
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EXPERIENTIAL EXERCISES
Try One !
• Restaurant - Visit two restaurants in the same class,
such as two fast-food restaurants or two casual
restaurants.
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– observe the cleanliness of the restaurants, in-house
signage, and other physical features
– order a menu item and observe the service and the
quality of the food
• Write up your observations, and then state which
restaurant you feel is more customer oriented.
– explain why
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EXPERIENTIAL EXERCISES
Try One !
• Hotel - Call the central reservation number of two
hotels. Request information on room availability,
different room types, and price for a date one month
from now. (Note: Do not make a reservation.)
• Write up your experience, including:
I
– description of how quickly the phone was answered
– customer orientation of information provided
– friendliness of the employee
• Based on your experiences, which hotels do you feel
had the more customer-oriented reservation system?
1
– why?
Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
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© 2010 Pearson Higher Education, Inc.
Pearson Prentice Hall - Upper Saddle River, NJ 07458
Web Site
www.prenhall.com/kotler
• One of the support features of this book is a Web site
to assist you: www.prenhall.com/kotler
• The site serves as a portal to a wealth of information
on marketing and travel & hospitality organizations.
• Designed to give real-world examples of how
companies market and provide information on
companies mentioned in the book
• The site also contains a resource guide, where
students can find information about marketing.
– major association sites, job information, and
research information can be found in this section
Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
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1
© 2010 Pearson Higher Education, Inc.
Pearson Prentice Hall - Upper Saddle River, NJ 07458
INTERNET EXERCISES
Try This !
• Choose three restaurants or hotels listed on the
book’s Web site under Internet Exercise Chapter
1,
I
– or use restaurant/hotel companies you find on the
Internet
• Based on information provided in each Web site:
– describe how each of these companies tries to satisfy
a customer’s want
– how does each of these companies create value for the
customer?
– do they segment the market by offering pages for a
specific market segment?
– select the company you would purchase from and
state why
Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
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1
© 2010 Pearson Higher Education, Inc.
Pearson Prentice Hall - Upper Saddle River, NJ 07458
END
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CHAPTER END
Marketing for Hospitality and Tourism, Fifth Edition
By Philip Kotler, John Bowen and James Makens
1
© 2010 Pearson Higher Education, Inc.
Pearson Prentice Hall - Upper Saddle River, NJ 07458