It is the whole business seen from the point of View of its final result, that is, from the customer

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Marketing is so basic
It cannot be considered a separate function.
It is the whole 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
producerbut by the customer. PETER DRUCKER
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OBJECTIVES
After reading this chapter, you should be able to

• Understand the relationships between the worlds
  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.

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Marketing for Hospitality Tourism
Chipotle Mexican Grill

• Chipotle opened in 1993 with the goal of serving
  fresh, gourmet-quality food at reasonable prices.
• the dream and creation of Steve Ells, a
  graduateof 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 dads help, the first Chipotle near the
  University of Denver sold four hundred dollars
  worth of burritos on opening night.

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Marketing for Hospitality Tourism
Chipotle Mexican Grill - Food with Integrity

• Food with Integrity - the philosophy that led
  to success, and continues to guide Chipotle.
• Food must complement and enhance its environment
  and not clash or harm the environment in which it
  exists.
• Steve insists on fresh productsnot 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
  incorporatingas many organic or naturally raised
  foods as possible

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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!
• 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
  ambienceof food preparation with food consumption

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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.
• 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
  designby the American Institute of Architects

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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.
• 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
  asthe 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
  goesinto their burrito or taco. Our crews dont
  just take orders.
• Our recipes are original and innovative. The
  ingredients in our food are the finest and
  freshestwhat we call food with integrity.

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Marketing for Hospitality Tourism
Chipotle Mexican Grill - Staff Loyalty

• Chipotles 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.
• 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 years budget.

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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.
• 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

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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.
• in todays 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 worlds 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 therewas nothing in Dubaibut a
  creek, a sheikspalace, and a reputationas a
  smuggling capitalof the Arabian Gulf.

• Today Dubai boasts some of the worlds best
  hotels 70 billion committed to development of
  tourism.
• 30 of Dubais 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 Worlds Best Airport is not held
  bya US or European airport, but by Hong Kong.
• Hong Kong International Airport boasts the
  worlds largest enclosed space, with a terminal
  eventuallycapable of handling 87 million
  visitors per year
• The best international airline is Singapore
  Airlines
• The worlds 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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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.
• yet opportunities are greater than ever before
• Welcome to marketing

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Your Passport to Success
Marketing in a Global Economy

• Today marketing isnt simply a business function.
• its a philosophy, a way of thinking, and a
  wayof structuring your business and your mind
• marketing is much more than a new ad campaign
• Marketings task is to provide real value to
  targeted customers, motivate purchase, fulfill
  consumer needs, and never fool the customer or
  endangerthe companys image.
• Creating customer value and satisfaction are at
  the heart of hospitality and travel industry
  marketing.

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Your Passport to Success
Marketing in a Global Economy

• Todays successful companies are strongly
  customer focused and heavily committed to
  marketing.
• Accor has become one of the worlds largest hotel
  chains by delivering Lesprit Accor
• the ability to anticipate and meet the needs of
  theirguests, with genuine attention to detail
• Ritz-Carlton promises delivers truly memorable
  experiences for its guests.
• McDonalds grew into the worlds largest
  restaurant chain by providing its guests with
  QSCV (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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Customer Orientation
Satisfied Customers

• The purpose of a business is to create and
  maintain satisfied, profitable customers.
• customers are attracted/retained when their needs
  are met
• customers talk favorably to others about their
  satisfaction
• Some hospitality managers act as if todays
  profitsare 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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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.
• much of the behavior of employees toward
  theircustomers 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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Customer Orientation
Satisfied, Profitable, Repeat Customers

• Without customers, assets have no value.
• a new multi-million-dollar restaurant will close
• a 300 million hotel willgo into receivership

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Customer Orientation
Satisfied, Profitable, Repeat Customers

• It is wise to assess the customers long-term
  valueand take appropriate actions to ensure a
  customers long-term support.
• The Forum Company found the cost of retaining a
  loyal customer is 20 percent of the cost of
  attractinga new one.
• Another study found an increase in customer
  retention rates yielded a profit increase of 25
  to125 percent.

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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 hotels food and
  beverage outlets.
• 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
  disappointedwith the impact of their advertising

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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.
• 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
  oromit 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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What is Hospitality and Tourism Marketing?
Products Serving Needs

• Marriott developed its Courtyard concept Darden
  designed the Olive Garden Italian Restaurant.

• Different products, offering new consumer
  benefits.
• marketing means hitting the mark.

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What is Hospitality and Tourism Marketing?
Effective Marketing

• The marketing mix must be just thata mix of
  ingredients to create an effective
  product/service package for the target market.
• This does not mean that selling and promotion are
  unimportant.
• 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 worlds
  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.
• McDonalds 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.
• all managers must understand marketing

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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.
• successful hospitality marketing is highly
  dependent onthe entire travel industry

• Many resort/hotel guests purchase
  travel-hospitality packages assembled by
  wholesalers and offered through travel agents

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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
  travelhospitality 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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Marketing in the Hospitality Industry
Definition of Marketing

• Many people think of marketing only as
  sellingand advertising, which is really only a
  tip of the marketing iceberg.
• today, marketing must be understood in a senseof
  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
  bythe customer.

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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.
• companies working to understand consumers,
  createcustomer value build strong customer
  relationships

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The Marketing Process
A Closer Look

• In the fifth, final step, companies reap the
  rewardsof creating superior customer value.

• By creating value for customers, they capture
  value from customersin the form of sales,
  profits long-term customer equity.

• As the first step, marketers need to understand
  customer needs wants, and the
  marketplacewithin which they operate.

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See this feature on page 11 of your textbook.
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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.
• 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
  willsatisfy needs

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Understanding the Marketplace
Customer Needs, Wants and Demands

• Sellers can confuse wants with needs. A drill
  bitmaker may think his customer needs a drill
  bit,but what the customer really needs is a
  hole.
• these sellers forget that a physical product is
  only atool 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.
• when backed by buying power, wants become demands
• Outstanding marketing organizations go to great
  lengths to learn about understand their
  customers needs, wants and demands.
• they conduct customer research.
• smart companies also have employees at all
  levelsincluding top managementstay 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.
• 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 aremore important than the tangible
  products.
• a market offering includes much more than
  physicalgoods 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
  tocreate experiences that will generate pleasant
  ones.

• at a Ritz-Carlton Resort, every evening at sunset
  they setup 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
  first-class 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
• Dominos Pizza saves the customer time and
  providesconvenience 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.
• managers must know their customers andunderstand
  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
  satisfythose 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?
• 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

• 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.

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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
  conceptof 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.

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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
• What customers will we serve?(what is our target
  market)?
• How can we serve these customers best?(whats
  our value proposition)?
• The company wants to select only customers
  thatit can serve well and profitably.

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Designing Customer-Driven Marketing Strategy
Choosing a Value Proposition

• A companys value proposition is the set of
  benefits or values it promises to deliver to
  consumers to satisfy their needs.
• such propositions differentiate one brand from
  another
• The company must decide how it will serve
  targeted customershow 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?
• 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.
• therefore management should focus on
  productionand distribution efficiency
• Management may become so focused on production
  systems they forget the customer.
• Unionization of service staff is another reason
  fora 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 productscan lead to
  marketing myopia.

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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
  undertakesa 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.
• 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.
• Four Seasons Hotels, Accor, and McDonalds 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
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,
  holdsthat the organization should

• 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
  consumersand societys well-being

• 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
  whatsbest for consumers and society in the long
  run.
• Advocates of societal marketing would like
  public-interest groups to guide corporations to
  decisionsthat will benefit society over the long
  term.
• Societal pressures are already manifested in
  themarketing 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
  theof 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
  beforepublic 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.
• the companys marketing strategy outlines which
  customers the company will serve and how it
  willcreate value for these customers
• The marketer develops an integrated marketing
  program that will actually deliver the
  intendedvalue to target customers.
• the marketing program builds customer
  relationshipsby transforming the marketing
  strategy into action
• it consists of the firms marketing mix, the
  marketingtools the firm uses to implement its
  marketing strategy

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Preparing an Integrated Marketing Plan
The Four Ps 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
  alllead up to the fourth and most important
  step, thatof building profitable customer
  relationships
• a company can adopt any of three value-building
  toolsto 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.
• 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.
• 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 guests 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.
• because you meet their needs more effectively
  than others

• 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 dont
  want a relationship with every customer.
• Guests who are in the low-frequency,
  low-profitability quadrant are often bargain
  hunters.
• they come when there is a promotion and avoid
  payingfull 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,
  maybe motivated by the value of additional
  purchases.
• 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
  real-time customer service through effective use
  of individualized information.
• important because a major driver of profitability
  isthe aggregate value of the companys 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.
• 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.
• 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.
• loyal customers purchase from the business
  theyare 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
• average life is determined through surveys or
  guest history

• It measures how much a member of a market segment
  produces per year, multiplied by theaverage 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
  50,000during 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.
• 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
  coaxsatisfied 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 customerthe share they get of the customers
  purchasing in their product categories.
• 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
  companys 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 companys 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.
• the more loyal the firms profitable customers,
  thehigher the firms customer equity
• Customer equity may be a better measure of a
  firms 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
Marketings Future

• Rapid changes can quickly make yesterdays
  winning strategies out of date.

• The Internet has changed the way we
  distributetravel products, but as a market force
  it is just alittle over ten years old.

• a technology executive stated, The pace of
  change isso rapid that the ability to change has
  now become a competitive advantage.
• management thought leader Peter Drucker observed,
  a companys winning formula for the last
  decadewill probably be its undoing in the next
  decade.

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Capturing Value from Customers
Marketings 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.
• in some regions projects are put on hold
  becausethe developer cannot acquire a management
  staff
• Marketing, with its customerorientation has
  become thejob of everyone, and

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KEY TERMS

• Customer equity - is the discounted lifetime
  values of all the companys 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 productfrom
  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 orher 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 organizations 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 improvesthe consumers and
  societys well-being.
• Transaction - Consists of a trade of values
  between two parties marketings unit of
  measurement.
• Value proposition - The full positioning of
  brandthe 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.
• observe the cleanliness of the restaurants,
  in-house signage, and other physical features
• order a menu item and observe the service and
  thequality 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
• 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?
• why?

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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,
  andresearch information can be found in this
  section

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INTERNET EXERCISES
Try This !

• Choose three restaurants or hotels listed on the
  books Web site under Internet Exercise Chapter
  1,
• 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
  satisfya customers want
• how does each of these companies create value for
  the customer?
• do they segment the market by offering pages for
  aspecific market segment?
• select the company you would purchase from
  andstate why

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END
CHAPTER END