Tourism and Hospitality Marketing

CHAPTER 1: AN OVERVIEW OF MARKETING

IN THE HOSPITALITY INDUSTRY

Chapter Objectives:
At the end of this chapter, the student must be able to:
1. Define marketing;
2. Enumerate and explain the different core marketing concepts;
3. Understand the meaning and components of the marketing mix;
4. Define marketing management; and
5. Enumerate and explain the five marketing management
philosophies.
6. Explain marketing in tourism and hospitality industry.

When someone travels to a destination, either as a tourist or a mere visitor, the

person will need a place to stay and relax. Accommodation provides a base where one
can engage in the process of staying at a destination. Over the years, accommodation
has become the center of focus when hosting guests. It is an important element to be
considered during the planning of a journey, because it comprises of the biggest
element of tourist spending during a trip.

Marketing is an essential element in running any business. Even though it is proven

to be an important factor which determines the success of any hotel unit, yet it is a
phenomenon which is often taken for granted. This chapter gives a definition of
marketing and explains in details the different marketing styles used in the hospitality
industry.

Marketing is a social and managerial process by which individual and groups obtain
what they need and want through creating and exchanging products and value with
others. All marketing efforts are made for attracting customers, serving superior value
and capturing return value for the customer in a superior routine than the competitors in

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the marketplace who compete with the same motive. So, understanding the customer,
the marketplace, and the behavior is essential for any marketing decision and action.

Marketing pundits and gurus have identified and acknowledged the 5 core concepts
of customer and marketplace as identified as follows:

 Five (5) core marketing concepts

1. Needs, wants and demands
2. Products / Market Offerings
3. Value, Satisfaction, and Quality
4. Exchange, transactions, and relationships
5. Markets

 Needs, Wants, and Demands

The most basic concept of fundamental marketing is that of human needs.
Marketing, like quality, starts with customer needs and ends with customer
satisfaction.

Needs are states of felt deprivation, personal necessities that motivate

behavior, and things that people cannot live without like food, clothing, warmth,
safety and shelter. Wants, on the other hand, are the form taken by human
needs as they may differ from person to person. These are needs shaped by
culture and individual personality. Every human being requires food but what
form they take food is different due to the cultural and social attributes of an
individual

As more and more products are introduced, we realize that we have

unlimited wants. We crave for more and unceasingly want more that what we
already have. However, we also know that with limited resources we cannot buy
everything we want; Thus, we are constrained to choose products that will give
us most value and satisfaction for our money. The concept of demands comes in
the picture. When supported by purchasing power, or the ability to buy, wants
become demands.

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 Products / Market Offerings

Consumers’ needs and wants are satisfied through market offerings.
Market offerings are some combination, mixture of blend of physical products,
services, information, ideas, or experiences offered to a market to satisfy a need
or a want. People satisfy their needs and wants with products. A product is
anything offered for sale to satisfy a need or want. Tangible products are
called goods. A product may also pertain to intangibles like a haircut, massage,
patient counselling, entertainment etc. Intangible products are known as
services.

For any sellers putting the best blend of offers in a market, the offering is
the challenge. Many of them make the mistake named “marketing myopia” –
paying more attention to specific products they offer than to the benefits and
experiences produced by these products.

Here, they are so hooked with their products that they focus only on
existing wants and lose sight of customer needs. They forget that a products is
only a tool to solve a consumer problem. “market offerings” – that gets results
for the sellers puts the customers’ needs, wants and demands first.

 Value, Satisfaction, and Quality

Needs can be satisfied by a wide array of products that people can
choose from. One question we need to answer, since we have limited resources,
it is that: how do we choose from among the wide array of products offered to us
to satisfy our needs and wants? The answer to this question is the third set of the
core marketing concepts – VALUE, SATISFACTION, and QUALITY.

When deciding which product to buy and where to buy it, customer value
should be considered. Customer value is the difference between the value of
buying, owning and using the product, and the cost of the product. The customer
compares the cost of the product with the benefits he gains from using the
product.

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Another factor in deciding which product to buy is customer satisfaction.

Customer satisfaction refers to the difference between the buyer’s expectation
and the perceived performance of the product. Before making any purchase, a
customer would already have an expectation in mind and his/her task is to look
for a product that he thinks would perform and deliver according to his
expectations.

Customer satisfaction is closely linked to quality. In recent years, many

companies have adopted total quality management (TQM) programs pertaining
to the continuous improvement of company products, services and marketing
processes. Quality is what the customer says it is. The decision-maker and the
final evaluator of quality is the customer. Indeed, quality must begin with
customer needs and end with customer satisfaction.

Marketers must be careful to set the right level of expectations.

Overcooked or undercooked market offerings will not help the marketer’s capture
value in return for customer satisfaction.

Satisfied customers will buy again and tell others about their good
experiences, on the other hand, dissatisfied customers will eventually switch to
competitors and surely disparage the product to others.

 Exchange, Transactions and Relationships

Marketing exists when people decide to satisfy their needs and wants
through beneficial exchanges. An exchange is the act of obtaining a desired
object by offering something in return. Exchange is said to be the core concept of
marketing.

If the exchange is the core concept of marketing, transaction is

marketing’s unit of measurement. A transaction, an exchange or trade of values
between two parties, measures the number of exchanges that take place.

By this, marketers try to build and maintain profitable exchange

relationships with target audiences interested in an exchange.

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 Markets
A market refers to a set of actual and potential buyers of a product who
have a common need or want that can be satisfied through exchange. Market in
marketing does not refer to a place but to a group of people bound by a common
need or want. The size of market is measured by the number of people who
exhibit the need, have the resources to engage in an exchange, and who are
willing to offer these resources in exchange for what they want.

Marketing efforts are undertaken for controlling markets to bring about

profitable customer relationships. For creating these relationships marketers
must search for buyers and their needs, design good market offerings, set prices
for them, promote them, and store and deliver them.

Activities such as consumer research, product development,

communication, distribution, pricing and services are must to stay ahead of
competitors.

THE MARKETING MIX

Success in marketing is determined by four equally important factors that are

collectively known as the marketing mix. These are Product, Price, Place, and
Promotion. It is said that the success of marketing depends on the success of the
company’s plans as far as the marketing mix is concerned.

A high quality, top-performing product sold at a reasonable price at convenient

and accessible places backed up by intensive promotion spell MARKETING SUCCESS.
If we put marketing success into an equation, it would be:

High quality Convenient and

Marketing Success = top-performing + Reasonable + Accessible + Intensive
PRODUCT PRICE PLACE PROMOTION

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Product

Place
THE

Price
MARKETING MIX

Promotion

Figure 1.1 The Marketing Mix

 WHAT IS TOURISM AND HOSPITALITY MARKETING? 

Marketing must be understood in the sense of satisfying customer needs. If the

marketer understands costumers need; develops products that provide superior
customer value; and prices, distributes, and promotes them effectively, these products
will sell easily.

In the hotel industry, marketing and sales are often thought to be the same and
no wonder: the sales department is one of the most visible in the hotel. Sales managers
provide prospective clients with tours and entertain them in the hotel’s food and
beverage outlets. Thus sales function is highly visible, whereas most of the
nonpromotional areas of the marketing function take place behind closed doors.

In the restaurant industry, many people confuse marketing with advertising and
sales promotion. It is not uncommon to hear restaurant managers say that they “do not
believe in marketing” when they actually mean that they are disappointed with the
impact of their advertising. In reality, selling and advertising are only two marketing
functions and often not the most important. Advertising and sales are components of

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promotional element of the marketing mix. Other marketing mix elements as mentioned
earlier in this chapter include product, price, and place (distribution). Marketing also
includes research, information systems and planning.

The two main industries that comprise the activities we call tourism are hospitality
and travel industries. Successful hospitality marketing is highly dependent on the entire
travel industry. Meeting planners choose destinations based on the cost of getting to the
distribution, the value of the hotels, the quality of restaurants, and evening activities for
the attendees.

Marketing Management
Marketing management is the analysis, planning, implementation, and control of
program designed to create, build and maintain beneficial exchanges with target buyers
for the purpose of achieving organizational objectives. Thus, marketing management
involves managing demand, which in return involves managing customer relationship.
Hence, marketing management is also called demand management.

Marketing is a department of management that tries to design strategies that will

build profitable relationships with target consumers. But what philosophy is the best for
a company in setting marketing strategies?

There are five (5) alternative concepts under which organizations design and
carry out their marketing strategies.

Figure 1.2 Marketing Management Principles

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Marketing Management Principles

1. Production concept. This concept holds that given a wide array of products in
the market, consumers will prefer to buy products that are widely available and
highly affordable.

2. Product Concept. This concepts holds that consumers favor products that offer
the best quality, performance and innovative features.

3. Selling Concept. This concept holds that consumers will not buy enough of the
company’s products unless the company undertakes an extensive and large-
scale selling and promotional effort.

4. Marketing Concept. This concept holds that achieving the goals of an

organization depends on knowing the needs and wants of the target market and
delivering the desired satisfaction more effectively and efficiently than others.

5. Social Marketing Concept. This concept holds that organizations must not only
study and satisfy the customer’s needs and wants but also deliver superior value
in a way that maintains or improves the customer’s as well as the society’s well-
being.

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CHAPTER TEST - 1

Name: Score:
Course: Date:

1. Define the following:

 Marketing
__________________________________________________________________
__________________________________________________________________
 Needs
__________________________________________________________________
__________________________________________________________________
 Wants
__________________________________________________________________
__________________________________________________________________
 Products
__________________________________________________________________
__________________________________________________________________
 Marketing mix
__________________________________________________________________
__________________________________________________________________

2. True or False
Read the following statements carefully. On the space provided, write TRUE if
the statement is correct and FALSE if otherwise.
_________1. A high quality, top-performing product sold at a reasonable price at
convenient and accessible places backed up by intensive promotion spell
marketing success.
_________2. Marketing Concept holds that achieving the goals of an organization
depends on knowing the needs and wants of the target market and
delivering the desired satisfaction more effectively and efficiently than
others.
_________3. Total quality management (TQM) programs pertains to the continuous
improvement of company products, services and marketing processes.
_________4. The size of market is measured by the number of people who exhibit the
need, have the resources to engage in an exchange, and who are willing to
offer these resources in exchange for what they want.
_________5. Marketing management is also called demand management.

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CHAPTER 2: MARKETING ENVIRONMENT AND

SWOT ANALYSIS

Chapter Objectives:
At the end of this chapter, the student must be able to:
1. Realize the importance of the environment to company operations;
2. Distinguish between the two types of business environment;
3. Identify and explain the forces in the microenvironment;
4. Identify and explain the forces in the macroenvironment;
5. Understand the meaning and importance of SWOT analysis; and
6. Distinguish which characteristics form the company’s strengths,
weaknesses, opportunities, and threats.

The operations of a company can never be isolated from its environment. An

environment consists of forces that are expected to affect company operations. A firm
has two sets of environment: the microenvironment and the macroenvironment.

 THE MICROENVIRONMENT
The microenvironment is also called the internal environment. It includes
forces affecting operations that are within the control of the company. Internal
environment consists of five (5) equally powerful forces, namely;
a. Management
b. Marketing
c. Finance
d. Production and Operations
e. Human Resources

 Management
This pertains to the organizational setup, including goals and objectives,
organizational structure, managerial composition, company philosophy, vision,
mission, policies, programs, plans, strategies, tactics, etc.

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 Marketing
This includes the marketing program of the company covering the basic
marketing mix – product, price, place, and promotion. Marketing is the process of
getting goods and services into the hands of consumer with a view to satisfying
the needs and desires of consumers and producers.

 Finance
This includes the company’s resources. Items covered under this force are
profitability indices, balance sheet and income statement results, assets,
liabilities, net worth, investments, capital expenditures and operating expenses.
Business maintains relationship with financial markets including institutions and
major shareholders.

 Production and Operations

This includes all aspects of manufacturing (pertaining to industries) or
operations (for commercial and service enterprises). Specific items falling under
this force are;
o Quality and sources of materials

o Machinery and equipment

o Production efficiency

o Service reliability

o Technical expertise

o Scheduling

o Delivery

o Sales services

o Maintenance

o Factory location

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 Human Resources
This deals with increasing the effectiveness of human performance. It
includes motivation, compensation, training and development, promotion,
recruitment, selection, placement, hiring policies and procedures, fringe benefits,
performance appraisal, grievance

 THE MACROENVIRONMENT
The macroenvironment is also called the external environment. It
includes forces that are beyond a company’s control. The macroenvironment
includes the economic, the sociocultural, the political-legal, the technological, and
the natural environment.

 Economic Environment
This environment includes such forces as balance of payments, foreign
exchange, import-export situations, competitive situation, taxation, energy and
oil prices, employment and other measures of economic performance.
The economic environment includes all those activities that influence the
wealth and income of the population. Examples of economic influences are:
 The state of the economy
 The structure of employment and the level of unemployment
 The rate of inflation
 The exchange rate.

These factors combine to influence business confidence, consumers’

disposable income and consumer confidence, which play a significant role in
changing demand for hospitality markets. When business and consumer
confidence is high, hospitality markets thrive; when business and consumer
confidence is low, hospitality markets decline and firms are prone to failure. A
key economic factor is the business cycle, which influences demand. Hospitality

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firms need to respond to the stages in the business cycle. Whilst hospitality
businesses all trade at the same stage of the business cycle, firms will respond
differently according to their financial and marketing strengths, and their
leadership

 Sociocultural Environment
This environment pertains to people and their culture. Examples of forces
under this type of external environment are education, customs and traditions,
religious affiliations, perception, cultural values, demography, ethnic and racial
diversity, etc.
The socio-cultural environment influences consumers’ purchase and
consumption behavior. A country’s socio-cultural environment is a complex mix
of its geography, climate, history, religion, and ethnic make-up. We are all
influenced by the values of our own culture, even though we are not aware of this
all the time. Indeed, cultural differences between countries provide hospitality
marketers with some of the greatest challenges when developing global brands.
One of the key aspects of a country’s hospitality industry, which is heavily
influenced by national culture, is eating and drinking habits. Each country and
region has developed its own cooking based on factors like the climate, which
dic- tates the produce available. The growth of international travel for business
and leisure purposes has widened people’s cultural knowledge and encouraged
the development of new food and beverage concepts. Demographic changes
(changes in the make-up of a population) also make a significant impact on
market demand in hospitality. Examples include the following:
 The increase in the number of older people living in Western
countries is changing the demand characteristics for holidays
 The increase in the number of single people (caused by people
marrying later, and more people getting divorced) is changing the
demand characteristics for eating out.

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Hospitality marketers need to be aware of socio-cultural and demographic

trends to ensure their companies understand changes in markets in order to
remain competitive.

 Politico-legal environment.
Politico pertains to government while legal pertains to law. This
environment includes legislation regulating business, legal restrictions, elections,
political stability, presidency, peace and order situation, armed forces, etc.

 Technological environment.
This refers to the advancement of science and technology and includes
new invention or discoveries, technological breakthroughs, research and
development, information technology, scientific experiments, etc.
The technological environment in hospitality is closely associated with
innovation and developments in information communications technology (ICT).
The rapid development of ICT in the late 1990s and during the current decade
has had a major influence in the industry. Improvements in the technological
environment include:

 The growing sophistication of computerized reservation services

 The development of global distribution networks
 Increasing consumer and commercial use of the Internet
 Improvements in kitchen equipment, which has changed food
production techniques
 The development of in-hotel computerized systems, which has
improved in- room comfort and security for guests.

The current rate of technological change is fast, and new developments

are constantly altering the technological environment.

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 Natural / Environmental environment.

This includes typhoons, earthquakes, the El Nino and La Nina
phenomena, pollution, ozone depletion, deforestation, preservation and
extinction of animal species, etc.
Environmental factors have become more important in all parts of the
world as people recognize the impact tourists have on the planet. In particular,
mass tourism has become much more controversial. Tourism:
 Encourages new hotel and leisure developments
 Impinges on natural habitats
 Uses up scarce resources
 Generates air and noise pollution
 Creates waste disposal problems.

Although the concept of sustainable tourism is much publicized, and

‘green’ pressure groups lobby government and hospitality companies to improve
the industry’s environmental policies, the hotel and restaurant industry does not
have a good reputation in this area.

 The SWOT Analysis

After thoroughly studying the microenvironment and the macroenvironment of the
firm, the company gets a clear picture of what it has and what it lacks; what to expect
and what not to expect. This leads to a very powerful tool in marketing—the SWOT
analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT
analysis in marketing will help the company decide which marketing strategy should be
used to get the best result for the business.

Hotels are one of the most important services which directly affect arrival of tourists
to a particular country. Obviously, it would not be possible for tourists to stay in a place
if there are not enough hotel rooms available. Therefore, the hotel industry plays a
significant role when it comes to tourism as it is a support service which will affect the
number of tourists visiting a particular place.

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SWOT analysis of hotel industry in this regard can provide a thorough insight to
whether or not the industry is contributing towards the achievement of its goals.

 STRENGTH
A strength is something that a company is good at doing. It is a quality that
produces a competitive advantage for the company. A characteristic is said to be a
strength if it belongs to the internal environment and is expected to affect company
operations in a positive manner. High technical expertise, superior financial resources,
good management-labor relations, a well-developed and carefully thought out vision-
mission, effective advertisements, clean corporate image and reputation, and
outstanding leadership are good examples of strengths that a company may possess.
Some examples of strength in hospitality industry are:
 Provides safe abode away from home
 Contributes to the local economy
 High-profit Margin
 Good customer relationship

 WEAKNESSES
The opposite of strength is weakness. A weakness is something that a company
lacks. It is a quality that puts the company at a disadvantage. A quality is said to be a
weakness if it belongs to the internal environment and has a detrimental effect on
company operations. Below-par financial performance, poor product quality and
availability, uncooperative workers, low employee morale, duplication of work, frequent
machine breakdowns, inconsistent policies, and poor planning are examples of
weaknesses.

Some examples of weakness in hospitality industry are:

 High Hotel Rates

 unfavorable sales reports

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 Poorly trained staff

 Resource limitation

 OPPORTUNITIES
An opportunity is a factor in the external environment that is expected to work
favorably towards company operations. Improvements in the economy, high barriers to
entry, high population growth rate, increase in purchasing power, stable political
leadership, and strong confidence of investors are some examples of opportunities.
Some examples of opportunity in hospitality industry are:
 Increasing number of tourists / Peak seasons
 Lower tax rates
 Few competitions in the area
 Press/media coverage of the company

 THREATS

A threat, on the other hand, is a factor in the external environment that is expected
to have a negative effect on company operations. Political unrest, presence of substitute
products, dumping of low-priced items from Asian neighbors, piracy, and a pending oil
price hike are examples of threats.
Some examples of threat in hospitality industry are:
 Competitors have cheaper hotel rates
 Negative press/media coverage
 Increase in local taxes

The real challenge of marketing, then, is to maintain (if not improve) a company’s
strengths and find ways on how to turn weaknesses into strengths. It is also a challenge
to take advantage of opportunities with the amount of resources that a company has
and to turn threats into opportunities or exhaust all possible means to be unaffected by

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these threats. How do we categorize a factor as a strength (S), a weakness (W), an

opportunity (O), or a threat (T)? Before we can do this, two important questions have to
be answered.

The two-part questions for SWOT analysis:

1. Is the factor within the control of the company or is it beyond the company’s
control? If your answer is within, then it belongs to the internal environment. If
beyond, it is part of the external environment.

2. Is the factor expected to affect company operations positively or negatively? If

positively, it may be either a strength or am opportunity. If negatively, it can be a
threat or weaknesses.

EFFECT ON OPERATIONS
Positive Negative

Internal Strength Weakness

E Opportunity Threat
N External
V
I
R
O
N
M
E
N
T

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CHAPTER TEST - 2

Name: Score:
Course: Date:

SWOT ANALYSIS
Suppose you are a Marketing Manager of a 5 Star Hotel located in Baguio City,
Philippines. You are tasked to perform a SWOT analysis to know what are the factors
expected to affect the company’s operations.
Examine each situations and identify whether it is a Strength, a Weakness, an
Opportunity or a Threat to your company.
Answer;
S. If the situation refers to a Strength
W. If the situation refers to a Weakness
O. If the situation refers to an Opportunity
T. If the situation refers to a Threat
X. If it will not affect the company at all
___________1. Excellent staff who are highly trained and very customer attentive
___________2. Business taxes will increase by 3% next year.
___________3. The present promotional activities have a great appeal to customers
___________4. Some employees have problems on dealing with arrogant customers
who give out unfavorable comments.
___________5. Sometimes overlook financial issuance of check and deposited cash.
___________6. Hotel rates are high which contradicts to the company’s positioning of
“Premium Quality Services at an Affordable Price”
___________7. Constant growth of the number of tourists visiting the city where the
hotel is situated.
___________8. Increasing number of potential investors in the company.
___________9. Growing number of cheaper hotels in the city.

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___________10. Based on financial analysis, the company has increased its profit
margin this year.

CHAPTER 3: THE MARKETING STRATEGY &

THE ROLE OF MARKETING IN HOSPITALITY INDUSTRY

Chapter Objectives:
At the end of this chapter, the student must be able to:
1. Understand the marketing strategies in hotel industry;
2. Identify the role of marketing in the hospitality industry;
3. Recognize the importance of effective marketing campaign; and
4. Explain how marketing elements affect marketing strategies.

I. MARKET STRATEGY IN HOTEL INDUSTRY

Marketing started as a result of economic and business pressure due to a need

which arises to focus on embracing a set of managerial measures in order to satisfy
customers’ needs. The evolution of marketing in the hotel industry is similar to every
other industry. The main reason for the marketing in the hotel business is because of
the growth in the number of guests who are in need of accommodation and the increase
in competitions by the accommodation service providers. Moreover, the hotel industry is
becoming a more and more mature market whereby the competition is increasing
globally and winning customers becomes a problem. Therefore, there is a huge shift to
marketing.

The hotel industry is so competitive that it requires the hotel to formulate a

dynamic mechanism which can adapt to the changes in the market environment, the

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competitiveness of the market as well as the economic climate. The ultimate goal of
having a marketing strategy is usually to identify opportunity to serve the market in a
way that is profitable and effective enough to the extent that it becomes difficult if not
impossible for another company to take up the venture without running into losses.

Some authors believe that at the initial stage of starting a hotel business, the
hotel will not make a profit, even in the second year the hotel will only break even and
the hotel may start to make a little profit from the third year. On the other hand, other
marketers in the hotel industry think that the hotel can start to make a profit immediately
from the first year of entering into the industry if the right marketing strategies were
used.

An hotelier that wants to achieve success needs to have a deep understanding of

marketing and how to combine various marketing elements such as the price, product
promotion and distribution.

Figure 3.1: The Marketing Strategy

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The above graph is a representation of the entire marketing strategy of a hotel. A

hotel needs to use different combinations of various inputs such as advertising
marketing channels, personal selling, and advertising and so on to get the desired
return on investment.

It is common to see society changes in its value and needs so hotel marketers
also have to change the overall marketing strategy to fit the changes in society.

II. ROLE OF MARKETING IN HOSPITALITY INDUSTRY

Marketing plays a vital role in the success of any business organization. Since all
aspects of the business depend on successful marketing, it is difficult to highlight all the
roles which marketing plays in a company. However, some of the major impact of
marketing will be highlighted in the following paragraphs.

Marketing helps in building a company’s brand name and placing the company’s
product or service in the heart of prospective customers. In the hotel industry, the
success of any hotel often depends on good reputation. As the reputation of a hotel
grows bigger within society, more customers will lodge in the hotel, thereby making the
hotel’s room occupancy rate increase and generate more income to the hotel.
Additionally, it is fair to say that marketing really helps in the aspect of branding as it
creates and supports effective communication within and outside the hotel unit.

Effective marketing campaign gives a company an edge over its competitors. A

business may offer the best product in the market, but without a good marketing
campaign, it will not generate the desired returns on investment because it is marketing
that makes the product or service known to prospective customers.

A good marketing campaign helps a company to efficiently manage its resources.

When an effective and efficient marketing strategy is adopted in a company, resources
wastage is reduced if not eliminated. The hotel industry is an industry with perishable
products, in other words, if a room is not occupied during a particular period, the income

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that is supposed to be realized on that particular room is lost forever and it cannot be
regained.

Figure 3.2: The Role of Marketing

Efficient marketing helps in ensuring that the hotel has a high occupancy rate at
all time. Marketing helps to ensure that a company’s income increases. As more people
get to know about a company’s products or services, the company’s share of the market
increases as well as its sales revenue.

Since marketing creates a platform of bridging the gap between a hotel and its
customers, it is important that a hotel as a company ensures that the right messages
are passed across to the customers with its marketing campaign. Furthermore, the
ultimate goal of marketing should be the facilitation of a win-win situation between the
hotel and the customers. The hotel management should adopt the most effective and
efficient marketing strategies that serve the interest of the company without jeopardizing
the interest of the customers.

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THE HOTEL MARKETING MIX

Defining a proper marketing mix for hotel industry is crucial for the success of
hotels marketing efforts. A marketing mix is used to indicate the several marketing
variables used by the sales team to target specific guests or target market segments
(E.g.: Corporate, Transient, Groups, Conference, Leisure etc.).
Marketing mix is normally prepared by the Director of sales and marketing /
Sales managers. The hotel should have the right facilities / services, define good
promotional strategies (both online and offline) and finally with the right pricing.

Figure 3.3: The Hotel Marketing Mix Chart

1) Service / Facilities:
This is considered as the first because without this hotel marketing team will
have nothing to deliver to the potential guest/ customers.
Hotel industry offer products like:
 Guest rooms
 Food and beverage

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 Banqueting rooms
 Conference facilities
 Recreational facilities
 Health and wellness facilities
 Executive lounge
 Express check-in checkout services
 Travel desk
 Business centre
 Parking facilities etc.

Hotels generally cater to different market segments and each of these market
segments has different requirements.  E.g.: A leisure guest on a family trip looks for
recreational and wellness facilities of the hotel where as a business traveller gives
importance on hotels business facilities like business centre, video conferencing, good
in room internet connectivity etc.
This analysis done by the sales and marketing department can help the top
management to identify these specific requirements and work along with the
management to either develop such facilities or make the required improvements.

2) Place and Distribution

This refers to the accessibility of the products to consumers. When comparing to
other products normally hotels products doesn't travel to customers but the customers
come to the product.
Place or Location of the hotel e.g; choices like in city, outskirts of
city, resort area, hill station. Or a chain of hotels with presence in multiple locations.
Hotel uses either direct or indirect distribution methods to reach out its potential
customers, below are few methods or channels used by hotels.

Direct methods
 Sales through the hotel sales team
 Personal telephone calls

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 Online pay per click or Banner Advertisements (Google ads, Facebook ads etc.)
 Printed media Advertisements
 Other Media Advertisements
 Hotel Website Booking System (WBS)
 Global distribution system (GDS)

Indirect methods
 Travel Agents
 Independent Travel agents
 Event Planners
 Online Travel Agents (Expeida, booking.com, Agoda etc.)
 Online Travel portals ( Trip Advisor, HotelIQ etc.)
 Independent hotel representative.

3) Promotions and communications
The director of Sales & Marketing should work out the most effective promotion
and communication mix for the hotel. Promotion is the way hotels communicate to
target customers.
Below are few promotions and communication channels used by hotels:
 Brochures
 Television commercials
 Hotel Websites
 Twitter Channel
 Facebook Page
 Google + Page
 Hotel pens & pencils
 Scratch pads with hotel logo
 Billboards
 T V Commercials

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4) Room Rate or Pricing:

Defining the correct pricing strategy is one of the most important aspects of the
marketing mix. If the hotel products like Guest rooms, Food and beverage menu etc. are
not priced competitively then the potential guest may reject the use of hotel services.
In this very competitive market guests are strongly influenced by the pricing
and packages. The hotel rate codes and packages are defined keeping in mind to
attract or impress guest.

Generally the hotel room rates are defined as per the below season:

Peak Season
This is the period when demand for a hotel and its services is highest and the
hotel can charge the highest prices to the guest. There is no defined peak period for all
hotels it vary from hotel to hotel.

Valley Season / Off Season

This is the time of the year with the lowest demand for rooms. Hotels generally
offer the reduced rates and packages eg: Stay for 3 and pay for 2 nights, Discounted
Package rates etc.

Shoulder Season
This period falls between peak season and off season, And this time is
considered as the best time to attract new business as the rooms are available and a
medium or highest rates can be charged. Also the sales and marketing activities should
be the highest during this period.

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CHAPTER TEST - 3

Name: Score:
Course: Date:

Answer the following questions comprehensively.

1. What are the marketing strategies necessary in hospitality industry?

________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________.
2. Why marketing plays a vital role in the success of any business organization?
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________.
3. Briefly explain how marketing elements / marketing mix affect marketing
strategies?
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________.

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CHAPTER 4: THE MARKETING PROCESS

Chapter Objectives:
At the end of this chapter, the student must be able to:
1. Explain the steps in marketing process;
2. Perform market targeting, market segmentation and market positioning;
3. Understand the four marketing management functions;
4. Describe the Contents of Marketing Plan;
5. Enumerate and explain the marketing control process; and
6. Know the organization of Marketing Department.

MARKETING PROCESS
The Marketing Process
Once the strategic plan has defined the company's overall mission and objectives,
marketing plays a role in carrying out these objectives. The marketing process is the
process of analyzing market opportunities, selecting target markets, developing the
marketing mix, and managing the marketing effort. Target customers stand at the center
of the marketing process. There are following steps in Marketing Process:

1. Analyzing marketing opportunities

2. Selecting target markets
3. Developing the marketing Mix
4. Managing the marketing effort

A. Analyzing marketing opportunities

First step of the marketing process is analyzing market opportunities and availing
these opportunities to satisfy the customer's requirements to have competitive
advantage. The marketing function of analyzing market opportunities is important in the

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marketing planning process. Any marketing manager must analyses the long-run
opportunities in the market to improve the business unit's performance. To evaluate its
opportunities firms needs to operate a reliable marketing information system.
Marketing research is an indispensable marketing tool for this purpose.
Researching the market allows the company to gather information about their
customers, competitors and any environmental changes to determine the market
opportunities. Once the market opportunities have been analyzed then modern
marketing practice calls for dividing the market into major market segments, evaluating
each segment, and selecting and targeting those market segments that the company
can best serve.

B. Selecting the Target Market:

To succeed in today's competitive marketplace, companies must be customer
centered. They must win customers from competitors and keep them by delivering
greater value.

 Sound marketing requires a careful, deliberate analysis of consumers.

 Since companies cannot satisfy all consumers in a given market, they must
divide up the total market (market segmentation), choose the best segments
(market targeting), and design strategies for profitably serving chosen segments
better than the competition (market positioning).

1. The hotel industry is one of the most diverse and dynamic industries in the world.
In order to understand the customers, it is necessary to divide the whole market
into subsets. Market segmentation is the process of dividing a market into
distinct groups of buyers with different needs, characteristics, or behavior who
might require separate products or marketing mixes.
The importance of market segmentation cannot be overemphasized. It
helps the hotel to divide the total market and identify the needs of the sub-group.
Segmentation is the first step taken when engaging in a marketing process that
involves developing products that meet the need of the customers. When a

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product meets the customers’ needs and expectation, they will usually come
back for more and more. This will definitely result in a good relationship between
the hotel and its customers. Moreover, it is necessary to divide the market into
different groups and subgroups when setting the market objectives. Having a
deep knowledge about the target customer for the company’s product helps in
planning, setting the budget and controlling the marketing activities.

Figure 4.1 Market Segmentation

2. Market targeting is the process of evaluating each market segment's

attractiveness and selecting one or more segments to enter. A company should
target segments in which it can generate the greatest customer value and sustain
it over time. A company may decide to serve only one or a few special segments,
or perhaps it might decide to offer a complete range of products to serve all
market segments. Special segments may be called "market niches." Most

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companies enter a new market by serving a single segment, and if this proves
successful, they add segments.

3. Market positioning is arranging for a product to occupy a clear distinctive and

desirable place relative to competing products in the minds of target consumers.
In positioning a product, a company first needs to identify possible competitive
advantages upon which to build the position. To gain competitive advantage, the
company must offer greater competitive advantage to the target segment. The
company's entire marketing program should support the chosen positioning
strategy. Effective positioning begins with actually differentiating the company's
marketing offer so that it gives consumers more value than they are offered by
the competition.

Marketing of hotel services cannot be discussed without mentioning

market positioning. According to Kotler “positioning is the act of designing the
company’s offerings and image to occupy a distinctive place in the mind of the
target market”. The rationale of positioning hotel services is to create a brand in
the minds of the customers so that the company can maximize the benefit it’s
derived from the customers. Positioning a product in the mind of the customers
also helps the hotel in differentiating its product and services from that of its
competitors. Much of the emphasis of position is based on what the guest will
receive or benefit by lodging in the hotel or using its services. Of course, the
ultimate goal of positioning is to have a win-win situation whereby both hotel
service provider and the guests can benefit from the transaction. In order to
achieve effective and efficient positioning, it is a prerequisite that the hotel is able
to identify the target market, its competitors and the ideal points-of-parity and
points-of-difference brand association. (Kotler et al. 2009, 361-362.) Once the
hotel’s product and services have been positioned in the right place within the
mind of the target customers, the hotel can make the right investment in utilizing
its resources and skills in the market place. That is, the right product or service is
placed on the market at a cost effective price (Kotler et al. 2009, 374.)

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C. Developing the Marketing Mix

Once the company has decided on its overall competitive marketing strategy, it is
ready to begin planning the details of the marketing mix. The marketing mix is the set
of controllable marketing variables that the firm blends to produce the response it wants
in the target market. The marketing mix consists of everything that the firm can do to
influence the demand for its product.

These variables are often referred to as the "four Ps."

1). Product stands for the "goods-and-service" combination the company offers
to the target market.

2). Price stands for the amount of money customers have to pay to obtain the
product.

3). Place stands for company activities that make the product available to target
consumers.

4). Promotion stands for activities that communicate the merits of the product
and persuade target consumers to buy it.

An effective marketing program blends all of the marketing mix elements into a
coordinated program designed to achieve the company's marketing objectives by
delivering value to consumers. Some critics feel that the four Ps omit or underestimate
certain important activities.

1). "Where are services?" they ask.

2). "Where is packaging?"
3). The 4 Ps seems to take the seller's view rather than the buyer's view.
4). Perhaps a better classification would be the 4 Cs:
a). Product = Customer Solution.
b). Price = Customer Cost.

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c). Place = Convenience.

d). Promotion = Communication.

D. Managing the Marketing Effort

The company wants to design and put into action the marketing mix that will best
achieve its objectives in target markets. This involves four marketing management
functions. The four functions are: analysis, planning, implementation, and control

1. Marketing Analysis:

Marketing analysis involves a complete analysis of the company's situation. The

company performs analysis by Identifying environmental opportunities and threats.
Analyzing company strengths and weaknesses to determine which opportunities the
company can best pursue. Feeding information and other inputs to each of the other
marketing management functions.

2. Marketing Planning:

Within each business unit, functional plans must be prepared, including

marketing plans. Such plans include marketing plans which are aggregate plans
consisting of plans for product lines, brands and markets.

Marketing planning involves deciding on marketing strategies that will help the company
to attain its overall strategic objectives. A detailed plan is needed for each business,
product, or brand. A product or brand plan should contain the following sections:
executive summary, current marketing situation, threats and opportunity analysis,
objectives and issues, marketing strategies, action programs,  budgets,  and controls.

Contents of Marketing Plan

1. Executive summary – The opening section of the marketing plan that presents a
short summary of the main goals and recommendations to be presented in the plan.

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2. Current marketing situation - The section of a marketing plan that describes the
target market and the company's position in it. The current marketing situation is the
section of a marketing plan that describes the target market and the company's
position in it. Important sections include:
a. A market description.
b. A product review.
c. Analysis of the competition.
d. A section on distribution.

3. Opportunities and Issues Analysis- This section requires the marketing manager
to look ahead for threats and opportunities that the product(s) might face. A
company marketing opportunity would be an attractive arena for marketing action in
which the company would enjoy a competitive advantage. In the threats and
opportunities section, managers are forced to anticipate important developments
that can have an impact, either positive or negative, on the firm. Having studied the
product's threats and opportunities, the manager can now set objectives and
consider issues that will affect them.

4. Objectives - Objectives should be stated as goals the company would like to reach
during the plan's term.

5. Marketing strategy - The marketing logic by which the business unit hopes to
achieve its marketing objectives. Marketing strategy consists of specific strategies
for target markets, marketing mix and marketing expenditure level. Strategies should
be created for all marketing mix components. The marketing budget is a section of
the marketing plan that shows projected revenues, costs, and profits. The last
section of the marketing plan outlines the controls that will be used to monitor
progress. This allows for progress checks and corrective action.

6. Action programs - This section sets out what will be done, when, by whom and
how much will be spent doing it.

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7. Projected profit-and-loss statement - The marketing budget section of the plan

shows projected revenues, costs and profits/surpluses.

8. Controls - This last section outlines the control measures that will be used to
monitor progress. Goals may be set out weekly, monthly, quarterly, annually or for
all such periods. Following evaluation of results, actions are recommended and
implemented in the next period.

3. Marketing Implementation:

Marketing Implementation is the process that turns marketing plans into

marketing actions in order to accomplish strategic marketing objectives. Whereas
marketing planning addresses the and "why" of marketing activities, implementation
addresses the "who", "where", "when", and "how".

One firm can have essentially the same strategy as another, yet win in the
market- place through faster or better execution. Successful implementation depends
on an action program that pulls all of the people and activities together and forms sound
formal organizational structure its decision and reward structure (HRM functions and
procedures) and the firm's marketing strategies fitting with its company culture (the
shared system of values and beliefs).

Marketing Department Organization

The company must design a marketing department that can carry out marketing
analysis, planning, implementation, and control. Formats for organizing the department
include:

a. The functional organization where different marketing activities are headed by a

functional specialist (such as a sales manager, advertising manager, etc.).

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b. The geographic organization where sales and marketing people are assigned to
specific countries, regions, or districts.

c. A product management organization where a product manager develops a

complete strategy for a product or brand. Today, many firms are shifting to
customer equity management where customer profitability is important.

d. A market or customer management organization where a specific market plan is

developed for each specific market or customer.

e. A combination plan where large companies many times combine elements of any
of the above.

4. Marketing Control

Marketing control is the process of measuring and evaluating the results of

marketing strategies and plans, and  taking corrective action to ensure that marketing
objectives are attained. Implementation requires four steps:

1). Set specific goals (What do we want to achieve?).

2). Measure performance (What is happening?).

3). Evaluate performance (Why is it happening?).

4). Take corrective action (What should we do about it?).

Two broad forms of control are important:

1). Operating control involves checking ongoing performance against the annual plan
and taking corrective action when necessary.

2). Strategic control involves looking at whether the company's basic strategies are
well matched to its opportunities. The major tool for accomplishing this form of control is

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the marketing audit. The marketing audit is a comprehensive, systematic,

independent, and periodic examination of a company's environment, objectives,
strategies, and activities to determine problem areas and opportunities. The purpose is
to recommend a plan of action to improve the company's marketing performance.

1). The marketing plan covers all major marketing areas of a business, and not
just trouble spots.

2). If done correctly, the audit is normally conducted by an objective and

experienced outside party who is independent of the marketing department.

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CHAPTER TEST - 4

Name: Score:
Course: Date:

Briefly discuss the following:

1. Marketing Process

2. Market Segmentation

3. Market Targeting

4. Market Positioning

5. The Marketing Mix

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6. Marketing Analysis

7. Market Planning

8. Marketing Control

9. Marketing Implementation

10. Marketing Organization

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CHAPTER 5: PRODUCT MIX

Chapter Objectives:
At the end of this chapter, the student must be able to:
1. Define product, product lines, and product mix;
2. Explain the three levels of a product;
3. Know the various product mix strategies; and
4. Describe the product life cycle.

 WHAT IS A PRODUCT?

A product is anything that can be offered to a market for attention, acquisition,

use, or consumption that might satisfy and delight a need or want of the target
clientele. It is a set of tangible and intangible attributes, including packaging, color,
price, quality and brand, plus the seller’s services and reputation.

 CLASSIFICATION OF PRODUCTS:
o According to Durability:
 Durable goods – are consumer goods that are used over an extended
period of time.
 Nondurable goods – are consumer goods that are quickly consumed,
worn-out, or outdated.
o According to Type of end-user or the purpose for which the product is
to be used:
 Consumer goods – are goods that are bought by household consumers
for their own final consumption
 Industrial goods – are goods bought buy business for resale, for further
processing or for use in producing other products.

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 THREE LEVELS OF PRODUCT

o Product planners think about the product on three levels. The most basic is
the core product, which answers the question: What is the buyer really
buying? Every product is really a package of problem-solving processes. In
other words, marketers must uncover the needs hiding under every product
and sell benefits not features. The core product stands at the center of the
total product as in the Three Levels of Product (see figure 1)

o Kotler says that the product manager has to turn the core product into a
tangible product, which may have as many characteristics like features,
styling, brand name, packaging, and quality level.

o Finally, the product planners may offer additional services and benefits that
make up an augmented product, by looking at the buyers’ total consumption
system.

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Figure 1. Three Levels of Product

 The hospitality product can be defined as the set of satisfactions and dissatisfaction
which a customer receives from a hospitality experience. The satisfactions may be
physiological, economic, social or psychological, as follows:

 Physiological Satisfactions – full stomach, quenched thirst, comfortable bed,

warm and subdued environment.

 Economic Satisfactions – good value for money, rapid service, convenient

location, and credit facilities.

 Social Satisfactions – enjoyable company, attentive service and sound advice

on food and wines.

 Psychological Satisfactions – enhancement of self-esteem, status and

security.

 PRODUCT LINE

A product line is a group of products that are fairly closely related. It is a broad
group of products, intended from essentially similar uses and having similar physical
characteristics.

 PRODUCT MIX

The set of all product lines offered for sale by the company is called product mix.

 PRODUCT MIX STRATEGIES

1. Product Positioning

Product positioning is a marketing strategy that helps place a product

perceptually in the minds of consumers. Positioning typically requires creating
differences between your products or services and your competitors' offerings, but can
be extended to your own products if they are marketed under different brands.

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Figure 2. Product Positioning Map

 Positioning Strategies:
a) On specific product attribute
b) On the needs they fill or the benefits they offer
c) According to usage occasions
d) For certain classes of users
e) Directly against a competitor
f) Away from competitors
g) Combination of Positioning strategies

2. Brand or Generic Name Decisions

 A brand is a name, term, sign, symbol, design, or combination of these,
intended to identify the goods or services of one seller or group of sellers
and to differentiate them from those competitors.
 A brand name is the part of a brand that can be vocalized. It is the verbal
part of the brand.

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 A brand mark is the part of the brand that appears in the form of a symbol,
design, distinctive coloring, or lettering. It is recognized by sight but cannot
be uttered or vocalized.
 A trademark is a brand or part of a brand that is given legal protection. It
protects the seller’s exclusive rights to use the brand name or brand mark.

Examples:

 Blanket Family Name

 Blanket Family refers to the use of same brand name for all products. This
strategy offers certain advantages such as the development cost is less
because there is no need for name research or heavy advertising
expenditures to create brand name recognition.

 Selecting a Brand Name

Some companies follow brand name selection process through its Product
Management Group, by carefully reviewing the product and its benefits, the target
market and proposed marketing mix strategy, then screening hundreds of potential
brand names suggested from various sources, and selecting the best one based
consumers’ reactions and the advice of company marketing people and through the
services of advertising and research agencies and outside brand new consultants.

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These are among the desirable qualities for a brand name:

1. It should closely suggest something about the product’s benefits and

qualities that the intended markets could associate with easily
2. It should be easy to pronounce, recognize, and remember.
3. It should be distinctive to readily arrest attention.
4. Adaptable to new products that may be added to the product line.
5. Capable of being registered and legally protected

 Protecting a Brand Name

Sometimes, brands become so well-accepted that the brand name is

substituted for the generic name of the product. To prevent the loss of the
distinctive character of the brand name and avoid its falling into a generic name,
three strategies could be used.

 Ensure the words “trademark” of the letters “TM” appear adjacent to the
brand name.
 Use two names; the company’s name together with the brand name of the
brand name together with the generic name.
 Incorporating into the brand name a distinctive signature or a logo.

3. Packaging
 Packaging is a marketing activity of creatively designing and producing
the appropriate container or wrapper for a product suitable to target
markets relative to competition’s products.
 The primary package is the product’s immediate container.
 The secondary package is the packaging material that protects the
primary package and that is thrown away when the product is about to be
used by the target consumer.
 The shipping package is used primarily to store, identify, and ship the
product to target markets.

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 Packaging is a highly important and valuable marketing tool for products.

 Purposes of Packaging:
 For safety and utilitarian purposes
 For company’s marketing program
 For increased profit and sales volume

4. Other Image-Building Features

Hotel has to provide some additional features like:

Hygiene: It comes next to the basic function of accommodation. Hygiene plays a

very important role in the status of a hotel. An unhygienic hotel will never be able
to attract lot of people, especially if it has to attract a lot of people from foreign
countries where the hygiene conditions are top notch.

Room Service: When people go to hotels, they would expect good and prompt
room service. This means, when they order food or ask for any service, a hotel
that provides it promptly will have a great edge over the other hotels.

Price: The price of the rooms should be such that both the rich and the middle
class people can afford them. Not everyone can afford a very expensive room
and also not everyone will like to stay in a room that does not have some
luxurious facilities.

Etiquettes: The people who come in contact with the customers, that is, the
reception people, room service people, and waiters, all have to be trained well to
behave in a manner that pleases the customer. They should be civilized, cultured
and polite.

Food and Wine: The food should be of good quality and should be prepared in
hygienic conditions.

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 Product Life Cycle

 Introductory Stage – at this stage, the product is launched full-scale into the
market. It is a period of very low sales performance during the first few months
to one year or more.
 Growth Stage – if the product earns market acceptance, it should at some point
enter a period of comparatively rapid growth.
 Maturity Stage – as the product approaches the end of its growth period, sales
begin to decline. This is to be expected as competing firms try to operate within
a slow-growth market.
 Decline Stage – the decline stage is characterized by falling scales and falling
profits. Most competitors have withdrawn from the market. Survivor firms
compete within an even smaller market, driving profit margins lower still.

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CHAPTER TEST - 5

Name: Score:
Course: Date:

IDENTIFICATION
Identify the term being described in each item.
___________1. It is anything that can be offered to a market for attention, acquisition,
use, or consumption that might satisfy and delight a need or want of
the target clientele.
___________2. It refers to consumer goods that are quickly consumed, worn-out, or
outdated.
___________3. It refers to a group of products that are fairly closely related. It is a
broad group of products, intended from essentially similar uses and
having similar physical characteristics.
___________4. It is a marketing strategy that helps place a product perceptually in the
minds of consumers.
___________5. It is the part of a brand that can be vocalized. It is the verbal part of the
brand.
ENUMERATION
A. Two (2) Classification of products according to durability

B. Two (2) Classification of products according to type of end-user or the purpose for
which the product is to be used

C. Three (3) Purposes of Packaging

D. Four (4) Stages of Product Life Cycle

E. Four (4) Main Product Mix Strategies

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CHAPTER 6: PRICE MIX

Chapter Objectives:
At the end of this chapter, the student must be able to:
1. Define price;
2. Identify the major considerations in setting price;
3. Realize the goals of pricing;
4. Identify and define the different cost-based pricing strategies;
5. Identify and define the different value-based pricing strategies;
6. Identify and define the different product-mix pricing strategies; and
7. Identify and define the different price-adjustment strategies.

 What is a PRICE?

A price is the amount of money charged for a product or service. More broadly
price is the sum of the values consumers exchange for the benefits of having or
using the product or service.

Price is also defined in many ways as follows:

o the values placed on goods and services

o the amount of money and/or goods needed to acquire some combination of
another good and its accompanying services;
o the value expressed in terms of pesos or any other monetary medium of
exchange.
 What are the factors influencing price?

Several factors primarily determine the price of a product as follows:

A. The Market for the Product

1. Market Appeal
2. Market characteristics
3. Elasticity of Market Demand

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4. Expandability of Market Demand

5. Pattern of Income Distribution

B. Costs of the Product

Costs and price are frequently used interchangeably. It must be noted,
however, that price and cost are two different terms. Cost refers to the amount of
money spent in producing goods or services. Price, on the other hand, refers to
the amount of money for which the same products or services are offered to
buyers. Price is simply cost plus mark-up. For example, if the company spends
Php 100 in producing one unit of product Y and sells the same product for Php
150, then the Php 100 is the product Y’s cost while Php 250 is product Y’s price.
The company’s markup is Php 50, which is the difference between the price and
the cost. The markup stands for the amount of money that the company earns
per unit of product Y it sells.

COST + MARKUP = PRICE

The amount of money The amount earned The amount of which
spent in producing a per unit of the each unit of the
unit of a product. product sold product is sold

 Types of Cost
The company has two types of costs: fixed and variable costs.
o Fixed costs are costs that do not change even if quantity or volume
of production changes. These costs are also called overhead costs.
And example of fixed cost is rent. If a company rents building space
for Php 100,000 per month, is required to pay Php 100,000 monthly
regardless of the number of clients within the entire month.
o Variable costs change directly with changes in quantity or volume of
production. Thus, variable cost is usually on a per-unit basis as
exemplified by the cost of ingredients to prepare a certain food in a
restaurant. If a company uses Php 200 worth of ingredients for one

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unit of product, it would spend Php 600 worth of ingredients to

produce 3 units.
o Total Cost refers to the sum of a company’s fixed costs and variable
costs under a given level of production.

 What are the GOALS OF PRICING?

 To maximize current profits.
 To maintain or improve target share of market.
 To pre-empt or minimize entry of competition in the specified market segment.
 To survive in business sue to increased overhead costs, excess capacity, stiff
competition and changing consumer needs and wants.
 To attain the highest quality product in the market.
 To keep the loyalty and support of resellers or to avoid government
intervention.

PRICING STRATEGIES

 New Product Pricing Strategies

 Generally, a company offering a new product has two pricing options: to set a
high price or to set a low price. The strategy of setting a high price for a
company’s products backed up by a strong promotional effort is called market
skimming pricing. Under this approach, the company initially sets high prices
to skim revenues layer by layer from the market. On the other hand, the
strategy of setting a low price for a company’s products also backed up by a
strong promotional support is called market penetration pricing. Under this
approach, the company initially sets a low price in order to penetrate the
market quickly and deeply, that is, to attract a large number of buyers and
capture a large market share in the process.

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QUALITY

High Low

Premium Overcharging
High
P Strategy Strategy
R
I
Good Value Economy
C Low
E Strategy Strategy

Figure 6.1. The Price-Quality Matrix

 Selling a high-quality product at a high price is called the premium pricing strategy.
 Selling a high-quality product at a low price is called the good value pricing strategy.
 Selling a low-quality product at a high price is clled the overcharging pricing
strategy.
 Selling a low-quality product at a low price is called the economy pricing strategy.

 Cost-Based Pricing Strategies

 Cost-Plus Pricing. This is the simplest pricing method that requires a
standard markup in the cost of a product. This approach is also called markup
pricing. After determining the cost of the product, a company simply sets a
price by adding a standard markup to the cost.

Price = Cost + Markup

(100%+Markup) = 100% + Markup
Example:
After determining the total product cost of Php 100.00 per unit, the company
decided to set a markup of 15% on cost. Determine the final retail price per unit
of product.
Solution:
100% Cost + 15% markup = 115%
Thus, Php 100.00 x 115% = Php 115.00 Final retail price

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 Break-even Pricing. Under break-even pricing, the selling price enables the
company to break even. Break-even refers to a condition where the company
neither earns profit nor incurs loss. In short, it is a point where net income is
nil. Three variables are needed to compute for the break-even point, namely,
the company’s total fixed costs, the company’s variable costs per unit, and the
company’s selling price. The formula for break-even point, or BEQ, is:

TFC
BEQ=
SP/u−VC /u

Where:

BEQ= Break Even Quantity to be sold

TFC= Total Fixed Costs
SP/u= Selling Price per unit
VC/u= Variable Cost per unit

Breakeven Price= ( BEQ

TFC
)+VC

Example:
Chenelyn Restaurant is a start-up restaurant offering various product lines.
One of its products is Special Bulalo. Use the following information to compute
for the company’s breakeven number of units:
 The per serving variable costs are Php 50
 the fixed costs are Php 250,000
 Selling price for each serving is Php 100.

Solution:

TFC
BEQ=
SP/u−VC /u

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 Tourism and Hospitality Marketing

Php 250,000
BEQ=
Php 100−Php 50

BEQ=5,000 servings

Thus, the company must produce 5,000 servings of Special Bulalo to

breakeven.

What if the company is determining the price per serving of Special

Bulalo? Use the following information to compute for the price per serving of
Special Bulalo:
 The per serving variable costs are Php 50
 The fixed costs are Php 250,000
 The company is required to produce 5,000 servings of Special Bulalo.

Solution:

Breakeven Price= ( BEQ

TFC
)+VC
Breakeven Price= ( 5,000 servings )
Php 250,000
+ 50

Breakeven Price=Php 100

Thus, the company should set the price of each serving of Special Bulalo
at Php 100.00 to breakeven.

 Target Profit Pricing. This pricing approach is a variation of break-even

pricing. Under this scheme, the company sets a target profit to be earned
and uses break-even analysis to meet the said target.

TFC +TP
TP Price= (
TFC +TP
BEQ )
+VC
Q=
SP/u−VC /u

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Where:
Q= Quantity to be sold
TFC= Total Fixed Costs
TP= Target Profit
SP/u= Selling Price per unit
VC/u= Variable Cost per unit
Example:
Chenelyn Restaurant is a start-up restaurant offering various product lines.
One of its products is Special Bulalo. The company wants to achieve a target
profit of Php 50,000. How many servings will Chenelyn produce to achieve its
goal? Use the following information to arrive at your final answer:
 The per serving variable costs are Php 50
 the fixed costs are Php 250,000
 Selling price for each serving is Php 100.

Solution:

TFC +TP
Q=
SP/u−VC /u

Php 250,000+ Php50,000

Q=
Php100−Php50

Q=6,000 servings

Thus, the company must produce 6,000 servings of Special Bulalo to arrive
at its target profit of Php 50,000.

What if the company is determining the price per serving of Special

Bulalo? Use the following information to compute for the price per serving of
Special Bulalo:
 The per serving variable costs are Php 50
 The fixed costs are Php 250,000

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 Tourism and Hospitality Marketing

 The company wants to achieve a target profit of Php 50,000

 The company is required to produce 6,000 servings of Special Bulalo.

Solution:

TP Price= ( TFCBEQ+TP )+VC

TP Price=( Php 250,000+ Php50,000
6,000 servings )+50
TP Price=Php100 per serving

Thus, the company should set the price of each serving of Special Bulalo
at Php 100.00 to achieve a target profit of Php 50,000.

 Value-Based Pricing Strategies

 Value-based pricing considers buyer’s perception of value as the main
ingredient in pricing. In value-based approach, the starting point is the
customer’s perception of value, not cost.

 Product-Mix Pricing Strategies

 Product line pricing. This is a pricing approach applicable to firms that
develop product lines rather than single products.
 Optional-product pricing. This approach offers to sell optional or accessory
products along with a main product.
 Captive-product pricing. Instead of offering accessories to the main product,
captive-product pricing would offer products that are essential to the main
product itself.
 By-product pricing. A by-product is a surplus product or item coming from
the main product itself.

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 Product-bundle pricing. In this pricing technique, a company combines

several of its products into a bundle and offers the bundle for sale at a reduced
price.

PRICE-ADJUSTMENT STRATEGIES

 Discount pricing – this pricing strategy allows a company to reduce prices to

reward customers for certain responses like paying promptly or promoting the
company’s products or services. Following are some common forms of discount
pricing:
 Cash discounts
 Quantity discounts
 Seasonal discounts
 Segmented pricing
 Customer-segment pricing
 Product-form pricing
 Location pricing
 Time pricing

 Psychological Pricing – this pricing strategy looks not only into the economics
of pricing but also on the psychology of pricing. This approach relates the effect
of pricing on people’s minds and determines consumer reaction to the price set
by the company for its products.

 Promotional Pricing – sometimes a company decides to price some of its items

below the regular list price, or at times even below cost, to attract customer
traffic. Macro comes up with items sold at very low prices to attract buyers to the
store.

 Geographical Pricing – this pricing strategy is used by companies operating in

different areas of the country or different countries of the world. In this approach,

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company sets different prices depending upon the region, state, or country where
the company sells its products.

 PRICING STRATEGIES TO INCREASE HOTEL REVENUE 

For those operating in the hotel industry, maximising revenue is a top priority,
and achieving this goal often requires the right pricing strategy, at the right time. In fact,
making room rate adjustments based on demand, customer segmentation and other
factors can be the key to overall business success. In this article, we offer insight into 10
pricing strategies that hotels can adopt in their revenue management strategy in order
to increase the amount of revenue they generate.

1. Pricing Strategy Based on Forecasting

The single most important pricing strategy for hotels to master is the use of
forecasting to set their prices based on anticipated demand. Essentially, this should
mean that the hotel room rate being charged will depend on how high demand is. For
instance, times of high demand may lead to higher room rates, in order to maximise
revenue.

A robust forecasting strategy relies upon accurate records being kept, with
historical data – such as occupancy, revenue, room rates and average spend per room
– proving particularly useful. In addition, it is important to make use of data that is
already in the books, such as reservations, as well as any wider market trends.

This data can then be used to make pricing decisions. So, if your hotel has
historically experienced low demand in January, there are strategic considerations
associated with that. As an example, you could consider lowering prices in January to
try to build demand, or you could raise prices, to get more out of the smaller customer
base.

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2. Rate Parity Strategy

In simple terms, a rate parity strategy involves maintaining consistent rates for
the same product, across all online distribution channels. The key benefit of this is that it
provides transparency for consumers, while it is also often a prerequisite of advertising
rooms through online travel agents, such as Expedia and Booking.com.

The primary challenge of this is the fact that OTAs charge commission, and
paying this while charging a low rate can eat into the revenue you would have earned
through direct bookings. However, direct bookings can be stimulated in ways aside from
simple room rate adjustments, as we will cover later in this article.

3. Price Per Segment

One of the most commonly used pricing strategies for those in the hotel
industry is price per segment, and this is where you offer the same product at different
prices to different types of customers.

While “open market” prices should be subject to a rate parity strategy, prices for

corporate segments could be lower, especially if they commit to a certain number of
rooms, or a certain number of meals. Another option would be to sell multiple rooms to
travel agents for a lower rate, so the travel agent can include the rooms in packages.

4. Discount Codes to Stimulate Direct Bookings

Although a price parity strategy may prohibit some of the pricing incentives that
can stimulate direct bookings, one highly effective strategy involves the use of discount
codes to encourage future direct bookings.

So, when a guest visits your hotel or property after booking through a third party,
you could offer them a discount code for any future direct bookings they make with you.
This has the dual benefit of encouraging repeat business and encouraging them to book
directly if they opt to stay in your hotel again in the future.

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5. Offer a Package

Another solid option for those in hotel management attempting to maximise

revenue is to create packages, allowing customers to pay for more than just a room.
Additional items, services or products that may feature in a package deal include meals,
bicycles, access to golf courses and equipment, and so on.

With packages, the actual room rate may be lower than the equivalent rate for an
identical room on its own. However, your hotel will be able to sell more products at the
same time.

6. Length of Stay Strategy (LOS)

As the name implies, a length of stay strategy is based around adjusting pricing
based on the length of the stay. In some instances, such as when demand outweighs
supply, it can be beneficial to implement a rule where guests are ‘obligated’ to stay a
minimum number of days. In such cases, lower rates may not always be necessary.

On the other hand, when demand is lower, you can potentially encourage guests to stay
longer by offering them a lower rate if they stay for multiple days, resulting in fewer
unused rooms overall.

7. Cancellation Policy

The cancellation policy of a hotel can also factor into a pricing strategy and help
to increase revenue. For instance, one option is to charge a lower rate on the condition
that a guest cannot receive a refund in the event that they cancel the room, while higher
rates are charged when guests have greater flexibility with cancellations.

This can be of particular value in hotels with high demand. By charging lower
rates, in exchange for no refunds, busy hotels can benefit from effectively being able to
sell the same room twice in the event of a cancellation.

8. Upselling

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The basic principle of upselling involves encouraging customers to spend more

on their existing purchase or booking, and it is a vital component of any effective hotel
revenue management strategy within the hotel industry.

It may mean encouraging a guest to upgrade to a better room, or pay a higher room
rate for a more desirable view. It could also mean persuading them to pay more for a
king size bed. Upselling is often most successful during the booking process, so it can
be beneficial to promote upgrade options while guests are making their choices.

9. Cross Selling

Cross selling is a similar concept to upselling, but rather than encouraging

customers to spend more on an existing purchase, it involves encouraging customers to
make additional purchases on top of the one(s) already made.

Within the hotel industry, this will typically refer to additional services, such as
local tours, massages, or gym services. Generally, cross selling is most effective after
the initial booking has been made, but before the guest actually arrives. For this reason,
it is often best achieved through promotional emails.

10. Excellent Review Management

Finally, better reviews are likely to result in improved conversion rates.

Meanwhile, guests are also usually willing to spend more on rooms in hotels with
positive reviews, because they can have greater confidence in their choice. Indeed,
when two hotels offer a similar product, the one with superior reviews will often be
chosen by customers.

For this reason, to maximise revenue, it is important to have a

comprehensive review management strategy in place. This will likely mean striving to
deliver an excellent customer experience, encouraging guests to leave reviews, and
responding swiftly and competently to reviews and feedback posted on social media
sites.

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 Maximising revenue in the hotel industry relies on the implementation of the right
pricing strategies, which is an important part of your revenue management strategy.
Typically, this requires the use of forecasting to understand and anticipate demand,
as well as a willingness to adjust room rates strategically, make use of cross selling
and upselling techniques, and manage online customer feedback.

CHAPTER TEST - 6

Name: Score:
Course: Date:

Answer the following accordingly:

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1. Use the following information to compute for the company’s breakeven number
of units:
 The per unit variable costs are Php 100
 the fixed costs are Php 350,000
 Selling price for each unit is Php 200.
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Final Answer:__________

2. CDG Resto wants to achieve a target profit of Php 25,000. How many units will
Shawn produce in order to achieve its goal? Use the following pertinent
information to arrive at your final answer.
 Selling price for each unit is Php 7.00
 The per unit variable costs are Php 2.00
 the fixed costs are Php 50,000
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Final Answer:__________

3. After determining the total product cost of Php 65.00 per unit, the company
decided to set a markup of 25% on cost. Determine the final retail price per unit
of product.
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Final Answer:__________

CHAPTER TEST - 6

Name: Score:
Course: Date:

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4. CDG Resto is performing its break-even analysis. Under the following pertinent
information, what should be the selling price of the product at breakeven point?
 The per unit variable costs are Php 100
 the fixed costs are Php 250,000
 No. of units expected to be sold at breakeven point: 5,000 units.
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Final Answer:__________

5. Chuchay Hotel wants to achieve a target profit of Php 25,000. Chuchay wants to
achieve 50,000 clients every year. What should be the rate (price) of each unit
of room to achieve Chuchay’s goal. Use the following pertinent information to
arrive at your final answer.
 The per unit variable costs are Php 2.00
 the fixed costs are Php 75,000
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Final Answer:__________

CHAPTER 7: PLACE MIX

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Chapter Objectives:
At the end of this chapter, the student must be able to:
1. Define place/distribution;
2. Distinguish between direct and indirect marketing channel;
3. Enumerate functions of distribution channels;
4. Identify the different distribution strategies; and
5. Explain the Basic Aspects of Physical Distribution;

 Place means distribution channels and physical distribution. Distribution refers

to the process of making a product available for the consumption or use of the
consumer or business user. It is a very vital element of the total marketing mix
that ensures the adequate availability and visibility of the right products, in the
right target markets, at the right quantity, at the right cost, at the right condition,
and at the right time.

 A distribution channel is a set of interdependent organizations involved in

making a product or service available for use by the target market. It is the route
along which the right product flow from the manufacturer to the final
consumption.

 A company may decide to sell its products directly to consumers. This is called a
direct marketing channel.

 Most companies, however, make use of the so-called marketing intermediaries to

sell their goods and services to target markets. This is known as an indirect
marketing channel.
 Marketing intermediaries are companies that act as a middleman who facilitate
the transfer of products from the company to the consumer.

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 The distribution channel or marketing channel – It is the configuration of

organizations and individuals between the hospitality marketer and his potential
customer which is used to make the product more accessible and convenient.
Each organization or individual is known as a ‘marketing intermediary’ or
‘channel member’. The intermediaries include:
o hotel representatives,
o travel agents,
o tour operators,
o referral organizations,
o tourist boards,
o tourist information centers,
o incentive travel planners,
o airlines,
o computerized reservation centers,
o convention bureau,
o car rental companies etc.

FUNCTIONS OF DISTRIBUTION CHANNELS

A distribution channel moves products from the producer to the consumer. Thus,
members of the marketing channel perform key marketing functions, which help
complete and fulfill completed transactions. These functions are as follows:

1. Information gathering and dissemination: performing marketing research

need for planning and aiding exchange;
2. Promotion: developing and spreading persuasive communication to attract
buyers;
3. Contact: looking and communicating with prospects;
4. Matching: shaping and fitting customer requirements with the company
activities like manufacturing, assembly, packaging, etc.;

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5. Negotiation: reaching agreement with customers to make an exchange

possible;
6. Physical distribution: transporting and warehousing products:
7. Financing: acquiring and using funds to cover costs of channel work; and
8. Risk taking: assuming the risks that go with the carrying out channel work.

DISTRIBUTION STRATEGIES

Three are three strategies in deciding on the number of middlemen to use and
these are:

1. Intensive Distribution – in this strategy, the company stock-up their product

lines in as many as sales outlet as possible, in both the traditional and non-
traditional markets. For example: Advertised products are sold and made
available in the thousands of sari-sari stores, groceries and supermarkets all over
the country.

2. Exclusive Distribution – this distribution strategy limits the number of sales

outlets given the exclusive right to distribute then products in a given territory,
area or region. The manufacturer requires the sales outlets such as hospitals and
industrial clinics not to carry competing lines in exchange of higher discounts,
promotions support and other service amenities.

3. Selective Distribution – this distribution strategy has very selected middlemen

to carry the manufacturer’s product lines for better control of market coverage
and better rapport in the long run. The manufacturer does not have to spread its
efforts over many sales outlets in order to develop long-lasting working
relationships fast. Many small and medium-sized companies prefer selective
middlemen and expect a better-than average selling effort and market coverage.

PHYSICAL DISTRIBUTION SYSTEM

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Physical distribution involves the following: customer service, warehousing,

transportation, inventory management and control, packaging, receiving, materials
handling, and store location.

Physical distribution encompasses the broad range of activities concerned with

planning, implementing and controlling the physical flow of raw materials, semifinished
and finished products to designated places, at designated time and in proper conditions
to promptly meet the needs of customers at a profit.

The objectives of physical distribution are spelled out in terms of getting the
products at the right places, at the right time for the least cost possible. The major
decisions involving physical distribution must be addressed on a total system basis, by
finding out what customers want and what competitors are offering.

Basic Aspects of Physical Distribution:

The physical distribution consists of four basic aspects namely: 1.) Order
processing; 2.) Warehousing; 3.) Inventory; and 4.) Transportation.

1. Order Processing
Order processing means customer sales orders being facilitated by the
order department by way of invoices, shipping, and billing documents using
computers. Sales orders submitted by sales representatives to the
manufacturer’s main office are being processed on schedule by the Sales and
Credit Departments. These are forwarded to the Computer Data Systems for
invoicing, then set to Warehouse for scheduled deliveries to the intended sales
outlets.

2. Warehousing
Warehousing means storage of products prior to selling the same to sales
outlets or end-users. A warehouse refers to a place where goods awaiting sale
are stored temporarily. Warehouses receive, identify and sort merchandise.

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Companies use either storage warehouse or distribution centers. A

storage warehouse is designed only for storing goods for moderate to long
periods of time. Distribution centers, on the other hand, are designed to move
goods rather than just to store them.

3. Inventory
Companies ideally would want to carry just enough finished goods
inventory to satisfy market demands, at the right time and right quantity. Large
inventories have to be evaluated carefully if these would mean incremental sales
and profits. Inventory decisions involve two major concerns: 1.) when to order
and 2.) how much to order. This requires entrepreneurial decisions in the right
stock quantities to maintain in order not to suffer out-of-stock or over-the-stock
situations.
There are four (4) aspects of inventory management and these are:
a. Stock turnover
b. When to order
c. How much to order
d. Warehousing

Stock Turnovers

This is the balance between sales and inventory on hand, expressed by

stock turnover, the number of times during specified period that average
inventory on hand is sold. Stock turnover is calculated in units and pesos:

No . of units sold during the year

Annual Rate of stock Turnover ( ¿ units ) =
Average Inventory on hand (¿ units)

Cost of G oods Sold

Annual Rate of stock Turnover ( ¿ Pesos ) =
Average Inventory on hand ( Pesos)

The advantages of high inventory turnover are:

1. Inventory investments are productive;
2. Merchandise are fresh;

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3. Losses from changes in styles and packaging are reduced; and

4. Cost of maintaining inventory are lessened to the minimum.

When to Reorder Inventory

The reorder point establishes an inventory level at which new sales orders
must be placed. The reorder point depends on: order lead time, usage rate, and
safety stock. Order lead time is the period form date a sales order is placed until
the date goods are ready for sale or use (received, checked and altered if
necessary). Usage rate means the average sales in units per day or the rate at
which a product is used in a production process. Safety stock is the extra
merchandise kept on hand to protect against out-of-stock conditions resulting
from unexpectedly high demand, greater-than-anticipated production volume and
delivery delays.

The Reorder Point formula is:

Reorder Point=( Order Lead Time × Usage rate )+ Safety Stock

How much to Reorder

There are two types of costs related to the maintenance of inventory in a

firm. The carrying cost refers to the cost of carrying one unit of inventory into
stock. On the other hand, ordering cost refers to the cost of placing an order for
an item. These two inventory related costs go in opposite directions. The carrying
cost is directly proportional to the number of units on stock (or the level of
inventory maintained), that is, as the number of units of stock goes up, so does
the carrying cost. Thus, more units will mean higher carrying cost. Ordering cost
and inventory level have an inverse relationship. This means that more
inventories on stock do not require frequent orders, resulting in lover ordering
costs.

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To illustrate, see the figure below:

Figure 7.1. Behavior of Carrying vs Ordering Cost

The level of inventory to be maintained by a firm is that level that will put
total inventory cost at a minimum. Total inventory cost simply refers to the sum of
carrying and ordering cost. The total inventory cost at its lowest level under the
inventory level where carrying amount and ordering costs are equal. This level is
known as Economic order quantity or EOQ. It is the order volume
corresponding to the lowest sum of ordering cost and inventory holding or
carrying costs. The formula of economic order quantity is:

EOQ=
√ 2 × D ×O
C

Where:
EOQ= economic order quantity
D= demand or requirement units for the period
O= ordering cost
C= carrying cost
4. Transportation

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Companies in the light of rapidly changing trends in physical distribution are

actually engaged in transportation decisions, more specifically in the choice of
transportation carriers which have substantial bearings in the pricing of the products.

There are basically four common modes of transportation used by companies in

shipment of goods:

a. Waterways. The cost of water transportation is low for shipping bulky,

low-value and non-perishable products. However, water transportation is
also the slowest transportation mode and is always affected significantly
by weather conditions.

b. Railroads. Railroads are one of the most cost-effective models for

shipping large amounts of bulk products. Railroads normally carry heavy
items that are low in value (relative to their weight) over long distances.
Railroads ship items too heavy for trucks.

c. Truck / Motor Carriers. Trucks are highly flexible in their routing and time
schedules. They are efficient in hauling high-value merchandise over short
distances. Motor Carriers are more flexible than rail because they can
readily pick up packages at a factory or warehouse and promptly deliver
them to the customer’s door. For all intents and purposes, trucks are
faster than rail for short distances.

d. Airways. Airways are the fastest but the air freights are much higher than
rail or truck rates. This mode of transportation is common for perishables
and high-value, low-bulk items.

 DISTRIBUTION CHANNELS OF HOSPITALITY INDUSTRY 

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To increase and enhance the sales of the hotels, the hotel management require
using the distribution channels for hotels. The online system helps a lot in attracting
guests and customers to the hotels.

In today’s cut throat

competition, technology is the
only medium through which
one can really push hard to
stand in the crowd. But what
technology would you choose
to solve your problems. In
hospitality there are
numerous software which
can really help your hotel to
gain new customers and
facilitate seamless activities.

Technology has really changed the hotel industry. There were days when there
was no reliability or guarantee on an arrival – guest, and when they arrive, they will stay
if there was a room or else they are gone. This seriously hampers the business in the
long run when the guests start assuming that your hotel would be fully occupied. So
rather coming to you, they go to check different hotels for the rooms. Now, to avoid such
scenario in the current market scene, it is important to use the latest technology which
helps you to provide an actual status of your hotel to the customer before they plan or
leave their homes.

The digital revolution has really come off age with the latest online reservation
solutions. Today the guests can book their rooms by using their iPad or mobile phone
months in advance or while moving.

As a hotel owner you are required to consider the changes. You cannot escape
the digitalization of the business processing; it helps in the long run strategy and

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planning. This revolution opens multiple distribution channels for the hotels which allow
the hotels to increase their visibility on the internet among the online users. There are a
number of blogs, websites, review sites which helps the hotels to grow on the internet.

For anyone to understand the advantages of online reservation, he/she should

look into the facts that nowadays people are more likely to book and reserve rooms
online than travel agents. It is a lot cheaper in comparison to the services of the travel
agents.

Distribution channel for hotels is an approach currently accepted by most of

the hotels for an aggressive sales and distribution purpose. The matter of the fact is that
the ultimate goal of the hotels are to create better visibility on all distribution channels so
that customers can find them easily and book a room.

Having a better distribution channel for hotels will mean that you can enhance
your reputation among the users and guests. But it requires a better management to
handle the online distribution channels.

A lot of hotels rely on the distribution channels to set their pricing after looking at
their competitors. This can be misleading. The guests always pay for the services that
you are offering than the price you have placed for things that doesn’t interest him/her.
So maintenance of standard of services will increase customers than the emphasis on
pricing. The distribution channels for hotels allow the hoteliers to earn from direct
sales.

An effective management of distribution channel for hotels require an eye on

the reviews and optimization of the hotel on the internet.

CHAPTER TEST - 7

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Name: Score:
Course: Date:

Answer the following questions accordingly:

1. Briefly discuss the following
a. Distribution Channels and its functions
b. Three (3) distribution strategies.

2. Compute for the following:

a. For the year ending December 2019, EAT’s Showtime Restaurant reported cost of
goods sold of Php 525,000 and an average inventory of 5,250 units which costs Php
52,500. Compute for the Annual Rate of stock Turnover (in Pesos).
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Final Answer:__________

b. Jollydog, a fast-food restaurant, needs to find when it should place orders for specific
food product from its manufacturer. Compute for the Reorder Point using the
following relevant information:
• Average usage: 500 units per day
• Average Lead time: 25 days
• Safety Stock: 250 units
• EOQ: 35,000 units
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Final Answer:__________

c. The demand for Special Bulalo at Chenelyn Restaurant is 120,000 servings per year.
Chenelyn incurs a fixed ordering cost of Php 60.00 each time an order is placed. The
carrying cost of each unit of a product is Php 10.00. Compute for the economic
order quantity.
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Final Answer:__________

CHAPTER 8: PROMOTIONS MIX

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Chapter Objectives:
At the end of this chapter, the student must be able to:
1. Define promotion;
2. Distinguish the types of communication media;
3. Know the five elements of promotion; and
4. Know the promotional strategies and promotional campaigns
commonly used;
5. Describe the different promotional strategies used in tourism
and hospitality industry.

 PROMOTION is an applied marketing communication. Marketers use it to

communicate both factual and persuasive messages to prospective consumers.
In the marketing mix, promotion serves three purposes:
o To inform. Promotion provides facts about the product and places where
to avail the product.
o To persuade. Promotion encourages a buyer to buy a product or to
change his attitude about the product
o To remind. Promotion reminds consumers to regularly buy a product.
The main function of promotion is to establish the awareness in the minds of
the customers about the company’s product / service. It also establishes a
positive value in the minds of customers by communicating with those who have
visited the organization.

 PROMOTION MIX refers to the blend of several promotional tools used by

business to create, maintain and increase the demand for goods and services.

 GENERAL TYPE OF COMMUNICATION MEDIA

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The promotional strategies use three general types of communication media:

1. Direct human communication – face-to-face basis
2. Indirect communication – e.g. radio, television, magazines and
newspapers
3. Interactive communication – e.g. Internet

 ELEMENTS OF PROMOTION:
There are five elements of promotion:
 Advertising
 Direct Marketing
 Personal Selling
 Sales Promotion
 Public relations

1. ADVERTISING
Advertising is any paid form of non-personal presentation and promotion
of goods and services by the identified sponsor in the exchange of a fee.
Through advertising, the marketer tries to build a pull strategy; wherein the
customer is instigated to try the product at least once. The complete
information along with the attractive graphics of the product or service can
be shown to the customers that grab their attention and influences the
purchase decision.
The purpose of advertising is to motivate the customers to make a repeat
purchase or visit by their positive experiences to create the brand loyalty. It
can be in the forms of advertisements in newspapers, magazines, hoarding,
sides of public transport (e.g. trains, buses, taxies etc.), posters, TV
commercials, radio, SMS (short message service), web banners, printed
flyers, wall paintings etc. Some forms of advertising are more costly than
others, such as TV commercials as compared to newspapers. Some forms
have much wider coverage at a relatively low cost. Some forms may be
more suitable for a particular product or service. The correct form of

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advertising must be chosen according to the marketing budget and target

market.
 All advertisement have four features:
 A verbal and/or visual message
 A sponsor who is identified
 Delivery through one or more media
 Payment by the sponsor to the media carrying the message

 Developing an Advertising Campaign

An advertising campaign consists of all the tasks involved in

transforming a theme into a coordinated advertising program to
accomplish a specific goal for a product or brand. The steps in
developing an advertising campaign are: (1) defining objectives, (2)
establishing a budget, (3) creating a message, and (4) selecting media

 Defining Objectives
 In general, advertisers expect to accomplish four broad
communication goals. Advertisements are expected to generate
attention, be understood, believed and remembered. Specific
advertising objectives are:
1. Encouraging current users to increase consumption of a
product
2. Generating more sales leads
3. Increasing brand awareness
4. Creating and maintaining a brand image or market position
5. Supporting personal selling efforts

 Establishing a Budget

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 Once a marketing communications budget has been established, it

is allocated among the various activities making up the overall
marketing communications program.
 Creating a Message
 Individual advertisements accomplish two things: (1) get and hold
the attention of the intended audience and (2) influence that
audience in the desired way. The most common approach to get
attention is to present the material in an unexpected and
unconventional manner.
 How an advertisement says something is its execution format.
Major formats include storyline, product uses and problem
solutions, slice of life, demonstration, testimonials, lifestyle,
montage and jingle.

 Selecting Media
 Developing a media strategy involves two factors: first, the media
which will efficiently get the message to the desired audience; and
second, the scheduling of these media so as not to bore people
with much repetition of the message of make them forget it. There
are some general factors that influence media choice:
1. Objectives of the advertisement
2. Audience coverage
3. Requirements of the message
4. Time and location of the buying decision
5. Media cost

2. DIRECT MARKETING

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Direct Marketing. With the intent of technology, companies reach

customers directly without any intermediaries or any paid medium. The e-
mails, text messages, Fax, are some of the tools of direct marketing. The
companies can send emails and messages to the customers if they need to
be informed about the new offerings or the sales promotion schemes.

3. PERSONAL SELLING
Personal Selling is one of the traditional forms of promotional tool
wherein the salesman interacts with the customer directly by visiting them. It
is a face to face interaction between the company representative and the
customer with the objective to influence the customer to purchase the
product or services. Personal selling is the most flexible means of delivering
a promotional message
 There are two kinds of personal selling:
 Inside selling involves retail-store selling.
 Outside selling involves people going to customers.
 The creative selling process
The creative selling process is a series of steps that provide guidelines for
the sales person. It is an adaptive process that begins with the
identification of potential customers and tailors the sales presentation and
product offering to each prospect’s needs. There are seven steps in the
creative selling processes:

Step One : Locating Qualified Prospects

It consists of identifying prospective customers and
qualifying them, that is, determining whether they have
the necessary purchasing power, authority to buy, and
the willingness to buy.
Step Two : Pre-approach Planning

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This step involves gathering and evaluating information

about the prospect’s situation. The salesperson needs to
know the prospects requirements and any other relevant
information that might help make the sale.
Step Three : The Approach
This step involves making an initial contact and
establishing rapport with the prospect.

Step Four : The Sales Presentation

This is the salesperson’s attempt to persuasively
communicate the product’s benefits and explain
appropriate courses of action to the potential buyer. An
effective sales presentation tells the product “story.’ This
step can be explained by the acronym AIDA that stands
for attention, interest, desire and action.
A – Attract Attention
The first task in sales presentation is to attract the
prospect’s attention and to generate curiosity.
I – Arouse Interest
The sales representative holds the prospect’s
attention and stimulates an interest in the product.
D – Create a Desire
Interest and desire for the product are established in
nearly simultaneous steps.
A – Call for Action
After creating a desire, the sales representative now
moves into action by urging the prospect to place an
order.
Step Five : Handling Objections
A salesperson who encounters an objection can provide
an additional persuasive information, clarify the sales

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presentation, or offer the basic argument for the product

in a different matter.
Step Six : Closing the Sale
In selling, the term closing indicates that the sale is being
brought to a finish. The main advantage of personal
selling over other forms of promotion is that the
salesperson is in a position to conclude negotiation by
actually asking for an order.
Step Seven : The Follow Up
During the follow-up, the salesperson makes sure that
everything has been handled as promised and that the
order was shipped promptly and received on the
schedule in good condition.

Personal Selling is a process of face-to-face or telephonic conversation

with one or more potential guests for the purpose of making sales. There are
three types of personal selling: field sales, telephone sales and inside sales.

It is also referred to as outside sales or

sales calls, where the sales person will
have face-to-face meeting with the
potential clients to make the
presentations. This is the most costly
type of personal selling as it involves
Field Sales
travel costs. Additional funds also have
to invested in the sales support
materials, such as laptops for
presentations, presentation manuals
with photographs, brochures, posters,
etc.

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It is also called telemarketing where the

communications via the phone lead to
Telephone Sales
the sales.

It is also called the internal selling which

is the efforts made when guests are
already in the premises, to increase the
Inside Sales revenue of a sale. Inside sales is
suggestive selling or up-selling where
employees suggest or recommend
additional or higher priced items.

4. SALES PROMOTION
Sales Promotion is the short term incentives given to the customers to
have an increased sale for a given period. Generally, the sales promotion
schemes are floated in the market at the time of festivals or the end of the
season. With the sales promotion, the company focuses on the increased short-
term profits, by attracting both the existing and the new customers. There are two
categories of sales promotion: trade promotions, which are geared toward
members of the distribution channel and consumer promotions, which is aimed
at consumers.
Sales promotion is about short term incentives to encourage the purchase
or sales of a product or service. There are two kinds of promotional strategy:
push promotions and pull promotions.

 Push Promotions – Push promotions involve activities that draw guests to your
product or service.

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Different Promotions Tools Associated with Push Promotions in Hotel Marketing Mix

It is the display at the counters of restaurants or as

table tents in the restaurants. The main function of the
display is to stimulate increased sales. This include
signs, banners to building exteriors, table tents
displayed in the lobbies, restaurants, room service
menu, elevators and guest rooms.
Point-of-sales (POS)
displays Example:

Hotels and restaurants frequently use POS to

announce special promotional events like kebab
festival, biryani or lassi festivals etc. Banners and
posters are displayed to promote the sales during these
events.

It is a joint marketing activity with select intermediaries,

it requires team work and advertising cost can be
shared.
Cooperative
Example:
advertising
For hotels, cooperative opportunities are most likely to
be transportation companies such as cruise lines,
airlines, rail lines.

Special Packages This is common for tourist destinations and or hotels

that cater to the MICE industry.

Example:

Special packages offered by resorts, hotels, and

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convention centers to attract conferences and meetings

with a large group of people. Normally the packages
include accommodation and meals, but they may also
have local tours, attraction admissions, special local
events or programs.

 Pull Promotions – Pull promotions are those activities that an organization

brings to the guests.

Different Promotions Tools Associated with Pull Promotions

It is a giveaway of trial amount of a product to the

guests, normally in small portions and complimentary. It
is commonly used in food and beverage service
industry and it is a very efficient tool for promotion.
Sampling
Example:

Supermarkets often feature free samples of new

products so that customers are guaranteed risk free of
buying something they did not like.

These occur when price is reduced for a limited time

and this encourages trial and increases sales.
Price Reduction
Example:
Promotions
Many resorts offer special rates during the low season
to increase the volume of business.

Coupons These are vouchers or certificates that offer the savings

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to guests and stimulate the guests to purchase the

product. Some coupons are sent to guests by direct
mail, some are placed in newspapers and magazines.

Example:

Many pizza takeaways or restaurants offer savings

cash coupons in newspapers.

It is the combination of two or more products or services

and offering for a special rate. The cost for the
combination offers is normally cheaper compared to the
products or services bought separately.
Combination offers or
bundling Example:

Pizza Hut offers a family value combo meal with pizza,

pasta and soft drinks which cost cheaper than each
item separately.

Contests and
sweepstakes
It is a way to give guests a chance to win prizes in the
form of cash or even vacations. A contest is to
encourage guests to make a purchase of the product
and submit an entry to the contest.

Usually the guests have to earn their prizes by

participating in contests by providing answers to a
game or completing puzzles.

On the other hand, sweepstakes require entrants to fill

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in their names and contact details only.

Example:

Hotel chains like Club Mahindra hold sweepstakes to

attract guests and giving prizes.

5. PUBLIC RELATIONS

Public Relations is a management tool designed to favorably influence

attitudes towards an organization, its products, and its policies. It consists of a wide
variety of communication efforts designed to contribute or create a positive attitudes
and opinions toward an organization and its products. The marketers try to build a
favorable image in the market by creating relations with the general public. The
companies carry out several public relations campaigns with the objective to have a
support of all the people associated with it either directly or indirectly. The public
comprises of the customers, employees, suppliers, distributors, shareholders,
government and the society as a whole.

The publicity is one of the forms of public relations that the company may use
with the intention to bring newsworthy information to the public. Publicity is a special
form of public relations that involves news stories about an organization or its
products or services that is not paid for.

The function of public relations is obtaining favorable publicity, developing a

positive corporate image, and handling unfavorable publicity, rumors, stories or
events. Some companies have in-house Public Relations departments to deal with
publicity of the company while others may rely on professional Public Relations
companies for a fee.

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To achieve publicity, public relations use different means ranging from news
releases to photographs, letters and enclosures, house newsletters, speeches and
public appearances, posters, bulletin boards, audiovisual materials etc.

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CHAPTER TEST - 8

Name: Score:
Course: Date:

TRUE OR FALSE

___________1. Promotion is an applied marketing communication. Marketers use it to

communicate both factual and persuasive messages to prospective
consumers.
___________2. Promotion provides facts about the product and places where to avail
the product.
___________3. In general, advertisers expect to accomplish four broad communication
goals. Advertisements are expected to generate attention, be
understood, believed and remembered.
___________4. Once a marketing communications budget has been established, it is
allocated among the various activities making up the overall marketing
communications program.
___________5. Personal selling is the most flexible means of delivering a promotional
message
___________6. A salesperson who encounters an objection can provide an additional
persuasive information, clarify the sales presentation, or offer the basic
argument for the product in a different matter.
___________7. Generally, the sales promotion schemes are floated in the market at the
time of festivals or the end of the season.
___________8. With the sales promotion, the company focuses on the increased short-
term profits, by attracting both the existing and the new customers.
___________9. Locating Qualified Prospects consists of identifying prospective
customers and qualifying them, that is, determining whether they have
the necessary purchasing power, authority to buy, and the willingness to
buy.
___________10. Price Reduction Promotions occur when price is reduced for a limited
time and this encourages trial and increases sales.

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Appendix A:
HOW TO CREATE A HOTEL MARKETING PLAN

From keeping things running smoothly in your hotel to building up an online presence,
there are a lot of moving parts that contribute to your property’s success. Do you know
which strategies are making the most impact? If you haven’t audited your marketing
efforts or if you don’t have a defined marketing plan, then it’s time to track and improve
the ROI of your marketing efforts.

From planning to execution, maintaining a successful hotel marketing plan will be an

ongoing process. Here are the essential steps to create a hotel marketing plan:

1. Complete an analysis

2. Set your objectives

3. Choose your strategies

4. Implement the plan

5. Evaluate the financial impact

1. Complete an Analysis

Before you can compete in the marketplace, you need to know where you stand.
You can do this by creating a competitive matrix to help you see where you stand in
comparison to your competition. Along the top, list your hotel and your closest
competitors. Then, on the side list key information such as the number of rooms,
average room rate, overall strengths, weaknesses, and ranking information such as
Google Hotels ranking, TripAdvisor Ranking, and your total social following.

You can also contact us to set up a free analysis of your hotel, including your
social media and review status, presence on listing websites and directories, search
engine indexing, NAP errors, and more.

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2. Set Your Objectives

Based on your analysis, where can you improve? Do you need a more engaged
social presence – or do you not have one at all? Are your online reviews hurting the
chances of gaining new guests? Is your competitor doing a better job of advertising?
Your objectives can be small tasks or overall business goals. Here are some sample
objectives you may want to set:

 Increase occupancy rate by 5%

 Raise TripAdvisor city rank by 7 spots

 Get 10% more direct bookings and pay less in Online Travel Agency (OTA) fees

3. Choose Your Strategies

This is how you will achieve your objectives. Choose which objectives you want
to improve on and decide how you will track the progress and the projected impact.
Strategies can include making updates to your hotel, implementing a reputation
management program, branching out to create an independent website, or creating a
plan to consistently post on social media.

4. Implement the Plan

Now that you know what you want to do, how will you do it? Follow through at
this point is the most important part to ensuring success with your new marketing plan.
To start, identify the following:

 Who will be in charge of each change?

 What will be the cost?

 How often will you measure the progress of your objectives?

 When are your deadlines for each task?

When it comes to making changes to your hotel marketing plan, you can’t just
make a change and forget about it. Most marketing projects require continuous
maintenance and tweaking to get the most out of each strategy.

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5. Evaluate the Financial Impact

On a monthly or quarterly basis, check in on each strategy to determine if they

are achieving your organization’s goals. If something is not working, you now have a
way to pinpoint what it is that needs to be changed.

It may seem like a lot of work if you’ve never made a hotel marketing plan before.
However, you can’t afford to not plan ahead. You’re fighting high OTA booking fees,
market share loss to shared lodging like Airbnb, and a customer base that has the tools
to be extremely discerning in their choices. It’s more important now than ever before to
be able to stand on your own in the digital space.

Source: https://www.travelmediagroup.com/create-your-hotel-marketing-plan/

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Appendix B:
DEVELOPING A MARKETING STRATEGY

Developing a marketing strategy

Effective marketing starts with a considered, well-informed marketing strategy. A

good marketing strategy helps you define your vision, mission and business goals, and
outlines the steps you need to take to achieve these goals.

Your marketing strategy affects the way you run your entire business, so it
should be planned and developed in consultation with your team. It is a wide-reaching
and comprehensive strategic planning tool that:

 describes your business and its products and services

 explains the position and role of your products and services in the market

 profiles your customers and your competition

 identifies the marketing tactics you will use

 allows you to build a marketing plan and measure its effectiveness.

A marketing strategy sets the overall direction and goals for your marketing, and
is therefore different from a marketing plan, which outlines the specific actions you will
take to implement your marketing strategy. Your marketing strategy could be developed
for the next few years, while your marketing plan usually describes tactics to be
achieved in the current year.

Write a successful marketing strategy

Your well-developed marketing strategy will help you realise your business's
goals and build a strong reputation for your products. A good marketing strategy helps
you target your products and services to the people most likely to buy them. It usually
involves you creating one or two powerful ideas to raise awareness and sell your
products.

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Developing a marketing strategy that includes the components listed below will
help you make the most of your marketing investment, keep your marketing focused,
and measure and improve your sales results.

Identify your business goals

To develop your marketing strategy, identify your overarching business goals, so

that you can then define a set of marketing goals to support them. Your business goals
might include:

 increasing awareness of your products and services

 selling more products from a certain supplier

 reaching a new customer segment.

When setting goals it's critical to be as targeted as possible so you can effectively
measure the outcomes against what you set out to achieve. A simple criteria for goal-
setting is the SMART method:

 Specific - state clearly what you want to achieve

 Measurable - set tangible measures so you can measure your results

 Achievable - set objectives that are within your capacity and budget

 Relevant - set objectives that will help you improve particular aspects of your
business

 Time-bound - set objectives you can achieve within the time you need them.

State your marketing goals

Define a set of specific marketing goals based on the business goals you listed
above. These goals will motivate you and your team and help you benchmark your
success.

Examples of marketing goals include increased market penetration (selling more

existing products to existing customers) or market development (selling existing

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products to new target markets). These marketing goals could be long-term and might
take a few years to successfully achieve. However, they should be clear and
measurable and have time frames for achievement.

Make sure your overall strategies are also practical and measurable. A good
marketing strategy will not be changed every year, but revised when your strategies
have been achieved or your marketing goals have been met. Also, you may need to
amend your strategy if your external market changes due to a new competitor or new
technology, or if your products substantially change.

Research your market

Research is an essential part of your marketing strategy. You need to gather

information about your market, such as its size, growth, social trends and demographics
(population statistics such as age, gender and family type). It is important to keep an
eye on your market so you are aware of any changes over time, so your strategy
remains relevant and targeted.

Profile your potential customers

Use your market research to develop a profile of the customers you are targeting
and identify their needs.

The profile will reveal their buying patterns, including how they buy, where they
buy and what they buy. Again, regularly review trends so you don't miss out on new
opportunities or become irrelevant with your marketing message.

While you try to find new customers, make sure your marketing strategy also
allows you to maintain relationships with your existing customers.

Profile your competitors

Similarly, as part of your marketing strategy you should develop a profile of your
competitors by identifying their products, supply chains, pricing and marketing tactics.

Use this to identify your competitive advantage - what sets your business apart from
your competitors. You may also want to identify the strengths and weaknesses of your

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own internal processes to help improve your performance compared with your
competition.

Develop strategies to support your marketing goals

List your target markets and devise a set of strategies to attract and retain them.
An example goal could be to increase young people's awareness of your products. Your
corresponding strategies could be to increase your online social media presence by
posting regular updates about your product on Twitter and Facebook; advertising in
local magazines targeted to young people; and offering discounts for students.

Use the '4 Ps of marketing'

Identify your tactical marketing mix using the 4 Ps of marketing. If you can
choose the right combination of marketing across product, price, place, and promotion
your marketing strategy is more likely to be a success.

Test your ideas

In deciding your tactics, do some online research, test some ideas and
approaches on your customers and your staff, and review what works. You will need to
choose a number of tactics in order to meet your customers' needs, reach the
customers within your target market and improve your sales results.

Source:
https://www.business.qld.gov.au/running-business/marketing-sales/marketing-
promotion/strategy

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Bibliography:

 Dwyer, F.R and Tanner, J.F (2002). Business Marketing. (2nd ed), Boston:
McGraw-Hill.
 Kotler P., & Armstrong G. (1996). Principles of Marketing (7 th edition). New
Jersey: Prentice Hall, Inc.
 Maricel B. (2015), Tourism Marketing, REX Book Store Inc.
 Zenaida D. & Edgar T., (2009. Marketing: A Simplified Approach. C & E
Publishing, Inc.
 https://hotelmanagementsoftware.wordpress.com/2013/11/11/how-effective-is-
distribution-channels-for-hotels/
 https://setupmyhotel.com/train-my-hotel-staff/sales-and-marketing/285-
marketing-mix.html
 https://www.bngkolkata.com/hotel-marketing-mix/
 https://www.business.qld.gov.au/running-business/marketing-sales/marketing-
promotion/strategy
 https://www.investopedia.com/terms/m/market-segemntation.asp
 https://www.revfine.com/pricing-strategies-hotel-industry/
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segmentation-targeting/segmentation-targeting-and-positioning/
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marketing_process_analyzing_marketing_opportunities_contents_of_marketing_
plan_principles_of_marketing&b=39&c=8

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