1. Introduction: Marketing for Hospitality and Tourism
Kotler, Bowen and Makens
Introduction: Marketing for Hospitality and Tourism
Chapter 1

2. Chipotle Mexican Grill
Loyalty
Ingredients
Pricing
Social Networking
Restaurant Environment
Key Components of
Chipotle’s Vision
Food with Integrity (FWI), The Cornerstone of Chipotle’s Vision
Fresh Ingredients
True to the tradition of French cooking, Steve insists on fresh products—not canned, frozen, or freeze-dried.
Organic, Naturally Raised Foods
With an emphasis on great-tasting food, quality, and simplicity, they review each ingredient used in Chipotle and explore the possibility of incorporating as many organic or naturally raised foods as possible.
Examples: Niman Ranch for pork, Bell & Evans for chicken
Restaurant Environment
The kitchen and food preparation areas are right in front of the customers and were designed to appeal to the senses. Customers observe freshness, cleanliness, and variety at the same time they smell spices and hear the sizzle of meat on the grill.
Chipotle is the only quick-service restaurant that commissions original art for each location.
Each piece of music played within a Chipotle restaurant was self-selected by a team from Chipotle management and is designed for self-destruction after a set period of time to ensure freshness in the music as well as the food.
Pricing
Unlike most quick-service restaurant chains, Chipotle offers no coupons or specials. At Chipotle all food all the time is either full price or free.
Loyalty
Both internal and external
External: crew members “help Chipotle customers build their version of the perfect burrito”
Internal: Chipotle has developed an incentive for managers to grow their employees, as well as letting managers keep 10% of any revenue gains over the year’s budget.
Social Networking
Over 1.5 million people have given Chipotle’s Facebook page a thumbs up
Not everything posted on Chipotle’s wall is positive. However, a representative of Chipotle responds to both the positive and negative comments, usually within the hour.

3. Learning Objectives
Understand the relationships between the world’s hospitality and travel industry.
Define marketing and outline the steps in the marketing process.
Explain the relationships between customer value and satisfaction.
Understand why the marketing concept calls for a customer orientation.
Understand the concept of the lifetime value of a customer and be able to relate it to customer loyalty and retention.

4. Purpose of a Business Customer Orientation
Create & Maintain
Satisfied & Profitable Customers
The purpose of a business is to create and maintain satisfied, profitable customers.
Customers are attracted and retained when their needs are met.
What about price?
When a business satisfies its customers, the customers will pay a fair price for the product, which includes a profit for the firm.
It is wise to assess the customer’s long-term value and take appropriate actions to ensure a customer’s long-term support.
A hotel that can increase its repeat customers from 35 to 40 percent should gain at least an additional 25 percent in profits

5. What is Marketing?
Marketing is the process by which companies create value for customers and society, resulting in strong customer relationships which capture value from the customers in return.

6. Marketing Mix Place Product Promotion Price (Distribution)
(Sales & Advertising)
Marketing means “hitting the mark.”
According to Peter Drucker:
“The aim of marketing is to make selling superfluous. The aim is to know and understand customers so well that the product or service fits them and sells itself.”
This does not mean that selling and promotion are unimportant, but are part of a larger set of marketing tools that work together to produce satisfied customers.
McDonald’s Example:
Product: fast-food with quality ingredients
Place: most customers will not travel more than 15 minutes to a McDonald’s, so they need restaurants that are conveniently located to their target market
Price: sells at prices people expect to pay for fast food
Promotion: they appeal to different market segments, which allows McDonald’s to make effective use of mass media for promotional purposes

7. Tourism Marketing Tourism Marketing Travel Hospitality Industry
The two main industries that comprise the activities we call tourism are the hospitality and travel industries.
The hospitality industry is one of the world’s major industries
In the United States, it is the second largest employer
In more than half of the fifty states, it is the largest industry.
Few industries are as interdependent as travel–hospitality.
The travel industry will require marketing professionals who understand the big picture and can respond to changing consumer needs through creative strategies based on solid marketing knowledge.

8. The Marketing Process The Marketing Process
In the first four steps, companies work to understand consumers, create customer value, and build strong customer relationships
In the final step, companies reap the rewards of creating superior customer value
By creating value for customers, companies are able capture value from customers in the form of sales, profits, and long-term customer equity

9. Core Customer & Marketplace Concepts
Needs, Wants & Demands
Marketing Offerings
Value & Satisfaction
Exchanges & Relationships
Markets

10. Needs, Wants & Demands Needs Demands Wants
As a first step, marketers need to understand customer needs and wants and the marketplace within which they operate.
Needs
A human need is a state of felt deprivation
Included are:
The basic physical needs for food, clothing, warmth, and safety
Social needs for belonging, affection, fun, and relaxation
Esteem needs for prestige, recognition, and fame
Individual needs for knowledge and self-expression
Wants
The form human needs take as they are shaped by culture and individual personality
As a society evolves, the wants of its members expand
Be careful not to confuse wants with needs
For example: a manufacturer of drill bits may think that customers need a drill bit, but what the customers really need is a hole (aka “marketing myopia”)
Demands
People have almost unlimited wants, but limited resources
Therefore, wants become demands when backed by buying power

11. Marketing Offerings
Customer wants and needs are fulfilled through some combination of tangible and intangible products and services
A market offering includes much more than just physical goods or services. Consumers decide which events to experience, which tourist destinations to visit, which hotels to stay in, and which restaurants to patronize. To the consumer these are all products.
Illustration 1-7

12. Customer Satisfaction
Value & Satisfaction
Customer Satisfaction
Customer Value
Customer Expectations
Customer value is the difference between the benefits that the customer gains from owning and/or using a product and the costs of obtaining the product
Costs can be both monetary and nonmonetary
One of the biggest nonmonetary costs for hospitality customers is time
Managers must know their customers and understand what creates value for them
This is an ongoing process as customers and competition change over time
Customer expectations are based on past buying experiences, the opinions of friends, and market information
If we meet customer expectations, they are satisfied
Marketers must be careful to set the right level of expectations
Too high = disappointed customers
Too low = fail to attract new customers
Customer satisfaction depends on a product’s perceived performance in delivering value relative to a buyer’s expectations
Delivering value:
If falls short of the customer’s expectations, the buyer is dissatisfied
If matches expectations, the buyer is satisfied
If exceeds expectations, the buyer is delighted
Smart companies aim to delight customers by promising only what they can deliver and then delivering more than they promise

13. Exchanges & Relationships and Markets
vs.
Exchange
Relationships
Exchange is the act of obtaining a desired object from someone by offering something in return
Beyond simply attracting new customers and creating transactions, the goal is to retain customers and grow their business with the company
Marketers want to build strong relationships by consistently delivering superior customer value
A market is a set of actual and potential buyers of a product
These buyers share a particular need or want that can be satisfied through exchange relationships

14. Marketing Management Orientations
Product
Selling
Marketing
Marketing 3.0
Production
Management
Orientations
There are five alternative concepts under which organizations design and carry out their marketing strategies: the production, product, selling, marketing, and marketing 3.0
Production
Belief that consumers will favor products that are available and highly affordable, and therefore management should focus on production and distribution efficiency
Problem: The management may become so focused on production systems that they forget the customer.
Product
Belief that consumers will favor products that offer the most in quality, performance, and innovative features
Problem: Focusing only on the company’s products can lead to marketing myopia (refer to slide 1-8)
Selling
Belief that consumers will not buy enough of the organization’s products unless the organization undertakes a large selling and promotion effort
Problem: Doesn’t establish a long-term relationship with the customer because the focus is on getting rid of what one has, rather than creating a product to meet the needs of the market
Marketing
Belief that achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfaction more effectively and efficiently than competitors
Problem: Niche opportunities may sometimes remain available long after suppliers recognize the need
Benefits: Focuses on customer needs and integrates all the marketing activities that affect customers, thereby meeting the organizational goals by creating long-term customer relationships based on customer value and satisfaction
Marketing 3.0
Belief that marketers should approach consumers as whole human beings with minds, hearts and spirits (continued on next slide)

15. Participation & Collaboration
Marketing 3.0 (cont.)
Participation & Collaboration
Marketing 3.0
Participation & Collaboration
Social media has enabled customers to participate and collaborate with each other and companies
Companies can tap into customer power and enable the customer to help design and shape products
Customer power:
Negative if companies provide poor products, have no service recovery, or abuse customers
Positive if companies provide excellent products and treat customers with respect
Globalization
International travel has become increasingly affordable to the middle class
One of the outcomes of travel is an understanding of other people and their culture
Travelers have also experienced the paradoxes of travel (luxurious hotel and surrounding poverty, etc.)
Therefore, customers are more likely to deal with companies that have created and/or are involved in projects that support social, economic or environmental issues in society
Globalization also means that the world is connected
Creative Society
Profit will result from customers’ appreciation of those companies that contribute to human well-being
Creative Society
Globalization 15

16. Customer Value-Building Tools
Financial Benefits
Structural
Ties, Social &
Financial
Benefits
Social &
Financial
Benefits
Financial Benefits
Example: airlines offer frequent-flyer programs, hotels give room upgrades to their frequent guests, and restaurants have frequent-diner programs
Problem: Can be imitated easily by competition and thus may fail to differentiate the company’s offer permanently
Social & Financial Benefits
Example: employees work to increase their social bonds with customers by learning individual customers’ needs and wants and then individualizing and personalizing their products and services (turns customers into clients)
Problem: Clients will often follow the employee with whom they developed a relationship when he or she changes jobs
Structural Ties, Social & Financial Benefits
Example: airline customers that have elite status can choose their seat including exit rows, which are sold at a premium price to non-elite status customers; Sheraton developed flexible check-in and checkout times for their best customers; Hilton is using technology to provide a personalized welcome message on the guest’s television
Problem: Difficult to implement (but harder to imitate)

17. Building Profitable Customer Relationships
Low Frequency
High Frequency
High Profitability
Try to get these customers to come more often
These are your best customers, reward them
Low Profitability
These customers will follow promotions – ensure your promotions make money
Some of these guests have the potential to become more profitable
A company should develop customer relationships selectively: Figure out which customers are worth cultivating because you can meet their needs more effectively than anyone else
Table 1-1

18. Guidelines for Customer Relationships
Target fewer, more profitable customers
Relate in deeper, more meaningful ways
Create dialogues with customers via online social networks
Invite customers to play a more active role in shaping products and brand messages

19. Lifetime Value of the Customer
Losing a customer means losing more than a single sale.
It means losing the entire stream of purchases that the customer would make over a lifetime of patronage
A company can lose money on a specific transaction but still benefit greatly from a long-term relationship
This is one of the reasons successful companies empower employees to resolve customer complaints
Examples:
Lexus estimates that a single satisfied and loyal customer is worth more than $600,000 in lifetime sales
Ritz Carlton Hotels puts the lifetime value of a guest at more than $120,000
Domino's Pizza puts the lifetime value of a customer at more than $10,000

20. Key Terms
Customer Equity the discounted lifetime values of all the company’s current and potential customer.
Customer Expectations based on past buying experiences, the opinions of friends, and market information.
Customer Relationship Management (CRM) involves managing detailed information about individual customers and carefully managing customer “touch points” in order to maximize customer loyalty.
Customer Touch Point any occasion on which a customer encounters the brand and product— from actual experience to personal or mass communications to casual observation.
Customer Value the difference between the benefits that the customer gains from owning and/or using a product and the costs of obtaining the product.
Demands Human wants that are backed by buying power.
Exchange The act of obtaining a desired object from someone by offering something in return.
Hospitality Industry Made up of those businesses that offer one or more of the following: accommodation, prepared food and beverage service, and/or entertainment.
Human Need A state of felt deprivation in a person.

21. Key Terms (cont.)
Human Want The form that a human need takes when shaped by culture and individual personality.
Lifetime Value The lifetime value of a customer is the stream of profits a customer will create over the life of his or her relationship to a business.
Market A set of actual and potential buyers of a product.
Marketing The art and science of finding, retaining, and growing profitable customers.
Marketing Concept The marketing management philosophy that holds that achieving organizational goals depends on determining the needs and wants of target markets and delivering desired satisfactions more effectively and efficiently than competitors.
Marketing Management The art and science of choosing target markets and building profitable relationships with them.

22. Key Terms (cont.)
Marketing Manager A person who is involved in marketing analysis, planning, implementation, and control activities.
Marketing Mix Elements include product, price, promotion, and distribution. Sometimes distribution is called place and the marketing situation facing a company.
Product Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. It includes physical objects, services, persons, places, organizations, and ideas.
Product Concept Anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. It includes physical objects, services, persons, places, organizations, and ideas.
Production Concept Holds that customers will favor products that are available and highly affordable, and therefore management should focus on production and distribution efficiency.
Purpose of a Business To create and maintain satisfied, profitable customers.

23. Key Terms (cont.)
Relationship Marketing Involves creating, maintaining, and enhancing strong relationships with customers and other stakeholders.
Selling Concept The idea that consumers will not buy enough of an organization’s products unless the organization undertakes a large selling and promotion effort.
Societal Marketing Concept The idea that an organization should determine the needs, wants, and interests of target markets and deliver the desired satisfactions more effectively and efficiently than competitors in a way that maintains or improves the consumer’s and society’s well-being.
Transaction Consists of a trade of values between two parties; marketing’s unit of measurement.
Value Proposition The full positioning of a brand—the full mix of benefits upon which it is positioned.