INTRODUCTION: MARKETING FOR HOSPITALITY AND TOURISM Chapter 1 Kotler, Bowen, Makens and Baloglu Marketing for Hospitality and Tourism

Chipotle Mexican Grill Key Components of Chipotle’s Vision Key Components of Chipotle’s Vision

Learning Objectives 1. Understand the relationships between the world’s hospitality and travel industry. 2. Define marketing and outline the steps in the marketing process. 3. Explain the relationships between customer value and satisfaction. 4. Understand why the marketing concept calls for a customer orientation. 5. Understand the concept of the lifetime value of a customer and be able to relate it to customer loyalty and retention.

Purpose of a Business Create & Maintain Satisfied & Profitable Customers Customer Orientation

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.

Marketing Mix Product Place (Distribution) Price Promotion (Sales & Advertising)

Tourism Marketing Hospitality Industry Travel Industry Tourism Marketing Tourism Marketing

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.

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

Needs, Wants & Demands Needs WantsDemands

Marketing Offerings Customer wants and needs are fulfilled through some combination of tangible and intangible products and services

Value & Satisfaction Customer Value Customer Expectations Customer Satisfaction

Exchanges & Relationships and Markets ExchangeRelationships vs. MARKET

Marketing Management Orientations Management Orientations Management Orientations

Societal Marketing (cont.) Company (Profits) Consumers (Want Satisfaction) 15 Society (Human welfare) Societal Marketing Concept

Customer Relationship Management Customer Value Customer Satisfaction

Engaging Customers Customer- Engagement Marketing Consumer- Generated Marketing

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

Building the Right Relationships with the Right Customers 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. The company can classify customers according to their potential profitability and manage its relationships with them accordingly. One classification scheme defines four relationship groups based on potential profitability and projected loyalty: strangers, butterflies, true friends, and barnacles; see above [Figure 1–5 in the text]. Each group requires a different relationship management strategy. “Strangers” show low potential profitability and little projected loyalty. There is little fit between the company’s offerings and their needs. The relationship management strategy for these customers is simple: Don’t invest anything in them. “Butterflies” are potentially profitable but not loyal. There is a good fit between the company’s offerings and their needs. However, like real butterflies, we can enjoy them for only a short while and then they’re gone.

Building the Right Relationships with the Right Customers (cont.) “True friends” are both profitable and loyal. There is a strong fit between their needs and the company’s offerings. The firm wants to make continuous relationship investments to delight these customers and nurture, retain, and grow them. It wants to turn true friends into “true believers,” those who come back regularly and tell others about their good experiences with the company. “Barnacles” are highly loyal but not very profitable. There is a limited fit between their needs and the company’s offerings. An example is smaller bank customers, who bank regularly but do not generate enough returns to cover the costs of maintaining their accounts. Like barnacles on the hull of a ship, they create drag. Barnacles are perhaps the most problematic customers. The company might be able to improve their profitability by selling them more, raising their fees, or reducing service to them. However, if they cannot be made profitable, they should be “fired.”

The Changing Marketing Landscape The Digital Age Changing Economic Environment Rapid Globalization Sustainable Marketing Co-Creation The Sharing Economy

Key Terms Consumer-Engagement Marketing fosters direct and continuous customer involvement in shaping brand conversations, experiences, and community. Consumer-Perceived Value the customer’s evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers. Customer Equity the discounted lifetime values of all the company’s current and potential customer. Customer Satisfaction the extent to which a product’s perceived performance matches a buyer’s expectations. 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.

Key Terms (cont.) 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. Digital and Social Media Marketing using digital marketing tools such as Web sites, social media, mobile apps and ads, online video, , and blogs that engage consumers anywhere, at anytime, via their digital devices. Exchange the act of obtaining a desired object from someone by offering something in return. Hospitality Industry made up of those businesses that offer one or more of the following: accommodation, prepared food and beverage service, and/or entertainment. Human Need a state of felt deprivation in a person. Human Want the form that a human need takes when shaped by culture and individual personality.

Key Terms (cont.) Lifetime Value (LTV) 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. 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. 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.

Key Terms (cont.) 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. 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. Share of Consumer the portion of the customer’s purchasing that a company gets in its product categories.

Key Terms (cont.) 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.