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The aim of this literature review is to present a brief overview of the main marketing strategies used by hospitality industry in order to increase the sales and gain new clients.
The article is divided in four parts: Definition of marketing in hospitality, Market segmentation in hospitality , brand positioning and finally customer loyalty. The author believes that such a short overview will give the reader a basic understanding of marketing strategies used in hospitality. All the research was based on academic journals and book.
Definition of Marketing in hospitality
Marketing plays a crucial role in the process of the development in most of the industries. Well planned and structured marketing promotion is the key to the business success (Hannam, 2004).On the other hand lack of marketing awareness can lead to the companys failure Fuller(1994 cited in Moriarty et al.2008).According to Chartered Institute of Marketing as cited in Holloway(2004) marketing can be defined as the management function which organizes and directs all those business activities involved in assessing customers needs and converting customer purchasing power into effective demand for a specific product or service, and in the moving that product or service to the final consumer or user so as to achieve the profit target or another objective set by the company or other organization. Levitt as cited in Holloway(2004) compares marketing with selling, which focuses on the needs of sellers , where else marketing is all about the needs of the buyer. Kotler et al.(2006) identifies marketing as social and managerial process by which individuals and groups obtain what they need and what they want through creating and exchanging products and value with others. According to Morrison (1996) hospitality services marketing in contrast to other sectors has several features that are unique for this industry. Which are: shorter experience with the services, easier copying of services and more emphasis on off-peak promotion, better emphasis on structure and imagery and more emotional buying appeals. Alistair Williams (2006) states that marketing in the hospitality and tourism sector differs from that of other businesses since purchase decision are based on perceptions and projected images rather than prior experience. Morgan et al.. (2002) as cited in Williams (2006) points out that the hospitality marketing goods are no longer related only with conveying an image of a place, but more with the experience associated with visiting the place through linking it to the lifestyle of the buyer. Kotler et al.. 2006 believes that the success of hospital marketing is related with the entire travel and leisure industry since regularly partnership packages between the wholesaler are eliminating the competitors. In his research Bell (1993) suggest that hotel companies should concentrate more on corporate travel-management department rather than individual travelers since they are the key to corporate clients. In the last few years hospitality and tourism has become a very powerful sector not based not only on the amount of people working for this industry (Ketler et al. , 2006) but also because of our growing expectation regarding the use of leisure time . (Bouchet et al. , 2004) cited in Williams (2006).
Market segmentation in hospitality and brand positioning
Market segmentation is the process of classifying customers and prospects into groups with similar needs and purchasing behavior.(Weinstein, 1994 as cited in Morritt 2007).Shepherd (1992) states that marketing segmentation is the most popular classification used by company or unit managers due to its accessibility and measurability. It is agreed by many authors that market segmentation is a very important tool , since it identify the particular needs and requirements of each group (Kotler 2008, Roberts 1993). It also gives the opportunity to the managers to apply the suitable marketing mix to improve the customer satisfaction. Market segmentation strategy is recognizable for the hospitality business. The constant need of maximizing the sales can be partly achieved by exploitation of target marketing. Roberts (1993) states that there are three major market segment groups in hospitality industry . The first one is an undifferentiated or mass marketing in which the corporation marketing aims at the overall market. The second one is concentrated on differentiated or selective marketing which is trying to attract many groups and markets using different methods. The third and the last one is aiming for small and specific segments using concentrated and niche marketing. Where else Doswell (1979) as cited in Shepherd (1992) believes that hospitality industry is simply and mainly composed of four segments which are: lower, middle , upper/ middle and upper. Bennett et al (2001) argues with Roberts (1993) theory stating that most of the marketers so use mass marketing things that individual customers in the market have the same preferences and that most of the customers will be satisfied by a single market offering . In most of the cases this offer is available in one version and only one price for everyone. This is one of the reasons why mass marketing is consider as much cheaper comparing to market segmentation. It also requires only one advertising campaign launch which is a great saving for the company. However now a days mass marketing is not consider as a successful method for hospitality industry since most of the customers are looking for variety of products and services, more personalized that fulfill all their needs.
In his article Roberts (1993) states that segments in hospitality industry can be divided not only by the basic model which analyses age, gender, location , socio-economic status which helps the managers to identify the common needs and buying behavior . Customers can also be analysed according to the purpose of their journey (eg. Tourism ,business, sport holidays or commercial trade). According to Bennett et al. (2001) hospitality industry could put their clients into several segments : socioeconomic or demographic segment, product related variables, psychographic variables, geographic variables , purpose of trip variables and behavior segmentation . However according to Morrison (1989) there are several issues and limitation with identifying and applying an effective market segmentation. One of the problems is related to the costs. Segmentation is often more expensive than non-segmented approach due to the expenses related with fulfilling each customer needs( eg. well equipped conference room for business clients).Furthermore many firms struggle with establishing the barriers of segmentation due to the broadly division of market segments which can follow to missing certain segments. Nevertheless finest market segments can lead to the loss of major segments. Benett et al. (2001) ads another limitation related with segmentation . He claims that a high degree of differentiation of the basic product leads to a proliferation of models and variations and finally to one product talking market share away from another product of the same enterprise.
After defining the optimal market segments, brand positioning is the another step in establishing a company in the market. Positioning of each firm relate to the style and range as well as the promotion of the product (Roberts 1993). According to Kotler et al. (1999) as cited in Bowen et al. (1998) a products position is the way the product is defined by consumers on important attributes - the place the product occupies in consumers minds relative to competing products. Simoes and Dibb (2001) as cited in Kayaman (2007) states that branding plays a crucial role for the companies service since a strong brand can improve customers trust and increase their understanding of provided service. Fogacs (2003) believes that the value proposition of branding can be simplified to a claim that it is more beneficial to belong to a brand than not.
Recently, many hotels all over the world have struggled with increasing their market share and improving their market position due to the constant developing competition from domestic and international companies. Reaching new customers can be achieved by decreasing prices for the provided services , expending the distribution channels or simply by investing in advertising campaign, but for many companies this methods often require big investments and frequently do not bring any improvements( Cravens,1994) as cites in Tepeci (1999). On the other hand customer loyalty is consider to be more profitable because of the nature of the business. Jarvis and Mayo (1986) cited in Tepeci (1999) believe that hospitality industry should pursue market share , rather than market growth gains. It has been agreed that keeping the old customer is much more cheaper than getting a new one, due to the costs of promotion and sales costs (Reichheld , 1996, Bowen et al. , 1998).Many companies ,especially in hospitality industry have invested millions in customer retention programs to capture the benefits of loyal customers. For example in 1996 Mariott spent more than 54$ millions on their loyalty program and Hayatt with his 25$ million investment.( Secord, 1996). However even though hotels are working very hard on developing and improving the loyalty program, the aspects that create and increase the loyalty are still not well understood( Zeithhaml, 2000).This is a reason why most of the programs are now being strongly scrutinized to determine if they are aching all the missions which are: building profits and increasing the number of loyal customers (Skogland and Siguaw, 2004).
In her studies Mattilla (2006) analyses different ways in which hotels are trying to connect to their customer. One of them is an affinity program which is based on collection frequency points which can be exchange for rewards. According to the author this method is not sufficient to create a strong connection between the hotel and the client. Instead she suggest to foster a form of emotional bonding with the company. The Hilton new strategy to make it easier for their customers to achieve an elite status a good example of revamping loyalty program. Unfortunately it is impossible to keep the program unique since its very easy to cope it. Another problem is arise from the standpoint of customer loyalty, because many travelers have cards to several hotels loyalt program(lodging hospitality 2002)
In their research O'Brien and Jones (1994) states that loyal customers have been found to purchase more and facilitate additional business from new customers by generating positing word of mouth. For customers satisfaction with the service and product had been indentify as the main factor for loyalty and often also with firms profitability. Satisfied clients tend to exhibit reduced price sensitivity but also improve the consumers base through positive word of mouth.( Anderson et al. 1994). In his book Bowen et al.(1998) writes that a loyal customer client who keep on returning to the luxury hotels that he is using, and continuing to spread a positive word of mouth has a value of more than 200,000$. For this reason many academics and professionals suggest to put a strong emphasis on loyalty programs since in the future it will be a necessary requirement for the continued existence of the hotel businesses (Kandampully et al. 2000).According to Scott (2001) cited in Kandampully (2006) the loyalty of the customers have become the determining factors in the firms success or failure.