Ritz Carlton marketing analysis

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19th May 2017 Marketing Reference this

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1. Introduction:

Ritz Carlton’s marketing conduct is a true paradigm that follows root rudiments of Marketing as a management discipline i.e. recognising, anticipating and satisfying customer needs profitability as defined by Chartered Institute of Marketing, UK (Cited in Brassington & Pettitt, 2001). At same point of time, the activities undertaken by Ritz Carlton under its marketing strategy not only contribute to overall brand development but rather also exemplify innovative methods to promote products or services and most significantly how to satisfy claims promised to customers as part of the strategy.

This assignment focuses to reveal current positioning of Ritz Carlton in industry, and discuss in depth important factors responsible for success of company. At same point of time, assignment will also examine the imperative factors that contribute to Ritz Carlton quality of service as perceived by customers. Finally light would also be laid down on how company tries to provide ‘consistent -universal’ experience to its customer all round the world and factors that act as obstacle against it.

Company Overview:

Ritz Carlton is one of the most well known luxury hotels company in the world. Right from inception, Ritz Carlton has brought significant innovation in practises of hospitality industry (See The Ritz Carlton, 2010a).With history of existence and success of over 100 years, Ritz Carlton as a company currently adopts ‘Limited Liability Company’ nature of ownership. Ritz Carlton LLC is subsidiary company of Marriot Hotel Incorporation. The parent company, Marriot Hotels hold as many as 18 brands including Ritz Carlton. The Ritz Carlton at presents manages 72 luxury hotels in 24 countries located in 5 different regions in the world, the USA and Canada; Mexico, Caribbean and South America; Asia-Pacific; Europe; and Middle East. Besides, the company has a number of further expansion plans specifically concentrated towards eastern world with a view to take advantage of booming market. (See Worth, 2009)

Service Marketing

With development of marketing as a discipline, the scope of marketing has also enhanced. Jacques et al (2007) rightly points out that it is organisation’s ‘self interest’ that decide its future course of it action. This self interest of any organisation largely depends upon nature of business it adapts and therefore, it is extremely important to recognize with what range of organisation we are dealing with beforehand, (Like Consumer, B2B, Service, Small Business, Web based and so on) so that it’s marketing strategy can be woven around core goals. Ritz Carlton test on product spectrum offered by Brassington & Pettitt (2007) indicates that the product that they deal with is characterised by extremely greater level of service or in fact pure services.

RITZ CARLTON ritz_carlton_logo.jpg

Intangibility Perishability Lack of Ownership Heterogeneity Inseparability

Different customer will opine differently on their experience at Ritz. Customer involvement plays vital role.

Customer need to come in contact with hotel -Service provider.

No Exchange of any Items takes place as part of primary offerings.

Simultaneous process of producing and consuming service.

Essence of Ritz Carlton success measure depends on ‘Experience’ of customers

Figure 1: Position of Ritz-Carlton in the Product Spectrum

Assumptions:

Ritz Carlton as discussed above is not only a subsidiary of Marriot Hotel Incorporation but also a LLC that deals with various type of accommodation. This does not just include hotels but rather also involves Clubs and residence properties. This assignment specifically focuses on Ritz Carlton as chain of hotels. Moreover, analysis is completely based on its worldwide presence and not limited to any particular geographic market. This is intentionally done so as to understand marketing of Ritz Carlton as ‘chain of hotels’ rather any specific unit. However, for understanding and justification purpose, region specific examples are cited in certain parts of assignment.

2. Exploring Secret behind Ritz Carlton’s Success:

Ritz – Carlton as an organisation offers its services across five continents. Right from USA to Asia its hotels at first look give us experience of ‘beyond imagination’ architecture and provides stereotype of luxury and elegance. There is no doubt to the fact that physical surrounding (which include premises) in case of service industry act as one of the most important element, that define success criteria for influencing consumer behaviour (Bitner M.,1992) and portray what it stand for. Physical evidences i.e. tangible items add value to service being offered. However, it can be argued that it is not the lone measure responsible for hotel’s success. The basic reason behind this is, a customer never judges a hotel solely on foundation of its tangible infrastructure (Building, Technological availability, Type of Rooms etc) but rather there are number of other elements that play vital role. This part of assignments will try to identify such important factors responsible behind Ritz Carlton success.

Successfully Targeting Segmentation:

The need of customers varies for various reasons and therefore it is very important to identify prospective strategic customer for organisation, (Johnson et al, 2008) at same point of time organisation must also have calibre to satisfy the targeted group of customers. Ritz- Carlton’s continued success, behind the scenes depicts its ability to successfully targets it segmentation, offering perfect Marketing Mix elements. Moreover, it also ensures that modifications are made in marketing mix elements with changing scenario in market trends and both these factors act as key elements. Kotler et al (2009) emphasise on a point that, marketing is all about forming strategy towards consumer and customer needs and thereby offering service or product that satisfy those needs. Ritz Carlton as an organisation in true sense is perfect at following and applying this basic ideology. This assignment aims to identify success factors of Ritz Carlton in light of marketing mix elements with a view to justify above argument.

Identifying Market Focus (Segmentation): Marriot Hotels has divided their business to number of segments where Ritz Carlton serves as Luxury Lodging (See Marriot Hotel Incorporation, 2008) and hence it is very evident from this fact that Ritz Carlton as a company exists to serve luxurious hospitality Ritz Carlton hotels are located at more than 70 destinations, the basic customer segment which Ritz-Carlton targets is, people with rich lifestyle in all aspects of life. Irrespective of any geographic location on earth, age, social-cultural belief, opinion of an individual, the common element that Ritz tries to concentrate is ‘People with Lavish living’. Therefore, it can be invariably noticed that Ritz Carlton adopts concentrated targeting method towards Psychographic segmentation. As Brassington & Pettitt (2007) rightly points that lifestyle segmentation is very difficult to define, we came up with following attributes that Ritz Carlton try to target. (See figure 1.1).

Psychographic Segmentation

Ritz Carlton

Figure 2 Targeting Customer Segmentation

Factors Defining Success of Ritz Carlton:

Perfect Offerings (Product):

The product anatomy (See figure 3) of Ritz Carlton illustrates that it is not just a customary hotel which satisfies basic needs but rather, it aspires to provide unforgettable experience to its customers, which perfectly matches its target market. Most importantly, providing value added services as ‘personalised attention’ very well justify its marketing appeal to customer ‘Experience The Ritz’, enabling it to exceed customer expectations. Moreover, this value added services acts as source of tremendous additional revenues for Ritz Carlton. (Baxter J, 2007) One of vital point to focus is product development undertaken i.e. offerings of special packages, with a view to attract more customers and adapt to current market situations. (See Appendix) Furthermore in hospitality industry, locations act as products, as it creates value to selling points and influence buyer’s behaviour as well (Brassington & Pettitt, 2007). All properties of Ritz Carlton are majority placed in USA, China and European countries which are strategically located as it intends to focus on top most tourism and business destinations of the world. (See UNWTO, 2006) Moreover, Ritz Carlton has its hotels at New York, London, Paris, and Dubai which are strongest cities in terms of highest occupancy rates of rooms. (Worth S., 2009)

ritz_carlton_logo.jpg

Figure 3 Product Anatomy of Ritz Carlton

Directly getting in touch with end Customer (Place)

In service industry generally, there exist direct selling between service provider and end customer and the basic reason behind this is core characteristics of service products by nature (i.e. Perishability, Intangibility, Heterogeneity, and Inseparability) as discussed above. (Cowell, 1984) The activity of providing service for hotels initiates as soon as customer triggers its efforts for bookings. Ritz Carlton recognises importance of rise in online booking which almost doubled in 2007 (Research by Travelclick cited in Baxter J., 2007) and offers easy access to its customer to book from its own website. Ritz Carlton has also entered into best available rate programmes with website as (such as Thomson.co.uk, InspiredLuxuryEscapes.com) to play with consumer confidence to get cheapest rates on web. This evidently suggests that primary focus of Ritz Carlton is to directly contact the customer which is vital need of service marketing i.e. to reach out customer and influence their behaviour encouraging them to ‘experience’ your service (Brassington & Pettitt, 2007).

Pricing Concentrating towards Sub-Segmentations (Price)

Price must convince customer’s perception towards compensation of service offered and value paid against it (Jacques et al, 2007) and therefore it is vital to ensure that pricing strategy is in synchronisation with segment targeted. As Javalgi et al (2006) rightly indicates that Ritz Carlton extends it services to industry executives, meeting and corporate travel planners, and affluent travellers, targeting sub-segments also plays important role. Ritz-Carlton has carved niche for itself which is evident from various range of prices its offer. At Ritz London one night accommodation costs from about £250 up to £3500, while similarly in USA markets the range exist between 200$ to 3000$ (As on 10 march 2010). This suggests that Ritz Carlton concentrates on sub segmentation acts as an advantage. However, base pricing is one of the areas where Ritz Carlton needs to seek improvements (See Current Positioning part) to attract more customers.

Brassington & Pettitt (2007) also brings to notice important issue that price is an important tool to manage demand. Understanding this vital point, during recent tough time company brought out number of attractive packages to influence more customer (Like package of 2 nights stay at 449$ per family) (See Schultenover J; Strout E, 2002) and that defines company’s ability to alter marketing mix elements as per relevant conditions.

Balance & Innovative Endorsement (Promotion):

Ritz Carlton involves itself with both form of promotional activities as referred by Berkowitz et al (1992) i.e. product oriented and institution oriented. It adopts a balance promotional strategy ensuring that using product oriented approach it continuously communicates with customers regarding its USP (Unique Selling Point) and recent offerings on other hand it uses Institution oriented approach to preserve Ritz Carlton as a Unique brand with historical excellence influencing consumer behavior.

Impact of Promotion on Consumer Perceptions towards Ritz Carlton:

High Expertise

Premium Brand

Life Time Experience

Symbol of Status

Going Beyond Expectations

Respect For Brand

A matter of Pride

Innovative and benchmark for Quality

Figure 4 Impact of Promotion on Consumer

In addition to this, Ritz Carlton adapts PULL strategy (Brassington & Pettitt, 2007) using perfect medium to directly communicate with customer. With rise in concept of Social marketing Ritz Carlton has tied up with Travel Click to actively manage its promotion over web. (Hospitality.Net, 2009) To target business travellers, paper adverts are given in leading business magazines (e.g. Business Traveller) along with television adverts and advertising in airlines. One of the important observations is Ritz Carlton uses its own Website as major promotional medium. All package brochures, promotional videos, Ritz Carlton’s own magazine are uploaded to website. (See The Ritz Carlton, 2010)

One of the significant points of observation is Ritz Carlton provides innovative edge to its promotion strategy. One of the classic examples is, it markets its biggest asset i.e. Employees. There is not a single promotional videos which fails to give importance to its own staff representing them as creators and followers of high quality standards in industry terming them as “Our Ladies & Gentleman” (See The Ritz London, 2008; Ritz Culture, 2007). Apart from this, instead of using simple adverts Ritz Carlton has created short films which are aired on televisions, hotel rooms, and websites to make people understand what uniqueness of its services is. (See The Delay, 2008; The Last Night, 2008, New Gold Standards, 2010, Audi and Tarma, 2007). Hence innovative and a balance promotional strategy is one of the important factors responsible behind Ritz Carlton success.

Staff- A Biggest Asset (People)

March, J.G and Simon (1958) emphasise on vital point that organisations are primarily formed and governed by people and therefore ‘image reflection’ of organisation largely depend upon actions of its staff and this is especially true in case of service industry as it deals with process of interactive marketing (Kotler P and Armstrong G, 2004; Brassington & Pettitt,2007). Ritz Carlton understands this vital point and implements customer focused approach. It aims at hiring right people, providing best fit to organisation’s culture of “Putting Customer First” who are characterized with a strong sense of values and overall desire to go beyond the call of duty. (Emerald Database, 2003) Furthermore, Ritz Carlton goes step ahead, as an organisation, it strives to get known for its excellent service and that act as a key to its success. Organisation best at this must try to invest their money, talent, time and attention to strengthen their current positing (Ferrell O.C; Hartline M., 2006) and that what Ritz Carlton does by investing in its people. In this process, over the year Ritz – Carlton has developed and raised bars of customer services with help of their staff which itself now act as their behavioural core competence that cannot be easily imitated by others. (Johnson et al, 2008; Bacon, 2005)

Internal Values & Operations (Process)

It is important for service industry to pay attention to both, employees and customer to successfully implement process of service profit chain. Ritz Carlton as an organisation aims to take extreme care and respect for their employees, with an understanding that, in return they will put up efforts to fulfil even unexpressed wishes of their customer. (Kotler P and Armstrong G, 2004) The employees are empowered, trained to develop gold standards (See Emerald Database, 2002) and are considered biggest strength of the organisation which produces exemplifying services towards customer. Employees are trained motivated to develop relational exchange with customer with a view to increase loyalty and development of brand. (Jain R and Jain S, 2006)

Creating Value

Internal Process

CUSTOMER FOCUS

Figure 5 Service Profit Chain for Ritz Carlton

Another important contributing factor is Ritz-Carlton has been successful in developing its own culture of servicing (Kent W, 1990) which is now considered as gold standards (Benchmark) towards quality development in servicing industry. Ritz Carlton also uses CLASS database with purpose of registering likes/dislikes, Interests, preferences, previous problems faced, attitude of every individual customer to provide personalised service. Hence, putting all together, these are innovative process that enables Ritz Carlton to fully engage employees and generate a creative delightful experience to its customer on one hand and simultaneously developing an unique core competence for itself at other hand.(Timmerman J, 2009)

2. Current Positioning

According to Kotler et al (2009), “all marketing strategy is built on STP – Segmentation, Targeting, and Positioning”. A company discovers different needs and groups in the marketplace, targets those needs and groups that it can satisfy in a superior way, and then positions its offering so that the target market recognizes the company’s distinctive offering and image. Positioning is process of analysing product or service, offered in context of competitive space (includes buyers and competitors) it works out. (See Brassington & Pettitt, 2007; Kotler et al 2009) It is a way of creating and engaging a place in the mind of the target market by highlighting the company’s offering, brand and image. The ultimate outcome of positioning is a flourishing establishment of a consumer focused value proposition, in other words a convincing reason why the target market should buy the product (Kotler, 2003) and therefore it act as base to company’s success. This part of assignment aims to explore current positioning of Ritz Carlton in market.

The basic idea is to understand customer’s perception towards our brand and towards our closest competitors. At same point of time identifying attributes that are responsible for creation of this illusion in minds of customer

Identifying relevant attribute & players:

The various attribute offered by the brand represents its market position, which are viewed and compared against other brand. Brands that offer similar package of attributes are deemed to be in the same competitive set (Dev C.S et al, 1995) and therefore it is important to concentrate on direct competitors rather than industry as a whole. Efforts must be laid down to identify players with similar attributes competing on same values. (Johnson et al, 2007)

It is a nature of the hospitality industry that most of the attributes offered are intangible which makes it tricky for the customer to differentiate the offerings of the competitor as such things can be experience only by staying in the hotel. A part of the positioning is also subjective, as it involves customer’s perception towards brand.

Here, analysis is based on Marketing Metrix Hospitality Index* which reveals price and level of customer satisfaction from the feedback of more than 35000 customers across world. (See appendix) There are numerous players in hospitality industry targeting luxury segment and so it is decided to firstly filter relevant players on basis of tangible attribute i.e. area of market covered geographically, as analysis is based on worldwide scenario. This enables us to get core market competitors (See figure 2) – (To an extent it influences customer choice of hotel, as it defines scope of service being provided and also impacts brand creation process in eyes of customer)

Hotels

Area Covered

Number of Properties

Ritz Carlton LLC

Across 5 Continents

72

Fairmont Raffles Hotels International Group

Across 5 Continents

Around 65

Starwoods Hotel &Resorts Le Meridien

16 Countries

116

Four Seasons PLC

35 Countries – Across 5 Continents

83

InterContinental Hotel Group

Across 60 Countries

166

(The Ritz Carlton, 2010; Four Seasons, 2010; InterContinental Hotels & Resorts, 2010; Fairmont Hotels & Resorts; Starwoods Hotel & Resorts, 2010)

Table 1 Identified Relevant Players on Basis of Geographical area

The other two most important attributes identified from view point of customer are price and quality. Quality can be judged on several others important sub attributes (As Quality of food and beverage, physical appearance and in-room facilities, helpful and courtesy of staff, Technology etc.) and therefore this aspect is judged on basis of customer satisfaction index which provides comprehensive picture of it.

About MMHI*: Based on 35,000 customer interviews conducted each quarter, the Market Metrix Hospitality Index (MMHI) is the largest and most in-depth measure of hospitality company performance available today. (MMHI, 2010)

Taj Hotels & Resorts

rc_logo_en

Industry Competitors

Four Seasons Hotels PLC

Starwoods Hotel & Resorts -ST Regis

Mandarin Oriental Hotel Group

Fairmont Raffles Hotels International

Jumeirah Hotels & Resorts

Pan Pacific Hotels & Resorts

Wyndham Hotel Group

Market Competitors

Marriot Hotels Incorporation*

Oberoi Hotels & Resorts

Rosewood Hotels group

Inter Continental Hotel Group

Starwoods Hotels & Resorts – Le Meridien

Figure 6: Competitors analysis of Ritz-Carlton

Starwoods Hotel &Resorts*: Its Brands, St. Regis & Le Meridien targets luxury segment within total of 152 properties across world.

Marriot Hotels Incorporation*: Although Ritz Carlton is subsidary of Marriot Hotel Incorporation, it has got more than 18 brands and there is defiante possiblity that these brand may compete amongst each other and therefore Marriot Hotel Incorporation is also considered as Industry competitor.

Perceptual Mapping:

The graph represents all the players targeting luxury segment with widespread presence all over the world under hospitality industry. Yet, it must be noted that level of quality, prices offered would differ under this banner as well and it is this factor that differentiates best in comparison to average player in eyes of customer which can be clearly identfied below. Ritz Calton fall under the segment of offering “High Quality with High Price”.

High Quality

Oberoi Hotels

Ritz Carlton

Low Price

High Price

Four Seasons

Inter Continental

Le Meridien

Low Quality

Figure 7 Perceptual Mapping of Ritz Carlton

Perceprtual Map enales us to find out gaps and provide us inights towards undertaking competitive action needed.(Brassington & Pettitt)

Gaps to be filled Up: Customer needs to be satisfied.

Pricing Strategy:

As discussed above Ritz Carlton concentrates on sub-segments that act as advantage however the minimum base price it offers is subject to risk. Ritz Carlton price starts at about 200$ while that of Oberoi hotels reporting maximum customer satisfaction (93.7) offers base price at 85$.Although, Ritz Carlton brand value is quite high compared to Oberoi group yet, It’s a huge gap and therefore it must revise its pricing strategy. Moreover, all of its market competitors also offers relatively too low price, closest being Intercontinental group offering 156$ (See appendix). At same point of time Ritz Carlton’s closest rival Four Season offers almost equal quality of service (86.6) at price of just 141$ which is matter of worry as well.

Improving Loyalty programmes:

Ritz Carlton understands that ‘complete customer satisfaction’ is one of the vital strategic to retain and maintaining long term relationship with its customer and it is best practising at that. (Bacon, 2005; Emerald Database, 2004) However, there is scope for improvement in its loyalty programmes as recent data indicates its loyalty program strength of 5% compared to industry average of 10 %. (See appendix). This will enhance its potential to gain increased customer loyalty.

Attracting New Market by adapting service innovations:

Ritz Carlton is aware of the fact that the key to a hotel’s survival is its ability to cater services with changing needs and life styles of customers. (Min et al, 2002) There is no doubt that organisation completely understands changing taste of consumers’ i.e. people are now becoming more casual compared to traditional formalin approach.(Gunter and Heather, 2007) But this needs to be communicated to customers and therefore, there is need for Ritz Carlton to presents itself as modern, technological hotel group supporting needs of modern, young travellers. At same point of time, as recommended by Victorino et al (2005) company must move further towards service innovation with use of technology to differentiate itself from others. Ritz Carlton has already started implementing steps towards this approach; however there is need for rapid actions and wide promotions with intentions to quickly change consumer perception towards its brand.

2000 Euros for Managing Guest Grievance – A Strategic Move!

Ritz-Carlton’s employees are allowed to spend up to $2,000 to redress a guest’s grievance. The employees are entrusted to spend the money to make a memorable stay for the guest in the hotel. Employees are encouraged to solve the guest’s complaints immediately on the spot. Permitting the employees to spend a sum of $2,000 shows how much the company trust the judgement of their employees and employees can even spend more than $2,000 with the permission from general manager. The basic logic behind such action is, with existence of fierce competition within the market it is always difficult for firms to increase their market share and therefore key to continue successful growth lies in devoting larger part of firm’s resources on existing customers with intention to retain them and gain their loyalty (Tepeci M, 1999) Moreover, such act adds value to brand creation and customer satisfaction and that encourages customer to become brand loyal. (Kandampully J and Suhartanto D, 2000) Most importantly, the question of such spending exceeds overheads does not arise as it is obvious that it doesn’t get used on every customer. It acts as meaningful amount yet, used rarely. (Reiss R, 2009).

Customer satisfaction is the key to customer retention. A greatly satisfied customer stays loyal longer with the company and talks favourably about the company. A loyal customer is less sensitive to price, pays less attention to the competitors brand and cost less to serve than new customer. From the customers who registered a complaint, between 54% and 70% will do business again with the same company if their complaint is resolved, these number could be pulled up to an overwhelming 95% if the customer experiences that their complaint is resolved quickly. Customers who have complained to an organization and had their complaints satisfactorily resolved tell an average of five people about the good treatment they received (Philip Kotler, 1977), which indirectly contributes to attract further new customer. Expanding the customer retention rate accumulates the customer lifetime value, and therefore this means life time revenue for company. On other hand company, attracting new customers are costly as that include cost of promotions, advertising and so on which can be avoided. Therefore such action is termed as strategic Move by Ritz Carlton.

There is also another point of view to this scenario which impacts internal working culture of within organisation. Allowing such amount to spend makes Employee feel that company respect them, trust them, considers them responsible and valuable and this generates feeling of empowerment impacting concept of service profit chain as discussed above. Employees get more engaged with company and works more responsibly ultimately resulting to exceptional customer service, which is the core aim of organisation.

Appendix:

Product Development by Ritz Carlton (i.e. to offer Special Packages) aims to attract more customers by influencing their behaviour and encouraging them to celebrate this important occasion with them and turn them to Life time Memories. (Festive Season Packages during Easter; Christmas, Valentine Day at Ritz, Summer Break Packages, Weekends Special, and Family Packages)

Ritz Valentine photo.jpg

(Rogers; Mark, 2009)

Along with these Ritz Carlton also developed special packages for companies during times of recession to provide luxury at budgeted economy. Packages were upgraded to more facilities at lower price. Significant efforts were also laid down in promoting it and communicating it to end customers as well. This indicates Ritz Carlton ability to act as per changing external situations (Schultenover J; Strout E, 2002)

MMHI Results: Market Metrix Hospitality index indicating customer satisfaction and average price results for hotels under luxury segment and Up Scale hotels.

page0001.jpg

(Source: MMHI Results, 2009)

Video Bibliography:

Official Ritz Carlton Promotional Videos:

1. New Gold Standard (2010) http://www.youtube.com/watch?v=IW70hBP5cIc (Promotional Videos at hotel rooms and Websites)

2. Ritz Culture (2007) ‘http://www.youtube.com/watch?v=W_iFSAAoQ-A (Interview of Diana Oreck, Vice President – Global Learning and Leadership Center)

3. The Last Night (2008) http://video.yahoo.com/watch/2296201/7207129 (Ritz Carlton Short Film in association with America Express)

4. The Delay (2008) http://www.youtube.com/watch?v=3oFz8E5fbJQ (Ritz Carlton Short Film in association with America Express)

5. The Ritz London (2008) http://www.youtube.com/watch?v=jQGlyhlhcK0 (Documentary on The Ritz London)

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