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2 Vice President, Editorial Director: Andrew Gilfillan Executive Editor: Daryl Fox Editorial Assistant: Lara Dimmick Program Management Team Lead: Laura Weaver Program Manager: Susan Watkins Project Management Team Lead: Bryan Pirrmann Project Manager: Maria Reyes Project Manager, Global Edition: Sudipto Roy Senior Acquisitions Editor, Global Edition: Sandhya Ghoshal Project Editor, Global Edition: Rahul Arora Senior Project Editor, Global Edition: Daniel Luiz Manager, Media Production, Global Edition: M. Vikram Kumar Senior Manufacturing Controller, Production, Global Edition: Trudy Kimber Senior Art Director: Diane Six Cover Designer: Lumina Datamatics, Inc. Vice President of Sales and Marketing: David Gesell Senior Product Marketing Manager: Darcy Betts Field Marketing Manager: Thomas Hayward Senior Marketing Coordinator: Les Roberts Digital Studio Project Manager: Leslie Brado Manufacturing Specialist: Deidra Smith Vendor Project Manager: Melissa Sacco, Lumina Datamatics, Inc. Full-Service Project Management and Composition: Revathi Viswanathan, Lumina Datamatics, Inc. Cover Art: Banana Republic images / Shutterstock Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: Pearson Education Limited 2017 The rights of Philip Kotler, John T. Bowen, James C. Makens, and Seyhmus Baloglu to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act Authorized adaptation from the United States edition, entitled Marketing for Hospitality and Tourism, 7th edition, ISBN , by Philip Kotler, John T. Bowen, James C. Makens, and Seyhmus Baloglu, published by Pearson Education All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a license permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6 10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners.the use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. ISBN 10: ISBN 13: British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Typeset in Melior Com by Integra. Printed and bound by Vivar in Malaysia.

3 Marketing for Hospitality and Tourism, Global Edition Table of Contents Cover Title Page Copyright Page Brief Contents Contents To the Student Preface About the Authors Part IUnderstanding the Hospitality and Tourism Marketing Process 1 Introduction: Marketing for Hospitality and Tourism YOUR PASSPORT TO SUCCESS CUSTOMER ORIENTATION WHAT IS HOSPITALITY AND TOURISM MARKETING? MARKETING IN THE HOSPITALITY INDUSTRY Importance of Marketing Tourism Marketing Definition of Marketing The Marketing Process UNDERSTANDING THE MARKETPLACE AND CUSTOMER NEEDS Customer Needs, Wants, and Demands Market Offerings: Tangible Products, Services, and Experiences Customer Value and Satisfaction Exchanges and Relationships Markets DESIGNING CUSTOMER VALUE-DRIVEN MARKETING STRATEGY Selecting Customers to Serve MARKETING HIGHLIGHT: JET BLUE DELIGHTS ITS CUSTOMERS Marketing Management Orientations PREPARING AN INTEGRATED MARKETING PLAN BUILDING CUSTOMER RELATIONSHIPS Customer Relationship Management Engaging Customers Partner Relationship Management CAPTURING VALUE FROM CUSTOMERS Customer Loyalty and Retention Growing Share of Customer Building Customer Equity What Is Customer Equity? Building the Right Relationships with the Right Customers

4 THE CHANGING MARKETING LANDSCAPE The Digital Age: Online, Mobile, and Social Media Marketing The Changing Economic Environment Rapid Globalization Sustainable MarketingThe Call for More Environmental and Social Responsibility Co-Creation The Sharing Economy MARKETINGS FUTURE S 2 Service Characteristics of Hospitality and Tourism Marketing THE SERVICE CULTURE CHARACTERISTICS OF SERVICE MARKETING Intangibility Physical Evidence Inseparability Variability Perishability SERVICE MANAGEMENT CONCEPTS FOR THE HOSPITALITY INDUSTRY The Service Profit Chain Three Types of Marketing MANAGEMENT STRATEGIES FOR SERVICE BUSINESSES Managing Service Differentiation Managing Service Quality MARKETING HIGHLIGHT: JETBLUE, SOUTHWEST, AND CIRQUE DU SOLEIL PROVIDE THREE EXAMPLES OF SERVICE DIFFERENTIATION Managing Service Productivity Resolving Customer Complaints MARKETING HIGHLIGHT: RECOMMENDATIONS FOR IMPROVING SERVICE QUALITY Managing Employees as Part of the Product Managing Perceived Risk Managing Capacity and Demand S 3 The Role of Marketing in Strategic Planning NATURE OF HIGH-PERFORMANCE BUSINESS Stakeholders Processes

5 Resources Organization CORPORATE STRATEGIC PLANNING: DEFINING MARKETINGS ROLE Defining the Corporate Mission Setting Company Objectives and Goals Designing the Business Portfolio MARKETING HIGHLIGHT: STARBUCKS COFFEE: WHERE GROWTH IS REALLY PERKING PLANNING MARKETING: PARTNERING TO BUILD CUSTOMER RELATIONSHIPS Partnering with Other Company Departments Partnering with Others in the Marketing System MARKETING STRATEGY AND THE MARKETING MIX Customer Value-Driven Marketing Strategy Developing an Integrated Marketing Mix MANAGING THE MARKETING EFFORT Marketing Analysis Goal Formulation Marketing Planning Implementation Feedback and Control MEASURING AND MANAGING RETURN ON MARKETING INVESTMENT S Part IIDeveloping Hospitality and Tourism Marketing Opportunities and Strategies 4 The Marketing Environment THE COMPANYS MICROENVIRONMENT The Company Existing Competitors Suppliers Marketing Intermediaries Customers Publics THE COMPANYS MACROENVIRONMENT Competitors MARKETING HIGHLIGHT: Cape town tourism destination marketingthe use of social media Demographic Environment The Changing American Family Economic Environment Natural Environment Technological Environment Political Environment

6 Cultural Environment LINKED ENVIRONMENTAL FACTORS RESPONDING TO THE MARKETING ENVIRONMENT Environmental Scanning S 5 Managing Customer Information to Gain Customer Insights MARKETING INFORMATION AND CUSTOMER INSIGHTS Marketing Information and Todays Big Data Managing Marketing Information THE MARKETING INFORMATION SYSTEM Assessing Information Needs Developing Marketing Information MARKETING RESEARCH Defining the Problem and Research Objectives Developing the Research Plan MARKETING HIGHLIGHT: ETHNOGRAPHIC RESEARCH: WATCHING WHAT CONSUMERS REALLY DO MARKETING HIGHLIGHT: ZMET: GETTING INTO THE HEADS OF CONSUMERS MARKETING HIGHLIGHT: PROS AND CONS OF ONLINE RESEARCH MARKETING HIGHLIGHT: A QUESTIONABLE QUESTIONNAIRE Implementing the Research Plan Interpreting and Reporting the Findings MARKETING HIGHLIGHT: RESEARCH PROBLEM AREAS MARKETING HIGHLIGHT: HSMAIS KNOWLEDGE CENTER: A GREAT SOURCE OF MARKETING INFORMATION INTERNATIONAL MARKETING RESEARCH MARKETING RESEARCH IN SMALLER ORGANIZATIONS S 6 Consumer Markets and Consumer Buying Behavior A MODEL OF CONSUMER BEHAVIOR PERSONAL CHARACTERISTICS AFFECTING CONSUMER BEHAVIOR Cultural Factors Social Factors Personal Factors Psychological Factors MARKETING HIGHLIGHT: SENSORY MARKETINGA POWERFUL TOOL FOR HOSPITALITY

7 BUSINESSES THE BUYER DECISION PROCESS Need Recognition Information Search Evaluation of Alternatives Purchase Decision Postpurchase Behavior MARKETING HIGHLIGHT: UNIQUE ASPECTS OF HOSPITALITY AND TRAVEL CONSUMERS EXPERIENTIAL EXERCISE S 7 Organizational Buyer Behavior THE ORGANIZATIONAL BUYING PROCESS Market Structure and Demand Types of Decisions and the Decision Process PARTICIPANTS IN THE ORGANIZATIONAL BUYING PROCESS Special Importance of International Companies MAJOR INFLUENCES ON ORGANIZATIONAL BUYERS Environmental Factors Organizational Factors Interpersonal Factors Individual Factors ORGANIZATIONAL BUYING DECISIONS 1.Problem Recognition 2.General Need Description 3.Product Specification 4.Supplier Search 5.Proposal Solicitations 6.Supplier Selection 7.Order-Routine Specification 8.Performance Review GROUP MARKETS Conventions Convention Bureaus ASSOCIATION MEETINGS Corporate Meetings Retreats Small Groups Incentive Travel SMERFs MARKETING HIGHLIGHT: GREEN MEETINGSgreen meetings in asias greenest city Segmentation of Group Markets by Purpose of the Meeting Restaurants as a Meeting Venue

8 DEALING WITH MEETING PLANNERS Career Opportunities THE CORPORATE ACCOUNT AND CORPORATE TRAVEL MANAGER Wedding Planners Other Planners EXPERIENTIAL EXERCISE 8 Customer-Driven Marketing Strategy: Creating Value for Target Customers MARKETS MARKET SEGMENTATION Geographic Segmentation Demographic Segmentation MARKETING HIGHLIGHT: TARGETING FAMILIES BY TARGETING KIDS Income Segmentation Psychographic Segmentation MARKETING HIGHLIGHT: W HOTELS: A LIFESTYLE HOTEL Behavioral Segmentation MARKETING HIGHLIGHT: THE VFR TRAVELER SEGMENT Using Multiple Segmentation Bases Requirements for Effective Segmentation MARKET TARGETING Evaluating Market Segments Selecting Market Segments Choosing a Market-Coverage Strategy MARKET POSITIONING Positioning Strategies Choosing and Implementing a Positioning Strategy Differentiating Competitive Advantages Choosing the Right Competitive Advantages Selecting an Overall Positioning Strategy Communicating and Delivering the Chosen Position Positioning Measurement: Perceptual Mapping EXPERIENTIAL EXERCISE Part IIIDeveloping the Hospitality and Tourism Marketing Value-Driven Strategy and Mix 9 Designing and Managing Products and Brands: Building Customer Value

9 WHAT IS A PRODUCT? PRODUCT LEVELS Core Products Facilitating Products Supporting Products Augmented Product BRANDING STRATEGY Building Strong Brands Brand Equity Brand Positioning Brand Name Selection Leveraging Brands Brand Portfolios MARKETING HIGHLIGHT: tourism new zealands china toolkit: helping businesses to serve an emerging tourism market Managing Brands THE NEW-PRODUCT DEVELOPMENT Idea Generation Idea Screening Concept Development and Testing Marketing Strategy Business Analysis Product Development Test Marketing Commercialization PRODUCT DEVELOPMENT THROUGH ACQUISITION PRODUCT LIFE-CYCLE STRATEGIES Introduction Stage Growth Stage Maturity Stage Decline Stage Product Deletion INTERNATIONAL PRODUCT AND SERVICE MARKETING 10 Internal Marketing INTERNAL MARKETING Post Face-to-Face Guest Relations MARKETING HIGHLIGHT: PINEHURST RESORT & COUNTRY CLUB DO WHATS RIGHT THE INTERNAL MARKETING PROCESS Establishment of a Service Culture Weak Service Culture Compared to a Strong Service Culture

10 Development of a Marketing Approach to Human Resources Management Dissemination of Marketing Information to Employees MARKETING HIGHLIGHT: INTERNAL MARKETING IN ACTION: LEWIS HOTELS Employee Involvement in Uniform Selection 11 Pricing: Understanding and Capturing Customer Value PRICE FACTORS TO CONSIDER WHEN SETTING PRICES Internal Factors Affecting Pricing Decisions External Factors Affecting Pricing Decisions Competitors Prices and Offers GENERAL PRICING APPROACHES Cost-Based Pricing Break-Even Analysis and Target Profit Pricing Value-Based Pricing Competition-Based Pricing PRICING STRATEGIES New-Product Pricing Strategies Existing-Product Pricing Strategies REVENUE MANAGEMENT MARKETING HIGHLIGHT: SEGMENTED PRICING: THE RIGHT PRODUCT TO THE RIGHT CUSTOMER AT THE RIGHT TIME FOR THE RIGHT PRICE Dynamic Pricing BAR Pricing Rate Parity Nonuse of Revenue Management Overbooking PSYCHOLOGICAL PRICING Price Endings Promotional Pricing Value PricingLow Price Approach MARKETING HIGHLIGHT: RYANAIR USES VALUE PRICING TO ATTRACT CUSTOMERS AND GAINS REVENUE FROM EXTRA SALES PRICE CHANGES Initiating Price Changes Responding to Price Changes EXPERIENTIAL EXERCISE

11 12 Distribution Channels Delivering Customer Value SUPPLY CHAINS AND THE VALUE DELIVERY NETWORK NATURE AND IMPORTANCE OF DISTRIBUTION SYSTEMS NATURE OF DISTRIBUTION CHANNELS Why Are Marketing Intermediaries Used? Distribution Channel Functions Number of Channel Levels HOSPITALITY DISTRIBUTION CHANNELS Major Hospitality Distribution Channels Direct Booking Online Travel Agency Global Distribution Systems Travel Agents Travel Wholesalers and Tour Operators Specialists: Tour Brokers, Motivational Houses, and Junket Reps Hotel Representatives National, State, and Local Tourist Agencies Consortia and Reservation Systems Distribution Systems in the Sharing Economy Restaurant Distribution Channels CHANNEL BEHAVIOR AND THE ORGANIZATION Channel Behavior SELECTING CHANNEL MEMBERS Customer Needs MARKETING HIGHLIGHT: RESTAURANT FRANCHISING Attracting Channel Members Evaluating Major Channel Alternatives RESPONSIBILITIES OF CHANNEL MEMBERS AND SUPPLIERS BUSINESS LOCATION S 13 Engaging Customers and Communicating Customer Value and Advertising THE PROMOTION MIX INTEGRATED MARKETING COMMUNICATIONS The New Marketing Communications Model The Need for Integrated Marketing Communications A View of the Communication Process STEPS IN DEVELOPING EFFECTIVE COMMUNICATIONS Identifying the Target Audience Determining the Communication Objective Designing the Message

12 Selecting Communication Channels MARKETING HIGHLIGHT: THANK YOUA GREAT PERSONAL COMMUNICATION Selecting the Message Source Collecting Feedback SETTING THE TOTAL PROMOTION BUDGET AND MIX Setting the Total Promotional Budget SHAPING THE OVERALL PROMOTION MIX The Nature of Each Promotion Tool Promotion Mix Strategies ADVERTISING MAJOR DECISIONS IN ADVERTISING Setting the Objectives Setting the Advertising Budget Developing Advertising Strategy Creating the Advertising Message Selecting Advertising Media Evaluating Advertising Effectiveness and the Return on Advertising Investment 14 Promoting Products: Public Relations and Sales Promotions PUBLIC RELATIONS Social Media MAJOR ACTIVITIES OF PR DEPARTMENTS Press Relations Product Publicity New Products Corporate Communication Lobbying Counseling MARKETING HIGHLIGHT: EXTREME SPORTS BRING PUBLICITY AND TOURISTS PUBLICITY THE PUBLIC RELATIONS PROCESS Research Establishing Marketing Objectives Specific Objectives Should Be Set for Every PR Campaign Defining the Target Audience Choosing the PR Message and Vehicles Public Services Activities Implementing the Marketing PR Plan Evaluating PR Results Overwhelming Negative Publicity PR OPPORTUNITIES FOR THE HOSPITALITY INDUSTRY

13 Individual Properties Build PR Around the Owner/Operator Build PR Around a Product or Service Crisis Management MARKETING HIGHLIGHT: CHESHIRES BEST KEPT STATIONS, CHESHIRE, UNITED KINGDOM SALES PROMOTION Setting Sales Promotion Objectives Consumer Promotion Tools Finding Creative Ideas Developing the Sales Promotion Program Pretesting and Implementing the Plan Evaluating the Results LOCAL AREA MARKETING (NEIGHBORHOOD MARKETING) EXPERIENTIAL EXERCISE 15 Professional Sales RESULTS MANAGEMENT OF PROFESSIONAL SALES NATURE OF HOSPITALITY SALES Competitive Analysis and Competitive Sets SALES FORCE OBJECTIVES Sales Volume Upselling and Second-Chance Selling Market Share or Market Penetration Product-Specific Objectives SALES FORCE STRUCTURE AND SIZE Territorial-Structured Sales Force Market-Segment-Structured Sales Force Market-Channel-Structured Sales Force Customer-Structured Sales Force Combination-Structured Sales Force Sales Force Size ORGANIZING THE SALES DEPARTMENT Inside Sales Force Field Sales Force Team Sales RELATIONSHIP MARKETING AND STRATEGIC ALLIANCES RECRUITING AND TRAINING A PROFESSIONAL SALES FORCE Importance of Careful Selection Establishing a Profile of Desired Characteristics Matching the Corporate Culture Matching Career Acquisitions with Corporate Objectives Sales Force Training

14 MANAGING THE SALES FORCE Selecting Sales Strategies Sales Force Tactics: Principles of Personal Selling Motivating a Professional Sales Force Evaluation and Control of a Professional Sales Force Peer-to-Peer Sales Networking SOCIAL SELLING: ONLINE, MOBILE, AND SOCIAL MEDIA TOOLS 16 Direct, Online, Social Media, and Mobile Marketing DIRECT AND DIGITAL MARKETING The New Direct-Marketing Model Rapid Growth of Direct and Digital Marketing Benefits of Direct and Digital Marketing to Buyers and Sellers FORMS OF DIRECT AND DIGITAL MARKETING DIGITAL AND SOCIAL MEDIA MARKETING Marketing, the Internet, and the Digital Age Online Marketing Social Media Marketing MARKETING HIGHLIGHT: HOW HOSPITALITY COMPANIES USE SOCIAL MEDIA CUSTOMER DATABASES AND TRADITIONAL DIRECT MARKETING Database Uses RELATIONSHIP MARKETING AND LOYALTY PROGRAMS Benefits of Customer Relationship Management Loyalty Programs TRADITIONAL FORMS OF DIRECT MARKETING Direct-Mail Marketing Telephone Marketing Kiosk Marketing Interactive TV ONLINE PRIVACY AND SECURITY EXPERIENTIAL EXERCISE Part IVManaging Hospitality and Tourism Marketing 17 Destination Marketing THE GLOBALIZATION OF THE TOURIST INDUSTRY

15 MARKETING TOURISM DESTINATIONS The Tourism Destination Destination Marketing System Destination Competitiveness Sustainable Tourism TOURISM DEVELOPMENT AND INVESTMENTS MARKETING HIGHLIGHT: CUBA TOURISM DEVELOPMENT: A TIME TRAVEL Tourism Events and Attractions Attractions SEGMENTING AND MONITORING THE TOURIST MARKET Agritourism Space Tourism Multiday Hiking and Religious Pilgrimages Medical Tourism Genealogical Tourism Identifying Target Markets Classification of Visitor Segments Monitoring the Tourist Markets COMMUNICATING WITH THE TOURIST MARKET Competition for Visitors Involves Image Making Branding Destinations Destination Tourism Slogans Effectiveness of Advertising/Promotion Developing Packages of Attractions and Amenities Creating and Managing Visitor Experiences ORGANIZING AND MANAGING TOURISM MARKETING National Tourism Organizations Regional Tourist Organizations: State Associations and Convention and Tourist Bureaus EXPERIENTIAL EXERCISE 18 Next Years Marketing Plan PURPOSE OF A MARKETING PLAN SECTION I: EXECUTIVE SUMMARY SECTION II: CORPORATE CONNECTION Relationship to Other Plans Marketing-Related Plans Corporate Direction SECTION III: ENVIRONMENTAL ANALYSIS AND FORECASTING Positioning Statement Major Environmental Factors Economic Drivers of Growth

16 Competitive Analysis Market Trends Market Potential Marketing Research MARKETING HIGHLIGHT: THE INDIGO PEARL RESORT: FACEBOOK STRATEGY AND PLANNING THE INDIGO PEARL SECTION IV: SEGMENTATION AND TARGETING Segmentation Analysis Market-Segment-Profitability Analysis (MSPA) Targeting Global Market StrategyAustralia SECTION V: NEXT YEARS OBJECTIVES AND QUOTAS Objectives Rating System Objectives Quotas Communicating the Plan Top Management Board of Directors or Group of Investors Subordinates Vendors Other Departments SECTION VI: ACTION PLANS: STRATEGIES AND TACTICS Nonqualified Audience: Cluster Marketing Sales Strategies Distribution Strategies Advertising and Promotion Strategies Pricing Strategies Product Strategies Lost or Decline of Iconic Restaurant Brands SECTION VII: RESOURCES NEEDED TO SUPPORT STRATEGIES AND MEET OBJECTIVES Personnel Other Monetary Support Research, Consulting, and Training Miscellaneous Costs Budgets SECTION VIII: MARKETING CONTROL Sales Objectives Sales Forecast and Quotas Expenditures Against Budget Periodic Evaluation of All Marketing Objectives Marketing Activity Timetable Readjustments to Marketing Plan SECTION IX: PRESENTING AND SELLING THE PLAN SECTION X: PREPARING FOR THE FUTURE Data Collection and Analysis Marketing Planning as a Tool for Growth

17 EXPERIENTIAL EXERCISE S Appendix A: The Five-Gap Model of Service Quality Appendix B: Forecasting Market Demand Case Studies Glossary Index