Universal Truth: Scenario. Market Issues in CRET. Repeat Visitor Concept. Market Issues. Market Research. Market Research

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1 Universal Truth: Scenario Market Issues in CRET Pfister & Tierney, Chap 5 & 6, p In a CRET enterprise, you need to know your customer if you intend to be successful! If you don t know what it takes to attract & keep your customer, your business will probably lose money. Repeat Visitor Concept The only reason to be in business is for repeat business; and in you aren t in business for repeat business, pretty soon you won t be in business The 80/20 principle 80% of business will come from 20% of the customers (customer loyalty) Visitor satisfaction strong predictor of intent to return (value for fee paid) Also affected by size & diversity of experiences (i.e. Critical Mass ) Market Issues Size Most CR&T operations are small scale Developing & implementing sophisticated market analyses & marketing strategies require specialized expertise, expensive, & time consuming Small business can form market groups or piggyback on larger organized or regional campaigns Over-use & carrying capacity Concerns about sustainability May require demarketing Market Research Assists Business Owners by Identification of consumer needs, preferences & behaviors Description of possible communication & media avenues best suited for marketing/promotion Assessment of client satisfaction Describing factor influencing customer loyalty & the likelihood of repurchasing a product Market Research A systematic & objective process for generating information to be used in decision making: Analysis of consumer needs, preferences, & behaviors Examination of best media avenues to market & promote products Assessment of client satisfaction Examination of factors influencing customer loyalty & repurchasing behavior Identification of business images Describing market trends & shifts in consumer activities Assessment of competition Market Research can help you KNOW who your customers are!

2 Who Are the Customers? Sample profile released by the Hawaii Visitors Bureau using market segmentation data: demographic, behavior, motivation & consumer satisfaction The typical visitor is female, in her middle 40s, from CA; she arrives by plane & stays for 10 days at a hotel; she comes for pleasure & visits one or more of the neighbor islands & is satisfied with her visit to Hawaii & plans to return. Market Share A measure of how dominant a business is within its service sector Before E enters the market. A = 40% B = 25% C = 20% D = 15% Your company is E. The market share is divided by percentage of businesses. Changes after E enters A = 37% B = 24% C = 19% D = 13% E = 7% Competitive Climate Zero Sum Market to increase your market share, competition has decreased share Market Analysis Research to be completed in order to describe market profile: Basic questions of the consumers Segmentation & key consumer characteristics Purchasing behavior Data from other similar businesses (competitors) Your market share Trend analysis Participation rates Market Analysis Who are the customers (market segmentation)? What are their needs? Given my business, how much of what I have to offer do the customers purchase (seasonally, annually)? How can my business differ from competitors businesses? How much market share can be captured? What is the potential for building a base of repeat customers? Gathering Information on Competitors Attend the trade shows or local business fairs Be a customer Talk with customers or suppliers Go to a franchise show & talk with vendors.

3 Where to Find Information Libraries U.S. Census Bookstores Trade associations Trade magazines Convention & visitors bureau (CVBs) Journals Chamber of commerce Segmentation of the Market Geographic variables Demographic variables Psychographic & behavioral variables Benefits variables Geographic Segmentation International National Regional or city Demographic Segmentation Dividing the market into groups based on variables: Age Gender Family size or life cycle Income Occupation Education Religion Race Generation Nationality Psychographic Segmentation Divides consumers into groups based on these aspects: Behavior patterns Lifestyle Personality Psychographic Typology based on Plog, 1972 Psychographic profile- attitudes, opinions & lifestyles Psycochentric vs. Allocentric Psychocentric traditional less self-confident more inhibited travel mostly by car familiar places spend < $ travel less Allocentric venturesome self-confident less inhibited travel by various means more exotic places spend > $ travel more

4 Psychographic Typology Psychographic Categories Psychocentrics Familiar travel destinations Common activities at destinations Sun & fun spots Relaxation Prefers driving Heavy tourist accommodation: hotels, family-type restaurants, tourist shops Family atmosphere with familiar entertainment Tour packaging should be complete with scheduled activities Psychographic Categories Allocentrics Nontourist destinations New experiences (unusual destinations) Sense of discovery (visit before others) High activity level Prefers flying Tour accommodations should be good but not chain-type hotels Enjoy meeting & interacting with people from another culture Tour arrangements should include basics but allow considerable freedom and flexibility on activities Behavioral Segmentation Dividing the market into groups based on variables: Benefits User status Usage rate Loyalty status Readiness stage Attitude toward product Adapted from S. Plog, 2001, Why destination areas rise and fall in popularity, Cornell Hospitality Quarterly 42 (3): Benefits Sought Typical CRET Experience benefits sought Escape Novelty & new experiences Health & physical fitness Social interaction/family Gain skill/competency Challenge, risk & excitement Stress relief & relaxation Education Ego Segmentation of the Market

5 Relative Importance of Segmentation Variables What is Marketing? The interaction & interrelationship among consumers & producers of goods & services, through which ideas, products services & values are created & exchanged for the mutual benefit of both groups Marketing Promotion Marketing Advertising Its MORE, MUCH MORE!! Primary Marketing Factors Target market Market position Company objectives Marketing mix. Target market The group of people at whom you specifically aim the marketing effort Usually based on Socio-demographics Benefits sought & motivations Perceptions of the CR&T product Level of skill or experience Psychographic profile attitudes, opinions & lifestyles Behavioral characteristics Geography. Market position How you want your target market to view your company & the product Positioning of products must be consumer driven Positioning objectives: Quality experiences Supply-driven Local control Sustainable development Minimum impact. Company Objectives What does your company hope to accomplish Quality product Make a profit Generate benefits Maximize satisfaction Repeat business (Recall the 80:20 rule).

6 Marketing mix The combination of variables which your company can control & manipulate to achieve the desired outcomes (Company Objectives) Components the 4 P s: Marketing mix (4 p s) Market mix A mix of inducements to buy that fit the needs and preferences of the target market Product Goods/services, consumers want or need Place A location, channel of distribution that is convenient and available to the customer Price The product/service in terms of its value to the consumer Promotion Advertising, direct sales, and other forms to offer product/service to potential customers. Product/Service Products/services are chosen by individuals for the benefits they offer to the individual Differences: Products & Services Products can be possessed & are real, tangible objects Services can only be experienced not possessed & are perishable in nature Products are "search goods" whose features & qualities can be inspected & determined prior to purchase Services are "experience goods" whose quality cannot be determined until the service is performed. Product Life Cycle The concept that products/services follow a pattern of introduction growth and decline Recall the Innovation-Diffusion Curve? Price Pricing for Product/Service Includes sticker price + time/opportunity costs + psychological costs + personal effort costs + indirect financial costs Pricing Strategies 1. Markup Pricing A fixed dollar or percentage amount is added to the cost of the product/service Simplest and most popular, cost is $10 with a 200 percent markup = $ Penetration Pricing Sets a price below cost in order to capture customers away from competitors then raise the price at a later time 3. Reference Price Price that the customer expects to pay, what is usual or typical price range 4. Price Skimming Set a high initial price for a new product or service than gradually reduce it as the market becomes more competitive Pricing Strategies 5. Going-Rate Pricing Match the price of your competitors and competes on non-price variables. 6. Variable-Cost Pricing Used where fixed costs comprise a large proportion of cost per unit sales One price is not necessary to produce profits 7. Single-Rate Pricing Reduces your ability to generate revenue because a one price policy does not take into consideration the customers willingness or ability to pay 8. Price by Product Characteristics Charging based on perceptible differences in the product/service 9. Price Fencing Logical rules and restrictions which allow customers to segment themselves based upon their need and willingness to pay (airlines).

7 Place Distribution & allocation Product delivery Intensity Intensive vs. selective/exclusive Scheduling CR&T works when others play Distribution channels Producer Wholesaler Retailer Consumer Allocation Usually economic merit as opposed to social merit Group sales/pricing Promotion Promotion mix Message types: educational, persuasive, reminding Promotion plan Public relations & customer service Personal selling: face-to-face Sales promotion (short-term) Publicity: Unpaid communications Advertising: paid, non-personal presentation Communication Channels Message, Sender & Receiver Media type Demarketing Discouraging of demand, often due to concerns of overuse, crowding, impact Reverse marketing Methods: Increase prices Queuing, ration or limit use Limiting promotion, selecting very specialized media/target markets Promote conservation, minimum impact, sustainable development education Promote a range of opportunities/areas Stress degradation that occurs due to overuse Stressing restriction & difficulties. Multiplier effect The number of times an "outside" (or tourist) dollar "turns over" (is re-spent) in a local economy. Leakage: when money is spent on goods or services that are imported from outside the local community The more self-sufficient a community is, the higher the multiplier effect (usually from 1 to 1.9x but can go to 0) The higher the multiplier; the greater the impact of a business on community economy