Hospitality Marketing Management, 5th Edition Solution Manual

Fifth Edition

Instructor’s Manual to accompany

Hospitality Marketing Management Robert D. Reid and David C. Bojanic

Contents To the Instructor

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Part One -- Introduction to Hospitality Marketing Chapter One – The Functions of Marketing Chapter Two – Introduction to Hospitality Services Marketing

1 3 10

Part Two -- Understanding and Targeting Hospitality Consumers Chapter Three – Understanding the Behavior of Hospitality Consumers Chapter Four – Market Segmentation and Positioning

19 21 29

Part Three -- Marketing Planning and Information Chapter Five – Developing a Marketing Plan Chapter Six – Information Systems for Marketing Decisions

37 39 46

Part Four -- Product-Service Mix and Distribution Strategies Chapter Seven – Developing New Products and Services Chapter Eight – Managing Products and Services Chapter Nine – Marketing Channels Chapter Ten – Electronic Commerce

55 57 64 72 80

Part Five -- Promotions Strategy Chapter Eleven – Promotion and Advertising Chapter Twelve – Advertising and Media Planning Chapter Thirteen – Sales Promotions, Merchandising, and Public Relations Chapter Fourteen – Personal Selling

87 89 99 107 114

Part Six -- Pricing Strategy and Destination Marketing Chapter Fifteen – Pricing Strategy Chapter Sixteen – Destination Marketing

123 125 134

Test Bank Answer Key

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Part 1 Introduction to Hospitality Marketing

1

Chapter One The Functions of Marketing Outline I. II. III.

IV.

V.

VI.

Chapter Objectives Industry Profile Introduction to Marketing A. Marketing Defined 1.

Marketing encompasses merging, integrating, and controlling supervision of all company’s or organization’s efforts that have a bearing on sales.

B. The Marketing Process C. The Emergence of the Marketing Concept 1.

The marketing concept is based on the premise that firms determine customer wants and needs, and then design products and services that meet those wants and needs, while also meeting the goals of the firm.

D. Marketing versus Selling 1.

Selling focuses on activities that push products and services on the consuming public.

2.

Marketing seeks to satisfy the needs and wants of the consuming public.

The Marketing Mix A. The Traditional Marketing Mix 1.

Price 2.

Product 3.

Place 4.

Promotion B. The Hospitality Services Marketing Mix 1.

Product-service mix 2.

Presentation mix 3.

Communications mix 4.

Pricing mix 5.

Distribution mix The Marketing Environment A. Economic Environment B. Social Environment C. Competitive Environment D. Political and Legal Environment E. Technological Environment The Marketing Management Cycle A. Marketing Planning B. Marketing Execution C. Marketing Evaluation

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VII. Marketing within the Organization A. Operations B. Finance C. Human Resource Management D. Research and Development VIII. Summary of Chapter Objectives A. Key Terms and Concepts B. Review and Discussion Questions IX. Case Study: Location, Location, Location?

Answers to End of Chapter Questions 1.

Why has marketing assumed a position of increased importance in the management of hospitality organizations?

Increased level of competition and more sophisticated consumers.

2.

What is marketing? Why is it important to the success of the firm?

Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and service to create exchanges that satisfy individual and organizational needs. Marketing is a key result area for firms. Marketing is the link between the firm and customers. Without new and repeat customers, the success of a firm is limited.

3.

Explain the difference between selling and marketing. How are the two similar? Can you think of an example to illustrate each concept?

Marketing is a broader concept that includes all activities involved in designing products, pricing, promoting, and distributing them to target markets. Selling is one component of the promotion mix that focuses on interpersonal communications.

4.

What is the marketing process? Briefly explain the process and its elements.

The marketing process refers to selecting target markets, developing a marketing mix for each target market, conducting marketing research, and scanning the external environment for opportunities and threats to the business.

5.

What are the key variables in the marketing environment? In your opinion, which is the most important? Why? The key variables are the: economic environment, social environment, competitive environment, political and social environment, and technological environment.

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6.

Of the variables in the marketing environment, is there one or two that you believe a marketing manager can control or predict more easily than others? If so, which one(s) and why?

The situation in which a firm finds itself will directly impact this answer. The one which is likely the most easily predicted is the economic environment, followed by competitive environment. The competitive environment is more easily controlled than others.

7.

What changes in technology will impact the hospitality and tourism industry in the next five years? What specific positive and negative impacts from technology to you foresee?

Continued pressure to control costs, especially labor, will result in the use of more technology. This may result in more self-service. The use of data bases for mining guest information will increase and become more critical to success.

8.

What is the marketing concept? What role should the marketing concept play in managing a hospitality or travel facility?

The marketing concept is based on the premise that firms should determine customer wants and needs, and then, design products and services that meet those wants and needs.

Hospitality and travel services must take a customer focus like any other services so that they can be competitive in today’s market.

9.

Discuss the components of the traditional and hospitality marketing mixes. What role does the hospitality manager play in managing the marketing mix? How is the marketing mix used?

The traditional marketing mix (referred to as the 4Ps) consists of price, product, place, and promotion. The hospitality marketing mix consists of the product-service mix, presentation mix, and communication mix. The two mixes are similar in most respects, but the hospitality marketing mix is adapted to fit services such as hospitality and travel. The marketing manager uses the marketing mix to develop programs that will appeal to particular target markets and differentiate the firm’s offering from those of competitors.

10.

What factors can affect the marketing mix? How might these factors affect the marketing mix? How might a manager anticipate the impact that these factors might have?

There are five major environments that affect a firm’s product offerings: competitive, economic, political/legal, social, and technological. Marketing managers must continually scan the environments to anticipate any opportunities or threats.

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11.

What is the marketing management cycle? Explain and discuss the major activities with which a manager must be concerned.

Marketing is a dynamic process with a cycle leading from marketing planning to marketing execution to marketing evaluation. The feedback throughout the cycle is used to continually update the marketing plan and improve the product offerings. Marketing planning involves a situation analysis, setting goals and objectives, and establishing strategies to accomplish the goals and objectives.

12.

How does the marketing function interface with other areas in an organization?

Marketing is an organizational function that interacts with other areas of the firm such as operations, finance, human resources, and research and development. All of these departments must work together to achieve the firm’s goals.

Case Study: Location, Location, Location?

1.

How can the marketing concept be applied to this situation?

After a series of failed restaurants, the marketing concept can be applied by carefully studying the market and determining the type of product-service mix that has the highest probability of success in this location.

2.

Should Bruce be considering the potential product-service mix for a restaurant at this location at this time?

Yes, any successful business person should always seek new opportunities. Bruce has been successful in the past and has the experience to run a successful restaurant. However, he should be very careful, for there has been a string of unsuccessful restaurants at this location.

3.

What information does Bruce need in order to make a decision about the possible purchase or lease of this site?

He needs to learn a great deal about the local market, including the following: (a) why each of the restaurants at this location failed; (b) market demographics and buying behavior of the target markets for a potential restaurant; (c) assessment of competing restaurants in the area; (d) projected expenses for leasing or buying the property; and (e) potential product-service mix concepts for this location.

4.

How should he go about gathering this information? What should his action steps be?

Whether Bruce uses his own staff or hires a marketing consultant, he needs to develop the answers to the issues raised in the preceding question. He needs to complete a thorough assessment of the competitive situation and market, then complete a feasibility study for a

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potential restaurant at this site.

5.

Based on what Bruce has said, do you perceive him to be a marketer or a seller? Why? Based on the limited information, Bruce appears to be a marketer. He is asking important questions and seeking information which will allow him to make an informed decision about this location. He is not jumping to conclusions about what type of restaurant concept he might “sell” to the local market.

6.

Based on the information you have, assess the marketing environment?

Economic environment: The local economy appears to be very strong. Unemployment is low and there appears to be a solid potential market.

Social environment: There is a mixture of permanent residents and college students in the area surrounding the property. More information is needed about the needs and wants of each of these groups, as well as sub-groups contained in each. Furthermore, the target marketing strategies for each of the failed restaurants should be studied.

Competitive environment: There is limited information about competing restaurants. More data is needed.

Political environment: There is limited information about the political environment.. More data is needed.

Technological environment: There is limited information about technology. The limited data indicates that the equipment in the restaurant is adequate.

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Chapter One Test Bank Multiple Choice Questions 1.

The primary focus of the marketing concept is to: a. generate a high level of customer traffic b. push products into the hands of consumers c. satisfy the wants and needs of consumers d. produce a high profit margin

2.

Which of the following is not a component of the original hospitality marketing mix? a. product-service mix b. communication mix c. presentation mix d. distribution mix

3. Which of the following traditional marketing mix elements is (are) part of the presentation mix? a. price b. product c. place d. promotion e. a and c 4.

Advertising and promotion are elements of the: a. product-service mix b. communication mix c. presentation mix d. distribution mix

5.

Which of the following marketing mix variables would directly affect the cost section of an income statement? a. price b. product c. promotion d. b and c e. none of the above 6.

Changes in the profile of residents within a city or given geographic area represent which of the following types of trends? a. economic b. political c. social d. technological

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7.

During the last ten years, the percentage of independent restaurants has: a. increased b. decreased c. remained about the same

8.

Major airlines competing with charter airlines and commuter airlines is an example of: a. product form competition b. product class competition c. general competition d. budget competition

9.

Fast food chains competing with convenience stores and supermarkets is an example of: a. product form competition b. product class competition c. general competition d. budget competition

10. Which of the following is the correct order of the three stages in the marketing management cycle? a. marketing planning – marketing execution – marketing evaluation b. marketing evaluation – marketing planning – marketing execution c. marketing execution – marketing evaluation – marketing planning True/False Questions 1. The larger the firm, the more likely it will have a structured approach to scanning the environment and documenting trends.

2. Self-service applications have increased in the hospitality industry due to labor shortages and the high cost of labor.

3. Selling focuses on the needs of the consumer while marketing focuses on the needs of the seller.

4. Product category competition exists among companies that provide similar products and services to the same customers at a similar price level.

5. A good marketing manager will be able to control the external environment for her firm’s products and services.

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Chapter Two Introduction to Hospitality Services Marketing Outline I. II. III.

IV.

Chapter Objectives Industry Profile Introduction to Services Marketing A. Services Defined 1.

Changing patterns of government regulation 2.

Relaxation of professional association standards 3.

Privatization of some public and nonprofit services 4.

Technological innovation 5.

Growth in service chains and franchise networks 6.

Internationalization and globalization 7.

Pressures to improve productivity 8.

The service quality movement 9.

Expansion of leasing and rental business 10.

Manufacturers as service providers 11.

Pressures on public and nonprofit organizations to find new income sources 12.

Hiring and promotion of innovative managers B. The Nature of Services 1.

No ownership by customers 2.

Service products as intangible performers 3.

Greater involvement of customers in the production process 4.

People as part of the product 5.

Difficulties in maintaining quality standards 6.

Harder for consumers to evaluate.

7.

Non inventories for service 8.

Importance of time 9.

Different distribution channels C. Search, Experience, and Credence Qualities 1.

Search qualities – investigate prior to purchase 2.

Experience qualities – evaluate only after the purchase 3.

Credence qualities – difficult to evaluate even after service is consumed Service Quality A. The Service Quality Process 1.

Service gap 2.

Knowledge gap 3.

Standards gap 4.

Delivery gap 5.

Communications gap

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B.

Managing Service Quality 1.

Relationship marketing 2.

Internal marketing V. Customer Satisfaction A. Improving Customer Service and Customer Satisfaction 1.

Define your standards of quality service with measurable indicators 2.

Assess your current situation 3.

Develop effective service improvement strategies 4.

Initiate your solutions carefully 5.

Provide feedback, recognition, and rewards B. Service Failures, Customer Complaints, and Recovery Strategies 1.

Service failures a. system failures b. customer needs failures c. unsolicited employee actions 2.

Customer complaint behavior 3.

Recovery strategies a. cost/benefit analysis b. actively encourage complaints c. anticipate the need for recovery d. respond quickly e. train employees f. empower the front line C. Techniques to assess consumer satisfaction 1.

Spoken comments and complaints 2.

Surveys and comment cards 3.

Number of repeat customers 4.

Trends in sales and market share 5.

Shopping reports VI. Service Trends Affecting the Hospitality and Tourism Industry A. Shrinking Customer Loyalty B. Increasing Consumer Sophistication C. Increased Emphasis on the Needs of Individual Consumers VII. Summary of Chapter Objectives A. Key Terms and Concepts B. Review and Discussion Questions VII. Case Study Service Quality at the Excelsior Hotel Answers to End of Chapter Questions 1.

What are services? Do you believe that service marketing should be studied separately from product marketing? Why or why not?

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Services are intangible goods or products that cannot be felt or examined before they are purchased and consumed. Marketing scholars have argued both positions, but there are some definite differences that must be recognized and understood.

2.

List and discuss several of the reasons behind the growth in services. Which of these do you consider to be the most important? Why? Some of the reasons behind the growth in services include: changing patterns of government regulation, relaxation of professional association standards, privatization, computerization and technological innovation, growth in franchising, expansion of leasing and rental businesses, manufacturers operating as service providers, market responses by non-business organizations, and globalization. A good case could be made for the importance of any one of these.

3.

How do services differ from products?

Services differ from products in seven key ways: there is a greater involvement of customers in the production process, people are part of the product, it is difficult to maintain a consistent level of quality, there is an absence of inventories (they are perishable), time is an important factor, and there are more direct channels of distribution.

4.

What is service quality? Discuss the service quality process.

Service quality is the perception resulting from attitudes formed by customers’ long-term evaluations of performance. Consumers have certain expectations of services around which a firm develops service specifications and a service delivery process. Firms communicate these specs to consumers and attempt to provide actual services that meet, or exceed, customer expectations.

5.

Why is relationship marketing so important to a hospitality firm? How can successful relationship marketing benefit firms?

Relationship marketing is based on the proposition that it is less expensive to keep customers you already have than to acquire new customers. Relationship marketing takes the long-term view. Relationship marketing is highly desirable when the following conditions are present o A customer has an ongoing or periodic desire for the service. o The service customer controls the selection of the service organization. o Alternative service providers make it easy for customers to switch.

6.

Using a food service operation with which you are familiar, develop a methodology to assess the service quality. Based on the data collected, how could their service standards be improved? What would be required to implement the changes?

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This is an experiential exercise. The methodology developed should include both qualitative and quantitative measures. Specific standards should be developed for each measure. Martin’s five-step process for improving customer service is an excellent framework to use.

7.

What are search and experience qualities? How these qualities used by consumers to evaluate services?

Search qualities are attributes that consumers can use to evaluate a service prior to purchasing it. Experience qualities are the attributes that can only be evaluated after the service has been purchased and consumed. The intangible nature of services forces consumers to rely more heavily on experience qualities, increasing the risk surrounding the purchase.

8.

Define relationship marketing? How can it be applied to the hospitality industry?

Relationship marketing focuses on developing extensive relationships with existing customers in an attempt to build loyalty and obtain repeat business. Travel agents, hotels, and restaurants all rely heavily on repeat business from both individuals and groups.

9.

Based on your knowledge of the hospitality and tourism industry, which firm does the best job of developing a positive relationship with customers? Why? What specific actions have they taken t accomplish this?

This is an experiential discussion question. There are a wide variety of firms that have done an excellent job.

10.

What are the types of service failures? What recovery strategies can be used in the event of a service failure?

Service failures can occur at “moments of truth” when customers interact with employees.

Failures can be system failures, customer needs failures, or unsolicited employee actions (both good and bad). In an attempt to recover from failures, firms can perform a cost/benefit analysis, encourage customer complaints, anticipate the need for recovery, respond quickly, train employees, and empower the front line.

11.

How would you define customer satisfaction? How can you improve customer satisfaction?

Customer satisfaction occurs when a firm’s service meets, or exceeds, customer expectations. Customer satisfaction can be improved by following Martin’s Five-Step Process (see Figure 2.2).

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12.

What are the techniques that can be used to assess customer satisfaction?

Firms can examine spoken comments and complaints, survey customers, examine the number of repeat customers, look at trends in sales and market share, and conduct shopping reports.

13.

Based on a careful review of the current trade magazines for the hospitality and tourism industry, cite and discuss current trends that affect hospitality and travel firms.

Three trends that are having an impact on the hospitality industry are: shrinking customer loyalty, increasing consumer sophistication, and an increased emphasis on the needs of individual consumers.

Case Study: Service Quality at the Excelsior Hotel 1. What steps should Kristen recommend to the General Manager?

Rather than a hastily developed response, she needs to approach the service failures in a systematic manner. There are several items from within the chapter that could be applied to this case, including: a GAP analysis, service blueprinting, Martin’s 5-step process for service improvement and establishing benchmarks for service to increase customer satisfaction.

2. What action steps and timetable should she recommend? How should decisions be made about which steps should be done initially?

There are several steps that could be undertaken first. The most logical is a GAP analysis, for this will provide specific service failures which can then be addressed with solutions.

3. Develop a service blueprint of the check-in process. How might this be used to improve the situation?

Use figure 2.2 as a model to develop this blueprint.

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4. Discuss the gaps in the service quality that Bill Foster experienced.

GAP 1: Management does not have a clear understanding of the expectations that customers have. In this case, the delivery of service to Bill Foster failed to meet his expectations several times.

GAP 2: Management has not developed service expectations that are measurable. For example, specifications have not been developed for any of the following: (a) maximum number of guests waiting in line to check in; (b)maximum wait time to check in; (c) flexibility in extending service hours for airport check-in and bell staff; and (d) response to double booking a guest room..

5. What kind of service failures occurred and what recovery strategies were employed?

The service failures which occurred were: (a) long wait times to check-in the hotel; (b) failure to develop a system to distribute keys and registration materials to guests arriving by motor coach; (c) lack of late night check-in service at the airport; (d) personal conversation between front desk associates instead of attending to the needs of a late arriving guest; (e) lack of bell staff to assist with luggage; (f) assigning a guest to an occupied room; and (g) failure to quickly and easily reassign the guest to an unoccupied room.

6. How did the Excelsior Hotel fail to meet Mr. Foster’s expectations?

See the list from #5 above.

7. What other actions could have been taken?

Working in teams, ask students to develop specific strategies to address each of the service failures.

Service Quality at Express Airlines 1. Assess the actions that Ben undertook. What were the positive actions? What might he have done differently?

Ben was proactive. He worked with others to keep abreast of the situation and how repairs were progressing. He maintained a balance between trying to board the flight in a timing manor and monitoring the repair work.

Ben likely could not have done anything differently, other than not boarding the passengers until the repair work was completed.

2. Develop a service blueprint of the preboarding and boarding of the flight to Washington, D.C. How might this be used to improve the situation?

Use figure 2.2 as a model to develop this blueprint.

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Ask students to bring a service blueprint to class. Using a document camera, review the blueprints. Offer a critique of each blueprint.

3.

What specific action steps and timetable would you recommend to Ben at this point?

There appears to be three options for rebooking passengers: (1) handling passengers at the gate with assistance from other gate agents; (2) referring passengers to the customer service desk; and (3) referring passengers to the toll-free number offered by the airline. A combination of all of these would be most appropriate.

4. Are there other individual airline personnel that might become involved? What role(s) might they play?

See previous question.

5. Discuss the gaps in the service quality process that passengers experienced.

GAP 3: There was variance between the service quality specifications and the service deliver.

GAP 4: Passengers expected to board the plane and take off to their destination. There was a gap between expected service based on communications with airline personnel and the service that was provided.

6. What other actions could have been taken by Express Airlines personnel?

Given the challenges faced by airlines, there may not be additional actions that can be taken.

Rebooking passengers on other flights or next available flights is likely the best service recovery actions the airline can take. There are unlikely to be spare aircraft that can be placed into service to replace the aircraft that requires maintenance.

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Chapter Two Test Bank Multiple Choice Questions 1.

Which of the following is not a characteristic associated with services? a. intangibility b. simultaneous production and consumption c. consumer involvement d. consistent delivery

2.

Purchase decisions for services such as foodservice are heavily slanted towards: a. experience qualities b. search qualities c. credence qualities

3.

The practice of overbooking in hotels can be best attributed to which of the following service characteristics? a. the absence of inventories b. the great involvement of customers in the production process c. the relative importance of time factor d. the nature of service distribution channels

4.

Which of the following service positions would not be considered a boundary spanning role? a. hotel salesperson b. airline pilot c. front desk clerk d. waitress

5.

Which of the following is the first potential gap in the service quality process? a. service gap b. standards gap c. knowledge gap d. delivery gap

6.

When there is a discrepancy between management’s perception of what customers expect and how the firm designs the service delivery process to meet customer expectations, it is referred to as a: a. knowledge gap b. standards gap c. delivery gap d. communications gap

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7.

According to Martin’s Five Step Process for Improving Customer Service, which of the following is not part of the procedural dimension? a. displaying a positive attitude and body language b. timeliness of service c. anticipation of customer needs before they occur d. clear and concise communication

8.

Which of the following is not one of the major categories of service failures? a. system failures b. customer needs failures c. unsolicited employee actions d. customer complaint failures e. all of the above are categories of service failures

9.

Which of the following is not a popular service recovery strategy? a. cost/benefit analysis b. anticipating the need for recovery c. training employees d. actively encouraging complaints e. all of the above are popular service recovery strategies

10.

Which of the following is the most straightforward method for evaluating customer satisfaction? a. surveys and comment cards b. shopping reports c. spoken comments and complaints d. trends in sales and market share

True/False Questions 1. Within the last several years, customer loyalty in the hospitality industry has increased.

2. If any of the first four gaps occur in the service quality process, then a service gap will occur as well.

3. Internal marketing refers to the process of communicating with employees.

4. Customer satisfaction occurs when customer expectations exceed the perceptions of the service delivered.

5. Complainers are more likely to do business with a firm again than non-complainers that have a problem.

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Part Two Understanding and Targeting Hospitality Consumers

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Chapter Three Understanding the Behavior of Hospitality Consumers Outline I. II. III.

IV.

V.

VI.

VII.

Chapter Objectives Industry Profile Introduction to Hospitality Consumer Behavior A. Describing Consumer Behavior 1.

Social setting 2.

Social forces 3.

Roles 4.

Attitudes relative to roles B. Reasons to Study Consumer Behavior Factors that Influence Consumer Behavior A. External Influences on Consumer Behavior 1.

Culture 2.

Socioeconomic level 3.

Reference groups 4.

Household B. Internal Influences on Consumer Behavior 1.

Personal needs and motives 2.

Experience 3.

Personality and self-image 4.

Perception and attitude C. Consumer Adoption Process 1.

Innovators 2.

Early adopters 3.

Early majority 4.

Late majority 5.

Laggards Consumer Decision-Making Model A. Problem Recognition B. Information Search C. Evaluation of Alternatives D. Purchase Decision E. Post Purchase Evaluation Consumer Problem-Solving Processes A. Compensatory Strategies B. Noncompensatory Strategies 1.

Conjunctive 2.

Disjunctive 3.

Lexicographic C. Combination Strategies Consumer Problem-Solving Techniques

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VIII.

IX. X. XI. XII.

A. Routine Response Behavior B. Limited Problem Solving C. Extended Problem Solving Organizational Buyer Behavior A. Characteristics of Organizational Buying 1.

Larger-volume purchases 2.

Derived demand 3.

More emphasis on specifications and service 4.

Professional buyers and more negotiation 5.

Repeat business 6.

Multiple buyers B. Members of the Buying Unit 1.

Users 2.

Influencers 3.

Deciders 4.

Approvers 5.

Buyers 6.

Gatekeepers C. Factors that Influence Organizational Buying Summary of Chapter Objectives Key Terms and Concepts Questions for Review and Discussion Case Study: Tempura Garden

Answers to End of Chapter Questions 1. What are some of the internal and external influences on consumer purchases?

External influences: culture, socioeconomic level, reference groups, and household.

Internal influences: needs, experience, personality and self-image, and perceptions and attitudes.

2. List and discuss the five stages in the consumer decision-making process.

Problem recognition, information search, evaluation of alternatives, purchase decision, and post purchase evaluation.

3. What are the differences between compensatory strategies and noncompensatory strategies for problem solving?

When consumers use compensatory strategies, they use product strengths in one or more areas to compensate for deficiencies in other areas. When using noncompensatory strategies, consumers do not allow strengths in one area to compensate for weaknesses in another.

Instead, consumers place more emphasis on individual attributes and, in some cases, develop minimum thresholds to use in evaluating products and services.

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4. Give an example of how a consumer would use a combination of problem-solving processes.

A traveler could use a conjunctive approach to eliminate all hotels over a certain distance from the tourist area in a city. Then, a lexicographic approach could be used to evaluate the remaining alternatives based on the remaining salient attributes.

5. What are the three problem-solving techniques used by consumers? Explain how they differ

using the stages of the consumer decision-making process.

Routine response behavior is habitual or impulsive, with very little information search and evaluation. Limited problem solving involves some level of information search and evaluation, but the consumer normally has some knowledge of the product category.

Extended problem solving occurs when consumers are highly involved in the buying process and there is a larger relative risk of making a wrong choice in what is often a high price purchase decision.

6. How would a hospitality marketer use the consumer adoption process in planning a

promotional strategy?

A new hotel or restaurant will tend to have a grand opening celebration and invite the opinion leaders in the community. Word-of-mouth and awareness advertising will attract the early adopters. Then, advertising and promotion are focused more on the mass market to attract the early and late majority. Finally, laggards will visit the restaurant or hotel when the feel it is established with a good reputation.

7. How does the decision-making process differ between consumers and organizations?

Organizational buying is similar to consumer buying in terms of the stages in the decisionmaking process. However, organizational buying involves larger volume purchases, it is based on derived demand, there is more emphasis on specifications, the buyers are more professional, there is more negotiation, there are often multiple buyers and, more repeat business.

8. What are the five components of the buying unit? Give an example of a buying unit in

hospitality or travel.

The members of a buying consist of “users” of the product, people with some expertise that influence the decision (influencers), the person(s) responsible for making the purchase (buyers), people who have the ability to select or approve suppliers (deciders), and people who serve as “gatekeepers” in the flow of information. Many associations that book meeting space and hotel rooms have committees of members that select a destination and a hotel for their meetings. Another example is how hotels or restaurants choose point-of-sales or reservations systems – several individuals are involved in the decision process.

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Case Study – Tempura Garden 1. How did people first become aware of the restaurant? How does this affect the owner’s approach to creating awareness and getting people to try the restaurant? What strategies would you recommend?

Most of the respondents became aware of Tempura Garden through word of mouth, followed by drive by traffic. This would suggest that the owner should devise a promotions campaign aimed at creating awareness and trial among potential customers. As long as the customers are satisfied with the dining experience, they will provide good word of mouth. This could be accomplished through the use of coupons or flyers in a direct mail campaign aimed at the target market. In terms of drive by traffic, the owner should provide signage that is easy to see and grabs the attention of passers-by.

2. What are the most important factors in choosing a restaurant? How does Tempura Garden rate on these factors?

The three most important factors are quality of food, cleanliness, and quality of service in that order. Tempura Garden happened to rate the highest on quality of food, employee friendliness, cleanliness, and quality of service in that order. It is important to rate highly on factors that are important to customers. If the restaurant were to receive low ratings on factors that weren’t that important to customers, then it wouldn’t be as much of an issue.

However, there is always room for improvement.

3. Discuss the owner’s response to the ratings for each of the consumer problem-solving processes.

Compensatory strategies: the owner can feel good that performance ratings were high for the factors that are most important to customers. He could assume that customers are willing to tradeoff the lower ratings on factors like atmosphere and timeliness of service for the higher ratings on the factors that were more important to them like quality of food, cleanliness, and the quality of service. However, the ratings were good overall with all factors receiving above 4 on a 5-point scale.

Noncompensatory strategies: if consumers use a conjunctive approach to decision-making, then the owner should make sure that the restaurant exceeds minimum expectations on all of the salient attributes (i.e., important factors). If consumers use a disjunctive approach, then the owner only needs to concern himself with the one or two factors that most people consider important. In this case, it could be quality of food and cleanliness. Finally, with the lexicographic approach, the owner would focus on the factors by giving priority to the one rated the highest on importance (i.e., quality of food) and then work his way down one by one in order of importance from highest to lowest. Consumers eliminate restaurants starting with the factor of highest importance and work their way down.

4. What additional information would be useful?

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One of the mistakes that many firms make is to survey their customers and neglect people who don’t purchase their products or services. It would be useful to survey people who don’t eat at the restaurant and find out why. They may consider different factors to be important and/or rate the restaurant differently on the factors. Another problem could be awareness – these other potential customers might not be aware of the restaurant or haven’t been enticed to try it.

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Chapter Three Test Bank Multiple Choice Questions 1.

Which consumer choice model involves prioritizing service attributes and then using minimum level cutoffs when evaluating a service? a. conjunctive model b. disjunctive model c. lexicographic model

2.

The information retrieval stage of the consumer decision-making model would tend to be the least involved for which of the following hospitality and travel services? a. a rental car for a three day vacation weekend b. a restaurant for a casual lunch c. a hotel for a large wedding reception

3.

Which of the following statements is not true in regard to postconsumption feelings? a. they are based on consumers’ expectations and actual firm performance b. hospitality chains have an advantage because of a lower perceived risk c. from a management perspective, it is better to under-promise and over-deliver d. all of the above are true

4.

The final set of products or service providers that are considered by consumers when making a purchase decision is referred to as the: a. choice set b. reference set c. evoked set

5.

Which of the following problem-solving processes allows consumers to make tradeoffs between product or service attributes? a. compensatory strategies b. conjunctive models c. disjunctive models d. lexicographic models

6.

The amount of search would be most substantial for the ____ problem-solving technique. a. limited b. routine response behavior c. extended

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7.

The number of attributes normally considered would be fewest for the ____ problemsolving technique. a. limited b. routine response behavior c. extended

8.

The process of influencing consumers who are innovators and early adopters is referred to as: a. diffusion and innovation b. consumer targeting c. niche marketing

9.

Which of the following is not a characteristic of organizational buying? a. larger volume purchases b. more emphasis on specifications and services c. derived demand d. less negotiation

10.

Which of the following is an example of organizational buying in the travel industry? a. hotel salespeople selling to meeting planners b. tour operators selling to travel agents c. a rental car agent renting a car to a family on vacation d. all of the above e. a and b only

11.

Which of the following is not an internal influence on consumer behavior? a. personal needs and motives b. experience c. culture d. personality and self-image

12.

Which stage in the consumer adoption process includes the largest percentage of consumers entering the market? a. innovators b. early majority c. early adopters d. late adopters

13.

In Maslow’s hierarchy of needs, the first set of needs individuals seek to satisfy is: a. lower-level needs b. middle-level needs c. higher-level needs

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14.

A pattern of behavior associated with a specific position within a social setting is a: a. social force b. attitude c. role d. none of the above

True/False Questions 1. Certain reference groups can influence the purchase decisions of individuals even if they don’t belong to the group.

2. Most hospitality and travel firms expect to fulfill the self-actualization needs of consumers as described by Maslow.

3. Problem recognition occurs when an individual realizes a gap between a desired state and the actual state.

4. The five members of an organizational buying unit must all be represented by different individuals.

5. An individual does not pass through all of the stages in the consumer decision-making model when engaging in routine problem solving.

6. Opinion leaders include formal and informal leaders of reference groups.

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Chapter Four Market Segmentation and Positioning Outline I. II. III.

IV.

V.

VI.

VII.

Chapter Objectives Industry Profile Introduction to Market Segmentation A. The Nature of Segmentation B. Criteria for Effective Segmentation 1.

Substantiality 2.

Measurability 3.

Accessibility 4.

Actionability Segmentation Variables A. Geographic 1.

Metropolitan Statistical Area (MSA) 2.

Primary Metropolitan Statistical Area (PMSA) 3.

Consolidated Metropolitan Statistical Area (CMSA) B. Demographic 1.

Family Life Cycle 2.

Senior Market C. Psychographic 1.

Attitudes, Interests, and Opinions (AIO) 2.

VALS Segmentation Framework D. Behavioral 1.

Frequent Traveler Programs E. Benefits sought Market Segmentation Decision A. Identifying Segmentation Bases B. Developing Profiles for Each Market Segment C. Forecast Performance for Each Market Segment D. Select the Best Market Segments Market Segmentation Strategies A. Mass-Market Strategy B. Differentiated Strategy C. Concentrated Strategy Positioning the Product-Service Mix A. Determine the ideal mix for consumers 1.

Salient Attributes B. Measure consumer perceptions of available services 1.

Perceptual Mapping 2.

Competitive Benefit Matrix

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C.

VIII. XI. XII. XIII.

Look for gaps in coverage and choose a desired position 1.

Positioning Statement 2.

Unique Selling Proposition (USP) D. Develop a strategy for obtaining the desired position Summary of Chapter Objectives Key Terms and Concepts Questions for Review and Discussion Case Study: Segmenting and Positioning in the Cruise Industry

Answers to End of Chapter Questions 1. What is market segmentation?

Market segmentation refers to a marketing strategy whereby the total potential market is divided into homogeneous subsets of customers, each of which responds differently to the marketing mix of the organization.

2. Of what value is market segmentation to marketing managers?

Market segmentation, when done properly, can improve sales and profits because it allows the organization to target specific market segments that are much more likely to patronize the organization’s facilities. Firms can use limited resources more efficiently and effectively.

3. What variables are used to segment target markets?

Marketing managers can use five basic types of variables when segmenting consumer markets: geographic, demographic, psychographic, behavioral, and benefits sought.

4. Which of these variables do you see as most and least useful to a manager working in the hospitality and tourism industry?

All of these variables can be used and often will be used in combination with one another.

Restaurants can perform a geographic segmentation to determine the trading area and then use demographics such as income or age to further segment the market. The value of the different variables will depend on the specific firm/industry.

5. Cite and discuss the criteria for effective segmentation.

Substantiality – large enough to warrant special attention.

Measurability – size of the market and purchasing power.

Accessibility – possible to reach segments with a variety of communications.

Actionability – able to attract certain types of customers.

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6. Is it possible to over segment a market? If so, can you give an example?

A market can be segmented to the point where a firm offers many different marketing programs that overlap and become inefficient. Many hotels have 20 or more prices for various groups. This makes it complicated for hotel salespeople and consumers may exchange information and become disgruntled.

7. What are the four steps in the market segmentation decision process?

Identify segmentation bases, develop profiles for each segment, forecast projected demand, and select specific target market segments.

8. Explain and give examples of each of the three market segmentation strategies.

Mass-market strategy – sell to all potential customers (e.g., Holiday Inns) Differentiated strategy – more than one segment with different marketing programs (e.g., Marriott Residence Inns, Courtyards, etc.)

Concentrated strategy – one or relatively few segments (e.g., Four Seasons) 9. What is positioning? Why is it important?

Positioning is the process of determining how to differentiate a firm’s product offerings from those of its competitors in the minds of consumers. Marketers want to position their products so they are closer to the consumer’s ideal product.

10. Describe the four steps in the positioning process?

Positioning consists of: determining the ideal mix for consumers, measuring consumers’ perceptions of available services, looking for gaps in coverage, and developing a strategy for obtaining the desired position.

11. What is perceptual mapping?

Perceptual mapping is a technique used to construct a graphic representation of how consumers in a market perceive a competing set of products relative to each other.

12. Internet Exercise: The VALS Survey There is no one solution to this exercise. Each student will take the survey and determine his/her VALS segment. The instructor could have students evaluate one another if they are close friends.

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Case Study – Segmenting and Positioning in the Cruise Industry 1. What cruise lines are available, and how are they positioned in the market? Explain your answer based on actual evidence and construct a simple perceptual map based on price and quality.

Carnival gives the perception that it would like anyone on its ships. The prices reflect are generally lower than other cruise lines.

Norwegian Sky charges a higher price but also leaves the consumer with the perception of higher quality.

Disney uses its name and image to target children and family. Just the established name Disney presents the consumer with familiarity of quality and with that higher quality comes a higher cost.

Royal Caribbean appears to offer a higher quality experience at a lower relative rate - i.e., the focus is on value. The cruise line targets beginning travelers and advises that those who don't like "noise and hoards" may not like this cruise line.

2.

What are the primary market segments for cruise lines based on your review of the Web sites? What ships are available within the Carnival Cruise Line, and how are they targeted to each of these segments?

The primary market segments for cruise lines are families, couples and singles, first-time cruisers, ethnicity, price, class and a mix of all. Carnival Cruise Line seems to take the Differentiated strategy approach because it appeals to more than one market segment.

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Carnival Cruise Line has many different ships available. The Carnival Valor targets a mixture of all different types of people: families with children, families and friends having reunions, singles and couples. The cruise targets this segment by mentioning it has "plenty of space" for everyone, telling the singles and couples they have plenty of space to relax. This lets those types of customers know that even though there are families with children on board, there are places to go where there won’t be any children.

Carnival Glory, also targeted toward all types of people, segments by mentioning that its cruise is for people that like to party into the wee hours of the night, while also having many activities for families with children.

Carnival Sensation targets the ethnic background by mentioning the diversity of the people on its ship.

Carnival Imagination targets only families by talking about its constant activity, fun-loving passengers, and a wealth of entertainment and recreational opportunities. Parents know that these activities will keep their children occupied while still being able to have a little fun of their own. The cruise also mentions its waterslides, mini-golf, and a video arcade that is definitely something that targets the families.

Carnival Fascination targets the youthful passengers, either in age or mindset. It also targets couples and singles. It also does target some families by saying that there are activities for children that can give parents time to party. But it mostly targets young singles and couples looking for to party. The cruise talks about its bars, casino and live music.

3. What other web sites are available for obtaining useful information for how the cruise lines, and their ships, are segmented?

Some alternative websites that could be useful when booking a cruise include: cruisecheap.com raynorshyn.com/cruises/ cruiseclues.com boards.cruisecritic.com

bestsyndication.com cruise411.com aaa.com/ cruisereviewsonline.com/

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Chapter Four Test Bank Multiple Choice Questions 1.

Market segmentation is the process of: a. dividing a total potential market into heterogeneous subsets b. dividing a total potential market into homogeneous subsets c. dividing a total potential market into broad segments d. none of the above

2.

Which of the following is not one of the criteria for effective market segmentation? a. substantiality b. measurability c. marketability d. accessibility

3.

Which of the following refers to the smallest geographic area? a. metropolitan statistical area (MSA) b. primary metropolitan statistical area (PSMA) c. consolidated metropolitan statistical area (CSMA)

4.

The family life cycle would be considered a(n) ________ variable. a. geographic b. demographic c. psychographic d. behavioral

5.

The use of frequent traveler or frequent diner programs would be considered a form of: a. geographic segmentation b. demographic segmentation c. psychographic segmentation d. behavioral segmentation

6.

AIO statements are used in: a. geographic segmentation b. demographic segmentation c. psychographic segmentation d. behavioral segmentation

7.

When restaurants or hotels record the license plates of their guests, it is a form of: a. geographic segmentation b. demographic segmentation c. psychographic segmentation d. behavioral segmentation

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8.

When a firm develops one product-service mix that is sold to all potential customers, it is using a: a. mass-market strategy b. differentiated strategy c. concentrated strategy

9.

The first step in the positioning process is to: a. measure consumer perceptions of available services b. determine the ideal mix for consumers c. look for gaps in coverage d. select a desired position

10.

What is the technique used to construct a graphic representation of how consumers perceive a competing set of products relative to each other? a. competitive benefit matrix b. preference mapping c. perceptual mapping d. gap analysis

11.

Which of the following is not an extension of the traditional family life cycle? a. people are waiting longer to get married b. increased divorce rate has led to more single parents c. there are more same-sex couples that adopt children d. people are living longer e. all of the above are extensions

12.

Which VALS category is primarily motivated by achievement? a. achievers b. believers c. strivers d. both a and c e. all of the above (a, b and c)

13.

Projected demand is equal to: a. total market demand x market share b. total market demand x price c. price x market share

14.

Southwest Airline’s addition of the ‘Business Select’ class to its existing economy class is an example of: a. mass marketing strategy b. differentiated strategy c. concentrated strategy

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True/False Questions 1. In practice, it is normally not a good idea to use more than one type of variable to segment markets.

2. The first step in the Market Segmentation Decision Process is to select specific target market segments.

3. Market segmentation is the process of determining how to differentiate a firm’s product offering(s) from those of its competitors in the minds of consumers.

4. Salient attributes are those attributes that are important to consumers in evaluating alternative product offerings.

5. A firm’s positioning statement should differentiate the firm’s product-service mix form that of the competition.

6. The basic tenet of the VALS segmentation framework is that consumers’ purchasing behaviors are based on their culture and ethnic background.

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Part Three Marketing Planning and Information

37

38

Chapter Five Developing a Marketing Plan Outline I. II. III.

IV.

V.

Chapter Objectives Industry Profile Introduction A. Advantages and Disadvantages of Planning B. Why Marketing Plans Fail The Marketing Planning Process A Conducting a Situation Analysis 1.

Historical appraisal 2.

SWOT analysis B. Defining the Firm’s Goals and Objectives 1.

Goals 2.

Types of objectives a. financial objectives b. sales objectives c. competitive objectives d. customer objectives C. Formulating Marketing Strategies and Action Plans 1.

Market penetration 2.

Product development 3.

Market development 4.

Product diversification D. Implementing Action Plans and Evaluating Performance 1.

Sales control data 2.

Cost control data 3.

Profit control data 4.

Consumer feedback Sales Forecasting A. Sales Forecasting Techniques 1.

Qualitative forecasting techniques a. expert opinion b.

Delphi technique c. sales force forecast d. survey of buying intentions 2.

Quantitative forecasting techniques a. time series analysis b. causal methods

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B.

Selecting a Forecasting Technique 1.

The time horizon 2.

The availability of data 3.

The pattern of the data 4.

The desired level of accuracy 5.

Cost 6.

Ease of application VI. VII. Summary of Chapter Objectives A. Key Terms and Concepts B. Review and Discussion Questions VII. Case study: Planning at the Westwind Resort Answers to End of Chapter Questions 1. What is the difference between strategic and tactical marketing plans?

Strategic marketing plans are based on an examination of a firm’s core business and tactical marketing plans focus on implementing the broad strategies that are established in the strategic plan.

2. Provide examples of the types of questions tactical marketing plans seek to answer.

-

What is our market share?

How have the strengths and weaknesses of our firm changed in the last year?

How has our mix of guests changed in the last year?

What advertising and promotions were most and least successful during the last year?

What types of promotions and sales efforts should we use to build business during our slow periods?

What specific promotion and advertising schedules will lead to success?

What in-house promotions should we schedule?

3. What are the advantages and disadvantages associated with planning?

Advantages: helps firms cope with change, puts focus on objectives, helps management in decision-making, forces managers to examine operations, and provides criteria for performance evaluation.

Disadvantages: time consuming, needs support of top management, may not be objective, short time frame may compromise quality, and may be a lack of personnel with expertise.

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4. Why to marketing plans fail? What steps might a marketing manager take to increase the probability of success?

-

Strategic planning is not integrated into day-to-day activities Those responsible for planning do not understand the process Lack of input from non-marketing managers Financial projections used as marketing plans Lack of information on the environment Based too heavily on short-term performance No procedures in place to monitor and control the process

5. Illustrate and discuss the steps in the marketing planning process.

Conduct a situation analysis – where are we now?

Define the firm’s goals and objectives – where are we going?

Formulate marketing strategies and actions – how are we going to get there?

Implement action plans and monitor performance – use control data.

6. What is a SWOT analysis? How can SWOTS be leverage or problem items?

A SWOT analysis is part of the situation analysis. It examines the firm’s internal strengths and weaknesses and the external opportunities and threats.

7. Conduct a SWOT analysis for a restaurant located in your area. How might this restaurant leverage elements of its SWOTs? This is an experiential exercise. Once students have completed the assignment, divided them into groups to discuss the results. Discuss how each restaurant might capitalize on the identified strengths and opportunities into a competitive advantage. Ask students to justify their analysis, assumptions and recommendations.

8. What are the criteria for good objectives?

Good objectives must be specific and easy to understand, identify specific results in specific terms, be within the power of the organization to achieve, and be acceptable to the individuals within the organization.

9. What are the four product development strategy options? Provide examples and justification of hospitality and tourism firms that you believe use each of the four options.

-

Market penetration. Hyatt Hotels Market development. Hyatt Hotels, Marriott International. The focus is on international development.

Product development. ARAMARK.

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-

Diversification.

10. What are the types of control data that are used to evaluate performance?

-

Sales control data Cost control data Profit control data Consumer feedback

11. What is sales forecasting? Why is it important?

Sales forecasting is the process of predicting future trends in sales and revenue. It is important because operating budgets, performance quotas, and strategies are based on the sales forecast.

12. Explain the difference between qualitative and quantitative forecasting techniques.

Qualitative sales forecasts involve some judgment or intuition on the part of the researcher, or expert, who is enlisted to participate in the process. Qualitative forecasts are useful for long range predictions used in strategy formulation. Quantitative forecasts predict future trends based on historical patterns of data. They are more objective and they can use sales alone, or incorporate one or more additional variables that are related to sales.

Case Study: Planning at the Westwind Resort 1. What should the mission statement for Westwind Resort be?

Don’t rush to develop a mission statement before fully understanding the nature of business, target markets served and the marketing environment. It is important to acknowledge the focus on families as a core target market, as well as the balance between year-round residents, time share owners and transient guests at the resort.

2. How should the mission statement be developed? Who should review it and have input?

Mission statements can be developed using a variety of methods, all of which can be successful. A suggested approach is to use an outside consultant or facilitator who works with a small group consisting of the General Manager, other key managers, along with representatives from stakeholder groups, such as the board of directors and stockholders.

3. How could Wendell use the SWOTs that the management team had developed to form the basis for a marketing plan?

Carefully review the SWOTs which have been developed, with particular attention on the strengths and opportunities, the “leverage” items which might be the basis for developing a competitive advantage.

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4. How should he lead the team in the development of a marketing plan? What should be the next steps?

-

Develop a mission statement, with input and review by key stakeholders.

Develop 3-5 year objectives and action plans.

Develop 12-18 month objectives and detailed action plans. Assign responsibility for key actions to appropriate managers.

5. What additional components of the marketing plan need to be developed? What additional data and input would be necessary to complete the plan?

Once the marketing plan is developed, sales forecasts and evaluation methods and metrics need to be developed. A systematic plan to review progress also needs to be developed.

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Chapter Five Test Bank Multiple Choice Questions 1.

Which of the following is not considered a disadvantage of marketing planning? a. marketing planning is time-consuming b. marketing planning requires a good deal of knowledge and expertise c. marketing planning does not help firms cope well with change d. marketing planning needs the commitment and support of top management

2.

Which of the following is not a reason why some marketing plans fail? a. strategic planning is not integrated into a firm’s day-to-day activities b. those responsible for planning do not understand the planning process c. no procedures are established to monitor and control the planning process d. financial projections are treated as marketing plans e. all of the above are reasons why marketing plans fail

3.

What is the first step in the marketing planning process? a. define the firm’s goals and objectives b. conduct a situation analysis c. formulate marketing strategies and action plans d. implement action plans and monitor performance

4.

Which step would normally include a S.W.O.T. analysis? a. define the firm’s goals and objectives b. conduct a situation analysis c. formulate marketing strategies and action plans d. implement action plans and monitor performance

5.

Which of the following items would be considered leverage items in a S.W.O.T. analysis? a. strengths and opportunities b. strengths and weaknesses c. threats and opportunities d. threats and weaknesses

6.

Which of the following is not a characteristic of a good objective? a. objectives should be specific and easy to understand b. objectives should identify expected results in specific terms c. objectives should not be constrained to a specific time frame d. all of the above are characteristics of a good objective

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7.

Increasing or maximizing market share is an example of a _____ objective. a. financial b. competitive c. customer d. sales

8.

A _____ strategy focuses on selling the existing product-service mix to the existing target markets. a. product development b. market penetration c. market development d. product diversification

9.

Which of the following is not a key control area that can be used to evaluate a firm’s performance? a. sales control data b. profit control data c. cost control data d. consumer feedback e. all of the above are key control areas

10.

Which of the following sales forecasting techniques would normally work best for predicting changes in the basic sales pattern over the long-term? a. expert opinion b. time series analysis c. moving average d. trend extrapolation

True/False Questions 1. Strategic marketing plans typically cover a period of one year and focus on specific activities that must be implemented by the firm to achieve its goals.

2. Marketing planning forces managers to carefully examine the firm’s operations.

3. A mission statement is created by a firm to describe its mission to the firm’s external stakeholders in terms of the public’s perceptions of the benefits the firm is offering.

4. The strengths and weaknesses components of a S.W.O.T. analysis reflect an evaluation of the firm’s internal situation.

5. Quantitative sales forecasting techniques tend to be used when data is not readily available and rely on judgment or intuition.

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Chapter Six Information Systems for Marketing Decisions Outline I. II. III.

IV.

Chapter Objectives Industry Profile Introduction A. Definition of a Marketing Information System – the structure of people, equipment, and procedures used to gather, analyze, and distribute information needed by an organization.

B. Components of a Marketing Information System 1.

Environmental Scanning 2.

Sub-environments a.

Macroenvironment b.

Competitive Environment c.

Organizational Environment C. Requirements for a Successful Marketing Information System 1.

It should be objective 2.

It should be systematic 3.

It should be useful Sources of Marketing Information A. Secondary Data 1.

Advantages a. cost b. timeliness c. limited applicability d. information may be outdated e. reliability 1.

Internal Data a. guest histories and sales data b. employees and management staff c. customer feedback 2.

External Data a. trade associations and travel bureaus b. trade journals and publications, and other periodicals c. university sources, government sources, and syndicated services d. guides, indexes, directories, and the Internet B. Primary Data 1.

Advantages a. specificity b. practicality 2.

Disadvantages a. cost b. time lag

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V.

VI.

VII. VIII. IX. X. XI.

c. duplication The Marketing Research Process A. Define the Problem B. Plan the Research 1.

Exploratory research 2.

Descriptive research 3.

Causal research C. Collect the Data 1.

Data collection methods a. observation b. surveys – telephone, direct mail, personal interview c. experiments - test marketing 2.

Determining the sampling plan a. population b. sample D. Analyze the Data 1.

Descriptive analysis 2.

Inferential analysis E. Prepare the Final Report Ethical Issues in Marketing Research A. Rights and Obligations of the Respondent B. Rights and Obligations of the Research Suppliers C. Rights and Obligations of the Clients Summary of Chapter Objectives Key Terms and Concepts Questions for Review and Discussion Case Study: Bel Air Motel Appendix: Data Collection and Sampling A. Designing Data Collection Forms B. Sampling C. Key Terms

Answers to End of Chapter Questions 1. Why would it be useful for a hospitality organization to implement a marketing information system?

Marketing information systems provide firms with useful information that can be used to reduce the uncertainty surrounding marketing decisions.

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2. What do you consider the best sources for internal and external marketing information?

Cite sources and discuss the advantages and disadvantages of each.

Internal: firm’s records, employees, consumer surveys External: trade associations, trade publications and industry publications, libraries, syndicated research 3. How do you differentiate between primary and secondary data, including their advantages and disadvantages.

Primary data is data that is collected by a firm for a specific purpose. It addresses the firm’s specific needs and it is practical. However, it can be time-consuming, costly, and duplicate information that is already available.

Secondary data refers to data that has been previously collected for a different purpose than the present need. It is relatively inexpensive and can be collected very quickly. However, it may be outdated, have limited applicability, and its reliability may be questioned.

4. What role should a marketing information system play in the management of a hospitality establishment?

The marketing information system should provide timely information to employees in the form that they need it for making marketing decisions.

5. Discuss the three types of research. Give an example of a situation in which you would use each one? Can you use more than one at a time?

Exploratory research is used when you don’t have a good understanding of the basic nature of the problem. It can be used to collect data in an area for the first time (e.g., the first time a restaurant surveys its customer base).

Descriptive research answers all of the basic questions who, what, where, why, when, and how. It can be used to obtain a profile of customers including demographics and purchase behaviors.

Causal research examines cause-and-effect relationships like the affect of price and quality on value and customer satisfaction.

All of these approaches can be used in any combination with one another.

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6. What are the three methods for collecting data? Can you give an example of how each one would be used in the hospitality and travel industry?

Experimentation involves changing certain variables and comparing the results against a control group that hasn’t been changed. A restaurant chain could test new menu items to see the impact on overall sales.

Observation involves examining the behavior of consumers without them knowing it.

Airlines often examine the trash after a flight to evaluate the popularity of the various elements in their meals.

Surveys involve asking respondents for feedback regarding one or more subjects.

Restaurants and hotels use comment card to obtain customer feedback about their operations.

7. Compare and contrast the three types of surveys.

Direct mail surveys are good for collecting data on sensitive topics and they result in a relatively low cost per respondent. However, the response rates tend to be low and it takes a longer time than the other methods to obtain the data.

Telephone surveys are quick, provide some anonymity, and allow for customer feedback. This method tends to be in the middle when it comes to the advantages and disadvantages.

Personal interviews are costly, don’t allow the respondent to be anonymous, and can result in interviewer bias. However, they are useful for complicated questions and they normally result in a high response rate.

8. What are the two major types of data analysis? When should the decision be made as to which methods will be used for analyzing the data?

There are two basic forms of statistical analysis used in marketing research: descriptive analysis and inferential analysis. Descriptive analysis makes use of aggregate data to describe the “average” or “typical” respondent, and to what degree respondents vary from this profile. The second form of statistical analysis is inferential analysis, which is used to test hypotheses and estimate population parameters using sample statistics. The decision regarding which type of analysis to use should be made prior to collecting the data so that data collection forms can be designed to include the proper types of questions or information.

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9. Who are the parties involved in the marketing research process? What are the rights and obligations of each party?

Respondent: obligated to be truthful, right to privacy, and the right to know the true nature of the research.

Researcher: obligated to provide privacy and confidentiality to respondents and clients, remain impartial, and provide objective and accurate results.

Client: obligated to be honest about the nature of the research, and in dealings with suppliers, and to be committed to the research process.

Case Study – Bel Air Hotel 1. Is the response rate large enough for the comment cards to be representative of all the guests?

How could the response rate be improved?

There are 116 rooms available for 365 nights per year = 42,340 possible room rentals. When adjusted for the hotel’s occupancy rate of 60%, the figure becomes 25,404. The larger the sample, the more likely it will be representative of the population. The total of 169 completed comment cards doesn’t seem like much if you have thousands of guests. However, the table in the chapter shows that sampling error will be over 8% if the sample is less than 200 (for a probability sample). This is actually a nonprobability sample so there is no way to calculate sampling error. Comment cards are notorious for low response rates – the cards are normally filled out by people who had a bad experience or a really good experience. Also, certain types of people are more likely to fill out the cards (i.e., they share certain demographic characteristics). The response rate could be improved by offering an incentive such as free overnight accommodations, a meal in the restaurant, or some other type of discount. Also, handing them to the guest in person might improve the response rate as well (versus leaving them in the room).

2. Are customers satisfied?

The hotel staff met or exceeded the expectations for over 75% of the guests. This would suggest that the hotel staff is doing a good job of satisfying guests. However, the ratings for overall quality and price were relatively low. This is an area that could be researched further. The hotel manager should work on increasing the percentage for exceeding expectations and decreasing the percentage for failing to meet expectations.

3. What are the major areas of concern and how can they be improved?

The lowest ratings were for bedroom lighting, price and furnishings. The hotel could be renovated to improve the lighting and update the furnishings in the rooms. It might even be advisable to contract an interior designer to help with the project. However, the hotel staff should be careful not to make any hasty judgments concerning price.

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4. What other information is necessary? How could you go about collecting that information?

The first step would be do conduct a competitive analysis and compare the prices and ratings for the other hotels in the area. Focus groups could be conducted to get more information on why guests aren’t as satisfied with the furnishings and overall quality. Students will suggest other alternatives that are worthy of note.

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Chapter Six Test Bank Multiple Choice Questions 1.

Within the components of a marketing information system, the statement “Nearly 20 percent of the population moves each year,” represents which component? a. macroenvironment b. competitive environment c. organizational environment

2.

A hospitality manager who measures consumer reaction to new menu items offered by the restaurant is obtaining which of the following? a. internal data b. secondary data c. primary data d. syndicated data

3.

One of the advantages of collecting secondary data is _____. a. specificity b. cost c. timeliness d. b and c

4.

One of the advantages of collecting primary data is _____. a. specificity b. cost c. timeliness d. b and c

5.

The first step in the marketing research process is to: a. plan the research b. collect the data c. define the problem d. conduct a preliminary investigation

6.

The best survey method for sensitive questions would be: a. telephone b. direct mail c. personal interviews

7.

The survey method with the best response time would be: a. telephone b. direct mail c. personal interviews

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8.

The best survey method for complicated or complex questions would be: a. telephone b. direct mail c. personal interviews

9.

A study used to measure the same population over an extended period of time is referred to as a: a. causal study b. cross-sectional study c. focus group d. longitudinal study

10.

When a closed-ended question is designed so that respondents will belong to at least one category, the available responses are said to be: a. mutually exclusive b. collectively exhaustive c. fully closed d. both a and b

11.

Which of the following types of information would not be important for a restaurant manager to assess? a. the characteristics of the current customers b. the characteristics of potential new customers c. the media habits of current customers and potential new customers d. the profile of the consumers of all available media e. all of the above types of information are important to access

12.

Which of the following is not one of the basic criteria for a well-designed marketing information system? a. it must include a structured organization or established system of people and information gathering procedures b. information should only be gathered from outside the organization c. the system should be designed to generate a continuous flow of information d. information should be compiled so that management can use it for decisions

13.

The basic level of investigation in a research design is referred to as a: a. sample b. census c. population d. sample unit

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14.

Test marketing is a common form of: a. experimentation b. observation c. survey

True/False Questions 1. Marketing research is a broader and more encompassing term than marketing information systems.

2. The use of a marketing information system helps an organization to shorten the reaction time to changing market conditions.

3. Sampling error increases at a diminishing rate as sample size increases.

4. Nonprobability samples cannot be representative of the population.

5. When considering marketing research ethics, the respondent, the researcher, and the client all have rights and obligations.

6. Measuring the relationship between price and quality for hospitality services would be an example of causal research.

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Part Four Product-Service Mix and Distribution Strategies

55

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Chapter Seven Developing New Products and Services Outline I. II. III.

Chapter Objectives Industry Profile Introduction A. The importance of product lines 1. Growth opportunities for the business 2. Efficient and effective use of company resources 3. Increasing company market share and importance of the company within the market 4. Diversifying a firm’s business risk IV. Planning for New Products A. Reactive Strategies for New Product Development 1. Defensive strategy 2. Imitative strategy 3. Second but better strategy 4. Responsive strategy B. Proactive Strategies for New Product Development 1. Research and development strategy 2. Marketing concept strategy 3. Entrepreneurial strategy 4. Merger or acquisition strategy 5. Alliance strategy V. Organizing for New Product Development A. New Product Committees B. New Product Departments C. Product Managers D. Venture Teams VI. New Product Development Process A. Idea Generation B. Product Screening C. Concept Testing D. Business Analysis and Test Marketing E. Market Introduction VII. Identifying Products and Services A. The Importance of Branding B. Characteristics of Effective Branding 1. Easy to pronounce, recognize and remember 2. Describes the benefits of the product 3. Can be translated into foreign languages 4. Distinctive and capable of legal protection VIII. Summary of Chapter Objectives

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A. Key Terms and Concepts B. Review and Discussion Questions Case Study: Product Development Dilemma at Rocco’s

IX.

Answers to End of Chapter Questions 1. What is a product line?

The product line refers to the portfolio of products and services that a firm offers.

2. What is the “best” type of new product development strategy: reactive or proactive? Explain your answer.

The “best” strategy is different depending on the firm. Firms have different levels of resources and competencies that affect the type of strategy that will be most valuable. There are examples of firms that have been successful with all of the basic reactive and proactive strategies.

3. What are the four reasons it is important to develop and extend product lines within a business?

-

Provides growth opportunities for the firm Results in more efficient and more effective use of resources Increases the company’s market share and importance in the overall market Diversifies the firm’s business risk

4. What are the steps used to develop new products and services?

The new product development process consists of: 1) idea generation, 2) product screening, 3) concept testing, 4) business analysis and test marketing, and 5) market introduction.

5. What is a strategic alliance? Why do you think a company would enter a strategic alliance?

What are the pros and cons of entering a strategic alliance? What impact do you think strategic alliances have had on the airline industry?

A strategic alliance occurs when firms agree to combine resources in order to achieve objectives which an individual company would be unlikely to accomplish. The firms are not merged or combined, but rather they agree to cooperate on specific marketing objectives.

Firms enter strategic alliances because they believe that it will yield a desired return at a reasonable cost. They pros of alliances include leveraging resources, broadening target markets and increasing sales. The cons of alliances are exposing internal operations to potential competitors and decreased autonomy. Strategy alliances within the airline industry has been widespread, including the largest, Star Alliance which brings together 15 airlines.

6. How are qualitative and quantitative analysis used in assessing potential new products and

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services?

The qualitative standards involve answering the following questions: - To what extent will the product increase sales and profits?

- Will the product attract new customers, and to what extent will it cannibalize from the sales of current products?

- What price would consumers pay for the product?

- Do we have the expertise and capacity to produce this product within our units?

- Does the competition offer a similar product? If so, how can we differentiate our product?

The quantitative analysis involves developing a weighted scoring for each new product idea to determine those with the greatest potential for success. The scoring is normally based on criteria such as the following: - how the potential product or service contributes in a positive way to the image of the product and the company, - how the potential product contributes to the achieving the overall company goals, - the strengths, weaknesses, opportunities, and threats which the firm faces, - impact on current and potential customers, - voids in the current product-service mix, - equipment necessary to produce the new item, and potential sources of supply for the new product or the necessary ingredients.

7. Define and cite two examples for each of the following: brand; brand name; brand mark; and trade mark.

-

Brand — This is the name, sign, symbol, design or any combination of these items that is used to identify the product and establish an identity which is separate and unique from those competing. (e.g., Delta Air Lines, Hertz Rental Car Agency) Brand name — This is the part of the brand consisting of the words or letters that can be used to identify the firm. (e.g., Friendly’s, Marriott) Brand mark — This is the symbol or logo design that is used to identify the product. (e.g., McDonald’s golden arches, Sheraton’s S inside the wreath) Trademark — A trademark is the brand that has been given legal protection and is protected for exclusive use by the owner of the trademark.

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8.

What are the characteristics of effective branding? Do you agree or disagree with these criteria? Can you cite examples of successful brands that do not meet these criteria? Why do you believe these brands are successful?

-

Easy to pronounce, recognize, and remember Describes the benefits of the product or service Can be translated into foreign languages Distinctive and capable of legal protection

Overall, they lead to better brand names. However, it is still possible to be successful without adhering to these criteria. For example, many independent restaurants use the family name of the owner and, in some cases, it is difficult to pronounce or remember. The restaurants are successful because they offer a unique product with good quality and value to the customer.

Case Study: Product Development Dilemma at Rocco’s 1. What should you tell the president when you meet on Monday? What action steps should you recommend? Why? Clearly the firm needs to take action, but not in haste. Sales are flat, despite modest price increases, indicating that actual customer counts are declining. When meeting with the President, the basis for the discussion should be centered on process, not specific steps. The focus should be on the “means” not the “ends.” Before decisions are made, the senior management needs to develop data and answers to questions such as: (a) why have sales of prepackaged salads failed to meet expectations; (b) why are customer counts declining; (c) to whom are we losing business?

2. Should Rocco’s develop a more structured approach to product development? Why or why not? If yes, what structure would you recommend and why? If no, why not?

Rocco’s could be more structured, but not in a way that imitates the development processes of national chains. They should seek to follow the market leaders quickly, with product which use a second but better strategy. This will provide the best competitive response, while minimizing the resources which need to be allocated for product development.

3. Are there specific structures or ideas that you might adapt from what the national chains do?

The structures and processes which national chains use are really not applicable to a 40 unit chain like Rocco’s. The depth and breadth of resources of national chains far outstrip companies such as Rocco’s.

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4. What type of product development strategy should Rocco’s use – defensive, imitative, responsive, or something else?

Rocco’s best approach is a reactive strategy. They should develop an approach which uses imitative, second but better, and responsive strategic approaches.

Case Study: Ben’s Internship Interview 1. What questions should Ben be prepared to answer?

All universities offer assistance in preparation for interviewing. This assignment offers an excellent way to connect with individuals responsible for this function. Invite a representative to class to discuss such items as resume preparation, interview preparation, interview questions, etc. In addition, there are numerous web based resources, including the following http://www.jmu.edu/cap/sweats2suits/ http://www.jmu.edu/cap/sweats2suits/PDFs/9-Interviewing.pdf http://www.jmu.edu/cap/job_intern_search/job_search_worksheet.pdf 2.

What questions should Ben ask at the interview?

Ben should conduct research about the company. This can be done on the company’s web site, but also through other electronic and non-electronic searching methods. Working with research librarians at the university could prove invaluable. In general, he should be prepared to ask questions about • Job duties and expectations • Training programs • Level and type of supervision • Performance expectations and evaluation • Feasibility of a permanent position offer following the internship • Organizational structure

3. What elements of branding and planning for new products and services are most important for Ben to be knowledgeable about?

He should be very knowledgeable about the products and services which the company offers.

He should know how individual brands are targeted towards specific markets.

4. What questions related to product and service development should Ben ask about?

He should be prepared to thoroughly understand the ways that products and services are developed and should be prepared to ask how such functions are performed at this particular company.

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Chapter Seven Test Bank Multiple Choice Questions 1.

Which of the following fast food restaurants has the reputation for being the major innovator in the industry? a.

Burger King b.

Arby’s c.

McDonald’s d.

Wendy’s

2.

Which of the following is not a reason for developing product lines. a. it offers new growth opportunities for the business b. it helps a company to concentrate its business risk in one area c. it leads to more efficient use of company resources d. it can help a company increase its market share

3.

Which of the following would be considered a proactive strategy for developing new products? a. acquisition b. imitative c. responsive d. all of the above

4.

Wyndham Hotels recent introduction of its line of “Garden” hotels targeted at business travelers would be an example of a strategy. a. proactive b. reactive c. innovative

5.

Which of the following is not a good source for new product ideas? a. employees b. research and development teams c. customers d. competitors e. all of the above are good sources for new product ideas

6.

Just prior to performing business analysis for new-product development, a firm must engage in: a. idea generation b. product screening c. concept testing d. none of the above

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7.

Which of the following is the most expensive stage in the new product development process? a. market introduction b. product screening c. concept testing d. business analysis and test marketing

8.

The symbol or logo design that is used to identify a product or service is a: a. brand name b. brand mark c. trademark d. brand concept

9.

Which of the following is not a characteristic of effective branding? a. easy to pronounce b. describes the benefits of the product or service c. can be translated into foreign languages d. all of the above

10.

Which of the following is true regarding test markets? a. locations should be representative of the planned markets b. there shouldn’t be any influence by competitors from neighboring locations c. the period for the test market should not exceed one month d. all of the above e. a and b only

True/False Questions 1. Customers are a good source for new product ideas.

2. During the product screening phase of the new product development process, both qualitative and quantitative analyses should be performed.

3. Profits are usually positive during the market introduction stage.

4. Firms that use proactive strategies will be more profitable than firms that use reactive strategies.

5. Firms within the restaurant industry tend to follow the criteria for branding very closely.

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Chapter Eight Managing Products and Services Outline I. II. III.

IV.

V.

VI.

Chapter Objectives Industry Profile Introduction A. Core Product B. Peripheral Services 1.

Facilitating products 2.

Supporting products C. Augmented Product The Product Life Cycle A. Introduction Stage B. Growth Stage C. Maturity Stage D. Decline Stage Applying the Product Life Cycle A. Developing Strategies for the Product Life Cycle 1.

Compile historical data 2.

Identify competitive trends 3.

Determine changes in the product-service mix 4.

Study the product life cycles of similar products 5.

Project sales 6.

Locate current position of the life cycle 7.

Develop strategies B. Ways to Extend the Product Life Cycle 1.

Increasing sales to existing customers 2.

Increasing the number of users 3.

Finding new uses C. Pros and Cons of the Product Life Cycle 1.

Identify stage and determine correct product-service mix 2.

Life cycle is not the same for all products or product categories Other Product Concepts A. Wheel of Retailing B. Resource Allocation Models 1.

Strategic business units 2.

Boston Consulting Group matrix a. question marks b. stars c. cash cows d. dogs C. Menu Sales Mix Analysis

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VII.

VIII. IX. X. XI.

1.

Menu engineering 2.

Sales mix analysis matrix D. Resource Allocation Models and the Product Life Cycle Managing in the Service Environment A. Conflicts between Operations and Marketing 1.

Sales and marketing focus on revenue maximization 2.

Operations focus on cost containment 3.

Building bridges between functional areas a. transfer managers across functional areas b. create cross-functional teams c. cross-train associates to perform broader variety of tasks d. delegate authority to individual units e. institute gain-sharing programs B. Managing Supply and Demand 1.

Modify price 2.

Develop programs to boost non-peak demand periods 3.

Shift demand through reservations 4.

Increase personnel efficiency 5.

Increase consumer involvement in the delivery process Summary of Chapter Objectives Key Terms and Concepts Questions for Review and Discussion Case Study: Starbucks Coffee

Answers to End of Chapter Questions 1. What are the four levels of a product? How can peripheral services be used to gain a competitive advantage?

Core product, facilitating products, supporting products, and the augmented product are the four levels of a product. Peripheral services include the facilitating and supporting products that allow a firm to differentiate itself from its competitors. For example, some rental car agencies have door-to-door service and some airlines offer ticketless travel.

2. What are the stages of the product life cycle? What are the characteristics of each stage?

• • • •

Introduction: low sales, negative profits, no competitors Growth: rapidly increasing sales and profits, new competitors Maturity: saturated sales, declining profits, many competitors Decline: low profits and rapidly declining sales, decreasing competition

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3. What do you see as the advantages and disadvantages of using the product life cycle as a marketing tool?

• •

Advantages: improves planning, encourages firms to be proactive, helps firms recognize potential threats and opportunities Disadvantages: doesn’t apply to all products, may be a self-fulfilling prophecy, hard to determine stages, may ignore other important factors

4. How should a business go about developing a strategy for various stages in the product life cycle? What techniques are most appropriate for the various stages?

Table 8.1 provides an extensive list of the strategies and tactics that can be used in the various stages of the product life cycle.

5. What are some of the ways to extend the product life cycle? Of these techniques, which one do you think is most useful? Why? • • •

Increasing sales to existing users Increasing the number of users Finding new uses

6. What is the wheel of retailing? Does it apply to the hospitality industry?

The wheel of retailing is founded on the notion that there is some type of impetus for retail firms that enter the low end of the market with basic products and low prices, to gravitate toward the high end of the market. This is accomplished by adding value through new features and amenities, and raising prices. Hospitality firms may look to move to locations with more traffic and higher rents or real estate values. Eventually, this continual upward movement of firms and their products provides an opportunity for new competitors to enter the market at the lower end of the market (e.g., economy hotels). This repositioning can backfire and cause a firm to loose sales and market share by positioning itself away from its original market.

7. What is menu sales mix analysis?

Menu sales mix analysis involves counting the time of times each item is sold and determining the most profitable menu items based on cost and revenue. It used to create the quadrants for a resource allocation model.

8. What are Lovelock’s recommendations for reducing the conflicts between sales and operations?

• • •

Transfer managers across functional areas Create cross-functional teams Cross-train associates to perform a wider variety of tasks

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• •

Delegate authority to individual units Institute gain-sharing programs

9. What are the methods for managing supply and demand? Which methods are capable of increasing capacity for hospitality firms?

• • • • •

Modify price Develop programs to boost volume during non-peak demand periods Shift demand through reservations Increase personnel efficiency Increase customer involvement in self-service aspects of service delivery

Increasing personnel efficiency and increasing customer involvement in service delivery are the two methods that focus on increasing capacity for hospitality firms. An argument could be made for modifying price as in the case of rental car agencies charging a premium for one-way use.

10. What are resource allocation models? How are they related to the product life cycle?

Resource allocation models evaluate a strategic business unit’s relative strength in a market along with the attractiveness of the industry to determine where firms will get the best return on investing capital to various products or divisions. The industry sales curve in the product life cycle illustrates the industry attractiveness, or potential growth rate, allowing managers to loosely fit growth-share quadrants in life cycle stages (e.g., question marks in introduction, stars in growth, cash cows in maturity, and dogs in decline).

Case Study – Starbucks Coffee 1. What stage of the product life cycle is the Starbucks brand in as of 2006? Explain your answer.

The chart below is based on the number of total units/stores in the chain from 1987 through 2006. It gives an indication of the growth experienced by the chain and would suggest that Starbucks is in the growth stage of the product life cycle. However, students should also examine the chain’s revenues and profits over the same time period to make a proper assessment (one would assume total revenue increases in proportion to the number of stores).

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2. What product category would describe the Starbucks brand? What other companies would you consider direct and indirect competitors for Starbucks and why?

Starbucks would be considered a relatively high quality coffee with a high relative price. The direct competitors for the stores would be Seattle coffee stores, often found in other retail establishments like hotels and bookstores (e.g., Borders), and independent coffee shops.

Starbucks competes with these brands in their stores and for packaged coffee sold in supermarkets. Some indirect competitors might franchise retail chains such as Dunkin Donuts and McDonald’s that sell coffee in addition to their other menu items.

3. In 2008, Starbucks announced plans to close over 600 of its stores, most of which were opened in 2006. What led to this decision?

Starbucks started to experience a decrease in same store sales from year to year, which led to a decrease in overall profits for the chain. After enjoying a healthy growth stage, the market for high-end coffee was becoming crowded and there was downward pressure on prices. Starbucks maintained higher prices and started to lose market share to lower-priced competitors.

4. What future strategies would you suggest for the Starbucks brand?

Students can offer many alternative strategies dealing with pricing practices and distribution. Starbucks tried offering a lower priced option to compete with McDonald’s and Dunkin Donuts, but the strategy wasn’t successful. In the long run, Starbucks has to clearly delineate its market and provide products that offer a high level of perceived value in the minds of these consumers. As for distribution, it might be necessary for Starbucks to continue to monitor store sales and close unprofitable operations. The company saturated the market and realized a large of amount of cannibalization between stores located close in proximity.

Finally, students should discuss the pros and cons surrounding the decision to expand the company by adding large numbers of stores around the world.

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Chapter Eight Test Bank Multiple Choice Questions 1.

A hotel concierge service is an example of a: a. core product b. supporting product c. facilitating product

2.

The core product and peripheral services combine to form the: a. supporting product b. facilitating product c. augmented product

3.

Profits are normally negative during the ____ stage of the product life cycle. a. introduction b. growth c. maturity d. decline

4.

Sales are normally at a maximum during the ____ stage of the product life cycle. a. introduction b. growth c. maturity d. decline

5.

The largest number of competitors is normally found during the ____ stage of the product life cycle. a. introduction b. growth c. maturity d. decline

6.

Increasing sales and maximizing market share is the main marketing objective during the _____ stage of the product life cycle. a. introduction b. growth c. maturity d. decline

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7.

Market growth rate in the Boston Consulting Group matrix serves as a surrogate for: a. relative market share b. competitive position c. industry attractiveness d. none of the above

8.

Strategic business units with high market growth rates and low relative market shares are labeled: a. question marks b. stars c. cash cows d. dogs

9.

The main purpose of using a growth-share matrix like the BCG matrix is for: a. forecasting sales b. allocating resources c. formulating promotion strategies d. setting prices

10.

Which of the following is not a strategy used by hospitality firms to manage supply and demand? a. modify price b. shift demand through reservations c. increase personnel efficiency d. all of the above are strategies used to manage supply and demand

11.

The menu sales mix analysis matrix is an example of: a. a resource allocation model b. the Wheel of Retailing c. the Product Life Cycle

12.

Which of the following is not a way to extend the product life cycle? a. increasing sales to existing customers b. increasing the number users or customers c. increasing the price level on existing products or services d. finding new uses for products or services

13.

The horizontal axis in the Boston Consulting Group Matrix is referred to as: a. market growth rate b. relative market share c. industry attractiveness

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14.

Darden Restaurant Group’s relatively new restaurant brand, Seasons 52, would be an example of a ____ in the Boston Consulting Group Matrix. a.

Star b.

Dog c.

Cash Cow d.

Question mark

True/False Questions 1. The core product and the peripheral services combine to form the augmented product.

2. It is fairly easy to forecast the stages in the product life cycle.

3. The Wheel of Retailing concept applies to product industries, but not very well to the hospitality industry.

4. Cash cows would most resemble products in the growth stage of the product life cycle.

5. The difference between REVPAR and ARGE is that REVPAR does not compare actual revenue to maximum potential revenue.

6. Menu engineering is a less sophisticated approach than menu sales mix analysis.

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Chapter Nine Marketing Channels Outline I. II. III. IV.

V.

VI.

Chapter Objectives Industry Profile Introduction Channel Strategy A. Channel organization 1.

Channel width a. exclusive distribution b. selective distribution c. intensive distribution 2.

Channel length a. direct channel b. indirect channel B. Intermediaries 1.

Travel Agents 2.

Tour Wholesalers and Operators 3.

Meeting Planners 4.

Hotel Representatives 5.

Destination Marketing Organizations (DMO) 6.

Destination Management Companies (DMC) 7.

Concierge C. Channel management 1.

Channel power a. reward power b. coercive power c. expert power d. legitimate power e. referent power 2.

Channel leadership 3.

Vertical marketing systems a. corporate vertical marketing system b. administered vertical marketing system c. contractual vertical marketing system 4.

Channel member selection and retention D. Building customer value in channel systems 1.

Increasing customer benefits 2.

Improving cost efficiency Franchising A. Franchisee B. Franchisor Summary of Chapter Objectives

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VII. VIII. IX.

Key Terms and Concepts Questions for Review and Discussion Case Study: The Wing Shack

Answers to End of Chapter Questions 1. What factors are considered in determining a firm’s channel width and channel length?

The channel width decision is concerned with the desired amount of market coverage. In other words, larger widths would be associated with more market coverage. There are three basic channel width strategies employed by firms: 1) exclusive distribution, 2) selective distribution, and 3) intensive distribution. The width of the channel ranges from exclusive distribution (one particular outlet) to intensive distribution (as many outlets as possible).

The channel length decision is involves the number of intermediaries between the manufacturer and the final consumer. In the case of services, the channel is usually very short because of the simultaneous production and consumption. A channel can either be direct from the manufacturer to the consumer, or indirect with intermediaries performing some of the necessary channel functions.

2. List and give examples of the intermediaries that exist in the hospitality and travel industry.

Travel agents are responsible for a large volume of bookings for airlines, hotels, and cruises.

In addition, travel agents sell admissions to tourist attractions and special events.

Tour wholesalers, or tour operators, contract with hospitality and travel firms to obtain services that can be combined in a package and offered to the leisure market. These packages can contain any combination of lodging, transportation, event or attraction tickets, and meals.

Large organizations like corporations and trade associations have individuals or departments that are responsible for the travel plans of its members. These meeting planners negotiate with hotels, airlines and other travel firms on behalf of their members for guest rooms and meeting space.

Smaller hotels may have a problem justifying a sales force. Therefore, it may be in the hotel’s best interest to hire an independent hotel representative that will market the hotel to chosen market segments. Even large hotels may hire these independent representatives to take advantage of their access to certain markets.

Each region, state, and/or city may have its own office for travel and tourism. These agencies or bureaus are responsible for promoting the area as a travel destination, and securing major events.

3. List and describe the five forms of channel power.

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• • • • •

Reward power is the ability of one channel member to influence the behavior of another member through the use of incentives. These incentives can be in the form of discounts, trade promotions, or some other form of promotional support.

Coercive power is the ability to influence a channel member’s behavior through the use of threats. These threats could be in the form of restricted availability or use of products, or other unfavorable terms such as price or discounts.

Expert power is the result of the superior knowledge of one channel member in relation to another.

Legitimate power is obtained through contractual arrangements that specify the members’ expected behaviors.

Referent power occurs when a channel member has a certain prestige, or image, that would benefit another member as a result of their association.

4. Explain the three types of vertical marketing systems.

•

Corporate system - when all of the participants are actually members of the same organization. In this case, the original firm either develops, or purchases, other firms at the various levels in the channel. A corporate system can be developed through backward integration (toward the manufacturer or supplier) or forward integration (toward the retailer or distributor).

•

Administered system - one in which a manufacturer or supplier attempts to control the flow of goods or services through the channel. This is usually associated with expert power in that distributors and retailers are willing to relinquish some of their control in order to benefit from the producer’s knowledge and background. This arrangement is similar to a conventional channel, but there is more cooperation and sharing of information that is necessary for a successful operation.

•

Contractual system - one that unifies the channel members by means of a legal and binding contract. The firms agree to abide by the terms of the agreement, the goal of which is to realize cost economies that would not be possible if the firms operated independently. This approach is similar to a corporate system, but it may be preferable when firms do not have the resources or expertise to develop operations at all channel levels. The firms benefit from pooling resources for functions such as advertising and research. Franchising is one example of a contractual distribution system.

5. What are the ways a firm can enhance customer value through channel systems?

• •

Increasing customer benefits Improving cost efficiency

6. What is franchising? Why would firms or individuals choose to enter this type of arrangement?

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Franchising is a contractual arrangement whereby one firm (the franchisor) licenses a number of other firms (the franchisees) to use the franchisor’s name and business practices.

As a method of distribution, franchising provides many opportunities for growth and profitability. However, when considering a franchising relationship, both parties should carefully evaluate the alternative forms of ownership and operation. The individual goals and objectives of each party have to be weighed against the tradeoffs that are required from a franchisor-franchisee relationship. Table 9.1 summarizes the advantages and disadvantages associated with franchising.

7. If you have 10 tour operators and 100 customers, what is the difference in the number of transactions with, and without, a travel agent acting as an intermediary?

If each of the tour operators had to deal with each of the 100 customers there would be a total of 1,000 transactions (10 x 100). However, if there is a travel agent acting as an intermediary, then there would only be 110 transactions (10 x 1) + (100 x 1).

8. Internet Exercise - Franchising There are many websites that help people find franchise opportunities. Some of the popular ones are: www.franchiseopportunities.com/industries/29/Full_Service_Restaur.htm www.franchise.com/franchise-opportunities.cfm www.americasbestfranchises.com/Food-Beverage-Franchises www.franchisedirect.com/restaurantfranchises/81 Once students start doing their research, they will find that most of the food franchise opportunities are for fast food or quick casual restaurants. It is much more difficult to find casual dining opportunities for full-service restaurants. The students need to find them through the websites listed above, or go to company’s website for casual dining restaurants to see if there are franchising opportunities available. For example, Damon’s is a wellestablished restaurant chain that offers franchises. www.damons.com/franchise.cfm Another well-established restaurant chain that offers franchises is Buffalo Wild Wings - the chain was started in the Midwest in Kent, Ohio. www.franchiseinfo.buffalowildwings.com/ Both of these restaurants have a good bar business. It should be interesting to see what students are able to find. There are many regional operations that are looking to expand into franchise operations.

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Case Study – The Wing Shack 1. What issues should the owners consider before deciding whether to open more restaurants on their own or franchise?

There are many advantages and disadvantages associated with franchising. The following table summarizes these advantages and disadvantages and students should discuss them from the point of view of the franchisor in this case.

Franchisee

Franchisor

Advantages Established product Technical assistance Quality standards Less operating capital Opportunities for growth Cooperative advertising Rapid expansion Diversified risk Cost economies Cooperative advertising Employee issues

Disadvantages Additional fees Loss of control Difficult to terminate Pooled performance

Loss of control Reduced profits Legal issues Recruitment

2. Assuming the original restaurant is in the Northeast, what cities or towns would you suggest for the next five restaurants?

The business model was created for a college town and it has been successful so far. The best cities or towns would be where there are large colleges or universities, but not a large city where there are many competitors and not much demand for take-out. Students should suggest towns like State College, PA (Penn State), Ithaca, NY (Cornell and Ithaca College), Amherst, MA (UMass and Amherst College), Storrs, CT (UConn), Kingston, RI (University of Rhode Island), Burlington, VT (University of Vermont), and Durham, NH (University of New Hampshire).

3. How many franchised units would they have to contract to make the same profit as they do in the original unit (assuming the revenue will be similar for all units)?

If the profit on the original restaurant is 28% of revenue and the franchise fee is 3-4%, then the owners would have to have 7 or 8 units to make the same amount of profit (28% / 4% = 8 units).

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Chapter Nine Test Bank Multiple Choice Questions 1.

Independent restaurants and hotels that have one or two locations are practicing: a. intensive distribution b. exclusive distribution c. selective distribution

2.

Which of the following restaurants would be the best example of selective distribution? a.

McDonald’s b.

Applebee’s c.

Hard Rock Café

3.

What type of power is used by a firm such as Microsoft to become successful? a. reward b. coercive c. legitimate d. referent e. all of the above

4.

_____ power is obtained through contractual arrangements between channel members. a. reward b. coercive c. legitimate d. referent

5.

Franchising is an example of a: a. contractual system b. corporate system c. administered system

6.

Which of the following is not an advantage for the franchisor in a franchising arrangement? a. diversified risk b. cost economies c. rapid expansion d. increased control

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7.

Which of the following is not considered an intermediary in the hospitality and travel industry? a. travel agent b. tour operator c. hotel salesperson d. meeting planner

8.

Which one of the following is not an activity associated with distribution? a. communicating and negotiating b. reducing storage c. installing products d. providing service

9.

Which of the following is considered a channel-length strategy? a. selective distribution b. redirect channel c. exclusive distribution d. indirect channel

10.

In choosing a channel system, which of the following does not increase customer benefits? a. expanding operations by franchising b. delivering product benefits c. building brand image d. delivering service products

11.

The following is not an advantage for the franchisee in a franchising arrangement. a. less operating capital is needed b. more opportunities for growth c. less costs/fees involved d. cooperative advertising

12.

The type of intermediary that is responsible for promoting the long-term development of a destination is: a. destination management company b. tour wholesalers and operators c. travel agents d. destination marketing organizations

13.

If you have 5 customers and 5 service providers, how many contacts or communications would be necessary if you added one intermediary? a.

25 b.

10 c.

5

14.

Which of the following companies would be considered an intermediary?

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a. b. c.

Expedia.com Marriott International Hertz Rental Car Agency

True/False Questions 1. The main objective of the distribution function is to get products and services to consumers where, when, and how they prefer them.

2. The channel width decision involves the number of intermediaries between the manufacturer and the final consumer.

3. There are no indirect channels in service operations like hospitality and travel.

4. Meeting planners are considered intermediaries in the hotel distribution system for guest rooms.

5. For a franchisor, the sharing of risk and ownership results in the sharing of profits.

6. The ability of one channel member to influence the behavior of other channel members is referred to as channel leadership.

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Chapter Ten Electronic Commerce Outline I. II. III.

IV.

V.

VI. VII. VIII. IX. X.

Chapter objectives and outline Industry profile Introduction A. What is the Internet 1.

The cyberspace community 2.

Security issues B. Traits of a networked economy C. Definition and scope of electronic commerce 1.

Exchange of digitized information 2.

Technology enable transactions 3.

Technology mediated transactions 4.

Intra- and inter-organizational activities D. Why use electronic marketing E. The beginning of electronic commerce 1.

Business-to-business (B2B) 2.

Business-to-consumer (B2C) 3.

Consumer-to-business (C2B) 4.

Consumer-to-consumer (C2C) Management issues related to electronic commerce A. Is electronic commerce for large and small companies?

B. Structures of business models 1.

Revenue model 2.

Value proposition C. Electronic commerce business models D. Internet strategies 1.

Site design and layout 2.

Taking orders and accepting payment E. Electronic commerce implementation considerations F. Benefits of electronic commerce for business and consumers Electronic marketing strategies and tactics A. Getting found online: Search engine optimization 1.

Natural or organic search 2.

Paid keyword search 3.

Search feeds B. Budgeting for online marketing Summary of chapter objectives Key terms and concepts Questions for review and discussion Case study: Electronic Commerce Strategy at Malone Golf Club Digital case study: Priceline.com

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Answers to End of Chapter Questions 1. What are the pros and cons of the openness and interconnectedness of the Internet?

Pros: - International reach - Cost reduction and supply chain improvements - Improved customer communications and relations - Availability of updated information and materials - Ubiquity - Instant delivery and confirmation - Gain market share - Improve customer service Cons: - Security issues and concerns - Reduce costs of transactions - Loss of personal face-to-face interaction 2. Why are security issues of such importance in developing an Internet strategy and business plan?

Consumers need to feel secure when the are online and transact business via the Internet.

They need to be confident that their personal information will be secure and that their personal information will not be sold. It is important for a company to develop privacy policies and share these policies openly with customers.

3. What are the traits of a networked economy? Which trait to you believe is the most significant? Why? -

Creates value through gathering, synthesizing and distributing information Convergence of the management of the business and management of technology Firms compete in real time Low barriers to entry and low variable costs Resources are organized around the demand side of the business Relationships are managed via customized customer experiences Uses technology-mediated methods to measure and track customer behavior and interaction patterns

4. Which of the electronic commerce trends discussed in the chapter will have the most impact on the hospitality and tourism industry? Why? What specific actions must a hospitality and tourism marketing manager make in order to take advantage of this trend?

This is an experiential and critical thinking exercise. Once students have completed the

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assignment, divided them into groups to discuss the results. Ask students to justify their answers, analysis, and assumptions.

5. Review two or three well-known hospitality and tourism web sites. Based on your review, prepare the responses to the following questions: (a) what is the firm’s purpose for engaging in online communication; (b) what is the firm’s web strategy? What are the goals and specific objectives? What outcomes do you believe the firm is seeking to achieve: and (c) how are the electronic commerce efforts being integrated with other forms of communication? How will consistency of branding and identity be maintained?

This is an experiential and critical thinking exercise. Once students have completed the assignment, divided them into groups to discuss the results. Ask students to justify their answers, analysis, and assumptions.

6. What are the four primary classifications if electronic commerce? Which is the most common in the hospitality and tourism industry?

- Business-to-business (B2B) - Business-to-consumer (B2C) - Consumer-to-business (C2B) - Consumer-to-consumer (C2C) The most common form in the hospitality and tourism industry is business-to-consumer.

7. What revenue models are most common in electronic commerce? Which one(s) are most applicable to the hospitality and tourism industry? Why? The revenue models are: - Sales - Transaction fees - Subscription fees - Advertising fees - Affiliate fees All types could be used by the hospitality and tourism industry. The sales revenue model is the most common.

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Case Study: Electronic Commerce at Malone Golf Club 1. What are the pros and cons of accepting tee time reservations online?

Pros: - Increase access to customer base - Cost reduction - Improved customer communications and relations - Availability of updated information and materials - Ubiquity, 24/7 access to tee times by customers - Instant delivery and confirmation - Improve customer service

-

Cons: - Decrease face-to-face personal service More high tech than customer based wants or needs. Will the members accept it, or view it as competing with guests for tee times?

- Transition from current system to online system 2. Will online reservations impact the staffing of the pro shop?

The impact on staffing should be minimal. Staff members will potentially have more time to work individually with customers, thereby improving customer service.

3. What electronic commerce business model should Malone Golf Club adopt? Should it auction off tee times in low-demand periods or keep the traditional pricing model in place?

What are the financial implications of these options?

There are considering adopting an online direct marketing model, which is base on a sales revenue model. Using an auction approach to tee times has many potential downside risks, including (a) reducing overall revenue if sales do not meet projections; (b) conditioning guests to only purchase when a price reduction can be attained; or (c) driving prices higher during peak time periods and creating the impression that the golf club is price gouging.

4. Should the club consider developing it own online reservation systems or outsource this to another company that provides the service for other golf clubs?

A single unit operation such as Malone Golf Club would be ill-advised to develop an online reservation system. There are numerous services that could be used to implement this service, all at a reasonable fee.

5. What increase in greens fee and membership revenue will be required to offset the costs of an online reservation system?

Additional data is required to answer this question. The total cost of the reservation system

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must be determined. Once this is known, then will the cost of the system be passed on to current members and guests, or will additional new business more than offset the cost of the system.

6. How will potential online systems integrate with the current tee time system?

Additional data is required to answer this question. The basic question is whether to develop your own reservation system, or contract with one of the many regional and national vendors. Encourage students to contact a web search of possible vendors and to develop a profile of the services and costs associated with each vendor.

7.

How might the members and frequent players react to online reservations? Will it be viewed positively or negatively?

Additional data is required to answer this question. Before committing to an online system, marketing research could be used to determine the potential impact on members and current guests. This question can be used to develop a survey questionnaire that would be administered to members and frequent players. In addition, data concerning the potential increase in new guests, and therefore market share, would be useful in making the decision about an online reservation system. Encourage students to search for articles and other research reports that address this subject. This can lead to an interesting useful class discussion.

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Chapter Ten Test Bank Multiple Choice Questions 1. Which of the following was a previous form of electronic business? a. CGI b. EDI c. WWW d. ATM’s e. b & d above 2. The precursor of the Internet was first introduced by the Rand Corporation in which decade? a. 1960s b. 1970s c. 1980s d. 1990s 3. Which of the following is not an aspect of Internet security a. Authentication b. Zone defense c. Firewall d. Encryption 4. Email that is sent to prior users and web sites which customize content based on the user’s prior visits are engaging in ___________ . a. Targeted marketing b. Push technology c. Pull technology d. Data encryption 5. The largest percentage of electronic commerce transactions are in which classification? a. Business-to-business (B2B) b. Business-to-consumer (B2C) c. Consumer-to-business (C2B) d. Consumer-to-consumer (C2C) 6. Which of the following is not a common objective for firms to engage in electronic commerce? a. Create brand awareness b. Provide information about the products and services offered c. Build loyalty through frequent guest programs d. Sell products and services e. Lower the cost of the products and services sold

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7. Which revenue business model is used by Marriott.com a. Sales b. Transaction fees c. Subscription fees d. Advertising fees e. Affiliate fees f. None of the above 8. Web content normally consists of which of the following? a. Text b. Links c. Forms d. Images e. All of the above 9. Benefits of electronic commerce include all but which one of the following? a. Cost reduction and supply chain improvements b. Ability to pressure franchisees to conform c. Improved customer communications and relations d. Availability of updated materials and information e. All of the above 10. Which of the following pertains to Internet security? a. TCP/IP b. Firewall c. JPEG d. DNS True/False Questions 1. One of the reasons for growth of the Internet is the ability for manufacturers and service providers to sell directly to consumers at retail or near-retail prices without channel partners.

2. Pure Internet companies, such as Expedia.com or priceline.com, have low barriers to entry and high variable costs.

3. The percentage of sales from Internet sales of hospitality and tourism service such as airline tickets is much lower than other purchases, such as books.

4. Amazon.com is an example of B2C electronic commerce.

5. The two most common electronic commerce business models are based on revenue models and value proposition models.

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Part Five Promotions Strategy

87

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Chapter Eleven Promotion and Advertising Outline I. II. III.

IV.

V.

Chapter Objectives and Outline Industry Profile Introduction A. The Promotional Mix 1.

Advertising 2.

Personal Selling 3.

Sales Promotion 4.

Public Relations B. The Functions of Promotion and Advertising Managing the Promotional Mix A. Promoting over the Product Life Cycle 1.

Introduction Stage 2.

Growth Stage 3.

Maturity Stage 4.

Decline Stage B. Establishing the Promotional Budget 1.

Advantages and disadvantages of using budgets 2.

Budgeting methods a. percentage of sales b. desired objective c. competitive parity d. all-you-can-afford 3.

A budgeting process Advertising Management A. Forms of Advertising 1.

National advertising 2.

Local advertising 3.

Cooperative advertising B. Advertising Positioning and Strategy 1.

Strategy development i. Objectives ii. Targeted audience iii. Key consumer benefit iv. Support v. Tone and manner 2.

Developing a central appeal 3.

Keys to successful advertising

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VI.

Planning and Evaluating Advertising Campaigns A. Types of Advertising Campaigns B. An Advertising Planning Model 1.

Input form the marketing information system 2.

Organizational objectives 3.

Planning and strategy formulation 4.

Implementation 5.

Evaluation of advertising effectiveness C. Evaluating an Advertising Campaign 1.

Copy testing 2.

Inquiry and sales 3.

Coupons and split runs 4.

Sales tests 5.

Consumer testing of awareness, recall, and attitude D. Relations with an Advertising Agency 1.

The role of an agency 2.

Types of advertising agencies 3.

Selecting an advertising agency 4.

Agency compensation VII. Effects of Advertising A. Social and Ethical Criticism of Advertising 1.

Misleading or deceptive 2.

Offensive or in poor taste 3.

Encourages materialism 4.

Encourages people to buy things they don’t need B. Economic Effects of Advertising 1.

Effects on consumer choice 2.

Effects on competition 3.

Effects on product costs and prices VIII. Summary of Chapter Objectives A. Key Terms and Concepts B. Review and Discussion Questions IX. Case Study: The Glen Pub Answers to End of Chapter Questions 1. What are the four elements of the promotional mix?

Advertising, personal selling, sales promotions, and public relations.

2. How is the promotional mix used throughout the stages of the product life cycle?

During the introduction stage, all components of the promotional mix are used. Advertising and publicity are used to generate awareness among consumers and personal selling is used to communicate with intermediaries. Finally, sales promotions are used to induce trial.

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During the growth stage, firms reduce the amount of sales promotions and publicity and focus more on brand loyalty. Comparative advertising is used for consumers and personal selling is still used for intermediaries.

During the maturity stage, reminder advertising is used along with some sales promotions.

There is a limited use of personal selling and public relations.

During the decline stage, there is virtually no public relations or personal selling, and advertising and sales promotions are kept at a minimum.

3. Select restaurants in your local area, placing each in one of the stages of the product life cycle. Explain why you placed each restaurant in that particular stage.

This is an excellent way to get students involved in using the material in this chapter. They are normally quite familiar with local restaurants and often have differing perceptions about the life cycle stage into which each restaurant will fall.

4. List and discuss the various methods used to establish promotional budgets. Which is the most common? Which one is the best from a theoretical standpoint?

- Percentage of sales - a sales forecast is obtained, and a given percentage of this forecast is allocated to advertising. This is the most common method because of its simplicity.

- Desired objective method - involves developing a budget based on well-defined objectives.

Management must plan precisely what it wishes to accomplish through promotion and advertising. Based on these objectives, management must then decide what type and what amount of promotion and advertising will be necessary to achieve the objectives. This method is complicated but it is the best method from a theoretical standpoint.

- Competitive parity method - involves direct comparison with the promotion and advertising efforts of major competitors. Based on the type and amount of promotion done by the competition, management then establishes a budget that will roughly match the activities of the major competition.

- All-you-can-afford method - this method is usually a last resort practiced by small firms that don’t have the luxury of setting resources aside for promotion and advertising. Whatever is left over after meeting the firm’s obligations can be used for promotion.

5. What are the three forms of advertising? Give examples of each form.

Advertising can be divided into two broad categories, national and local. National advertising is aimed at a national audience by using network television and radio, or national print media such as magazines. This form of advertising normally promotes the general name of the chain, not individual locations or stores. Large hotel and restaurant

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chains like Holiday Inns and Friendly’s use this type of advertising.

Local advertising is used not only by the major hospitality chains but also by second-tier chains, regional chains, and independent operations. Independent restaurants or local rental car companies will focus on the local region. Cooperative advertising, as the name implies, involves two or more firms working together as sponsors of an advertisement that provides benefit to all parties involved. A rental car agency and airline might advertise jointly to form an alliance and defer the cost.

6. How would you describe the process of positioning?

Positioning is the manner in which the consumer views the product-service mix, and each hospitality operation is positioned differently. Before any advertising decisions are made or strategy is plotted, the proper market position must be determined. Firms must understand the target market’s ideal mix and how the firm is positioned relative to the ideal and competitors’ offerings. Then, advertising strategies are devised to move the product-service mix toward the desired position.

7. How would you describe the process of positioning? Cite two examples of hospitality or tourism firms that you believe have done an excellent job of positioning the product–service mix. Why do you believe they have done an excellent job?

Positioning is the manner in which the consumer views the product–service mix, and each hospitality and tourism operation is positioned differently. Before owners or managers make any advertising decisions or plot strategy, they must determine the proper market position.

8. What are the three major goals of advertising?

Generally speaking, advertising should set out to accomplish three goals: (1) to establish awareness in the minds of consumers, (2) to establish positive value in the minds of consumers, and (3) to promote repeat patronage and brand loyalty among consumers.

9. What are the pros and cons of using an advertising agency? Would you use the services of an agency?

- Advantages: First, an agency can increase the effectiveness of advertising; its work is more professional, and its use of media is better. Second, agencies can be especially helpful, if not necessary, in overcoming the special production requirements of radio and television advertising. Third, using an advertising agency is like maintaining a staff of part-time specialists – copywriters, artists, and layout professionals. Fourth, agencies are able to maintain closer contacts with media representatives than can a single advertiser. Finally, some advertising agencies are able to offer consultative services related to such advertising and marketing projects as test marketing.

- Disadvantages: First and foremost is, of course, the question of money. "There is no such

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thing as a free lunch," and top-quality professional assistance will cost money. Furthermore, if the hospitality organization has access to adequate free-lance talent and assistance, the services of an agency may not be required.

10. How are agencies compensated for their work?

Typically, agencies receive payment in several ways: (1) commissions from media, (2) fees or retainers paid by client, (3) service charges for creative and production work, (4) markups on outside purchases, and (5) trade-outs.

11. How would you go about selecting an agency?

- First, make a list of the needs that an agency must satisfy. It is also wise to make a list of the major problems or symptoms unique to the character of the specific hospitality client.

- Second, make a list of prospective agencies. This will involve checking the track records of several agencies as well as informing them of the organization's interest. Some managers prefer to use an agency questionnaire to gather preliminary data from prospective agencies.

- Third, after a list of prospective agencies has been developed, it must be narrowed to a few viable agencies. At this point management should be prepared to meet with agency representatives, review samples of their work, listen to ideas, and evaluate the agency against the organization's needs and criteria.

12. Critique the six keys to successful advertising.

-Allocate enough time -Allocate adequate resources -Analyze the firm’s position -Analyze the market -Carefully select the media -Form and advertising plan 13. What is an advertising campaign? What factors should be considered when planning a campaign?

An advertising campaign includes all forms of advertising held together by a single message or overall theme. A campaign is the overall plan or strategy that guides the development of all forms of advertising. Campaign planning is initiated by considering the competitive situation, currently targeted markets, potentially targeted markets, and market positioning.

The advertising planning model contains five components: (1) input from the marketing information system, (2) organizational objectives, (3) planning and strategy formulation, (4) implementation, and (5) evaluation of advertising effectiveness (see Figure 10.4).

14. Cite and discuss the major campaign checkpoints.

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- Maintain visual similarity - Maintain verbal similarity - Maintain similarity of sound - Maintain similarity of attitude 15. What techniques are used to evaluate advertising effectiveness?

- Copy testing - Inquiry and sales - Coupons and split runs - Sales tests - Consumer testing of awareness, recall, and attitude 16. What are some of the social and ethical consequences associated with advertising?

- It can be misleading or deceptive - It can be in poor taste - It encourages materialism - It encourages people to buy things they don’t need 17. What economic effects are associated with advertising?

- It affects consumer choice (may decrease alternatives considered) - It affects competition (may benefit larger firms) - It affects product costs and prices (increases) Case Study: The Glen Pub 1. How can Mike and his new public relations employee generate more local customer business in the off-season?

As part of a small chain of restaurants, they could learn from the activities used by other units in the chain. What are they doing that is successful? What tactics might be adapted for this resort location? What techniques to restaurants in other resort communities use? What has been successful elsewhere?

They might also seek to become more involved in the local community. In what service organizations and projects might the restaurant’s managers and employees become involved? Might they provide leadership of a service project that occurs during the offseason, thereby providing greater visibility for the restaurant at a time of the year in which they could benefit from more local business?

2. What can they do to entice residents of neighboring communities to drive 10-35 miles for an upscale dinner?

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There are numerous promotions that might be used to entice surrounding residents to drive to the restaurant. These might include price promotions, time of day promotions, frequent guest promotions, or promotions of specific items or offerings. In addition, they might seek more banquet or group business during the off-season, as a means to increase sales.

3. What types of advertising and promotions might increase local community traffic?

They should carefully review what has been used previously, with the goal of re-cycling those promotions and advertising that have been most successful in the past. In addition, what promotions have been used successfully by other units in the chain?

4. What other information is necessary to make advertising and promotion decisions?

More information about the target markets, both locally and within the surrounding communities is needed. What are their purchase habits? What are the costs associated with various forms and vehicles for advertising? Which ones have been used most successfully in the past?

Case Study: Mr. C’s Sandwich Shoppes Students should review and explain the advantages and disadvantages of advertising that are discussed in the chapter. In addition, students should be expected to explore and develop a point of view and justification for (1) where in the product life cycle Mr. C’s restaurant fall and based on this stage, what the most appropriate promotional mix strategy should be; and (2) provide specific suggestions for ways in which the promotional mix could be implemented, including the elements of advertising, personal selling, sales promotion and public relations. The major objective of this case is to help students think more strategically and to be able to develop a point of view and defend it.

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Chapter Eleven Test Bank Multiple Choice Questions 1.

Which of the following components of the promotion mix is a paid form of nonpersonal presentation of ideas and promotion of ideas, goods, or services by an identified sponsor? a. advertising b. personal selling c. public relations d. sales promotions

2.

Which of the following components of the promotion mix involves interpersonal communication? a. advertising b. personal selling c. public relations d. sales promotions e. b and c

3.

Which of the following components of the promotion mix does not have an identified sponsor? a. advertising b. personal selling c. public relations d. sales promotions e. b and c

4.

_____ refers to the elements in the environment that may distract the receiver from properly decoding an intended message. a. interference b. complications c. interruptions d. noise

5.

Advertising and promotion are focused on building name recognition and persuading consumers to buy your brand during the _____ stage of the product life cycle. a. introduction b. growth c. maturity d. decline

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6.

Sales promotions are used primarily during the _____ stage(s) of the product life cycle. a. introduction b. growth c. maturity d. decline e. a and c

7.

The most complicated method for developing a promotional budget would be the: a. percentage of sales method b. desired objective method c. competitive parity method d. all-you-can-afford method

8.

Which of the following types of hospitality firms is most likely to use the all-you-canafford method? a. an international hotel chain b. a government tourism bureau c. a bed and breakfast d. a restaurant franchise

9.

If an evaluation shows that the promotional mix is not successful, a firm can take the following action: a. the promotional mix can be changed to increase the probability of success b. the budget can be modified based on changing market conditions c. the short- and long-range objectives can be changed based on new information d. all of the above e. a and b only

10.

Which of the following is not one of the rules of thumb in developing a central appeal for advertising? a. the appeal should be complex and multifaceted b. the appeal should offer some value to the customer c. the appeal should be believable d. the appeal should be distinctive

11.

Which of the following is not one of the four checkpoints for an advertising campaign? a. maintain visual similarity b. maintain competitive similarity c. maintain similarity of sound d. maintain similarity of attitude

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12.

When advertisements are shown to a group of consumers and the consumers are asked questions about the ads, it is referred to as: a. copy testing b. inquiry and sales c. coupons and split runs d. sales tests

13.

Which of the following is not an advantage of using an advertising agency? a. an agency can increase the effectiveness of advertising b. agencies can overcome special production requirements of the media c. agencies are able to maintain closer contacts with media representatives d. all of the above are advantages of using an advertising agency

14.

Advertising agencies usually receive a _____ commission for advertisements placed in the media. a.

5 percent b.

10 percent c.

15 percent d.

20 percent

15.

Which of the following is not a common criticism of advertising? a. advertising can be offensive or in poor taste b. advertising encourages materialism c. advertising encourages people to buy things they don’t need d. all of the above are common criticisms of advertising

True/False Questions 1. Advertising is a broader term that encompasses all the elements of promotion.

2. Any promotion that is not paid for is referred to as public relations.

3. When promotional budgets are established, all management personnel with marketing responsibilities should be involved in their preparation.

4. Advertising effectiveness can only be measured over the short-term.

5. Given a firm’s limited resources, it is virtually impossible to reach the saturation point for advertising with all market segments.

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Chapter Twelve Advertising and Media Planning Outline I. II. III.

Chapter Objectives and Outline Industry Profile Introduction A. Media Selection B. Developing Media Plans 1.

Performing a market analysis 2.

Establishing media objectives 3.

Developing media strategies 4.

Selecting the media mix 5.

Determining target market and geographic coverage C. Scheduling the Media IV. Print Media A. Techniques for Successful Print Advertising B. Developing Copy for Print Advertising C. Print Advertising Terms V. Broadcast Media A. Radio Advertising 1.

Advantages and disadvantages of radio advertising 2.

Techniques for successful radio advertising 3.

Types of radio stations 4.

Selecting radio spots a. number of spots b. days the spots are broadcast c. time of day the spots are broadcast 5.

Producing radio commercials 6.

Radio advertising terms B. Television Advertising 1.

Advantages and disadvantages of television advertising 2.

Techniques for successful television advertising 3.

Types of television commercials 4.

Television advertising terms VI. Direct Mail A. Advantages and Disadvantages of Direct Mail Advertising B. Techniques for Successful Direct Mail Advertising C. Mailing Lists VII. Support Media A. Outdoor advertising 1.

Advantages and disadvantages of outdoor advertising 2.

Techniques for successful outdoor advertising 3.

Types of outdoor advertising

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B.

Internet and Web Advertising 1.

Advantages and disadvantages of Internet advertising C. Brochures and Collateral Materials 1.

Creating effective brochures a. cover b. photograph c. information d. copy C. Specialty Advertising 1.

Advantages and disadvantages of specialty advertising VIII. Summary of Chapter Objectives A. Key Terms and Concepts B. Review and Discussion Questions IX. Case Study: Advertising Decisions for the Alexandria Inn Answers to End of Chapter Questions 1. What factors affect the selection of advertising media?

When selecting the media mix, it is important to examine the general nature of the target market segments. A medium should be selected based on its ability to reach the maximum number of potential consumers at the lowest cost per thousand (C.P.M.). However, it is also necessary to minimize wasted coverage while trying to maximize reach. Wasted coverage refers to advertising exposures that do not involve members of the target market. Also, the objectives of the overall campaign must be considered. Is the advertiser seeking maximum impact, or is continuity with previous and future advertising more important 2. Discuss the media planning process.

-

Perform a market analysis Establish media objectives Develop media strategies

3. What are the advantages and disadvantages of each of the major media types?

Newspapers offer the following advantages: • Short lead time for placing ads.

• Low cost.

• Good coverage.

• Can be used for coupon.

Newspapers have the following disadvantages: • Short life span of the advertisement.

• Wasted coverage.

• Clutter Magazines offer these advantages:

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• • • • •

Quality reproduction Long life span Audience selectivity High information content Better reproduction than newspapers and allow marketers to segment on a regional basis Magazines have the following disadvantages • Long lead time for ad placement • High production costs • Lack of flexibility.

Radio advertising offers these advantages: • Personal • Low relative cost • Flexibility • Low production costs • Audience selectivity Radio advertising also offers some disadvantages: • Lack of visual appeal • Fleeting message • Clutter Television advertising has the following advantages: • Large audiences • High impact of message • Low cost per exposure • Credibility Television advertising has disadvantages: • High absolute cost • High production costs • Fleeting message • Clutter • Low selectivity Direct mail has the following advantages: • Highly selective, low-waste coverage • Easily evaluated • Short lead time • High information content Direct mail has the following disadvantages: • Poor image • Clutter • High cost per contact

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Outdoor advertising has the following advantages: • Low cost per exposure • High repetition • Ability to target location Outdoor advertising has the following disadvantages: • Poor audience selectivity/high wasted coverage • Legislation/local restrictions • Long lead time • Lack of flexibility Internet advertising has the following advantages: • Low cost per exposure • Easy to monitor click-through impressions • Can be highly targeted • Short lead time • Search engine optimization Internet advertising has the following disadvantages: • Clutter of banner advertising • Low target market selectivity of some Web sites Specialty advertising has the following advantages: • Retention • Selectivity • Low cost Specialty advertising has the following advantages: • Image • Clutter 5. What are the methods of media scheduling? Which one do you consider the best? Why? Continuous advertising refers to the practice of keeping the amount of advertising relatively constant over time. This type is appropriate for those hospitality operations with very stable volumes. Flighting media scheduling involves a schedule set up in spurts and stops. Periods of blitz advertising are used, with no advertising between blitzes. Pulsing advertising balances the previous two approaches in that it provides a constant low-level flow of advertising with intermittent periods of blitz advertising. Ideally, high levels of continuous advertising are normally thought to be superior, but economic considerations may necessitate the adoption of either flighting or pulsing media scheduling.

6. Compare and contrast the various types of media based on their respective characteristics.

See Table 12.1 in textbook.

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7. Assignment for class discussion: Every city or town has its share of media that can be used for advertising. a.

Discuss some of the media vehicles used by hospitality and tourism firms in your area. b.

What similarities and differences exist among the different types of firms? c.

How do the characteristics of these vehicles affect the firms’ decisions? d.

Contact some of the local media and ask them how they charge for advertising. e.

In each medium, how much does it cost to produce a typical advertisement (i.e., the cost range), and what is the lead time to place the ad?

This question can be used to generate class discussion and should provide for different perspectives and rationales for these perspectives.

Case Study: Advertising Decisions for the Alexandria Inn 1. As an independent restaurateur, should he start advertising?

Yes, he should consider advertising. He should answer these questions: (a) to whom should we advertise; (b) where to the live; and (c) What media should be used? A conservative approach is desirable. Following the lead of the national and regional chains will not lead to success. A me-too, or follow the chain approach will not result in success. He must clearly define what he wants to accomplish, design a program to achieve the desired results, then implement and evaluate the plan.

2. How should he achieve his goal of increasing dinner volume by 10-15 percent?

3. How should he achieve his goal of increasing lunchtime off-site catering by 10 percent?

These goals are similar and demand a similar approach. It begins by clearly defining the target market, developing a compelling advertising and promotional message, selecting the advertising media and vehicles, then implementing and evaluating the plan.

One of the best places to start is with the loyal repeat customers. This seems like a logical target market, especially for the desired increase in off-site lunchtime catering. Many firms discover that a significant percentage of the sales volume comes from a relatively small percentage of customers.

4. He is being given the hard sell by the radio station sales representative; should he consider advertising in other media such as print or television? Is direct mail an option he should consider?

It is always wise to consider all options. Resist giving into high pressure sales. Use the high pressure sales approach to your advantage by asking for concessions or guarantees of results.

5. His clientele is quite loyal, with approximately 60 percent of his customers being repeat

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customers. How can he attract more business from this group while brining in first-time guests?

Loyal customers are a marketer’s dream. Businesses expend significant resources in an effort to increase customer loyalty. With a 60 percent repeat customer rate, the Alexandria Inn has developed a loyal customer base. The current repeat customers seem like a logical target market, especially for increasing off-site lunchtime catering.

6. Only 10 percent of his business comes from tourists visiting the area. Should he advertise to attract this market> If so, how?

Before making a decision, the desirability of this target market must be assessed? How can they best reach this market? At what cost? What is the expected for desired increase in sales which would justify the expense? How well do they mix with the loyal repeat guests? Should they advertise, or perhaps engage in some direct selling to the staff of local hotels and the Visitors Center, encouraging and rewarding them for suggesting the restaurant to tourists.

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Chapter Twelve Test Bank Multiple Choice Questions 1.

_____ refers to the number of people exposed to a specific advertisement. a.

Reach b.

Frequency c.

Milline rate d.

Cost per thousand

2.

_____ is used to compare the cost of advertising in different newspapers. a.

Reach b.

Frequency c.

Milline rate d.

Cost per thousand

3.

Magazines offer _____ as a primary advantage. a. timeliness b. low production costs c. good reproduction of artwork d. flexibility

4.

Advertising that is scheduled to run for three continuous weeks, stop for a week, and then run for another three weeks is referred to as _____ scheduling. a. continuous b. flighting c. pulsing d. none of the above

5.

The advertising medium with the least amount of wasted coverage is: a. newspapers b. television c. direct mail d. outdoor advertising

6.

Which of the following advertising media has the longest lead time? a. newspapers b. direct mail c. radio d. television

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7.

Short life span is a limitation of: a. newspapers b. magazines c. radio d. a and c e. all of the above

8.

Which advertising medium has the best “pass along” value? a. newspapers b. magazines c. direct mail d. television

9.

Which of the following is not an advantage associated with outdoor advertising? a. short lead time b. low cost per exposure c. high repetition d. ability to target location e. all of the above are advantages

10.

Which of the following would not be an example of specialty advertising? a. hotel pens b. a Hard Rock Café t-shirt c. a McDonald’s kid’s meal toy d. a pack of matches with a restaurant’s name on them e. all of the above are examples are specialty advertising

True/False Questions 1. Publicity is always favorable.

2. An advertising medium should be selected based on its ability to reach the maximum number of potential consumers at the lowest cost per thousand.

3. Print advertising is the most commonly used media by restaurants.

4. Video brochures are the most common item used by hotels to create awareness and interest among potential customers.

5. Consumers normally need only one exposure to an advertisement for it to be effective.

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Chapter Thirteen Sales Promotions, Merchandising, and Public Relations Outline I. II. III. IV.

Chapter Objectives and Outline Industry Profile Introduction Sales Promotion A. Historical Perspective on Promotions B. Role of Sales Promotion 1.

To increase customer awareness 2.

To introduce new products and services 3.

To increase guest occupancy and customer counts 4.

To combat competition 5.

To encourage present guests to purchase more 6.

To stimulate demand in non-peak periods C. Types of sales promotions 1.

Techniques for Push techniques a.

Point of sale displays b.

Cooperative advertising c.

Advertising materials d.

Traditional and electronic collateral material e.

Convention and managers' meetings 2.

Techniques for Pull techniques a.

Sampling b.

Price reduction promotions c.

Price reduction coupons d.

Combination offers or bundling e.

Premiums f.

Contests and sweepstakes 3.

Commonly Used Techniques a.

Coupons b.

Sampling c.

Premiums d.

Contest and sweepstakes D. Managing Successful Promotions 1.

Steps to successful promotions 2.

Evaluating the impact of sales promotions a. administrative costs associated with conducting a sales promotion b. cost of displaced sales c. additional revenue from new customers

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V.

Merchandising A. Missed Selling Opportunities 1.

Some examples 2.

Suggestions for effective suggestive selling B. Training Guest-Contact Personnel 1.

Product-service knowledge (Cognitive aspect) 2.

Physical skills (Psychomotor aspect) 3.

Attitude (Affective aspect) 4.

Reassurance (Affective aspect) C. Entertainment D. Other Merchandising Techniques VI. Public Relations A. Public Relations Techniques B. Guidelines for Public Relations 1.

Suggested guidelines 2.

Public relations timetable for hotel opening C. Evaluating Public Relations 1.

Personal observation 2.

Public opinion surveys 3.

Use objective measures VII. Summary of Chapter Objectives A. Key Terms and Concepts B. Review and Discussion Questions VII. Case Study: Princess Suites Answers to End of Chapter Questions 1. What are the elements of the promotional mix?

Advertising, personal selling, sales promotions, and public relations (see Chapter 10 for a more detailed description).

2. Illustrate the components of the communications model. How can this model be used to improve communications?

-

Sender – persons who encodes a message to be delivered to the audience Message – message must be developed to obtain the firm’s objective Channel – a medium must be chosen to deliver the message and minimize noise Receiver – the audience should interpret the message as intended

3. What is the role of sales promotion?

As is the objective with all forms of promotion or advertising, the ultimate goal is to stimulate attention, interest, desire, and action (AIDA). Sales promotions are most effective as short-term inducements to purchase a particular brand. As such, they can lead to desire

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and action, but sales promotions are normally not effective as long-term strategies.

4. What are several of the objectives of sales promotion? Which one(s) do you believe is (are) the most important? Why? -

To increase customer awareness To introduce new products To increase sales volume and revenue To combat competition To encourage current customers to purchase more To stimulate demand in non-peak periods

A case could be made for any of the objectives to be important depending upon a firm’s situation and objectives. The instructor could give some examples of firms in various situations and ask students to choose viable objectives.

5. What is the difference between push and pull strategies? Use an example to illustrate the difference.

Push promotion is used when the marketing manager wants to "push" the product-service mix through the service delivery system or channels of distribution. This approach encourages increased purchases and increased consumption by consumers. Pull promotion, on the other hand, is aimed at stimulating the interest of consumers and having them “pull” the product through the channels of distribution. This in turn puts additional pressure on the retail outlets or hospitality facilities to supply the products and services most in demand by consumers. For example, firms could provide channel members with advertising materials or engage in cooperative advertising to get them to help push their products. Or, firms could use coupons or contests to generate interest among consumers to pull products through the channel.

6. Cite and discuss the pros and cons of each of the major sales promotional techniques discussed in the chapter.

-

Coupons – tangible, can limit time, and focus on specific objectives; possible fraud and redemption rates not easy to predict - Sampling – induces trial, provides value, and generates word-of-mouth; can be expensive, may displace current sales, and could be unattractive - Premiums – consumers like free items, generates word-of-mouth; storing and handling, theft, forecasting, maintaining quality image - Contests – consumer involvement, creates interest and possibly trial; difficult to select winner, may be complicated and turn off consumers - Sweepstakes – easy to enter and conduct, creates interest in product; chance of winning is small, consumers can stuff entries 7. If you were given the job of designing and managing a sales promotion, how might you use the guidelines presented in the chapter? What would you do differently?

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Basically, you need to 1) select a target markets, 2) establish specific objectives, 3) select the promotional technique, 3) create a theme and a budget, 4) select the timetable, 5) conduct internal training, and 6) implement the plan and monitor the results. There really isn’t much latitude for changing these guidelines – all of these tasks must be performed.

8. What are the skill areas in which guest-contact employees must be trained? Which of these, in your opinion, is the most important? Why? -

Product-service knowledge Physical skills Attitude Reassurance

9. Select a table-service restaurant in your area to visit as a customer. Using the merchandising techniques discussed in the chapter, assess how well the restaurant staff performed. What were their strengths and weaknesses? What could they have done differently?

This is an excellent way to have students do field work, perhaps in teams. It provides an opportunity for them to view restaurant operations from a management perspective and begin to understand that a concept which is explained in the book may seem easy, in reality, it is much more difficult to implement. In this case, students should be encouraged to conduct the field study and be prepared to submit a report and discuss in class the following: (1) sales promotions, including both push and pull strategies; (2) how the restaurant creates AIDA – awareness, interest, desire and action; and (3) uses effective merchandising to increase sales.

10. What is public relations? What do public relations personnel do?

Public relations is the process by which the relationships with each of a firm’s publics is managed. Public relations personnel try to give publics such as stockholders, consumers, the community, and employees a positive attitude about the firm and its product through relationships with the media.

Case Study: Princess Suites 1. What steps might Reginald take to respond to Chris Wood’s request for a promotion to increase weekend business?

Reginald should talk with his fellow managers and also review trade journals for ideas about how similar hotels have develop more robust weekend demand. Often the best ideas are ones that have been used in other locations, which are then modified for the particular hotel or destination.

Reginald might also brainstorm with his staff to generate a list of potential promotions that

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could be implemented. This is an excellent way to get others involved and to engage them in the problem. He might consider an incentive to the staff member who provides the best idea or the one which produces the best results.

2. How might Reginald develop a promotional strategy using the steps outlined in the chapter?

Reginald should use the outline for both push and pull promotional strategies to develop a listing of potential promotions. These can then be refined to a point when a sub-set of the original list would be implemented.

3. What would be reasonable financial results for the promotion? How did you determine these results?

This discussion should occur with Reginald’s boss to set expectations for any promotion.

What are they seeking to accomplish? An initial starting point might be to set targets for measurable items such as:(1) increase in the number of promotional rooms sold; (2) increase in sales; (3) net profit resulting from the promotion.

4. What costs will Reginald incur in launching such a promotion?

There are a variety of costs that the property might incur including: advertising, printing of flyers and other promotional materials, increased labor costs to service the rooms sold during the promotional period.

5. How can Reginald ensure that the promotion will not adversely impact business from his current key customers?

He needs to be certain that he is targeting a guest that is different from the weekday guest.

Those who stay in the property during the week are likely mostly traveling on business. The goal of the promotion is to increase weekend business. To accomplish this, he will likely be targeting leisure travelers.

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Chapter Thirteen Test Bank Multiple Choice Questions 1.

Which of the following is not an example of a sales promotion pull technique? a. sampling b. premiums c. point-of-sale displays d. price reduction coupons

2.

When a restaurant uses a wine display in the dining room to promote the purchase of wine, this is an example of: a. a premium b. a push technique c. a pull technique d. none of the above

3.

The use of coupons as a promotional vehicle is: a. increasing each year b. decreasing each year c. remaining relatively stable

4.

Which of the following is not considered a commonly used sales promotion technique among hotels? a. coupons b. price reduction coupons c. premiums d. contests and sweepstakes

5.

The net effect of a sales promotion (e.g., a coupon) depends on: a. the amount of sales to new customers b. the loss in revenues due to current customers using the promotion c. the costs of printing and administering the promotion d. all of the above e. a and c only

6.

Which of the following is not a suggestion for effective suggestive selling? a. develop a positive mental attitude b. always be attentive to guests’ needs c. be aggressive and try to manipulate the guest d. turn guests’ negative comments into a positive

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7.

The most difficult aspect of training guest-contact personnel involves the _____ aspect. a. affective b. cognitive c. psychomotor

8.

An effective brochure should: a. identify the facility b. contain basic information c. minimize the amount of descriptive facts d. all of the above are characteristics of effective brochures

9.

At what point should a hotel launch its public relations campaign to the local media before its grand opening? a.

30-60 days before opening b.

60-90 days before opening c.

90-120 days before opening

10.

Which of the following methods is (are) used to evaluate a public relations program? a. personal observation b. public opinion surveys c. number of impressions d. all of the above

True/False Questions 1. McDonald’s use of a toy in the kid’s meal is an example of a push technique.

2. A firm is most likely to get more participants with a contest than with a sweepstakes.

3. Sales promotions are useful at increasing customer brand loyalty.

4. Waiters should suggest their favorite items from the menu because they are familiar with them.

5. In general, public relations programs are effective because they require little cost and they have the ability to generate interest in a firm’s product.

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Chapter Fourteen Personal Selling Outline I. II. III.

IV.

V.

Chapter Objectives Industry Profile Introduction A. Sales Roles 1.

Order takers and order getters 2.

Telemarketing and sales blitzes B. Profile of a Successful Salesperson 1.

Impression criteria 2.

“Can do” criteria 3.

“Will do” criteria Selling to Group Markets A. FAB Selling Technique 1.

Features 2.

Advantages 3.

Benefits B. Meetings Market Segments 1.

Association market segment 2.

Corporate market segment 3.

Decision factors C. Other Meetings Market Segments Personal Selling Process A. Prospecting and Qualifying 1.

Qualifying questions 2.

Prospecting sources B. Planning and Delivering Sales Presentations 1.

Research and initial contact 2.

Outlining the presentation 3.

Adaptive selling and listening C. Overcoming Objections 1.

Types of objections a. price b. products and services offered c. facility or brand d. pressure to decide e. individual sales manager 2.

Methods for handling objections a. agree and counter b. turn the objection into a reason for buying c. seek more information d. postpone the objection

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D.

VI.

VII.

VIII.

IX. X. XI. XII.

Closing the Sale 1.

Continued affirmation 2.

Prestige or status close 3.

Assumptive close 4.

Closing on a minor point 5.

Standing room only Asking Probing Questions A. Situation Questions B. Problem Questions C. Implication Questions D. Need-payoff Questions Personal Selling Tools A. Key account management B. Negotiating skills C. Suggestive selling D. Information technology Ethical Issues in Personal Selling A. Sharing Confidential Information B. Reciprocity C. Bribery D. Gift Giving and Entertainment E. Making Misleading Sales Claims F. Business Defamation Summary of Chapter Objectives Key Terms and Concepts Questions for Review and Discussion Case Study: Atlantis Resort

Answers to End of Chapter Questions 1. Cite and discuss the attributes of a successful sales manager. Which one do you consider to be the most important? Why? • • •

Impression criteria – appearance, dress, demeanor, attitude, and voice “Can do” criteria – good grades, extracurricular activities, work experience “Will do” criteria – attitude, motivation, ability to work well with others

It is difficult to be successful without possessing all of these characteristics. Students might make a case for “will do” criteria being most important because it is easiest to compensate for the other two areas through training.

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2. What do you see as the pros and cons to a career in sales?

Salespeople have a lot of autonomy in a challenging environment. Often, there are no restraints to how much time one can devote to his/her career and the rewards are commensurate with the effort. The disadvantage is that there is less structure than with other jobs and salespeople may feel that they are on their own. Also, a salesperson’s compensation can vary widely making it difficult to budget personal finances.

3. What is the role of the meeting planner? How does this individual interact with the hotel sales and marketing staff?

Meeting planners are responsible for selecting destinations and hotel accommodations for entire groups of individuals. The size of these groups can vary from ten into the tens of thousands depending on the organization that he/she represents. Hotel salespeople contact meeting planners as prospective clients and attempt to persuade them to use the hotel for future meetings.

4. Cite and discuss the nature of the association and corporate market segments, including decision-making, lead-time, types of meetings, and site selection criteria.

•

•

Association market  Long lead times  Voluntary attendance  Price and location are important  Committee decision-making Corporate market  Shorter lead times  Mandatory attendance  Service quality and convenience are important  Centralized billing and decision-making

5. What are the steps in the personal selling process? Provide a brief description of the activities at each step.

• • • •

Prospecting and qualifying – compiling lists of prospective clients and determining their ability and willingness to buy Planning and delivering sales presentations – getting an appointment, researching the organization, and adapting to behavioral style Overcoming objections – handling prospects questions and objections regarding your product Closing the sale – getting prospects to be confident enough about your firm’s ability to meet their needs that they sign a contract

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6. Discuss some of the procedures that can be used to qualify a prospect.

• • • • •

Determine a prospect’s need for the product Determine a prospect’s ability to afford the product Determine a prospect’s willingness to purchase your type of product Determine if prospect has the authority to make a purchase decision Make sure the prospect is accessible for contact

7. When a sales manager encounters objections, how might these be handled?

• • • •

Agree and counter Turn the objection into a reason for buying Seek more information Postpone the objection

8. What does it mean to close a sale? What methods can be used to accomplish this?

Closing the sale involves getting a prospect to make a final purchase decision and sign a contract if necessary. The following are some common closing techniques: • Continued affirmation • Prestige or status close • Assumptive close • Closing on a minor point • Standing room only 9. How does gaining a commitment differ from a closing sale?

The idea of gaining commitment is to prepare for the sale, investigate the prospect’s needs, demonstrate your company’s capabilities to meet those needs, and obtain a commitment. The commitment can be in the form of an advance in the sales process, or an actual sale. Closing a sale focuses on only one positive outcome.

10. What is the proposed benefit of using the spin selling approach instead of the traditional selling approach?

SPIN selling is an alternative approach to the traditional personal selling process that focuses more on using probing questions and avoiding objections. The salesperson asks more questions so that he can match the firm’s benefits with the customer’s needs.

11. What is account management? How can it be done?

Key account management involves focusing attention on the small percentage of clients that represent a large percentage of overall revenues for the firm. The sales manager must examine the present profit margin on existing accounts and the client’s potential for new business to determine where the emphasis should be placed. Salespeople have a limited 117

amount of time that must be allocated so as to provide the highest return on investment.

12. What are some common negotiating skills?

• • • •

When you give something up, make sure you get something in return Look for items other than price to negotiate Do not attack your prospect’s demand, look for the motive behind it Do not defend your position; ask for feedback from the prospect

13. List and discuss the ethical issues in personal selling.

• • • • • •

Sharing confidential information with other people (e.g., clients, friends) Reciprocity – trading favors or gifts Bribery – offering money or gifts in return for business Gift giving and entertainment Making misleading sales claims Business defamation – making derogatory claims about your competition

Case Study – Atlantis Resort 1. Which of the meetings market segments discussed in the chapter would be good target markets for the Atlantis Resort? Explain your answer.

The corporate segment would be a good target segment for the Atlantis Resort. Corporate sales meetings would be another specific target market as most corporations maintain sales staffs that they want to provide information to and motivate them. The corporation is less sensitive to price and concerned about providing the attendees with convenience and comfort - both of which could be provided at the Atlantis.

Within the corporate market segment another one of the meetings that should be targeted by the Atlantis Resort are the incentive trips. The incentive meetings tend to be held at luxurious resorts in exotic locations. Location and climate are very important on incentive trips, as are recreation and relaxation. Atlantis with its lush tropical setting, sophisticated rooms and diverse activities is perfect for this kind of a meeting.

The Atlantis can accommodate up to 5,000 people in their meeting facilities. Therefore, the resort must also attract some association meetings and conventions. However, only associations with international memberships could justify the travel and expense of holding a meeting at the Atlantis Resort.

The tour group market is also a good target for the Atlantis Resort. The resort is an optional excursion for passengers who happen to be visiting the Bahamas by way of the cruise lines like Royal Caribbean and Carnival. Another target market could be weddings and other family functions like reunions and anniversaries.

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2. What other destinations or hotels/resorts do you think would be competitors for each of the meetings markets you listed?

The Baha Mar-Nassau Bahamas resort will be a strong nearby competitor once it gets established, but most of the competition will come from other destinations like Las Vegas and Orlando. They both have a large selection of hotels that provide the kind of service and meeting facilities available at Atlantis. The other popular destinations would be island resorts like those in Hawaii and Tahiti, or high-end destinations like West Palm Beach (e.g., The Breakers) and Palm Springs.

3. What are some potential objections that the salespeople at the Atlantis Resort might expect?

Be specific.

Price and location/distance would be the two most common objections. Students might also mention things like sale manager’s personality or lack of local attractions.

4. Provide examples of how you would use the techniques for handling objections for each of the specific objections you’ve anticipated.

The best method for handling a price objection is to provide compensating benefits such as the high level of service, the variety of restaurants and entertainment, and beach location. It would be difficult to deny the price is high, or translate it into a reason for buying.

The location/distance objection would be best handled by translating into a reason for buying. The isolated location will ensure that attendees will stay around for the meetings instead of wondering off to local tourist attractions. Also, the resort is basically selfinclusive.

Another method that would help the salesperson to get a better understanding of the objection is to ask questions. For example, what other properties or destinations are you considering that would offer a better value than the Atlantis Resort?

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Chapter Fourteen Test Bank Multiple Choice Questions 1.

A hotel salesperson at a popular resort hotel would most likely be a(n): a. order taker b. order getter

2.

Which of the following is not a characteristic associated with a successful salesperson? a. complete knowledge of the product-service mix b. professional appearance and behavior c. organizational ability d. all of the above are characteristics of successful salespeople

3.

The FAB Selling Technique refers to: a. facility, advantages, benefits b. features, advantages, benefits c. features, attributes, benefits d. facility, attributes, benefits

4.

The first stage in the personal selling process is: a. planning the sales presentation b. overcoming objections c. prospecting and qualifying d. scheduling a sales meeting

5.

When a hotel sales manager makes a sales call on a prospective client without making an appointment, it is referred to as: a. a cold call b. an initiating call c. a blind call

6.

Which of the following is not a recommended method for handling an objection? a. agree and counter b. stick your ground and argue your point c. postpone the objection d. turn the objection into a reason for buying

7.

Which of the following types of lodging facilities would most be able to use a standing room only close? a. a rural motel b. a bed and breakfast c. an airport hotel d. not enough information is provided

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8.

Key account management is based on the theory that _____ percent of the business that is booked will be generated by _____ percent of the clients. a.

50, 50 b.

60, 40 c.

70, 30 d.

80, 20

9.

Which of the following is not a useful tip for negotiating? a. use price as a major negotiating tool b. when you give something up, try to gain something in return c. do not defend your position; ask for feedback d. all of the above are useful tips

10.

When salespeople make disparaging comments about their competitors to customers, it is referred to as: a. reciprocity b. libel c. defamation d. illegal

11.

The type of accounts that have high potential for increased business, but low profit margins at the present time, would be: a. developed accounts b. undeveloped accounts c. desirable accounts d. undesirable accounts

12.

What is the name of the sales and catering software that is used by many hotel chains? a.

Delphi b.

Fidelio c.

Marsha

13.

What type of SPIN selling question is focused on gathering background information? a. problem questions b. need-payoff questions c. implication questions d. situation questions

14.

Which closing technique involves the salesperson asking a series of questions? a. assumptive close b. prestige or status close c. continued affirmation d. closing on a minor point

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True/False Questions 1. Corporations tend to hold fewer meetings than associations.

2. Successful salespeople tend to have grades in the upper 25% of their graduating class.

3. Association meeting attendees are typically more price-sensitive than corporate meeting attendees.

4. It is more important for a salesperson to be a good talker rather than a good listener.

5. Business practices that are unethical will be illegal as well.

6. The SPIN Selling approach is based on research with performed with companies that sell in large volume.

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Part Six Pricing Strategy and Destination Marketing

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Chapter Fifteen Pricing Strategy Outline I. II. III. IV.

V.

VI.

VII.

Chapter Objectives Industry Profile Introduction Factors that Affect Pricing Decisions A. Pricing Objectives 1.

Financial objectives 2.

Volume objectives 3.

Competitive objectives 4.

Image objectives B. Consumer Price Sensitivity 1.

Price-quality effect 2.

Unique value effect 3.

Perceived substitutes effect 4.

Difficult comparison effect 5.

Shared-cost effect 6.

Total expenditure effect 7.

End-benefit effect C. Environmental Factors 1.

Economic 2.

Social 3.

Political 4.

Technological 5.

Competitive Broad Pricing Strategies A. Skim Pricing B. Penetration Pricing C. Neutral Pricing Pricing Techniques and Procedures A. Cost-oriented Pricing 1.

Break-even analysis 2.

Cost-plus pricing 3.

Target-return pricing B. Demand-oriented Pricing 1.

Price elasticity of demand 2.

Psychological pricing a. prestige pricing b. odd/even pricing c. price lining C. Competitive Pricing Segmented Pricing

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VIII.

IX.

X. XI. XII. XIII.

A. Segmenting by Buyer Identification B. Segmenting by Purchase Location C. Segmenting by Time of Purchase D. Segmenting by Purchase Volume E. Segmenting by Product Design F. Segmenting by Product Bundling Revenue Management A. Establishing a Price Structure B. Yield Management 1.

Perishable inventory 2.

Fluctuating demand 3.

Ability to segment consumers 4.

Low variable costs C. Selective Discounting D. Historical Booking Analysis E. Yield Management Equation Pricing Law and Ethics A. Legal Issues in Pricing 1.

Explicit agreements 2.

Nonexplicit agreements 3.

Price discrimination laws 4.

Tie-in sales B. Ethical Issues in Pricing 1.

Level one - all exchanges are voluntary 2.

Level two - no asymmetric information 3.

Level three - no excessive profits 4.

Level four - no segmented pricing 5.

Level five - share with all members of society Summary of Chapter Objectives Key Terms and Concepts Questions for Review and Discussion Case Study: The Pasta Shack

Answers to End of Chapter Questions 1. What is price? What are some of the major factors that affect pricing decisions?

Price is the utility, or value, that consumers place on a product or service. Pricing decisions are affected by a firm’s cost structure, its available resources, the price sensitivity of consumers, and the external environment.

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2. What are the major pricing objectives discussed in the chapter?

• • • •

Financial performance – profit, cash flow, ROI Volume – sales, revenue, market share Competition – leader, follower, parity Image – positioning, quality

3. What are the most common effects on consumer price sensitivity?

-

price-quality effect perceived substitutes effect shared cost effect end-benefit effect

-

unique value effect difficult comparison effect expenditure effect

4. What are the three broad pricing strategies? When is it appropriate to use each strategy?

• • •

Skim pricing – with a unique or superior product, high variable costs Penetration pricing – when consumers are price sensitive, high fixed costs, and many competitors with similar products Neutral pricing – value conscious consumers, market sets price

5. What are the advantages and disadvantages of using break-even analysis?

Breakeven analysis is good for examining the relationships between costs, sales, and profits.

However, it does not account for the price sensitivity of consumers or the competition. In addition, it is very important that the costs used in the analysis are accurate. Any changes in the contribution margin or fixed costs can have a significant impact on the breakeven point.

6. What is economic value? Give an example of how you would determine the economic value for a particular hospitality service.

Economic value can be defined as the sum of a product’s reference value, or the cost of the competing product that the consumer perceives as the closest substitute, and a product’s differentiation value, or the value to the consumer (both positive and negative) of any differences between a firm’s offering and the reference product.

A restaurant could take a look at its closest competitor, either in price, cuisine, or proximity, and determine a reference value. Then, the restaurant management would perform an objective analysis of the relative strengths and weaknesses of the two properties, thereby adjusting for differentiation value. For example, the restaurant with the higher quality food, or more menu variety, would have positive differentiation value and could justify a positive impact on price.

7. Discuss some of the price segmentation strategies that can be used by hospitality and travel firms.

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• • • • • •

Segmenting by buyer identification (AAA discounts, senior citizen discounts) Segmenting by purchase location (airline routes, rental car agencies) Segmenting by time of purchase (weekend packages, advance purchase discounts) Segmenting by purchase volume (group rates) Segmenting by product design (corporate hotels, theme restaurants) Segmenting by product bundling (tour packages, value meals)

8. What are the three major pricing techniques? Can you use more than one? Explain.

• • •

Cost-oriented pricing Demand-oriented pricing Competitive pricing

It is normally advisable to use more than one approach. For instance, firms should always perform a cost analysis before determining price. Consumer demand may not be such that the price would cover the firm’s costs. Conversely, a cost-oriented approach alone might neglect the competition and customer demand for a product. In most cases, firms should apply all three analyses and then determine the best price given all available information.

9. What is revenue management? How are yield management and revenue management related?

Revenue management involves combining people and systems in an attempt to maximize revenue by coordinating the processes of pricing and inventory management. The goal of revenue management is to sell the right product to the right customer at the right time for the right price. Yield management utilizes an equation to maximize actual revenue in relation to the maximum potential revenue. Yield management is basically a practical application of revenue management.

10. What are some of the legal and ethical issues surrounding pricing decisions?

• •

Legal Issues – explicit and nonexplicit agreements, price discrimination, and tie-in sales Ethical Issues – price paid is voluntary, equal information, price does not exploit buyers needs, price is justified by cost, and/or price provides equal access to all consumers

11. Internet exercise - online travel agents a. In a recent study, I found that Travelocity charged slightly lower prices than Expedia for a 7-night trip to Orlando from Chicago. This will probably differ by origin city. Prices tend to fall from six months to three months to one month advance booking - this is a function of revenue management. b. The airline prices tend to be very similar. Once in a while there is a lag between the two prices, but airlines don’t offer the online travel agents any discounts. In fact, the online travel agent price is usually $5 more than the airline’s rate on its own website (the

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administrative fee is the only markup). Hotel chains typically sell their inventory to the online travel agents at a 15% discount that may, or may not, be passed on to consumers.

Many hotel chains will match the online travel agent prices because they get to keep the 15%. Online travel agents provide hotels access to markets where they currently have low market shares. c. Once again, Travelocity tends to offer slightly better package prices. It is interesting that the prices for the individual components are often higher on the online travel agent websites than the hotel and airline websites (the airline situation was discussed above). One theory is that the online travel agents are setting the hotel prices arbitrarily high to show better savings for the package (this is an example of price bundling) and encourage consumers to buy both products from them. The best savings are for higher priced hotels (4+ stars). d. The packaging concept is an example of price bundling - shifting consumer surplus from one product to another in an attempt to extract the largest amount of surplus. The online travel agents are setting reference prices by showing them on the website and then showing the savings for purchasing the bundle at the lower combined price. Students could mention some other concepts like economic value and segmented pricing.

Case Study – The Pasta Shack 1. What was the effect of the price change on total revenues during the early-bird time period?

The net impact on revenues would be: New customers: 8 x $8.95 = $71.60 per day on average (additional customers during the early-bird time period) Cannibalization: 5 x $2.00 = $10.00 per day on average (customers switching from $10.95 to $8.95) Net impact = $71.60 - $10.00 = $61.60 additional revenue per day 2. Using the concepts presented in the chapter, how would you explain this change?

Some customers are more price-sensitive than others and are willing to eat at an earlier time to increase value by reducing the price and maintaining the same level of food quality.

However, menu variety is normally less for early-bird specials because they are limited to a few options. Therefore, you add customers who felt the price was too high in the past and now find it a better value. At the same time, you cannibalize some of your regular customers who decide to tradeoff convenience for price. If too many customers decide to make the tradeoff, the restaurant would lose money on the promotion. Also, this looks at revenue only – no profit.

3. Is the new strategy successful? Explain your answer.

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At this point, the new strategy does seem to be successful. As long as there aren’t any major cost increases associated with the strategy and the cannibalization remains constant, the strategy will work. Also, the cannibalization can be replaced if there is additional capacity after 6pm that is filled with new customers.

4. What could be the cause for the initial decline in sales?

Initially, a larger percentage of the regular customers might try to take advantage of the lower prices at the earlier time period. Over time, these customers might return to the later time if they find the portions are smaller or the restaurant is crowded with families and seniors. Also, the customers might realize the savings is not worth the inconvenience of eating earlier. It is mentioned in the case that there is some cannibalization of the restaurants current customers - they shift customers paying higher prices to the lower prices at the earlier time period.

5. Are there any additional costs associated with the new strategy?

There may be costs associated with promoting the new early-bird program and the manager might also have to schedule additional waiters from 4-6pm to accommodate the increase in demand. However, these costs are minimal and should not have a major impact. In fact, it might be possible to reduce the food costs for the specials because of the economies of scale and volume discounts.

6. How could you increase the profitability associated with the early-bird strategy?

One of the popular strategies is to offer smaller portions at the lower price to offset the decline in revenue by reducing the cost of the meal. In addition, a limited number of meals can be made available at the early-bird price. That way, the restaurant can sell higher volumes of those meals resulting in economies of scale - the restaurant will get volume discounts from its suppliers for the meal components. Another strategy could be to offer an early-bird combo that includes an entrée, a dessert, and a beverage at a profitable price.

Consumers will pay a little more and purchase items they wouldn’t have purchased otherwise - a price bundling strategy. Finally, the restaurant will increase profits if a large percentage of the additional customers during the new early-bird period are new customers.

This will offset any negative impact from the cannibalization.

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Chapter Fifteen Test Bank Multiple Choice Questions 1.

When individuals or organizations exchange goods and services without exchanging money, it is referred to as: a. an exclusive tying arrangement b. bartering c. fair trade

2.

The fact that corporate travelers are less price sensitive than most leisure travelers because the corporation pays for the travel is referred to as the: a. unique value effect b. expenditure effect c. shared cost effect d. price-quality effect

3.

_____ is the cost of the competing service that the customer views as the best alternative to your service. a.

Reference value b.

Differentiation value c.

Economic value

4.

A price skimming strategy is appropriate when: a. the market is price sensitive b. the service or product is unique c. the service or product is easy to duplicate d. a and c

5.

A price penetration strategy is appropriate when: a. the market is price sensitive b. the service or product is unique c. the service or product is easy to duplicate d. a and c

6.

The breakeven point in pricing occurs where: a. profits are maximized b. costs are minimized c. total cost is equal to total revenue

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7.

When restaurants set menu prices based on the cost of the product ingredients, they are practicing: a. cost-plus pricing b. breakeven pricing c. target-return pricing

8.

The maximum price that a consumer is willing to pay for a product or service is referred to as the: a. prestige price b. reservation price c. threshold price d. premium price

9.

Yield management is an example of: a. segmenting by purchase location b. segmenting by purchase volume c. segmenting by time of purchase d. segmenting by product design

10.

The highest level of ethical restraint on pricing is when: a. the price is paid voluntarily b. the price is based on equal information c. the price is justified by costs d. the price provides equal access to goods for all people

11.

Increasing or maximizing market share would be a: a. financial performance objective b. volume objective c. competition objective d. image objective

12.

When tour operators offer a group of travel products together for one price it is called: a. product bundling b. price lining c. segmented pricing d. exclusive tying arrangement

13.

Which of the following is not a reason for using yield management in hospitality? a. perishable inventory b. fluctuating demand c. ability to segment customers d. high variable costs

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14.

The fact that 4-star hotels charge higher prices than 3-star and lower is an example of: a. the unique value effect b. end-benefit effect c. price-quality effect d. expenditure effect

True/False Questions 1. In regard to pricing objectives, maximizing sales revenue and maximizing market share represent the same thing.

2. Consumers tend to be less price-sensitive when it is easier to compare brands.

3. It is possible for economy hotels (e.g., Motel 6) and premium hotels (e.g., Four Seasons) to offer the same relative value.

4. Price elasticity of demand is a measure of price sensitivity.

5. “Meeting competition” is a legal defense for price discrimination.

6. The perceived-substitutes effect applies to all substitute products or services whether the consumer is aware of them or not.

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Chapter Sixteen Destination Marketing Outline I. II. III.

IV.

V.

VI.

VII.

Chapter Objectives Industry Profile Introduction A. Destination Marketing Organizations 1.

Tourism bureaus 2.

Convention and visitors bureaus (CVB) B. Destination Market Segments 1.

Associations 2.

Corporations 3.

Tour operators 4.

Individual travelers Destination Product Development A. Destination Attributes B. Destination Branding 1.

Destination brand pyramid C. Tourist Area Life Cycle 1.

Exploration 2.

Involvement 3.

Development 4.

Consolidation 5.

Stagnation Destination Marketing Communications A. Bureau Communications Plan B. Media Relations Strategies 1.

Customer plan 2.

Community relations plan 3.

Stakeholders relations plan 4.

Crisis management plan 5.

Internal relations plan Destination Research A. Economic Impact Studies 1.

Satellite account method 2.

Input-output model 3.

Multiplier analysis B. Destination Image Studies C. Conversion Studies Summary of Chapter Objectives

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VIII. IX. X.

Key Terms and Concepts Questions for Review and Discussion Case Study: Paradise Valley CVB

Answers to End of Chapter Questions 1. What are destination marketing organizations? What is their major function?

According to the Destination Marketing Association International (DMAI), destination marketing organizations (DMOs) are primarily concerned with promoting the long-term development and marketing of a destination, focusing on convention sales, tourism marketing, and service.

2. What are the tow most common types of destination marketing organization? How are they funded?

The two most common forms of DMOs are convention and visitors bureaus (CVBs) and tourism bureaus. Tourism bureaus in the United States focus on the state level and CVBs focus more on cities or regional destinations within the state. A similar process is used in other countries. Also, there is usually one large bureau that is responsible for the tourism and travel for the entire country. You can familiarize students with this concept by having them search for various countries’ websites and CVBs on the Internet.

3. What are the target market segments for destinations?

The four primary market segments for CVBs are associations, corporations, tour operators, and individual travelers. Associations consist of social, military, education, religious, and fraternal (SMERF) groups, as well as industry trade groups. These groups can be local, regional, or national, and they all have meetings and events throughout the year.

4. How do visitors’ perceptions of destination attributes affect the product development process?

The visitors’ perceptions of competing destinations are based on the number and quality of these tangible attributes. It is necessary to determine the weight, or importance, that visitors place on each of these attributes when positioning the destination using product development and marketing communications.

5. What is the tourist area life cycle concept? How is it related to the product life cycle concept?

The tourist area life cycle is very similar to the product life cycle. The first stage is the inception stage when the more adventurous travelers are looking for a new destination that is not popular among the masses. The second stage is the growth stage where the number of travelers starts to increase and new businesses are started to service tourists. The third stage is the maturity stage when the destination starts to get crowded and there are larger chains

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and franchises. The final stage is the decline stage where the destination starts to lose its popularity due to overcrowding and lack of novelty.

6. What is a communications plan? What are the target publics for the communications plan?

A comprehensive communications plan is composed of several individual plans designed for each of the target markets or “publics.” It is important that the organization is proactive in its communications rather than merely responding to inquiries as they come in. The primary target publics include residents of the local community, tourists, attractions and hospitality firms, and the news media that cover the destination. The secondary target publics include residents of nearby communities and destinations, and their destination marketing organizations, and public segments such as the local government, schools, and medical facilities.

7. How is destination research used in the tourism and travel industry by destination marketing organizations?

The goal of research is to reduce the uncertainty surrounding managerial decisions. These decisions are made on a regular basis and included in the organization’s marketing plan.

There are four main objectives of research regarding tourism destinations: • What is the profile of the visitors, or potential visitors, which compose the target market(s) for the destination?

• What is the overall value, or economic impact, provided by the target market(s)?

• What are the attributes or characteristics associated with the destination that attract visitors, and how does the destination compare with other destinations on those attributes?

• How should the marketing mix be composed for each target market? For example, what types of marketing communications should be used to reach the target markets, and what should the message be?

8. What is a conversion study, and why is it important?

The purpose of the conversion study is to measure the effectiveness of the destination marketing organization’s advertising and promotion. The most important performance measure is the number of inquiries that are converted to visitors. Inquiries come to convention and visitors bureaus through three main sources: telephone, Web site, and drop cards placed in magazines. The goal is to measure the conversion rate on each of the three methods of inquiry to determine the most effective means of reaching the target market.

Case Study – Paradise Valley CVB 1. What is the conversion rate for inquiries, and what were the main reasons for respondents not visiting? What strategies would you recommend for improving the conversion rate?

The conversion rate is given in question 2 of the study and it is 51.8%. That is the percentage

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of respondents who visited the region after receiving the promotional materials. The most common reasons given for not visiting are personal reasons (e.g., financial difficulties, health issues, etc.), they visited another destination (which is typically in the same region), and “other” which includes any reason not mentioned. It could be that they decided not to take a vacation at all.

2. How did the respondents first become aware of the destination, and what effect would this have on your marketing strategies?

The most popular method stated by respondents for becoming aware of the region is magazine (30.7%), followed by other (28.1%), and then friends and relatives (21.6%). This would suggest that the CVB should continue to place ads in popular travel magazines and other regional publications that have subscribers that match the demographic profiles of the visitors to the region. It is difficult to determine the other response without looking at the actual questionnaires, but it is important for the CVB to provide visitors with a good experience and market to the local population to continue to receive good word-of-mouth from potential visitors’ friends and relatives.

3. How would you describe the destination’s image based on the results of the study? What type of market segment(s) would be the best target(s) for this type of destination? Explain your answer.

The destination rates highest on scenery and historical appeal in question 4 on the questionnaire. This would suggest that it is thought of as a rural destination with natural attractions and historical attractions for the state or region. In addition, it is perceived as a safe place with some man-made tourist attractions as well. Overall, the destination was rated fairly well on all of the destination attributes.

4. What are the expenditures per person per day on each of the travel components? What is the total economic impact of tourism on this region? Show your calculations and state your assumptions.

The expenditures per person per day would be calculated by taking the average amount spent during the trip for each category and dividing it by the average number of people in the party (3.65 people), resulting in the average expenditure per person. Then, that figure would be divided by the average length of stay (4.25 days) to get the average expenditure per person per day for each category.

Accommodations = ($185.60/3.65)/4.25 = $11.96 Food = ($143.95/3.65)/4.25 = $9.28 Tourist Attractions =($60.95/3.65)/4.25 = $3.93 Shopping = ($134.50/3.65)/4.25 = $8.67 Transportation = ($40.40/3.65)/4.25 = $2.60 Other = ($13.50/3.65)/4.25 = $0.87

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The total economic impact would be determined by either multiplying the total expenditures per person for all six categories by the total number of visitors (3 million), or calculating the total expenditure per person per using ($564.75/3.65 = $154.73) and multiplying by 3 million visitors. The answer using the second method is: $154.73 x 3,000,000 = $464,190,000 You don’t want to use the expenditures per person per day because you would just have to multiply again by 4.25 to account for the number of days the people stay in the region. Also, it should be noted that the total economic impact would be slightly different if you used totaled the expenditures per person for each category and then multiplied by 3,000,000 (as noted in under the table included in question 7 of the questionnaire). As you can see, it is somewhat arbitrary how tourism bureaus and CVBs arrive at tourist arrival and economic impact figures.

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Chapter Sixteen Test Bank Multiple Choice Questions 1.

What is the primary concern for destination marketing organizations? a. raising funds for tourism product development in the region b. promoting the long-term development and marketing of a destination c. providing research for its members

2.

Which of the following is not one of the four primary market segments for CVBs? a. associations b. corporations c. sports teams d. individual travelers

3.

Which of the following type of organization would not be a member of a CVB? a. hotels and other lodging facilities b. convention centers c. tourist attractions d. shopping centers e. all of the above are potential members for a CVB

4.

The first task in the product development process for the DMO is: a. to combine the various destination elements to create packages b. to develop marketing programs c. to take an inventory of the various elements available at the destination

5.

Which of the following is not considered a tangible attribute? a. the cleanliness of a destination b. the accommodations available at a destination c. tourist attractions located at a destination d. all of the above are tangible attributes

6.

The question regarding the first level of the destination branding pyramid is: a.

What does value mean for the typical repeat tourist? b.

What is the essential nature and character of the destination brand? c.

What are the tangible and verifiable characteristics of this destination? d.

What benefits to the tourist result from this destination’s features?

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7.

The stage in the tourist area life cycle that occurs when there is a limited interaction between tourists and the local community, resulting in only basic services is: a. the exploration stage b. the involvement stage c. the development stage d. the stagnation stage

8.

Which of the following is not true regarding a bureau’s communications plan? a. the CVB should be reactive in its communications b. there should be an open dialogue between the bureau and its publics c. the bureau should create a theme for the destination and its communications d. the CVB’s sales staff should actively seek out leads and continually prospect

9.

Which of the following is not an objective for a bureau in dealing with its publics? a.

Increase awareness, interest, and participation of the attractions and hospitality firms. b.

Increase awareness, interest, and participation of the residents. c.

Develop and maintain good relationships with the media so they can help to communicate the bureau’s goals and objectives to the destination’s target publics. d. all of the above are objectives

10.

Which type of destination research focuses on the effectiveness of the destination marketing organization’s advertising materials in attracting visitors? a. economic impact studies b. destination image studies c. conversion studies d. none of the above

11.

Six Flags amusement parks would be an example of: a. a destination marketing organization b. an individual service provider c. a destination management company

12.

Which of the following types of organizations is not involved in developing regional tourism products? a. destination management companies b. destination marketing organizations c. individual service providers d. tour operators and wholesalers

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13.

Which of the following is not an advantage of branding a destination? a. it provides a means of communicating the destination’s unique proposition b. it helps the DMO to create a theme and a consistent message c. it gives the DMO a reason to ask for more money from the government d. all of the above are advantages of branding

14.

Which of the following is a reason why branding a destination is difficult? a.

DMOs have direct control of the delivery of the brand promise b. destinations are more one-dimensional than most other products or services c. it is difficult to measure the brand loyalty of the visitors to the destination d. the market interests of the stakeholders are very similar

True/False Questions 1. Convention and Visitors Bureaus are normally governed by a board of directors that follows a published list of by-laws.

2. The statement used to describe the elements that are unique to a destination in an attempt to differentiate it from other destinations is referred to as a unique destination proposition.

3. The decision-making process for people planning a trip is different than the decision-making process for other products and services.

4. The community relations plan is the component of the communication plan developed to foster business partnerships and alliances.

5. An input-output model is a common approach for estimating the economic impacts of tourism by directly surveying tourists to obtain their spending data.

6. The majority of CVBs are part of the local government for the destination.

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Test Bank Answer Key Chapter 1– The Functions of Marketing Multiple Choice 1.

C 6.

2.

D 7.

3.

E 8.

4.

B 9.

5.

D 10.

True/False 1.

T 2.

T 3.

F 4.

F 5.

F

C B B C A

Chapter Two – Introduction to Hospitality Services Marketing Multiple Choice 1.

D 6.

2.

A 7.

3.

A 8.

4.

B 9.

5.

C 10.

True/False 1.

F 2.

T 3.

T 4.

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B A D E C

Chapter Three – Understanding the Behavior of Hospitality Consumers Multiple Choice 1.

A 8.

2.

B 9.

3.

D 10.

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A 12.

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C 13.

7.

B 14.

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A D E C B A C

Chapter Four – Market Segmentation and Positioning Multiple Choice 1.

B 8.

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B 11.

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C 13.

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A B C E D A B

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Chapter Five – Developing a Marketing Plan Multiple Choice 1.

C 6.

2.

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3.

B 8.

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B 9.

5.

A 10.

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T 3.

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C D B E A

Chapter Six – Information Systems for Marketing Decisions Multiple Choice 1.

A 8.

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A 14.

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C D B E B D A

Chapter Seven – Developing New Products and Services Multiple Choice 1.

C 6.

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A 8.

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E 10.

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C A B D E

Chapter Eight – Managing Products and Services Multiple Choice 1.

B 8.

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C 9.

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A B D A C B D

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Chapter Nine – Marketing Channels Multiple Choice 1.

B 8.

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B D A C D B A

Chapter Ten – Electronic Commerce Multiple Choice 1.

E 6.

2.

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B 8 4.

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A 10

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E A E B B

Chapter Eleven – Promotion and Advertising Multiple Choice 1.

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B 15.

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D A B A D C D

Chapter Twelve – Advertising and Media Planning Multiple Choice 1.

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C 10.

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D D B A C

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Chapter Thirteen – Sales Promotions, Merchandising, and Public Relations Multiple Choice 1.

C 6.

2.

B 7.

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A 8.

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Chapter Fourteen – Personal Selling Multiple Choice 1.

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Chapter Fifteen – Pricing Strategy Multiple Choice 1.

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Chapter Sixteen – Destination Marketing Multiple Choice 1.

B 8.

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C 9.

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E 10.

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C 13.

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