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SHA501: Marketing Fundamentals for the Hospitality Industry School of Hotel Administration, Cornell University

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SHA501 Transcripts

Transcript: Course Introduction Hello I'm Judy Sigua. Welcome to Marketing Fundamentals for the Hospitality Industry. This introductory course is the first in a four course series in the Hospitality Marketing Certificate Program. We will provide you with an overview of Marketing Management in the Hospitality Industry. We will also cover key marketing concepts, and the role of marketing in the organization. We will be using real marketing situations and we'll be exploring practical solutions and approaches to marketing situations and challenges. I hope you will have as much fun taking this course as the e-‐Cornell team and I had putting it together. Transcript: Hydrotech Vacuum Cleaner

Product specifications for the Hydrotech Vacuum, the most technologically advanced vacuum on the market today:

• The Hydrotech is the most powerful and complete vacuum available today. It traps 99.9% of dirt, pollen, dust and other irritants using its patented Ionic-‐Scrub technology—and doesn't spew pollen and dust back into the air like other Vacuums. The Hydrotech is a much more advanced piece of equipment than other vacuums on the market.

• The Hydrotech is one of the most popular vacuums in the Health Club industry, because it stands up to any challenge.

• It's favored by many smart consumers in the upscale private sector. • If consumers really care about cleaning, then they need a Hydrotech. Studies have

shown that no other vacuum comes within 20% of the cleaning power of the Hydrotech. • It starts at $1,200. • With regular maintenance, and emptying of the water reservoir that traps what the

Hydrotech picks up, this vacuum will provide years of service. It does take some training to understand how to carefully clean the Hydrotech after each use.



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Corporate Strategic Goals Summary

To continue to grow we need to expand our customer base. After successfully gaining product recognition and steady sales results in the consumer market and health industry, the next obvious market for our company is the hospitality industry. For the Hydrotech Company, the advantages of making sales to the hospitality industry are many, the big one being that a sale to a consumer is one vacuum, but a hotel would buy multiple units. Further, in the hospitality industry vacuum cleaners are replaced approximately every three years. Once staff are trained to utilize the dramatic cleaning power of a Hydrotech, the results will create return customers. We did some market research of potential customers to see what Hydrotech's selling points would be.

Hydrotech Market Research

In our market research, we uncovered the following data points:

Consumer Feedback

• A standard vacuum returns a high percentage of the dust and airborne allergens that it encounters back into the air.

• A Hydrotech vacuum removes 99.95% of them; 89% of hotel visitors rated this attribute as "very important".

• 80% of hotel visitors rated room cleanliness as "very important" to the quality of their experience.

• 55% of hotel visitors said allergies were an issue for them; 40% of visitors use medication to treat allergic symptoms.

• 60% of hotel visitors said they have had experience staying in a hotel where the room cleaning was sub-‐par, and it influenced their decision to not return for a follow up stay.

Manager Feedback

• Managers prefer to have one vacuum cleaner brand for all areas so maintenance is simple and replacement parts do not have to be stocked for different brands.

• Commercial vacuum cleaners also have to be much sturdier than the vacuums used by consumers for their homes.

• The list price of a commercial vacuum cleaner is around $500-‐$600, but discounts are routinely given by vendors to make a large sale. Housekeeping Directors can usually negotiate prices of $350-‐$450 for each unit purchased.

• Housekeeping Directors also prefer upright vacuum cleaners with only one attachment that cannot be removed—as one Director noted, "fancy, removable attachments get lost and are seldom used."

• Ease of operation for the vacuum cleaner is essential.



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• Commercial vacuum cleaners for guest rooms typically weigh about 18 lbs and are 12-‐15 inches wide so they can go under and behind furniture.

• Vacuum cleaners for hotel public areas are generally much bigger, wider and more powerful then room-‐use models; they often are self-‐propelled.

Corporate Sales Report Results

Despite the best efforts of our talented sales team, including the introduction of an installment payment plan, we are very disappointed with our sales volume to date. Further analysis is needed to examine why we have not achieved the same success in the hospitality industry that we have enjoyed in other market segments.

Transcript: Ask the Expert: Why It’s Not a Good Idea to Start With a Good Idea

What are the advantages of not starting the marketing process with a specific idea of the service or property I want to develop?

The best ideas are those that meet customers' current or future needs. So rather than just saying "I have this good idea," and going out and implementing that idea, you must first identify what are customers' needs and how you might best use your expertise to meet those needs, now and in the future. This process may result in your adapting or discarding your original "good idea." When individuals or companies fail to explore customer needs, new products and services generally fail. For example, one company developed an orange-‐scented deodorant, while another created baked cat food. Both companies thought these ideas were really good, but their customers saw no need for these products.

On the other hand, the company that first invented the microwave oven recognized the need for customers to save time. Utilizing its expertise in appliances, the firm invented a device that helps us save time; now this device is found in nearly every home, apartment, and dormitory in every developed country. Similarly, within the hospitality industry, Jack DeBoer was an apartment building developer who frequently received requests for short-‐term leases. He recognized this customer need and built the first extended-‐stay hotel, thus beginning the Residence Inn chain, which he later sold to Marriott.

How do I get an idea?

You should seek new ideas by examining trends in culture, politics, ecology, demographics, competition, economics, and technology. Based on these trends, try to identify what customer needs will be in the future and how you can step in to fill gaps that are not being met by your competitors. Also ask if there are new market segments that have developed which your



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company should be targeting? Are there new technologies that you should be embracing or that you need to prepare for because your customers will be adopting them? Are there new health trends on which your restaurant or spa can capitalize? I hope you get the general idea. A wonderful resource for noting trends is American Demographics magazine, and you may find the book The Tipping Point: How Little Things Make a Big Difference especially interesting.

How do I develop my idea?

Once you have identified an idea that you believe truly meets customer meets, you need to assess the viability of this idea by proceeding with the environmental and SWOT analyses as outlined in this course. This will ensure that your good idea becomes a successful idea!

Transcript: InterContinental Hotel Case Study

Background

The General Manager of Toronto InterContinental Hotel, Mr. Rex Rice, wondered how he could increase occupancy and raise prices to their original levels. The hotel had opened with a single corporate rate of $195 but only a 22 percent occupancy during the first four months. Occupancy increased to 55 percent when the rate was dropped to $169 after the first summer. (All dollar amounts in this study are Canadian dollars, which at the time of the study were equal to about .85 U.S. Dollars.)

About the ICH Corporate Parent

The InterContinental Hotel (ICH) was owned and operated by the parent company of the same name, which is owned by the Saison group of Japan. It claimed to be the world’s leading deluxe hotel chain. ICH contended that 85 percent of its customers were business travelers, 40 percent of all guests at a specific hotel were repeat visitors to that hotel, and it was the first choice of frequent international business travelers, according to an in-‐flight survey.

The chain had 105 properties located in 48 countries around the world. Eighty-‐six of these were deluxe, first class InterContinental Hotels; 17 were high quality, moderately priced hotels known as Forum hotels; three were executive conference centers called Scanticon.

Over the past 40 years, the company had achieved a reputation for personalized service, luxury product, and geographic scope, making it a recognized name among international business and leisure travelers. ICH had a strong foreign presence, but its image in the North American Market was considerably weaker.



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Toronto Facility

The Toronto property was built for about $50 million and was fully owned by ICH. It was one of Toronto’s premier boutique hotels and was located in the upscale downtown area of the city, also known for expensive restaurants and boutique shops. There were 213 guestrooms, including 12 suites plus seven meeting rooms, a business center, a fitness center, an indoor rooftop lap pool, and a sundeck. There was also an upscale lounge and dining room. Guest services included laundry, valet and shoe shine service, 24-‐hour pressing, twice daily maid service and turn down, 24-‐hour room service, concierge, guest relations service, and valet parking.

Competition

The InterContinental Hotel had five competitors in the same product class. All were in the same approximate area, except for the King Edward, which was farther downtown. A comparison of these properties for the past year-‐-‐on price, number of rooms, average occupancy rate, and market share-‐-‐is shown in the table on slide 6. Mr. Rice, however, felt that not all of these properties were competing for the same customer.

Mr. Rice felt that the main competitive advantage for the ICH was its facilities. The hotel was less than a year old and had a very high quality product with exclusive guest services. Mr. Rice asked his Marketing Director, John Visconti, to rank the competition based on the condition of the facility and the guest services offered for the corporate market. His report follows.

Marketing Report

Analysis by John Visconti:

The Four Seasons has the same guest services and competes for the same business market segment. It is a luxurious facility with an image of being the best upscale hotel chain in North America. The Toronto property has a refurbished lobby and front desk, but the rooms are beginning to look tired and run down. (Mr. Visconti rated it as an eight out of 10.)

The King Edward and Sutton Place have refurbished facilities, but each lacks essential customer services for the corporate transient segment. (He rated the Sutton Place a six, but downgraded the King Edward to a five because of its location.)

The Park Plaza has two towers. One has been recently refurbished but the other is very run down. It also lacks essential guest services. (Mr. Visconti rated it a four.)

The Renaissance is being refurbished and promises an upgraded facility next year. (It also lacks essential guest services and so was rated a four.)



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The ICH has superior facilities with a lavish marble entryway, mahogany paneling, and rooms that cater specifically to the business traveler with oversized desks, and a separate shower and bathtub in each bathroom. Extensive guest services also rank the ICH higher than the competitive properties, except the Four Seasons, which has the same services. (ICH was rated a nine out of ten).

Marketing Report Table

*The Renaissance periodically closed rooms for refurbishing during the year.

FMS (fair market share) is the number of rooms of each hotel divided by the total number of rooms.

AMS (actual market share) is the number of rooms occupied of each hotel divided by the total number of rooms occupied.

Marketing Report Recommendations

Mr. Visconti felt that the area drew four major market segments. They were the tourist/entertainment, corporate transient, government, and upscale conference segments. Major attractions for the tourist entertainment segment were in the farther downtown core except for the very upscale boutique shop buyer. The ICH area was home to most of the large businesses in the downtown area and attracted the corporate transient market. Government was a large segment because of Queens Park, just to the south and home of the provincial government. The upscale conference market was attracted to the area because of its quality and upscale hotels.

ICH targeted the corporate transient and corporate group markets specifically. The Four Seasons, King Edward, and Sutton Place were competing for these same segments. The Park Plaza and the Renaissance, because of their lower prices, were getting a majority of the government segment. The tourist/entertainment market, because of its diversity, was spread among all downtown hotels.



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Conclusion

Mr. Rice wondered how to position the InterContinental Hotel for the future. If they stayed at their present price level, other hotels might steal their present customers. If he raised prices to attract the upscale business market, he was afraid that occupancy would drop as it had before. What is the real problem in this case? What would you recommend that Mr. Rice do?

Transcript: Marketing Concepts

Definition of Marketing

The American Marketing Association defines marketing as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

This new definition positions marketing as an activity instead of a function. It identifies marketing as a broader activity in a company or organization, and not just a department. The new definition also recognizes that marketing provides long-‐term value as well as the short-‐term benefit of exchange of money for the shareholder and the organization.

Concept of Exchange

The essence of marketing is an exchange between two parties, meaning one party is willing to give up something (often money) in exchange for something he or she would rather have. Exchange occurs when one social unit (person or organization) exchanges something of value with another social unit.

Conditions for Exchange

Six conditions must exist for an exchange to be able to occur:

• First, two or more social units must be involved. • Second, the parties must be involved voluntarily—that is, each party must be free to

accept or reject the other's offer. • Third, each must have needs that must be satisfied. • Fourth, each party must have something of value to exchange. • Fifth, the parties must believe that they will benefit from the exchange. • And finally, the parties must be able to communicate with each other, and deliver the

goods or services to be exchanged.



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The Marketing Concept

The Marketing Concept is a philosophy that guides the firm in how it conducts its business. The Marketing Concept suggests that an organization should aim all its efforts at identifying and satisfying consumer needs.

The Marketing Concept is based on three fundamental beliefs:

• First, all planning and operations should be customer-‐oriented. • Second, all marketing activities in an organization should be coordinated. • And third, customer orientation and coordination of activities are essential to achieve

the organization's performance objectives.

Strategic Marketing Concept

However, some observers have said that the focus of the Marketing Concept was too narrow, because it failed to account for the larger business and social environment. Consequently, there have been efforts to extend the Marketing Concept to create a philosophy more attuned to the realities of today's business environment.

One such extension is the Strategic Marketing Concept.

Noting that the Marketing Concept does not adequately consider a firm's competition, the Strategic Marketing Concept suggests that a firm must satisfy customer needs while sustaining a competitive advantage to ensure long-‐term profitability. That is, a firm must have dual goals: satisfying customers and outperforming the competition on one or more key factors.

For example, Tune Hotels is a rapidly growing lodging chain designed to provide real value to the large population at the base of the population pyramid. Tune Hotels' business model embraces many of the efficient operating characteristics pioneered by low-‐cost carrier airlines such as Southwest Airlines, RyanAir, and Air Asia.

For Tune Hotels, this includes:

1. Internet distribution direct to customers, 2. Aggressive use of price to stimulate demand and maintain high occupancies, 3. "Opt-‐in/opt-‐out" amenities, 4. High operating efficiencies, and 5. A simple and consistent operating model that gives the customer a significant value

proposition.

Using ten tiers of room rates, Tune can offer incredible value for guests willing to book months in advance; this represents a creative marketing opportunity for developing markets that have rapidly growing, large populations with limited disposable incomes. Guests can access a quality,



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compact, clean guest room for less than US$5.00 per night, including all fees, and pay only for the amenities they require. Prices are kept low because incremental revenue is generated in every way possible, including the selling of advertising space throughout the hotel's physical structure.

Societal Marketing Concept

Another extension of the Marketing Concept is the Societal Marketing Concept, which addresses the criticism that although the Marketing Concept may lead to business success, it may encourage actions that conflict with a firm's responsibility to society. Thus, the Societal Marketing Concept evolved to resolve what is known as "the micro-‐macro dilemma." That is, what is good for some producers and consumers may not be good for society as a whole.

The Societal Marketing Concept recognizes that the market includes not only buyers of the firm's products, but also other people affected by the firm's operations. It also means the firm takes a long-‐term view of customer satisfaction.

For example, in one region of Cambodia, every tour bus company stops at a particular wat (a Cambodian temple) starting at 4:00 in the evening for the express purpose of letting tourists view the sunset from the top of the hill where the wat is located. Although including this scenic view increases the satisfaction of the tour bus companies' customers, the vast number of tourists clambering around the hill are destroying the ancient wat, so future generations will be unable to enjoy it. If the tour companies were practicing the Societal Marketing Concept, they would identify another venue that would provide equal customer satisfaction and would also protect the wat from destruction, especially since the customers are there to view the sunset, not the wat.

Firms that practice corporate social responsibility are utilizing the philosophy of the Societal Marketing Concept.

Applying Marketing Concepts

So which of these marketing concepts is the most appropriate for your organization?

In their 2008 article on the relative merits of the different marketing concepts, Ward and Lewandowska indicate that in volatile, uncertain business environments, following the simpler Marketing Concept strategy of customer orientation seems to be most effective. In stable business environments, it is better to use the Societal Marketing Concept and competitive-‐based Strategic Marketing Concept. All strategies come with caveats and marketing is no different. In very rare conditions, utilizing any form of marketing may waste resources. These limited conditions include:

• When the customers are satiated to the point they will not make any further purchases



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• When a product that customers want will not be made available • When the cost of gathering the information about customer needs exceeds the revenue

it will generate • When the firm is restricted in what it can exchange

Marketing Myopia

The Marketing Concept suggests that an organization should aim all its efforts at identifying and satisfying consumer needs.

Businesses that define themselves in terms of goods and services rather than consumer needs often find themselves engaging in narrow, short-‐term thinking, which is sometimes called "marketing myopia." The term "marketing myopia" was coined by Ted Levitt in a 1975 essay published in the Harvard Business Review. When an organization suffers from marketing myopia, it defines its business strategy too narrowly, to the point where it cannot adapt to evolving consumer needs.

Service-‐Profit Chain

Another critical concept in the hospitality industry is the service-‐profit chain.

The concept of the service-‐profit chain was originally introduced by Heskett and others in an essay published in theHarvard Business Review in March-‐April 1994. It has been widely embraced by the hospitality industry because the model contends that if the organization treats employees well, employees will be more satisfied and have greater loyalty and productivity. In turn, increased employee productivity will increase focus on providing an excellent customer experience, and increase customer value and satisfaction. Because satisfied customers are more loyal to the brand and more willing to shop with the firm, the internal service focus leads to improved firm financial performance.



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Extended Service-‐Profit Chain Model

Most recently, in the March 2009 issue of Journal of Marketing, Christian Homburg, Jan Wieseke, and Wayne D. Hoyer published research that demonstrated that customer satisfaction resulted more from employee-‐company identification than from employee satisfaction. In this complementary model, employee-‐company identification leads through improved customer focus to customer-‐company identification. This directly influences customer loyalty and customer willingness to pay. As in the traditional service-‐profit chain, these factors lead to improved financial performance.

These two complementary models make up the extended service-‐profit chain.

Transcript: Marketing Mix: The Four Ps of Marketing

Product

Product means identifying and developing the goods and services that consumers want or need. Often this involves in-‐depth market research.

Place

Place is offering products in a location so that they are convenient to the guest. For example, the number one hotel attribute for which a customer selects a particular hotel over that of a competitor is the convenience of the hotel's location.Price



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Setting the price is an essential step of the process. A price must serve many functions. It must yield a profit, it must provide value to the guest, and it has to take into account the price of competing goods and services.

Promotion

Promotion involves letting guests know about the product through advertising, personal selling, and other forms of marketing communications.

Transcript: The Marketing Process Continuum

Mission statement

The mission statement should answer the following questions about the business:

• Who am I? o Type of hotel—product focus and need o Quality level—luxury, first-‐class, budget o Business mix

• What are the key market segments I serve? • What makes me unique?

o Salience, determinance, and importance • Who are the key competitors whose success directly affects my business? • Who are my constituents—formal and informal groups (employees, unions, suppliers,

regulators/inspectors, and so on)—whose efforts on my behalf may contribute to success?

• How will I improve over the next 3-‐5 years?

The answers to these questions help organizations define their target markets and their business mix.

Strategy

Strategy involves matching opportunities with corporate capability. The strategic window of opportunity is a limited period during which the combination of an opportunity and the firm's ability to exploit it exists.

Breakthrough Opportunities are opportunities that help innovators develop hard-‐to-‐copy marketing strategies that will be very profitable for a long time. There must be a match or "fit" between the target market opportunity and the company's resources.



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Competitive Advantage means that a firm has a marketing mix which the target market sees as better than a competitor's mix. The goal of strategic planning is to gain a sustainable competitive advantage.

An organization with a production orientation would focus on achieving a competitive advantage by increasing production efficiencies to develop a production cost advantage. A company with a sales orientation would develop a competitive advantage by having a more persuasive sales message. A firm with a marketing orientation would achieve a competitive advantage by satisfying consumers' needs.

Unless the company has some overriding competitive advantage, the target market selected should be served by only a few, small competitors.

Analysis

There are two schools of thoughts regarding what happens after an opportunity is identified. The traditional belief is that marketers must conduct an environmental analysis to analyze the sociocultural, demographic, economic, technological, political and legal, competitive, and ecological environments. Marketers use the data they've gathered in an environmental analysis to conduct a SWOT analysis, identifying the strengths, weaknesses, opportunities, and threats associated with their enterprise. In concert with the identification of organizational resources, this enables organizations to define marketing objectives and a unique competitive advantage.

The opposing, and more nascent view, known as the Effectual Approach, is that analogical reasoning based on experience should be used to make marketing decisions, whereas predictive information should be ignored or given little weight. The goal is to control outcomes, co-‐create value through partnerships, and transform situations to achieve desired results.

Read, Stuart, Nicholas Dew, Saras D. Sarasvathy, Michael Song, and Robert Wiltbank (2009), "Marketing Under Uncertainty: The Logic of an Effectual Approach," Journal of Marketing, 73 (3), 1-‐18. Tactics

Under the traditional approach, organizations develop product, place, price, and product strategies for each target market based on resource and capability constraints; develop actionable tactics to implement strategy; and identify all resources needed for implementation.

As part of this stage, they also create a set of tools such as budget and pro-‐forma income statements for the next five years. These are used to perform a business analysis to ensure the direction the firm is taking will be a profitable one, to determine the actual cost of the business tactics, and to identify how much income the firm expects to generate. In addition, accountability controls and methods of evaluation are developed to assist with the review process that will follow at a later time.



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Contingency plans are also created so that organizations are prepared to respond rapidly to minor changes in their situations.

Following the effectual approach, the belief is that markets and products can be broadly transformed when moving along the path from concept to acceptance. Thus, alternative markets are more likely to be considered, pricing is likely to follow a skimming strategy, and channel strategies are more likely to focus on partnerships serving a narrow customer segment. Succinctly, the effectual approach is focused on relationships, networking, equity, co-‐creation, humans, and operant resources.

Review

During this phase, marketers re-‐examine strategies to ensure their continued fit with the organization's defined objectives as well as the prevailing environmental constraints. Further, they review and evaluate the effectiveness of their tactics based on the accountability controls, methods of evaluation, and contingency plans they established earlier.

Strategy

On the basis of their review, it may be necessary to revise strategies and even, in the most extreme circumstances, the mission statement. Such revisions lead to consequent revisions in tactical implementations, which are followed by another review cycle, another round of revisions, another review cycle, another round of revisions, and so on.

Transcript: Service Characteristics of Hospitality and Tourism Marketing

Service

At first glance, defining service as a product is not an easy task, because service is not a physical item that can be picked up and examined. But customers paying money for your organization's services, come to conclusions regarding the value of those services. That is, they decide whether the service received has been worth its cost.

Christian Grönroos (a pioneer of modern service marketing) defines service as an intangible activity that takes place between the guest and a service organization's service employees, physical resources, or systems—or some combination of those.



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Characteristics of Services

Most products have components of both goods and services inherent to their purchase. This can be as simple as a mailing address to return a defective product, or a huge facility equipped to respond to varying needs, such as an auto dealership with an attached service department. Most services are performed in the context of a tangible good, and most goods are combined with some element of a service. In the restaurant business, for example, the product is a combination of the food (the "goods") and everything associated with the way it is served (the service).

The relationship between goods and services can be illustrated by the Goods-‐Services Continuum. Most hospitality purchases fall to the right of this spectrum.

Characteristics of Services

In the hospitality industry, the key features of services include intangibility, inseparability, perishability, and the difficulty of standardization. Understanding each of these elements can help you define your tasks as a manager to improve the production and delivery of services.

Intangibility

The intangibility of service makes it difficult for hospitality organizations to differentiate themselves from the competition, and it makes it difficult for consumers to compare the quality of different services prior to consumption. When it comes to purchasing service, consumers simply do not have as much information to go on before they spend their money. That means it's riskier for consumers to try a new service or a new service provider than it is to try a new good. At the same time, the risk associated with trying new services means that, given a positive experience, customers are more likely to purchase the same service again.

Managers in the hospitality industry try to minimize the risk associated with first-‐time service purchases by making the nature of those services as tangible as possible, so that customers know what they're buying before they spend their money. Some of the strategies they use include:

• Requiring employees to wear uniforms • Employing the same logo, building design, and façade on all buildings • Making certain features (such as lobbies) visible, recognizable, and attractive • Creating outward identifying signs and signifiers at every opportunity

Inseparability

Inseparability means that the production and consumption of services are tied together and often occur simultaneously. In the hospitality setting this often involves interactions between guest and clerk or guest and waiter; in such cases, there are usually several well-‐defined points



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of contact. These moments of personal contact between employees and guests are very important in the effectiveness of the service delivered. The interaction between the employee and the guest is part of the total product. Proper training and proper attention to detail are essential to ensure a successful interaction between guest and employee.

Perishability

When it comes to most tangible goods, items not sold today will keep their value and can be sold tomorrow. But certain goods are perishable-‐-‐fruit, for example, ripens and has retail value for a limited window of time. The service-‐related efforts of your staff are similar in that they cannot be stored or saved. To manage a facility and staff profitably and ensure customer satisfaction, managers in the hospitality industry must be aware of such perishability and manage their capacity accordingly. The value of a room carried vacant tonight can never be realized in a future time period. To guard against this, hotels (and often airlines) frequently overbook their facility. If this is a regular business practice within your firm, then it's important to develop a process for finding alternate accommodations when guests walk in and discover their rooms have been given away.

Difficulty of Standardization

It is difficult to ensure consistent quality in the service industries because of the human element involved in the service production. Highly standardized behavior is almost impossible and not always desirable. Still, employees must be managed so that they provide a level of service that meets customer expectations and is commensurate with the corporate image. There are a wide variety of tactics used by the hospitality and tourism industry to manage the difficulty of standardization including:

• Increasing automation of tasks (electronic check in/out) • Training employees to make good decisions • Empowering employees to make those decisions

Nonetheless, one of the more frustrating aspects of the service industry is that regardless of the employees' best efforts, ill-‐natured guests will probably not have a good experience.

Transcript: The Servuction Model

The interactive relationship between all the variables involved in the production and delivery of services in the hospitality industry can be illustrated by something called the Servuction Model. Hospitality managers must be aware of the elements of this model, and do their best to influence how they combine, to make sure the customer experience is a positive one.



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The customer is the center of the service experience. Businesses must not lose sight of the fact that the quality of a customer's experience, repeated over and over, forms a business reputation that will determine long-‐term profitability and success.

There are many places where the inanimate environment of the hospitality setting can have an impact on the customer. When customer A pulls into the parking lot, and then walks into the lobby this customer will immediately form impressions based on a number of visual and sensory cues. For example:

• What impression do the hotel grounds make? • Is the sidewalk to the front door clean and free of snow, ice, gravel, or other blemishes? • When the customers enter the hotel, does the physical setting of the main lobby match

their expectations? • Do small details warn customers of carelessness on the part of the staff? • When customers reach their rooms, how thorough was the housekeeping staff in

preparing those rooms? • What little elements have/have not been taken care of, and does the level of

care/extras match the customer's expectations for the business?

The lesson that needs to be absolutely clear is that the inanimate environment provides an initial benchmark that begins to define the way the customer experiences your business.

The customer-‐facing staff have a tremendous impact on the visitor's experience. Their ability to greet the customer politely and meet needs efficiently is often a key determinant of how the customer will perceive the hotel. In addition to those at the front desk, customer-‐facing staff can include bellhops and gift-‐shop, bartending, and wait-‐staff employees.

Behind the scenes, the invisible organization defines, informs, and shapes the level of service each customer experiences. The most obvious examples of a hotel's invisible organization are the kitchen, housekeeping, and engineering staff. Less apparent but equally important are the support systems, training programs, and resources available for front-‐line employees. If the organization chooses to reveal any of these elements to the guests (such as by incorporating an open kitchen into the restaurant design) the organization must understand how that may alter the customer experience.

If the only thing impacting a customer's experience were the grounds, staff and support systems, then the job of hospitality administration would be much easier. But each customer's hospitality experience includes his or her interactions with other customers. Imagine a couple sitting at a table tucked away in a corner of the hotel restaurant, enjoying a romantic evening together. Suddenly, their experience is shattered by the loud, obnoxious behavior of a customer at a neighboring table speaking loudly on his cell phone. Potential hazards also include customers traveling with noisy families, or travelers whose idea of a relaxing night in the room next door involves the TV blaring at earsplitting volume all night long. The adept



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manager will have a well-‐conceived plan in place to ensure that all customers' needs are met with a minimum of conflict.

No matter how thorough the organization is in doing everything possible to ensure customer satisfaction, there are always elements beyond the organization's control that nonetheless affect the customer's overall experience. Weather is perhaps the most obvious example. What does a resort property do to compensate its customers when the weather refuses to cooperate—when there's no snow at the ski resort during the holidays, or the island resort experiences a week of non-‐stop rain? Customers realize, of course, that such factors are beyond the control of the organization, but they can't help but allow them to color their experience.

There are many ways to show your appreciation of a customer who chooses your organization. Examples of service benefits include everything from the trivial to the substantial: mints on the pillow, room upgrades, frequent-‐flyer miles, room vouchers, monogrammed pillow cases, coupons for low-‐cost follow-‐up stays, in-‐hotel health-‐club privileges, and more—the list is limited only by the promotional staff's creativity. Especially when dealing with external factors beyond the organization's control, such as inclement weather, such service benefits can go a long way toward ensuring a positive overall experience. These small outlay expenditures in the "bundle of service benefits" category often repay the organization many times over by winning long-‐term repeat customers.

Transcript: Ask the Industry Expert: Value Drivers in the Restaurant Industry

Why is marketing important in the restaurant industry?

First, it is impossible to overstate the importance of marketing in the restaurant industry today. Every single thing a restaurant does, I think, expresses its marketing, from the design and materials of the restaurant, to the menu and its expression, even the uniforms and the tabletop, the logo, and the furnishings market directly to the customer.

How does the restaurant industry express value to its customers?

Value is expressed by direct communication with a customer of a complete marketing strategy. Like a Wheel of Excellence, each spoke must be strong and of the same quality level as the next. Crisp table linens may be one spoke on the wheel, a specialty shellfish service another, and a quality guest newsletter yet another, but each making that Wheel of Excellence stronger than the sum of its parts.



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How do customers perceive value today?

We used to say that you could sell the customer the "sizzle" in the steak. However, today that is not enough. We must sell a truly great steak not just the "sizzle" because customers are more sophisticated, they are better read, they are more well traveled, and are more knowledgeable about food. Therefore, only marketing that stresses a restaurant's uniqueness will get the customer's top of the mind awareness.

What are some things restaurants are doing to introduce new value propositions to their customers?

Unfocused promotions that do not relate to the restaurant's real marketing plan will not work. For example, an ethnic liquor promotion, or trying to sell German beer, in a fancy French restaurant is something that is unrelated to a restaurant's marketing position and therefore does nothing to really reinforce it. Yet, a French brasserie that features a Mother's Day menu containing recipes from famous French chef's mothers, is a natural extension of the marketing of a brasserie, and will work. Things such as periodic menu changes, easily promotable, will work best if they express and reinforce the marketing program of the restaurant, whereas peripheral, unfocused ones, will be the least effective.

SHA501 transcripts - Amazon S3 · !SHA501:Marketing!Fundamentals!for!the!Hospitality!Industry!...

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