Place Mix in Hospitality Marketing

Cheatsheet Content

Place Mix: Meaning and Definition Definition: Place refers to the point of interaction between the product and potential customers. It relates to how the marketer distributes the product and provides information about it. Also known as channel, distribution, or intermediary . Channel of Distribution: A set of institutions that perform all activities required to move a product and its title from production to consumption. Learning Objectives of Place Mix Meaning of Place Mix Various place strategies Various channels of distribution Various distribution strategies Factors for selecting a distribution channel Meaning of rental/leasing, franchising, agent, broker, electronic channels, integrated service system Implications of hospitality distribution network Place Mix - Channels of Distribution Place refers to the contact between the service provider and the consumer. It includes all channels between the firm and the target market that increase the probability of getting the customer to the product. Options: Owning/running a property, managing a property, franchising, using channel intermediaries. The more access points consumers have, the better for the business and consumer. Place Strategies How an organization distributes its product/service to the end-user. Efficient distribution is crucial for meeting marketing objectives. Decision Variables in Planning Distribution Strategy of Services Location of Services: How important is the location to customers? (e.g., convenience for fast food vs. reputation for doctors). Is the service technology-based or people-based? How flexible? Importance of complementary services to location decision. Direct vs. Intermediaries: Direct sale is only possible for services inseparable from the performer. Other services (hotels, airlines) may use middlemen. Cost-Effective Service Provision: How to provide service to maximum guests in the most cost-effective manner. Cultural Trends Affecting Hotel Distribution Five major cultural trends driving consumer expectations in hospitality: Exclusivity: Personalization and localization. Upscale Design: No longer a luxury, but a trend. Control & Consumer Transparency: Consumers want control (e.g., price comparison, online reviews). Empathy & Social Networking: Intersection of real and virtual worlds, offering networking opportunities. Abundance: Wealth of opportunities to service micro-niches, allowing personalization. Hotels need to be dedicated to green initiatives. Channels of Distribution Two types: Indirect Distribution: Involves intermediaries (e.g., manufacturer -> wholesaler -> retailer -> consumer). Direct Distribution: Direct from manufacturer to consumer (e.g., Dell Computers). Gives manufacturer complete control. Distribution Strategies Three common strategies based on product type: Intensive Distribution: Distributing low-priced or impulsive products (e.g., chocolates, soft drinks). Exclusive Distribution: Limiting distribution to a single outlet for high-priced products (e.g., luxury cars). Selective Distribution: Choosing a small number of retail outlets for products where consumers shop around (e.g., computers, TVs). Intermediary For exclusive/selective strategies, select an intermediary with experience, credibility, and target audience recognition. Place Mix / Distribution Mix (Hospitality Specific) Definition: All channels between hotel and target market that increase customer acquisition probability. Distribution Mix: Combination of direct and indirect channels used by hospitality organizations. Main Components of Distribution Mix Direct Distribution: Organization handles promotion, reservation, and service provision. Indirect Distribution: Uses other hospitality organizations for promotion, reservation, and service provision. Options for Distribution Mix Effectiveness Own and run a property. Manage a property. Franchise (granting rights to exploit trade name for royalty/lump sum). Use channel intermediaries (travel agents, tour operators, airlines, etc.). Push and Pull Strategies Push Strategy: Incentives to channel members to sell more. Pull Strategy: Inducing customers to use the channel (freebies, discounts) by direct persuasion. Basic 'Channel' Decisions Direct or indirect channels? Single or multiple channels? Cumulative length of multiple channels. Types of intermediary. Number of intermediaries at each level. Which companies act as intermediaries to avoid intra-channel conflict? Factors Influencing Selection of a Distribution Channel Market Segment: Distributor must know the target consumer. Product Lifecycle Changes: Different channels for different PLC stages. Producer-Distributor Fit: Match in policies, strategies, image (synergy). Qualification Assessment: Experience and track record of intermediary. Training & Support: How much will the distributor require? Rental or Leasing in Services Easy solution for companies to expand without buying assets. Popular in services (e.g., time-sharing for holiday resorts). Franchising in Services Definition: Agreement allowing use of a name/business format for selling product/service. Granting rights to exploit trade name for a lump-sum payment or royalty. Used by major international restaurant chains (McDonalds, Pizza Hut) and hotel chains (Holiday Inn, Sheraton). Characteristics of Franchising Ownership of name/idea/process/equipment and associated goodwill. Grant of license to another to exploit these. Inclusion of regulations in license agreement. Payment of royalty or other consideration. Benefits of Franchisees (of Service) Established business format. National/regional brand marketing. Minimizing startup risks. Disadvantages of Franchisees Disappointing projects/revenues. Encroachment/Franchise Saturation. High failure rate/unfair termination. Lack of perceived control. Unrealistic revenue/profit expectations. Benefits of Franchisors (of Service) Leverages business format for expansion/revenues. Maintains consistency in outlets. Gains knowledge of local markets. Shares financial risk, frees up capital. Disadvantages of Franchisors Difficulty in maintaining/motivating franchisees. Highly publicized disputes/conflicts. Possibility of inconsistent quality. Control of customer relationship by intermediary. Agents and Brokers Agents: Intermediaries acting on behalf of a service provider; make agreements between customers and principals; do not take title to goods. Mainly used in international markets. Brokers: Bring buyers and sellers together, assist in negotiation; paid by party hiring them; rarely involved in financing/risk. Advantages of Agents and Brokers Reduced selling/distribution costs. Intermediary's special skills/knowledge. Knowledge of local markets. Customer choice. Disadvantages of Agents and Brokers Loss of control over pricing/marketing. Representation of multiple service principals. Electronic Channels of Distribution in Services Used by News and Entertainment Services via wireless/cable linkages (e.g., Teletype, Telex, TV signals, video disks). Internet Geographically dispersed market. Niche products reach wider audience (e.g., Scottish Salmon). Low barriers to entry (low setup costs). Uses e-commerce technology. Trends in Electronic Distribution of Hospitality Services Hotel chains invest in websites, direct links. Rising occupancy reduces wholesaler markups. Leisure travelers prefer online travel agencies for selection. Hotel commission payments shift to pay-for-performance. Hotel chains challenge major travel agencies. Hotels gain experience in managing distribution channels. Mobile Technology Increasing importance in hospitality (mobile-friendly websites). Broadband internet access on mobile devices. Personalized marketing messages based on geographic location. Mobile mapping, search engines, advertising. Consumer Generated Media (CGM) Latest buzzword in Electronic Marketing. De-commoditizes hotel product. Examples: online blogs, discussion boards, review sites, social networks. Used for consumer feedback, interactive tools. Online advertisement opportunities. Hoteliers must monitor CGM and maintain up-to-date, informative websites. Online Marketing Strategies - Trends Shift from converting "hits" to sales to "profits" via value-based pricing. Harnessing marketing power at property level for customer retention. Integrated Service System Latest trend in hospitality. Hotels offer local tours (e.g., ITDC's Ashoka Travels and Tours). Hotel chains offer reservation facilities across their network. Travel agencies offer "Package Tours" handling all formalities. Types of Hospitality Distribution Network A number of independent or related organizations, with specific skills, working together to assemble and deliver hospitality products and services. Affiliations Voluntary links between hospitality properties and other businesses for mutual advantage in distribution and marketing. Consortium Group of independently owned/operated hospitality properties forming a loose coalition to distribute and market offerings. Management Contract Agreement where one company operates a hospitality property for a fee (often based on gross sales). Direct Channel Communication involving direct contact between provider and guest (post, email, phone calls). Aims for one-to-one relationships. Indirect Channel Communication between providers and guests via intermediaries (travel agencies, reservation networks, etc.). Direct vs. Indirect Online Distribution Direct online channel remains main focus for hoteliers. Internet is preferred for planning/booking lodging and is cheapest distribution form. Shift from indirect to direct online distribution is a major trend. Intermediaries Independent businesses acting as links between suppliers and guests, adding value. May or may not take title to products. Major Travel Trade Intermediaries Retail Travel Agents. Tour Wholesalers and Operators. Corporate Travel Managers and Agencies. Incentive Travel Planners. Convention/Meeting Planners. Roles of Retail Travel Agents Expand distribution network for suppliers. Retailing services at convenient locations. Providing specialized advice on destinations, prices, schedules. Tour Operators Organizations planning, assembling, and marketing travel packages at wholesale and retail levels. Role of Tour Wholesalers and Operators Expanding distribution network. Assembling vacation packages (primary). Operating and guiding group tours (primary for tour operators). Role of Corporate Travel Managers and Agencies Expanding distribution network. Coordinating corporate travel arrangements to maximize efficiency (primary). Role of Incentive Travel Planners Expanding distribution network. Tailor-making incentive travel trips (primary). Role of Convention/Meeting Planners Expanding distribution network. Organizing and coordinating conventions, conferences, and meetings (primary). The Internet and Travel Consumer Perceptions Internet changed planning, purchasing, and accessing travel info. "Ideological clash" between "official" content (hotel websites) and CGM-related content (blogs, reviews). Key Distribution Trends in India's Hospitality Market Technology facilitates accessibility (mobiles, kiosks, web, interactive TV, SMS, call centers). Travel industry growth spurred by need for fast, accurate, cheaper travel options. Automated platforms drive growth. Hospitality industry has been slower to adapt to technological changes. Increasing IT applications redefine service, focusing on guest convenience. Future sees Web-based check-ins and identity-based procedures.