A SIXTH EDITION Marketing for Hospitality and Tourism Philip Kotler John T. Bo wen James C. Makens PEARSON Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Contents To the Student xiv What Is Customer Equity? 25 Building the Right Relationships with the Right Preface xix Customers 26 Building Customer Equity 2 7 About the Authors xxi MARKETING'S FUTURE 27 KEY TERMS 27 CHAPTER REVIEW 28 PART I Understanding the DISCUSSION QUESTIONS 30 EXPERIENTIAL EXERCISES 30 Hospitality and Tourism INTERNET EXERCISES 30 Marketing Process 1 REFERENCES 31 Introduction: Marketing for Hospitality and Tourism 3 Service Characteristics of 1 Hospitality and Tourism YOUR PASSPORT TO SUCCESS 5 2 Marketing 35 CUSTOMER ORIENTATION 7 WHAT IS HOSPITALITY AND TOURISM THE SERVICE CULTURE 36 MARKETING? 9 CHARACTERISTICS OF SERVICE MARKETING 37 MARKETING IN THE HOSPITALITY Intangibility 37 INDUSTRY 10 Physical Evidence 38 Importance of Marketing 10 Inseparability 38 Tourism Marketing 10 Variability 39 MARKETING HIGHLIGHT 11 Perishability 41 Definition of Marketing 11 SERVICE MANAGEMENT CONCEPTS FOR THE The Marketing Process 11 HOSPITALITY INDUSTRY 42 UNDERSTANDING THE MARKETPLACE AND The Service Profit Chain 42 CUSTOMER NEEDS 12 Three Types of Marketing 42 Customer Needs, Wants, and Demands 12 MANAGEMENT STRATEGIES FOR SERVICE Market Offerings: Tangible Products, Services, BUSINESSES 43 and Experiences 13 Managing Service Differentiation 43 Customer Value and Satisfaction 13 Managing Service Quality 43 Exchanges and Relationships 14 MARKETING HIGHLIGHT 44 Markets 14 Managing Service Productivity 45 DESIGNING CUSTOMER-DRIVEN MARKETING STRATEGY 15 Resolving Customer Complaints 45 Selecting Customers to Serve 15 MARKETING HIGHLIGHT: RECOMMENDATIONS FOR IMPROVING SERVICE Marketing Management Orientations 15 QUALITY 46 48 PREPARING AN INTEGRATED MARKETING Managing Employees as Part of the Product PLAN 19 Managing Perceived Risk 48 BUILDING PROFITABLE CUSTOMER Managing Capacity and Demand 49 RELATIONSHIPS 20 KEY TERMS 55 Customer Relationship Management 21 CHAPTER REVIEW 55 The Changing Nature of Customer DISCUSSION QUESTIONS 56 Relationships 22 EXPERIENTIAL EXERCISES 56 CAPTURING VALUE FROM CUSTOMERS 24 INTERNET EXERCISES 56 Customer Loyalty and Retention 24 Growing Share of Customer 25 REFERENCES 56 Contents vii The Role of Marketing in Strategic Economic Environment 103 Planning 59 Natural Environment 104 3 Technological Environment 105 NATURE OF HIGH-PERFORMANCE BUSINESS 62 Political Environment 106 Stakeholders 62 MARKETING HIGHLIGHT: HOSTILE ENVIRONMENT 107 Processes 62 Cultural Environment 109 Resources. 63 LINKED ENVIRONMENTAL FACTORS 110 Organization 64 RESPONDING TO THE MARKETING CORPORATE STRATEGIC PLANNING: DEFINING MARKETING'S ROLE .64 ENVIRONMENT 111 Environmental Scanning 112 Defining the Corporate Mission 65 Setting Company Objectives and Goals 67 Using Information About the Marketing Environment 112 Designing the Business Portfolio 67 KEY TERMS 112 MARKETING HIGHLIGHT: STARBUCKS COFFEE: WHERE GROWTH IS REALLY CHAPTER REVIEW 113 PERKING 70 MARKETING STRATEGY AND THE MARKETING MIX 72 DISCUSSION QUESTIONS 114 Customer-Driven Marketing Strategy 72 EXPERIENTIAL EXERCISES 114 Developing an Integrated Marketing Mix 74 INTERNET EXERCISES 114 MANAGING THE MARKETING EFFORT 75 REFERENCES 114 Marketing Analysis 75 Goal Formulation 78 Market Planning 79 Marketing Information Implementation 80 5 Systems and Marketing Feedback and Control 80 Research 119 UNIQUE CHALLENGES OF THE HOTEL INDUSTRY 81 MARKETING INFORMATION AND CUSTOMER KEY TERMS 82 INSIGHTS 121 CHAPTER REVIEW 83 THE MARKETING INFORMATION SYSTEM 122 DISCUSSION QUESTIONS 84 Assessing Information Needs 123 EXPERIENTIAL EXERCISES 85 Developing Marketing Information 123 INTERNET EXERCISES 85 Marketing Intelligence 129 REFERENCES 85 MARKETING RESEARCH 131 Defining the Problem and Research Objectives 132 Developing the Research Plan 133 PART 11 Developing Hospitality MARKETING HIGHLIGHT: ETHNOGRAPHIC RESEARCH: WATCHING WHAT and Tourism Marketing CONSUMERS REALLY DO 135 Opportunities and MARKETING HIGHLIGHT: PROS AND CONS OF ONLINE RESEARCH 140 MARKETING HIGHLIGHT: A "QUESTIONABLE" QUESTIONNAIRE 143 Strategies 87 Implementing the Research Plan 147 Interpreting and Reporting the Findings 147 The Marketing Environment 89 MARKETING HIGHLIGHT: RESEARCH PROBLEM AREAS 148 4 MARKETING HIGHLIGHT: HSMAI'S eCONNECT: A GREAT SOURCE OF MARKETING THE COMPANY'S MICROENVIRONMENT 91 INFORMATION 149 The Company 91 INTERNATIONAL MARKETING RESEARCH 150 Existing Competitors 91 MARKETING RESEARCH IN SMALLER Suppliers 93 ORGANIZATIONS 151 Marketing Intermediaries 94 KEY TERMS 151 Customers 95 CHAPTER REVIEW 152 Publics 96 DISCUSSION QUESTIONS 153 THE COMPANY'S MACROENVIRONMENT 96 EXPERIENTIAL EXERCISES 154 Competitors 96 INTERNET EXERCISES 154 Demographic Environment 98 REFERENCES 154 viii Contents Consumer Markets and Consumer Corporate Meetings 194 Buying Behavior 157 Small Groups 195 6 Incentive Travel 195 A MODEL OF CONSUMER BEHAVIOR 158 MARKETING HIGHLIGHT: GREEN MEETINGS: THE RIGHT THING TO DO FOR THE PERSONAL CHARACTERISTICS AFFECTING CONSUMER ENVIRONMENT AND BUSINESS 197 BEHAVIOR 159 SMERFs 198 Cultural Factors 159 Segmentation of Group Markets by Purpose Social Factors 162 of the Meeting 198 Personal Factors 166 Restaurants as a Meeting Venue 199 MARKETING HIGHLIGHT: THE SAN DIEGO PADRES BASEBALL CLUB 169 DEALING WITH MEETING PLANNERS 199 Psychological Factors 170 THE CORPORATE ACCOUNT AND CORPORATE TRAVEL THE BUYER DECISION PROCESS 174 MANAGER 201 Need Recognition 174 KEY TERMS 202 Information Search 175 CHAPTER REVIEW 202 Evaluation of Alternatives 176 DISCUSSION QUESTIONS 203 Purchase Decision 177 EXPERIENTIAL EXERCISE 203 Postpurchase Behavior 177 INTERNET EXERCISE 204 MARKETING HIGHLIGHT: UNIQUE ASPECTS OF HOSPITALITY AND TRAVEL REFERENCES 204 CONSUMERS 178 KEY TERMS 179 CHAPTER REVIEW 179 Market Segmentation, Targeting, DISCUSSION QUESTIONS 180 8 and Positioning 207 EXPERIENTIAL EXERCISES 181 MARKETS 209 INTERNET EXERCISE 181 MARKET SEGMENTATION 209 REFERENCES 181 Geographic Segmentation 209 Demographic Segmentation 211 Organizational Buyer Behavior Gender 212 of Group Market 185 MARKETING HIGHLIGHT: TARGETING FAMILIES BY TARGETING KIDS 213 7 Psychographic Segmentation 214 THE ORGANIZATIONAL BUYING PROCESS 186 Behavioral Segmentation 215 Market Structure and Demand 186 MARKETING HIGHLIGHT: THE VFR TRAVELER SEGMENT 216 Types of Decisions and the Decision Process 187 Requirements for Effective Segmentation 219 PARTICIPANTS IN THE ORGANIZATIONAL BUYING MARKET TARGETING 219 PROCESS 187 Evaluating Market Segments 219 MAJOR INFLUENCES ON ORGANIZATIONAL Selecting Market Segments 220 BUYERS 188 Choosing a Market-Coverage Strategy 222 Environmental Factors 189 MARKET POSITIONING 222 Organizational Factors 189 Positioning Strategies 223 Interpersonal Factors 189 Choosing and Implementing a Positioning Individual Factors 189 Strategy 224 ORGANIZATIONAL BUYING DECISIONS 189 Product Differentiation 225 1. Problem Recognition 189 Selecting the Right Competitive Advantages -228 2. General Need Description 190 Communicating and Delivering the Chosen 3. Product Specification 190 Position 229 4. Supplier Search 190 Positioning Measurement: Perceptual 5. Proposal Solicitations 190 Mapping 230 6. Supplier Selection 190 KEY TERMS 231 7. Order-Routine Specification 191 CHAPTER REVIEW 231 8. Performance Review 191 DISCUSSION QUESTIONS 233 GROUP BUSINESS MARKETS 191 EXPERIENTIAL EXERCISE 233 Conventions 192 INTERNET EXERCISE 233 Association Meetings 193 REFERENCE 233 Contents ix THE INTERNAL MARKETING PROCESS 276 Establishment of a Service Culture 276 PART III Developing the Development of a Marketing Approach to Human Hospitality and Tourism Resources Management 280 Marketing Mix 235 Dissemination of Marketing Information to Employees 287 Designing and Managing MARKETING HIGHLIGHT: INTERNAL MARKETING IN ACTION: LEWIS HOTELS 288 Products 237 9 Employee Involvement in Product Selection 290 WHAT IS A PRODUCT? 239 MARKETING HIGHLIGHT: THE FOUR SEASONS: TAKING CARE OF THOSE WHO TAKE PRODUCT LEVELS 240 CARE OF CUSTOMERS 291 Core Products 240 KEY TERMS 292 Facilitating Products 241 CHAPTER REVIEW 292 Supporting Products 241 DISCUSSION QUESTIONS 293 Augmented Product 242 EXPERIENTIAL EXERCISE 293 BRANDING STRATEGY 248 INTERNET EXERCISE 293 Building Strong Brands 248 REFERENCES 293 Brand Equity 248 Brand Positioning 250 • Pricing Products: Pricing Brand Portfolios 250 Considerations, Approaches, Managing Brands 251 11 THE NEW-PRODUCT DEVELOPMENT 252 and Strategy 297 Idea Generation 253 PRICE 299 Idea Screening 255 FACTORS TO CONSIDER WHEN SETTING PRICES 299 Concept Development and Testing 255 Internal Factors Affecting Pricing Decisions 300 Marketing Strategy 257 External Factors Affecting Pricing Decisions 304 Business Analysis 257 Competitors' Prices and Offers 310 Product Development 258 GENERAL PRICING APPROACHES 311 Test Marketing 258 Cost-Based Pricing 311 MARKETING HIGHLIGHT: THE NATIONAL FOOD LABORATORY Break-Even Analysis and Target Profit Pricing 312 HELPS RESTAURANTS DEVELOP NEW PRODUCTS AND IMPROVE EXISTING Value-Based Pricing 313 PRODUCTS 259 Competition-Based Pricing 314 Commercialization 260 PRICING STRATEGIES 315 PRODUCT DEVELOPMENT THROUGH ACQUISITION 260 New-Product Pricing Strategies 315 PRODUCT LIFE-CYCLE STRATEGIES 261 Existing-Product Pricing Strategies