Market Issues in CRETMarket Issues in CRET

Pfister & Tierney, Chap 5 & 6, p. 87-132

Universal Truth: ScenarioIn a CRET enterprise, you need to

know your customer if you intend to be successful!

If you don’t know what it takes to attract & keep your customer, your business will probably lose money.

Repeat Visitor Concept“The only reason to be in business is

for repeat business; and in you aren’t in business for repeat business, pretty soon you won’t be in business”

• The 80/20 principle• 80% of business will come from 20% of

the customers (customer loyalty)• Visitor satisfaction strong predictor of

intent to return (value for fee paid)• Also affected by size & diversity of

experiences (i.e. “Critical Mass”)

Market IssuesMarket Issues• Size

• Most CR&T operations are small scale• Developing & implementing sophisticated market

analyses & marketing strategies require specialized expertise, expensive, & time consuming

• Small business can form “market groups” or piggyback on larger organized or regional campaigns

• Over-use & carrying capacity• Concerns about sustainability• May require demarketing

Market Research

• Assists Business Owners by• Identification of consumer needs,

preferences & behaviors• Description of possible

communication & media avenues best suited for marketing/promotion

• Assessment of client satisfaction • Describing factor influencing

customer loyalty & the likelihood of repurchasing a product

Market ResearchA systematic & objective process for generating

information to be used in decision making: • Analysis of consumer needs, preferences, &

behaviors• Examination of best media avenues to market &

promote products• Assessment of client satisfaction• Examination of factors influencing customer

loyalty & repurchasing behavior• Identification of business images• Describing market trends & shifts in consumer

activities• Assessment of competitionMarket Research can help you KNOW who your

customers are!

Who Are the Customers?Sample profile released by the Hawaii

Visitors Bureau using market segmentation data: demographic, behavior, motivation & consumer satisfaction• The typical visitor is female, in her

middle 40s, from CA; she arrives by plane & stays for 10 days at a hotel; she comes for pleasure & visits one or more of the neighbor islands & is satisfied with her visit to Hawaii & plans to return.

Market Share

Before “E” enters the market.

• A = 40%• B = 25%• C = 20%• D = 15%

Changes after “E”enters

• A = 37%• B = 24%• C = 19%• D = 13%• E = 7%

A measure of how dominant a business is within its service sector

Your company is “E.”The market share is divided by percentage of businesses.

Competitive ClimateCompetitive Climate

• Zero Sum Market• to increase

your market share, competition has decreased share

Research to be completed in order to describe market profile:

• Basic questions of the consumers• Segmentation & key consumer

characteristics• Purchasing behavior• Data from other similar businesses

(competitors)• Your market share• Trend analysis• Participation rates

Market Analysis

Market Analysis• Who are the customers (market

segmentation)?• What are their needs?• Given my business, how much of what I

have to offer do the customers purchase (seasonally, annually)?

• How can my business differ from competitors’ businesses?

• How much market share can be captured?

• What is the potential for building a base of repeat customers?

Gathering Information on Competitors

• Attend the trade shows or local business fairs

• Be a customer• Talk with customers or suppliers• Go to a franchise show & talk with

vendors.

Where to Find Information• Libraries• U.S. Census• Bookstores• Trade associations• Trade magazines• Convention & visitors bureau

(CVBs)• Journals• Chamber of commerce

Segmentation of the Market

• Geographic variables• Demographic variables• Psychographic & behavioral

variables• Benefits variables

Ways to SegmentGeographic Segmentation• International• National• Regional or city

Ways to SegmentDemographic SegmentationDividing the market into groups based

on variables:• Age• Gender• Family size or life cycle• Income• Occupation• Education• Religion• Race• Generation• Nationality

Ways to Segment Psychographic Segmentation

Divides consumers into groups based on these aspects:• Behavior patterns• Lifestyle• Personality

Psychographic Typologybased on Plog, 1972

• Allocentric• venturesome• self-confident• less inhibited• travel by various

means• more exotic places• spend > $• travel more

• Psychocentric• traditional• less self-confident• more inhibited• travel mostly by car• familiar places• spend < $• travel less

Psychographic profile- attitudes, opinions & lifestylesPsycochentric vs. Allocentric

Psychographic TypologyPsychographic TypologyPsychographic Categories

Psychocentrics• Familiar travel destinations• Common activities at destinations• Sun & fun spots• Relaxation• Prefers driving• Heavy tourist accommodation: hotels,

family-type restaurants, tourist shops• Family atmosphere with familiar

entertainment• Tour packaging should be complete

with scheduled activities

Psychographic CategoriesAllocentrics• Nontourist destinations• New experiences (unusual destinations)• Sense of discovery (visit before others)• High activity level• Prefers flying• Tour accommodations should be good but not

chain-type hotels• Enjoy meeting & interacting with people from

another culture• Tour arrangements should include basics but

allow considerable freedom and flexibility on activities

Adapted from S. Plog, 2001, “Why destination areas rise and fall in popularity,” Cornell Hospitality Quarterly 42 (3): 17-18.

Ways to SegmentBehavioral Segmentation

Dividing the market into groups based on variables:• Benefits• User status• Usage rate• Loyalty status• Readiness stage• Attitude toward product

Benefits Sought• Typical CRET Experience benefits sought

• Escape• Novelty & new experiences• Health & physical fitness• Social interaction/family• Gain skill/competency• Challenge, risk & excitement• Stress relief & relaxation• Education• Ego

Segmentation of the Market

Relative Importanceof Segmentation Variables

What is Marketing?What is Marketing?

• The interaction & interrelationship among consumers & producers of goods & services, through which ideas, products services & values are created & exchanged for the mutual benefit of both groups• Marketing ≠ Promotion• Marketing ≠ Advertising• Its MORE, MUCH MORE!!

Primary Marketing FactorsPrimary Marketing Factors

• Target market• Market position• Company objectives• Marketing mix.

Target marketTarget market• The group of people at whom you specifically

aim the marketing effort• Usually based on

• Socio-demographics• Benefits sought & motivations• Perceptions of the CR&T product• Level of skill or experience• Psychographic profile

attitudes, opinions & lifestyles• Behavioral characteristics• Geography.

Market positionMarket position• How you want your target market to view

your company & the “product”• Positioning of products must be consumer

driven• Positioning objectives:

• Quality experiences• Supply-driven• Local control• Sustainable development• Minimum impact.

Company ObjectivesCompany Objectives

• What does your company hope to accomplish• Quality product• Make a profit• Generate benefits• Maximize satisfaction• Repeat business (Recall the 80:20 rule).

Marketing mixMarketing mix• The combination of variables

which your company can control & manipulate to achieve the desired outcomes (Company Objectives)

• Components – the 4 P’s:

Marketing mix (4 p’s)• Market mix

• A mix of inducements to buy that fit the needs and preferences of the target market

• Product• Goods/services, consumers want or need

• Place• A location, channel of distribution that is convenient and

available to the customer• Price

• The product/service in terms of its value to the consumer• Promotion

• Advertising, direct sales, and other forms to offer product/service to potential customers.

Product/Service• Products/services are chosen by individuals for

the “benefits” they offer to the individual• Differences: Products & Services

• Products can be possessed & are real, tangible “objects”

• Services can only be experienced not possessed & are perishable in nature

• Products are "search goods" whose features & qualities can be inspected & determined prior to purchase

• Services are "experience goods" whose quality cannot be determined until the service is performed.

Product Life Cycle• The concept that products/services follow a pattern of

introduction growth and decline

Recall the Innovation-Diffusion Curve?

Price • Pricing for Product/Service

• Includes “sticker price” + time/opportunity costs + psychological costs + personal effort costs + indirect financial costs

• Pricing Strategies1. Markup Pricing

− A fixed dollar or percentage amount is added to the cost of the product/service

− Simplest and most popular, cost is $10 with a 200 percent markup = $30.00

2. Penetration Pricing − Sets a price below cost in order to capture customers away from

competitors then raise the price at a later time3. Reference Price

− Price that the customer “expects” to pay, what is usual or typical price range

4. Price Skimming− Set a high initial price for a new product or service than gradually

reduce it as the market becomes more competitive

Pricing Strategies5. Going-Rate Pricing

• Match the price of your competitors and competes on non-price variables.

6. Variable-Cost Pricing• Used where fixed costs comprise a large proportion of cost per unit sales• One price is not necessary to produce profits

7. Single-Rate Pricing• Reduces your ability to generate revenue because a one price policy

does not take into consideration the customers willingness or ability to pay

8. Price by Product Characteristics• Charging based on perceptible differences in the product/service

9. Price Fencing• Logical rules and restrictions which allow customers to segment

themselves based upon their need and willingness to pay (airlines).

Place• Distribution & allocation• Product delivery

• Intensity• Intensive vs. selective/exclusive

• Scheduling• CR&T works when others play

• Distribution channels• Producer ⇒ Wholesaler ⇒ Retailer ⇒ Consumer

• Allocation• Usually economic merit as opposed to social merit

• Group sales/pricing

Promotion• Promotion mix

• Message types: educational, persuasive, reminding

• Promotion plan• Public relations & customer service• Personal selling: face-to-face• Sales promotion (short-term)• Publicity: Unpaid communications• Advertising: paid, non-personal presentation• Communication Channels

• Message, Sender & Receiver• Media type

DemarketingDemarketing• Discouraging of demand, often due to concerns of

overuse, crowding, impact• Reverse marketing• Methods:

• Increase prices• Queuing, ration or limit use• Limiting promotion, selecting very specialized media/target

markets• Promote conservation, minimum impact, sustainable

development education• Promote a range of opportunities/areas• Stress degradation that occurs due to overuse• Stressing restriction & difficulties.

Multiplier effectMultiplier effect• The number of times an "outside" (or tourist)

dollar "turns over" (is re-spent) in a local economy.

• Leakage: when money is spent on goods or services that are imported from outside the local community

• The more self-sufficient a community is, the higher the multiplier effect (usually from 1 to 1.9x but can go to 0)

• The higher the multiplier; the greater the impact of a business on community economy