Marketing and Managing Travel DemandChapter 7

LibertyName Roll

Khadiza Noor 55

Zakia Shabnam Maria 27

Aaqib Md. Shatil 87

Cynthia Islam 101

Poly Talukder 47

Marketing Goods and Services

Until 1970s the significance of service industries and service marketing was largely ignored Employment in service sector is rising rapidly in the last half of twentieth century Large-scale commercial service operations shifted the emphasis from marketing studies to service In 1980s major transnational service corporations helped to shrink the globe with their global brands

Large-scale service operations

Production and sale of purpose designed repeatable, quality controlled productsTypically branded with the producer’s name and bearing standard pricesProducts available at many placesContinuous production and availability, mostly on a daily basis Most marketing undertaken by head offices, which control and direct the activities

Services and their characteristics

Services are performed, goods are produced Services are products purchased through an exchange transaction that does not confer ownership but permits access to and use of a service, and goods are products purchased through an exchange transaction conferring ownership of a physical item that may be used or consumed at the owner’s choice of time and placeService products may be summarized as

1. Inseparability 2. Perishability

Services and their characteristics

Inseparability Inseparability means that the act of production and consumption is simultaneous. The performance of the service requires the active participation of the producer and the customer together. PerishabilityPerishability can be explained this way, that if service capacity of products are not sold on a particular day, the potential revenue they represent is lost and cannot be recovered

Services and their characteristics

Inseparability Inseparability means that the act of production and consumption is simultaneous. The performance of the service requires the active participation of the producer and the customer together. PerishabilityPerishability can be explained this way, that if service capacity of products are not sold on a particular day, the potential revenue they represent is lost and cannot be recovered

No Possibility of creating and holding stocks Because of the characteristics of “Inseparability” and

“Perishability” it's not possible for service producers to create a stock of products to satisfy daily fluctuations in demand.

The process of stock creation and physical distribution between factories, warehouses and retailers stability and continuity in the production process is not available to service producers.

However, inventory systems for services can be created. In 1980, service marketing refined systems which made it possible to retain details of each year's production capacity in a computerized inventory and then to treat the inventory in exactly the same ways that physical stocks are treated by producers of physical goods.

For example, a hotel may keep inventory of its production capacity for conferences for 2 or more years ahead of the actual performance of services and market that capacity through contracts to deliver products at specified times

No Possibility of creating and holding stocks Two other characteristics that distinguish

between product and service are: 1. Heterogeneity2. Intangibility Heterogeneity refers that every service

performance is unique to each customer. But the practice of heterogeneity is said to be totally academic and application of this in service products such as those marketed by banks, transport operators, fast-food chains and other large scale service all of which are committed to specification and quality control of service performance.

Intangibility is a important characteristic of service products in the sense that most services can't easily measured, touched or evaluated at the point of sale before performance

Generic Characteristics distinguishing

Goods Services

Are manufactured. Are performed.

Made in premises not open to customers.

Performed with customers’ participation.

Goods are delivered to places where customers live.

Customers move to places where services are delivered.

Purchase means right of ownership to use at will.

Temporary right to use at a fixed time and place

Tangible; can be inspected. Intangible; can’t be always inspected.

Can be stocked physically. Perishable; can’t be stocked.

Particular characteristics of travel and tourism services There are three characteristics of travel and tourism

services: 1. Seasonality2. The interdependence of tourism products 3. High fixed costs of operations

Seasonality: It is a characteristic of most leisure tourism markets that demand fluctuates greatly between seasons of the year. Most northern Europe and northern states of USA mostly make their holiday during June to September. Climatic variations are not so relevant to many Mediterranean, middle Eastern, pacific or Caribbean tourism destinations. Schools, many business year cycles reinforce such traditions.

Interdependence: Travel purchase is a combination of several product and service. A vacationer chooses attractions at a destination together with the products of accommodation, transport, other facilities such as catering.

Characteristics of travel and tourism servicesHigh fixed costs of service operations: When

profit and loss account of businesses in the travel and tourism industry are analyzed, it reveals relatively high fixed costs of operating available capacity and relatively low variable costs.

Following costs must be incurred in order to open to receive visitors:1. Premises2. Rents, leases and rates3. Equipment4. Heating, lighting and other energy costs 5. Insurance6. Wages and salaries of full time employees

Characteristics of travel and tourism servicesManagement overheads and administrative

costsThe bulk of marketing costsThese fixed costs are mostly committed ahead

over12 months period and have to be met whether the attraction draws 50 or 500 visitors

Significant element of variable cost arises in operating catering and shops and number of part time staff employed, the variable cost of admitting an additional visitor is virtually nil

Most large businesses are obligated through competition to operate on a very narrow margin between total costs and total revenue .

Marketing Response to the characteristics of supplyMarketing application is required in the

following main sectors of the industry: - Inseparability - Perish ability - Interdependence - Seasonality - High fixed cost - Fixed in Time and place.

Role of marketing in the travel and tourism industry in response to the six factors noted in this section is to manage or manipulate sales, customer behavior on a daily basis.

Marketing in travel and tourism

Marketing in travel and tourism differs from other forms of marketing. Tourism and travel industry follows a particular approach and style in marketing practices which are based on some distinct characteristics. These are-

1. Nature of demand2. Nature of supply3. Products and prices4. Characteristics of promotion that

influence demand5. Characteristics of distribution that

facilitate purchase

Marketing in travel and tourismOn the basis of these aspects, it is possible to

concludethree propositions about marketing in travel

and tourism1. Product in tourism are designed, adopted

and promoted • In the context of opportunities and

constraints arise in national and international market

• To meet the long-run needs, expectations and interests of prospective customers

2. Insuperability and perishability of service products call for a different application of marketing mix variables.

3. Marketing in travel and tourism industry is shaped and determined by • nature of demand for tourism • operating characteristics of supplying

industries

Marketing in travel and tourismMarketing demand and customer behavior for travel and tourism reflect two separate dimensions characterized by “determinants and motivation”

1. Determinants: Economical factors that set limit to volume of populations demand for travel ,whatever individual's motivation may be.

2. Motivation: Internal factors within individuals, expressed as needs, desires which lead people to place a higher value on leisure travel than others.

Main determinants of demand

Main determinants of demand can be categorized under eight broad headings, they are-

1. Economic2. Demographic3. Geographic4. Socio-cultural and Social Attitudes5. Comparative Prices6. Mobility7. Government/Regulatory8. Media Communications

Main determinants of demandEconomical factorsEconomical variables greatly influence the total volume of demand generated. The influence is equally obvious in leisure travel and business travel. The relation between income and expenditure on travel and tourism is known as the income elasticity of demand.1. In any measured group in a population

there is a greater1% increase in expenditure in travel and tourism results1% increase in disposable income and the market is known as income elastic

2. If demand changes less than proportionately to income, the market is known as inelastic

Demographic factorsThe term demographics factors is just one convenient way to identify the main characteristics of the population that influence demand for travel and tourism, which can change rapidly from year to year.

Geographical Factors The weather is undoubtedly one if the principal determinants of travel demand foe leisure purpose, and explains destination patterns. Another geographic factor is the size of the community in which population live.

Socio-cultural factors The term socio-cultural factors is used to describe the broad trends in any society's attitude that influence individual motivations. but have a wide national imp[act in the sense that they respect commonly held beliefs and notions with which people are brought up as children.

The importance of attitudesAttitudes are not of course based simply on facts,

they are formed of ideas, fears, aspirations and beliefs which people hold about their lives. Attitudes to tourism do not exist in isolation: they are sub-sets of a wider view of the desired quality of life and how to achieve it. Quality of life is not simply quantifiable but it is recognized intuitively and experienced as satisfactions, enjoyment, stimulation and through a sense of physical and mental well-being.

Changing AttitudeMost commercial businesses understand that and invest heavily in market research to assess the implication of attitude shift on purchasing behavior. The more affluent customers are and the more discretionary their expenditure the more likely it is that purchases reflect their ideas about business in travel and tourism to understand changing attitude especially to marginal shifts in annual tourist volume.

Attitude Grouping for Residents

There are types of attitude groups of purchasing behavior. These are:

1. Sustenance driven group

2. Outer directed groups

3. Inner directed groupSustenance driven group: these are the people of all ages attitudes and behavior patterns are organized around fear for future and needs for security. Many such people are old and economically disadvantaged and live in constant fear of losing income, health or what they have managed to achieve of stability and status in their lives.Outer directed groups: people of all social groups with sufficient income and confidence to overcome their security worries, who strive to achieve their perception of social esteem and status. Typically materialistic and acquisitive in outlook and often in their twenties to forties members of this group organize their purchasing behavior around the way they look and the excepted effects on others of the possession they own and the holyday they take.Inner directed groups: in this group people of all social categories and income levels are mostly educated beyond school leaving age and usually 40 who have achieved the self-confidence maturity of personality and tolerance to be able to live easily with themselves and social contacts

Comparative pricesPrice which represents value to customers and is relative to their spending power reinforces the economic determinates. In case of international tourism, price is complicated by the combined effects on holiday prices of exchange rates between countries of origin and countries of destination and by the comparative level of inflation in the destination area compared with the area in which tourists live. The cost of oil which is especially important in all forms of air transport adds a third variable to these price complication. The concept of comparative price is highly complex in practice and the effects are far from easy to protect with any perception.

Personal mobility factors

The personal mobility provided by cars has become a prime determinant of the volume and nature of tourism.

Government regulatory factors

Almost all governments impose laws and regulations to safeguard the health and safety of their populations and the use of land and most penalties for non-compliance.There are three principle reasons that directly influence demand and supply and often have a particular impact on travel and tourism which marketing managers have to understand:The first regulation is to ensure fair competition between suppliers.The second is regulation to ensure that customers have choices and rights against suppliers which may be enforced.The third which is relatively new but expected to have a particular impact on travel and tourism is regulation to ensure that project developments and business practices do not damage the environment.

Tour operators and the hotels

Computer reservation s systems (CRS):CRS system, such as SARBRE, WORLDSPAN, GALILED, and AMADEUS could inhabit competitionNew regulation for the development: The Rapidly expanding influence of environmental legislation now affects most sectors of the travel and tourism

Mass media communicationThe most powerful and influential factors over the demand for travel and tourism .Television is of course also a main medium for advertising many products in travel and tourism.Example: Television, Radio, Internet etc

Characteristics associated with high and low demand for tourism:

Underlying factors determine the volume of demand for tourism are common to all countries.It is useful to distinguish between gross propensity and net propensity. 1. Net propensity is the proportion of a

population that takes at least one holiday in a 12-month period.

2. Gross propensity is the total number holidays taken. Expressed as a proportion of a population.

The response of marketing managersTo research and monitor the external factors that influence movements in the particular markets. To forecast the direction and speed of change in the determinants. To identify opportunities and threats emerging in the business environment.

The scale of opportunity to engage in travel and tourism

Low propensity characteristics:1. Low income per household2. single parent household.3. Educated to minimum age.4. Rural community dweller.5. Older people 75+.6. No private transport.7. 3 or less weeks paid holiday.

High propensity characteristics: 8. High income per household.9. Two parents household .10. City community dweller.11. Younger people12. 6 or less weeks paid holiday.