Segmentation in the hotel industry
Businesses use various segmentation bases in targeting the different groups of consumers. These segmentation bases include; first, psychographic segmentation, this is usually based on psychological factors whereby product positioning is done by incorporating activities, opinions, interests, attitude, and values of consumers to the end product (Charles 2002). Secondly, geographical segmentation is where product positioning is based on the geographic location of the product. Thirdly, segmentation is based on behavioral patterns of consumers by taking a look at the various factors such as user status, readiness to buy, benefits sought, brand loyalty, and usage rates. Lastly, segmentation can be demographic and in this case, product positioning is done by considering age, gender, family size, income, and nationality when making the final product mix. Marriot Hotel is one such hotel that can be used to appreciate the importance of segmentation within the hotel industry.
The Marriot Hotel was established back in 1927 in Virginia, United States (O’Brien 1995). The hotel presently has over 2500 branches that are scattered over 60 countries and employed over 15,000 employees globally. Some of the packages offered at Marriott include full service and lodging, select service and lodging, and extended long stays and resorts. Besides, the Marriot Hotel owns both premium and price-friendly business wings. Thus, given the diversity of its products the hotel can successfully use both the price skimming strategy and a price penetration strategy and take advantage of the market to stabilize and maximize its revenue streams. The top management in Marriott understands the importance of product and service differentiation and the role in which such a process helps to achieve its organizational goals therefore making segmentation a reality.
The level of complexity in the service industry and the number of features that are included in particular customers’ product package/service helps the hotel segment its markets. Psychographic techniques of segmentation are common because many individuals, especially the wealthy ones usually use value as a basis of justifying their purchases and therefore they may often purchase a highly expensive service or product simply because they believe the price is a direct mechanism that can be used to describe the quality of the product, and therefore consequently the Management of Marriot uses this bases to segment their market and attend to their needs (Kotler 1999).
Consumer purchasing behavior is normally triggered by a need that serves as a motivation that in turn initiates the purchase and therefore a consumer always needs that he or she desires to satisfy at the end of the purchasing and consumption process. Motivational guru, Abraham Maslow, suggests that the two highest levels of motivation usually involve catering for the needs of ego and self-esteem. Marriott hotel Customers who purchase their premium products and services, such as ExecuStay and Resort services, which usually targets the high spending clientele, are those who consider themselves as high-ranked within the society and therefore are motivated by self-esteem and ego needs (Kotler 1999). Some of these individuals may be high-earning citizens and celebrities who use these services and packages to distinguish and make them look unique within society. Therefore, consumers who consume these highly differentiated products that Marriot hotel provides derive more utility or satisfaction by obtaining some sense of pride and psychological satisfaction that is usually linked to the fact that their purchases are a direct indication of their social status.
Marriott’s executive rooms and apartments, for example, those located in Dubai creek, are well furnished with the best touch of classy Arabic design, with top class customized hotel amenities that are to some extent customized to fit the personal tastes and preferences of some consumers. The hotels are also furnished with flat TV screens, air conditioning, individual climate control, feathered pillows, business amenities, and entertainment systems not to forget its nearness to a golf club and the best yacht clubs, therefore taking the consumer experience for high end the holiday and business consumers to another level.
A wealthy businessman may desire to maintain a luxurious and classy lifestyle while at the same time enjoy doing business and making money and therefore this is what the management of Marriot ensures it does and the individual may be forced to part with up to $ 545. While on the other hand, couples who desire to spend their time at Marriot for holiday and may opt to purchase the romance option packages that include additional features such as a menu full of strawberries chocolate, champagne, and amenities such as dim romantic lighting which sometimes goes for up to $ 795 may do so to have their complete customer experience and therefore consequently pay a premium (Lugosi 2009).
On the other hand, the hotel offers cheaper options in some of its worldwide branches, because of the brand that Marriot has, by offering these cheaper hotel facilities ensures that it captures the low-end market and maintain a large clientele base. Just like the high-end consumers, low-end consumers may operate with indentions of saving money, and as common consumer behavior, such individuals expect to pay less for more and it, therefore, becomes necessary for the hotel management to make this wish somehow a reality for these individuals so that at the end of their stay satisfaction may be obtained. Just like high-end consumers, low-end consumers undergo the same purchase and decision-making process before they transact by buying a service or a good
A cheap room belonging to Marriott hotel in Budapest goes for as low as $ 75, and the hotel room itself is considered to be quite decent highly hygienic, and even well designed. The rooms furthermore contain a good air conditioning system, good fluffy pillows, and big beds that are very comfortable to sleep in. Most low-end consumers always demand convenience, and their needs are mostly basic because they are financially cautious and therefore their main intention is to save on funds by getting the most economically sensible option contrary to high-end consumers.
Describe in general the value chain of a hotel chain
A value chain is a systematic analysis of the particular activities of an organization that can build a competitive edge; it concepts the organization as a chain of value-adding activities (Lugosi 2009). Without the presence of these value chains then business activities that enable the delivery of goods and services within an organization would simply be paralyzed and brought to a standstill, therefore, making business paralyzed.
A hotel’s value chain may often include activities such as research and development, design of products and services, the actual production of products and services, sales and marketing, distribution, and also customer services. These activities within a hotel value chain may either be upward or downward and contribute to the smooth and efficient delivery of products and services and hence help the firm achieve its core mission. Therefore, when the leadership or management of a hotel develops strategy and plans to guide these activities, it becomes more plausible for synergistic advantages that arise from coordinating these activities more efficiently to enable the hotel to produce products and services efficiently and thereby satisfy consumers.
Consequently, activities that take place within an industry’s value chain may move forward or backward before the main targets and objectives of these activities are realized. An example is when a seafood restaurant orders fresh shrimps from its distributor but upon arrival, the shrimps go bad then it would become necessary for the distributor to contact his supplier and go back to ensure that another order is secured on behalf of his client. It is in the same way the marketing department can communicate with their consumers to know their desires and therefore pass the message to the management hoping to trigger some degree of change that will then go ahead to please their consumers by providing to their needs.
Choose two different product or service attributes that you think have the greatest impact on attracting customers
Product attributes can be defined as characteristics or particular features that are normally assumed to be appealing to customers (Kotler 1999). A product or brand can have attributes such as cost, reliability, safety exclusivity, luxury, and even sometimes its place of origin. Product attributes are sometimes decided by the perspective of a seller and manufacturer who uses these attributes to give an identity and perception to his/her products to influence the purchasing decisions and customer experience. Products attributes are hard to be quantified and therefore may be classified using a five or seven-point Likert Scale that attempts to measure the magnitude of the attribute using descriptions such as good or bad. Therefore, sometimes many consumers may simply end up purchasing a product not even because of its special features but rather the attributes that are directly related or identified with a product.
Promotion activities give the product identity is therefore made simple by the fact that product attributes can be used in the process of advertising and promotion of products. Look at an example, Marriott ExecuStay, even from the branding of such a product it becomes quite clear and apparent that such a brand is for individuals who consider themselves as executives, and as a result, the customer goes ahead to purchase this brand as they think is special and somehow a direct transposition of their image. However, the pricing of such a product is likely to be high and as it gives consumers the perception that it is meant for those who are executives or consider themselves as executives. Thus, a product attribute enables hotels such as Marriot to segment their markets properly and be able to serve other niches to these effects.
The high-end consumer market is therefore attracted to the kind of prestige that is a product and service attribute belonging to Marriot hotel high-end services. The level of complexity and sophisticatedness that Marriot hotels put in its high-end product packages, such as the romance package and also the business executives packages for high-end consumers, caters to the needs of self-esteem/ego that are normally considered also as a package of prestige (Stem 2006). High-end consumers of Marriot products and services feel proud of themselves especially when they spend a lot of money knowing they are consuming what is reserved for a special few. This attribute of prestige, class, and uniqueness gives these individuals the satisfaction that they, in turn, search for. And therefore Marriot ensures that it has appropriately trained its staff in high-quality service delivery throughout the hotel industry’s value chain.
Low-end consumers on the other side appreciate brands that are under the Marriot name and know that the kind of status and brand value that Marriott has made within the years is unquestionable. Consequently, when they pay less to spend time at Marriott facilities they derive more utility out of their money, and they feel as if there is some sense of trust and credibility that exists in the products packages of Marriot.
Value for money is a product attribute, and therefore attributes should not be confused with benefits. The product attribute value for money is simply obtained by the consumer because the Marriot chain of hotels operates with one mission, which is to provide high-quality services despite which segment that a consumer belongs in. Brand attributes or product attributes are important because they often impact the perception of consumers concerning products and may even go forward to influence the nature of the purchase they make. It is thus right to say that if these attributes were not available, then low-end consumers would have felt ripped off and unrecognized by the company (Kotler 1999).
What are the alternative ways of managing and carrying out the value activities and obtaining the resources and capabilities necessary for carrying out the activities?
Activities within a value chain need to be carried out carefully, and hotels usually set up strategies that in turn give business executives and the hotel management the chance to chose the best alternatives that would optimize usage of the resources available. Commercial organizations, like hotels, usually have one intention in mind, that is to maximize income and minimize costs, and therefore every effort within the industry will emphasize this (Charles 2002). Consequently, when changing these activities and choosing the next best alternatives it becomes important that an organization ensures that any changes will not, in turn, affect the actual goals and objectives of the hotel. It is thus worth noting the importance of the customer and the particular attributes which have always attracted the customer to Marriott in this case be it prestige, or cost.
Marriot has a systematic way of handling business issues especially, in that it handles customer care; its customer care activities are usually centered on offering the best solutions to its clients. Policies such as the one ring policy that forces customer care staff to pick the phone when it rings without delays make customer care efforts fruitful. Customer care is a sensitive issue in the hotel industry, and failure to handle this function may lead to inefficiencies and loss of potential customers.
Before a consumer can enjoy the actual service that he has paid for, there are several channels and many individuals who are involved in the process of ensuring that these services reach where they are supposed to in time and with a high degree of efficiency. There may be many ways of doing this especially in operations management and therefore operational managers should make sure that they choose the critical path to optimize resource use and maximize efficiency. This is because when operations management within the industry’s value chain is wrongly planned, it becomes quite difficult for the hotel to realize efficiency in its operations. As a result, any kind of inefficiency may lead to dissatisfaction of stakeholders including both employees and also consumers, who are the pivot of the hotel’s business (Kotler 1999). For example, if Marriott decides to suddenly change the raw material suppliers without undergoing a verification and vetting process then the end product, which consumers in turn consume may end up being affected negatively. While on the other hand if the Hotel decides to go for an efficient supplier then it will be more possible to improve their service delivery.
The creation of value is very important in the hotel industry, without creating value then there will, in turn, be no satisfaction, and without satisfaction institutions within the hotel industry are bound to ultimately fail. Customer care services, if they are upgraded will most likely improve the consumer experience and therefore make it better and easy for customers to feel appreciated. Hotel departments are not islands, and, therefore, they must interact to make sure that service delivery is highly efficient and to the satisfaction of the target market. It is for that reason at the end of the day issues, such as cost, quality, flexibility and imitability, efficiency, timeliness, and other factors must be taken into consideration while determining the critical path that is to be followed in the hotel value chain.
And as a result, it becomes totally necessary for the Hotel, to only consider options that will, in turn, improve on efficiency and accuracy of service delivery and at the same time save on costs that the hotel is to incur during the process of service delivery by using friendlier and less costly customer relationship management approaches. It is therefore in this way that service attributes and qualities that are highly attractive to consumers can be preserved without possibly being compromised depending on the segment of the customers (Charles 2002). For example by reducing the lead time that the hotel orders high-end delicacies, such as lobsters, then Marriot will be able to ensure timeliness in the process of service delivery and possibly improve quality simply because chefs will be able to cook these lobsters better knowing that there is more time on their hands.
On the other hand, if the hotel upgrades its information technology then the organization will most likely enjoy better communication and coordination therefore improving the customer relationship management process. Although it may cost more in the short run, it may prove very beneficial in the long run because it will become easier to carry out activities within various functional areas and therefore making value activities within Marriot much better to the satisfaction of their clientele (Kotler, 1999). Consequently, costs may go up but on the other hand the level of efficiency is likely to also go up and as a result service delivery within the whole industries value chain are more likely to be carried out faster and with a high degree of accuracy, therefore, improving overall qualities of service delivery. With this fact, true then the level of imitability and also flexibility within the organization will be healthy, therefore, making it possible for the staff to assist each other in the process of service delivery, which is highly important for the hotel industry.
The same goes for production activities which are mainly just in time with little effort dedicated to holding a lot of stock that may sometimes seem unnecessary, if Marriot hotel changes the way it carries out such activities it may incur extra costs in holding a lot of stock and therefore tying back capital and this could hinder its profitability targets. Besides, a just-in-time approach can enable the hotel to produce more fresh meals and delicacies due to the highly perishable nature of their goods (as is with the food industry (Charles 2002). Hence, logistics and service delivery activities become highly necessary for Marriot hotels to plan carefully and ensure that stock levels are kept certain at an all-time optimum. Thus, instead of opting to use an MRP method (materials resource planning), the organization should adopt a more modern and conventional technique such as the just-in-time approach that ensures only what is needed is ordered as it is needed (Lugosi 2008). By using such an approach extra incremental costs can be saved and the staff will be more flexible in handling stock, hence optimizing usage.
In conclusion, a hotel must understand the most important activities within its industry value creation chain, then identify which of these can be used to improve the service delivery process and at the same time save on costs without necessarily compromising on the key attributes that are associated with their particular brands/products. Value creation should be considered when considering the various alternatives that can be embraced during the process of service delivery, however, the efficiency and accuracy in the process should not be compromised at whatever cost. Nevertheless, failure to critically analyze and optimize the possible outcome that can come from manipulating value-adding activities to the company’s advantage could obstruct the company from achieving its actual objectives.
Charles, W. et al. (2002). Essentials of Marketing. Natorp Boulevard: South Western Cengage Learning.
Kotler, P. (1999). Principles of marketing, (2nd end). New York: Prentice Hall.
Lugosi, P. (2008). Hospitality spaces, hospitable moments: consumer encounters and affective experiences in commercial settings. Journal of Foodservice, 19(2), 139-149.
O’Brien, R. (1995). Marriott: the J. Willard Marriott story. Salt Lake City, UT: Deseret Book Co.
Stem, B. S. (2006). Stern’s Guide to the Greatest Resorts of the World. Florida: Stern’s Travel Guides Ltd.