1. Cost Based Pricing The simplest pricing method is a. Cost-plus pricing – adding a standard markup to the cost of the product. Construction companies, for example, submit job bids by estimating the total project cost and adding a standard markup for profit. Some sellers tell their customers they will charge cost plus a specified markup. Example . Assume that a computer(manufacturer) had the following costs and sales expectation: Variable cost Rm 10 Fixed cost RM 300,000 Expected unit sales 50,000 units Unit cost = variable cost + fixed costs Unit costs = RM 10 + 300,000 50,000 units = RM16 GENERAL PRICING APPROCHES 44
Now assume the manufacturer wants to earn a 20% markup on sales. The manufacturer’s markup price is given by : Mark up price = unit cost ( 1 - Desired return on sales) = RM 16 (1 – 0.2) = RM 20 Understanding The manurafturer would charge delers RM 20 per computer and make a profit of RM 4 per unit. The dealers in turn will mark up the computer for their own wants or needs. If the dealer wants to earn 50% on sales, they will mark up the computer to RM40. b. Break even analysis/ target profit pricing. Another cost-oriented pricing approach is break-even pricing or so call as target pricing. The firm tries to determine the price at which it will break even or make the target profit it is seeking. 45
Target pricing uses the concept of a break-even chart, which shows the total cost and total revenue expected at different sales volume levels. Fixed cost are $30,000 regardless of sales volume. Variable costs are added to fixed cost to form a total costs, which rise with volume. The total revenue curve starts at zero and rises with each unit sold. The slope of the total revenue curve reflects the price of $20 per unit. The total revenue and total cost curves cross at 30,000 units. This is the break-even volume. At RM $20 , the company must sell at least 30,000 units to break even; that is for total revenueto cover total cost. Break even volume is calculated using the below formula: If the company wants to make a target profit, it must sell more than 30,000 units at RM $20 each. Suppose the toaster manufacturer has invested $1,000,000 in the business and wants to set price to earn a 20% return, or $200,000. In that case, it must sell at least 50,000 unitsat RM$20 each. If the company charges a higher price, it will not need to sell as many toasters to achieve its target return. But, the market may not buy even this volume at the higher price. This due to the price elasticity and competitors’ prices. Example General Motors, prices its automobiles to achieve a 15 -20 % profit on its investment. This pricing method is also used by public utilities, which are constrained to make a fair return on their investment. Break-Even Volume = Fixed Cost = RM300,000 Price – Variable Cost $20 -$10 = 30,000 46
Break-even chart for determining target price 47
3. Competition Based Pricing Consumers will base their judgment of a product’s value on the prices that competitors charge for similar products. One form of competition based pricing is a. “Going – rate pricing” in which a firm bases its price largely on competitors’ prices, with less attention paid to its own costs or to demand. b. “Sealed – bid pricing” a firm bases its price on how it thinks competitors will price rather than on its own costs or on the demand. 2. Value Based Pricing Setting price based on buyers’ perceptions of value rather than on the seller’s cost. It means that the marketer cannot design a product and marketing program and then set the price. Price is considered along with the other marketing mix variables before the marketing program is set. Value pricing – offering just the right combination of quality and good service at a fair price. NEW PRODUCT PRICING STRATEGIES a. Market-skimming Pricing Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales. b. Market-penetration pricing Setting a low price for a new product in order to attract a large number of buyers and a large market share. Ei. Dell used penetration pricing to enter the personal computer market, sellinghigh- quality computer products through lower-cost direct channels. 48
a. Product line pricing Setting the price between various products in a product line based on cost differences between the products, customer evaluations of difference features, and competitors’ prices. b. Optional-product pricing The pricing of optional or accessory products along with a main product. c. Captive-product pricing Setting a price for products that must be used along with a main product, such as blades for a razor and film for a camera. d. By product pricing Setting a price for by-products in order to make the main product’s price more competitive. e. Product bundle pricing Combining several products and offering the bundle at a reduced price. PRODUCT MIX PRICING STRATEGIES SCAN HERE 49
PRICE ADJUSTMENT STRATEGIES Competition-based pricing Price elasticity Value pricing Variable cost Value-based pricing Allowance Discount Market penetration pricing Market skimming pricing Optional product pricing Product bundle pricing Product line pricing Psychological pricing Segmented pricing Reviewing the Key Terms 50
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The promotion mix is the specific blend of advertising, public relations, personal selling, sales promotion, and direct-marketing tools that the company uses to communicate customer value and build customer relationships persuasively. THE PROMOTION MIX SCAN HERE 52
Advertising Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor. Advertising objective A specific communication task to be accomplished with a specific target audience during a specific period of time. Marketing management must make 4 important decisions when developing advertising program: a. Setting advertising objectives b. Setting advertising budgets c. Developing advertising strategies d. Evaluating advertising campaigns ADVERTISING 53
Advertising objectives are specific communication task to be accomplished with a specific target audience during a specific period of time. Advertising objectives can be classified as primary purpose whether to ; 1) inform, 2) persuade, and 3) remind. SETTING ADVERTISING OBJECTIVES Informative Advertising Inform Consumers or Build Primary Demand i.e CD Players Persuasive Advertising Build Selective Demand i.e Sony CD Players Advertising Objective Specific Communication Task Accomplished with a Specific Target Audience During a Specific Period of Time Comparison Advertising Compares One Brand to Another i.e Avis vs Hertz Reminder Advertising Keeps Consumers Thinking About a Product i.e Coca-Cola 54
POSSIBLE ADVERTISING OBJECTIVES Factors that should be considered when setting the advertising budget are; a. Product stage in the product life cycle b. Market share c. Competition and clutter d. Undifferentiated brands Developing advertising strategy a. Advertising campaign might start with a great message idea, followed by the choice of appropriate media. b. In other cases, however, a campaign might begin with a good media opportunity, followed by advertisements designed to take advantage of the opportunity. 55
Advertising strategy consists of 2 elements; a. Creating advertising messages. Message strategy Message execution b. Selecting advertising media Deciding on reach, frequency and impact. Choosing among major media types Selecting specific media vehicles Deciding on media timing. MAJOR ADVERTISING DECISIONS Communication objectives Sales objectives Objectives Setting Affordable Approach Percent of sales Competitive parity Objective and task Budget Decisions Message Strategy Message Execution Message Decisions Reach, Frequency, Impact Major Media Types Specific Media Types Media Timing Media Decisions Communication Impact Sales Impact Campaign Evaluation 56
Short-term incentives to encourage the purchase or sale of a product or service. Ei, A freestanding insert in the Sunday newspaper contains a coupon offering $1 off Folgers coffee. Sales promotion tools are used by most organizations, including manufacturers, distributors, retailers, and notfor-profit institutions. They are targeted toward final buyers (consumer promotions), retailers and wholesalers(trade promotions), business customers (business promotions), and members of the sales force (sales force promotions). Today, in the average consumer packaged-goods company, sales promotion accounts for 76 percent of all marketing expenditures. SALES PROMOTION 57
Several factors have contributed to the rapid growth of sales promotion, particularly in consumer market. First, inside the company, product managers face greater pressures to increase their current sales, and promotion is viewed as an effective short-run sales tool. Secondly, externally, the company faces more competition and competing brands are less differentiated. Increasingly, competitors are using sales promotion to help differentiate their offers. Third, advertising efficiency has declined because of rising, costs, media clutter, and legal restraints. Finally, consumers have become more deal oriented, and ever-larger retailers are demanding more deals from manufacturers. SALES PROMOTION OBJECTIVES Sales promotion objectives vary widely. Sellers may use consumer promotions to increase short-term sales or to help build long-term market share. Objectives for trade promotions include getting retailers to carry new items and more inventory, getting them to advertise the product and give it more shelf space, and getting them to buy ahead. Objectives for sales, include getting more sales force support for current or new products or getting salespeople to sign up new accounts. Sales promotions are usually used together with advertising, personal selling , or other promotion mix tools. Consumer promotions must usually be advertised and can add excitement and pulling power to ads. Trade and sales force promotions support the firm’s personal selling process. 58
a. Samples A small amount of a product offere to customers for trial. b. Coupons Certificate that gives buyers a saving when they purchase a specified product. c. Cash Refunds Offer to refund part of the purchase price of a product to consumers who send a “proof of purchase” to the manufacturer. d. Price Packs Reduce price that is marked by the producer directly on the label or package. e. Premiums Good offered either free or at low cost as an incentive to buy a product. f. Advertising specialty Useful article imprinted with an advertiser’s name, given as a girt to consumers. g. Patronage rewards Cash or other award for the regular use of a certain company’s products or services. h. Point of purchase displays Display and demonstration that takes place at the point of purchase or sale. i. Contests, Sweepstakes, Games Promotional events that give consumers the chance to win something – such as cash, trips, or goods – by luck or through extra effort. MAJOR SALES PROMOTION TOOLS Main Consumer Promotion Tools are ; 59
a. Discount : A straight reduction in price on purchase during a stated period of time. b. Allowance : Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer’s products in some way. TRADE PROMOTION TOOLS Public Relations Building good relations with the company’s various publics by obtaining up a good” corporate image,” and handling or heading off unfavorable rumors, stories, and events. PUBLIC RELATIONS 60
Public Relations perform the following function, a. Press relations or press agency : Creating and placing newsworthy information in the news media to attract attention to a person, product, or service. b. Product publicity : Publicizing specific products. c. Public affairs : Building and maintaining national or local community relations. d. Lobbying : Building and maintaining relations with legislators and government officials to influence legislation and regulation. e. Investor relations : Maintaining relationships with shareholders and others in the financial community. f. Development : Public relations with donors or members of not-for –profit organizations to gain financial or volunteer support. 61
Speeches Special Events News Web Site Public Service Activities Corporate Identify Materials Audiovisual Materials Written Materials MAJOR PUBLIC RELATIONS TOOLS 62
Definition Personal selling is the direct, personal communication of information, in contrast to the indirect, impersonal communication of advertising, sales promotion, and other promotional tools. This means that personal selling can be more flexible than these other tools. Sales people can tailor their presentations to fit the needs and behavior of individual customers. They can see their customers’ reactions to a particular sales approach and make adjustments on the spot. PERSONAL SELLING Also, personal selling can be focused on individual or firms that are known to be prospective customers if an organization has done an adequate job of segmenting and targeting its market. Advertising messages are often wasted on people who are not realistic prospects, but personal selling minimizes wasted effort. Another advantage of personal selling is that its goal is actually make a sale. It is often designed to attract attention, provide information, and arose desire, but it seldom stimulates buying action or completes the transfer of title from seller to buyer. Even though personal selling can minimize wasted effort, the cost of developing and operating a sales force is high. Another disadvantage is that a company may find it difficult to attract the quality of people needed to do the job. At the retail level, many firms have abandoned their sales forces and shifted to self-service for this very reasons. 63
Two types of personal selling are ; A. Inside selling that primarily involves retail sales. This means sales people in stores and the sales people at catalog retailers who take phone orders. But, this can be replaced by purchasing over the Internet. B. Outside selling, where sales people go to the customers. They make contact by telephone or in person. Most outside sales forces usually represent produces or wholesaling middlemen, selling to business users and not to household consumers. However, in out definition of an outside sales force, we also include ; (1) producers whose representatives selling directly to household consumers – for example, insurance companies such as State Farms or Northwestern Mutual, (2) representatives of retail organizations who go to consumers’ home to demonstrate a product, give advice, or provide an estimate, such as sales people for some furniture stores and home heating and air-conditioning retailers, (3) representatives of nonprofit organizations - for example, charity fund raisers, religions missionaries, and workers for political candidates. TYPES OF PERSONAL SELLING 64
Delivery – sales person. Sales person primarily delivers the product example, are soft drinks, service account. Inside order taker. Sales person takes orders and assists customers at the seller’s place of business for example a retail clerk. Outside order taker. In this position the sales person, representing a manufacturer or wholesaler, goes to the customer in the field and requests an order. Missionary sales person. Sales person is expected to provide information and other services for existing or potential customers, perform promotional activities, and build goodwill. Sales engineer. Emphasis on the person’s ability to explain the product ot a prospective customer, and also to adapt the product to the customer’s particular needs. Consultative sales person. Involves the creative selling of goods and services. This category contains the most complex, difficult selling jobs – especially the creative selling of services, because a customer can’t see, touch taste, or smell them. A typical sales job includes three(3) activities; a. order taking, b. customer support, and c. order getting. PERSONAL SELLING JOBS The relative emphasis on these functions is what distinguishes on sales job from another. 65
Direct marketing entails communicating directly with carefully targeted individual consumers in order to elicit an immediate response and cultivate long-term customer relationships. It is accomplished through the use of direct mail, telephone, direct-response television, e-mail, and the Internet. •Catalog •Telemarketing •Kiosks DIRECT MARKETING Advertising Sales Promotion Cash refund offer Sample Coupon Discount Premium Public Relations Reviewing the Key Terms 66
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A distribution channel is a collection of separate entities that work together to make a product or service available to consumers or businesses. A marketing channel (also known as a distribution channel) is a group of interconnected organisations that assist in making a product or service available for use or consumption by consumers or business users. PLACE / DISTRIBUTION CHANNELS DEFINITION SCAN HERE 68
ROLES OF DISTRIBUTION CHANNEL NATURE OF DISTRIBUTION CHANNELS The selection of channel members is the first step in the development of a distribution system. Once members have been chosen, the attention moves to channel management. In the hotel industry, distribution networks are made up of contractual agreements and loosely organised alliances between independent businesses. Traditionally, distribution systems have been employed in marketing to transport commodities (tangible things) from the maker to the buyer. Distribution systems are used in the hospitality and travel industries to transport customers to the product: the hotel, restaurant, cruise ship, or flight. Information: Gathering nad distributing marketing research and intelligence information about actors and forces in the marketing environment needed for planning and aiding exchange. Promotion: Developing and spreading persuasive communications abour an offer. Contact: Finding and communicating with prospective buyers. Matching: Shaping and fitting the offer to the buyer's needs, including activities such as manufacturing, grading, assembling, and packaging. Negotiation: Reaching an agreement on price and other terms of the offer so that ownwrship or possession can be transferred. Physical disctribution: Transporting and storing goods. Financing: Acquiring and using funds to cover the costs of the channel work. Risk taking: Assuming the risks of carrying out the channel work. 69
TYPE OF DISTRIBUTION CHANNELS Producer Producer Producer Producer Consumer Consumer Consumer Consumer Retailer Retailer Retailer Wholesale Agent Wholesale VARIOUS LEVELS OF MARKETING CHANNELS The number of channel levels can be used to characterise distribution channels. A channel level is each layer that contributes to getting the product and its ownership closer to the final buyer. Every channel includes the producer and the final consumer because they both do labour. The length of a channel is determined by the number of intermediate levels. 70
Channel 1 There is no intermediary in the direct marketing route. Channel 2 It has one level, which is usually a retailer in the Channe consumer market. l 3 There are two layers in consumer marketplaces, which are often a wholesaler and a retailer (both of whom are used by small manufacturers). Channel 4 Jobbers buy from wholesalers and sell to smaller businesses that aren't served by larger wholesalers on three levels. VARIOUS LEVELS OF MARKETING CHANNELS 71 A jobber is a merchant, such as a wholesaler, reseller, or independent distributor, who buys items in bulk from manufacturers or importers and sells, resells them to retail chains on consignment.
A.Major hospitality distribution channels i.Direct booking ii.Online travel agencies (OTA) iii.Global distribution systems iv.Travel agents v.Tour wholesalers B.Specialists: tour brokers, motivational houses, and junket reps C.Hotel representatives D.National, state, and local tourist agencies E.Consortia and reservation systems F.Concierges G.Restaurant distribution systems HOSPITALITY AND DISTRIBUTION CHANNELS 72
73 VISIT MALAYSIA
PAST YEAR QUESTIONS PART 3 74
Past Year Questions SCAN THE QR CODE! There 5 papers of past year questions that will help you & assessment module as your exercises for better understanding. 75
76 BEAUTIFUL MALAYSIA
R E F E R E N C E S Abu, N. K., & Kamarulzaman, Y. (2009). Principles of marketing. Oxford University Press. Chaudhary, M. (2010). Tourism marketing. (No Title). Chu, S. C., Deng, T., & Cheng, H. (2020). The role of social media advertising in hospitality, tourism and travel: a literature review and research agenda. International Journal of Contemporary Hospitality Management, 32(11), 3419-3438. Del Chiappa, G., & Fotiadis, A. (2021). Contemporary issues in ensuring excellence in tourism, travel and hospitality. European Journal of Tourism Research, 29, 2901-2901. Gursoy, D., Malodia, S., & Dhir, A. (2022). The metaverse in the hospitality and tourism industry: An overview of current trends and future research directions. Journal of Hospitality Marketing & Management, 31(5), 527-534. Holland, J. (2010). The role of mobile marketing communications in media strategy. Innovative Marketing, 6(2). Hsu, M. J., Ting, H., Lui, T. W., Chen, S. C., & Cheah, J. H. (2022). Guest editorial: Challenges and prospects of AIoT application in hospitality and tourism marketing. Journal of Hospitality and Tourism Technology, 13(3), 349-355. Hudson, L., & Hudson, S. (2017). Marketing for tourism, hospitality & events: a global & digital approach. Marketing for Tourism, Hospitality & Events, 1-384. Hudson, S. (2008). Tourism and hospitality marketing: a global perspective. Sage. Jamaludin,Mazlina., (2006). Modul Pelajar Fundamental of Marketing (P1701), Politeknik Sultan Azlan Shah. (Unpublish). Jamaludin,Mazlina., (2006). Study Guide Fundamental of Marketing (P1701), Politeknik Sultan Azlan Shah. (Unpublish) Jamaludin, Mazlina., (2007).Students Study Guide Fundamental of Marketing (P1701), Politeknik Sultan Azlan Shah. (Unpublish). Kotler, P., Bowen, J. T., Makens, J. C., & Baloglu, S. (2014). Marketing for hospitality and tourism. Middleton, V. T., Fyall, A., Morgan, M., & Ranchhod, A. (2009). Marketing in travel and tourism. Routledge. 77
R E F E R E N C E S Minazzi, R. (2015). Social media marketing in tourism and hospitality. Springer International Publishing Switzerland. Morrison, A. M. (2018). Marketing and managing tourism destinations. Routledge. Morrison, A. M. (2022). Hospitality and travel marketing. Taylor & Francis. Quesenberry, K. A. (2015). Social media strategy: Marketing and advertising in the consumer revolution. Rowman & Littlefield. Sigala, M., & Gretzel, U. (Eds.). (2017). Advances in social media for travel, tourism and hospitality: New perspectives, practice and cases. Routledge. Sotiriadis, M. (2015). Improving marketing effectiveness: Advances in tourism, travel, hospitality and leisure marketing. Anatolia, 26(1), 1-4. 78
MAZLINA JAMALUDIN PhD. Senior lecturer Working at Department of Tourism and Hospitality at Polytechnic Sultan Idris Shah Selangor, Malaysia. She had published more than 23 journal articles, 23 international proceedings and 8 book chapters in various disciplines such as recreation, tourism and education. Her research interest is in the area of tourist behavior interaction in tourism social media. SYAZWANI FISAL Lecturer Working at Department of Tourism and Hospitality at Polytechnic Sultan Idris Shah Selangor, Malaysia. Graduated from Universiti Teknologi MARA with Bachelor of Science (Hons) in Hotel Management and alumni of Polytechnic Merlimau, Melaka. She had six years working experience in tourism industry focusing on indoor museum. This is her first venture into writing an interactive E-book. NUR FATIN NADZIRAH Lecturer Working at Department of Tourism and Hospitality at Polytechnic Sultan Idris Shah Selangor, Malaysia. Graduated from Universiti Teknologi MARA with Master in Hospitality Management. This is her first venture into writing and publication. Looking forward for more in the future. 79 BIOGRAPHY 79
BIOGRAPHY NUR BALQIS BAHARIN Tour Operation Officer Graduated in Diploma of Tourism and Hospitality Management from Politeknik Sultan Idris Shah. Currently she is working at IBC Tours Corporation M Sdn. Bhd. NURFADHILAH HUSNA SABRE Majlis Daerah Perak Tengah (Unit Korporat) Graduated in Diploma of Tourism and Hospitality Management from Politeknik Sultan Idris Shah. She also holds a Certificate in Tourism and Adventure from Kolej Komuniti Sungai Siput, Perak. 80
9 789672 860549 e ISBN 978-967-2860-54-9 This TOURISM & HOSPITALITY MARKETING book provides knowledge on basic theories, concepts, and strategies applied in marketing tourism and the hospitality industry. This book offers brought views on marketing methods employed by enterprises in the tourism industry. It includes current practices and methods of selling practice and developing communication skills, organizational skills, and other skills necessary to succeed in any career, particularly in the profession of selling. This e-book focuses on the overview of marketing and the use of four marketing mix (4Ps') strategies. Publised by Politeknik Sultan Idris Shah Sg. Lang, 45100 Sg Air Tawar, Selangor Darul Ehsan No. Tel : 03 3280 6200 No. Fax : 03 3280 6400 Laman web : https://psis.mypolycc.edu.my Tourism & Hospitality Marketing