Inbound and Outbound Marketing

Think about marketing as “inbound” marketing (hearing from stakeholders) and “outbound” marketing (getting the word out to stakeholders).

Inbound Marketing Includes Market Research to Find Out:

1. What specific groups of potential customers/clients (markets) might have which specific needs (nonprofits often already have a very clear community need in mind when starting out with a new program — however, the emerging practice of nonprofit business development, or earned income development, often starts by researching a broad group of clients to identify new opportunities for programs)
2. How those needs might be met for each group (or target market), which suggests how a product might be designed to meet the need (nonprofits might think in terms of outcomes, or changes, to accomplish among the groups of clients in order to meet the needs)
3. How each of the target markets might choose to access the product, etc. (its “packaging”)
4. How much the customers/clients might be willing pay and how (pricing analysis)
5. Who the competitors are (competitor analysis)
6. How to design and describe the product such that customers/clients will buy from the organization, rather than from its competitors (its unique value proposition)
7. How the product should be identified — its personality — to be most identifiable (its naming and branding)

Outbound Marketing Includes:

1. Advertising and promotions (focused on the product)
2. Sales
3. Public and media relations (focused on the entire organization)
4. Customer service
5. Customer satisfaction

 

Market research

Market research is for discovering what people want, need, or believe. It can also involve discovering how they act. Once that research is completed, it can be used to determine how to market your product.

Questionnaires and focus group discussion surveys are some of the instruments for market research.

For starting up a business, there are some important things:

• Market information

Through Market information one can know the prices of the different commodities in the market, as well as the supply and demand situation. Information about the markets can be obtained from different sources, varieties and formats, as well as the sources and varieties that have to be obtained to make the business work.

• Market segmentation

Market segmentation is the division of the market or population into subgroups with similar motivations. It is widely used for segmenting on geographic differences, personality differences, demographic differences, technographic differences, use of product differences, psychographic differences and gender differences. For B2B segmentation firmographics is commonly used.

• Market trends

Market trends are the upward or downward movement of a market, during a period of time. The market size is more difficult to estimate if one is starting with something completely new. In this case, you will have to derive the figures from the number of potential customers, or customer segments. [Ilar 1998]

Besides information about the target market, one also needs information about one’s competitors, customers, products, etc. Lastly, you need to measure marketing effectiveness. A few techniques are:

• Customer analysis
• Choice modelling
• Competitor analysis
• Risk analysis
• Product research
• Advertising the research
• Marketing mix modeling

 

Knowledge Oriented Customer Relationship Management: An Application Model for Hotels Management

By

Dr. Vijila Kennedy

Director, RVS Institute of Management Studies & Research

&

Anu V

RVS Institute of Management Studies & Research

Abstract

One way of improving competitive advantage is attract more customers and increase customer retention. Customer relationship management (CRM) is an integrated approach to managing relationships by focusing on customer retention and relationship development. Knowledge management (KM) can help businesses collect customer information and further influence customer retention. KM is a prerequisite for CRM. Some few researches have been conducted on the link between KM and CRM within hospitality industry and hotels management. The purpose of this study is to develop a better understanding of KM impact on CRM in hotels management. This study presents a proposed model of knowledge oriented customer relationship management (KCRM) with 7Ps marketing mix framework for hotels management. Finally, points out to recommendations regarding the implementation KCRM in hotels management.

Keywords: Customer relationship management; Knowledge; Hospitality; Hotel.

Introduction

In the hospitality industry there are many new opportunities, but also many new risks that must be considered. Two of the most crucial opportunities and risks are the customer relationship management (CRM) as well as knowledge management (KM). Now the marketing model is changing from product-centered stage to customer-centered stage. The new database technologies enable organization get the knowledge of who the customers are, what they bought and when they bought, and even predictions based on the historical behavior [1].Both CRM and KM approaches can have a positive impact on reducing costs and increasing revenue. The improvement of customer relationships through KM can generate great business opportunities [2]. Hotel managers begin to realize that no hotel can offer all products and be the best hotel for all customers. They are forced to find a new basis for competition and they have to improve the quality of their own products [3].

Hotels are an ideal example of a market which could benefit from the implementation of CRM. First from a customer’s perspective, the hospitality market is perpetually inundated by many similar service offerings. One solution to this challenge may be to offer new and innovative features to customers. Secondly, the hospitality industry is rapidly changing due to accelerations in information technology [4]. Managers will need to make proactive changes which focus even more intensely on customer preferences in order to stay competitive in such a dynamic environment [5]. Thirdly, travelers today do not exhibit, a truly brand loyal behavior. Travelers instead are choosing to patronize hotels that offer the best value proposition under existing budgetary constraints. In order to add value to the guests’ experience, hotel managers must meet the challenge of determining which services are preferred by hotel guests.

Once a manager understands customers’ preferences, the challenge then becomes prioritizing those preferences which add the greatest value to the hotel’s existing service offering. This type of knowledge will enable managers to select innovative offerings that are most beneficial to the firm and that will truly have an impact on customer’s choices [6].To enhance profitability and guest loyalty, hotels must nowadays focus on implementing CRM strategies that aim to seek, gather and store the right information, validate and share it throughout the entire organization an then use it throughout all organizational level for creating personalized, unique quests’ experiences. Therefore, this study explores the way in which KM can help CRM and then presents an application knowledge oriented customer relationship management (KCRM) model for hotels management.

Customer relationship management

Increasing competition and decreasing customer loyalty have led to the emergence of concepts that focus on the nurturing of relationships to customers. A key driver of this change is the advent of CRM which is underpinned by information and communication technologies [7]. CRM is a notion regarding how an organization can keep their most profitable customers an at the same time reduce the costs; increase the values of interaction to consequently maximize the profit. More specifically, CRM involves acquisition, analyze and use of knowledge about customer in order to sell more goods or services and to do it more efficiently [8]. CRM is defined by researchers as the building and managing of customer relationships on an organizational level through understanding, anticipating and managing of customer needs, based on knowledge gained of customer, to increase organizational effectiveness and efficiency and thereby increasing profitability [9].

While CRM has been defined in numerous ways, elements common to all definitions include leveraging technology to engage individual customers in a meaningful dialogue so that firms can customize their products and services to attract, develop, and retain customers. Various researchers have extolled the potential of CRM as an opportunity for firms to achieve a competitive advantage by offering more value to customers. But implementing a software tool alone to manage customer relationships does not guarantee such results. Many firms now know quite a lot about the behavior of their customers but little about how the firm should make good use of this knowledge [10]. As CRM reaches into many parts of the business it has been suggested that organizations should adopt a holistic approach. The holistic approach places CRM at the heart of the organization with customer orientated business processes and the integration of CRM systems [11]. In hotels management CRM also largely depends on staff attitudes, commitment and performance and so, success on the external marketplace requires initial success on internal business by motivating and getting employees’ commitment. For dealing with guests’ experience related desires, employees will be required to have advanced social skills such as understanding of role conflict, role theory, communications and personality identification [12].

Knowledge management

One view of CRM is the utilization of customer-related information or knowledge to deliver relevant products or services to customers. The success of relationship marketing heavily depends on the collection and analysis of customer information that is used for developing highly personalized offerings. Massey, Montoya-Weiss, and Holcom (2001) strongly advocated the relation of CRM with KM and specifically customer knowledge management, while the significance of customer knowledge is highlighted in several CRM studies. However, information should not be confused with knowledge. Knowledge is produced when information is analyzed and used to enable and leverage strategic actions [13]. Alavi and Leidner (2001) define knowledge as a justified belief that increases an entity’s capacity for effective action [14]. The spirit of KM may be defined as knowing individually what we know collectively and applying it, knowing collectively what we know individually and applying it and knowing what we don’t know and learning it [15]. Plessis and Boon (2004) define KM as a planned, structured approach to manage the creation, sharing, harvesting and leveraging of knowledge as an organizational asset, to enhance a company’s ability, speed and effectiveness in delivering products or services for the benefit of clients, in line with its business strategy [9].

The literature on CRM suggests that to build a profit-maximizing portfolio of customer relationships, firms need to develop knowledge stores related to the (1) desirability of prospects, (2) customer defection intentions, (3) needs and preferences of customers, (4) likely profitability of current and prospective customers, and (5) emergence of market threats. Thus, from a CRM standpoint, the KM process is concerned with all of the activities directed towards creating and leveraging the market intelligence that firms need to build and maintain a portfolio of customer relationships that maximizes organizational profitability [16].

The KM process can be further subdivided into three distinct micro processes: (1) data collection, (2) intelligence generation, and (3) intelligence dissemination [17]. As it name implies, the data collection process refers to firm’s activities that focus on capturing information about customers and markets. In contrast, the intelligence generation process attempts to convert data that has been amassed into actionable intelligence. This involves employing traditional analysis techniques, as well as data mining and modeling methods, to identify trends and patterns related to customers’ behavior and general market conditions. Finally, any intelligence that is generated needs to be disseminated to all members of the organization who either have direct contact with the customers or have an influence over the marketing mix elements of firm’ s operation.

Hotel Industry

The hospitality industry is easy to assume that the industry is homogeneous and there are clear worldwide trends of relevance to hospitality operators everywhere. In reality, the industry is incredibly diverse and complex, which makes identifying common issues and future trends extremely difficult. The use of information technology (IT) is an excellent example of future trends in hotel services. One study determined which of the recent technological innovations were most beneficial, least beneficial, and had future benefits for hotels.

Customizing the service experience for hotel guests is another trends in hotel services. Some examples of service customization include: personalizing room decor, or having child care options available. Customized options adapt the hotel’s service offering to each individual guest’s preferences [6]. Leisure facilities are increasingly being added to hotel properties especially where there is a strong local market for leisure club membership. Bradach (1998) argues that the most successful restaurant chains adopt what he call the plural form, that is a combination of their own units and franchises. He believes this creates a number of synergies, which enables better control over franchises, but enabling better and quicker adaptation to local differences and changes in the market place [19]. Hospitality firms and the products they sell have to adapt if they wish to survive. The industry has many examples of firms that were the pioneers of original ideas that have been subsequently overtaken by firms with better or newer ways of doing things [18].

Hotels generally have limited sources and channels for reaching customers; consequently they are concerned about keeping customers. As a result, information and communication technologies, customer participation, internal business dynamics, ease of use, innovation and quality, security and flexibility need to be taken into consideration to improve CRM for tourism sector [20]. Dev and Olsen (2000) reported that although hotels capture considerable amount of customer data those data are rarely assembled to create useful knowledge about customers [21]. Cline and Warner (1999) also found that the collection and use of customer information are frequently intermittent, delayed and fragmented [22]. The lack of ICT applications’ integration and the legacy systems designed along functional lines creating fragmented guests’ profile have been reported as the major reason of duplication, inconsistencies, incompleteness and inaccuracies of customer data in hotels [23].

7Ps marketing mix framework

The traditional marketing mix and it 4Ps, which has dominated the marketing paradigm for decades is challenged by the relationship marketing writers as a production oriented definition of marketing instead of a market oriented, or customer oriented approach [24]. More recently the weaknesses of the goods marketing approach have been exposed by the growing literature on services marketing. There is a growing consensus in the services marketing literature that services marketing are different because of nature of services. That is, because of their inherent intangibility, perish ability, heterogeneity and inseparability services require a different type of marketing and a different marketing mix. Various modifications have been suggested to incorporate the unique aspects of services, for example Renaghan (1981) proposes a three-element marketing mix for the hospitality industry: the product- service mix, the presentation mix and the communications mix.

The most influential of the alternative framework is, however, Booms and Britner’ s 7Ps mix where they suggest that not only do the traditional 4Ps need to be modified for services but they also need to be extended to include participants, physical evidence and process [26]. The participant/people and process variable are frequently discussed in the literature on CRM and KM which provides a strong rationale and conceptualization of these variables. Therefore we suggest the following 7Ps marketing mix framework for hotels management

The 7Ps marketing mix framework for hotels

An application KCRM model

KCRM defines as managing customer knowledge to generate value-creating lock-ins and channel knowledge to strengthen relationships and collaborative effectiveness [27]. The proposed KCRM model can even be fitted to other companies to solve their problems.This article argues that successful CRM implementation requires the KM process. To that end crucial factors for implementing CRM in general as well as in the hotel industry are analyzed and summarized into a KCRM model (fig. 1).

Fig 1: Knowledge oriented customer relationship management (KCRM) model

Source: Authors, 2006

As fig. 1 suggests the KM process can be further subdivided into three distinct areas: (1) data collection (that refers to capture information of the customers) (2) information generation, and (3) knowledge dissemination. CRM process also can be divided into nine phases: (1) customer identify, (2) customer evaluation, (3) customer prioritization, (4) customer acquisition, (5) differentiate, (6) customer enhancement, (7) interact, (8) customize (through 7Ps marketing mix: product, place, price, promotion, participant, physical evidence, and process), and (9) customer retention (through information that has been given by the customers).

Future trends

In the future, hotels will need to consider yield management in the context of the internet and World Wide Web. Currently, less than 2% of advanced reservations are from this source, but are

expected to be 35% in less than ten years. This hi-tech approach guest self-service will clearly have implications for productivity. But similar technologies may also revolutionize employee task. The first commercial robot vacuum cleaner is about to go on the market and self-clean bathrooms already exist. Flat screen televisions will be built-into the hotel room, also simplifying cleaning. Customers in the future may be able via virtual reality to pre-determine their room décor so that on check-in the room has been prepared to their personal taste [18].All sectors of the hospitality industry will have to address the issue of quality. The futurist Marvin Cetron argues that global chains find it difficult to differentiate themselves from each other. He writes “increasingly, what distinguishes one provider from another is attention to detail. This is the battle ground on which hotels and restaurants will fight the competitive wars of the 21st century” [18].

References

1- Management Conference (PP.185 – 192). Tehran: Editors,(2004).

2- Lin, Y., Su, H. Y., & Chien, S.A knowledge – enabled procedure for customer relationship management. Industrial Marketing Management, (in press).

3- Zineldin, M., Sanayei, A., & Gholami Karin, M.,Customer relationship management (CRM) in third millennium in the banking industry. In Aryana Industrial & Research Group (Eds.), Proceedings of 2 nd International Research and concepts: Quality and customer relationship management (CRM) as competitive strategy in the Swedish banking industry. The TQM Magazine, 17 (4), (2005),329 – 344.

4- Olsen, M. D., & Connolly, D. J.,Experience – based travel. Cornell Hotel and Restaurant    Administration Quarterly,41 (1), (2000),30 – 40.

5- Karmarkar, U.,Will you survive the services revolution? Harvard Business Review, 82 (6), (2004),100 -108.

6- Victorino, L., Verma, R., Plaschka, G., & Dev, C. Service innovation and customer choices in the hospitality industry. Managing Service Quality, 15 (6), (2005), 555 – 576.

7- Ryals, L., & Knox, S.,Cross – functional issues in the implementation of relationship marketing through customer relationship management. European Management Journal, 19 (5), (2001), 534 – 542.

8- Bose, R.,Customer relationship management: Key components for IT success. Industrial Management & Data Systems, 102 (2), (2002), 89 – 97.

9- Plessis, M. D., & Boon, J. A., Knowledge management in ebusiness and customer relationship management: South African case study findings. International Journal of Information Management, (24), (2004),73 -86.

10- Campbell, A. J., Creating customer knowledge competence: Managing customer relationship management programs strategically. Industrial Marketing Management, (32), (2003), 375 – 383.

11- Bull, C., Strategic issues in customer relationship management (CRM) implementation. Business Process Management Journal, 9 (5), (2003),592 – 602.

12- Sigala, M.,Integrating customer relationship management in hotel operations: Managerial and operational implications. International Journal of Hospitality Management, (24), (2005), 391–413.

13- Massey, A., Montoya – Weiss, M., & Holcom, K.,Reengineering the customer relationship: Leveraging knowledge assets at IBM. Decision Support Systems, 32 (2),(2001),155 – 170.

14- Alavi, M., & Leidner, D.E., Review: Knowledge management and knowledge management systems: Conceptual foundations and research issues. MIS Quarterly, 25 (1), (2001), 107 – 136.

15- Havens, C., & Knapp, E.,Easing into knowledge management. Strategy & Leadership, 27 (2), (1999), 4 – 10.

16- Zablah, A. R., Bellenger, D. N., & Johnston, W. J.,An evaluation of divergent perspectives on   customer relationship management: Towards a common understanding of an emerging phenomenon. Industrial Marketing Management, (33), (2004),475 – 489.

17- Fahey, L., Srivastava, R. K., Sharon, J. S., & Smith, D. E., Linking e – business and operating  process: The role of knowledge management. IBM Systems Journal, 40 (4),(2001), 889 – 907.

18- Jones, P.,Operational issues and trends in the hospitality industry. International Journal of Hospitality Management, (18), (1999), 427 – 442.

19- Bradach , J.L.,Franchise organization. Boston,Harvard Business School Press, (1998).

20- Ozgener, S., & Iraz, R.,Customer relationship management in small – medium enterprises: The case of Turkish tourism industry. Tourism Management,(in press).

21- Dev, C., & Olsen, M. D.,Marketing challenges for the next decade. Cornell Hotel and Restaurant Administration Quarterly February, (2000), 41 – 47.

22- Cline, R., & Warner, M., Hospitality 2000: The technology a global survey of the hospitality industry’s leadership. New York,Arthur Andersen Consultancy, (1999).

23- Sigala, M.,Competing in the virtual marketplace: A strategic model for developing e – commerce in the hotel industry. International Journal of Hospitality Information Technology, 3(1),(2003),43 – 60.

24- Gilbert, D., & Tsao, J.,Exploring Chinese cultural influences and hospitality marketing relationships. International Journal of Contemporary Hospitality Management, 12 (1), (2000), 45– 53.

25- Webster, F. E. Jr.,Industrial Marketing Strategy (2 nd ed.). New York, NY, John Wiley & Sons, (1984).

26- Rafiq, M., & Ahmed, P. K.,Using the 7Ps as a generic marketing mix: An exploratory survey of UK and European marketing academics. Marketing Intelligence & Planning, 13 (9), (1995), 4 –15.

27- Tiwana, A. The essential guide to knowledge management, e – business and CRM applications. Prentice – Hall ,Upper Saddle River, NJ:, (2000).

One of “My Favorite” Strategic concept – Porter’s Five Forces Model of Analysis

Michael Porter’s five forces describe the characteristics of an industry that influence how profitable firms in the industry will be.

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The threat of the entry of new competitors

Profitable markets that yield high returns will attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents, the abnormal profit rate will fall towards zero (perfect competition).

• The existence of barriers to entry (patents, rights, etc.) The most attractive segment is one in which entry barriers are high and exit barriers are low. Few new firms can enter and non-performing firms can exit easily.
• Economies of product differences
• Brand equity
• Switching costs or sunk costs
• Capital requirements
• Access to distribution
• Customer loyalty to established brands
• Absolute cost* Industry profitability; the more profitable the industry the more attractive it will be to new competitors

The intensity of competitive rivalry

For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.

• Sustainable competitive advantage through innovation
• Competition between online and offline companies; click-and-mortar -v- slags on a bridge
• Level of advertising expense
• Powerful competitive strategy
• The visibility of proprietary items on the Web used by a company which can intensify competitive pressures on their rivals.

How will competition react to a certain behavior by another firm? Competitive rivalry is likely to be based on dimensions such as price, quality, and innovation. Technological advances protect companies from competition. This applies to products and services. Companies that are successful with introducing new technology, are able to charge higher prices and achieve higher profits, until competitors imitate them. Examples of recent technology advantage in have been mp3 players and mobile telephones. Vertical integration is a strategy to reduce a business’ own cost and thereby intensify pressure on its rival.

The threat of substitute products or services

The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives:

• Buyer propensity to substitute
• Relative price performance of substitute
• Buyer switching costs
• Perceived level of product differentiation
• Number of substitute products available in the market
• Ease of substitution. Information-based products are more prone to substitution, as online product can easily replace material product.
• Substandard product
• Quality depreciation

The bargaining power of customers (buyers)

The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer’s sensitivity to price changes.

• Buyer concentration to firm concentration ratio
• Degree of dependency upon existing channels of distribution
• Bargaining leverage, particularly in industries with high fixed costs
• Buyer volume
• Buyer switching costs relative to firm switching costs
• Buyer information availability
• Ability to backward integrate
• Availability of existing substitute products
• Buyer price sensitivity
• Differential advantage (uniqueness) of industry products
• RFM Analysis

The bargaining power of suppliers

The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm, when there are few substitutes. Suppliers may refuse to work with the firm, or, e.g., charge excessively high prices for unique resources.

• Supplier switching costs relative to firm switching costs
• Degree of differentiation of inputs
• Impact of inputs on cost or differentiation
• Presence of substitute inputs
• Strength of distribution channel
• Supplier concentration to firm concentration ratio
• Employee solidarity (e.g. labor unions)
• Supplier competition – ability to forward vertically integrate and cut out the buyer

Ex. If you are making biscuits and there is only one person who sells flour, you have no alternative but to buy it from him

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