Inkijkexemplaar_Marketing & Sales for the Hospitality_2

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INKIJKEXEMPLAAR ©SVHColophonISBN 9789052112954© Copyright 2015 PlanBoek Uitgeverijwww.planboekuitgeverij.nlMarketing & sales for the hospitality industry part 2First edition: 2018Translation: AVB VertalingenPhil Wheeler ROC Mondriaan.All rights reserved No part of this publication may be reproduced and/or made public in print, photocopy, microfilm or any other meanswithout the prior written permission of the publisher.

INKIJKEXEMPLAAR ©SVHMAR KETING & SALES HOSPITALIT Y MARKETING & SALES FOR THE HOSPITALITY INDUSTRY ELLEN VAN KOOTEN 2

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ForewordINKIJKEXEMPLAAR ©SVHThis book is the second of two parts, which together with a project book, short films and a websiteform the method Marketing and sales for the hospitality industry. The guiding principle is today’shospitality industry. The website www.masaho.nl serves as a supplement to the information providedand provides support and a visualisation of the topics for student and lecturer. This makes the websiteeminently suited to a digital learning environment.Each chapter of this book begins with a brief overview of the subject matter. These overviews can bedownloaded as Prezi presentations from the website. Eight films are also available on the website.These use interviews to explain marketing and sales terms.Project assignments can be used to test the student's knowledge of the theory described in thebook. These can be found at the end of each chapter. Photos, short real-life examples, trends andillustrations make the entire theory clearer. The terms used and a definition of these terms can befound in the index at the end of the book.Extra questions and project assignments can be found on the website.The project book contains a series of lessons with the final goal of a promotion plan for a hospitalitybusiness (or bakery) of the student's choice.The method gives shape to training as a hospitality entrepreneur and is tailored to the MBOqualification file Hospitality/Bakery Entrepreneur (level 4). The method is therefore also suited for usein the first phase of HBO training (hotel schools).We welcome any comments or suggestions for improvement.Please e-mail us at [email protected] 2015 E. van Kooten SVHAmsterdamZoetermeer

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Table of contentsTable of contentsChapter 11 The marketing strategyINKIJKEXEMPLAAR ©SVH 11 The chapter at a glance 121.1 Introduction 131.2 Marketing strategy 191.3 Market approach strategies 231.4 Growth strategies 261.5 Competitive strategies 291.6 Questions about the chapter 32Chapter 22 Product  35 The chapter at a glance 362.1 Introduction  372.2 2.3 The hospitality product 392.4 2.5 Product lifecycle 412.6 2.7 Product additions  452.8 Product range 53 Menu engineering 59 Quality64 Questions about the chapter 68 7

Marketing & Sales for the Hospitality Industry Chapter 3 71 3 Presentation 72INKIJKEXEMPLAAR ©SVH The chapter at a glance 73 3.1 Introduction  75 3.2 Image and identity 77 3.3 Atmosphere 80 3.4 Elements of presentation 88 3.5 Corporate identity 90 3.6 Questions about the chapter 93 Chapter 4 4 Personnel / Personality 94 95 The chapter at a glance 97 4.1 Introduction  101 4.2 Communication 103 4.3 Personal selling 105 4.4 Reducing/extending services 109 4.5 The entrepreneur and his staff 114 4.6 Internal marketing  4.7 Questions about the chapter 117 Chapter 5 118 5 Place  119 120 The chapter at a glance 126 5.1 Introduction  134 5.2 Choosing a location 142 5.3 Location and premises 5.4 Distribution  5.5 Questions about the chapter8

Table of contentsChapter 6 1476 Price (strategy)  148INKIJKEXEMPLAAR ©SVH The chapter at a glance 1496.1 Introduction  1516.2 Pricing methods 151 6.2.1 Cost-led pricing methods 153 6.2.2 Competition-led pricing methods 154 6.2.3 Demand-led pricing methods 1566.3 Range and pricing strategy 1626.4 Price discrimination and price differentiation 1686.5 Questions about the chapter 173Chapter 77 Promotion & social media  174 175 The chapter at a glance  1767.1 Introduction  1797.2 Communication mix 1807.3 Promotion budget  1827.4 Personal selling 1867.5 Promotion 1887.6 Public relations 1997.7 Advertising 2087.8 Media choice & social media7.9 Questions about the chapterDefinitions209 9

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Chapter 1 | The Marketing StrategyChapter 1The Marketing Strategy The chapter at a glance 1.1 Introduction 1.2 Marketing strategy 1.3 Market approach strategies 1.4 Growth strategies 1.5 Competitive strategies 1.6 Questions about the chapterINKIJKEXEMPLAAR ©SVH 12 13 19 23 26 29 32For more information, exercises, answers and supportingmaterial see: www.masaho.nl 11

Chapter 1 | The Marketing Strategy Marketing and Sales for the Hospitality Industry part 2INKIJKEXEMPLAAR ©SVHStrategy Growth Marketing Marketingstrategies strategy processDevelopments Strategies · Macro · Meso www.masaho.nl - questions: e-mail to [email protected]

Chapter 1 | The Marketing Strategy 1.1  | Introduction The hospitality business that gives its guests what they want and understands what they need has the best odds of success. What the guest wants forms the basis of a hospitality business, because the guests choose where they spend their money. In marketing, we study the market and all the factors that influence it. Part 1 of Marketing for the hospitality industry provided a clear description of supply and demand in the hospitality market. Below is a brief summary of part 1.INKIJKEXEMPLAAR ©SVH Marketing policy An entrepreneur in the hospitality industry wants to meet his guests’ needs in a manner that is profitable to him. He knows from the theory that there are six marketing tools that he can use. These are: product, presentation, personality, place, price and promotion. They are sometimes called the six Ps.Marketing activities We call the deliberate use of these tools marketing activities. An entrepreneur sets himself goals, for instance to increase his turnover or attract a certain audience. If he develops and implements systematic plans to achieve his marketing goals, this is called a marketing strategy.Marketing policy All entrepreneurs in the hospitality industry aim for a recognisable business formula. If this business formula is to be good, all of the marketing tools must be aligned. If an entrepreneur wishes to beBusiness formula successful in the present and in the future, he must develop a business formula that is better than Marketing tools those of his direct competitors. The more his business formula meets the needs of the guest, the more likely his business is to be successful.All entrepreneurs in thehospitality industry aim for arecognisable business formula. 13

Marketing & Sales for the Hospitality IndustryINKIJKEXEMPLAAR ©SVHFigure: the marketing process Desires of the guest 1 Hospitality business What does the consumer want 5 and how and where does he want it? Market research 2 Marketing plan Marketing concept 4 314

Chapter 1 | The Marketing StrategyINKIJKEXEMPLAAR ©SVH IndustryMacro developments An entrepreneur in the hospitality industry must be aware of all developments in the hospitality Meso developments market. He will therefore be interested in national developments (developments at the macro level): for instance, legal developments or developments in the economy. However, his prime focus will be developments in the industry (developments at the meso level).Industry All businesses that perform a similar function belong to an industry. We distinguish between four sectors in the hospitality industry: companies that provide beverages, companies that provide food, companies that provide meals and companies that provide accommodation.Expansion of scale of Typical developments in the hospitality industry are: expansion or reduction of the scale of production production, increased demand for convenience products and increased wages. These changes have a significant effect on hospitality businesses.Reduction of scale of production The entrepreneur will, of course, know what his competitors are up to. We distinguish between two types of competitor: direct and indirect competitors. Direct competitors are businesses that have a Direct competition comparable business formula and focus on the same target group.Indirect competition The entrepreneur will mainly focus on those businesses that are of a similar type to his own. However, he may also face indirect competition from businesses that provide hospitality services or sell similar products in another industry. 15

Marketing & Sales for the Hospitality IndustryFigure: the hospitality marketDemographicINKIJKEXEMPLAARdevelopments©SVHPolitical, legal, technological and economic developments IntermediariesClient groups Meso environment Guest Marking policy: Socio-cultural trends to make the business formula Other participants and suppliers as different as possible from that of the competitor when responding to the desires of the guest Hospitality Competition business microenvironment Other suppliers Macro environment Political, legal, technological and economic developments.16

Chapter 1 | The Marketing Strategy Demand In the hospitality industry, we distinguish between three types of clientele: the consumer market, the business market and the tourist market. The majority of the demand comes from the consumer market. This makes it important for entrepreneurs in the hospitality industry to follow trends and developments in consumer behaviour. An entrepreneur in the hospitality industry who is familiar with his customers’ behaviour will have a good idea of how they will respond to his marketing activities.INKIJKEXEMPLAAR ©SVH Market segmentationMarketing strategy In part 1 we looked in detail at the market segmentation marketing strategy. Here market demand is divided into homogenous segments (people with the same desires and expectations). The entrepreneur focuses on one of these segments. In the hospitality industry, an entrepreneur can do this by, for instance, making his bar appeal to the many students who live in his city: he will keep down the cost of beer, play the music that students like and consider his audience when hiring staff.Market segmentation Market segmentation only works if everyone in the segment responds to marketing activities in a similar way. The entrepreneur will then know how best to approach them. He will, for instance, consider whether his audience is sensitive to pricing or how modern his restaurant should be. The market segmentation strategy should mean less marketing waste and more targeted marketing. However, the entrepreneur must ensure that his market segment is large enough and that it is measurable and receptive to communication. Various market-segmentation methods can be used. These include dividing the market according to geographic characteristics, psychographic characteristics, demographic characteristics, socio- economic characteristics or purchase behaviour characteristics. 17

INKIJKEXEMPLAAR ©SVH Marketing & Sales for the Hospitality Industry What is the mission of a hospitality business? A mission provides a general outline of the reason why a hospitality business exists (or is being established) and an indication of the desired direction and market position. The mission forms the basis for the realisation of business goals. • Who are the most important future guests/customers? • What are the most important future products/services? • What are the core skills of the company? • What are the most important success factors for the future? • On which scale does the company want to operate? • What is the basic goal of the company? • How does the business want to pursue corporate social responsibility? • What is the business’s approach to staff? By formulating the mission, the entrepreneur is forced to contemplate the activities of the business. The mission is an important aspect of strategic planning.18

Chapter 1 | The Marketing Strategy 1.2  |  Marketing strategy GoalsINKIJKEXEMPLAAR ©SVHBusiness goals An entrepreneur has a certain goal in mind for his business. He has an idea of what the business's future should look like. The goals that he wants to achieve with the business are called business goals. Business goals are long-term goals that the entrepreneur wants to attain. Making a profit, growing the business, creating jobs and generating continuity are considered to be the most important business goals.Marketing goals In addition, the entrepreneur has goals that he wants to achieve in the short term. These include Marketing plan increasing turnover, sales of a certain product, gross margins, number of guests, market share, risk mitigation, and so on. The entrepreneur defines these marketing goals in his marketing plan. Continuously changing market conditions will force the entrepreneur to keep developing new plans to achieve his goals. He will have to conduct a thorough examination of the external market before he can develop his plans. He will need to look at his opportunities in the market, and will need to know the strengths and weaknesses of his business. He can then devise plans to improve these weaknesses. His plans will also need to seize opportunities in the market. These plans will help the business stand out in the market. The entrepreneur will need vision, insight and creativity to develop successful plans. The following famous words sum up how important the mission, strategy and goals are, and thus the core competences of a hospitality business: ‘If a man knows not to which port he sails, no wind is favourable.’ (Lucius Annaeus Seneca, 4 BC - AD 65) 19

Marketing & Sales for the Hospitality Industry StrategyStrategy An entrepreneur will think about where he wants his company to be in five years’ time. What does the future of his business look like? Once he has defined his goals, the entrepreneur must then determine how to achieve them.INKIJKEXEMPLAAR ©SVH A strategy identifies the route a business will take to achieve its goals. It is defined for the long term, and is implemented with the aid of plans. Large companies develop an annual marketing plan, which, although it does touch upon the long-term strategy, mainly focuses on the plans for the coming year. An important aspect of the marketing plan is a forecast of what it will cost to implement. This is called the budget.Budget Figure: marketing strategy Long term Business goals Strategy Marketing policy Short term Marketing goals Marketing plan Once he has defined his goals, the entrepreneur must then determine how to achieve them.20

Chapter 1 | The Marketing Strategy SWOT analysis The entrepreneur in the hospitality industry will want to conduct a situation strategy that will help him determine his strategy. This will involve analysing the external and internal environment of the business.INKIJKEXEMPLAAR ©SVHExternal analysis The external analysis will reveal the opportunities and threats (for instance from the competition) inInternal analysis the market. The internal analysis will reveal the business's strengths and weaknesses. This analysis is also called a SWOT analysis. SWOT stands for strengths, weaknesses, opportunities, threats. . Business plan Figure: SWOT analysis Situation analysis External analysis Internal analysis • market and customer analysis • management capacity • competition analysis • staffing capacity • environment analysis • production capacity • financial capacity Opportunities and threats • marketing capacity Strengths and weaknesses SWOT analysis 21

Marketing & Sales for the Hospitality Industry Business plan The SWOT analysis enables the entrepreneur to set a number of business goals. He will use a particular strategy to achieve these goals. He then determines how he will implement this strategy in his annual plan of business activities. This plan is called the business plan. It lists which marketing activities the entrepreneur has in mind and how and when they must be carried out. The plan also lists who is responsible for which activity. The budget forecast is a particularly important aspect of the plan. How much can the planned activities cost? The entrepreneur often splits his business into separate departments, each with its own plan and goals. This allows him to assign tasks to the heads of department and to check that they are doing their work properly. Business planINKIJKEXEMPLAAR ©SVHBudget forecast Traditional restaurant The business plan of a traditional restaurant often comprises two sections: a kitchen plan and a restaurant plan. Marketing goals such as increasing sales and targeting a specific market share are primarily covered in the restaurant section. The kitchen section mainly focuses on production costs. However, the kitchen may be assigned marketing goals such as improving quality or changing the restaurant’s image. The maître d’ is responsible for the restaurant plan and the chef de cuisine for the kitchen plan. Hotel A hotel comprises of several departments. Each department may be issued with its own plan. For instance, the business plan of a hotel consists of plans for the reception, sales, kitchen, restaurant, banqueting and housekeeping. Each department is asked to set its own goals, develop a pro- gramme of activities and draw up a budget forecast. Each will have to account for the time and money spent on the activities that it must carry out. Evaluation and modifications For the entrepreneur, the plan forms the basis of the marketing activities that need to be carried out during a financial year along with their evaluation and any potential modifications. Constant evaluation of the implementation and results of the plan is important, to ensure that modifications can be made. The marketing plan must be implemented as efficiently and effectively as possible. The entrepreneur can use it to monitor the performance of his departmental managers and the running of his business as a whole. The better the entrepreneur documents business and market data, the easier it is to evaluate and make adjustments to the business.22

Chapter 1 | The Marketing Strategy 1.3 | Market approach strategies An entrepreneur in the hospitality industry will devise plans that will enable him to make his business a success or ensure it continues to be a success. The more original the plans, the greater the odds of the entrepreneur standing out in the crowded hospitality market. However, he does not have to start from scratch.INKIJKEXEMPLAAR ©SVH Marketing scientists have spent years studying and providing insight into a number of strategies. It is a good idea for an entrepreneur to study these strategies and examine how they can be applied. The crucial decision that an entrepreneur must make is to answer the question of how he should approach the market. He has two options here: he can base his business formula on the demand side or the supply side of the market.Product differentiation If the entrepreneur opts for product differentiation, this means he takes a supply-side market approach. His business formula must then differ as much as possible from the business formulas of his competitors. His prime focus will need to be on the differences that the guest can perceive, because this will drive purchase preference.Market segmentation If the entrepreneur opts for market segmentation, he then takes a demand-side market approach. He will need to be very familiar with the demand side of the market, so that he can divide it into segments. He can then serve the market in three different ways. 1. Concentrated marketing strategyConcentrated marketing Here the entrepreneur focuses his business formula on one or a few market segments. He focuses strategy all his marketing effort on these segments. As he has chosen to focus on a small section of the market, he is able to adapt fully to the specific desires of this segment. He must make sure that there are sufficient profit and growth opportunities in the segment. 2. Differentiated marketing strategy The entrepreneur chooses two or more market segments and devises a marketing mix for each specific target group. Hospitality businesses often operate multiple business formulas, each with its own target group. A conference and resort hotel is an example of this.Differentiated marketing strategy 23

Marketing & Sales for the Hospitality Industry 3. Undifferentiated marketing strategyUndifferentiated marketing The entrepreneur serves the whole market with the same marketing mix, seeking similarities strategy between the largest segments. In this approach, the business uses sales arguments that appeal to the largest possible group of consumers. By focusing on a large group of consumers, the entrepreneur can benefit from economies of scale.INKIJKEXEMPLAAR ©SVH STRATEGY CHOICE choosing the target group and business formula are the most important long-term decisions that a hospitality entrepreneur will make MARKET SEGMENTATION PRODUCT DIFFERENTIATION approach the market from the demand approach the market from the supply side side POSITIONING PROFILING concentrated marketing strategy make the business formula stand out differentiated marketing strategy from the competition in the eyes of the guest undifferentiated marketing strategy24

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Marketing & Sales for the Hospitality Industry 1.4  |  Growth strategies An entrepreneur in the hospitality industry who has a successful business formula will want to grow. He will see opportunities in the market to earn more money. Four growth strategies are identified in marketing theory. These were developed by marketing strategist Ansoff, hence the name Ansoff’s growth matrix.INKIJKEXEMPLAAR ©SVHGrowth strategy Ansoff Existing products or services Existing market New market New products or services Market penetration Market development Product development Diversification Ansoff’s product-market combinations (PMCs). Market penetrationMarket penetration If an entrepreneur opts for this strategy, he remains active in the same market with the same product, but intensifies his marketing to the existing target group, in order to increase his turnover. He can increase his turnover through:eeper market penetration 1. Deeper market penetration This means focusing his marketing efforts on existing guests and encouraging them to visit more often or spend more per visit. This could be achieved with a customer loyalty card that rewards guests with a free bottle of wine on their third visit and a free meal on their tenth. Alternatively, it could be achieved by increasing sales at the table, to increase the average spend per guest.Wider market penetration 2. Wider market penetration Here the entrepreneur tries to attract new guests to the existing target market. One way to achieve this is with intensive promotional activities. The entrepreneur chooses the market penetration strategy if the situation analysis shows that there are still sufficient growth opportunities for the current product in the current market . This is the obvious strategy for small hospitality businesses, because other strategies often require significant investment.26

Chapter 1 | The Marketing Strategy Market developmentMarket development In this strategy, the entrepreneur chooses a new target market, which he will target with the existing business formula. The product-service mix does not require much adjustment for this growth strategy. The entrepreneur targets new market segments for which the business formula requires little adjustment. However, he will have to use promotional activities to reach the new target market. He can find a new target market in a new geographic area or in another demographic group such as the senior market. Alternatively, he can try targeting a certain cultural group.INKIJKEXEMPLAAR ©SVH The entrepreneur will only choose this strategy if he and his staff have sufficient knowledge of the new market. There will also need to be sufficient growth opportunities in the market. Examples of market development are a conference hotel that decides to target the resort market or a night club that decides to specialise in parties on a Friday night. Product developmentProduct development Here the hospitality entrepreneur chooses to grow by developing new products or services for the existing clientele. Innovative entrepreneurs can benefit from this strategy, because they are good at developing new products and services. The entrepreneur will have to train his staff to provide these new products and services, but as he is targeting his existing clientele, it is very easy for him to draw attention to the new product. A bar that starts selling meals is an example of product development, as is a restaurant that starts offering catering services. DiversificationDiversification Here the entrepreneur wants to develop a new product for a new target group. This is the most risky strategy, because the entrepreneur has no knowledge of or experience with the new product and the new target market. Some businesses choose this strategy because the growth opportunities are favourable or it means spreading risk. If an entrepreneur discovers an attractive gap in the market, he wouldn’t be a proper entrepreneur if he didn't seize such an opportunity. However, there are few examples of hospitality businesses that have successfully applied this strategy on a large scale. 27

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Chapter 1 | The Marketing Strategy 1.5  |  Competitive strategies There are many different types of business in the hospitality industry. It is an industry with a varied supply and lots of competition. An entrepreneur in the hospitality business experiences competition from businesses not only of a similar (direct competition) but also of a very different type. An example of this is the competition that a traditional restaurant experiences from a bar, a themed restaurant or the convenience products offered by the retail industry.Direct competitionINKIJKEXEMPLAAR ©SVH How can a hospitality entrepreneur deal with this competition? Porter is a marketing strategistPorter who developed three competition strategies. He said that there are three ways in which an entrepreneur can compete. Porter's Generic Competitive Strategies: 1 Differentiation 2 Cost Leadership 3 Focus 4 Stuck in the middle 1. Differentiation Here you choose to sell your product in a unique way. You can see a product as a whole made up of a number of factors such as packaging, price, distribution and content. Organisations often choose one aspect of a product that is very important to the consumer and make this aspect unique. They achieve this with a unique product design or unique or useful packaging. Another option is to choose a unique new combination of factors. Here the factors themselves remain the same but it is the new combination that makes them special. As the concept is unique and has that bit extra, the consumer is often willing to pay more. If you achieve this for the same cost, you increase your margins. Ways to differentiate: • Product quality improvement. • Product innovation. • Unique service. • Unique product design and packaging. • Unique selection of distribution channels. 29

INKIJKEXEMPLAAR ©SVH Marketing & Sales for the Hospitality Industry 2. Cost leadership Cost leadership means keeping your costs as low as possible. You want to differentiate by keeping your costs as low as possible and thus creating a competitive advantage. To reduce your costs, you can optimise the production process or change your product by removing extras or simplifying the packaging or design, for example. By keeping your costs as low as possible, you can offer your products cheaper or for the same price, which increases your margins. This strategy makes it easier for you to fight price wars and more difficult for new entrants to your market, because it is difficult for them to produce cheaper. Ways to apply cost leadership: • Low wages. • Simplify design and/or packaging. • Optimise the production process, automation. • Government grants. • Remove unnecessary extras from the product. • Reduce fixed costs. 3. Focus With the focus strategy, you focus on one or more target groups within the entire market. If the market as a whole is unattractive, perhaps due to too much competition, you can focus on specific market segments or target groups. By conducting a clear analysis of these target groups, you gain a better understanding of and more information about them than other organisations in the market. This enables you to align your product to the needs and desires of these consumers and thus create a competitive advantage in these market segments. This strategy can be divided into a cost focus and a differentiation focus. This means that in the special target group on which you are focusing, you again choose whether to keep costs as low as possible or sell a unique product.30

INKIJKEXEMPLAAR ©SVHChapter 1 | The Marketing Strategy Average Bar – stuck in the middle 4. Stuck in the middle Porter says that as an organisation you must choose cost leadership or differentiation, thus creating your own identity and USP (Unique Selling Point). If you are not clear about this, you end up in the stuck-in-the-middle strategy. Here you fail to choose a clear strategy and thus end up stuck in the middle. This can sometimes be pursued successfully if, for instance, the competition does the same. Criticism of Porter’s strategies. There is sometimes faint criticism of Porter's theory from those who believe that a combination of both strategies can also be very powerful. Each company has its own identity and each market is different, so a combination of certain elements of both strategies (cost leadership and differentiation) can sometimes create a strong market position. Source: zakelijk.infonu.nl 31

INKIJKEXEMPLAAR ©SVH Marketing & Sales for the Hospitality Industry 1.6  |  Questions about the chapter Answer the question and find the answer in the chapter. 1 Explain in your own words which marketing activities a hospitality business might carry out. 2 How do these activities fit into the entire marketing strategy of a company? 3 Give two examples of marketing activities in a hospitality business. 4 Which of following are macro developments in the hospitality industry? Circle the macro developments. a. A general smoking ban in hospitality businesses. b. Introduction of legislation on allergens. c. Legal drinking age. d. The use of social media for promotion. 5 What of the following are meso developments in the hospitality industry? Circle your choice. a. A general smoking ban in hospitality businesses. b. Introduction of legislation on allergens. c. Legal drinking age. d. The use of social media for promotion. 6 Market segmentation – target groups – entrepreneur What do these terms have in common? 7 What is a differentiated marketing strategy? 8 Explain the difference between market segmentation and product differentiation. 9 Draw a table of Ansoff’s four growth strategies and use examples from the hospitality industry to explain them. 10 Which competitive strategies can a business use?32

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Chapter 2 | ProductChapter 2ProductINKIJKEXEMPLAAR ©SVH The chapter at a glance 36 2.1 Introduction 37 2.2 The hospitality product 39 2.3 Product lifecycle 41 2.4 Product additions 45 2.5 Product range 53 2.6 Menu engineering 59 2.7 Quality64 2.8 Questions about the chapter 68 For more information, questions, answers and supporting material see: www.masaho.nl 35

Chapter 2 | The Product as Marketing Tool Marketing and Sales for the Hospitality Industry part 2INKIJKEXEMPLAAR ©SVHExtensive product & additionsProduct life Hospital- Product range cycle ity productQuality Menu engineering www.masaho.nl - questions: email to [email protected] 3636

Chapter 2 | Product 2.1  | Introduction In this second part of Marketing and Sales for the hospitality industry we will look at each of the individual marking tools, covering successively: product, presentation, personality, place, price and promotion. We will begin by looking in detail at the possibilities of the product as a marketing tool. We will begin with a clear definition of what the hospitality product is exactly, and will then try to divide the product into sections. Then we will study possible additions to a product and how to develop a product range. We will end the chapter by considering the fact that the entrepreneur in the hospitality industry and his guests have different perceptions of quality.INKIJKEXEMPLAAR ©SVH Hospitality mixHospitality mix Of the six marketing tools that an entrepreneur in the hospitality industry has at his disposal, three play a pivotal role. Together these are called the hospitality mix. The hospitality mix consists of the marketing tools: product, presentation and personality. It is with these three tools that the entrepreneur in the hospitality industry can, in the eyes of the guest, stand out most from the competition. If a hospitality business is unable to stand out from the competition, the guest will not develop a preference for this business. The three tools of the hospitality mix play a key role in the business formula of the hospitality business, because the hospitality mix consists of those features of hospitality businesses that the guest notices most. Characteristics of the hospitality product What makes the hospitality product unique is that it is the combination of a tangible product and a service. This means that the hospitality product has a number of characteristics that were covered in detail in part 1. To summarise, these were: • Providing hospitality services is labour-intensive. • The hospitality product cannot easily be kept in stock or produced in advance. • The product must be continuously available. • The guest can only form an opinion of the product once he has made use of the service. 37

Marketing & Sales for the Hospitality Industry Tips for outdoor dining The view, a good conversation and a nice 4 Good mise en place drink. Eating comes second when it comes With outside dining there will be many peak to outdoor dining. Alongside tasting good, and slow periods. You need to be able to food served outside must be practical, respond immediately. Make sure that you familiar and simple. Make it easy for you and have simple dishes that can be prepared in your guests with these tips on outdoor dining a few steps. Have a good mise en place and that will boost your turnover in the new ensure you have sufficient stock. At least outdoor season. have a supply of frozen snacks and cake.INKIJKEXEMPLAAR ©SVH 1. No frills 5 Choose classics Serve the food without too much Many business guests want a quick bite to embellishment. Don’t stack it into towers or eat outside. And there are always people who other precarious arrangements. Your guests don’t want to have to think too much. Make shouldn’t have to struggle to get their fork sure you have familiar dishes on your outdoor into the food. So serve everything on a plate. menu. Dutch classics such as the ‘twaalfuurt- Don’t use individual elements or gimmicks je’, bread with croquettes or a salad or soup, like skewers. The kitchen and serving staff always do well. The twaalfuurtje (usually also benefit from less fuss on the plate. This comprising bread with a croquette and soup makes for faster kitchen and table service. or Russian salad) is also quick to prepare. The same is true for salads and soups. According 2 Make sure the food doesn’t cool down to research by Misset Horeca, salads are the As you may be aware, we live in a changeable best-selling dishes outside. climate. On days that are that bit cooler, it is important that hot dishes stay hot outside, 6 Healthy is popular which makes it a good idea to heat the plates. It’s been a trend for years already and is now Or serve the food 10 °C warmer than you a feature of Dutch cuisine: healthy eating. A would indoors. nutritious and healthy bite won’t go amiss, particularly outside in the fresh air (and sun). 3 Windproof Salads work well here as do vegetable dishes As well as ensuring the food isn’t served and bread rolls with plenty of salad and cold, you also need to ensure that the vegetables. Or a nutritious soup, hot or cold. dishes that you serve outside are windproof. Nothing worse than garnish or napkins flying Source: Missethoreca.nl away. So leave out light fly-away elements such as frisée. If you do want to put separate elements on the plate, ‘stick’ them down to stop them moving. Remember tip 1: make the presentation plain and stable.38

Chapter 2 | Product 2.2  |  The hospitality product A successful entrepreneur in the hospitality industry tries to meet the needs of the guests as efficiently as possible. Guests have certain expectations when they buy the product The entrepreneur must do his best to meet these expectations. A guest does not buy a bottle of beer but a sparkling, refreshing, thirst-quencher. The entrepreneur takes advantage of this. He tries to enhance the guest’s experience. The quality of the tangible product is important of course, but so too are the atmosphere, music, staff and decor of the hospitality business. The total product must meet the needs of the consumer as much as is possible.INKIJKEXEMPLAAR ©SVH Value of the product The term product has several meanings.Material/physical product 1. The material/physical product The product is a collection of ingredients and characteristics. A meal, for instance, could consist of soup, potatoes, vegetables, meat and a pudding. Beer is made from a number of ingredients.Comprehensive product 2. The comprehensive product Besides a number of ingredients and properties, a product comprises a certain image. Manufacturers try to add value to their product by adding characteristics such as design, colour, service and advertising. A soft drink can therefore be the ultimate thirst-quencher, a sweet the ‘freshmaker’ and a car the safest. The comprehensive product is the sum of the tangible product and the additional characteristics. We will take a closer look at these added characteristics in the next section. 3. The total product The buyer of a certain product assigns a certain value to it. Each consumer sees a product from his own perspective. The buyer wants to fulfil a need, sometimes several at a time.Total product The value that a buyer ascribes to a product is the total product. The manufacturer will always try to influence the total value of the product, but in the end it is the buyer who defines this value. 39

INKIJKEXEMPLAAR ©SVHMarketing & Sales for the Hospitality Industry Trends in the hospitality industry Experience We are living more and more in an experience economy. People want to feel that something is 'authentic'. They want to physically experience all sorts of situations. Nowadays, people are constantly looking for a new kick, from survival to the authenticity of the countryside. They want to feel that they have made their own choices and that they live ‘authentically’ This trend can also be seen in the hospitality industry. Restaurants are increasingly relying on seasonal influences to emphasise the sense of authenticity. Guests want to see the chef at work. This enables them to experience the work going on in the kitchen. Like gardening, cooking as an experience has become a real leisure activity. You can do it passively (watching cooking shows on TV, eating at restaurants) or actively (cooking yourself). The interest in cooking clubs, cooking lessons and special cooking equipment only looks set to increase in the coming years. Restaurants with a theme, such as Greek or Japanese restaurants, can also benefit from the experience trend. Exotic food can also be a complete experience. This is on the condition that it is done properly. Authentic tastes, authentic products and authentic crockery. The cultural background of the dishes is almost as important as the food itself. An ethnic restaurant can provide a dining experience where guests become familiar with an ethnic culture (and cuisine). They want to feel that they have made their own choices and that they live ’authentically’.40

Chapter 2 | Product 2.3  |  Product life cycle No single product and no single business formula is immortal. But some products live longer than others. The life cycle of a product is taken to mean the sales development of a product over time. Product life cycle is often abbreviated to PLC.INKIJKEXEMPLAAR ©SVHProduct life cycle The concept of a life cycle of products and services teaches the entrepreneur in the hospitality industry that all markets can change drastically over time. What stands out is that successful products have a similar life cycle. The hospitality entrepreneur will not, of course, have time to determine where in the PLC each product that he sells is. But the life cycle of his business formula as a whole is comparable with the life cycle of products. The PLC concept helps a company with its long-term and short-term commercial and strategic planning. If an entrepreneur has multiple hospitality businesses, it is recommended that he spreads these businesses over the phases, because he then spreads his risks and ensures the continuity of his business. Length of the life cycle As already mentioned, some products live longer than others. Coca Cola, for instance, was first produced around 1880 and it is still a successful brand. Over the years, enough other soft drinks have entered and disappeared from the market. By adapting the product and making successful use of marketing techniques, Coca Cola has even managed to become market leader. The length of a product service life cycle usually depends on four factors: 1. The changing needs of the consumer. 2. The activities of the competition. 3. Technological developments and innovation. 4. Product development and marketing activities. Of course these four factors are interconnected. The consumer's needs will change if huge technological developments are made. 41

Marketing & Sales for the Hospitality Industry Technology does not stand still in the market for electronic and computerised products. In this market in particular, technological developments make for many products with a short life cycle. The developments in the food market are less spectacular. The suppliers on this market are primarily active in product development, in such areas as taste and design. Examples of this are the development of Diet Coke or caffeine-free Coke. These products have a clear effect on the sale of regular Coke. The consumer can change too. The introduction of Allerhande magazine by the Albert Heijn supermarket chain has significantly changed our patterns of consumption. Pastas, unusual spices and ingredients that used only to be used by chefs are now used in everyday cooking.INKIJKEXEMPLAAR ©SVHFigure: Life cycle of a product/service mixTurnover Product life cycle II III I IV Profit Time The product cycle describes the sales development of a product from its introduction to its removal from the market. This is divided into four phases. If they wish to make optimum benefit of market conditions, entrepreneurs, as they develop their marketing strategy, must take into account which phase the product is currently in.42

Chapter 2 | Product Phases of the product life cycle A product goes through the following phases during its life:INKIJKEXEMPLAAR ©SVHI the introduction phase II the growth/maturity phase III the saturation phase IV the decline phaseIntroduction phase When a product is brought to market, it enters the introduction phase. This phase is all about communication. The ‘unique’ features of a new product must be communicated to the target group in a clear and identifiable manner. The introduction phase is a period with high extra costs, which often means a high product price.Growth phase If the product is a success and sales increase rapidly, the product enters the growth phase. In this phase, the entrepreneur must be able to earn the maximum profit. Sales are high and the costs are relatively low. It should not take too much effort to sell the product. Word of mouth can be very important in this phase. If the market is large enough and there are sufficient growth opportunities, the competition will become interested. The increased competition will put pressure on prices in the market. The entrepreneur will use a lot of advertising (and thus incur high advertising costs) to try to retain his market share.Saturation phase When growth reaches a standstill and sales stabilise, the product enters the saturation phase. The entrepreneur must now do all he can to avoid entering the decline phase. This is the phase in which the entrepreneur will tinker with the product and come up with product differentiation.Decline phase In the decline phase sales drop and there is no market interest in the product. The entrepreneur can avoid this situation by improving the product. If the profit perspective is minimal, he will decide to remove the product from the market. When exactly the decline phase begins depends on the obsolescence of the product and if there are alternatives on the market that are better at meeting the latest needs of the consumer. 43

INKIJKEXEMPLAAR ©SVHMarketing & Sales for the Hospitality Industry Extending the product life cycle There are a number of tactical solutions that can be used to extend the product life cycle. 1. Try to get current users to use the product more often. This could mean expanding the number of flavours or options in the range. For instance, Magnum brought out a number of varieties of its ice cream bar to market in 2007, which were available for a limited period only. This limited period of availability made the ice cream bars seem more exclusive, persuading consumers to try these varieties too. 2. Persuade the current target group to consume the product at another time. Cup-a-Soup had a very successful marketing campaign that managed to get people to use their product as a mid-afternoon snack. Before this campaign, the product was mainly used as a starter. The campaign was reinforced by installing Cup-a-Soup vending machines all over the place. 3. Try to find a new target group. Mentos had an old-fashioned image a number of years ago. It was mainly bought by adults over the age of 45. An advertising campaign focusing on the young succeeded in giving Mentos a younger sporty image. Incidentally, without making significant changes to the packaging. Cheese spread has been on the market for years and is considered to be healthy. The manufacturers of Laughing Cow made a ‘healthy’ snack of its cheese spread for children in the form of its Dip & Crunch line. 4. Discover new ways to use the product. Brinta developed a new breakfast line, Brinta Wake-Up! Unox brought out packaging containing its smoked sausage and a part-baked bread roll. 5. Adapt the product to contemporary demands. If the manufacturer notices that product sales are falling, it may be possible to bring the product back to market with a minor adjustment. Take the example of dairy puddings, which are constantly brought to market in slightly different permutations.44

Chapter 2 | Product 2.4  |  Product additions A hospitality entrepreneur must stand out from the competition. If he succeeds, guests will want to pay more for his product or service. The entrepreneur thus achieves consumer preference. A visit to his business is worth more to the guest, because the business formula is better at meeting his needs. The competition strategy of product differentiation responds to this.Purchase preferenceINKIJKEXEMPLAAR ©SVHProduct differentiation We understand product differentiation to mean that a product differs from the competition by the Product additions addition of physical or other characteristics. We call these added characteristics product additions. Design, colour, brand, packaging, service and guarantee are ways in which the supplier of a product can stand out from the competition. The design An attractive or eye-catching design helps promote a product. It makes people want to buy it. It is important that the design of sustainable consumer goods in particular is pleasing to the consumer’s eye. The design of most home appliances, coffee machines and audio equipment for instance, must not only be functional but also aesthetic. Product design is also important in the hospitality industry. How the food is plated is an important indicator of the chef’s craft. Some chefs create a name for themselves by presenting a certain dish in a certain manner. Luxury restaurants use designer crockery and a different kind of plate for each dish. The plating of puddings in particular is often very original.An attractive or eye catchingdesign helps promote a product. 45

INKIJKEXEMPLAAR ©SVHMarketing & Sales for the Hospitality Industry Brand names You can register and protect all sorts of brands. Or you can trademark a trading or company name. A brand can mean many different things: a word, an image and even a colour or a shape. A good example of the latter is the ‘Wokkel’, by crisp manufacturer Smiths. Registering a trademark If you want to register and protect a brand you will need to file the brand name and/or logo online. The Benelux Office for Intellectual Property (BOIP) is the official body for trademark registration in the Benelux. You can also trademark your brand at the European or global level. It depends on the reach of your business which of these offices you register your trademark with. BOIP registration gives you the exclusive rights to use the brand in the Benelux. The definitive registration procedure for a trademark takes about three months. The cost of a standard registration varies from about 240 to 1,000 euros. The registration is valid for ten years and can be renewed. Help registering It is advisable to hire a specialist who can help you register by, for instance, investigating whether there are older registrations of the trademark. You can find a suitable specialist through the Benelux Association of Trademark and Design Law. Infringement If you think that there is an infringement of your trademark, you will need to go to court. The court can determine if it is trademark piracy: if your trademark has been counterfeited or another brand is too similar. The court may decide that the counterfeited items must be confiscated and that you will receive compensation. Do note that if you do not register your brand you will not be protected. Transfer You can transfer the use of your trademark to another party. This must be recorded in a written contract and a note must be made in the BOIP. Right to use You can grant other parties permission to use your brand in a licence. There are no requirements for this licence. It can be concluded verbally or in writing. It is advisable to also make a note of this in the BOIP. Then the licence holder can also act against piracy. Source: www.boip.int46

INKIJKEXEMPLAAR ©SVH Chapter 2 | Product The packaging Many products stand out from the rest with their packaging. In self-service businesses in particular guests will be influenced in their decision by what the packaging looks like. Packaging can stimulate sales, because: • you can advertise on it; • it can explain how to use the product (recipes, for instance); • its design and colour can attract the attention of a potential buyer; • it increases product recognition. However, the packaging does not only serve as promotion, it must also be functional. Good packaging prevents waste, spoilage and leakage. The packaging must make the product easy to transport (stackable) and store. The Dutch Commodities Act (Warenwet) specifies that certain information must be listed on the packaging. The packaging can also promote longevity and hygiene. Obviously, the type of product determines whether the manufacturer chooses packaging that is very promotional or has another function. However, the fact that the packaging is sometimes more than 25% of the purchase price illustrates how important packaging is to manufacturers. The brand One of the strongest additions to make a product stand out from the competition is the brand name. For consumers, the brand is a way to identify a product or service. We know that certain brands are so strong that even bad publicity will not affect products sales. If a brand is very strong, it can be used for many other products too. A brand is a name, group of letters, symbol or combination of these that an entrepreneur or group of entrepreneurs uses to identify a product or service. A brand name is the pronounceable Brand part of the brand. The logo is the distinctive design used to depict the brand name and is often supported by an image. Famous examples of logos are the golden arches of McDonalds, the star of Heineken and the shell of Shell. Choosing a brand name is not easy. A brand name must meet the following requirements: 1. It must be short and easy to spell, read and pronounce. 2. It must be recognisable, easy to remember and sound nice. 3. It must suggest something about the type of product and its benefits. 4. It must stand out. 47

Marketing & Sales for the Hospitality Industry The advantages of a brand are: 1. It helps the product stand out from the competition. 2. Advertising can help build up a powerful image. 3. People can recognise and identify a product. 4. It is easier to bring new products to market under the same brand name. 5. A strong brand keeps clients.INKIJKEXEMPLAAR ©SVHRelationship marketing However, brand loyalty is not easy to achieve. The manufacturer does have to put in some effort to achieve it. To build (and maintain) brand loyalty, the entrepreneur must use relationship marketing. Relationship marketing is taken to mean regular contact with regular guests in the form of special opening evenings or personal letters or emails. The buyer expects a constant quality, stable prices, availability, service and a guarantee from a brand. To market a brand, a manufacturer will have to spend a lot on advertising to introduce and establish the brand. He will have to use expensive themed advertising. Themed advertising is a form of advertising that uses a recurring theme or slogan. It emphasises certain features of the product. Some manufacturers have had so much success in generating market awareness that their brand has become a generic term. If a guest in a restaurant orders ‘Spa’, it is very likely that they will be served another brand. To the great dissatisfaction of Spa, or course, who did not come up with the advertising slogan ‘Sta op Spa’ [insist on Spa] for nothing. Themed advertising is a form of advertising that uses a recurring theme or slogan.48

INKIJKEXEMPLAAR ©SVHChapter 2 | Product Explosive growth of micro-breweries Beer website Cambrinus.nl lists no fewer than 208 Dutch breweries, 14 of which started this year (2015). Entrepreneur Luc Vandewall is aware of how many new beers that means. His Bierapp(www.debierapp.nl) is a free app that helps you work out your taste in beer. If you give a beer a four or five star rating, the app suggests other beers that you will probably also like. Vandewall: ‘We’ve now got almost 30 bars in the Bierapp. Together they offer about 1,100 different beers. It’s hard to keep up with the huge influx of new beers. Apart from Oersoep, three breweries have opened in three years in Nijmegen alone.’ Breweries such as Rooie Dop (since 2012) in Utrecht, De Molen (since 2004) in Bodegraven and Van Moll in Eindhoven (since last year) are flourishing. Dutch micro-breweries like these make beer for the beer lover. Sander Kobes: ‘We don’t make middle-of-the-road beer. Our beers are a bit acidic, for instance. You have to learn to drink them, like coffee or whisky. But the enjoyment is that much greater. If you learn to appreciate it, you experience more pleasure drinking craft beer than lager.’ Export is really important for small breweries. ‘There are many craft beer lovers. Unfortunately not all in one place,’ says Kobes with a smile. ‘Craft beer is really big in America. It has ten to 15 percent of the market share there; here it isn't even one percent.’ Source: www.z24.nl Service and guarantee We distinguish between three types of service: 1. Pre-sales service This applies to informative advertising, informing potential customers about the product and offering a varied product range. 2. During-sales service Providing demonstrations and information during the sales talk. This takes place at the table in a restaurant. 3. Post-sales service Ease of payment, home delivery, fast guarantee or complaint process are aspects of this. But so too is a regular inspection of the business or the service. A guarantee is the insurance from the manufacturer, salesperson or entrepreneur in the hospitality 49

Marketing & Sales for the Hospitality Industry Guarantee industry that the product or service will meet certain requirements. A guarantee is often given on certain parts of the product for a certain period. This is not possible in the hospitality market, of course. Here the guarantee is mainly at the time of delivery itself. By monitoring the quality of the products that it provides, a hospitality business can provide a guarantee. Complaints are sometimes made after big parties and events. How the business deals with these is part of the guarantee.INKIJKEXEMPLAAR ©SVH Peak tea The Dutch drink an average of 101 litres of tea per year per capita. That is over two cups of tea per day. Before the Second World War it was even more. Tea was the most popular drink in the Netherlands then. Per capita we drank almost 200 litres of tea per year. The amount of tea that people drink has decreased since then. Tea has lost out to coffee, water and soft drinks. But the enthusiasm for tea is returning. Mainly thanks to good quality tea and herbal tea in the hospitality industry. It is a no-brainer for the entrepreneur in the hospitality industry: focus on tea and benefit from the growing popularity of this product. There is a huge potential profit to be made from tea and it is a good product for the hospitality industry. After coffee, tea is the most popular hot drink and its consumption is still increasing. Tea facts: • Tea is a product with a high gross margin, higher than coffee even. • Tea fits in with today’s culture and is drunk by almost everyone. • Tea is particularly popular with the young. • Tea can be drunk at almost any time of day. • Tea offers the variety and options that guests want.50