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Alaska is more than just snow and grizzlies
Free essay example:
MARKETING MANAGEMENT (MPK732)
Semester 1, 2008
UNIT NAME - MARKETING MANAGEMENT
UNIT CODE - MPK732
Case study-1:Alaska is more than just snow and grizzlies
Due Date: 11th APRIL, 2008
BHARAT BHUSHAN - 700337799
SURYAKANT BEHERA – 700280747
KARTIK CHOPDA – 800386508
SUHASSAVVASERE SATHYANARAYANA- 800231436
(A)The environmental analysis of travel Industry in Australia
Tourism has emerged as one of the most significant economic and social drivers on the 20th century. Tourism industry is growing at a faster rate not only in Australia, but throughout the world (Victoria Tourism website). Tourism is an $81 billion industry for Australia (Tourism Australia website). The total economic value of inbound tourism in 2006 was $20.5 billion and the total economic value of domestic tourism in 2006 was $60.2 billion (Tourism Australia website).
An analysis of the environmental of such a huge industry is crucial. Hence based upon the factors and forces which may impact this industry can be differentiated based on:-
- Demographic Environment
- Economic Environment
- Technological Environment
- Natural Environment
- Socio-Cultural Environment
- Political Environment
(Source: Kotler and Keller, 2006)
The demographic environment is described as the human population with regard to age, income, sex, size and growth rate of the population, geographic distribution, occupation, education, etc ( Kotler and Keller ,2006).
Australia’s population is growing and its population reached the 21 million mark (Australian Bureau of Statistics, 2008). The population growth is mainly due to natural birth and from overseas migration of people in Australia. More and more people are migrating in Australia every year from different places around the globe (Kotler et al, 2006). There were 180,000 permanent additions of migrants in 2005-06 which was 72% more than the number in 1996–97 (105,000) (Australian Bureau of Statistics, 2007). It provides an opportunity for Phil Hoffman Travel to target these migrating people for holidays in Australia as well as overseas.
Population of Australia is ageing and the baby boomers are getting older and becoming wealthier day by day. This will have a great outcome in an increase in the seniors market, which will have enough time, money with good health to travel (www.tourism.vic.gov.au). Phil Hoffman Travel can take advantage of these and focus on this age group for inbound and outbound tourism.
The economic environment is significant because the purchasing power of the customer depends on factors such as income, savings, prices, economic growth, interest rates, inflation, and so on (Kotler and Keller, 2006).
The Australian economy has grown significantly in the past two decades and as a result most Australians have experienced increased living standards and this is reflected in their lifestyles (Kotler et al, 2006). Increase use of e-commerce and also ever-increasing globalization will continue to expose the tourism industry of Australia to global markets (www.tourism.vic.gov.au).
The Australian dollar has appreciated notably against the US dollar as on April 2008 the AUD/USD was 0.90, compared to April 2007 where the AUD/USD was 0.82 (www.marketvector.com). If the AUD continues to appreciate against the USD than the Australian’s would like to travel overseas more.
- The constant increase in the world fuel prices has a significant effect on tourism industry. As on March 2008, the cost of crude oil price was $106.13 AUD. (tonto.eia.doe.gov). With theincreases in the fuel prices, the cost of air travel increases and thus it affects the long destination travel as air fares are a big part of total cost of travel.Than too, tourism industry has shown a superior progress with a $23.3 billion boost to the Australian economy in 2007, a 6% increase on 2006 through international tourists (Tourism Australia website). The interest rates are increasing in Australia and the current cash rate as on 10th April, 2008 is 7.25% (www.rba.gov.au).This high interest rate will affect not only Phil Hoffman Travel but also to the whole industry to attract the customers.
- The internet is increasingly being used for various purposes like research, book, advertising and pay for various tourism goods and services(Victoria Tourism Website). In this case Phil Hoffman Travel can use internet for advertising purpose. The use of internet helps consumers gather information through interactive websites and decide their travel. The efficient use of database software and e-commerce would also help them to capture market (Hewerdine, L, 2005).
Australia is one of the world’s top green and natural destinations (Tourism Australia Website). Its animals, plants and landscapes have evolved over millennia, and there are about a million different natural species in Australia. More than 80 per cent of the country’s flowering plants, mammals, reptiles and frogs are unique to Australia, along with most of the fish and almost half the birds. Australia has more than 140 species of marsupials, including koalas, wombats and the Tasmanian devil, now found only in the Tasmanian wilderness. More than 750 species of birds have been recorded in Australia, 350 of which are found nowhere else in the world. Among them are the kookaburra, the rainbow lorikeet and fairy penguins. There are also 55 different species of macropods - the kangaroo family-native to Australia (www.australia.gov.au).
Phil Hoffman Travel can help their customers to experience Australia’s natural wonders.
Socio Cultural Environment:
There is a change in household patterns and this has a great impact on travel industry. Traditional family is declining due to changes in the society and this is somewhat due to higher divorce rates, fewer children among couples and fewer marriages so that they can travel extensively before taking the responsibility of spouse and children (Victoria Tourism website).
Whatever people are earning, they spend their money mainly on leisure and recreational activities. More and more people are planning a holiday with short trip experience on weekends. This has shown a significant growth in unplanned travel for shorter periods and with shorter lead times (Victoria Tourism website).
Marketing decisions are strongly affected by developments in the political environment. The political environment consists of laws and government agencies (Kotler et al, 2006). The biggest change in the political scenario of Australia is the change of the Government which brought Labor Party and Prime Minister Kevin Rudd into majority, (www.abc.net.au) and we believe with the change in government and the adoption of new policies by the current government may support people seeking to travel internationally as well as domestically. Tourism Australia has announced the open skies agreement between Australia and the USA, liberalising the regulation of air services on the trans-Pacific route. It helps to grow tourism from the important US travel market. Initiative like working holiday visa will allow young Americans to work and holiday in Australia (Tourism Australia Website). Phil Hoffman Travel can take advantage of these American customers by helping them in their travel within Australia and back to their own country.
In Australia, the Tourism Forecasting Committee (TFC) is a self-governing body that provides various resources to industry, government and to present and potential tourism investors with consent of forecasts of evolution across international, domestic and outbound tourism sectors (Tourism Australia Research, 2008).
The main aim of TFC is to improve private as well as public sector investment and marketing decision making. It provides kind information regarding the changes occurring in the tourism industry with regard to government policy at national, state and regional levels within the Australian tourism sector (Tourism Australia Research, 2008).
- Effective marketing strategy: - Like dropping newsletters in local news papers, maintaining long relationship with past clients and the most important was advertising on radio (Hewerdine, L, 2005)..
- Reputation of the company: - It achieved through more than 25 awards in 14 years and also appreciation through satisfied customer with dedicated staff of the company (Hewerdine, L, 2005).
- Attractive packages: - A diverse range of tour packages like honeymoon packages, premium cruises for Australia, escorted group cruises, luxury deal and so on (Phil Hoffmann website).
- Less physical presence in Australia.
- Growing population is regarded as most important asset as it will help to create more and more market for travel industry.
- A presence in fast-growing activity holidays segments such as river cruising, safari, climbing and so on, is likely to raise revenue growth (Activity Holidays guide website).
- Rising ATF prices: - The price of aviation turbine fuel (ATF) has soared to record highs in the past few years and continues to hold at that level. Fuel costs exercise direct and indirect influence on travel operators. Higher fuel costs force airlines to raise fares, which affect tour operators (First Choice Holiday, 2008).
- Terrorist incidents: - The threat of a terrorist attack exists despite a worldwide effort to curb terrorism. In the past, the company's operations were adversely affected by terrorist attacks in the US, Egypt and Turkey. The 9/11 terrorist attacks significantly reduced the turnover (First Choice Holiday, 2008).
- Other factors like cyclones along the coastline, rigorous droughts, fires in the forests and climate changes such as Global warming also threaten the travel industry.
Changes going to occur in next five years:
• Growth in the Australian economy
• Australia’s population is ageing which will help a long term market for travel industry.
• Continuing high aviation fuel prices along with related fuel surcharges on airfares.
• Development of new destinations.
(Tourism Australia Website, 2007)
(B) MARKETING RESEARCH FOR PHIL HOFFMANN TRAVEL
(1)Define problem and research objectives:-
The research objective explains what the marketing research study must achieve.
Research Objective: - To determine the potential demand, public attitudes and competitive advantages for Phil Hoffmann Travel.
Research Questions: -
- What environment changes may influence potential demand?
- What features of the service are most desired by consumers?
- How pleased are consumers with Phil Hoffmann Travel?
- What sorts of consumers are aware of Phil Hoffmann Travel and what do they know about it?
- Is Phil Hoffmann Travel reasonably well priced compared with its main competitors?
(Source: Chapman, 1989)
(2) Developing of Research Plan: - The second step of the market research is to develop a plan for collecting the information efficiently. The plan shows sources of secondary data and tells the particular approaches or methods like focus groups, observations, questionnaires etc. that researcher will be use to acquire primary data (Kotler et al, 1998).
Researcher can gather secondary or primary data or both. “Secondary data are data that were collected for some other purpose and already exist somewhere” (Kotler and Keller, 2006). Examples of secondary data are company internal records, government publications, periodic and journal and so on (Kotler et al, 1998). Secondary data gives a good initial base for research and often help to identify problems and research objectives. As the data are open to all firms, they do not give competitive advantage when used as a single source of information. In most instances, secondary data sources cannot present all the required information and therefore, will need a considerable primary data collection effort (Kotler et al,1998).
Focus Group Research:-
It consists of 6 to 10 people discussing their views about a product, service or organization carefully guided by a moderator (Kotler and Keller,2006).
Phil Hoffman Travel could consider a single focus group of ten people differing in their demographic and psychographic factors. This group will consist of young childless couples between 25 – 35, affluent families and older affluent families (Tourism Australia Qualitative Study, 2006).
A number of useful insights about customer’s attitudes, perceptions, etc. can come to light from thoughtful conduction of focus groups (Kotler and Keller, 2006). For instance, working couples might find the convenience of the new travel packages worth the price but families with children might want to pay less (Kotler et al, 1998).
It is conducted to collect the information it requires about the people’s knowledge, attitude, preference or buying behavior (Kotler and Keller, 2006). Phil Hoffmann Travel can plan to use survey instrument which can have direct or indirect survey research questions. In the direct method, researcher puts direct questions concerning behaviour and thoughts- for example, ‘Why don’t you like Phil Hoffmann Travel’? (Kotler et al,1998). By contrast, in the indirect method researcher might put, ‘What kinds of people like Phil Hoffmann Travel’? (Kotler et al, 1998).
They can also use other research to know the public buying behaviour like intercepting interview people at busy locations like stations, malls etc. They can also mail online questionnaires to existing customers and their acquaintances (Kotler and Keller, 2006).
Experimental research makes an effort to describe cause and effect relationships (Kotler and Keller,2006). For example, to assess the effects of two different packages, Phil Hoffmann travel can organize the following experiment. It could launch two different packages at the same price for Adelaide to Singapore, one at Norwood office and the other at Glenelg office. If all other marketing efforts for the package are similar, then variance in sales in two offices could be associated to additional benefits offered with the packages (Kotler et al,1998).
(3) Collect and Analyze the information:-
At this time there is lot of raw data available. The researcher is now expected to make meaning out of the information collected. Data could be preferably organized and presented in the form of interpretations and inferences (Kotler and Keller 2006).
(4) Make the Decision:-
The managers who order the research require evaluating the evidence. If they’re positive in the results, they may choose to launch the new package with special vacation discount which may lead to increase in the number of consumers and sales. Hopefully, the research presented them with insight into the problem but they can have further research if not satisfied with the research (Kotler and Keller 2006).
INDICATIVE BUDGET FOR MARKETING RESEARCH PLAN:-
A sample frame of 500 people in the age group of 25 and above is selected from Adelaide.
Focus Group -
1 focus group of 10 people @ $100 = $1000.
Moderator fee = $3000.
Analysis and Report writing fee = $5000.
Miscellaneous (Rent, food and drink) = $1000.
Survey Research –
Online Questionnaire = $5000-$7000.
Intercept Interviews (hiring 20 people for 5 days) @ $15/hr = $12000.
Experimental Research –
Experimental Launch = $4000.
Data Mining - = $5000.
Thus the total costs will amount to $36,000-$38,000.
(Source: Harrison, P. J, Lecture slide 3, 2008)
Segmentation is the process of dividing the consumer market into groups, based on roughly related taste, needs and wants. This eases the task of the company to focus on a particular group to target upon and come up with products according to their requirement (Kotler and Keller, 2006).
Segmentation is broadly divided into four main categories depending on various factors. The segmentation variables used to divide the consumer market in Australia are mainly Geographic, Demographic, Psychographic, and Behavioural (Kotler and Keller, 2006).
Considering the fact that consumer now-a-daysare very much concerned about the deal they get, Phil Hoffman Travel might target the market mainly based on occupation segmenting the market into three categories student, businessman and professionals. Segmentation variables used are demographic, psychographic and behavioural.
Mostly 18 to 30
Mostly 30 and above
Mostly 30 and above
$19,000 plus per annum
Students with part-
Managing Directors and Chief Executives.
Doctors, Engineers, Teachers, Managers and other similar professionals.
Value for money
Premium Quality, Best
Value for money
The variables used to segment the target market is demographic which includes age, income and occupation, psychographic considering lifestyle and behavioural taking into account their benefits sought, usage rate and loyalty.
Demographic segmentation of consumer market is mainly concerned with the consumer’s age, gender, occupation, income, nationality etc. Consumers these days are mainly concerned with quality and service at a relatively acceptable cost regardless of the brand image of the service provider excepting certain situations and certain class of people who can incur costs to any extent (Kotler and Keller, 2006).
- Age: - 67.4% of the population in Australia is between the age group of 15 – 64. They are considered to be the mass who are heavily indulged in travel and leisure activities (World Fact Book). Therefore, these groups of people are worth targeting.
- Income: - This is another aspect of segmentation to be considered while targeting the market. Australian population comprises of student (local and overseas), businessman and professionals who are very much apart in their income. While students work part time has a likely income of $19,000 plus per annum (Australian Vice-Chancellors Committee, 2007), professionals have a likely income of $50,000 plus per annum (New South Wales Government Portal, 2007). Businessmen are the one with maximum income of $300,000 plus per annum (Professional Network, 2005). Thus, this variation in income allows them to spend money accordingly.
- Occupation: - This is our main base for segmenting the market. Students include local as well as overseas doing part time job searching for cheapest means of travelling, businessmen includes Managing Directors and Chief Executives looking for quality regardless of the amount involved and professionals consisting of Doctor, Engineer, Teacher, Manager and many other similar professionals seeking value for money travel (International Visitors Survey, 2007).
Psychographic segmentation can be included under Demographic segmentation as this includes segmenting consumers with respect to their psychology and demographics. Sometimes consumers under the same demographic segment vary in their psychographic profile (Kotler and Keller, 2006).
- Lifestyle: - Students having very minimal income will have a low living standard. So, they will always prefer cheapest deals. As businessmen have a very high income and they have high living standard so they will always prefer to have the best facilities involved. Professionals with moderate income choose a fairer deal.
Behavioural segmentation is done by understanding the consumer’s knowledge towards the product and their view point. This is done taking into account various variables such as occasion, benefits, usage rate, user status etc (Kotler and Keller, 2006).
- Benefits Sought: - Students and professionals, looking value for money travel would accordingly benefited where as businessmen spending huge amount for best facilities would in return get top quality and finest service.
- Usage Rate: - Students travel only during holidays or in case of emergency. Hence, their usage rate is low. Businessmen have to travel frequently for business purpose and also leisure travel making them the heavy users. Professionals are intermediate travellers either for business or vacation. So, they have a medium usage rate.
- Loyalty Status: - Students and professionals search for value for money travel so they are very less loyal to a particular brand but businessmen are concerned about the best so they are highly loyal to a particular brand.
(D) Consumer Decision Making Process
The decision making of purchasing a service or commodity by a consumer involves various external and internal factors which affects the individual’s behavior towards the actual purchase. Based upon Five stage model of the consumer buying process, the various factors influencing the buying behavior can be explained as below.
Need recognition - consumer is stressed with his job and due to this he often doesn’t give much time to his family.
Information search - consumer decides to go for a holiday trip with his family and browses the web for information.
Evaluation of alternatives - consumer compares the price available in different agencies.
Purchase decision - consumer selects the holiday package which is cheap and has best offers.
Outcomes - consumer goes on a holiday trip with his family.
Its instinct arose in the consumer’s mind for a particular commodity or service; it’s the stage where consumer moves to a better position or a standard of living. Needs or desires could be influenced by internal and external factors (Kotler and Keller, 2006). In this context, if a consumer wants to learn something new, which is an internal trigger than he would be initiated to travel (Tourism Australia Qualitative Study, 2006).
Beliefs and Attitudes- Evaluation often reflects beliefs and attitudes. People acquire attitude, this in turn influence buying behavior. In this case if a consumer is using a particular service for a holiday pack in a particular agency, it becomes hard for the competitors to attract such consumers because they have a particular attitude towards their service provider and they don’t want to switch the agency. Hence attitude constitutes a major role in buying behavior (Kotler and Keller, 2006).
Search for information:
Consumer satisfies their wants in order to meet their basic needs. In the search of their basic needs, we can observe the following behavior in the consumer.
- Personal- In this context the buyer may refer to friends or family members to get the necessary information about the service or product.
- Commercial- In this context the buyer would refer to advertising, websites, sales persons, dealers, packaging and displays for the information about the service or product.
- Public- In this context the consumer will acquire knowledge from the sources available in the public. Like mass media, consumer-rating organizations and so on to get the information about the product or service he’s willing to buy (Kotler and Keller, 2006).
Evaluations of alternatives:
There are several processes to understand consumer evaluation process. Some basic concepts of consumer evaluation process are: Firstly, the consumer is trying to satisfy a need. Secondly, the consumer is looking for certain benefits from the product solution. Thirdly, the consumer sees each product or service as a bundle of attributes with varying abilities for delivering the benefits. The attributes of interests to buyers vary product to product. For example: Hotels- location, cleanliness, atmosphere and price.
In this case the consumer may have many alternatives to buy a holiday package, but the company which provides unique and best services for the reasonable price would win over the consumer’s decision and the service provider gets focused (Kotler and Keller, 2006).
After the evaluations of the alternatives available in the market, consumer decides to purchase a service or a commodity based on the quality and price. The purchase decision may differ at the time of purchase due to various external factors like budget, availability of product and references. In executing the purchase decision the consumer will consider the following factors.
- Brand or dealer
- When to purchase
- Payment mode
But in some cases consumer might not consider the above facts while making the purchase decision. Example: when a consumer buying salt, sugar, or rice on a regular basis (Kotler and Keller, 2006).
Post purchase behavior:
After the purchase of the product the consumer might trigger some of the disadvantages of the brands and hear favorable things about the other brands and will be alert to information that supports his decision. Marketing communication should supply beliefs and evaluations that reinforce the buyer’s choice. Therefore the marketer’s job does not end with the purchase. Marketers must monitor post purchase satisfaction to the buyers.
In this case the agency that’s providing holiday package to the consumer must ensure that their price is worth their service and this in turn will help the company retain the consumer with them for longer period (Kotler and Keller, 2006).
Sociological and psychological factors determining consumer behavior:
- Culture - Culture is the fundamental determinant of a person’s wants and behavior. Culture is a behavior which an individual learns from the elders or people around us in the society by absorbing their behavior.
Since going on a holiday is just equal to the celebration and it’s a necessary too for the stressed out people, so this itself forms a culture among the people or the society going on trips and tours and this in turn watched by their children’s will also form a culture in them.(Kotler and Keller, 2006)
- Social class - Consumer behavior is influenced by social factors like groups, reference, family, status. It has different groups of people carrying different attitude towards purchase. It determines the buying behavior of consumer with whom he/she is associated with. The different classes are classified in this fashion: upper-uppers, lower-lowers, upper-middles, middle class, working-class, upper-lowers, lower-lowers.
In this context, if the consumer belongs to the upper-uppers category he would go for a luxury holiday package. Example: travel in business class, stay in seven star hotels, rent a room in the presidential suit. Similarly if the consumer belongs to the category below upper-uppers his buying behavior would differ. He will plan things and set a budget and then act. In this way I feel social class has a major role in consumer buying behavior (Kotler and Keller, 2006)
- Lifestyle - Every individual has a particular life style and this in turn affects the consumer behavior. Example: people who are outdoor-oriented would prefer more activity holidays like rock climbing, river cruising, safari, and so on. (Kotler and Keller, 2006)
Consumer behavior varies with their Psychology. The various psychological factors affecting consumer behavior are motivation, learning, beliefs and attitude.
In this context, consumers would be attracted if the features of the package are attractive and cost-effective (motivation). Sometimes prior experiences of the consumers play an important role in selecting a particular option (learning). Consumers have a general belief that product or service matters with brand which in this context means that reputed service providers would supply them with better service (belief). However, consumers might get some set of alternatives with respect to pricing and quality which will change their behavior (attitude). (Kotler and keller, 2006)
- Kotler, P, Keller, K.L 2006, ‘Marketing management’, 12th edition, Pearson Education Pty Ltd.
- Kotler, P., Adam, S., Brown, L., and Armstrong, G., 2006, ‘Principles of Marketing’, 3rd edition, Pearson Education Australia, Sydney
- Chapman, R.G 1989, ‘Problem-definition in marketing research studies’ Journal of Consumer Marketing, vol. 6, no.2, pp.51-9.
- Kotler, Armstrong, Brown, Adam and Chandler 1998, ‘Marketing’, 4th edition, Prentice Hall Australia Pty Ltd.
- Harrison, P. J, Marketing Management, 2008, Lecture Slide 3, Faculty of Business & Law, Deakin University, Burwood, Victoria
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- Activity Holidays – Website retrieved on 22 March, 2008.
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- World Fact Book retrieved on 25 March, 2008.
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- Australian Vice-Chancellors Committee 2007, retrieved on 30 March, 2008.
- New South Wales Government Portal, 2007 retrieved on 30 March, 2008.
- Professional Network 2005 retrieved on 30 March, 2008.
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- Crude oil retrieved on 01 April, 2008
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