Principles of Marketing (questions and answers)

Even though this collection is an expensive choice it makes sense because the new products or the reshaping of current holiday offers are about to be established. In addition, the company must have data about their former customers which could be included into market research (secondary data).

Once those questions have been answered SDH has to decide on a suitable research approach. After studying several methods, I came to the conclusion that the qualitative research, the quantitative research and the survey research are the best suited approaches for Sunny Days Holidays.

The qualitative research defined as ‘exploratory research used to uncover consumers´ motivations, attitudes and behaviour. Focus-group interviewing, elicitation interviews and repertory grid techniques are typical methods used in this type of research’7. This method would give SDH reasons why, for instance, there is no repeat business, as well as what customer’s viewpoint of tailor-made holidays is.

To carry out a quantitative research SDH could make inquiries about consumer attitudes and opinions on SDH. This could be brought forward via mail or personal interviews on former customers to allow statistical analysis.The most suitable research approach is in my eyes the survey research. This attempt would allow SDH ‘to gather primary data by asking people questions about their knowledge, attitudes, preferences and buying behaviour`8.

This method could be carried out through the use of postal questions, email surveys, telephone interviewing or individual interviewing.

Concerning the establishment of tailor-made holidays I would additionally like to introduce the focus group approach.

‘A small sample of typical consumers under the direction of a group leader who elicits their reaction to a stimulus such as an ad or product concept’9; in SDH`s case the organisation of tailor-made holidays. Various approaches could be additionally used, but those stated are in my opinion best suited. After results of the research are available a research plan has to be presented and implemented.

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Question 2

Discuss suitable types of segmentation the firm could use, and comment on how you think the tailor-made market should be positioned in the market.

One man’s meat is another man’s poison.

Tastes are different among customers. Not only their tastes but also their ‘wants, resources, locations, buying attitudes and buying practises’ It is therefore necessary when offering a product to specify the group a company wants to target with it. This specification is called market segmentation in marketing terms. Companies carry out this concept by ‘dividing large, heterogeneous markets into smaller segments that can be reached more efficiently with products and services that match ... unique needs’10 of their customers.

On page 322 in ‘Principles of Marketing’ the different concepts of market segmentation are summed up in a table. This table outlines typical breakdowns of the main variables.

Geographic-, demographic-, psychographic- and behavioural segmentation are the four main schemes to segment consumer markets.

A geographic segmentation addresses to a region, a country size or for example the climate of a country. Demographic segmentation is aimed at the division of the consumer market into groups ‘based on variables such as age, gender, sexual orientation, family size, family life cycle, income, occupation, education, religion, ethnic community and nationality’11.

Social class, lifestyle and personality characteristics are the main elements of a psychographic segmentation.

The last point of departure concerning market segmentation is the behavioural one. This type ‘divides buyers into groups based on their knowledge,

attitudes, uses or responses to a product’12. All these options can be combined or used alone to develop the best strategy to segment a market.

Since SDH is offering holidays they should take following methods into account:

Income, age (demographic segmentation) and the social class (psychographic segmentation) are in my opinion the important variables. It is the money earned which decides what kind of holiday people book and how exclusive they can be, e.g. the groups C1 and C2 (supervisors and clerks) are very unlikely to go for expensive holidays.

Still using the concept of demographic segmentation, age plays an important role. To give an example, the winter golf holidays SDH offers appeal to people in an older age range, whereas low-cost skiing holidays target a younger age group with lower income.

The last point  is the social class (psychographic segmentation) which would specify in what different classes customers are in. SDH could include that information when adjusting their product range.

There are more possibilities, for example a geographic segmentation or the analysis of the family life cycle, but a mix of those mentioned are in my eyes the most suitable before the results of the market research are available.

After those steps are establish Sunny Days Holidays has to decide how many segments they want to serve. Since tailor-made holidays have a quite reasonable growth prospect, I would recommend a risky method, but one which ‘can earn a high rate of return on its investments’13, the concentrated marketing.

This method ‘is especially appealing when company resources are limited’14. To explain this choice I think that the tailor-made market is not yet explored by competitors, so a chance for SDH to specialise in this niche and promote with great expertise.

This expertise and above all consumer awareness of this expertise could be the definition of the product and create a competitive advantage. This concept is called market positioning, ‘the way in which the product is positioned in the mind of the consumer’15. 

The products the company is currently offering are well suited to be reshaped to tailor-made holidays. This could save money. A ski holiday in Eastern Europe combined with the ski pass, a sledge ride and some other features is perhaps more expensive than a package but compared to a tailor-made ski trip to Austria offered by competitors, it is still cheaper. This is the concept of perceptual mapping and at the same time it lays the foundation of a competitive strategy.

Furthermore, the company has to build certain images of these tailor-made holidays. To be the market leader always is an image.

Another attribute to strengthen consumer loyalty and to improve customer awareness is to provide possibilities for the prospective buyer to choose holiday key features on his own offered in travel agencies. SDH could for instance offer golf holidays with different destinations, various hotels, exquisite golf courses, approved golf academies or even holiday tournaments. This would give a competitive advantage over other less-experienced sellers.

Question 3

Analyse suitable methods SDH could use to promote its new tailor-made product.

After the preparatory work has been done and a concept of SDH´s new services has been established it has to be communicated to the prospective buyer. In marketing terms this communication is called promotion, the third element of the marketing mix.

Before SDH can decide what kind of promotion mix is advisable for them the total promotion budget has to be set. There are several methods the company could use. The first method is called the affordable method, where the ‘promotion budget is set at a level the management thinks the company can afford’16.

‘Setting the promotion budget at a certain percentage of current or forecast sales or as a percentage of the sales price’17 is the definition of the percentage-of-sales method. Another possibility for setting a budget is the competitive-parity method. Using this method marketers have a closer look at  promotional expenditures for e.g. advertising of their competitors ‘and then set their budgets based on the industry average’18. The last method is the so called objective-and-task method. This way ‘defines specific objectives; determines the tasks that must be performed; and estimates the costs of performing these tasks. The sum of these costs is  then the proposed promotion budget’19.

One advisable method to set SDH´s promotion budget is, in my opinion, the affordable method, especially when the product is at the beginning of the product life cycle.

There is a tendency that SDH´s net profit and its gross profit went down in recent years.

The company has high fixed costs.  Since the company has scarce financial resources this method seems to be appropriate even though it ‘tends to place advertising last among spending priorities’20.

Another way of setting the promotional budget and, in my eyes, a suitable and logical method for SDH is the objective-and-task method. This method is rather difficult to carry out but could at the same time be the most effective way to set the budget. Defining the objective, finding the right way to achieve this target and then estimating the budget. Those simple steps would help to analyse the relationship ‘between amount spent and promotional results’21. For SDH this methods could be risky because of possible high expenses. My final advise would be to start of with the affordable method but still keeping the opportunity of changing to the objective-and-task method.

The preparatory work is very important when forming the right promotion mix. The results of the market research, the appropriate market segment, the position of the product as well as the commitment on a promotional budget now has to be taken into account. SDH efforts to investigate those issues will form the frame of a promotional strategy.

Promotion can be brought forward in different ways. Promotional mix which was mentioned above is the application of the tools which are available. The mix consist of four major tools: Advertising, personal selling, sales promotion and public relations.

SDH has to decide which tools are best suitated for communicating their products to the prospected customer.

The promotional budget gives the frame because one tool can be more expensive then the other.

Advertising for instance ‘can be very costly. Although some advertising forms, such as newspaper and radio advertising, can be done on smaller budgets, other forms, such as network TV advertising, require very large budgets`22 which SDH does not have.

Of course, advertising has many advantages. It reaches the masses, large-scale advertising can say something positive about the seller’s size, popularity and success and it builds images of the product which can due to the artistic freedom memorised easily by the recipient.

Another tool out of the promotion mix is personal selling. ‘Personal selling is the most effective tool at certain stages of the buying process, particularly in building up buyers´ preferences, convictions and actions’23. This tool attaches great importance to cultivate the customer relationship.

The next tool which is worth mentioning is sales promotion. This type of promotion ‘includes a wide assortment of tools – coupons, contests, price reductions, premium offers, free goods and others’24 - which can attract the intention of the consumer and may lead to a quicker respond.

Public relations describes all the activities the company does to communicate with target audiences. ‘PR is very believable: new stories, features and events seem more real and believable to readers than ads do’25.

Direct marketing is the last tool of the promotion mix. It is about the personal contact to  consumers and allows a dialogue with them. It can be carried out for instance via direct mail, telemarketing, electronic marketing or online marketing.

SDH wants to promote their new product; tailor-made holidays. Since this type of holiday is a special one, not a holiday for the masses, they have to decide carefully which tool they want to use.

In my opinion SDH should use the promotional concept of sales promotion in combination with personal selling and direct marketing. To get people to know about the quality and the expertise SDH offers on the tailor-made holiday sector, they should address to the consumer personally. A concept like Lufthansa’s ‘Miles and More’ could be developed. They could offer current customers to give them a flight for free or pay, for instance, golf lessons if the customer commits to book with SDH again. To realise this, SDH have to address to a smaller group, the group which is interested in tailor-made holidays. Advertising for example is not the best tool to promote these holidays. It is not from interest for the masses, and therefore too expensive compared to the outcomes. A little radio or newspaper campaign would be cheap and form a customers´ awareness. The promotion has to be personal and addressed directly to prospective buyers. Therefore the direct marketing approach would support the promotion. This concept is cheap and builds one-to-one customer relationships. The information to contact the prospective taker are already available from the market research.

This mix of different promotional tools could guarantee SDH`s success and establish the product on the market.

Bibliography

Books:

• Baker, M.J. (1991). Marketing – An Introductory Text. (5th Ed.) Hampshire: Macmillan Education Ltd.

• Booth, D. (1990). Principles of Stategic Marketing. Kent: Tudor Publishing.

• Chaston, I. (1990). Managing for Marketing Excellence. Berkshire: McGraw-Hill Book Company (UK) Limited.

• Christopher, M., & Mc Donald, M., (1995). Marketing – An Introductory Text. Bath: Bath Press.

• Cooper, M.J., & Madden, C., & O’Brien, E., (1995). Introduction to Marketing. London: Harper Collins College Devision.

• Dalrymple, D.J. & Parsons, L. J. (1995). Basic Marketing Management. New York: John Wiley & Sons, Inc.

• Kotler, P., & Armstrong, G., & Saunders, J., & Wong, V., (2001) Principles of Marketing. (3rd Ed.). Harlow: Pearson Education Limited.

Online Sources:

Words excluding quotations, questions: 1993

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