Marketing Marketing Inclusive Tours and Inclusive Tours and Product Packages Product Packages

ObjectiveObjective:: Introducing the meaning and Introducing the meaning and applications in the practice of marketing applications in the practice of marketing

inclusive tours and product packages.inclusive tours and product packages.

The Nature of the The Nature of the Marketing Task for Tour Marketing Task for Tour

OperatorsOperators The marketing task of the tour The marketing task of the tour

operators give emphasis on short-run operators give emphasis on short-run tactical considerations because of the tactical considerations because of the nature of tour operation where daily nature of tour operation where daily fluctuations are enormous. fluctuations are enormous.

However, strategic decisions are also However, strategic decisions are also important and will be more important important and will be more important in the coming 30 years when the in the coming 30 years when the markets reach maturity.markets reach maturity.

Strategic MarketingStrategic Marketing

Five strategies are worth mentioning Five strategies are worth mentioning here;here; Interpreting the strength and direction of Interpreting the strength and direction of

change in the external environment.change in the external environment. Strategic decisions on volume and pricing.Strategic decisions on volume and pricing. Choice of product/customer portfolio.Choice of product/customer portfolio. Positioning and image.Positioning and image. Choice and maintenance of distribution Choice and maintenance of distribution

systems.systems.

The external The external environmentenvironment

External influences are more powerful External influences are more powerful when tour operation is concerned when tour operation is concerned because of the international nature of because of the international nature of their business. their business.

The total market demand fluctuates as The total market demand fluctuates as the result of economic events which the result of economic events which therefore affects employment, levels of therefore affects employment, levels of wages, real income, and the impact of wages, real income, and the impact of international exchange-rate movements international exchange-rate movements on prices. on prices.

In addition, the actions of the In addition, the actions of the competitors is another external factor. competitors is another external factor.

In order to minimize the effects of In order to minimize the effects of these external factors, tour these external factors, tour operators, first, they prepare the operators, first, they prepare the tour packages 18 months in advance tour packages 18 months in advance the actual delivery of the product to the actual delivery of the product to the customers. Second, tour the customers. Second, tour operators have started to take the operators have started to take the advantage of using new information advantage of using new information technology for reservations and technology for reservations and bookings.bookings.

Strategic decisions on Strategic decisions on volume and pricingvolume and pricing

For tour operators, decisions on capacity For tour operators, decisions on capacity and average price levels are strategic and average price levels are strategic decisions because of the unpredictable decisions because of the unpredictable external business environment. This external business environment. This means that annual decisions on volume means that annual decisions on volume and average price levels are strategic and average price levels are strategic rather than tactical issues.rather than tactical issues.

If the initial estimates of capacity and If the initial estimates of capacity and pricing are proved wrong by events, the pricing are proved wrong by events, the marketing tactics can be used to correct marketing tactics can be used to correct the problem and get a market share the problem and get a market share among the competitors.among the competitors.

Product/market Product/market portfoliosportfolios

The other strategic consideration for The other strategic consideration for operators is concerned with the operators is concerned with the content and balance of the product content and balance of the product portfolio, as represented in their portfolio, as represented in their program packages. A product program packages. A product portfolio is a mix of destinations, portfolio is a mix of destinations, accommodation types, and range of accommodation types, and range of elements to be included in the elements to be included in the product. It is always profitable to product. It is always profitable to offer products in demand.offer products in demand.

Segmentation of tour-operator Segmentation of tour-operator products is facilitated today due to products is facilitated today due to the growing use of data mining. As the growing use of data mining. As a result, tour companies a result, tour companies strategically publish different strategically publish different brochures to appeal different market brochures to appeal different market segments.segments.

Positioning and imagePositioning and image Competition between tour operators has Competition between tour operators has

primarily focused on price and on product. primarily focused on price and on product. Image and positioning have taken second Image and positioning have taken second place to price competition. At the place to price competition. At the moment, the market is highly price-elastic, moment, the market is highly price-elastic, mostly favoring the low prices. However, mostly favoring the low prices. However, when the market reaches maturity, the when the market reaches maturity, the competition will switch from price to competition will switch from price to branding and images. Hotels in developed branding and images. Hotels in developed countries already operate in mature countries already operate in mature markets in the 1990s, branding has markets in the 1990s, branding has become a major element in their become a major element in their marketing strategies.marketing strategies.

DistributionDistribution

The fifth strategic issue is distribution or The fifth strategic issue is distribution or providing access for customers. For all providing access for customers. For all tour operators the cost of distribution is tour operators the cost of distribution is normally the largest item of their total normally the largest item of their total marketing expenditures. There are marketing expenditures. There are heavy fixed costs in distribution, heavy fixed costs in distribution, including the printing and distribution of including the printing and distribution of brochures, installing computer links with brochures, installing computer links with retail outlets, regular sales promotion retail outlets, regular sales promotion and merchandising efforts. and merchandising efforts.

For all operators there is a strategic For all operators there is a strategic choice to be made between choice to be made between marketing direct to customers or marketing direct to customers or achieving sales through travel achieving sales through travel retails. Some tour operators have retails. Some tour operators have direct-response marketing policy direct-response marketing policy with no retail agency involvement. with no retail agency involvement. On the other hand, others sell their On the other hand, others sell their packages through retailers.packages through retailers.

However new web-based distribution However new web-based distribution channel outlets are expected to channel outlets are expected to replace traditional retail travel replace traditional retail travel outlets. outlets.

Apart from the basic choice, direct Apart from the basic choice, direct or retail sales, some other strategic or retail sales, some other strategic decisions are, for example, should decisions are, for example, should particular retailers get extra particular retailers get extra support? Should extra commission support? Should extra commission be paid in some circumstances?be paid in some circumstances?

Tactical MarketingTactical Marketing

As discussed previously, strategic decisions As discussed previously, strategic decisions determine the product/market portfolio, the determine the product/market portfolio, the product image and positioning, the capacity product image and positioning, the capacity of the program, the price range, and the of the program, the price range, and the structure of distribution system to be used. structure of distribution system to be used. In other words, all the four Ps are strategic In other words, all the four Ps are strategic decisions. The principle role for marketing decisions. The principle role for marketing tactics is to secure a continuous flow of tactics is to secure a continuous flow of bookings for the program from the day it is bookings for the program from the day it is offered for sale. offered for sale.

It is almost inevitable that every It is almost inevitable that every year operators find themselves with year operators find themselves with too much or too little capacity in too much or too little capacity in relation to the available demand. relation to the available demand. Because long planning periods are Because long planning periods are required to prepare the tour required to prepare the tour programs and because it is programs and because it is impossible to know the competitors’ impossible to know the competitors’ prices and capacity of their prices and capacity of their programs in advance. programs in advance.

If sales are slow, customers should If sales are slow, customers should be encouraged with the help of the be encouraged with the help of the aggressive tactical actions in order aggressive tactical actions in order to reach the targeted break-even to reach the targeted break-even occupancy level. On the other hand, occupancy level. On the other hand, If bookings are higher than If bookings are higher than predicted in favorable market predicted in favorable market conditions, the tactical response will conditions, the tactical response will be to look for additional capacity and be to look for additional capacity and to reduce promotional spending.to reduce promotional spending.

When operators’ prices and products When operators’ prices and products are competitive, it is probable that are competitive, it is probable that all operators in the same market all operators in the same market field will experience similar reduces field will experience similar reduces in their bookings. They will all have in their bookings. They will all have to react, but they have to decide how to react, but they have to decide how quickly, and how much.quickly, and how much.

For tour operators, the choices for For tour operators, the choices for tactical promotion are;tactical promotion are; Increased advertising Increased advertising Sales promotions aimed at consumers, Sales promotions aimed at consumers,

such as competitions, free children’s’ such as competitions, free children’s’ places (assuming these are not part of places (assuming these are not part of the original product), special discounts the original product), special discounts for bookings received by a certain date.for bookings received by a certain date.

Sales promotion aimed at retailers.Sales promotion aimed at retailers. Price-cutting to increase sales for Price-cutting to increase sales for

targeted weekstargeted weeks

If such tactical effort did not succeed, If such tactical effort did not succeed, the operator would have no choice but the operator would have no choice but to consolidate his program in order to to consolidate his program in order to avoid a heavy loss. Consolidation is avoid a heavy loss. Consolidation is the technical term used in charter the technical term used in charter airlines to cancel the specified flights airlines to cancel the specified flights that would be uneconomic to operate that would be uneconomic to operate at the load factors available. at the load factors available. Consolidation flights result into Consolidation flights result into canceled accommodation allocations.canceled accommodation allocations.

The operators’ link with retailers, The operators’ link with retailers, especially where on-line computers can especially where on-line computers can be used to communicate the late be used to communicate the late availability of products and handle availability of products and handle bookings, are very helpful in the bookings, are very helpful in the tactical process of selling last minute tactical process of selling last minute discounted offers. discounted offers.

Merchandising of a retailer distribution Merchandising of a retailer distribution system to secure last-minute sales, system to secure last-minute sales, often just days before departure, is one often just days before departure, is one of most powerful advantage to of most powerful advantage to operators. operators.

No other form of marketing in the No other form of marketing in the industry works as fast and cost-industry works as fast and cost-effectively as the combined operator effectively as the combined operator and retailer promotion focused on and retailer promotion focused on price. It is recognized that the first price. It is recognized that the first 60 percent of bookings are easy to 60 percent of bookings are easy to achieve on a well-designed program. achieve on a well-designed program. The next 30 percent, and especially The next 30 percent, and especially 10 percent, on which so much of the 10 percent, on which so much of the profit depends, are more difficult to profit depends, are more difficult to achieve. These sales are the main achieve. These sales are the main target of tactical marketing. target of tactical marketing.

SourcesSources

Kotler, P.; Bowen, J. and Makens, J. (1999). Kotler, P.; Bowen, J. and Makens, J. (1999). Marketing for Hospitality and Tourism (2nd Marketing for Hospitality and Tourism (2nd ed.). Prentice Hall: NJ.ed.). Prentice Hall: NJ.

Kotler, P. and Armstrong, G. (2006) Principles Kotler, P. and Armstrong, G. (2006) Principles of Marketing (11th ed.). Prentice Hall: NJ. of Marketing (11th ed.). Prentice Hall: NJ.

Middleton, V. T. C. (2004) Marketing in Travel Middleton, V. T. C. (2004) Marketing in Travel and Tourism (3rd ed). Elsevier: Oxford.and Tourism (3rd ed). Elsevier: Oxford.

Middleton, V. T. C.; Fyall, A.; Morgan, M. And Middleton, V. T. C.; Fyall, A.; Morgan, M. And Ranchhod A. (2009). Marketing in Travel and Ranchhod A. (2009). Marketing in Travel and Tourism (4th ed). Butterworth-Heinemann: Tourism (4th ed). Butterworth-Heinemann: Oxford.Oxford.