Consumer behaviour

 

 Case Study

 

Tourism, as the third major socio-economic activity in Europe, along with its related sectors, accounts for 10% of the EU GDP and represents 12% of the total EU employment. It is therefore an area of utmost importance as it contributes both to the development and the integration of less advanced areas in Europe, and it manages to combine growth, sustainable development and ethics in the different member states. Tourism is an essential tool for enhancing, disseminating and promoting our image in the world, safeguarding Europe’s prime position as the number 1 destination.

 

All of these aspects have been the focus of the new framework of the European policy on tourism following the coming into force of the Lisbon Treaty, and they represent key priorities within the work of all European institutions in this field. Some core topics in line with the objectives of ‘Europe 2020: Europe’s Growth Strategy’, include educational and professional training to stimulate mobility and create new high-quality professional opportunities, the development of ICT to create new synergies between tourism enterprises of all sizes, and addressing issues such as deseasonalization, tourism for all, and the debate on quality tourism in Europe.

 

In order to develop all these ideas and to strengthen our tourism industry and its competitiveness, it is important to invest further in the concept of sustainability, an element which is common to all aspects of the new tourism policy: namely that a broad approach on sustainability is needed, which holds together the valorisation of European cultural heritage, the protection and safeguarding of European territories and of its environment, as well as the economic development and social cohesion of the system as a whole. Prior to the economical crisis starting in 2008, the UK travel industry saw close to 22 million overseas booked holidays on a yearly basis. These ranged from short break holidays (up to 3 nights away), to “all inclusive” holidays to independently booked holidays (including flight, accommodation, food/drink, and experiences). In the past travel agents (intermediaries between the Tour Operators and consumers) were widely used. From the years 2008 to 2013, reservations fell by approximately 15% and Mintel predicts that a further decline of 11% will occur by 2017, with more consumers choosing to make their own (online) travel arrangements. Globally travel trends are continuing to change.

 

Innovative technologies and business models have revolutionized the hospitality and tourism industries. Examples of such innovations are phone-as-key-cards, mobile self-check-in, mobile booking, self-service check-in kiosks, lobby media panels, electronic luggage tags, smartphone boarding passes, hotel service optimization systems, guest device connectivity tools, wearable devices to identify guests, tablet menus and table reservation systems to name just a few of the most known innovations.

 

These innovations may take place in the frontline of a service where customers observe the innovation or they may operate in the backend and be “invisible to consumer”. For example, Link@Sheraton is a touchscreen device that creates a new experience by interacting with guests and providing them with a new way to explore local tourist attractions and enhance their hotel experience.

 

However, some innovations such as customer relationship management (CRM) and customer intelligence tools are not observed by the guests, but hoteliers can customize and enhance their guests’ experiences using order histories and consumption patterns. Innovative collaborations between brands that operate in different industries are also shaping the hospitality and tourism industries. For example, the Line Hotel in Los Angeles partnered with Linus Bike by creating a fleet of co-branded bikes for hotel guests. They also created maps of local bike routes for the hotel guests to discover (e.g. tour of local breweries). Marriott partnered with IKEA to create Moxy brand. The three-star Moxy hotels target the millennial travelers who do not want to spend as much for a five-star hotel, yet do not like the style of less expensive hotels.

 

These hotels offer stylish rooms, using a calming neutral tones and local artistic features and buildings that are environment-friendly (http://moxy-hotels.marriott.com/). An important emerging business model is the sharing or collaborative economy which has further changed the landscape of hospitality and tourism. The idea behind the sharing economy is utilizing the unused personal resources such as spare bedrooms and car seats more efficiently. This new business model has been quite successful. For example, Airbnb has been in business for about seven years. Without owning a single room for rent, it has served over 30 million guests and has been valued at about $24 billion, putting it ahead of Marriott hotels and rivals such as Expedia and Priceline (Winkler and MacMillan, 2015).

 

New entrants offering innovative hospitality and tourism services have challenged incumbent service providers. The emergence of online booking web sites has enforced many traditional travel agencies to go out of business. Many traditional hotels are getting concerned about the growing popularity of services such as Airbnb. The question is how can these hotels react to the growing pressure from these new entrants? Can they cooperate with these new companies? This is an open question for future research. A challenge for the hospitality and tourism industry is finding the optimal mix of digital and human interactions to create personalized guest experiences while respecting their privacy. For example, Chinese Spring Airlines has equipped flight attendants with Google Glasses on a flight from Shanghai to Chengdu. Iberia developed smartwatch boarding passes to allow passengers to receive flight updates. Some companies, such as car rental agencies, try to use distant customer service representatives to handle the process of doing the paperwork for picking up cars in airports.

 

Furthermore, researchers and managers must consider that consumers do not adopt or use a new service only for the purpose of the benefits it offers, but they also use it due to the social aspects such as what adopting the innovation would say about them. This leads to different segments of adopters of a new service based on customer motivation and types of benefits they seek in an innovation. For example, some individuals may adopt a new service when it is quite novel to satisfy their need for uniqueness. However, once the majority of consumers start using it, they may terminate using it and move to the next big trend (Nejad et al., 2014). Consumers may also use a certain service because of the attributes that are assigned to users of that service. For example, some consumers may decide to ride bicycles because riding bicycles is considered more green and environment-friendly.

 

Nonetheless, there are always individuals who ride a bicycle due to economic reasons or for the recreational aspects. Consumers, nowadays, are more interested in sharing their experience with others (Huang and Benyoucef, 2013). For example, the once popular point-and-shoot cameras lost their markets to cell phone cameras due to the shift in consumers’ interest to sharing their moments with others through social media rather than storing their photos for the future. A better understanding of motivations to adopt and use an innovation in the areas of hospitality and tourism will help us develop more appropriate services and market them. Even for a single hospitality firm, the adoption of various technologies has not advanced equally. For example, many family-owned small hotels and bed-and-breakfasts in cities or rural areas (e.g. rural tourism destinations in Europe such as Tuscany), nowadays, offer their services using online booking services such as booking.com. They are generally concerned with online reviews about their services on tripadvisor.com and other online forums. However, these hospitality services have been slow in adopting modern hotel management services such as the ones described earlier. Although, according to Mintel research, some customers still use travel agencies for research prior to going home and booking the accommodations online. In the past, consumers chose holidays from paper brochures available from local travel agents, trained to make bookings on behalf of their customers.

 

Travel agents, were backed by the Association of British Travel Agents (ABTA), who existed to reduce the risks associated with foreign travel e.g. provide assistance for holidaymakers being stranded abroad, if things went wrong with their travel provider.  Mintel (2013) identified five key segments of UK holiday takers:

 

There are other significant changes going on in the travel industry. The majority of companies operating in this sector are focused on economic, environmental and social sustainability, believing these are essential to long term success. New European laws state that although sustainability is a concept, it is a value which must be ‘incorporated’ into the consciousness of all European citizens, politicians, administrators, entrepreneurs and tourists. All projects in the field of tourism should take sustainability into account and make it integral part of their content. Responsible Tourism is about taking responsibility for making tourism more sustainable. It is about identifying and agreeing with local stakeholders on the sustainability issues which matter to them – economic, social and environmental. Not necessarily the issues which matter to the tourism industry, but rather the sustainability issues causing concern to local people in their particular place. The aspiration of Responsible Tourism is to make better places for people to live in and better places for people to visit; in that order. This means addressing the issues of local concern and the negative impacts which tourism has on the local environment.

 

TASK

 

Your role is that of a marketing consultant and you have been asked to advise a travel company (of your choice) about consumer behaviour in this industry. The advice will be focused on the tasks below. Your solutions to the tasks should be laid out in the style of a briefing paper, addressed to the senior management team of the travel company.

 

Task 1 – 10 Marks

 

(a) Explain what is meant by demographics and psychographics and using an example to demonstrate why an understanding of these would be useful to a travel company.

(5 marks)

(b) Evaluate to what extent demographics and psychographics relate to the buying decisions of those purchasing travel products and services.

(5 marks)

 

Task 2 – 10 Marks

 

There are many different customer segments (both business and consumer) that engage with companies in the travel sector. Explain how an understanding of consumer behaviour in these sectors could inform your chosen organisation’s marketing strategy.

 

Task 3 – 15 Marks

 

The head of the Business Development Team has asked for your assistance in producing and delivering a short presentation on the specifics of Business to Business Buyer Behaviour for the next company Presentation to that segment. This presentation needs to be delivered in only fifteen minutes. Your presentation should be composed of six slides for the main points, plus a further four slides for the following: introduction; agenda; questions; and a conclusions slide. To accompany your PowerPoint slides you should produce brief speaker notes for each slide, stating what you would expect to develop and discuss when presenting each slide at the presentation.

 

Task 4 – 10 Marks

 

The Business to Business buyer process is often divided into three types: Straight Rebuy, Modified Rebuy and New Task/New Buy. Using your knowledge of these three categories, discuss and evaluate the importance of each category to both the buyer and the seller.

 

Task 5 – 10 Marks

 

Travel agencies used to be the main channel for consumers purchasing a holiday. Explain shortly why customers have defected from using these intermediaries and assess how travel agencies might add value to the customer buying experience in the future.

 

Task 6 – 10 Marks

 

Consider the range of digital innovations currently taking place in the travel sector. Discuss how these might change the product buying behaviours of customers in the travel sector. And how the company can use these innovations to attract new consumers

 

Task 7 – 10 Marks

 

Secondary research, such as TGI Indexing, can provide extensive information about consumer behaviour in the travel industry overall but not detailed information relevant to individual travel organisations. Discuss methods that your chosen organisation might use to better understand the behaviour of its existing (and potential) customers more effectively.

 

Task 8 – 5 Marks

 

Ensure that you have complied with format requirements and have presented your assignment, as prescribed. This includes checking the references used, as well as your spelling, punctuation and grammar before submitting your work. Guidance; Consult with your tutor if you are uncertain about any aspect of this assignment. Submission requirements; Answers should be presented in a clear and professional manner, ideally in a business report format. The word count for this assignment is 4000 words.

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