Chapter 2:

Marketing Mix-8P’s

By: Norharnani Zulkifli

 Learning Outcomes:
2.1.1 Explain the meaning of product
2.1.2 Describe the characteristics of tourism or hospitality product
2.1.3 Explain the meaning and importance of Branding
2.1.4 Explain Product Life Cycle and Service Life Cycle

2.2.1 Explain the meaning of price

2.2.2 Describe the factors that influence price fixing
2.2.3 Explain the types of strategies in price fixing

2.3.1 Explain the meaning of place (distribution channels)

2.3.2 Explain the functions of place (distribution channels)
2.3.3 Identify appropriate place (distribution channels) for tourism and hospitality industry

2.4.1 Explain the meaning of promotion

2.4.2 Explain types of promotion

2.5.1 Explain the meaning of host and guest

2.5.2 Differentiate between host and guest
2.5.3 Explain the relationship between a host and a guest with an emphasis of quality service

2.6.1 Explain the meaning of packaging

2.6.2 Explain the role of packaging in marketing

2.8.1 Explain the meaning of partnership

2.8.2 Explain the role of partnership in marketing
2.1 Understanding on tourism and hospitality product
2.1.1 Definition of Product

• Product or services can be define as anything that can be offered

to a market for attention, use or consumption and that might
satisfy a want or need.

• Products include
physical objects,
services, persons,
places, organization,
ideas or mixes of
these entities.
2.1.2 Characteristics of Tourism or Hospitality Product

Intangibility

Lack of Inseparability
Ownership
Characteristics

Perishable Variability
1. Intangibility
• Cannot be seen, tasted, felt, heard or smelled
before they are bought.
• The service cannot be evaluated until a
person uses the service.

2. Inseparability
• Services cannot be separated from
the service provider.
• The customer and the employee
interact with the service delivery
system.
• Production and consumptions is
simultaneously.
3. Variability or inconsistently
• Services are highly variable because they depends on who
provides them and when and where they are provided.
• Hard to standardize.
• Ex: Services in a restaurant, McDonald’s serves delicious
instant food. But Mc Donald’s employees may not have
the skills to prepared the order immediately.
4. Perishable
• Services unused in one time period cannot be stored for
later sale or use.
• Ex: A 100-room hotel sells only 60 rooms on a particular
night cannot inventory the 40 unused rooms and the sell
140 rooms the next night.
5. Lack of Ownership
• Customer did not have ownership on the service.
• Although customer pay an amount of money for the services,
but it only for a certain period of time until the train reach
the destination.
• Ex: The train seat are rented for a trip but not for customer
to own it.
2.1.3 Definition and importance of branding
Meaning:
 “A name, term, symbol or design or combination of them, intend
ed to identify goods or services of one seller or group of sellers a
nd to differentiate them from those of their competitors”
 The objective that a good brand will achieve include:

Confirms your Connects your

Delivers the credibility target prospects
message Clearly
(kebolehpercayaan) emotionally

Motivates the Concretes User

buyer Loyalty
 2.1.4 Definition of Product Life Cycle:

• Describes the period of time over which an item is developed,

brought to market and eventually remove from the market.
• The cycle is broken into four stages: introduction, growth, maturity
and decline.
• The idea of the product life cycle is used in marketing to decide
when it is appropriate to advertise, reduce prices, explore new
markets or create new packaging.
Product Life Cycle
Product
Development
stage

Decline stage Introduction Stage

Maturity Stage Growth Stage

 What is Tourism Area Life Cycle?
The Tourism Area Life Cycle (TALC) is a theory of tourism region
evolution designed to assist destination managers and others in dealing
with and understanding problems that seem to almost inevitably arise
with concentrated tourism development (e.g. environmental
despoilment, low visitor yield and social issues).
Rantau Abang is a small village in Dungun District, Terengganu, Malaysia,
which used to be known for its leatherback sea turtle nesting.
It is located 22 km north of Kuala Dungun and 80 km south of Kuala
Terengganu, Terengganu, Malaysia.
At one time, every year during the months of May to August, the turtles
would come ashore and lay their eggs. However, the number of sea turtles
that lay their eggs has severely decreased in recent years.
It has been estimated that during
the 1950s over 10,000 of these
turtles called the beaches on
Rantau Abang their sanctuary.

Recently the local government

declared these turtles extinct as
no turtle landings have been
sighted for quite some time.

The biggest reasons for the

decline have been poachers who
take the turtle eggs and sell them
in local villages, as turtle eggs are
a local delicacy, and disturbance
from tourists.

The Turtle and Marine Ecosystem

Centre has been set up in Rantau
Abang to spearhead conservation
efforts.
 2.1.5 Tourism Area Life Cycle
Stage 1: The Exploration stage

• Small number of tourist.

• Based on primary tourist attractions. These maybe natural or
cultural.
• No secondary
tourism
attractions.
• Tourism has no
economic or
social
significance to
local residents.
 Stage 2 : The Involvement Stage
• Local residents become involved in tourism.
• Emergence (kemunculan) of secondary tourism facilities
such as guest house.
• A tourism season may develop.
• Pressure develops for governments to improve transport for
tourists
 Stage 3 : The
Development Stage

1. High number of tourist that may exceed the local population

during peek periods.
2. Heavy advertising will create a well-defined tourist market.
3. Local involvement and control of tourism declines rapidly.
4. External organizations will provide secondary tourism
attractions.
5. Natural and cultural attraction will be developed and
marketed.
6. Local people experience physical changes to the area that
may not approve of.
 Stage 4: The consolidation (gabungan) Stage
1. Tourist growth slows but the
numbers of tourist exceeds the
local population.
2. The area’s economy is tied to
tourism.
3. Marketing and advertising will
be wide-reaching.
4. Major franchises and tourism
chains will be represented.
5. Resort areas will have a well-
defined recreational business
district.
6. Tourism arouses opposition
and discontent from some local
people.
 Stage 5 : The Stagnation Stage
Keadaan tidak bergerak/berkembang)

1. Visitor numbers have reached

their peak.
2. Carrying capacity (jumlah max)
has been reached or exceed.
3. Tourism courses environmental,
social and economic problems.
4. The resort become divorced from
its geographical environment.
5. Artificial tourism attractions now
supersede (menggantikan) the
original primary attractions.
6. Area has well-established image
but will no longer be fashionable.
 Stage 6 : The Decline Scenario
1. Unable to compete with newer tourism attractions.
2. Holidaymakers replaced by weekend or day-trippers.
3. Tourism facilities replaced by non-tourism activities.
4. Hotels may become retirement homes or flats for local residents.
5. Ultimately, the area may become a tourism slum (sesak/kotor) or drop
out of the tourism market completely.

Stage 7 : The Rejuvenation Scenario

Memberi nafas baru

1. Requires a complete change in tourism attractions.

2. Previously untapped tourism resources maybe found.
2.2 Knowledge and Understand of Price
2.2.1 Definition of Price

Price is the amount of money paid by the

consumer in the exchange of products
2.2.2 Factors Influence Price Decision
Internal Factors External Factors

 Market Condition &

Marketing demand
Objectives  Competitor’s Price &
Marketing Mix Offer
Strategy Price  Other factory
Setting (Economy, sales,
Cost
personnel,
Organization government)
2.2.3 Pricing Strategy

New 1. Market skimming Price

Product
2. Market Penetration Price
1. Initiating Price Cuts
2. Initiating Price
Increase

Price Pricing Product

Change Strategy Mix

1. Discount and allowance pricing 1. Product-line Pricing

2. Segmented Price
3. Psychology Pricing
2. Optional-Feature Pricing
4. Promotional Pricing Price 3. Captive-Product Pricing
5. Value Pricing Regulation 4. By-Product Pricing
6. Geographical Pricing 5. Product-Bundling /pricing
7. International Pricing
A. Pricing for New Product

i. Market skimming Price

Setting a high price for a new product to skim maximum revenues layer by
layer from the segments willing to pay the high price; the company make fewer
but more profitable sales.
 Makes sense only under certain conditions:

a. The product quality’s and image must support its higher price and enough
buyers must want the product at that price.
b. The cost of producing a smaller volume cannot be so high.
c. Competitor should not be able to enter the market easily and undercut the
high price.
 ii. Market Penetration Price

 Setting a low price for a new product in order to attract a large

number of buyers and a large market share.
 Several conditions must take into consideration:
i. Market must be highly price sensitive so that a low price
produces
more market growth.
i. Production and distribution cost must falls as sales volumes
increases.
ii. The low price must help keep out the competition – otherwise
the
price advantage maybe only temporary.
B. Product Mix

I. Product-line Pricing

The firm has to look at the overall product line to

ensure the new model’s price is in the price range
of the current products.
ii. Optional-Feature Pricing

Many companies offer optional products,

features and services along with their main
products. Ex: A person who purchase a
computer may purchase additional
accessories like modem, speakers and so
on.
iii. Captive-Product Pricing

Used by firms that offers products that have services

along with their main products.

iv. By-Product Pricing

If the product have value to the customer, they should be

priced for their value.

v. Product-Bundling Pricing

Sellers often bundle products and

features.
C. Price Regulation

i. Discount
ii. Segmented iii. Psychology
and allowance
Price Pricing
pricing

iv. vi.
v. Value
Promotional Geographical
Pricing
Pricing Pricing

vii.
International
Pricing
1. Discount and allowance pricing
Discount is a straight reduction in price by company on
purchase while allowance is promotional money paid by
company to retailer in respect of an agreement to feature
the company’s product in some way.

2. Segmented pricing is a marketing strategy where

products or services are priced differently depending on the
customer's perceived needs. For example, you may charge
different prices for premium, luxury, and basic products or
services.
 Adjust price based on differences in:
 Customer group (locals, foreigners)
 Product form (bottle, soft-pack)
 Place (city, town, village)
 Time (evening, weekend, festive seasons)
 3. Psychological pricing is a pricing strategy that implies
using psychological tricks when setting the price of a
product. In other words, every tactic whit a purpose to “hit
the sweet spot in customers’ minds” or to make prices more
eye-appealing and customers ready to buy, can be
considered psychological pricing.
Strategy of Psychological
Pricing
1. 'Charm pricing': Reduce the left
digits by one, often called "charm
pricing," involves using pricing that
ends in "9" and "99."
The left digit is reduced from a
round number by one cent. For
example, brain processes $3.00 and
$2.99 as different values: To brain
$2.99 is $2.00, which is cheaper than
$3.00.
In an experiment conducted by the
University of Chicago and MIT,
women's clothing was used to test
the left-digit effect. First, prices were
set for $34, $39 and $44. To the
amazement of the researchers, the
items sold best at $39 even though
that price was more expensive than
other options.
Strategy of Psychological Pricing

2. 'Prestige' pricing strategy

Prestige pricing is the complete opposite of odd or charm pricing.
Prestige pricing involves making all numerical values into rounded
figures, i.e., $99.99 is converted to $100.

Zhang and Wadhwa realized that consumers were more inclined to

buy a bottle of champagne when it was priced at $40.00, rather than
$39.72 or $40.28.
Strategy of Psychological Pricing The psychological strategy at work
3. 'BOGOF': here is, simply, greed. Once a
customer comes across the offer, the
Buy one, get one free. main focus is making a purchase to
This is a pricing strategy in which get the free item.
customers pay the full price for one
product or service to get another for
free. Now, this technique has been widely
adopted and most people no longer
take the bait, business could stir
things up a bit by offering one of the
following:

• Buy one and get 25 percent off

your next purchase.
• Purchase one and get four
bonuses valued at $60, for free.
• Buy one, get three for free.
• To fully maximize this strategy, get
creative with your discount offers.
Strategy of Psychological Pricing

4: Comparative pricing
Placing expensive next to standard
Comparative pricing may be tagged as the most effective psychological
pricing strategy. This simply involves offering two similar products
simultaneously but making one product's price much more attractive than the
other.

This is a psychological game of choice for the customer, who has to choose
between two products that are similar but have different prices.

This strategy works well with fashion brands, which place side by side tuxedos
with similar quality but different prices, to make customers pick the more
expensive one, which is the desired purchase.

To the average human, if something is expensive, then it is "quality."

A perfect illustration of this strategy would be the case study on "The

Williams-Sonoma bread maker".
Strategy of Psychological Pricing

5: Price appearance
Humans are visual beings and this fact applies to prices. The same price for
the same product can bring different selling results – it all depends on how
people perceive that price. Here are a few points you can improve, to make
your prices better:

Remove $ sign from the price – this will make the price look shorter, and
people will think less about the money they are spending.

Remove additional digits and marks – when displaying a price, pay attention
to make it look lower, by making it shorter. Remove the “.00” from the end of
the price or if the price is 1,299 use just say 1299. Some fine dining
restaurants are using this tactic in the menu writing, showing only the simple
number, instead of all additional details.

Price design – make price stand out. For example, if offering a discount, put
the color of the old price in red and the new discounted one in green. Or if
the price is in an odd number, write the digits on the right smaller than those
on the left.
Strategy of Psychological Pricing

5: Creating an urgency
“Hurry up! 3 hours before this special offer expires! “

The idea is to offer a special price for a limited period of time.

The psychology behind this is that an urgent situation is created,
so the customer has to make a decision faster.
Value pricing
1. The practice of setting prices based on estimates of how valuable a good is
to the customer.
2. Ignores the prices of competitors and costs
3. Focuses on what the customer is willing to pay based on their needs,
preferences and perceptions.
Company Value
Existing Apple ecosystem that they've built up through purchases over the years
Familiarity with iOS and macOS
First to launch a bonafide smartphone system (which made them the default pioneers of
the technology)
The sleek design element that's different from other such products
Software and hardware integration that makes Apple products work very well within
that ecosystem
An almost default image of style and exclusivity
The social versatility of their accessories
A gender-neutral product design, despite a segregated catalog
A price that's somewhat more affordable than some other high-end brands, despite the
stylish image
The urban appeal of the product (a low price for a good social image)
The design of the logo and the warmth of their shop interiors
The ability to socialize within shop premises without restriction
Their premium outlook that the company projects
A geographical pricing strategy is a practice of adjusting the price
of a product or service depending on the geographical location of
the buyer. The adjusted price often reflects the costs of shipping,
local taxes, market competition, or willingness to pay.
International pricing is determined based on the customer's shipping
address and not the currency that the customer uses to pay for their
order. This means that if a customer chooses to ship to a country or
region that differs from the one selected on the storefront, then their
prices change to match their shipping destination at checkout.
D. Price Change
i) Initiating Price Cuts
 Firms need more business and cannot get it through
increased sales effort, product improvement or other
measures.
 Falling market share
 To dominate the market through lower costs.

ii) Initiating Price Increase

 Cost inflation.
 Over demand.
 To keep up with rising cost.
2.3.1 Definition of Place (Distribution channel)
Marketing channels or distribution 4 forms of marketing channel:
channels are sets of interdependent 1. One-level channel
organizations involved in the process
of making a products or services 2. Zero-Level channel
available for use or consumption by 3. Two-level channel
the consumer or business user.
4. Three-level channel
2.3.2 Functions of Place (Distribution channel)

1. Gather and spread the

2. Develop and spread
marketing information
persuasive communications
about potential and
regarding the offer designed
current customers,
to attract the consumer’s
competitors and other
interest.
actors

3. Reach agreements on
4. They acquire the funds to
price and other terms so
finance inventories at
that transfer of
different levels in the
ownership cannot be
marketing level.
effected.
2.3.3 Appropriate places (distribution channel) for Tourism
And Hospitality Industry.
An individual or company that sells tour
packages and tour product to travel agents.

Retail
Tour
Travel
Wholesalers
Agent

Charter Inbound
Tour Operator
Operator Operator

combines tour and travel components to create a package holiday.

2.3.4 Strategy in Selecting Distribution Place

Exclusive • Used when the seller wants to control over

the service level and product offered.
Distribution

• Company sells through as many outlets

as possible, so that the consumers
Intensive encounter the product almost
distribution everywhere they go : supermarkets, drug
stores, gas stations, and the like.

• Involves the use of more than a few but

Selective less all of the intermediaries who are
Distribution willing to carry a particular product. Ex:
Tv, furniture etc.
Exclusive Distribution Intensive Distribution

Selective Distribution
2.4 Understanding of Promotion
2.4.1 Definition of Promotion
Promotion is communicating with the public in an attempt
(usaha) to influence them towards buying your product or
services.
2.4.2 Types of promotion

• To create awareness of a newly introduced

service.
a. Advertising
• Ex: New airline route, cruise package,
hotel, menu item.

b. • Involves a company’s sales people

Personal meeting face to face with customers.
Sales • Eg: Cuckoo, Coway, insurance, Unify

• The intention is to generate quick sales of

c. Sales product.
Promotion • 3 types: Consumer promotion, trade
promotion and sales force promotion.
 d. • Is activity to promote a company or its
products by planting news about it in
Publicity medias not paid for by the sponsor.

• Involves direct conversation with

e. Direct targeted individuals to get quick
Marketing feedback.
• Use of mails, telephone, fax and e-mail.
2.5 Understanding of People
2.5.1 Definition of Host and Guest

Guest
• One who is a recipients
of hospitality at the
home or table of
another.

Host
• One who receives or
entertain guests in a
social or official
capacity.
 2.5.2 Differentiation between Host and Guest

Host Guest
Is the party Is the party who
who gives the receive the
service service.
Ways to make
guest satisfied?
Provide a good product in terms of holiday
package, tourist guide service, ticketing, food
and beverages, room, airplane seat, car rental
etc.

Provide a good service in term of human

relationship in serving a good product. Must
ensure that they can satisfied the customer so
that the customer will use their services again.
2.5.3 Relationship between a host and a guest with an emphasis of quality service

Relationship shown under the concept of Total Quality Management (TQM).

5 principles of TQM:
1. Quality Environment
Every organization that practice TQM must have a commitment to maintain the
quality as a first priority.
2. Concentrate on customer satisfaction
Identified the customer’s quality expectation and make sure to fulfill the expected
quality.
3. Evaluate on organization culture
Organization must look at the consistency of its culture with the TQM principles.
4. Workers and group effort
The success of one organization TQM programme is depend on the workers and
group effort in satisfying the customers.
5. Quality Effort Measurement
Measure customer satisfaction and reaction, worker performance, supplier
reaction etc.
2.6 Understanding of Packaging and Programme

2.6.1 Meaning of Packaging

Prearranged combination of elements such as airline, hotel,
sightseeing, and social events package together and sold
as a an all-inclusive package price, not sold by components parts.
2.6.2 Roles of packaging and programmes in marketing

Smoothing patterns of business

Improving profitability

Assisting is use of segmented marketing strategies

Completing other product/service-mix elements

Bringing together related hospitality and travel

organizations
 2.6 Organize Tourism And Hospitality Packaging
1. Packaging is the process of putting
together, or bundling, the core tourist
product with additional services desired
by tourists.
2. The package is then promoted to
tourists, who can then easily purchase
their desired travel experience.
3. Tourism packages may include a wide
variety of components, and will vary
according to a key element or theme.
4. Typical components of tourism
packages include:
 transportation to or within the
destination area (flights, vehicle or
bicycle rental; van, boat or bus
transport);
 accommodations en route or at
the destination (hotel, motel, bed
and breakfast, cottage,
campground);
 2.6 Organize Tourism And Hospitality Packaging

 meals at or en route to the

destination (bed and breakfast
plan, all meals included, meal
vouchers at a variety of
restaurants);
 activities or entertainment,
which may be the main reason
for the package or be
secondary to the tour
(adventure, recreational or
educational activities;
workshops or conventions; visits
to museums or galleries;
evening slide presentations;
sightseeing);
 mementoes or souvenirs (T-
shirts, photos of the client
participating in an activity, gifts
of local arts or crafts);
 2.6 Organize Tourism And Hospitality Packaging

 related services (interpreters, translators, guides, instructors,

equipment rental or sale, equipment service, welcome reception,
baggage handling); or
 Extra and/or creative elements (photo service and film delivery,
self-help coffee/drinks, discount coupons from local gift stores).
2.7.1 Definition of programme

Is a technique that have a relationship with package.

Include various activities, events or special event or programme
to increase the customer spending rate or as an additional event
in the package.
2.8 Understanding of Partnership
2.7.1 Definition of Partnership
The collaboration of marketing and hospitality organization with tourism
and its components such as accommodation, transportation, food and
beverages and tour organization.
2.8.2 Role of partnership in marketing

• If a company is looking to get its product

into a foreign market, it will look for a
Expansion partner in those markets to help make
expansion easier.

• Partners share resources to help each other

develop their employees to assist each
Resources other in developing an edge in the
marketplace.

• Two complementary industry that combine

Marketing forces can create a marketing effect that will
be felt throughout the industry.