RESEARCH

PROJECT REPORT

IMPACT OF
MARKETING IN
BOOSTING SALES IN
HOTEL INDUSTRY
SUBMITTED BY:
 ACKNOWLEDGEMENT

This Project Work titled IMPACT OF MARKETING IN BOOSTING SALES IN

HOTEL INDUSTRY is a successful out come of my hard work with the
help and guidance of my respectable Sir.

I sincerely acknowledge the contribution of the suggestions given by

MR. R. K. GUPTA without which his project could never became a ratify.
Last but not least I acknowledge all my friends who gave me suggestion
and full support by heart.
 TABLE OF CONTENTS
CHAPTER - 1
1.1 INTRODUCTION
1.2 OBJECTIVES
1.3 METHODOLOGY
CHAPTER – 2 IMPORTANT ASPECT OF HOSPITALITY
MARKETING
2.1 MARKETING MIX
2.2 VALUE AND WORTH
2.3 PROMOTION
2.4 PERSONAL SELLING
2.5 ADVERTISING
2.6 SALES PROMOTION
2.7 MERCHANDISING

CHAPTER –3 SERVICES MARKETING

3.1 INTRODUCTION
3.2 THE CONCEPT OF SERVICES
3.3 POSITIONING AND DIFFERENTIATION OF SERVICES
3.4 SUMMARY

CHAPTER – 4 BRANDING OF RESTAURANTS

4.1 INTRODUCTION
4.2WHAT IS BRAND?
4.3 ISSUES OF BRANDING SERVICES
4.4 UNDERSTANDING CUSTOMER NEEDS
4.5 A COMPREHENSIVE APPROACH
4.6 ISSUES & PROBLEMS
4.7 BRAND ADVERTISING
4.8 BRAND RESEARCH AND DEVELOPMENT
4.9 CORPORATE, INDUSTRIAL AND SERVICE BRANDING
4.10 BRAND EXTENSIONS AND INGREDIENT BRANDING
4.11 BRAND MANAGEMENT
4.12 BRAND AS ORGANIZATION
4.13 BRAND AS SYMBOL
4.14 ROLE EXPECTATION
4. 15 ADJECTIVES FOR THE BRAND
4.1 6 UNDERSTANDING THE VALUE OF RESTAURANT
BRANDING
4.17 SUMMARY

CAHPTER - 5
 5.1 INTRODUCTION
5.2 MARKETING FOR RESTAURANTS
5.3 CHARACTERISTICS OF AN EFFECTIVE MARKETING
STRATEGY OF A RESTAURANT INDUSTRY
5.4 STRATEGIC OPTIONS FOR RESTAURANT INDUSTRY
5.5 FRANCHISING FOR RESTAURANTS
5.6 SUMMARY

CHAPTER 6 - CUSTOMER SATISFACTION & RETENTION

6.1 INTRODUCTION
6.2 CUSTOMER SATISFACTION
6.3 RELATION BETWEEN EMPLOYEE AND GUEST
SATISFACTION
6.4 CUSTOMER RETENTION
6.5 SUMMARY

CHAPTER 7 MARKETING MANAGEMENT

CHAPTER : 8

8.1 CONCLUSIONS
8.2 RECOMMENDATIONS
8.3 LIMITATIONS

BIBLIOGRPHY
 CHAPTER - 1
INTRODUCTION
OBJECTIVES
METHODOLOGY
 CHAPTER - 1

INTRODUCTION

Advertising, promoting and merchandising are essentially a process and

consequence of an established objective-seeking and satisfying device
known as „Marketing‟. Marketing is variously defined. However, the
essence is “Sensitively serving and satisfying human needs” (Philip Kotler)
and “Focussing on the needs of the buyer” (Peter Drucker).
Obviously being a symbiotic relationship, a reverse process necessarily
takes place by the focusses on the needs of the seller. The activity termed as
selling targets to satisfy the needs of the seller. Advertising, promoting and
merchandising are geared to enhance sales once the marketing plan has
defined a path for effective selling.
In the world of hotels, some of the peculiarities that differentiate the
services from the others are:
1. Intangible nature of service
 Customer satisfaction almost impossible to quantify
2. Simultaneity of product and consumption
 Reaction upon service of product almost instantaneous
 Feedback is immediate
 Time gap for consumption and guest giving feedback is very small

3. Perishability of service
 Lost opportunity for sale cannot come back as for as one customer is
concerned

4. Variability of output
 Service output quality could be affected by occupancy
 Number of covers serviced could affect the quality of service output
5. Case of duplicating service
 Standardized product in all hotels
 Most hotels clones of each other
 Only service has to make up in the form of the human factor
6. Customer‟s perceived risk
 Customer minds easily influenced
 Service considered a buying risk, and value for money in terms of service demanded

OBJECTIVES

To study Important Aspect of Hospitality Marketing. The main purpose of the

project is to analyze the importance of Marketing in today’s world especially in
the restaurants. Customer satisfaction and retention have constantly played an
important role for shaping the image of hotel t industry in order to provide the
sector popularity through various aspects, one of them being branding.

METHOLOGY

In order to accomplish the objectives of the study, it is essential to articulate

the manner in which it is to be conducted, i.e., the research process is to be
carried-out in a certain frame work. The Research Methodology, which
follows, is the backbone of the study.

Type of Research: The project used the secondary data to study the brand-
related issues in restaurant industry.

Data Collection Approach: The plank on which the edifice of a study rests
is information. The data contained here in has been obtained from
secondary sources of data. The views of various experts in the industry have
been referred to for the purpose of dissertation.
Secondary Data: Already published data formed the starting point of the
study.

This includes: -

 Books of branding and marketing.

 Various news papers, articles and Magazines on Restaurants.

 The Internet web sites.

 Journals.

 Articles from Ebsco database.

 CHAPTER –2

IMPORTANT ASPECT OF
HOSPITALITY MARKETING

 COMPONENTS OF MARKETING SYSTEM

 MARKETING MIX
 VALUE AND WORTH
 PROMOTION
 PERSONAL SELLING
 ADVERTISING
 SALES PROMOTION
 MERCHANDISING
 COMPONENTS OF MARKETING SYSTEM
In developing a marketing plan for a hotel, each of the following
components, known as the 6 P‟s of marketing system, are to be considered.

1. People
2. Product
3. Price
4. Promotion
5. Package
6. Performance

1. People
 Who are the present and potential customers?
 Where are they?
 What are their needs, desires and constraints?

2. Product
 What are the existing or planned facilities and services?
 How closely do they match?
 Do they address correctly what the guests want and desire?
3. Price
Consider the hotels‟ need to operate at a profit while offering products and
services which are competitive not only with other comparable hotel
facilities, but with other products such as vacations abroad, second homes,
camping and the suchlike.

4. Promotion
 Utilize all appropriate communication media and merchandising tools
 Attract the attention of prospects
 See that the product and price are right

5. Performance
Living up to what has been promised in every respect in order to maximize
the guests‟ length of stay, amount of spending, and loyalty, so that the guest
becomes a repeat customer and the hotel‟s ambassador of goodwill.

6. Package
 Comprises of incentives, including discounts and loyalty programs
 Attractive set of offers put together at what the customer perceives as a
reasonable price
 Offers a good experience and value for money

MARKETING MIX

The three elements of marketing plans are as under.

1. Customer or Prospect Mix
 Who are the present customers?
 Who are the desired customers?

. Service Mix
 What needs and wants of each group are now being met?
 What needs and wants of each group should be met in the future?

3. Promotion Mix
 How is the demand being activated and sustained?
 How should it be?
 Promotion mix includes Advertising, Promoting, Merchandising and
Personal Selling
 VALUE AND WORTH

Value is the customer‟s estimate of the product‟s capacity to his set of goals.
Worth is the perception of the balance between satisfied goals and the costs
involved in satisfying these goals. Good value is where worth is perceived
as greater than the costs, and poor value where the costs are perceived
greater than the worth.

As consumer needs, wants and demands change, as competition increases,

and as technology offers new opportunities, the process of creating a
consumer-product relationship is also the process of managing change.

Broadly, advertising, promoting and merchandising may be described as the

process of bringing the buyer and seller together once the needs of both
these parties have been understood.

PROMOTION
The product in a hotel context constitutes a wholesome package on the
offer, and attempts to satisfy and convey:
 The image of the establishment
 Quality of the product and service
 Style of management

Prices
 Environment, facilities and services
Promotion is an activity directly concerned with the product. Promotion
should inform the customers of the establishment, make them aware of its
existence, persuade them to buy and convince them of the image and quality
of the product. This is done by way of:
Personal selling
Advertising
Sales promotions
Merchandising
Public relations
Agents

Promotion is an activity which must be carefully planned and controlled.

Usually the main objective of the promotional campaign is to stimulate
demand by using persuasive messages to attract past users and new
customers to the establishment. Such messages should convince prospective
customers that the product on offer is good value for money.

PERSONAL SELLING

Personal selling is doe through contacts with local organizations and

committees, or more directly through the restaurant staff talking to guests.
All employees who are in contact with the customer must be made aware of
the importance of selling the products to increase profits and provide a
satisfactory experience for the customers.

Personal selling is the most potent method of promoting sales where the
seller has an opportunity to make a complete presentation of his sales story,
answer all objectives, and follow through the computation of a sale with a
signed order. All staff must therefore gain a good knowledge of the
company‟s products and services, and develop good social skills with an
ability to promote and sell. Showing concern for the customers not only
makes them feel comfortable, but also promotes sales and increases the
effectiveness of the establishment.

ADVERTISING

Advertising should convey messages which influence customer behavior.

Advertisements should convey and result in:
 An immediate increase in sales
 Awareness of the existence of the establishment
 Informing the public of the name and location of the establishment
 Telephones and faxes of the establishment
 Timings and dates of operation
 The type of offer - room, restaurant, catering, leisure activities
 Style of food and drink offered
 Unique selling propositions and special features
 Whom to contact for what

Advertising messages should define and clarify:

 Objectives of the advertisement
 Menu offering
 Target customers
 Media type to reach target
 Timing of the advertisement
 Budget
 Product differentiators
The medium used for the advertisement may be television, radio,
newspapers, magazines and journals, Internet, pamphlets, brochures,
posters, static poster sites, sponsorships, cinema and direct mailers. The
selection of the medium depends on the budget and the target audience.
Large hotel companies organize their own local campaigns. This requires
that the hotel progresses and reviews the various stages in the preparation of
various ads and be aware of the advertising production cycle.

SALES PROMOTION

Sales promotion is a day to day operation relating to discount offers, price

reduction and special offers. They are designed to appeal to a certain section
of the market or the target audience. Food festivals, for example, are held to
promote cuisine and beverages of a particular region or country. A theme
promotion may help the business and promote sales by way of volume of
sales increased during off-peak periods by attracting new customers, gain
publicity in the local media circle, and stimulate and interest regular groups.
Follow up after sales is a very vital component of any promotional activity.

MERCHANDISING
The objective of merchandising in F&B is not so much to create new
techniques, but to implement existing merchandising techniques to their
utmost potential. A customer can hardly buy what he doesn‟t know, and so
all merchandising and salesmanship should be directed to the five senses of
sight, smell, taste, touch and hearing. Based on these factors, we should
analyze our restaurants in detail in order to establish adequate programs for
improvement.
Sight - The most common technique in this category is the use of visual
displays. These not only include static displays of fruit or ice, but also
menus, tabletops, trolleys and carts, and the suchlike.
Smell - Aroma stimulates taste-buds, and the use of smell to sell is a very
effective tool. Aromas used effectively in restaurants include freshly brewed
coffee, exotic herbs and spices, and the like.
Taste - Whereas the success of a restaurant depends on the taste of the food,
successful merchandising may include pre-order tasting and niblets.
Touch - Merchandising to the touch not only include various textures on the
food but also such things as crisp napkins and beautiful crystal ware.
 SERVICES
MARKETING
INTRODUCTION
THE CONCEPT OF SERVICES
POSITIONING AND
DIFFERENTIATION OF SERVICES
SUMMARY

CHAPTER 3
 SERVICES MARKETING

INTRODUCTION

This chapter explains the concept of services. It deals with

positioning and differentiation of services. The purpose of this
chapter is to is to identify the need for positioning and
differentiation of Restaurants. This will provide a basic
information on why this is important for restaurants.

THE CONCEPT OF SERVICES

To define service narrowly as only relating to service industries is

clearly incorrect. Today there is an increasing trend to attempt to
differentiate product by service elements. (See figure 1 in
Appendices)

Understanding the position of a particular service on each

continuum, and the position of competitors, is an important step
towards finding possible sources of competitive advantage. (See
figure 2 in Appendices)

POSITIONING AND DIFFERENTIATION OF SERVICES

The positioning of a restaurant is a very important aspect for the

marketers since it helps them to recognize the component
characteristic of the services the customers need. Combining an
analysis of customer needs on a segment-by-segment basis with an
understanding of competitive offerings enables the marketer to
identify opportunities for serving a particular segment‟s needs
better than anyone else. If offering such a service is seen as
compatible with the organization‟s resources and value, then the
firm should be able to develop a profitable niche for itself in the
market.

Here we have to understand that the buyers have different needs

and hence they are attracted to different offers. It is therefore,
important to select distinguishing characteristics, which satisfy the
following criteria.

 Importance – the difference is highly valued to a sufficiently

large market.

 Distinctiveness- the difference is distinctly superior to other

offerings, which are available.

 Communicability – it is possible to communicate the difference

in a simple and strong way.

 Superiority – the difference is not easily copied by competitors.

 Affordability – the target customer will be and is willing to pay

for the difference. Any additional cost of the distinguishing
characteristic(s) will be perceived as sufficiently valuable to
compensate for any additional cost.

 Profitability – the company will achieved additional profits as a

result of introducing the difference
SUMMARY

It is very important for the restaurants to position their services

and products to recognize the component characteristic of the
services the customers need. It helps the restaurant managers to
identify opportunities for serving a particular segment‟s needs
better than anyone else.
CHAPTER – 4 BRANDING OF
RESTAURANTS
INTRODUCTION

WHAT IS BRAND?

ISSUES OF BRANDING SERVICES

UNDERSTANDING CUSTOMER NEEDS

A COMPREHENSIVE APPROACH

ISSUES & PROBLEMS

BRAND ADVERTISING

BRAND RESEARCH AND DEVELOPMENT

 CHAPTER THREE

BRANDING OF RESTAURANTS

INTRODUCTION

The chapter entails the need for Branding of restaurants. It covers

in detail all the aspects concerning brand and the impact that a
brand has on consumer‟s mind.

WHAT IS BRAND?

“A successful brand is an identifiable product, service, person or

place, augmented in such a way that the buyer or user perceives
relevant unique added values, which match their needs most
closely”. Furthermore its success results from being able to
sustain these added values in the face of competition.

(De Chernatony and McDonald)

Brand! What is it?

Brand is the identity of a product given to it by the manufacturer

in the form of a name. (Aaker D., 1996) But, branding means
much more than mere naming the product or service, it involves
giving a distinguished as well as identifiable personality
attributes, which can be understood by the target consumers as
well as others. These attributes must mean something to the target
consumers. These personality attributes builds auras around the
brand‟s name giving it shape of a being in flesh and blood.
“Brands are a part of the fabric of life” said David Ogilvy. A
brand must be something different from a product. Arguably all
brands start as undifferentiated products; their success or failure
in the marketplace depends on their functional quality. A brand,
then, has an existence separate from an actual product or service:
it has a life of its own. Thomas Cook means something to us; it
carries with it associations and memories that are generally to do
with travel (and with tradition and reliability perhaps), but which
are not necessarily tied exclusively to shops or traveler's cheques.
(Kotler, 2003)

Brands can exist in any field. Most of the well- known brands, are
from the fast- moving consumer goods (FMCG) area, but we can
also think of Coca Cola, Singapore Airlines, Club Med, Disney,
Caterpillar, and many more.

Branding is a fundamental strategic process that involves all parts

of the firm in its delivery. It is about marketing, but is not confined
to the marketing department. The brand must always deliver value,
and the value must be defined in the customer‟s terms. (Reich A Z,
1997) It has a continuing relationship with its buyers and users;
this may change over time, but the firm must always work to
maintain it. Since competition is getting fiercer all the time, and
because structural changes undermine the status quo, branding
must be continuously adapted so that it is both efficient and
effective.
ISSUES OF BRANDING SERVICES

Extant literature that deals with branding of services, directly or

indirectly is presented here. Dobree and Page (1990) list five steps
for effectively branding services. These are:

(1) building a brand proposition;

(2) overcoming internal barriers;

(3) measuring delivery against the proposition;

(4) continual improvement; and

(5) expansion.

They also recommend developing a "service contract" internally to

create ownership for the service brand across all levels of the
organization.

Onkvisit and Shaw (1989) differentiate between the two levels of

service offerings: the form and the brand. Credit cards have
several forms namely bank cards, airlines cards, car rental
companies' cards, oil companies' cards, store cards and travel and
entertainment cards. Each of these forms requires a different type
of branding effort. In fact they suggest launching different brands
for different service forms.

There are several ways to 'brand' product for sale to the trade and
to consumers.
  Your Own Brand: Use your own company name and / or
create separate brand names for your product line(s) or
specific product.

 Private Label: You package your product as a 'store brand'

or even for another product company who can market your
product as their own. Many food service products are private
(or control) labeled, as well.

 Control Brand: Packaging your product for exclusive

distribution in a given geographical area or specific
markets. Typically, arrangements are made with one
distributor for a given 'control brand'. This could mean
multiple 'control brands' to cover various areas.

 Co-Branding: This can be various combinations of the above

options.

It is not unheard of to do more than one, or all, of the branding

strategies listed here.

UNDERSTANDING CUSTOMER NEEDS

Gale (1994) defines a power brand as a "name that means

satisfaction, quality and value to the customer". He recommends
understanding customer needs, delivering superior quality on
attributes that matter to customers, low "cost of quality", overall
cost leadership and effective positioning as some of the steps that
lead to building a powerful service brand.

Kapferer (1992) opines that branding culture is not strongly

embedded in service firms. He specifically notes branding in
banking services. He touches on the issues of intangibility and
invisibility of services. He also gives suggestions on how to name
brands. Berry and Parasuraman (1991) give a more
comprehensive checklist for naming brands.

Levy (1996) contends that successful service brands can be

developed based on the principles of fast moving consumer goods
(FMCG) branding. These principles are product definition, clear
product benefit identification, brand differentiation, consumer
motivation and measurement of product strength.

De Charnatony and McDonald (1998), like Levy, feel that the

FMCG model of branding can be used, with modifications, to
build service brands. Like other authors, they too think that
branding efforts in the services industry do not match the rapid
growth of the industry itself. They sum up some of the important
issues that affect branding (e.g. characteristics of services,
importance of symbols in brand building, empowerment of staff,
consumer participation in developing the brand).
A COMPREHENSIVE APPROACH

As explained above, does throw light on how to build a service

brand. But it does not suggest a comprehensive approach for
branding services. This paper proposes to present such an
approach by applying Aaker's brand identity framework to the
economic classification of three types of goods and the 7Ps of
services.

Aaker's (1996) brand identity framework proposes four elements

under which an identity is XCtypically developed for a brand.
These are:

(1) brand as product;

(2) brand as organization;

(3) brand as person; and

(4) brand as symbol.

Brand as product is about the product related attributes of the

brand. This dimension deals with the tangible and the intangible
aspects of the product and the manner in which the customer
relates to it. Brand as organization deals with the organization's
innovation, consumer concern etc., which are important for
building strong brands. Brand as person deals with the personality
aspects of the brand. This tells us what happens to the brand when
it is converted to a person by endowing it with social,
demographic and psychographic values. Finally brand as symbol
deals with the symbolic aspects of the brand like visual imagery,
logo, brand heritage etc. Any given brand can be described in
terms of these four elements. This basic framework has been
extended in this paper to brand a service. (Aaker D., 1996)

Branding is an effective marketing strategy tool that has been used

with frequent success in the past. Today, branding is experiencing
a new popularity resulting from new, innovative applications.
Although there have been instances where branding has been less
than successful, marketers are beginning to find the appropriate
applications in a given setting. Issues and problems concerning
branding strategy today include the selection of a brand name.
This fundamental issue will impact on the success of a branding
strategy. Once a name is selected, marketers have to choose the
advertising strategy to support and communicate the name.
Finally, keeping the brand in a strong position is a critical
concern. New areas of branding include corporate, industrial, and
service branding. These nontraditional branding environments are
becoming the future for marketers using branding strategy. To add
to the new branding areas, there are new branding techniques.
These techniques include brand extensions and ingredient
branding. New strategies, techniques, and arenas for branding
have to be managed. The organization must support and identify
with the strategy. The goals, objectives, and mission of any
organization should be in line with the branding strategy
employed.

ISSUES & PROBLEMS

Brand naming

Perhaps the most fundamental problem regarding the issue of

branding is what name to use. Berry et al. (1988) go as far as to
say that a well-chosen name can give a company a marketing edge
over comparable competitors. They concede that a name may not
make or break a company but it may be a key factor in its success
or failure. Ginden (1993) points out that the point of a name is to
have consumers link it to quality.

Early in the period of branding, products were given distinctive

names to differentiate them (The Economist, 1988). These were
usually the last names of the inventor, founder or investor.
However, today the trend is toward more descriptive titles
(Hambleton, 1987).

Six-step method

Shipley and Howard (1993) suggest a six-step method for naming

industrial products that branders can use for other products as
well. It starts with setting the brand objective followed by
specifying branding criteria, generating name ideas, selecting
name ideas, and finally, selecting a name.
Berry et al. (1988) have set criteria for formulating service brand
names that can also be adopted for naming other types of
products. They suggest a name should have four characteristics,
including distinctiveness, relevance, memorability, and flexibility.
All products should avoid generic sounding names and should
convey the essence of the product through indirect connotations.
Names should be simple, brief, and easy to pronounce and read.
They should not rely on cuteness or gimmicks and should be broad
enough to change over time. The use of geographic references and
purely descriptive terms are not recommended. Effective graphics
and logos are recommended, however, to support the name.

Naming guidelines are helpful and effective

These naming guidelines are helpful and effective. However, there

are exceptions to these rules that have been successful. The point
is, it is easier to be successful in branding if the product does not
have to overcome the disadvantage of a bad name.

BRAND ADVERTISING

After spending resources on naming a product, it is imperative to

support it through advertising and communication (Berry et al.,
1988). For a product to succeed, the brand owner must dedicate
more resources to promoting it through advertising. O'Malley
(1991) writes that advertising is a key to sustaining appeal of
brands. It is also a key to developing that appeal in the first place.
Gregory (1993) says that the first job of advertising is to build
brand awareness and corporate brand approval. Through
advertising, marketers expose the potential consumer to the brand
and give them the opportunity to accept it.

A definition from the Institute of Practitioners in Advertising is:

“Advertising presents the most persuasive possible selling
message to the right prospects for the product or service at the
lowest possible cost. Advertising works because the message that
is created is transferred to the receiver in a format that has shared
meaning.” (Ellwood I, 2002)

Advertising should be thought of as an investment in the brand it is

promoting. Just as a company would invest in technology and
innovation, it must also invest in advertising and promotion if it is
to succeed (Wentz, 1993). Gregory (1993) suggests there is a
correlation between the level of advertising investment and the
level of brand awareness achieved.

Advertising, marketing and promotion

In Liesse's (1990) article, John S. Bowen, chairman emeritus of

D'Arcy Mesius Benton & Bowles says, "Brands that offer
consumers a consistent ad message and regularly updated product
will lead their industries" (p. 52). He goes on to say that
companies, which believe in outstanding advertising, are those
which will build leadership brands. The commitment to the brand's
success is encompassed in its advertising. In the increasingly
competitive marketplace, advertising, marketing, and promotion
may be the only things that differentiate extremely similar
products (Coonan, 1993).

The added value of advertising

Advertising helps generate awareness of the brand proposition

and expresses the brand personality to a target audience for
minimum cost. This awareness may be needed to:

 Launch a new brand on the market. This will express the brand
personality to the targeted audience.

 Revitalize a brand that is losing market share.

 Protect a brand against a competitor‟s brand advertising

efforts.

 Suggest new ways a brand might fit with a new target

customer‟s needs and desires.

 Reinforce a brand‟s appeal in the market.

 To arise awareness of a brand for trade communication,

stockholder information and investor relations.

 Remind current customers of aura – the brand personality they

have purchased.
The golden rule in advertising is to make the message both simple
and short; anything else will not be well received or may not even
be understood by the customer. Hence it is imperative that the
message should be able to create a brand personality in the mind
of the consumers. (Ellwood I, 2002)

BRAND RESEARCH AND DEVELOPMENT

Once a brand has successfully entered the marketplace and has

achieved status as a leading brand, marketers must be concerned
with keeping it there. O' Malley (1991) points out that strong
brands cannot rest on their laurels and brand owners must
constantly review the appeal of their brands to ensure that they
remain contemporary and relevant. Although it has been
suggested that killing a brand leader is difficult (O' Malley, 1991;
The Economist, 1988), companies, which neglect their brands,
increase the risk.

Market research should be used to monitor consumers,

competition, and changes in the environment that may affect a
company's brand (O' Malley, 1991). This gives the company the
advantage of knowing how its brand compares with the
competitions and how it fits into the big picture. Berry (1993) also
recommends a formal tracking method be in place to monitor the
value of a company's brands. It is important for a company to
know if consumers have the same perception of its product as
itself.
 CAHPTER – 5
MARKETING FOR RESTAURANTS

INTRODUCTION

MARKETING FOR RESTAURANTS

CHARACTERISTICS OF AN EFFECTIVE
MARKETING STRATEGY OF A
RESTAURANT INDUSTRY

STRATEGIC OPTIONS FOR RESTAURANT

INDUSTRY

FRANCHISING FOR RESTAURANTS

SUMMARY
 CHAPTER: 5

INTRODUCTION

This chapter encompasses various aspects of marketing a

restaurant, it highlights the significant role of innovation in the
restaurant sector. Moreover the strategic options which comprise
of various parts one of them being franchising has been explained
in detail. Furthermore it explains the importance of franchising
as it is a cost-effective measure for the restaurant chains.

MARKETING FOR RESTAURANTS

To be successful in the modern hospitality business, a market-

oriented business philosophy is required. It is considered essential
for hospitality companies to co-ordinate their marketing process.

For the restaurants it's usually the same line of thinking. "My food
is one-hundred percent better, my service is better, and you can
eat here for pretty much the same cost. It's a shame - people just
don't appreciate fresh food, and simply don't know any better."
(http://www.hotels-online.com)

But guess what – customers aren‟t going for the food, and they
don't believe for a second that your prices are competitive with
those of their favorite chain. The war isn't being fought in the
kitchen, it's being won in an office several doors away from the
President. They call that person the Director of Marketing, and he
or she is responsible for spending the big bucks in radio and
television, and those beautiful four-color print ads that can make a
hamburger place look like a DiRoNa Award winner. (The Chains
are winning, and it's all in the Marketing by Bob Bradley,
(http://www.hotels-online.com)

Thus a good Restaurant manager in a hospitality business must

understood the other important aspects of the company in order to
achieve the desired long-term profits. (see figure 3 in Appendices).

In many ways, marketing for restaurants seems different from the

marketing of products owing to the following unique
characteristics of the restaurants industry.

1. Customers‟ presence during production and service. A

restaurant can be compared to a factory (for example the
kitchen is similar to a production line) with show rooms (e.g.
public lounges), sales outlets (e.g. Restaurants), an after-sales
service unit (e.g. maintenance services) and a customer
complaint counter (e.g. guest relations desk) all rolled into one!

2. More personal contact between the service providers and

customers.

3. Many hotel guests stay longer than just a day or two. Where a
guest‟s meal experience is for some reason unsatisfactory, there
is normally plenty of opportunity to demonstrate high food and
beverage standards and extra attention to ensure guest
 satisfaction on subsequent occasions before the guest‟s
departure. Such opportunities do not exist where
physical/tangible products are sold.

4. A variety of products and services are combined and offered to

the customers as a total and complex package. For example, a
hotel customer who enjoys his/her meals, drinks, music, room
service, restaurant service and mini-bar facilities may still be
unhappy because of noise in his/her room. All elements of the
total package have to be satisfactory. Another example could be
of a highly priced fine dinning restaurant, where the guest has
had a very pleasant experience while booking a table over the
phone and so on. Moreover, the ambience is also being
appreciated at the time of the arrival however, if the restaurant
attendant is slack than it can provoke commotion in the mind of
the consumer.

5. Many elements of the total package are both intangible and

unquantifiable. As an example, the smile of a waiter the
politeness of a restaurant hostess, the showmanship of a
cocktail barman and they are important but intangible and
unquantifiable elements of a restaurants product.

6. Most hospitality products cannot be examined in advance of

consumption. The equivalent of a fit-on a dress or a test-drive
of a car prior to purchase is not possible.
7. In the restaurant industry, payment for products and services
will generally be made after consumption.

8. As explained earlier, there is no actual distribution of products,

although channels are used to attract customers.

9. Sales can be optimized through planned „in-house‟ (internal)

promotions and merchandising, as customers is to some extent
a captive audience.

10. Heterogeneous services make quality control and

standardization difficult. As an example the smile of a waitress
cannot be identical every day. Her personal life will have an
impact on her smile, irrespective of the training and directions
that she has received. Similarly a potage of the week served
from the same kitchen may taste different from one day to
another depending on the chef on duty or the mood of the same
cook. With the use of standard recipes, communication and
training one may achieve near perfection, but assuring the
same standard day after day can be difficult. Moreover,
pleasing every guest‟s pallet is a difficult task to accomplish.

11. High fixed costs coupled with low variable costs, means
generally high profit margins and lot of scope for flexible
pricing.

12. High degree of perishability. For example if a restaurant is

ready to serve 100 customers for dinner and only 40 arrive, the
 restaurant will lose the man-hours, heating, flowers, lighting,
etc., adequate to serve 60 customers. This obviously cannot be
stored and reused and will affect profitability.

CHARACTERISTICS OF AN EFFECTIVE MARKETING

STRATEGY OF A RESTAURANT INDUSTRY

Following are the features of an effective marketing strategy:

1. It should be customer as well as profit oriented. It should have

as its principal focus meeting the needs and wants of its target
customers and should have ways to satisfy their needs to
achieve 100% customer satisfaction along with the overall
profitability. (Kotler, 2003) If customers are happy, they will
come back to the property again and again and thus, it leads to
the maximization of revenue of the concern.

2. It should be visionary. It should articulate a future for the

restaurant or concern that offers a clear sense of where the
organization is going, what the „new‟ enterprise would look
like, and what it will achieve when it meets with its expected
success.

3. It should differentiate its organization from its key rivals. The

marketer should stand out; it would offer target markets unique
reasons to prefer its goods & services. The most suitable
channel to impact the consumer‟s mind is through innovation
 and the best example is of a restaurant called „Punjabi by
Nature‟. (serves chilled Vodka in Golguppas-semolina balls)

4. It should be sustainable for the long run and in the face of likely
competitor‟s reactions.

5. It should be easily communicated and simple in understanding

so as make its targeted customers and own staff clears about
what the strategy is and why it should be supported. A good
example of an organization that lays emphasis on the
transparency of its strategy is McDonald‟s.

6. It should be motivating and flexible.

STRATEGIC OPTIONS FOR RESTAURANT INDUSTRY

The restaurant industry has traditionally adhered to the true

entrepreneurial spirit of profit making in a flexible, unrestricted
business environment industry and declining growth rate, has
shifted competition towards a battle for market share.
(http://www.restaurant.org).

The large number of competitors, difficulty in establishing

differentiation, cost in new build, renovation of physical
structures, plus high fixed costs, will continue to intensify
competition within the industry. Adapting to the new rules of the
global marketplace, restaurant operators are developing new
strategies for success. Some of these strategies include the
following:
Growth Strategies

Many restaurants firms‟ primary growth strategies are very

similar: growth and quality of products and services supported by
technology appear to be the most favoured approaches. Growth
appears to be mainly based around franchising and management
service contracts, with some asset acquiring activity by a number
of firms. Conversions accomplished through the acquisition and
“cherrypicking” of small chains is also an increasingly popular
growth strategy. (Knowles Tim; 1996)

Strategic Alliances (Khurana R. & Ravichandran A.N, 1995)

Strategic alliances give restaurant chains the chance to expand

rapidly by joining forces with another restaurant chain/other
products. This particular strategy takes many forms, from joint
marketing to common reservations system. By using a common
name, or one of the partner‟s names, it is possible to double a
restaurants company‟s portfolio overnight.

Example of Strategic Alliance:

“Marco Pierre White formed a joint venture with Granada hotels

valued at £2 million to provide F&B services at seven select Forte
hotels in the UK. The new organisation, MPW Criterion,
reengineered the way select Granada hotel F&B outlets do
business”.
(Source: UK: Finance News- Restaurant Deal, The Times, June
17, 1998 http://www.fooddude.com/branding.html)

Thorough carefully selecting a partner with similar properties,

standards and expectations, the use of strategic alliances is an
effective means of global expansion.

Although direct revenue does not increase, because the restaurant

chain still owns the original number of restaurants that existed
before the partnership, there are advantages that make strategic
alliances a real alternative to franchising and management
contracts. It also results in reduction of cost because marketing is
done for both the products at single cost and thus it leads to
overall profitability at the end of the day.

Example of Strategic Alliance:

When Regal Hotel Group struck an alliance with a major

restaurant company it cast light on new ways hotels compete for
food and beverage (F &B) revenues. With more than half of the
revenues in Regal's 102 hotels coining from restaurants and bars,
the F&B function has played a significant role in the chain's
profitability. U.K.- based Regal moved to bolster this business by
taking a £1 million equity position in The Restaurant Partnership,
an organization that devises F&B solutions and outsourcing to the
hospitality and leisure industry. Even more than opportunities for
adding branded outlets, management cited the expertise brought to
Regal's F&B operations as the ventures most important benefit.
(www.hotel-online.com).

Hotel guests generally enjoy the convenience of F&B outlets, but

when given the chance, they frequently choose a known brand off
the premises, leaving a hotel for nearby restaurant chains. In the
process, they take much desired dining dollars with them. As
customers become more brand - aware, competition for F&B
business continues to grow in importance for many hotels. From
the hotel's perspective, a joint venture or outsourcing arrangement
can provide a combination of restaurant skills and brand strength,
often supported by national advertising. Hotels adding branded
restaurants have reported improved F&B volume, including room
service sales, as well as an attendant increase in occupancy and
average rate. In a period of hospitality industry consolidation,
branded restaurants may become a point of differentiation among
hotel properties.

(Source: UK: Finance News- Regal Restaurant Deal, The Times,

June 17, 1998 By Sally Robinson and Stacy Saef, London and
Lawrence Kantor, Los Angeles - Summer 1998)

Joint Ventures (Knowles Tim; 1996)

Another approach to growth is the joint venture strategy. This is

usually adopted by a large real estate developer or holder and a
hospitality firm. The institutional investor in this equation is
principally interested in longer-term capital appreciation, which
entails a high level of risk.

Franchising: a corporate growth strategy (Kotler, 2003)

Franchising can be considered within the wider context of a

corporate growth strategy; specifically as a way to expand the
market easily, and as a way to reach the market quickly. This
approach reduces risks and as a consequence strengthens the
products positioning as well as the brand name: both so important
to increased sales. So, it also leads to maximizing property‟s
strength in the market in terms of product quality and overall
profitability of the concern.

Franchising in the international restaurant market is becoming

more significant as large corporations move towards offering less
capital-intensive, economy properties, which become fundable by
proprietor operators.

Generic Strategies (Wheelen L, T & Hunger D J., 2003)

In order to gain sustainable competitive advantage, Porter

suggests that there are three ways in which a firm can achieve that
objective:

 Lower Cost Strategy: A cost leadership strategy is one in which

a firm sets out to become the lowest-cost producer in the
industry.
 Differentiation Strategy: A differentiation strategy is one in
which a firm seeks to be unique within the industry; with this
uniqueness it is able to charge a higher than average price. In
this sense it is seeking to differentiate itself from the
competition.

Long term profitability requires the choice of one of these

fundamental generic strategies.

Market-based generic strategies (Khurana R. & Ravichandran

A.N, 1995)

Porter‟s approach states that it is important to relate an internal

strategy to the market or client base. It is this market-based view
that needs to be added as a new dimension to the hotels generic
strategies. Refer to appendix Porters Model

Price (Knowles Tim; 1996)

There is a market segment in many industries that‟s willing to

accept substantially lower quality goods at significantly lower
prices and such a segment can be regarded as price sensitive.
Companies could be competing in the same industry but be
attempting to appeal to specific market segment with a low
income, or to budget-conscious clients. Another approach could
be to reduce price while still maintaining quality of the product or
service, but this approach can lead to a price-based battle with the
competition.
Differentiation Strategies

In essence, a differentiation strategy is one in which the firm:

 Offers perceived added value over the competition at a similar

or somewhat higher price; or

 Offers what the customer believes is a better product at the

same price; or

 Gains enhanced margins by slightly higher pricing, so that it

achieves higher market share and therefore higher volume.

According to Knowles Tim, (1996) such approaches are likely to

be successful if the firm can clearly identify who the customer is
and what the customer‟s needs and values are. Also, the firm must
understand what is valued by the customer, a major differentiating
factor is the manager‟s ability to stay close enough to the market
to sense and respond to customer tastes an values. However, over
time, customer values change and therefore the basis for
differentiation needs to change with them. A firm following a
differentiating strategy may therefore have to review continually
the basis for differentiation and keep changing its strategy.

The Hybrid Strategy (Knowles Tim; 1996)

It is possible to combine differentiation and price strategies. Here

the success of the strategy depends on the ability both to
understand and to deliver against customer needs while also
having a cost base that permits lower prices that are difficult to
initiate. Such as approach generates grater volumes and maintains
profit margins because of a low cost base. Some of the examples of
this may be, Mass package tours, etc

Implementation Of Generic Strategies (Knowles Tim; 1996)

Sometimes it is the intangible aspects of strategy that suggest that

value should not just be related to the produced and technology.
Service, in terms of delivery or after-sales service, linked to an
understanding of customer needs and values, can be one means of
differentiation. Hence differentiation can be achieved not just by
one element of the value chain but by multiple linkages with all
elements of the value chain. If these linkages can be established, a
sustainable basis for differentiation can be found. For instance, a
quality image, staff training, information systems, and control of
suppliers will all contribute to a strategy of differentiation and the
linkages within the value chain.

Another approach to differentiation and improved competitive

standing is to build in switching costs within the strategy
(switching costs will be incurred if the customer believes there is
an actual or perceived cost in switching from one product to
another). If there are actual or perceived switching costs, the firm
may achieve a differentiated position in the market. It is therefore
important for managers to consider not only their own value chain
but the value chain of others, such as buyers and suppliers, and
they therefore need to consider the linkages between and within
value chain in order to provide a competitive advantage for the
firm.

Strategic Direction (Knowles Tim; 1996)

A number of alternative strategic directions for the firm can be

determined and set within the context of product and market
choices, which in many cases will be related to the environmental
opportunities for growth that are available to the firm. However,
strategic direction can concern not only growth but also
consolidation and efficiency. Four main alternative directions for
development can be identified.

 Withdrawal, consolidation and market penetration;

 Product development;

 Diversification

Withdrawal Consolidation and Market Penetration (Knowles

Tim; 1996)

Withdrawal, either completely or partially, may be the most

sensible course for a firm to take. For instance, declining
performance may be an opportunity for withdrawal from some
activities within the firm as a whole in order to raise funds or cut
losses and allow the firm to consolidate or grow in other areas.
Consolidation suggests changes in the way that a firm operates,
although the range for products markets may remain unchanged.
The firm may choose to maintain market share by growing with
the market and so maintain a competitive cost structure in relation
to the competition. As a product moves into the mature state of its
life cycle the firm may choose to increase its marketing activity in
order to highlight perhaps more intangible aspects of the product
or service. Equally it may seek to improve its cost structure
through productivity gains or higher capital intensity.

The strategy of market penetration may enable the firm to gain

market share but will be dependent on the nature of the market
and the position of the competition. The relevance of this
approach will depend on whether the overall market is growing, is
static or is in decline. For instance, in static markets the
experience curve suggests that market penetration would be
difficult, as the advantageous cost structure of market leaders
would normally prevent the incursion of competitors with lower
market share. However, this would not prevent firms from
adopting the market penetration strategy in mature markets if they
chose some from of collaboration with other firms.

Product Development (Knowles Tim; 1996)

A firm may decide to the search for alternatives that build upon
the company‟s present knowledge and skills. This may be a viable
choice, and such as approach can be described as product
development. Firms need to follow the changing needs of their
customers by a policy of continually introducing new product
lines. There has been a trend towards technology transfer and
collaborative ventures for product development.

Conversion of older restaurants - into economy properties that

have the brand name of well-known chains, to adapt to shifting
demand in markets where primary sites are hard to find.

New Product Development: (Wearne. Neil; 2001)

Hamel and Prahalad (1991) claim that the most profitable

companies will be those that create and dominate new markets,
looking for opportunities further to exploit key skills and
competencies. They will take measured risks, innovate and launch
new products and services.

New products are also needed to replace existing ones at

appropriate stages in the lifecycle and as additional products to
foster growth. Where new products are additional to those that the
company already markets, rather than replacements, there should
be an analysis of where synergy might be obtained. New products
will be aimed at generating new revenue, and they may boost the
sales of existing products if they strengthen the overall line or mix.
For example: seasonal packages.
Diversification (Wheelen L, T & Hunger D J., 2003)

The term „diversification” can be used to identify a situation when

an industry consolidates and becomes mature, most of the
surviving firms have reached the limits of growth using vertical
and horizontal growth strategies.

Concentric (Related) diversification is development beyond the

present product and market but still within the broad confines of
the industry within which the firm operates. For example; a hotel
opening a fast food joint chain, etc.

Conglomerate (Unrelated) diversification is development beyond

the present industry into products and markets that at face value
may bear no clear relationship to the present product or market.

Recent Trends suggest outsourcing:

Until recently, hotels have been reluctant to outsource their F&B

operations - or single restaurants. Traditionally, hotel
management viewed F&B operations as a low margin or
unprofitable service required to enhance guest satisfaction. As
such, F&B profitability was always examined with a mentality of
"minimizing a loss." As a way to rationalize an unprofitable track
record, hotel management often convinced itself that there was
insufficient demand for profitable F&B operations. In addition, as
hotels emerged from the last recession and downturn in hotel
profitability, emphasis was placed on the renovation of
guestrooms, lobbies and banquet space over F&B outlets
(Restaurants Fine Dining or cafes). Based on historical trends,
renovation priority has consistently been given to profit-
generating guestrooms over unprofitable food and beverage
operations. (http://www.hotel-online.com)

Additionally, hotels opting to create a new concept or introduce an

existing, branded concept may find start-up costs to be enormous.
Estimated costs of upgrading a food and beverage outlet to a
chain's specified standards range from $500,000 to $1.5 million,
depending on the extent of renovation and equipment purchases
required. Of course, outsourcing operations to a local
restaurateur would likely cost far less. (Source:
http://www.fooddude.com/branding.html)

The hotel, however, would not benefit from the brand recognition
associated with a larger, more established name in the
marketplace. Lastly, hotel management companies earning fees
based on gross revenue may be reluctant to reduce the base on
which their management fee is calculated. This may prompt hotel
owners and managers to reassess their management position.
Frequently the parties agree to either renegotiate revenue-based
fee percentages or include revenues earned by third party F&B
operators in the management fee calculations.

Despite the issues associated with outsourcing of food and

beverage operations, there are compelling reasons for hotels to
consider this option. Brand strength and competitive positioning
for the hotel property are among the most important. (Source:
http://www.fooddude.com/branding.html)

FRANCHISING FOR RESTAURANTS

What is franchising?

“Franchising is a system for selective distribution of goods and or

services under a brand name through outlets owned by
independent businessmen, called „franchisees‟. Although the
franchiser supplies the franchisee with know-how and brand
identification on a continuing basis, the franchisee enjoys the right
to profit and runs the risk of loss. The franchiser controls the
distribution of his goods and or/services through a contract, which
regulates the activities of franchisee, in order to achieve
standardization.” (Rosenberg and Bedell, 1969; p. 41)

“Franchising is a method of doing business by which a franchisee

is granted the right to engage in offering, selling, or distributing
goods or services under a marketing format which is designed by
the franchisor. The franchisor permits the franchisee to use its
trademark, name and advertising.” (Kotler P, Bowen J & Makens
J, 2003)

Franchising has become one of the fastest form of retailing,

moreover, in the United States itself there are about 500,000 or
more franchise operations which accounts for one third of the
total retail sales.

According to Stephen Rushmore the franchised hotels account for

more than 65% of the existing U.S. hotel-room supply.
Franchising is one of the safest ways to start a new business and
hence it is very popular.

The success rate estimates for different methods of starting a

business are as follows:

 Starting a new business: a 20% chance for survival.

 Buying an existing business: a 70% chance for survival.

 Buying a franchise: a 90% chance for survival.

It is a popular form of distribution for both hotels and restaurants.

Some of the popular Restaurant franchises include McDonald‟s,
Burger King, Kentucky Fried Chicken, Pizza Hut, and T.G.I.
Friday‟s. Franchises have been responsible for shifting the
restaurant business from individual operators to multiunits.
“Franchised restaurant companies had sales of $79 billion in
1991 and accounted for more than half of all restaurant sales.
They achieved this through a network of 106,000 locations.”
(Kotler P, Bowen J & Makens J, 2003)

The Franchisee pays an initial, royalty, and marketing fee for the
right to use the name, methods of operation, and other benefits to
the franchise organization. Hotels are charged a fee for use of the
central reservation system.

Example: Embassy Suites charges an initial fee of $500 per room

with a minimum fee of $100,000. The royalty is 4% of gross room
revenue, the marketing fee is 2% of gross room revenue, and the
reservation fee is 1% of gross room revenue.

The initial fee and the royalty depend on the brand equity of the
franchise. For example: As McDonald‟s has a more valuable
brand name as a fast-food restaurant around the world. People in
across the globe recognize McDonald‟s. Thus a it‟s franchise
offers more value than a Mr. Quick franchise.

The advantages of the franchise to the franchisee (person or

organization buying the franchise) are:

 Recognition of brand

 Less chance of a business failure

 National advertising, premade advertisements, and

marketing plans

 Faster business growth

 Help with site selection

 Architectural plans

 Operational systems, software, and manual to support the

systems
  National contracts with suppliers

 Product development

 Help with financing

The disadvantages of purchasing a franchise are:

 Fee and royalties are required.

 It limits the products you sell and the recipes you use.

 You are often required to be open a minimum number of

hours and offer certain products.

 A poorly operated company can affect the reputation of the

entire chain.

 The franchisor‟s performance affects the profitability of

franchisees.

 Some franchisees may not benefit from national advertising

as much as other franchisees – often a source of conflict.

(Kotler P, Bowen J & Makens J, 2003)

One of the reasons that companies decide to franchise is that it

allows for increase distribution of their product. Franchising is
not effective for all companies. It is only suitable for companies
that are able to offer the operational systems, management
support, and a good business concept.
According to Kotler, Bowen and Makens, smaller chains often
franchise to people who are close to business. For example:
Franchising is used in smaller restaurant chains to help them
retain Managers. It is difficult for a small chain to compete with
opportunities that a large chain offers to its Managers. Some
small chains combat career opportunities the large chains offer by
helping their best Managers get their own store through
franchising. This allows the chain to withhold Managers who
might otherwise grow bored and unchallenged.

The advantages of franchising for the franchisor are as follows:

 Receives a percentage of gross sales.

 Expands brand

 Support for national advertising campaign

 Negotiating support for national contracts with suppliers.

The disadvantages of a franchise for a franchisor are as follows”

 There are limits on other options of expanding distribution;

for example, the ability to develop alliances may be limited if
the alliances may violate the territorial agreements of the
franchisees.

 Franchisees must be monitored to ensure product

consistency.
  There is limited ability to require franchisees to change
operations; for example, Pizza Hut had a difficult time
getting franchisees to add delivery when Domino‟s was
developing the delivery market.

 Franchisees want and need to have an active roll in decision

making.

(Kotler P, Bowen J & Makens J, 2003)

SUMMARY

Hence it can be said that marketing of restaurants requires

innovation and strategies which are unique in nature and also
understand the market potential in order to provide the restaurant
with higher profit margins. In order to cutdown the advertising
costs franchising is an important area to explore especially for
stand-alone restaurant chains.

However product development is an essential component of

creating an impact on the customers decision making process.
 CHAPTER6 - CUSTOMER
SATISFACTION & RETENTION
INTRODUCTION

CUSTOMER SATISFACTION

RELATION BETWEEN EMPLOYEE AND

GUEST SATISFACTION

CUSTOMER RETENTION

SUMMARY
 CHAPTER :6

CUSTOMER SATISFACTION & RETENTION

INTRODUCTION

This chapter deals with the need for customer satisfaction and
retention for the Restaurant industry. The chapter also highlights
the importance of employee satisfaction and retention.

CUSTOMER SATISFACTION

„Satisfaction is defined as a post consumption evaluation that the

chosen alternative is consistent with prior beliefs and expectations
(with respect to it). Dissatisfaction, of course, is the outcome
when this confirmation does not take place (Lockwood, Baker and
Ghillyer,1996)

Consumer satisfaction is the outcome when expectations are

matched by service experience, conversely, dissatisfaction occurs
when there is a mismatch and expectations are not fulfilled by the
service delivered.

The Importance of Customer Satisfaction

In principle, an organization can increase its turnover in two

ways:

1. Increase sales to existing customers: In order for the

organisation to do this, the customers need to be satisfied and
 still want to buy more products and services from the
organisation.

2. Win new customers: In order to the organisation to do this, the

new customers need to form a positive impression of the
organisation. This impression may be formed either through
marketing and sales initiatives or because satisfied customers
speak favorably of the organisation‟s products, services, and
staff.

Customer satisfaction is crucial to the organisation’s future,

because:

 Satisfied customers come back. Dissatisfied customers do not

come back.

 Satisfied customers are often “goodwill” ambassadors and help

the organisation to win more customers. Dissatisfied customers
share their dissatisfaction with anyone who will listen and in
the process give the organisation a bad reputation.

 Satisfied customers are usually prepared to buy new products/

services from the organisation. Dissatisfied customers rarely
return as customers.

 Potential customers are more inclined to listen to existing and

previous customers than to the organization‟s marketing
campaigns. The “information service” provided by dissatisfied
 customers can spoil the effect of even the most powerful
marketing campaigns.

 Satisfied customers are a source of inspiration to the

organization and contribute to giving the employees increased
job satisfaction.

It is very important for an organization to satisfy the needs and

expectations of their customers. The organization should deliver
quality products and services to their customers in order to
maximize the repeat clientele. Strategically, they should try to
provide all the services and products in the same way, which they
promised during the campaigns and advertisements. (Kotler,
2003).

RELATION BETWEEN EMPLOYEE AND GUEST

SATISFACTION

Customer satisfaction has emerged as an important component in

the bottom-line success of service businesses. Satisfying
customers is especially important because it encourages repeat
business and fosters word-of-mouth advertising. ((Kotler P, Bowen
J & Makens J, 2003)

Employees feel good when they feel that they are involved in
decision making, receive adequate training, and are recognized
for their contributions. Empowerment is recognized as an
important tool for improving employee morale and performance.

Pay and benefits are a strong consideration in employee

satisfaction, and most employees feel that they are underpaid for
the job they do regardless of their compensation. Pay and
benefits, however, are only one factor among many. A study by
Bruce and Blackburn, for instance, indicated that the absence of
those economic factors will lead to discontent, but their presence
will not add to long-term satisfaction. On the other hand, job-
enrichment factors, such as recognizing contributions, employee
involvement in decision making, and management keeping the
lines of communication open, continue to be important factors in
employee satisfaction.

On the other hand the guests feel strongly about the treatment they
receive from the hotel‟s employees, and guests are happier if
employees respond to guests individual needs. We can thus
conclude that a happy employee does influence the guest‟s attitude
towards the hotel and thereby increasing customer loyalty.

CUSTOMER RETENTION

Companies must be customers centered to be successful in current

market scenario. They must deliver superior value to their target
customers and must become adept in building customers and not
just building products. (Kotler P, Bowen J & Makens J, 2003)
Many companies think that obtaining customers is the job of the
marketing or sales department. But in reality although marketing
plays a leading role, it can be only a partner in attracting and
keeping customers.

Customer satisfaction measures how well a customer‟s

expectations are met. If customers received what they expected,
they are satisfied. If their expectations were exceeded, they are
extremely satisfied. Customer loyalty, on the other hand,
measures how likely customers are to return and their willingness
to perform partnershipping activities for the organization.

Customer satisfaction is requisite for loyalty. The customer‟s

expectations must be met or exceeded in order to build loyalty.

But the real issue is retention of customers that all marketers need
to consider. The restaurant industry benefits from continued
patronage of loyal customers because of reduced marketing costs,
decreased price sensitivity of loyal customers, and partnership
activities of loyal customers. The restaurant requires fewer
marketing dollars to maintain a customer than to create one and
the creation of new customers through the positive word of mouth
of loyal customers thereby reducing marketing costs.

Reichheld and Sasser found that a 5% increase in customer

retention resulted in a 25 to 125% increase in profits in nine
service industry groups they studied. It is found that that building
a relationship with customers should be a strategic focus of most
service firms.

As the competition is strong and often there is little differentiation

between products in the same product class in the restaurant
industry it becomes imperative to reatin customers. Increased
competition with little differentiation between core product is one
of the factors that led to the development of relationship marketing
in the 1990s. Relationship marketing enables companies to build
loyalty with their customers. Developing customers as partners is
different from traditional marketing, which is more transactions-
based. Beyond building a stronger relation with their partners in
the supply chain, thus companies today must work to develop
stronger bonds and loyalty with their ultimate customers. Thus
relationship marketing is a useful tool to retain customer,

SUMMARY

In conclusion it can be said that employee satisfaction plays a vital

role in creating customer loyalty and resulting in satisfying the
needs of the customer. However customer needs and wants must
be understood by the restaurant to retain and attract more
customers.
7: MARKETING MANAGEMENT

 Introduction
 Definition of Marketing
 Components and Classification of Market
 Marketing System
 Marketing Activity and Environment
 Five Ps
 Marketing Goals
 Selling and Marketing Concepts
 Market Structure and Dynamics
 Challenges in Indian Marketing
 Marketing Practices
 CHAPTER : 7
INTRODUCTION

The term Rural marketing is a synthesis of two words -Rural and

Marketing. Characteristic details of the rural market and definitions
thereon are dealt. This project deals with the concepts and principles
of marketing.

Marketing generally involves a series of planned activities involved

in moving goods from point of production to the point of
consumption. It includes all the activities involved in the creation of
demand, time frame, place, from of possession and utility. Marketing
is undisputedly the most important function of all business
organizations worldwide.

Marketing starts with human needs, wants and demands. Substantially met
with the availability of products and solutions in the form of goods, services
and ideas. The consumer, when in need, of products, is made by the value
and expected satisfaction – her the consumer‟s estimate needs to be
prioritized. In this case, the consumer exchanges and precisely obtains the
desired product in exchange of something in return. An exchange is termed
as „a value creating process,‟ in which both the parties involved get better
off due to it.

COMPONENTS AND CLASSIFICATION OF MARKET

Market is a social and economic institution which performs activities and

provides infrastructure for exchange of commodities between buyers and
sellers. A market is not confined to a particular geographical location, it
exists wherever the fundamental forces of demand and supply exist.
Market Components

The following components are necessary for a market to exist:

 Two parties are necessary – one buyer/s and secondly seller/s

 Goods or commodity for transaction. Physical existence of goods is
not necessary.
 Business relation and communication between buyer and seller and
 Demarcation-area or place there, uniform price or
competition is not a condition.

Classification of Markets

Based on nature and dimensions, markets are classified as under:

1. Area of Coverage
 Local Market: Where buying and selling activities are
taking place, where buyers and sellers belong to same or
nearby villages. These are for perishable items like
vegetables.
 Tehsil Level Markets: Market catering to buyers and
sellers of taluka area. Buyers and seller meet for their
stock of food grains and other daily use items.
 Regional Level Markets: Usually at district headquarters
to cater to a larger area.
 National Level: Buyers and sellers world over meet in this
market. These are large scale markets and business value
and volumes are large. The items transacted include,
silver, gold, non-ferrous metals, petro goods and
machinery. In the recent past, agricultural commodities
have also entered the area.
2. Location
 Village Market: The transactions between buyer and
seller takes place in a small village center called a village
market or a Haat. This meet is periodical, usually once or
twice a week
 Primary Market: The villagers take their agricultural
produce to the nearby town or Tehsil on bullock carts,
buses or tractors-transaction in the town market takes
place between farmers and products.
 Wholesale Markets: These markets are located at
important commercial centers or district headquarters.
The arrivals from villagers and other markets are large in
quantities. The transactions take place among villagers,
village traders and wholesalers. There are specialized
marketing functions that take place in this market. They
are commission agents, brokers, packers, weighment etc.
These are also called Secondary markets.
 Terminal Market: This market caters to the final
consumer or processor. These are organized and modern
markets. These markets are in cities or state capitals and
deal in many commodities.

3. Volumes of Trade
 Retail Markets: Where goods are brought and sold to
consumers based on actual requirements. The retailers
purchases goods from the wholesale market and sell in
small lots to the nearby consumers.
 CHAPTER 8

CONCLUSIONS
RECOMMENDATIONS
LIMITATIONS
 CHAPTER 8

CONCLUSIONS

The basic characteristics of services are intangibility,

inseparability, variability and perishability. Unlike, physical
products, services cannot be seen, tasted, felt, hurt or smelled
before they are purchased.

Buyers look for tangible evidence that will provide and confidence
about the services. Like one can look for uniforms of an employee
while entering a hotel to understand that the hotel is
professionally managed. Hotels on the other hand can park luxury
automobiles in the front to instant deliver a message for quality
and up scale services.

One of the key factors for restaurants‟s marketing process is to

satisfy customers needs by means of product they serve.
Restaurants across the globe can be developed into strong
components of a brand. It is in this changing scenario across the
globe that Restaurant owners must feel the need for branding their
Restaurants. This will help their restaurant to turn into a brand
that is instantly recognizable to the customer, and thus they need
to focus both on the internal and external consumer needs. The
key component of branding lies not in the purchase or addition of
a product; rather it lies in the effective usage of the power of the
brand within your environment.
Many restaurant concepts enjoy widespread recognition but have
difficulty in responding to rapid changes in the marketplace,
mostly because of rigid standards in service, equipment and mind-
set. Clearly, branding is a subject that needs to be addressed as
part of the strategic planning process in the Restaurant Industry.
Stepping back and looking from outside the box can clearly give
Restaurant owners a view to future success, assisting them in
building their restaurant or chain into a brand instantly
recognized for quality, consistency and value.

To put into a nutshell, the future of brand creation, development

and management should reflect emerging business models of the
key markets of a restaurant. This will ensure that the restaurant
can maximize its profit ratio and minimize the risks attached to it.
Introduction of new technology as well as identification of cultural
and social needs will result in optimizing customer satisfaction
and loyalty. Moreover the latest brand management tools create
multisensorial brand experiences based on various channels of
media.

One of the key effects of globalization is the increase in product

availability and providing the customer with a choice. However
this is combined with the increase in communication channels
developed by businesses. The brand has become increasingly
important as media has created lot of awareness amongst the
customer.
Brands are considered important because they act as the
communication tool between increasingly globally separated
businesses and consumers. A brand is said to be the aura that
surrounds a product or service that engenders the power of
communicating the benefits and differentiates at the same time
from its competitors to provide the consumer with the best
product/service.

Many processes can create brand name but it is essential that the
chosen name feel right as well as being structurally correct. The
brand proposition can be a combination of the rationale and
emotional benefits targeting consumer desires. The brand
personality is considered as a visual identity used to best express
the benefits pertaining to a brand. Brand Imagery as well as
collateral can be matured through various parts of ones cultural
heritage, science, politics, etc.

Moreover it is essential that a brand strategy fits into the

corporate strategy as both strategies go hand in hand.

Advertising has been highlighted as one of the key areas in

increasing awareness and encouraging interest and potential sales
in the brand. Two-way communication processes need to be
developing for the creation of successful brands. Semiotic analysis
has proved to be a rich resource for symbolic brand imagery.
The Internet and digital television are also the components, which
have resulted in providing the customer with the knowledge of
brands.

It has been found that customer satisfaction and retention are the
buzzword in the Restaurant industry and restaurant chains must
make efforts to maintain customer loyalty due to the increasing
competition in the sector. Hence it can be rightly said that the
impact of branding on restaurants has generated immense amount
of clientele for the restaurants. The conformance to high level of
standards in the industry have lured the customer towards itself.
 RECOMMENDATIONS

 Restaurant Industry in India and across the globe needs to give

a greater in-depth thought to branding their products and
services to reap the benefits of changing customer needs.

 The Restaurant Industry as a whole must understand the

importance of Customer Satisfaction and Loyalty and make all
efforts to retain customers.

 Restaurants must be given a higher ratio of importance as

future trends signify that the mentioned sector will be a cash
cow for the investors.

 Innovation is also proposed as a key to success in the

restaurant industry currently and also for the future as
competition is growing rapidly. So, it will be a good idea to
establish theme restaurants with variety of cuisines.

 Emphasizing on areas like Semiotics would result in generating

brand recognition and awareness. This would be a helpful tool
inorder to impact the consumer‟s mind. Media is the
recommended channel through which the impact can be
profound.

 Advertising costs should be minimized as they account for

nearly 10 percent of a businesses profit. The best way to
minimize advertising costs is franchising moreover,
 McDonald‟s has expanded its operations all over the world
through this medium.

 Ensuring exceptional guest care by each and every employee

should be the norm. To ensure this, flatter structures are
recommended to stimulate communication process and close
working as a team.

 Staff levels must be offered better pay packages since they are
the ones in direct contact with your customers. Competitive pay
packages will also help in retention of staff and better services
to the customers.

 Empower employees, encourage and -support them in their

decisions to build confidence. This will lead to better customer
service at guest contact points.

 Outsourcing options should be considered seriously, and in as

many services as possible. This will definitely lower payroll
costs and may also improve efficiency of operations.
 LIMITATIONS

The dissertation is based on the use of secondary data. It gives us

a birds eye view of the Restaurant Industry and thus cannot be
generalized for the overall benefits of Branding on the Restaurant
Industry.

Time was a biggest constraint but all efforts were made by me to

collect all the relevant information for the dissertation.
 BIBLIOGRAPHY
1. Khurana R. & Ravichandran A.N. Strategic Marketing
Management: Concepts and Class (1995), Global Business
Press, New Delhi.
2. Reich A.Z., Marketing Management for the Hospitality
Industry: A Strategic Approach (1997), John Wiley & Sons Inc.,
New York.
3. Porter, M.E. Competitive Strategy. Techniques for and
analyzing industries and competitors (1980), New York, Free
Press, pp. 89, 149.
4. Kotler Philip, Marketing Management, 11th ed. 2003,
Englewood Cliffs, NJ: Prentice Hall, New Delhi.
5. Pearce, J. II and Robinson, R.B. Jr., Formulation and
Implementation of competitive strategy, 4th Ed. (1989),
Homewood, IL: Irwin.
6. Reich A.Z. (1994) (a) Comprehensive Strategic Planning as a
capstone course in hospitality education CHRIE Hospitality
and Tourism Educator, pp. 67-70.
7. Roberts, John, Marketing for the Hospitality Industry, 1993,
Hodder Stoughton, London.
8. Wearne. Neil; Hospitality Marketing, 2001, Global Books D
Subscription Services, New Delhi.
9. Kotler, Bowens and Makens, Marketing for Hospitality and
Tourism, 2003, Prentice- Hall International, USA.
Trade journals & magazines:
1. Hotelier and caterer
2. FHRAI magazine
3. Cornell Hotel and Restaurant administration Quarterly
4. Journal of Marketing
5. Business Week Magazine
6. Indian Journal of Marketing
Websites
 www.fhrai.com
 www.hotelinteractive.com
 www.thomsonlearning.co.uk
 www.hcima.com
 www.ehotelier.com
 www.hotelier&caterer.com
 www.fooddude.com
 www.biz.yahoo.com
 www.restaurant.org
 www.hotel-online.com
 www.cio.com
 www.entrepreneur.com
 www.mckinseyquarterly.com