Marketing Inclusive Tours and Product Packages

1. Marketing Inclusive Tours and Product Packages Objective:Introducing the meaning and applications in the practice of marketing inclusive tours and product packages.

2. The Nature of the Marketing Task for Tour Operators • The marketing task of the tour operators give emphasis on short-run tactical considerations because of the nature of tour operation where daily fluctuations are enormous. • However, strategic decisions are also important and will be more important in the coming 30 years when the markets reach maturity.

3. Strategic Marketing • Five strategies are worth mentioning here; • Interpreting the strength and direction of change in the external environment. • Strategic decisions on volume and pricing. • Choice of product/customer portfolio. • Positioning and image. • Choice and maintenance of distribution systems.

4. The external environment • External influences are more powerful when tour operation is concerned because of the international nature of their business. • The total market demand fluctuates as the result of economic events which therefore affects employment, levels of wages, real income, and the impact of international exchange-rate movements on prices. • In addition, the actions of the competitors is another external factor.

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

6. Strategic decisions on volume and pricing • For tour operators, decisions on capacity and average price levels are strategic decisions because of the unpredictable external business environment. This means that annual decisions on volume and average price levels are strategic rather than tactical issues. • If the initial estimates of capacity and pricing are proved wrong by events, the marketing tactics can be used to correct the problem and get a market share among the competitors.

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

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

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

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

11. For all operators there is a strategic choice to be made between marketing direct to customers or achieving sales through travel retails. Some tour operators have direct-response marketing policy with no retail agency involvement. On the other hand, others sell their packages through retailers. • However new web-based distribution channel outlets are expected to replace traditional retail travel outlets.

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

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

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

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

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

17. For tour operators, the choices for tactical promotion are; • Increased advertising • Sales promotions aimed at consumers, such as competitions, free children’s’ places (assuming these are not part of the original product), special discounts for bookings received by a certain date. • Sales promotion aimed at retailers. • Price-cutting to increase sales for targeted weeks

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

19. The operators’ link with retailers, especially where on-line computers can be used to communicate the late availability of products and handle bookings, are very helpful in the tactical process of selling last minute discounted offers. • Merchandising of a retailer distribution system to secure last-minute sales, often just days before departure, is one of most powerful advantage to operators.

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

21. Sources • Kotler, P.; Bowen, J. and Makens, J. (1999). Marketing for Hospitality and Tourism (2nd ed.). Prentice Hall: NJ. • Kotler, P. and Armstrong, G. (2006) Principles of Marketing (11th ed.). Prentice Hall: NJ. • Middleton, V. T. C. (2004) Marketing in Travel and Tourism (3rd ed). Elsevier: Oxford. • Middleton, V. T. C.; Fyall, A.; Morgan, M. And Ranchhod A. (2009). Marketing in Travel and Tourism (4th ed). Butterworth-Heinemann: Oxford.