Mustang Journal of Business & Ethics (2010)

A STUDY ON MARKETING PRACTICES IN SELECT SERVICE

INDUSTRY

Dr. B. Sudhir*
Mr. Tharaka Rami Reddy**

Abstract
Today’s market has become consumer driven and the marketer has to delight the
customer to achieve success. To achieve this service firms have to identify needs of the customer,
design the product mix, communicate price to the public and promote the services in such a way
to position that in an attractive manner and in different way than the competitor. Marketing
expenditures and practices are important for service innovation, customer satisfaction, customer
loyalty, and organizational practices, which in turn influence future profitability and value of the
firm. Hotel industry has been selected for the study. This study mainly concentrated on service
marketing mix variables (7Ps) and also the importance given for these elements by the selected
hotels. Marketing practices of the select hotels have been identified with reference to 7Ps and
findings are discussed elaborately. Hypothesis are formed and tested to determine the
relationship between investments, annual sales and supply of services. Price, physical evidence
and promotions are the first three elements among the 7Ps preferred by the respondents.
Developing infrastructure facilities, use of information technology and establishing full pledged
marketing department are some of the suggestions made to improve the marketing practices of
the hotel industry.

INTRODUCTION:
Marketing practices in Service Industry:
The marketing concept is valid for both products and services. The marketing mix is one
of the most important universal concepts, which has been developed in marketing. All the
variables are inter-related and interdependent on each other. It is appropriate to reconsider the
traditional marketing mix in the context of services. Several authors have agreed that a different
marketing mix is needed for services, while some have expanded the traditional 4Ps of the
Marketing Mix to make it more appropriate recognizing the diversity of service marketing.

*Associate Professor, Dept of Management studies, S.V.University, Tirupati, India.

**Research Scholar, Dept of Management studies, S.V.University, Tirupati, India.

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The strategies for the 4 Ps require some modifications when applied to services due to the
special features of the services. The challenges encountered by the service marketer – like
heterogeneity – the requirements of customers, interaction with customers while delivering
service and perishability or absence of inventory, intangibility of offer and absence of patent
protection etc., necessitate the extension of the marketing mix to include people, process and
physical evidence.

Gronroos defines marketing orientation as that a firm or organization plans its operation
according to market needs. The objectives of the firm should be to satisfy customer needs rather
than merely using existing ready facilities or raw materials. It is imperative to say that within
service firms it is nearly impossible to be totally marketing oriented. Customers cannot be given
everything they want because of the constraints imposed by the services operating system.

HOTEL INDUSTRY IN INDIA:

Hotel Industry in India has witnessed tremendous boom in recent years. Hotel Industry is
inextricably linked to the tourism industry and the growth in the Indian tourism industry has
fuelled the growth of Indian hotel industry. The thriving economy of the Indian hospitality
industry is projected to grow at a rate of 8.8% during 2007-16, placing India as the second-fastest
growing tourism market in the world. Initiatives like massive investment in hotel infrastructure
and open sky policies made by the government are all aimed at propelling growth in the
hospitality sector.

LITERATURE REVIEW
Rogerson (1983), specified that in marketing or selling quality hotel product, high price
will increase its reputation and brand loyalty. In an effort to build and maintain reputation, good
service quality which has been promised has to be fulfilled. Having a good reputation can
increase selling, attract new customer by word of mouth activities and reduce unsatisfied
customer.

Leonid Julivan Rumambi and S. Pantja Djati (2007) stated that, Hotel industry is a form of an
intense interaction between employee and consumer. When hotels choose to perform in a perfect
manner, then every operational mistake will be considered as a loss and lowering brand asset
value in consumer‟s mind. Brand can be the most valuable asset of a company. In this case, a
hotel actually can develop its market size and consumer amount growing rate by their loyal
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consumer. This approach surely gives more advantage than other marketing activities such as
discount or promotion program. Beside, it‟s cheaper for a hotel to give a best serve to its existing
consumer than trying to get new consumers. A satisfied consumer will become a success
standard and also become a free promotion for the hotel. The more consumers satisfy, then the
more positive message they will spread to their friends, family and colleagues through word-of-
mouth.
Giribaldi (2003), defines brand in terms of hotels as a combination of attributes which is
communicated through name or symbol which can influence consumer‟ mind in buying decision
process. Brand is an un-separate part of world market nowadays. American Marketing
Associations gives definitions of brand as a name, term, sign, picture or symbol or the
combination of those mentioned before which propose to identify a single or group of seller‟s
product or service and to differentiate their product or service from its competitor.

Nan Hua; Basak Denizci; Anna S. Mattila; Arun Upneja (2008), examined the effect of
marketing expenditures and practices of hotel firms. They argued that marketing expenditures
and practices are important for service innovation, customer satisfaction, customer loyalty, and
organizational practices, which in turn influence future profitability and value of the firm.

Rajasekhara Mouly Potluri (2008), Stated that, creating effective communication with
customers is the most important aspect in hotel services marketing. To date we still have poor
understanding of the role of effective communication with customers in attracting and
maintaining prospective and present customers. He evaluated the effectiveness of advertising and
personal selling practices of Ethiopian Service Sectors especially hotels in communicating with
its customers with the aim of finding solutions to improve the existing communication and
customer satisfaction.
Jane Moriarty, Rosalind Jones, Jennifer Rowley, Beata Kupiec-Teahan (2008),
contributed to the understanding of marketing in small hotels specifically, and, more generally,
to the area of SME or entrepreneurial marketing. – A deductive-inductive approach based on
interviews with 15 small hotel owner-managers, supported by web site analysis and three in-
depth case study interviews, was used to provide a profile of marketing activities in small hotels
in North Wales.

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OBJECTIVES OF THE STUDY:

1. To study the marketing practices of hotel industry.

2. To identify the importance of marketing mix variables with respect to hotel industry.
3. To suggest ways and means, if needed, for strengthening hotel industry for better marketing
practices.

HYPOTHESES:
H1. There is no significant relationship between number of rooms available and annual sales of
the hotels.
H2. There is no significant relationship between investment and annual sales of the hotels.

METHODOLOGY:

i. Data Sources:
This study requires both Primary and Secondary data. The Primary data has been
collected from hotels located in Andhra Pradesh. Secondary data is collected from journals,
publications and various websites.

ii. Data collection method:

Questionnaire is used as research instrument followed by personal interview to collect

primary data.

iii. Research Instrument:

The questionnaire consists of Part-A and Part-B.

Part-A, consists of questions related to socio-economic factors of the hotels such as Size,
Annual Sales, Investment, Year of Establishment and Location of the hotel.

Part-B consists of the questions related to Marketing mix and ranking of 7P‟s

iv. Sampling:

The questionnaire was pre-tested using a sample of 10 respondent hotels and lodges. The
samples were selected by using, non-probability sampling procedure and in specific, Quota
Sampling technique has been adopted to select the sample. To make the sample more

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representative of the entire state, sample has been selected from all the three regions of Andhra
Pradesh state in India namely Coastal, Telangana, and Rayalaseema.

The questionnaires were distributed to the target respondent firms and 114 valid
responses were received.

v. Data Analysis:
The collected data is coded, tabulated and summarized. Friedman test and Chi-Square
tests have been applied for analyzing the data.
MAJOR FINDINGS:
Hypothesis Testing:

H1. There is no significant relationship between number of rooms available and annual sales of
the hotels.

The study explored whether there is any relationship between Annual sales of hotels and
Number of rooms available. Chi-square test is used to find whether any relationship exists or not.
From the table-6, the obtained Chi-square value is 15.110. At 5% level of significance the critical
value of chi-square for 1 degree of freedom is 3.841. Since the calculated value is greater than
the critical value of chi-square, it can be concluded that Number of rooms available in the hotels
has influence on its Annual sales.

H2. There is no significant relationship between investment and annual sales of the hotels.

The study explored whether there is any relationship between Annual sales of hotels and their
investment. Chi-square test is used to find whether any relationship exists or not. The Chi-square
value from the table-7 is 24.166. At 5% level of significance the critical value of chi-square for 1
degree of freedom is 3.841. Since the calculated value is greater than the critical value of chi-
square, it can be concluded that Investment incurred by the hotels has influence on their Annual
sales.
88.4% of the hotels have up to 30 number of rooms, 95.6% of the hotels invested up to
Rs.15 crores amount, 94.8% have 75 employees and 96.5% have up to20 years of experience in
the field of their service, but they are achieving fair revenue. As a result it can be concluded that
financially they are not doing up to the level of expectation (Table-1, 2, 3, 4&5).

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All hotels have failed to offer full range of services to their customers. Based on
availability of the Customer‟s requirements and professionals, few selected services are offered.
Except communication services, reception services and boarding services, other services like
Personal care, entertainment services are offered rarely. The reasons identified are lack of
facilities and equipment (Table-8).

Adhoc pricing mechanism is adopted by hotels. Hotels are preferring method of pricing
based on cost, competition, goodwill and economic condition of the customers. The price
structure is intimated to the customers in advance and differential pricing and discounted price
are also offered to the customers based on their income, referral source, and regularity and
Government nominee. It is understood that „price of their services compared to competitors is
high (mean=2.47), and they are highly satisfied with their present price. (Table-9)

Hotels agreed to a great extent that location advantage affects sales growth. Place well-
connected to others, Good Market, Availability of Expert staff are affecting the hotels to choose
convenient location for establishing their firm. Providing services through internet and at door-
step is seen from majority of hotels. (Table-10)

All hotels are giving importance to promotion activities and undertaking those activities
for the promotion of their services. It is understood from marketing perspective that they are not
able to work out on elaborate and well defined promotional strategies because most of them do
not have separate marketing department and marketing professionals. They believed that Word-
of-mouth helps in promotion. Advertisements are preferred mostly in television and concentrated
much on hotel‟s image in its content. (Table-11&12)

Employees in hotel industry are taking much care and supervising well for their effective
performance. Majority of the hotels are well organized. But very few hotels have branches at
different places. It is opined by them that infrastructure of the hotel building is convenient.
Process of the service delivery is same for all customers. Even though customers are involving
directly in enquiring the service delivery process on their own but the level of their involvement
by the customers in knowing the service delivery process is Medium (Mean=2.58) and their
satisfaction is also medium (Mean=2.40).( Table-13,14,15.16&17)

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It is found that hotel industry has given first priority to „Price‟ of the services offered.
Second priority has given to „Physical evidence‟ and third priority awarded to „Promotion‟
(Table-18)

It is found that, all hotels are agreed with every statement regarding their approach
towards marketing practices. The mean values are in the range of 1.82 to 2.45 (Table-19).

SUGGESTIONS TO HOTEL INDUSTRY:

Developing Infrastructure Facilities and Diversified Products/ Services

In order to distinguish their services among the competitors, it is suggested that hotels
should give importance to Entertainment, Personal care and Shopping services. They need to
concentrate more on providing reservation services, local transportation and information assistance
on customer demand to sustain in highly competitive market.

Special Tariffs in Drooping Seasons

Hotels should have more flexibility about the price offered to the customers in order to
meet their satisfaction and budget set. Special tariffs may be offered to the customers in drooping
season.

Use of Information Technology for effective Distribution

The internet appears to be influencing the customers in searching the information. It is
found that limited number of hotels are having website and providing guidance through internet.
For effective zero-level distribution without depending on intermediaries, it is suggested that the
hotels should provide guidance through internet which helps customers especially in terms of
booking rooms in advance and from far distance places. Providing on-line services to the
customers is having many advantages and may be helpful for better promotion.

Maintaining Public Relations

It is suggested that hotels may offer benefit packages for individuals and families during
week ends. Hotels should sponsor the local events, meetings and special programmes, maintain
relationship with business houses and official visitors, mail brochures, offer special benefits to card
holders, and distribute pamphlets at various travel points and tourists destinations. This may
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increase the room occupancy rate during slack periods. They should place large size hoardings at
vantage points of town/city and pilgrim places to attract customers especially tourists.

Establishing Marketing Department

As few hotels have marketing department separately for the promotion of their services
and image, it is suggested that hotels should establish a marketing department with well defined
goals to succeed in the competitive markets. Marketing department need to be headed by qualified
and experienced marketing professional.

Designing Evaluation forms

Hotels should design evaluation forms and distribute to the customers at exit point to get
feedback about quality of services.

CONCLUSION:

The research was conducted in Andhra Pradesh to study the marketing practices in
various hotels. This study mainly concentrated on service marketing mix variables (7Ps) and also
the importance given for these elements by the selected hotels. Number of rooms available &
investment in the hotels have influence on their annual sales. The study identified important
elements among 7Ps preferred by the hotel industry. The study can be expanded to star hotels.
References:
1. Amy Wong ooi Mei, Alison M Dean and Christopher J White, 1999 “Analyzing the
Service Quality in the hospitality Industry”, Managing Service Quality, Vol.9, Issue:2,
Pp.136-143.
2. Berry, L., Lefkowith, E, Claek, T. (1988). “Harvard Business Review”, Vol. 66, Pp.28-
32.
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Medical Marketing: Henry Stewart Publications.
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exploratory study”-Paper presented at the 98th EAAE Seminar „Marketing Dynamics
within the Global Trading System: New Perspectives‟, Chania, June – July.
5. Giribaldi, V. (2003).”The Fundamentals of Branding”. Website: www.brandchannel.
Com

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6. Hilary Catherine Murphy and Christian D kiegast, (2008), “Do small and medium sized
hotels exploit search engine marketing?”- International Journal of Contemporary
Hospitality Management, Vol.20, Issue: 1, Pp.90-97.
7. Jane Moriarty, Rosalind Jones, Jennifer Rowley, Beata Kupiec-Teahan, (2008),
“Marketing in small hotels: A qualitative study”, Marketing Intelligence and Planning,
Vol.26, Issue.3, Pp. 293-315.
8. Krishna mohan G, Krishna Naik C N (2006), Healthcare Marketing, Discovery
Publishing House, 1st Edition, New Delhi.
9. Leonid Julivan Rumambi and S. Pantja Djati, (2007), “Hotel Management And Brand
Achievement : A Study of Hotel Industry Achievement”, Website: www.marketing-
interactive.tk
10. Levent Altinay, (2007), “The internationalization of hospitality firms: factors influencing
a franchise decision-making process”, Journal of Services Marketing, Vol..21, Issue.6 ,
Pp.398 – 409.
11. Liana Victorino, Rohit Verma, Gerhard Plaschka, Chekitan Dev, (2005), “Service
innovation and customer choices in the hospitality industry”, Managing Service Quality,
Vol.15, Issue.6. Pp.555-576.
12. Minakshi Trivedi, Michael S Morgan And Kapesh Kaushik Desai, (2008) “ Consumer‟s
value for informational role of agent in service industry”, Journal of Services Marketing,
Vol.22, Issue.2, Pp.149-159.
13. Nan Hua; Basak Denizci; Anna S. Mattila; Arun Upneja , (2008), “Marketing Outlays:
Important Intangible Assets in the Hotel Industry?”, Journal of Quality Assurance in
Hospitality & Tourism, June, Vol.8, Issue.4, Pp. 61 - 76 .
14. Prof.Kripa Kalro(2009), “Hotel and Catering Services(Hospitality)”, Notes for TYBMS,
Sem 5th, No.1, Pp.1-17.
15. Rama Yelkur, Paul Herbig in 1997 “Differential pricing for services”, Marketing
Intelligence & Planning, Vol.15, Issue: 4, Pp.190 – 194.
16. Rajasekhara Mouly Potluri(2008), “Assessment of effectiveness of marketing
communication mix elements in Ethiopian service sector”, African Journal of Business
Management, March, Vol. 2, No.3, Pp. 59-64.

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17. Ray Pine, Hanqin Qiu Zhang, Pingshu Qi (2000), “The Challenges and opportunities of
franchising in China‟s hote Industry”, International Journal of Contemporary Hospitality
Management, Vol. 12, and Issue. 5, Pp. 300-307.
18. Rogerson, W.P. (1983). "Reputation and product quality", The Bell Journal of
Economics, Vol. 14.
19. Thanika Devi Juwaheer, Darren Lee oss (2003), “A study of Hotel Guest Perceptions in
Mauritius” , International Journal of Contemporary Hospitality Management, Vol.15,
Issue: 2, Pp.105 – 115.
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Websites:
www.bambooweb.com

www.balckwellpublishing.com

www.iloveindia.com

www.sagepub.com

APPENDIX:

Table-1: Number of rooms available

No. Of Rooms available Number of respondents %

0 – 10 11 9.6

11 – 20 49 42.9

21-30 41 35.9

≥ 31 13 11.6

Total 114 100

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Table-2: Investment incurred by selected hotels

Investment
Number of respondents %
(in Crores)
≤5 46 40.4
6-10 51 44.7
11-15 12 10.5
≥ 16 05 4.4
Total 114 100

Table -3: Annual sales of selected hotels

Annual Sales
Number of respondents %
(in Lakhs)
≤ 25 42 36.9
26-50 52 45.6
51-75 14 12.3
≥ 76 06 5.2
Total 114 100

Table-4: Period of existence of sample hotels

Number of years of existence Number of hotels %

0-5
11 9.6
6-10
11 9.6
11-15
54 47.4
16-20
33 28.9
Above 21
5 3.5
Total 114 100

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Table-5: Employee size of sample hotels

Number of employees Number of hotels %

0-25
21 18.4
26-50
57 50.0
51-75
21 18.4
76-100
11 9.6
Above 100
4 3.5
Total 114 100

Table -6: Number of rooms available Vs Annual Sales of the Hotels

Number of rooms
Annual Sales
available χ2-value
(in Lakhs)
≤ 20 >20
≤ 25 31 11
15.110*
>25 29 43
* Significant at 0.05 level

Table -7: Investment Vs Annual Sales of the Hotels

Annual Sales
Investment (in Crores)
(in Lakhs) χ2-value
≤5 >5
≤ 25 28 14
24.166*
>25 18 54
* Significant at 0.05 level

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Table- 8: Services offered by hotels

No. Of Respondents

Type of Services Offered YES NO

f % f %

Reception 102 89.5 12 10.5

Boarding 94 82.5 20 17.5
Lodging 65 57.0 49 43.0
Entertainment 56 49.1 58 50.9
Personal care 45 39.4 69 60.6
Shopping 74 64.9 40 35.1
Communication 105 92.1 09 7.9

Table-9: Opinion on Pricing compared to competitors

Hotel (N=114)
Response
Mean SD

Opinion on Pricing compared to competitors 2.47 1.099

5 point scale: 1- Very High……………. 5- very low

Table-10: Distribution of Service

No. Of Respondents(N=114)
Service distribution YES NO
f % f %
Through internet 68 59.6 46 40.4

Delivery at door step 28 24.5 86 75.5

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Table-11: Promotion of Services in TV channels

No. Of Respondents(N=114)
Promotion YES NO
f % f %
Sponsoring programmes
73 64.0 41 36.0
Highlighting firm by the specific
38 33.3 76 66.7
Services in advertisements

Table-12: Availability of Marketing and PR department

No. Of Respondents(N=114)
Promotion YES NO
f % f %
Marketing department 49 42.9 65 57.1
Public Relation Department 114 100 0 0

Table -13: Techniques adopted for Motivation of employees

No. Of Respondents (N=114)

Motivation Techniques f %

Continuous performance appraisal 23 20.2

Rewards 45 39.5

Awards 46 40.3

Table 14: Same Service delivery to all customers

No. Of Respondents (N=114)
Response
F %

YES 79.8
91

NO 20.2
23

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Table -15: Physical evidence of Hotels

No. Of Respondents (N=114)

Infrastructure Facilities f %

Availability of reception counter 110 96.5

Displaying Names and Qualifications of staff 70 61.4

members
Appearance of staff members in uniforms 91 79.8

Segregation into departments 84 73.7

Provision of well-equipped Cabins to staff members 91 79

Furnishing the building with A/C, Lighting & 98 85.9

Ventilation
Availability of House-keeping Department 109 95.6

Availability of Branches 50 43.9

Table -16: customer’s involvement in enquiring delivery process

No. Of Respondents (N=114)
Response
F %

YES 64.9
74

NO 35.1
40

Table 17: Explaining the process of service delivery to customers

No. Of Respondents (N=114)

Motivation Techniques f %

Reception staff 88 77.2

Marketing / PR Personnel 10 8.8

Administrative Personnel 16 14.0

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Table -18: Mean ranks of Marketing Mix variables

No of Respondents (N=114)
Marketing mix

variables Mean Rank Rank SD

Product/ Service 4.10 4 1.729

Price 2.88 1 1.500

Place 4.17 5 1.784

Promotion 3.33 3 1.572

People 5.15 6 1.934

Physical evidence 3.12 2 2.293

Process 5.25 7 1.703

Table -19: Approach towards marketing practices-Friedman test

Friedman Test

Hotel (N=114)
Statement

Marketing helps the organization to build image 2.85

Marketing can increase productivity of organization 3.44
Marketing creates awareness about wellness programmes 3.27
Marketing helps to generate revenue 3.77
Marketing helps customer to select best service organization 3.82
Marketing provides scope for organization expansion 3.85

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