Fight the Economic Storm with Marketing and Sales Strategies: Part 2

For hospitality companies, the storm that has hit US consumers is what matters most these days thanks to elevated food and fuel prices, troubled credit market conditions, and excessive consumer debt levels. That means that hospitality companies not only have to shield themselves from an economic downturn, they also must undertake measures to adjust to a changed business environment due to a rise in supply of new hotel rooms despite declining occupancy rates and overall demand. As consumers spend less, hospitality companies are faced with the challenge of cutting costs while finding ways to increase demand.

In part one of this report, Deloitte examined the circumstances surrounding the state of the U.S. economy with the suggestion that operators can implement four key sales and marketing initiatives in an effort to increase room demand while decreasing costs. Part one looked at optimizing performance capabilities; part two will examine how to improve spending effectiveness across sales and marketing channels and how to re-evaluate customer segments and touchpoints.

2. Improving spend effectiveness across sales and marketing channels
In addition to better budgeting and better calculation of marketing spend, companies may want to optimize their targeting efforts across their sales and marketing channels. Ideally, one key role of marketing is to help drive the prospective customer to a lead-generation "source/widget." The leads can then be picked up by the sales team and developed into pursuits. The measurement of the success of this approach is the effectiveness of the marketing and sales activity to reach the targeted audience and drive action. Two key opportunities that can help an organization improve its sales and marketing channels are:

• Identify emerging cost-effective channels. For some time now, travel has been the most popular product sold online, accounting for around 35-40% of total online retail revenue. Yet the industry as a whole has been slow to allocate significant marketing dollars to online marketing and sales activities. The Internet should not only be viewed as a distribution tool but also as a platform to engage and interact with the customer on a more personal level.
  
  User-generated content, including blogs, wikis, special-interest online groups; audio and video podcasts; mobile phones, PDAs and iPods; and Web sites such as MySpace, Facebook, and YouTube should be considered as alternative marketing platforms that could help differentiate brands at a discount to traditional marketing and sales channels.
• Shop for the best deals. Economic downturns and recessions may be the perfect time to renegotiate marketing/advertising contracts and vendor relationships. Hospitality companies have the opportunity to use market conditions to re-negotiate lower prices, especially when it comes to agencies (e.g., advertising agencies, event planners), sourcing, and media buy. Many hospitality companies have long relied on relationships based on pre-negotiated prices, but now may be the perfect time to re-evaluate and re-negotiate.

3. Re-evaluating customer segments and touch-points
The customer is changing, and travel-oriented companies need to be proactive, not reactive, in their outreach in order to prevail in a difficult environment. Economic pressures and the corresponding pullbacks in personal and business travel are creating a need for companies to reevaluate their understanding and classification of their customers.

Business travelers are the industry's leading sources of revenue. Yet in this slowdown, corporations are cutting discretionary costs, including business travel. Business travelers are also changing their traveling behavior to help their companies reduce spending: choosing to fly in coach, staying at less expensive hotels, or reducing business travel altogether and opting for cheaper alternatives such as video conferencing.

In addition, many companies are experimenting with changes in their travel spending habits in three important ways. First, companies with corporate offices located around the world are installing video/web conferencing capabilities and are conducting meetings over the Internet, using available services. Second, companies are mandating that more day trips be taken, where travelers fly in and out the same day to avoid a hotel stay. Third, companies have decreased the number of conventions and conferences that their employees can attend.

Leisure travelers also are changing. In particular, micro-groups of consumers, including those who are eco-conscious, health-oriented, ultra-wealthy, or interested in "doing good" while away, are turning into profitable sources of income for certain hospitality companies.

These changing behaviors and emerging trends offer challenges and opportunities to hospitality companies. In particular, a decrease in business travel translates into substantial revenue loss. Some key opportunities to help an organization improve its customer touch points include:

• Address and evaluate changes in customer segmentation. The traditional model of customer segmentation is changing and is becoming less relevant with the new economic realities and changing consumer lifestyles. Additionally, historical segmentation analysis may be outdated as targeted consumers cascade downward into lower segments based on changes in behavior and economics. As current customer segmentation and profiles become obsolete, companies should re-think how to best segment their customer base and perhaps re-target different demographics to make up for the loss of customers and revenue. Companies should consider customer psychographics as well.
• Develop a new customer segmentation strategy. With customer behaviors and economic positions changing, now is the time to respond. Hospitality companies should consider re-focusing their efforts on creating segments that are more targeted to their preferred customer base. Improved customer segmentation can enable marketing and sales functions to target and reach customers in a more cost-effective and efficient manner.

Fight the Economic Storm with Marketing and Sales Strategies: Part 1

Fight the Economic Storm with Marketing and Sales Strategies: Part 3

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