Mobile Marketing in Hotels

Mobile Marketing

The Utility of Mobile Marketing in the Hospitality Industry:

An Evidence Based Approach

What is Marketing?

Categories of Demand

Hospitality Marketing

Mobile Marketing

Case Study Questions and Data Collection

Issues in Application of Mobile Marketing

Mark Twain once quipped that, "Many a small thing has been made large by the right kind of advertising. The truth of this maxim is as true in today's marketing reality as ever. Marketing can be understood primarily as a business philosophy that puts the customer first. From this perspective, the primary goal of hospitality businesses should be to create and retain satisfied customers. This concept proposes that satisfying customers' needs and wants should be at the center of an organization's decision-making process. Professional marketers believe that this customer focus is the responsibility of everybody in the organization. Adopting this philosophy requires a total management commitment to the customer, and companies that pursue this approach can be described as having a customer orientation.

One new area to better serve the customer through the distribution of information and discounts is mobile marketing. With the proliferation of mobile device the hospitality industry is going through a gradual transformation as it adapts to this new technology. Literature on the benefits of this technique can be extremely beneficial to industry efforts. Furthermore, an awareness of the issues that must be addressed can help ease the adoption of this novel technique. This paper will present extensive interviews and data analysis performed of the hospitality industry's use of the technology to elucidate key themes regarding mobile marketing.

What is Marketing?

Originally a market was a meeting place where people could buy and sell produce, and of course this type of market still exists today. In modern societies a 'market' is much more complex, but retains the core principles of bringing together buyers and sellers with common interests. This modern concept of the market is based on groups of people who have similar needs and wants (actual and potential buyers or consumers), and companies that aim to satisfy the consumers' needs and wants better than their competitors (an industry). Needs can range from the basic requirements for survival -- food, shelter, safety -- to much more complex social needs, such as belonging and recognition (Singh, 2011). Wants are how different people choose to satisfy their needs, and are shaped by culture and personality. Hence people with similar needs, for example the need to travel for a family event and stay overnight, can have different wants -- some may stay with relatives while others book their own hotel accommodation. Obviously, a major limitation on how people can satisfy their wants is what they can afford (Gleanster, 2011).

Consumers have to make buying choices based on their own resources or buying power. Consumers will often buy the best bundle of benefits provided by a product, for the price that can be afforded. The combined purchase decisions of all the individuals buying a product (or service) is described as market demand. Market demand is normally measured using two criteria: 1) The number of units sold, which is a reflection of the number of people buying the product or service; this is called the volume and 2) How much people have paid for the product; this is called the value. Individuals can choose different ways to satisfy similar needs (Nester and Alt, 2003). Not everyone wants the same bundle of benefits, and this creates sub-markets, or market segments, within the overall market. In hospitality markets, luxury, mid-market and budget market segments represent different bundles of benefits sought by different groups of customers. Over a period of time the volume and the value of market segments can increase or fall, depending upon a wide range of factors. Market supply can also be measured, and this is called the industry capacity. In the hotel market, the number of hotels and bedrooms in an area is called the market capacity. If the number of hotels and bedrooms is increasing, because new hotels or bedroom extensions have been built, then the market capacity increases. In the hospitality industry, market supply is often categorized under the same headings as market demand segments; so the luxury, mid-market and budget classifications are used to describe the different types of operations serving those market segments. Other ways of categorizing hospitality market supply include: Tourist board, motoring, or other, organization ratings for hotels and restaurants (e.g. star rating classification) Purpose of travel (leisure or business) Niche markets (youth action adventure holidays, conferences or gourmet food). The level of market demand and the amount of industry capacity is a crucial factor underpinning the profitability of hospitality: When market demand is consistently high and industry capacity low, the hospitality business should be operating at high capacity and be profitable. When demand fluctuates and industry capacity is high, the hospitality business will be operating in a highly competitive environment and profitability will rise and fall (Rask and Dholakia, 2000).

Categories of demand

One way to think about marketing is to view it as the art and science of managing customer demand. Negative demand exists where consumers positively dislike a product -- e.g. An unpopular food or drink product. The marketing response is to encourage demand by educating consumers about the positive features of, or benefits from, the product. You can often witness free tastings of food and drink products in supermarkets and wine shops, which enable potential customers to see, taste and buy the product. Where there is no demand, the marketing task is to create demand. Raising awareness by advertising and public relations activity to demonstrate a product's positive attributes will help to educate consumers, and encourage them to sample the product (Brown and Chalmers, 2003). Latent demand means that demand would exist if there were a product/service available to meet consumer needs. The development of domestic short breaks as a hotel product was originally based on consumers' increasing affluence and available leisure time. Where demand is falling, the task is to revitalize demand. This situation can occur when a product/service is beginning to lose its appeal. Marketers need to research the reasons why the product no longer meets consumers' needs, reformulate the offer and re-launch the product to stimulate consumer interests and revitalize demand. Irregular demand can be described in hospitality markets as the seasonality of demand. In these situations, companies strive to develop marketing strategies to synchronize demand over the high and low seasons, often using price-led promotions. Full demand occurs when actual demand matches the desired demand, and the marketing task is to maintain current demand. In hospitality markets full demand rarely occurs, since competitors are likely to enter attractive markets and disturb the equilibrium. If there is too much (or overfull) demand, the service operation will not be able to cope and there is likely to be considerable customer dissatisfaction. The hospitality marketer will aim to reduce demand either by increasing prices or by managing the booking/queuing process to prevent overfull demand. A long-term solution to overfull demand is to increase capacity by building more bedrooms or extending the seating area in a restaurant, but managers need to be confident that overfull demand will be sustained. Unwholesome demand can occur when illegal activities such as drug taking, gambling or prostitution are taking place on the hospitality premises. Management clearly has a legal and ethical duty to try and inhibit or destroy unwholesome demand; however, this can be a difficult situation when customers are willingly involved (Krum, 2010). In short, a proper appreciation of the nature of demand is critical in establishing effective marketing.

Hospitality Marketing

Market demand in hospitality can be broadly described under four key headings: 1) Business travel demand includes all those journeys business people make to meet customers and suppliers, and attend conferences, exhibitions and seminars. Business travel does not include the daily journeys people make when commuting to work; 2) Leisure travel demand includes journeys where people travel away from home for amusement, entertainment or relaxation -- for example, holidays, weekend breaks, or same-day visits; 3) Domestic travel demand includes all the travel generated within a country by people living in that country -- so, for example, the domestic demand for business travel in Australia is all business journeys taken in Australia by people living in Australia and 4) International travel demand includes all the journeys generated to a country from people living in other countries (Brown and Chalmers, 2003). France is one of the most popular tourist destinations, and attracts international visitors from all over the world. Some types of travel do not fit easily into these broad categories. People often combine business and holidays in the same trip. However, these are convenient descriptions which tourist and hospitality organizations use. In short, hotel marketing exists to meet the reasonable demands of customers in order to make profits in a series of hotel operations and sales activities. Hotel marketing's aim is to meet the reasonable demands of the customs and the ultimate goal is get more profit for the hotel. What separates hospitality marketing is that while most industries sell products to customers, hotels sell service, comfort and convenience (Singh, 2011).

Mobile Marketing

The mobile market has revolutionized the way we go about our daily business. From checking our email, doing our banking, getting involved in social media and even operating our automobiles, mobile devices are essentially becoming the world's remote control. But what about businesses, and their use of these mobile devices? Companies from all over the world are coming together to create mobile tools which increase business utility and increase overall business value (Gleanster, 2011). This report covers a few of those utilities and the businesses that have made excellent use of mobile devices to generate value. The hospitality industry is taking full advantage of the many mobile utilities and there is no clear point in time where this is going to end. Eventually everything you do will have some form of mobile application that allows you to take your experiences with a business to a next level. These applications give people a sense of participation in the forefront of technology. As a result of this, those users can also gain a sense of affiliation with what they are using them for, making them feel like a part of that business (Gleanster, 2011b).

Propelled by the arrival of new technological innovations, the prevalence of personal mobile devices and the continuing business need to do more with less, mobile marketing in the United States is going mainstream. According to Gleanster, Acuity Mobile found that 89% of major brands were planning to market via mobile in 2008, and nearly one-third of those brands were planning to spend greater than 10% of their marketing budgets on mobile (Gleanster, 2011a). Research by Nielsen Mobile shows the extent of the penetration of mobile devices in American society: In the fourth quarter of 2008 there were 109 million subscribers to the mobile Internet; 44 million of them had used the mobile Internet within the previous 30 days. U.S. mobile advertising revenues (search and display) will grow to $3.1 billion in 2013, from $160 million in 2008, representing a compound annual growth rate of 81.2%. During the same period, the firm forecasts mobile local search advertising revenues will increase from $20 million to $1.3 billion, an annual growth rate of 130.5% (Heinonen and Standvik, 2003).

Unlike the Internet revolution when home computers helped drive the development of online marketing, mobile devices are already in the hands of millions of people in the United States, so a ready market already exists. Attracted by high response rates and the relatively low cost of campaign deployment, early adopters are seeing encouraging results from well-designed and well-executed mobile marketing promotions. These mobile trailblazers represent well-known major brands and a wide cross-section of industries, including restaurants, online and offline retailers, auto manufacturers, consumer electronics, travel and entertainment, casinos, and political campaigns. As companies realize the full potential of mobile marketing and expand the size of their mobile marketing budgets accordingly, the need for specialized talent in this young and burgeoning industry will grow (Krum, 2010).

Case-Study Questions And Data Collection

Mobile services seem to be an apparent choice for travel and tourism as the travelers are on the move, which is the first criterion for mobile services to be relevant to the hospitality industry. The travel and tourism industry, which is one of the largest and most rapidly expanding industries in the world and one of the significant users of technology in its operations, will undoubtedly be a significant market place for mobile services. It can be assumed that travellers' and tourists' lives will be enhanced by smart services accessible via mobile devices anywhere and anytime. Intelligent software technologies will allow mobile services to be personalized and context-aware to improve travelers' and tourists' experiences. In order to better understand these trends, this work look to answer three questions: 1) How do hotels apply mobile marketing? 2) What are the benefits of mobile marketing for hotels? And 3) What are the issues to consider in order to apply the mobile marketing in hotels?

In order to asses and understand these trends a series of interviews were conducted with 6 small hotels (5 of them 4 star and 1 of them 5 star) in order to facilitate within-case and cross-case data analysis of the impact of mobile technology on their business. This study is a pioneering research, therefore, exploratory research purpose was applied. This type of research purpose should be employed when the researched problem has not been precisely defined so far and needs to be clarified. The work seeks to determine and explain the hospitality industry's usage of mobile marketing and provide new information about the benefits and problem areas. Different strategies can be used when carrying out the research in business area. Yin enumerates them as case study, experiment, survey, history and archival records (Yin, 1994). For this work, case study and survey could be taken into consideration, as all other strategies did not enable collecting appropriate data for the research questions.

The choice of the research strategy is influenced by the formulation of the research problem and the research questions. Case study is preferred for research questions starting with "how" or "why" aiming to provide explanations about the problem area, while survey is relevant for research questions starting with "who," "what," "where," "how many" or "how much" focusing on describing the examined phenomenon (Yin, 1994). Formulation of research questions in this thesis (starting with "how") supported the choice of case study instead of survey. Survey enables researching a large sample size in an economic way, but the data are usually not as wide-ranging as if they were collected using another research strategy. On the other hand, case study does not allow collecting data from a large sample, but offers to gain deep understanding of the problem and researching many variables. Because of the above stated reasons, case study research strategy was employed.

The scope of this paper did not allow collecting data from a large sample of hospitality providers. Still, conducting only one case study was also not suitable, as single case study should be employed, when it represents either extreme or unique case, critical case that can test a well-formulated theory, or revelatory case that provides an opportunity to research so far inaccessible problem area (Yin, 1994). None of the options applied for this thesis, therefore multiple case studies were carried out and compared, as their findings are usually considered to be more credible and solid. Moreover, multiple case studies enable comparison among the cases and increase the research validity (Yin, 1994).

For selecting cases, probability methods, which are based on the concept of random selection -- a controlled procedure that assures that each element of total population is given a known nonzero chance of selection, could not be applied in this work, because it was not feasible to embrace all the hospitality providers using mobile marketing. This group is very large and it is changing constantly. Instead non-probability methods were employed. Three content providers were chosen by the researchers for conducting the case studies. They were chosen by convenience selection method, which means selecting cases according to their availability and accessibility for the researchers, using personal contacts. The reason for applying this type of selection methods was mainly the availability of such contacts and expected willingness to provide data.

In order to answer the research questions of this work, content providers that were selected for case studies needed to meet several criteria. First, they had to be involved in mobile marketing for their hotel. This condition should have ensured that the content providers had experience with different types of mobile media, they were knowledgeable about marketing and were able to assess its advantages and disadvantages. Furthermore, running marketing ventures should have been the primary job for hotels, so that they were highly involved in performance of their platforms and tried to achieve the best results for them.

For the exploratory studies such as this one, the qualitative methods for data collection and analysis are appropriate, as they frequently work with a smaller sample size that enables gaining deeper insight into the problem. Due to the small amount of researched subjects, generalization is usually not possible. Moreover, data collected in the research were not suitable for statistical processing, but they required categorization and interpretation, which is also characteristic for qualitative methods (Saunders, Lewis, Thornhill, 2000:378). Therefore, this study employed qualitative methods.

Data were collected by interviews with people responsible for choosing, implementing and evaluation of mobile marketing in the chosen subjects and by observation of their marketing. Interviews were chosen, as they enable acquiring in-depth data and are suitable for qualitative analysis. In the study, interviews were conducted by telephone or during personal meeting. All interviews were recorded and were semi-structured, which means that list of themes and questions needed to be covered was prepared, but it was possible to make variations in every interview according to the actual needs. This way it was possible to compare the interviews, but also adapt their flow to the new information learnt during the interview.

Questions were asked according to an interview guide, which was prepared in advance in order to cover all topics connected to research questions of this work. In the beginning, interviewees were encouraged to describe their hotels and introductory questions were asked. Even though these questions were not directly connected with any research questions, they were important for understanding the hotel's focus, visitors, business model etc. If necessary, sequence of questions from the interview guide was changed to keep continuous flow of the interview. Apart from interviews, observation at the hotel and of their mobile marketing was applied. Due to the observation, it was possible to verify data collected at the interviews and find out additional information about their marketing and other forms of advertising.

Case Study Analysis

Data in multiple-case studies can be investigated through within-case and cross-case analysis. In the within-case analysis, collected data are compared with the theories in the frame of reference. Within-case analysis was used to find out similarities and differences between the findings from the case study and theoretical background described in the literature overview chapter of this work. Potential discrepancy between findings and theory was analyzed and explanation was sought after. The same structure of within-case analysis was used for all six case studies. After within-case analysis, cross-case analysis, that enables confronting cases and comparing findings from all of them, was used. In the cross-case analysis, findings from the cases were compared.

Two measures are usually taken into account, when the research quality is assessed -- validity and reliability. Validity is concerned with whether the findings are really about what they appear to be about. In order to assure validity, the research methodology and frame of reference for this study were adhered to. Multiple sources of data were used -- six professionals involved in hotel marketing were interviewed and also their marketing materials were observed in order to verify the data provided by the informants. External validity - specifying the area, in which the conclusions from the study can be generalized (Yin, 1994) -- had to be also taken into consideration because of the small number of informants. Three content providers, that were interviewed, cannot represent precisely all hotel marketers using mobile technology.

The chosen informants were affected by their backgrounds, type of business models they had, or opportunities offered at the market(s) they were active at. These factors had also impact on research reliability - assuring that the same results would be achieved when conducting another research. For strengthening the reliability of the research, the same interview guide was used for all interviews, which were recorded and analyzed by two researchers in order not to miss out important information and to reduce interviewer bias and errors. Though it is not possible to generalize the findings and conclusions of this research to all mobile marketing, the research provides in-depth insight into the problem area and offers new perspective to the companies considering the technology. The work can be also used as a basis for further studies about the topic.

Results

Interview 1

Interview 2

Interview 3

Interview 4

Interview 5

Interview 6

Current Relevance

Future Relevance

Utility of iPhone Application

Serves to Expand Relationship with Guest

Helps Acquire New Guests

Distributes Information

Use SMS

Beneficial

Problematic

Key: (+): Affirmative; (++): Very much so: (-): Negative; ( -- ) Very much no.

All six hotel employees involved in mobile marketing expressed positive support for the future value of mobile marketing in the hospitality industry. This trend was mostly due to the ubiquity of mobile applications in modern society, whether as phone or tablets. What varied significantly was the degree to which the technology was useful in the current market. While one interviewer found mobile marketing extremely useful, one found it not very important. The average user did find it mildly useful. This response may be a reaction to how the technology is implemented. The two general uses for mobile marketing appeared to be in the distribution of hotel information and in serving as a direct means of room bookings for the hotel.

The distribution of hotel information was one place that everyone interviewed agreed. The type of information did vary, however. Some interviewers used the technology to distribute restaurant information, sales and event news to existing customers while others merely focused on in hotel-information. Other interviewers sought to attract new customers and expand their relationship with existing customers through the use of mobile marketing.

Another relevant field of analysis focused on the benefits and disadvantages of mobile marketing. Only three interviewers found that mobile marketing technology affected their business and only one found that it had a significant impact. Half of those interviewers saw now impact and one was considered discontinuing its use. One area that at times led to difficulties was in implementation. The importance of using a professional service to establish the platform and to maintain it was highlighted by the interviewers. This led to better coordination with platforms, such as Apple, in developing the iPhone application and better quality outcomes.

Issues in Application of Mobile Marketing

Mobile marketing is a topic of growing interest and importance. While the evidence of mobile marketing effectiveness is still scarce, marketers around the world are spending increasing amounts of money on marketing activities in mobile media. This is due, in large part, to the fact that companies are seeking ways to get better value for their marketing investments in rapidly changing marketing communications environment. Mass markets have fragmented, and therefore impersonal mass communication, especially media advertising, has become less effective whereas targeted one-to-one marketing communications have become more important.

Prompted by highly publicized over-optimistic predictions of future success of mobile marketing and the success stories of mobile marketing campaigns, academic research on mobile marketing is snowballing. While prior research have provided useful insights into mobile marketing, our understanding of mobile marketing strategy formulation and implementation remains deficient. In short, more insights into the emerging mobile marketing value system are needed in order to exploit the full potential of mobile marketing opportunities. Against this backdrop, the value of interviewing those in the hospitality industry implementing mobile marketing strategy is valuable. Many scholars have noted that marketing communications in mobile media has, implicitly or explicitly, been conceptualized as (1) mobile marketing, (2) mobile advertising, (3) wireless marketing, and (4) wireless advertising. In a recent commentary, Mobile Marketing Association (2006, p. 22) defined mobile marketing as "the use of wireless media as an integrated content delivery and direct-response vehicle within a cross-media marketing communications program." We adopt their definition in this article and highlight its emphasis on two-way communications and integration of mobile media into a cross-media marketing communications program.

Advertising is defined as any paid form of nonpersonal presentation and promotion of products, services, or ideas by an identified sponsor (Singh, 2011). This definition and many others suggest that advertising uses mass media. However, nowadays the meaning of mass media is blurred. That is, advertising can be made also in mobile media that is not a mass media in the same sense as television, radio or press. Thus, a wide variety of mobile advertising formats can be identified.

Sales promotion refers to short-term incentives to encourage the purchase or sale of a product or service. This definition, like definitions of sales promotion in general, tends to emphasize its financial incentive elements but ignore other marketing communications aspects (Krum, 2011). Sales promotions are marketing communications activities used to encourage the trade and/or end customer to purchase or take other relevant action by affecting the perceived value of the product being promoted or to otherwise motivate action to be taken. This definition suggests that action can take the form of purchase or other acceptable outcomes. This notion is very important when examining sales promotions in mobile marketing context. Broadly speaking, there is a wide variety of possible activities that can be classified as sales promotions in mobile marketing. Thus, the following categorization should not be considered as comprehensive but rather it is intended to represent the most common promotional activities in mobile marketing context.