Distribution channel agency agreement form of contractual navy. Channels of distribution of the tourist product. Electronic commerce. Selling tours directly to end consumers via the Internet is on the rise
When selling a tourist product, first of all, it is necessary to decide on the method of marketing - through intermediaries (indirect marketing) or without their participation (direct marketing). In other words, the travel company must choose a marketing channel for itself.
A distribution channel is “a set of firms or individuals that assume or help transfer to someone else the ownership of a particular good or service on its way from producer to consumer2. The distribution channel is "the path of movement of goods from the manufacturer to the final consumer" Krylova G.D., Sokolova M.I. Marketing. Theory and 86 situations: Proc. allowance for universities. M., 2009. S. 173.
Depending on the number of intermediaries, four types of traditional distribution channels are distinguished, which are indicated by the level. The level of the distribution channel is understood as "any intermediary on the way of the tourist product from the enterprise to the final consumer" Ibid. 174..
A tourism enterprise may organize direct sales of its own tourism product to consumers, organize sales through travel agencies, or use a combination of several distribution channels:
- 1) Zero level channel(direct marketing channel) implies the presence of two participants: a tourist enterprise (its branches, representative offices) and a consumer. Organization of direct sales is a traditionally common form of marketing in tourism.
- 2) Single layer channel implies the inclusion of an intermediary - a travel agency.
Travel agency - a separate enterprise, not connected with the main enterprise, specializing in the sale of a tourist product, as a rule, in a certain territory on the basis of contractual obligations to the tour operator.
3) Bi-level channel includes two intermediaries in the form of a travel agent and a travel agency, one of which acts as a retailer and the other as a wholesaler.
In the Russian tourist market, there are two main forms of selling a tourist product: through a tour operator and a travel agent.
tour operator is a tourism enterprise that develops tourist routes, ensures their operation, organizes advertising, calculates prices for tours along these routes in accordance with applicable regulations, and sells tours to travel agents for issuing and selling vouchers under their licenses.
Travel agent is a travel intermediary company engaged in the sale of tours formed by the tour operator. The travel agent purchases tours from the tour operator and sells the tourist product to the buyer, or acts as an intermediary between the tourist and the tour operator for a commission provided by the tour operator. At the same time, the sale of individual tourist services to tourists is not prohibited by law. For example, booking only a hotel stay or only a flight. However, the arrangement of such services into a finished tour is already a tour operator's activity.
Control over the work of travel agents - intermediaries is based on the assessment indicators of their sales activity:
- ? fulfillment of the sales norm;
- ? maintaining the level inventory,
- ?? promptness of delivery to the customer;
- ?? level of service to the consumer.
Comparative evaluation makes it possible to identify the best employees with their subsequent remuneration in the form of bonuses. To motivate employees, competitions can be held for the best forms of service, attracting new customers, etc. and awarding prizes. Summing up the results of the year, as well as competitions, often takes the form solemn ceremony, public recognition of merit, and success.
To determine the optimal number of intermediaries, it is necessary to resolve the issue of choosing a marketing strategy.
There are three types strategies:
- 1. Intensive sales.
- 2. Exceptional sales.
- 3. Selective marketing.
The choice of a strategy option depends on the characteristics of the product, the volume and goals of sales, the company's market strategy, product positioning, competitors' practices, and the desired degree of manufacturer's control over the work of the intermediary.
Intensive sales is a marketing strategy for goods and services intended for a wide range of consumers. The fulfillment of the task of intensive distribution depends on the number of trade enterprises and their location, taking into account the convenience of purchase.
Exceptional Sales organized as the distribution of new goods and services that are positioned as exclusive and expensive. To accomplish this task, the number of intermediaries is limited, giving them the exclusive right to sell the product.
selective marketing involves optimizing the number of intermediaries in such a way as to provide the required market coverage and at the same time control the work of the wholesaler or retailer. This strategy is not related to the positioning of goods as unique, prestigious, and the sales organization is at an average level or slightly higher.
In the practice of tourism organizations, two directions for the formation of sales channels are distinguished: external channels (foreign) and internal.
External distribution channels- this is a certain number of foreign travel intermediary firms (tour operators, travel agents) that have assumed, according to the contract, the obligation to sell tourist trips to this country in their country.
Internal distribution channels- this is a system of branches and intermediary organizations through which various tourist services are sold on the territory of the country itself (regardless of who they are sold to - citizens of the country or foreigners located on the territory of this country) The essence and features of marketing in tourism / article from the Tourlib website .net", access mode: http://tourlib.net/books_tourism/kvartalnov_tourism13.htm.
The marketing strategy involves the integrated use of both internal and external distribution channels. But their role, depending on the nature of the services provided, is different. If the tourist organization specializes in selling comprehensive service, its sales apparatus should mainly focus on foreign intermediaries. You can open your own agencies and representative offices abroad, as the giants of the tourism business do, but this is associated with large foreign exchange costs. For medium-sized firms to sell their services abroad, it is much more profitable to use tourist organizations that have taken a strong position in the local tourist market and have extensive experience in such work.
The formation of an external sales apparatus should be understood as the establishment on the basis of an agreement or contract of partnerships with foreign travel companies. Therefore, their study (assessment of business qualities and interest in cooperation with domestic firms) is the most important condition for the effective functioning of this apparatus. If a travel company produces individual tourist services in large volumes, it is preferable for it to have a more developed internal sales apparatus.
The tourist market is a system of economic relations in which the process of exchanging tourist and excursion services into money and the reverse exchange of money into tourist and excursion services takes place.
In other words, the tourism market is a sphere of manifestation of economic relations between producers and consumers of a tourism product. If the economic interests of the producer and consumer of the tourist product coincide, then the act of buying and selling the tourist product takes place.
The fundamental functions of the tourism market are:
Realization of the value and consumer value contained in the tourist product.
Organization of the process of bringing the tourist product to the consumer (tourist).
Economic provision of material incentives to work.
In the process of performing the first function by the tourist market, there is a movement of value, which is reflected through the exchange: money is a tourist product.
The completion of this exchange means the completion of the act of commodity-money relations, the realization of the value contained in the tourist product, and public acceptance its consumer value. As a result, the normal course of social reproduction is ensured, funds appear and accumulate for the development of the tourism industry.
The function of organizing the process of bringing the tourist product to the consumer is carried out through the creation of a network of travel agents and tour operators for its implementation.
Function economic support material incentives to work lies in the fact that in the process of exchange "money is a tourist product" in the tourist market, distribution as a necessary phase of reproduction appears in its final form. Employees of a travel company, who receive monetary remuneration for their work, are provided with material incentives to improve the quality and increase the quantity of the tourist product, and to produce it in accordance with the needs of consumers.
The tourist market is characterized by the presence of entities, that is, legal entities and individuals who are producers and consumers of the tourist product. Three subjects of the tourism market can be distinguished, namely: the tourists themselves (consumers of the tourism product); tour operators and travel agents.
Functional tasks of tourism market statistics can be presented in the following order:
Collection and processing of statistical information.
Evaluation and analysis of the conjuncture of the market of tourist services.
Characteristics of the market structure.
Evaluation and analysis of market development.
Regional analysis of the tourist services market.
Characterization of the economic and social consequences of the development of the tourist services market.
The main distribution channels of the tourist product
Bringing the tourist product to the appropriate consumers is the most important stage of implementation marketing strategy tour operator, which largely determines the effectiveness of other marketing efforts.
The distribution system must eliminate the gaps in time, place and ownership that separate the proposed tour from those who would like to use it, ensure the transfer of information, orders and payments.
Unlike other services, the specific nature of a tourist product makes it possible to sell it through intermediaries: the purchase and consumption of a tourist product are delayed in time, and at the time of sale, only the right to receive complex services is transferred to the consumer. At the same time, the sale and promotion of a tourist product are usually associated with large difficulties due to the remoteness of marketing territories. In order to ensure full coverage of target segments, significant financial and technical capabilities, work experience, contacts, etc. are required.
For these reasons, when selling a mass tourist product in remote markets (especially foreign ones), the role of independent intermediaries - operating travel agencies - operators is great. The so-called distribution partners use their experience and capabilities to active sale tours to target consumers.
It is important for the tour operator to know and understand the mechanism for distributing the tourism product he created on the market (Figure 2.)
Figure 2 - Possible marketing channels for the tourist product
The main distribution channels of the tourist product are:
1) Direct sale through own affiliates or agencies. In the territories from which a mass reception of tourists is planned, an own network of retail outlets for tourist products is being created. With all the advantages of this option, most host travel agencies are deprived of the opportunity to use it due to significant financial costs for legal registration, rent and maintenance of the premises, wages personnel, advertising, etc.
2) E-commerce. Selling tours directly to end consumers via the Internet. In the foreign travel industry, this channel is becoming increasingly large. In the Russian Federation, the use is constrained by a small number of Internet users and credit card holders, which are the main means of payment for this method of sale.
3) Sales through independent travel agencies. Travel agencies that have the appropriate state license and have entered into an agreement with the tour operator - the developer of the tour, provide retail sales in a certain territory.
4) Sales through existing independent tour operators. Widely used in international tourism business. A partner tour operator that has a good position in its national (local) market, a large production potential and an interest in the development of the proposed destination, can quickly and cost-effectively promote the tourism product on the market and ensure good sales. In turn, an independent tour operator can use all of these channels to sell the product in its market. The sales network of a tour operator is usually represented by its own branches and wholesale and retail travel agencies, which take blocks of seats in catalog tours for subsequent resale, and travel agencies.
5) Selling through non-traditional distribution channels. Along with the above-mentioned traditional channels for the sale of travel services, non-traditional intermediaries are emerging and actively operating in the tourist market: large international airlines, banks, insurance companies, trading houses, and chain stores. They open their own branches selling tours or integrate with existing travel agencies (Figure 3):
Figure 3 - Non-traditional sales channels for tourism services
The introduction of capital from these industries into the tourism business is facilitated by two conditions: the availability of free funds for development and favorable forecasts for the development of international tourism.
The main advantages of non-traditional sales structures over travel agencies are:
Availability of its own extensive network of branches or points of sale, qualified sales personnel;
Usage international systems booking, automatically providing acceptance and confirmation of the application for the tour;
Direct dependence of tour operators on the support of airlines, banks, insurance companies (they are providers of tourist services).
Criteria for evaluating distribution channels:
Economic: creating your own network is associated with large financial costs, while attracting independent travel agencies allows you to avoid most of the costs.
Form of control: own branches operate under the full control of the tour operator, independent partners can be controlled only within the framework of the concluded agreement;
Market coverage: own branches and agencies sell in a limited sales area, independent partners are constantly expanding the sales market;
Ability to adapt: own network makes it possible to pursue a flexible policy and quickly adapt to changes in the conjuncture, independent partners, due to their own goals, limited resources, insufficient staff qualifications, do not always accept the policy of the tour operator.
Depending on the specialization, the specifics of the target tourist market, the volume of sales of the tourist product and a number of other conditions, tour operators use various sales channels. Often, distribution channels are combined in order to reach different market segments.
Sometimes channel integration may be required, for example:
Possibility to order a tour via the Internet and receive a voucher in a place convenient for the client;
Possibility to return a voucher ordered via the Internet through the nearest agency;
When receiving a discount, accounting for both online and offline purchases.
2. Wholesale and retail intermediaries in the marketing of the tourist product
According to the nature of the operations of intermediaries in the sale of tourist products, they are divided into wholesale and retail.
Retail trade is understood as activities related to the sale of travel services to end consumers - tourists.
Wholesale trade is the activity of selling tourism services to companies that purchase them for the purpose of obtaining commercial benefits.
Retail travel agencies work on the basis of direct contracts with clients to whom they sell inclusive tours, as well as the services of passenger transportation companies, hotels and other tourism service enterprises of which they are agents.
The only source of income for the travel agency is commission on sales. In this regard, retail intermediaries have a pronounced dependence on the policies of tour operators and large enterprises tourism industry.
Retail travel agencies play an important role in the market, as most of the tourist trips are sold through them. As a rule, these are small enterprises with insignificant capital and a local market of action.
Cooperation between the tour operator and independent travel agencies is formalized by an agency agreement. In accordance with the agreement, the tour operator receives, and the travel agent assumes the obligation to sell, under his own responsibility, tours developed by the tour operator. In particular, the travel agent:
Incurs the costs associated with organizing the promotion and sale of tours in the local tourist market (ensuring the activities of the travel agency itself, advertising and other marketing activities);
Accepts responsibility to its customers for receiving proper service in accordance with the declared conditions of the purchased tours.
Main terms of the agency agreement:
1) The volume of sales to be carried out by the travel agency (the number and cost of tours sold) can be defined in two ways:
Application based. In the case of a client's request, the travel agent sends an appropriate application to the tour operator. The latter, subject to availability on the tour, confirms the booking to the travel agent. With this method, the agent does not assume obligations in relation to sales volumes, but the tour operator does not guarantee the fulfillment of the application to the agent.
Based on a fixed quota of places in organized tours. Places are transferred to the full disposal of the travel agent. The travel agent can refuse the full quota of places or part of it only within the established time limits. If the terms of refusal are violated, a penalty is paid. This condition gives the travel agent confidence in confirming the application for booking seats from the quota allocated to him. But on the other hand, the travel agent is financially responsible for the implementation of its quota.
2) Commission - represents a certain percentage of the cost of the sold tour. Usually a differentiated commission is used. When determining the amount of the commission, the following are taken into account:
The degree of financial responsibility assumed by the travel agent;
The volume of realized tours;
Duration and stability of work;
Relationship between travel agent and tour operator (status).
3) Rights and obligations of the parties. The tour operator reserves the right to make changes to the terms of the tour in case of unforeseen circumstances, to cancel the tour if there are not enough seats sold. The travel agent has the right to demand compensation from the tour operator for damages caused to tourists due to improper performance of the tour.
Tour Operator Responsibilities:
Timely informing about the confirmation / non-confirmation of the application for booking the tour;
Registration required documents for travel agency clients (tickets, vouchers, insurance);
Timely submission of documents to foreign consulates for visa processing;
Timely informing about changes and cancellations of the tour;
Ensuring the declared completeness and quality of services in sold tours;
Travel Agent Responsibilities:
Timely submission of applications for booking, documents for registration;
Timely payment and reporting for sold tours;
Informing clients about changes in tours;
Providing customers with full information about the tour and travel conditions.
4) Change and cancellation of booked tours. If changes are made to the booking application, or the application is completely / partially canceled, fines are imposed on the travel agent as a percentage of the tour cost. The amount of penalties depends on the timing of changes and cancellations.
Other retail intermediaries. Tour operators can engage in the sale of tours intermediaries who do not have the status of a travel agency and the corresponding license, but who have a permanent clientele (shops, educational establishments, banks, etc.). In such cases, a commission agreement is drawn up, according to which the intermediary sells tours on behalf of, at the expense and under the responsibility of the tour operator and receives a commission for his services.
Wholesale intermediaries
Wholesale intermediaries in the tourist market of travel services are firms - tour operators, which not only form their own tours, but also carry out large-scale operations to promote and sell purchased serial inclusive or package tours. In fact, tour operators act as generators of organized tourism, including foreign ones.
The main functions of tour operators as intermediaries include:
Promotion of the tourist product on the market: using all possible methods and means to attract the attention of local consumers to the proposed tours;
Organization of the sale of a tourist product through a network of travel agencies;
Adaptation of the tourist product to local conditions (organization of transportation to the starting point of the route and back, registration of a request for a visa, insurance, etc.);
Contacts and negotiations with clients, receiving payment and processing documents for the trip;
Transferring applications to the tour operator-developer and receiving confirmation of booking from him;
Transfer of money and reporting to the tour operator-developer for sold tours;
Work with claims, settlement of customer complaints.
The performance of these functions requires significant capital, the amount of which is determined by the cost of renting premises for offices and trading floors, staff salaries, formation of working capital and marketing expenses, etc. [A.1]
When working on foreign markets, the tour operator forms an external sales network, establishing and implementing cooperation with foreign partners from among the tour operator firms in the direction. At the same time, priority is given to partners that interact with a large number of travel agencies, covering the entire sales territory and having access to target segments. Travel agencies with a limited number of their own or independent travel agencies are unlikely to be able to provide mass promotion and sale of the proposed tourist product.
The internal marketing network is a system of branches, branches and intermediary organizations (tour operators and travel agencies, tourist service bureaus, travel agencies, etc.) through which travel services are sold within their country. At the same time, domestic distribution channels can serve not only compatriots, but also foreigners who have come to the country for a long time for business or private purposes. [6, 288pp.]
As noted above, the specificity of the activity of any tourist enterprise is not only to produce a tourist product, but also, and often first of all, to sell it, thereby determining the final result of all marketing efforts of the
enterprises. Speaking about the sale of a tourist product by one or another enterprise, whether it be directly to the consumer through agency agreements, or directly at the office of the company or outside it, with a direct visit to the enterprise or by phone, we are talking about the marketing (distribution) channels of the tourist enterprise.
Under the marketing (distribution) channel, as defined by F. Kotler, they mean: "a set of firms or individuals that take over or help transfer to someone else the ownership of a particular product or service on their way from producer to consumer". Speaking about the specifics of the tourism business, where a tourism company, as a rule, does not produce specific services (accommodation, transportation, etc.), we can say that any tourism company is itself involved in the distribution channel. However, this is not entirely true, since the tourist product does not consist of one service, but, as we have already said, is a set of services offered by both third-party manufacturers and the travel company itself. Therefore, under the marketing (distribution) channel in tourism, we understand the totality of ways to organize the sale of a tourist product by a tourist enterprise to a consumer.
Sales (distribution) channels in tourism, as in any other industry economic activity, can be characterized by the number of their constituent levels. The level of the distribution channel is understood as any intermediary on the way from the tourist enterprise to the final consumer. On fig. 13.2. a different structure of sales channels of a tourist enterprise is presented.
A tourism enterprise may organize direct sales of its own tourism product to consumers, organize sales through travel agencies located in other regions, or use a combination of several distribution channels.
The organization of direct sales (the most common form of marketing in tourism) or a direct marketing channel implies the presence of two participants: a tourist enterprise (its branches, representative offices, representatives) and a consumer.
Rice. 13.2. Examples of distribution channels for a tourism product
A single-level channel implies the inclusion of one intermediary in the sales process, called a travel agency in tourism. A travel agency is a separate enterprise, not connected with the main enterprise, specializing in the sale of a tourist product, as a rule, in a certain territory on the basis of contractual obligations to the tourist enterprise.
A two-level channel includes two intermediaries in the form of a travel agency and a travel agent, one of which, by analogy with trade, acts as a wholesaler, and the other as a retailer.
With a detailed study of the different structures for marketing a tourism product used by various tourism enterprises, one can find channels with a large number of levels, but they are much less common, since an increase in the levels of the distribution channel reduces the possibility of its management and control.
Speaking about sales channels in tourism, one cannot fail to note the fact that most of them are built on the principle of vertical marketing systems. The use of this principle is primarily due to the specifics of the production of a tourist product; because the tourist enterprise-manufacturer does not produce some impersonal
a product that can be sold and consumed in any region, by any seller or at any time, and therefore, by organizing its own distribution network or using the services of third-party travel agencies, the tourist enterprise seeks to retain control over the distribution channel and ensure its manageability.
In marketing practice, there are several types of vertical marketing systems (Fig. 13.3.).
Rice. 13.3. Types of vertical marketing systems
Corporate BMS is a vertical marketing system in which all successive stages of production and distribution are in single ownership. Such a vertical marketing system is built on the principle of a direct marketing channel and implies the presence of a widely branched own sales network, including branches, representative offices or representatives in various regions, which contribute to a faster and more efficient delivery of the tourist product from the manufacturer to the final consumer. As a rule, only very large companies can create a corporate CPA, since its maintenance requires significant efforts and costs. Examples of corporate Navy can be attributed in our market
Some companies such as JSC "Sputnik", the company "Belarus-tourist", the national corporation "Belintourist", among Western companies, a typical example is the West German company ITS, where almost 74% of sales are carried out by their own bureaus.
Contractual IUDs imply the construction of a distribution channel based on contractual relationships between independent participants. This type of IUD is perhaps the most common today in the tourism business, including our market. The organization of a distribution channel on the principles of a contractual CMC allows its participants to use their advantages most effectively and thereby achieve greater commercial results while reducing the overall level of costs for maintaining the distribution channel. In the practice of using contractual navy, three main types can be distinguished: agency agreement, exclusive agency agreement, and franchising.
Types of contractual IUDs differ from each other in the degree of dependence of the agent on the manufacturing enterprise, and, as a result, in the ability to manage and control the distribution channel.
An agency agreement is the most common form of contractual CPA. Relationships within the framework of an agency agreement are built on the basis of a number of mutual obligations between the enterprise producing the tourist product (tour operator) and the agent.
Typical obligations under an agency agreement include:
obligations to present a tourist product;
price policy;
the nature and procedure of the commission;
Confidentiality;
settlement systems;
responsibility;
procedure for consideration and satisfaction of claims. An exclusive agency agreement is a form of contractual CPA that provides certain privileges to the agent in the implementation of the tour operator's tourist product.
As a rule, such privileges include: assigning a certain territory to a specific agent, granting exclusive rights to a tourist product, exclusive prices and commissions. Exclusive agency agreements, in contrast to agency agreements, are concluded, as a rule, with wholesale agents who build or have their own agent network.
Franchising (license agreement) is a special form of contractual Navy. More common in the organization of food systems (McDonalds) or accommodation (Holiday Inn). In tourism, the most striking example is the construction of the Navy by the German company TUI. Franchising is understood as an agreement under which the agent is transferred not only certain privileges, but also the name of the manufacturer, its trademark. Undoubtedly, in this case, the tour operator imposes more stringent requirements on the agent enterprise, which acts in this case not only on behalf of the manufacturing enterprise, but also under its name.
The third type of vertical marketing systems are managed CMS. Controlled naval forces are such systems where one of the channel participants occupies a prevailing position. The coordination of a series of successive stages in the movement of a product on its way to the consumer is carried out not on the basis of a common belonging to one owner, but due to the size and power of one of its participants. An example of such BMCs is the activities of companies such as Thomas Cook or American Express.
There is no doubt that building a sales channel on the principle of a vertical marketing system is not the only possible one. One of the phenomena inherent in distribution channels has been the willingness of two or more firms to join forces in the joint development of marketing opportunities. Such joint cooperation can be carried out both on a permanent and temporary basis, and sometimes lead to the creation of a joint company. Building a sales channel according to this principle is called a horizontal marketing system.
However, as experience shows foreign countries, when building sales channels, tour operators, as a rule, are not limited to using only one, even well-established, distribution channel. In table. 13.1. the structure of the sales network of the largest tour operators in Germany is presented.
Table. 13.1. Sales network of German tour operators
Such marketing systems are called multi-channel marketing systems.
They try to match supply with demand at the stage of designing a product and activating demand through its promotion or the introduction of an appropriate pricing policy. But the tourist product needs to be effectively sold, which requires the involvement of many intermediary quotes. However, their role is not limited to a technical function. All institutions that are interested in placing a product on the market must come to a common decision in determining the ways of presenting and selling a good or service, as well as identify the groups of buyers who will be offered their consumption. The concept of distribution is close to the concept of sales (implementation), but covers a wider scope of activities. Distribution is understood as any activity related to overcoming temporal and spatial differences associated with consumption and production. Distribution requires continuous transformation of various speech (money, products) and information (negotiations, order, popularization) flows that pass from the producer to the buyer of the tourist product. Such movements create dependencies between producers, intermediaries and consumers, as well as various legal entities and institutions that complement their collaboration.
One of the principles of marketing speaks of the need for the manufacturer of tourist services to control the effectiveness of distribution channels for the final product. This is especially important in the tourism sector, which is dominated by the provision of services, which, based on their properties, makes it impossible to separate sales from consumption, and hence the transfer of economic risk to an intermediary, as CA happens in the distribution of material goods. The choice of sales channels is especially important when a company is starting out or trying to enter a new market segment.
An analysis of the definitions of distribution channels by various authors leads to the conclusion that they can be generalized around two concepts. The traditional concept refers to the market, where the producers themselves or intermediaries are involved in the implementation. In this concept, the distribution channel is understood as the internal structure of the enterprise and external institutions through which the tourist product is sold. "Tourist distribution channel is a chain independent enterprises through which the product or the right to the product is transferred from the manufacturer to the final buyer". So, the distribution channel, on the one hand, is a kind of "product path", on the other hand, a set of elements that participate in its distribution.
However, the above concept does not take into account the participation in the tourism movement of many institutions, in modern marketing are important. This is due to the development of the internal division of labor in enterprises and the decline in the right of individual organizations to conduct a set of special events. Such a choice and transfer of individual components of tourism services to other organizations is a manifestation of the application of functional concentration. Therefore, banks, trade organizations, organizations involved in market research, insurance, advertising, etc. participate in tourism marketing. Various institutions associated with a certain territory also play a significant role in the formation of a tourism product. Giving them authority is a decision to form a distribution channel, which at the same time requires changes in the vision of the essence of the distribution channel.
In general, we can conclude that "a distribution channel (chain) is a complex of constituent parts (institutions or persons) through which the movement of one or more flows of market activity is carried out":
These streams include:
Transfer of ownership of the product;
Promotion of the product;
Product order;
transaction payment;
Acceptance of risk;
Negotiation;
Distribution of market information (fig. 8.1).
As a result, a complex "web" of dependencies and relationships arises between manufacturers, intermediaries and customers, as well as various entities that are directly or indirectly related to the distribution of a product in a particular market (for example, advertising, insurance agencies, consulting, information firms, banks). So, in reality, we are dealing not with one channel, but with a whole network of distribution channels.
The number and intensity of flows may be subject to modifications depending on the type of product and distribution concept. A characteristic feature of the distribution of a tourist product, given its specific characteristics, is the absence of physical transfer in space. The sale takes place mainly in the place of permanent residence of the buyer. This is especially true for basic services such as transportation, accommodation, as well as packages of excursions and recreational services. So this creates "make-to-order" because a product is being implemented that doesn't exist yet. Distribution of a product without presentation, "testing" gives the flow of market information and promotion a special meaning.
Since the sale in the place of permanent residence occurs ahead of the time of consumption, this partially avoids the inconvenience associated with the seasonal shopping rush.
A specific property of the distribution of a tourist product is the absence of a transfer of ownership of it. The travel agency, which, on the basis of the relevant agreement, is an intermediary in the sale of the hotel stock, does not buy it for the purpose of appropriation, but only acts on the market as a representative of the manufacturer, accepting commissions from the sale of services. Kiosks and other facilities that offer bus tickets or tickets for various entertainment events are also such agents or representatives of service providers. Since the intermediaries in the implementation of tourism services cannot appropriate them, they thereby do not risk an unsuccessful offer. Of course, this does not apply to the material components of the tourism product.
This gives rise to such an interesting property in the tourism market: the mass tourist product has the same price, regardless of whether the buyer makes a purchase from an intermediary (for example, a travel agency) or from a manufacturer (for example, in a hotel). The price of the product that the tourist pays is not the increased margin of the intermediary.
The modern tourism market is losing the ability to directly order services from manufacturers, bypassing intermediaries (for example, hotels, airlines, etc.), using the Internet.
From the foregoing, we conclude that a tourism product can be distributed through various distribution channels that have a simple or complex structure. The same product created by one manufacturer can be distributed through different distribution channels not only in different markets, but also in the same market.
Based on the number of specialized sales links, distribution channels can be distinguished as short (with a small number of links or completely devoid of intermediaries) and long (with a large number of intermediary structures).
Since the number of intermediaries in the distribution channels of a tourist product is much less compared to the markets for material goods, in theory and practice the division is carried out into:
Direct (immediate) channels (lack of intermediaries)
Indirect (mediated) dripping (using intermediaries).
Among the latter, two-stage and multi-stage distribution channels are most often distinguished.
Considering the number of participants, the drips are narrow (with a small number of participants) and wide (with a large number of participants).
All types of distribution channels can act in various combinations. So, for example, a hotel sells accommodation services on its own, uses short and narrow channels, but airlines offer tickets through their own representatives and many intermediary structures (travel agencies, travel agencies and even supermarkets) - long and wide.
The successful combination of distribution channels for each enterprise is an important task, since it has a significant impact on its economic performance. When we talk about an enterprise, it is necessary to take into account both manufacturers and sales intermediaries, whose role in the formation of distribution channels is constantly increasing.
The choice of a specific channel concept is influenced by:
The nature of the product (diversity of the range, the role of components in the formation of service packages);
Segments of the market to which the activity of the enterprise is directed;
The capacity of the local markets to which the product is suitable;
Economic potential of the enterprise;
Intentions to expand new markets;
distribution costs;
Experience of cooperation with partners - participants of the channel.
The study of these factors should give an answer to the question, is it profitable to sell the product to the manufacturer? own funds, use intermediaries. The lack of such an analysis can lead to the fact that the successful approach of a product to certain market segments can be fatal relative to others.
In 1991, Little Caesar's small restaurant company entered into a strategic alliance with Kmart, one of the largest chains of cheap stores in the United States. Under this agreement, Kmart stores were to replace all food outlets in their stores with 1,200 Little Caesar restaurants over the next five years "s. Instead of cafeterias-snack shops, Kmart stores received a chain of branded restaurants for their customers. In turn, Little Caesar's restaurants received additional channels to stabilize their sales and the hope that once visiting Little Caesar's restaurant in Kmart, the client would prefer to go to Litlle Caesars restaurants located outside these stores. Kmart also agreed to bear a portion of Little Caesars' national advertising costs in funds mass media thus providing her with the best sales opportunities. Little Caesar's management was delighted.
However, some executives (franchisors) were unhappy. Although the agreement included outside sales, they expected that under this agreement, customers would only eat at the Kmart restaurant-stores themselves. They felt that these take-away sales were in direct competition with their restaurants. They formed the Little Caesar's Association of Franchisors (ALCF), which represented the interests of 70 authorized persons operating more than 550 restaurants out of 4,000 restaurants in this chain. ALCF claimed that some of its members noticed a drop in their sales by as much as 20% after they opened Restaurants in Kmart Stores The ALCF also complained that Kmart stores located in the same pedestrian area as other Little Caesar's restaurants have become competitors. For example, in a city of 5,000 residents in North Carolina, there were two restaurants of Little Caesar's privileged members: a new one in a Kmart store and a regular one that had been working in this city for a long time. rather than into local advertising.Some members of the association felt that Kmart had robbed them of customers by using their money for local advertising.The members of the association were so bitter that they collected the amount of monthly membership dues to create a legal fund in order to bring legal action against the main Little Caesar's.
However, all franchisors were disappointed. Many believed that the agreement with Kmart was successful, as it served to successfully promote their sales and thanks to her, the name of Little Caesar's restaurant was recognized by millions of Kmart shoppers.
The case of Little Caesar's shows that distribution systems are delicately balanced: what is acceptable for one channel member may not be acceptable for another, and this can lead to conflict and active struggle. Managers should be very careful when choosing distribution channels, as this can have long-term consequences.
Summary of the chapter
Chapter 15 introduces general scheme key concepts for the construction and operation of distribution channels and provides a brief overview of the main distribution channels in the hospitality, restaurant and tourism business.
We first look at the essence distribution channels and functions, which channels perform. We will then discuss activities. market intermediaries, used in the areas of hotel, restaurant and tourism business.
We end the chapter with an explanation of the method choice, motivation and evaluation channel members.
The essence and significance of distribution systems
If you imagine property as the heart of a hotel management company, then distribution systems, distribution channels appear as a circulating system - its arteries. Distribution systems provide a steady influx of customers. A well-managed distribution system can distinguish a market leader from a struggling company. Many hospitality companies make extensive use of the marketing channels available to them. For example, the Ritz-Carlton hotels receive a significant share of business from travel agents due to the active development of this channel. Marriott entered into a marketing alliance with New Otani, which enabled it to host Japanese travelers in North America. In turn, New Otani was able to receive Americans traveling in Japan. In today's competitive environment, it's not enough to take into account a central seat reservation system and your own marketing opportunities. Companies must develop increasingly sophisticated, complex networks and distribution systems.
Competition conditions, market globalization, electronic distribution methods and a short shelf life of a product (service) increase the importance of the distribution network. New and existing markets need creativity. Globalization means that many hoteliers must look for foreign partners to help them expand their business in many regions. Sheraton has signed an alliance agreement with the Welcome Group in India, which operates Sheraton hotels in the Indian subcontinent. New electronic distribution methods have led to the growth of international booking systems like Utell. .
RCI, a timeshare exchange company 1 , uses a large number of its members to regulate hotel rates for club members. The agreement is equally beneficial for both parties: hotels can sell places during the low season, and RCI can offer club members favorable deal terms.
1 Timeshare (time-share) - buying and selling time spent in a hotel (usually in a resort area). (Approx. scientific ed.)
The essence of distribution channels
Distribution channel- a set of independent organizations involved in the production of a product or service - available to an individual consumer or firms of user industries. The development of a distribution system begins with the selection of channel participants. Once they are selected, the focus shifts to channel management. Hospitality distribution networks are formed on the basis of contractual relationships and on the basis of freely organized alliances between independent organizations.
Why are market intermediaries used?
Why does Shenago China sell porcelain tableware to restaurants through middlemen? After all, this means a lack of control over the final price of their products. But Shenago gets the advantage of organizing sales through intermediaries: it doesn't need to maintain dedicated showrooms and large commercial forces in every major city. The intermediary - the supply company shows their products, promotes their sale and prepares personal sales offers directly for restaurants. The intermediary company sells hundreds of other products, a wide range of which makes it a convenient regular supplier for the restaurant business. The commercial potential of the range of products on offer allows her to prepare and submit personal sales inquiries, send catalogs and provide other support for the marketing of the products she represents. Selling through wholesalers and retailers is usually much more effective than direct sales.
In promoting goods to target markets, the effectiveness of intermediaries is high. Thanks to their connections, experience, specialization and scale of action, they can provide a wider market than the firm itself. Rice. 15.1 will help to understand how intermediaries can provide savings in the organization of sales to a firm producing goods or services. Part A shows the work of three manufacturers, each using direct marketing to connect with three customers. This system requires nine different contacts.
Rice. 15.1. How a Distributor Reduces Sales Deals
Part B shows three manufacturers working through one distributor.
The second system requires only six contacts. It is enough for a restaurant manager to place one order with a restaurant supplier and receive a French knife, a dozen plates, a set of candles, a dozen oyster forks, a set of glasses and a set of cocktail napkins. Each of these products is made by different companies, but they are all available with one phone call to an intermediary firm. For the buyer, this is the ability to purchase small quantities of items that have become part of a large order, which reduces the need for goods, the number of shipments and the number of invoices processed.
Distribution channel functions
The distribution channel moves goods from producers to consumers. It overcomes the barriers of time, distance, and ownership that separate goods and services from those who will use them. Market channel participants perform the following key functions:
- Information- collection and provision of marketing research results and information regarding the marketing environment.
-Promotion- creation and dissemination for promotional purposes of persuasive information regarding the offer.
- Contact- Finding prospective buyers and establishing appropriate relationships with them.
- Adaptations- the formation and adaptation of the offer to the needs of the buyer, including such activities as production, sorting, assembly and packaging.
- Negotiation- negotiating the price and other items of the offer in order to transfer ownership or ownership rights.
- Physical distribution- transportation and storage of goods.
- Financing- purchase of goods and use of funds to cover costs and ensure the operation of the channel.
- Risk acceptance- taking financial risks, for example, due to the inability to sell goods at full profit.
The first five functions help to conclude deals, the last three - to carry out concluded deals.
Typically, all of these functions have the following three characteristics: they use limited resources, they work more efficiently on a specialization basis, and they can be transferred from one channel participant to another. Changing functions allows the intermediary not only to reduce producer costs and keep prices low, but also to add their own price to cover the cost of their work. To keep costs low, functions should be assigned to those channel members who can perform them most efficiently. For example, many airlines encourage passengers to use the services of travel agencies - they answer passengers' questions, issue tickets, accept payment, and when passengers' plans change, they reissue tickets. The convenient location of many travel agencies allows them to deliver tickets to customers on the same day of order. The introduction of such a ticket distribution system into the work of the airlines themselves would be economically unprofitable for them.
Number of channel levels
Distribution channels can be characterized by a number of levels. The distribution channel level refers to any level at which some work is performed to deliver a product from the manufacturer to the final customer. Since both the producer and the end user do some work, they are part of every channel in the distribution system. We use the number of intermediary levels to show the length of the channel. Rice. 15.2 illustrates several options for building distribution channels.
Channel 1, called direct marketing channel, has no level of intermediaries. It is represented by a manufacturer selling the product directly to consumers. For example, an entrepreneur who owns a restaurant may buy groceries directly from a farmer. Channel 2 contains one proxy layer. In the consumer market, this is usually the level of the retailer. Fisherman's Pier in Geelong (near Melbourne, Australia) buys fish from a fishermen's cooperative, allowing fishermen to focus on catching fish rather than selling and marketing.
Many of the agricultural products purchased by hospitality businesses come from cooperatives. For example, in the United States, the Sunkist, Diamond Walnuts, and Land o'Lakes cooperatives are all production cooperatives. The New Zealand Dairy Company is also a cooperative that sells milk powder and cheeses in Southeast Asia and Latin America.
Channel 3 contains two levels. In consumer markets, this is usually the wholesaler and retailer. This type of channel is used by small manufacturers. Channel 4 consists of three levels. A small wholesaler buys goods from large wholesalers and sells them to small retailers that are not served by large wholesalers. From the manufacturer's point of view, a large number of intermediaries in the channel means less control over the distribution system and creates additional complexity.
All organizations in the distribution channel are connected by several types of flows. These are the physical flow of goods, the flow of ownership, the flow of payments, the flow of information, and the flow of promotional and incentive measures. These streams can make channels even with only one or more layers very complex.
Market intermediaries
Many specialized channels are available to tourism and hospitality organizations. Consider the following intermediary links in the marketing system in the field of hospitality and tourism: travel agencies, tour operators, tour wholesalers, professionals, hotel sales representatives, travel agent incentives, government tourism associations, consortiums, reservation systems and electronic service distribution systems. The manager must select the intermediaries that will make up the distribution system and the number of levels.
travel agents
One of the ways to conquer a geographically diversified market is through travel agents (travel agents). There are more than 32,000 travel agents in the United States who, in 1993 alone, booked more than $93 billion in travel services, $56 billion in air travel, $14 billion in cruises, $10.4 billion in hotel services, $6.6 billion car rentals and $0.5 billion in other services. Travel agents handle over 95% of cruises, 90% of airline tickets, 50% of car rentals and 25% of hotel rooms.
Hotels that cooperate with travel agencies are listed in airline reservation systems and in hotel directories. Hotels also send information packages to travel agencies, including information about hotels and changes in services, promotion of special events, etc. Hotels also invite travel agents to study tours. Airlines offer them familiarization flights, providing guests with free air tickets. Such trips should be well organized. Finally, these promotional materials can be sent by travel agents to printed editions for travel agencies Travel Weekly, Travel Trade and Travel Agent. Holding advertising campaigns, aimed at travel agents, will be discussed in Sec. sixteen.
Hotels working with travel agents should make it easy for them to make reservations. Free (for travel agents) booking by phone (i.e. paying for the cost of a telephone conversation for them) makes it easier for them to order. Hotels that receive a lot of bookings from travel agents have a certain number of places for business travelers. Travel agents prefer fast payment for their services, so hotels wishing to work with them must pay commissions quickly. For example, Hyatt hotels guarantee payment to travel agents within one week from the date of departure of the guest. International hotel chains now pay travel agent commissions in their local currency, and they don't have to go through expensive currency conversions - of the $50 commission, agents can lose almost everything, because most banks usually charge $30-40 for processing and conversion. Money which are transferred to a foreign bank.
Hospitality service providers working with travel agencies should remember that the agents match the hotel with clients. In the review of the market of transport services for 1994 of the weekly Travel Weekly travel agents rated the ability and reputation for providing room reservations as the most important factor in their hotel selection. Other important factors are given in table. 15.1. Hotels should do everything possible to create a favorable experience for guests who have reserved places through travel agents in order to guarantee future cooperation with them. When bookings are received through an intermediary, hospitable hoteliers or cruise liners have two customers: the customer and the intermediary.
Most cruise lines will not sell directly to the end consumer, but will insist on ordering through travel agents or tour operators.
Currently, travel agents are changing the way they make hotel reservations. They are gradually moving from free phone calls to booking hotel rooms directly through computer systems. Travel agent computer systems, formerly referred to as seat reservation computer systems, are now referred to as global distribution and marketing systems. These systems allow hotels to display information about the availability of their rooms for use by travel agents when making reservations. In 1992, 377,000 travel agents worldwide used this system.
Companies are the main source of seat reservations for travel agencies. The total volume of American tourism in 1994 reached $130 billion. Every cent of this amount represents a cost that corporations would like to reduce. Therefore, companies, in an attempt to reduce their costs, enter into agreements with travel agencies and in some cases open their own travel agencies.
Table 15.1
_______________________________________
* Percentage of the number of agencies that participated in the survey
Many organizations sign exclusive agreements with one travel agency and require employees to book hotels only through this firm. In such a case, the travel agency takes on a special responsibility for choosing the most economical options in a way that is beneficial to them. Computerized programs such as Prelude, Dacoda, Maestio, PDQ, and Maximizer allow companies to overcome employee preferences for one airline or another if it is possible to use another carrier's cheaper service. It is estimated that if the lowest fare is not used, corporations incur an unjustified loss of an average of $141 per trip. The software also allows companies to determine which employees are frequently violating the overall travel policy by booking travel tickets and hotel rooms at higher prices.
beacons of marketing 15.1
Top ten rules for working with travel agents
1.
Pay commissions quickly. Meet the requirements of agents in timely payment and take measures to respect their interests.
2.
Make broad commitments to the agent market, starting with the most important ones.
3.
Educate your staff on the importance and special needs of the agent market.
4.
To promote a better understanding of each other's needs and responsibilities, introduce a special room sales program for your hotel staff and travel agents.
5.
Reward and reward agents who frequently book rooms at your hotel.
6.
commercial brochures, electronic lists and a hotel promotional guide will provide your agents with detailed information about the facilities and services your hotel offers. Include in it data on how to book rooms and the procedure for paying commissions.
7.
Work with local travel organizations to provide study tours for travel agents.
8.
Make sure you give agents free or discounted visits.
9.
Conduct training sessions for agents, organize seminars, schedule meetings and conferences, or offer them various sales promotion measures.
10.
Provide agents with information about special events, service packages and special sales promotions as early as possible so that agents can sell them to their customers. If you make last-minute "special offers" to consumers, make them known to agents as well.
Wholesalers of travel services
wholesale travel companies collect so-called "travel packages", which are in good demand in the leisure market. These packages usually include not only transport services and hotel accommodation, but also meals, ground transportation, excursions and entertainment. To expand the package of services, wholesalers enter into contracts with airlines and hotels for a specified number of seats and rooms, receiving discounts for the number. The wholesaler also arranges transportation between the hotel and the airport. Retail travel agents sell these packages to individual consumers. The travel wholesaler must provide a commission to the travel agent and provide consumers with a travel package that is perceived as a better and better deal than what consumers could put together themselves. In addition, tour operators must make a profit for themselves. Net profit Since the sale of each package is small, so wholesalers must sell 85% of the corresponding packages to receive the balance. This high break-even point leaves little room for error. As a result, quite often wholesalers of tours do not reach the level of cost recovery. Thus, it seems important that providers 1 in the hospitality industry check the data on the tour operator itself, receive prepayment and full payment for the services provided. Additional security is provided if they deal with tour operators that are members of the United States Tour Operators Association (USTOA). Members of this association are transferring $100,000 to its account to form a fund in support of the consumer payment protection program. This guarantees the compensation of funds in the event of a financial collapse of any of the members of the association.
1 Providers (providers) - agencies that develop packages of new tourism services. Often providers perform functions similar to wholesale travel agencies. (Approx. scientific ed.)
With the increase in the number of international resorts, wholesalers in the tourism industry are becoming a powerful participant in the distribution channel. Ordinary travel agencies cannot know about all the resorts. They rely on catalogs offered by travel wholesalers. If a couple wants to spend their holidays in Saipan, they will be given a catalog from a Micronesia tour operator. The catalog includes luxury hotels, four-star hotels, three-star hotels and tourist class hotels. The wholesaler will give a full description of each of them. The hotel can provide him with any information about himself, but the tour operator selects those characteristics that correspond to his goals and which are then entered into the catalog.
Therefore, if, for example, someone wants to stay in a luxurious luxury hotel, and only three hotels of this level are included in the catalog, then others not included in the catalog will not be offered to the client. The couple will choose a resort they think offers the best way holiday, based on information provided by the wholesaler of travel services. Thus, the value of a wholesaler of tours for resorts, especially for remote international markets, huge.
Specialists: travel brokers, motivational houses 1 and representatives of gaming establishments
1 Motivational houses (motivational houses) - specific shopping tours for employees of firms and organizations (Approx. scientific ed.).
Travel brokers sell bus tours that appeal to a variety of markets. Tours of New England just to see the leaves fall, trips to college and sports, tours built around Mardi Gras, and regular tours of Washington DC are examples of popular bus tours. Some bus tours are seasonal, others are dedicated to an event, and still others are year-round. For hotels located on such routes, bus tours are the most important source of income.
Bus tours are extremely important for both museums and historical sites (for example, the colonial city of Williamsburg in Virginia). Tourist service providers such as visits to reconstructed historic sites, hotel accommodations, and trips to famous cities typically participate in travel conferences sponsored by the American Bus Association. A conference venue is leased and salespeople representing their providers compete for bus tour companies that serve their area.
Motivational houses develop incentive trips offered to employees or distributors as a reward for success in their work. Companies often use incentive trips as a reward for employees who meet targets or sales employees who achieve the best results. An incentive trip, usually offered to a resort area, includes first-class or deluxe accommodations. For luxury resorts or hotels in cities like New York, San Francisco, Chicago, or Boston, motivational houses serve as an effective marketing channel for their services.
Tour brokers and motivational houses can be contacted through specialized magazines and associations such as the National Tourist Association and the Society for the Encouragement of Travel Agents.
Representatives of gaming establishments as intermediaries of premium players serve the casino business. They maintain lists of players who like to visit certain entertainment areas (Reno, Las Vegas or Atlantic City). As a rule, such representatives work with one or more casinos. They receive commissions based on the amount of money the casino makes from the players they refer, or in some cases based on the player. Players referred by gambling establishments receive free or low-cost services, including air travel, ground transportation, hotel accommodation, food, drinks and entertainment. The number of services received as a gift depends on the number of gamblers in the casino.
Hotel representatives
Hotel representatives sell hotel rooms and hotel services in a specific market area. This method is effective for hotels that hire a representative and do not use their own sellers, it is especially effective for a distant market and cultural differences that make it difficult for an outsider to enter the market. For example, it may be more efficient for a hotel in Houston to hire a representative in Mexico City, the capital of Mexico, than to send its commercial manager there.
Such hotel sales representatives should represent the interests of non-competing hotels. They receive direct commissions or commission plus salary or a combination of both. It will take time for the hotel representative to study the services offered by the company and to inform the market about them. The choice of a hotel representative should be deliberate. Frequent replacement of the hotel representative is not desirable.
National, state and local travel agencies
THESE agencies are an excellent way to inform the market and increase seat bookings. National associations promote tourism within their own countries. And for hotel chains with branches across the country, their impact can be important. Government agencies promote their services both abroad and within their own country. They usually have numerous information centers located even at the points of entry into the country. Regional associations may also assist independent operators and hotel chain representatives.
Consortiums and seat reservation systems
Seat reservation systems such as Loews Representation International, Steigenberger Reservation service and International Reservations and Information Consortium are expanding their services. Booking systems are a centralized room reservation system for hotels. They usually provide a system for small hotel chains or overseas reservation services, allowing foreign guests to call a local phone number to contact the hotel.
Ski resorts can also use the hotel reservation system. The resort may book reservations at independent hotels or motels for a commission of approximately 15%. Since the resort usually owns accommodation in independent hotels, motel managers are sometimes afraid of the influence of this organization and may refuse to cooperate with it, as they do not want to share their customer database.
Consortium- a group of organizations in the field of hospitality, which is based on an alliance in order to obtain mutual benefits for its members. The main reason for organizing consortiums is marketing. The consortium allows the hotel to be independently owned and operated, benefiting from a combined marketing effort. An example of a consortium is Leading Hotels of the World. The distinction between consortiums and reservation services is becoming less clear as reservation services such as SRS, Utell and Supranational have now expanded into marketing activities. This is a natural way for the development of redundancy systems.
The top five consortiums, measured by the number of hotel rooms provided, in 1990 were Utell, Supranational, Logis de France, Leading Hotels of the World and Golden Tulip. As a reservation service, Utell has provided more than 1.3 million beds in 6,500 member hotels. The UtellVision system provides agents of various countries with booking information on their computer screens. Utell also uses Hotel and Travel Roadshows. This organization represents hotels in the tourism market for conference organizers, tour operators, meeting planners, travel agents and wholesalers in the tourism industry. Logis de France is a consortium of over 4000 small hotels in France with one, two and three stars. Logis de France hotels have decals and road signs.
Consortiums and reservation systems allow you to expand the influence of marketing on the organization of hotels. Franziska Martin, Chief Editor magazine hotels, reports that 25 major consortiums have more than tripled (to 1,995,486) the number of hotel rooms provided from "1989 to 1990. Membership in an organization like Logis de France can be the main way to promote and network sales of rooms in the small hotel market, while Utell is part of the sophisticated marketing program used by the major chains, which allows them to increase their cooperation with travel agents and international markets.With the development of business globalization, consortiums are becoming a more powerful marketing tool.
Regions also create consortiums to increase the attractiveness of their region for tourists. For example, tourism organizations in the Bath area of the UK have set up the Association of Bath and District Leisure Enterprises (ABLE) to enable them to develop and distribute promotional material. In turn, travel agents have formed their own consortiums to negotiate hotel rooms, airline services and other travel services at discounted prices. One of the largest consortia of travel agencies is Woodside Management Systems. Consortiums can also develop vertical marketing systems by setting special order prices for their members.
Reservation systems based on computer networks of airlines
Another type of computerized seat reservation system is the travel product catalog for travel agents and other hospitality distributors. This system was developed by the airlines to stimulate their sales, which list flights in the database according to the time of departure of the aircraft. In the United States, 96% of travel agents are connected to at least one computerized seat reservation system. The most popular systems in the United States are Apollo (United Airlines), Saber (American Airlines), System One (Continental Airlines), Worldspan (Delta Airlines and Northwest Airlines) and TWA.
British Airways has merged with Apollo their system, Galileo, which is one of the main international systems. Another major international system, Amadeus, was developed by Lufthansa and Air France. Hotel owners, car rental companies and other travel companies can obtain information about themselves from these reservation systems, creating a good opportunity for travel agents to sell their services.
Airlines may also operate as tour operators. For example, Air New Zeland offers foreign independent travelers a ranch or bed and breakfast, car or camper rentals, and accommodation reservations through specialized accommodation providers.
Internet
Many hospitality firms are now using the Internet as a distribution channel for their services. The Internet system can help millions of travelers - in the system they will find well-known booklets, prospectuses of various hotel chains.
Users of the Internet system can not only view various brochures on the monitor screen, but also save the information they are interested in on their computer. And they can place an order without leaving their computer. Thus, with the help of the Internet, Best Western receives 72% of customers who do not use the services of travel agents.
Restaurant companies also use the Internet as a distribution channel. Pizza Hut developed PizzaNet, an online ordering system in California. TerraNet was developed in Boston to deliver food from a restaurant to customers' homes. The database allows the user to search for relevant information by restaurant name or type of food. The Internet user receives information about the menu, including color photographs of dishes. The client can pick up the completed order himself or receive it with home delivery. After the choice is made, the client receives all the necessary information for calculating the cost, including shipping costs. The ability to share color photographs with millions of people around the globe makes the Internet a new and exciting way to distribute goods and services.
Electronic distribution systems "From the client - to the supplier"
Customers can now book rooms and functional spaces with specially designed software packages. For example, the Meeting Services Network (MSN) contains detailed descriptions of the rooms, meeting rooms, and amenities in 7,500 hotels, meeting centers, convention centers, and resorts. Using such a system, conference organizers do without direct contact with hotel sales departments.
The International Association of Conference Planners has an on-line database that allows conference planners to select conference venues. Thanks to the additional features of the reservation service of such systems, a direct connection with the reservation services and sales departments is possible.
By operating global distribution systems, large corporations and conference organizers avoid travel intermediaries and use electronic systems to make direct reservations in all regions of the world.
Technology that allows guests to directly connect with hotels, airlines, car rental companies and other service providers is available to many today. One possible use is to use an airline seat as a workplace, entertainment center and reservation point. In the future, passengers on the San Francisco - Hong Kong airline (while in flight) will be able to get a view and description of Hong Kong hotels with their prices on the screen, book a room and receive confirmation of their booking.
However, the application the latest technologies in the system "From the client - to the supplier" can dramatically affect the interests of travel intermediaries such as travel agents (see Marketing Beacons 15.2).
Beacons of Marketing 15.2
Hilton Model
Hilton hotels have introduced a variety of programs designed to evaluate and reward agents. Effective initiatives include:
- Centralized telephone line for reservations Hilton travel agents help agents request information and make reservations at Hilton hotels nationwide. Staffed by 40 seat reservation specialists trained to work with travel agents, the line offers 24/7 contact every day. Other Hilton centralized system services include ovia's Inside Availiability automated systems; advanced categories; rate returns; testing and other marketing information.
- Centralized payment of commissions. Hilton pays commissions to agents for booking rooms at its hotels worldwide. Bi-weekly for hotels registered with Hilton's Centralized Commission Program, commissions are paid within 48 hours of the guest's check-out. The receipt includes the amount of the commission, the personal file number, the name of the hotel, the number of nights of stay and the name of the guest. At the time of accepting an order, Hilton determines at what rate commissions are calculated. Hilton Introductory Club. Recognizing the importance of travel agent study tours, Hilton has developed an "introduction policy" for hotels in its chain that provides agents with a 50% discount off the minimum room rate at any Hilton hotel.
Straight line. Hilton provides agents with toll-free phone calls and a meeting system, offers them information on availability and rates for the area and conference facilities in the hotel within 24 hours of any request. Travel Agent Help Desk- free. She advises agents on commission payments, assists with CRS bookings and pricing, and provides comprehensive support with Hilton's travel agent marketing and sales programs. Consulting system for travel agents. Nine travel professionals and five responsible Hilton employees work specifically to provide advice and ensure feedback with travel agents of the company, strengthening ties between them and hotels.
Behavioral systems of sales channels and their organization
Distribution channels are more than simple associations of firms connected by various streams. These are complex behavioral systems in which people and companies interact in order to fulfill their goals. Some systems are built on formal relationships between loosely organized firms, others on formal relationships managed by strong organizational structures. Distribution channel systems are constantly evolving, creating new types and new systems. Consider the behavioral systems of distribution channels and the way they organize their work.
Behavioral distribution channel systems
The system of distribution of goods and services consists of various firms united for their common good: Each participant in the channel, dependent on others, plays a role in the distribution channel and specializes in performing one function or another.
Since the individual success of a channel member depends on the overall success of all channel members, ideally all channel firms should work together and in concert. They must understand and accept their roles, coordinate their goals and actions, and cooperate in achieving the main objectives. By collaborating, they can understand and serve the target market more effectively.
However, channel participants tend to be more interested in achieving their own short-term goals and are concerned about the state of their affairs with firms closest to them in the distribution channel. Collaborating to achieve overall channel goals sometimes means lessening the role of individual company goals. Although each participant in the distribution channel is dependent on the other, they often act on their own, guided by their own interests. They often disagree on the roles they should play: who should do what and what rewards to get for it. Such disagreements about goals and roles lead to channel conflict.
Horizontal conflict- conflict between firms at the same level of the distribution channel. For example, some privileged members of the Pizza Inn distribution channel may complain about others who deceive them by providing poor product components or poor service, thus damaging the Pizza Inn's image.
Vertical conflict- More commonly, it is a conflict between different levels of the same distribution channel. At the beginning of this chapter, we mentioned the agreement between Little Caesar's restaurants and Kmart stores. For Little Caesar's, this agreement increased sales and the number of new outlets in the distribution system to 1200. However, the sales volumes of other members of the Little Caesar restaurant chain distribution channel "s have decreased.
Some channel conflicts take the form of healthy competition: without them, the channel becomes passive and uncreative. But sometimes contradictions can hurt the channel. In order for the overall channel to work well, the role of each channel member must be defined, and the conflict in the channel must be resolved. Cooperation, distribution of roles and conflict management provides only strong leadership - a firm, agency or mechanism.
Of course, due to the complexity of distribution channels, it is quite difficult to manage participants and their work, while maintaining the interests of all participants in the distribution channel. For example, the Embassy Suites Hotel had to change its promotion system, which was developed jointly with Hertz, a promotion system that offered cash payments to Hertz customers who rented cars and stayed overnight. Along with a confirmed hotel reservation, customers were offered a cash voucher if they stayed and redeemed it at the Embassy Suites Hotel. The opportunity to get Embassy Suites customers who made immediate purchases and the opportunity to do business for Hertz by offering customers a cash bonus seemed like a good idea to both companies. However, the American Society of Travel Agents protested against such an agreement, believing that travel agents who made the original booking were being unfairly taken commissions. Both Embassy Suites and Hertz did not appreciate the negative impact that the promotion they developed would have on one of the members of their distribution channel - the travel agent.
In a large company, formal organizational structure defines the roles of channel participants and provides the necessary leadership. But in a distribution channel made up of independent firms, leadership and power are not formally established. Traditionally, distribution channels have lacked the leadership needed to assign the roles of their participants and manage conflicts. Therefore, new types of distribution channel organizations have emerged in recent years that actually provide stronger leadership and better channel performance.
Distribution channel organization
Historically, distribution channels have developed as loose associations of independent companies, each of which has shown little interest in the success of the channel as a whole. These conventional distribution systems lacked a strong leader and were troubled by dangerous conflicts and low quality of service.
The rise of vertical marketing systems
One of the most significant advances in channel building is vertical marketing systems that have replaced conventional marketing systems. The distinctive properties of the two types of channels are illustrated in Fig. 15.3.
A typical distribution channel for goods and services consists of one or more independent manufacturers, wholesalers and retailers. Each of them is a separate business, trying to maximize its own profits even at the expense of the profits of the system as a whole. None of the channel members has sufficient control over the other members, and there are no formal means to assign roles and manage conflicts in such a distribution channel. For example, most hotels pay commissions to travel agents. No formal contract is signed between the hotel and the agent. The hotel simply announces a policy to attract their services and may, if it wishes, at some time not provide places for sale to travel agents at all.
The vertical marketing system (VMS) includes manufacturers, wholesalers and retailers acting as an integrated system. One member of the channel either manages the others by making contracts with them, or has such power that they all cooperate with him. Either the manufacturer, the wholesaler or the retailer can manage the VMC. The VMC was originally designed to manage channel behaviors and conflicts. Another big advantage of the VMS is the economy of size, the power to close deals, and the elimination of duplication of services. The Navy has come to dominate consumer marketing, serving 64% of the market.
Now consider the three main types of IUDs (see Figure 15.3). Each type uses different means to achieve leadership and power in the distribution channel. In a corporate CPA, coordination and conflict management is achieved through shared ownership at various levels in the channel. In a managed CMC, leadership is exercised by one or more dominant channel participants; in a contractual CMC, it is through contractual relationships between the distribution channel participants.
Corporate Navy unite successive stages of production and distribution, which are in the same property. For example, Red Lobster has its own food processing plants and distributes groceries to restaurants. Breweries in the UK have pubs that only serve their own beer.
Gallo, the world's largest wine producer, does more than just process grapes into wine:
The Gallo brothers own Fairbanks Trucking, one of the largest heavy-duty trailer haulers in California. 200 trucks and 500 trailers constantly transport wine and raw materials (return trips), including lime from the eastern Gallo quarry in Sacramento. The company is the only wine producer to produce two million bottles of wine a day, and Midcal Aluminum produces corks as fast as bottles fill. Most of the country's winemakers concentrate their efforts on production, neglecting marketing. Gallo, on the other hand, is involved in every aspect of the sale. The company owns a network of distributors in a dozen markets and would probably have more and more if laws in most states didn't prohibit it.
Managed navies coordinate the successive stages of production and distribution not through a system of common ownership or contractual ties, but through the size of the influence and strength of the parties. For example, in the 1970s, a popular brand of beer gained the exclusive right to supply restaurants and bars with fresh draft beer. The manufacturer did not allow bars serving this beer to serve any other beers, claiming that other beers on the same line would reduce the quality of their product. The manufacturer argued that other beer companies could use dirty tools to clean lines and apply pressure inappropriately. Thus, the manufacturer used the strength and power of its brand to suppress competitors.
Managed Navy impact the global airline industry since its inception. Many states continue to subsidize national transport, known as flagship transport. These airlines often have a strong influence on the reservation system, on the work of tour operators and transport agencies within the borders of the respective states.
Treaty Navy unite independent firms at various levels of production and sales, which are linked by contractual relations in order to obtain discounts or increase sales. A contract with a hotel representative is an example of a negotiated IUD. An important form of contractual navy is franchising.
Franchising
Franchising is a trading method in which the franchisee is granted the right to participate in the offer, sale or distribution of goods or services under the guidance of a marketing model developed by the franchisor. The franchisor allows the franchisee to use his trademark, title and advertisement. Franchising has become the fastest growing form of retail organization in recent years. More than 500,000 franchise firms now account for about a third of all retail sales. In the US, this figure by the year 2000 may reach half.
Franchising is the most popular form of marketing for both hotels and restaurants. The most famous franchise chains in the hotel business are Choice Hotels, Days Inns, Holiday Inns, Sheraton and Hilton hotels, in the restaurant business - McDonald's, Burger King, Kentucky Fried Chicken, Pizza Hut and T.G. I. Friday's. They are responsible for the transition of the restaurant business from individual operators to multi-unit. Franchise restaurants had sales of $79 billion in 1991, or more than half of all restaurant sales, thanks to an extensive network of 106,000 branches.
For the right to use the names, methods of operation and other benefits that franchising gives, franchisees are charged an initial fee, a license fee (royalty) and a marketing service fee. In addition, hotels charge a fee for using centralized system booking rooms. For example, Embassy Suites charge an initial fee of $500 per room with a minimum charge of $100. Royalty payment marketing services and reservation system is respectively 4, 2 and 1% of the gross income per room. Using gross income in calculations allows the franchisor to charge fees from unprofitable businesses as well. The franchisor can verify gross income information through tax reports.
The following information from the Hospitality Franchise System's 1993 Annual Report shows how profitable franchising is.
Oh!... What a year!
1993 was the year of the Hospitality Franchise System, the company became the largest and most successful franchise hotel in the world. It was the year that we acquired two hotel authority systems, set records for internal growth in the industry, entered into strategic alliances with other travel service providers as well as their merchants, and developed our business into a booming entertainment industry. As a merger of Days Inns, Howard Johnson, Park Inn, Ramada and Super 8, HFS has demonstrated a unique combination of financial stability and rapid growth, primarily due to the fact that royalty payments, calculated as a percentage of hotel room revenue, make up the majority of company income. The fees for the use of marketing and reservation systems, made by our preferred franchisees, cover all our expenses, marketing and maintenance of the reservation system. These characteristics create such a high operating level that virtually every dollar of royalty increase brought in $32 million in 1993, i.e. revenue increased by 111% compared to 1992.
The stock market showed that the company's success in 1993 caused the company's share price to rise from $9.63 to $26.56.
The initial fee and payment of royalties depend on the familiarity of the brand of the authorized member. For example, McDonald's is recognized as a fast food restaurant all over the world. It is known in London, Paris, Hong Kong and New York. The stronger the company's market position, the greater the price of its brand name. Thus, the authority McDonald's provide more value than Mr. Quick. Other benefits of an authorized member relate to leadership assistance, quality control, accounting systems, marketing, access to capital, architectural planning and group purchasing.
The Marriott Hotel, owned by Courtyard Marriott, switched to an aggressive franchise program in 1990. Mike Ruffer, Marriott's executive vice president, states, "We expect our own brand to grow in visibility and service distribution in the 1990s, but we can't do it on our own." Marriott was looking for additional features distribution, including central business districts and resorts. In 1992, the Courtyard Marriott in Chicago became the first Courtyard to develop in the CBD.
Franchising is used in small chains of small restaurants to help them retain managers. It is difficult for a small network to compete with the opportunities offered to managers by a large network. Some small chains offer great career opportunities for their best managers to start their own business through the franchise system. Well-designed powers provide benefits for both the franchisor and the authorized member of the channel. Tab. 15.2 shows the costs of franchised restaurants.
Table 15.2
Franchise Restaurant Costs
Unions
Unions are another form of contractual relationship. They are created to provide an opportunity for mutually beneficial cooperation between the parties involved. We have already mentioned the alliance between the Welcome Group and Sheraton hotels. It was almost impossible for Sheraton to enter the Indian market, given the country's foreign business regulations. Welcome Group offered Sheraton an Indian partner. In addition, the Welcome Group had a good reputation in India and knew how to do business there. Sheraton offered the Welcome Group its name, widely known to business people all over the world, as well as training and management support systems. And both partners benefited from such an alliance.
Alliances of two or more firms that are not competitors is a very popular and effective way to expand the market. For example, restaurants form alliances with shops and hotels to distribute their products more effectively. 7-Eleven Stores sells Dunkin' Donuts in 2,000 of its stores. Embassy Suites have Red Lobster restaurants located in their hotels. In-store fast food restaurant chains serve well-known brands and have additional opportunities to distribute their products more widely. In addition, the opening of well-known restaurants in hotels will allow visitors to get good quality dishes at reasonable prices.
Airlines are forming alliances to gain additional opportunities in other parts of the world and provide customers with new services. For example, SAS's alliance with Continental Airlines gave it access to the US market. The SAS lines, which until then served only a small part of American cities, began to be used for subsequent transfers to Europe. Continental received passengers from SAS flying to Newark and other American cities.
National Network Motorcoach, a marketing consortium of bus operators, has developed an affiliate program to take charter passengers to their preferred hotels. Tour operators are now extending their trips by staying overnight in a hotel, where previously they preferred to complete their trip in one day. Representatives of the network of bus operators visit all hotels wishing to participate in the agreement before they are accepted. Such an alliance gives additional business to hotels and provides bus operators with preferential contract prices at hotels that meet their standards.
The rise of horizontal marketing systems
Another type of distribution channel organization is horizontal marketing systems, bringing together the sales networks of two or more companies at the same level in order to use new marketing opportunities. Companies that pool their capital, production capabilities, and marketing resources will achieve better results than companies operating on their own. For example, Seaworld offers discounted tickets to a car club that provides them as an added benefit to its members. In return, Seaworld gains access to several hundred thousand members of this car club. Another example, Sears and McDonald's have joined forces to promote their products in the McKids "fun clothes for small fries" clothing market. The McDonald's restaurant franchise and Sears stores have collaborated to develop local sales promotion programs. Such joint marketing has been widely developed in recent years and it is clear that it will be improved.
American Express, Coeur D Alene, and K2 Skis worked together to offer free skis to holidaymakers at the ski resort, provided they booked a Ski Week Holiday with American Express.
The rise of multi-channel marketing systems
In the past, many companies used a single distribution channel to sell to a single market or market segment. Today, with the rapid growth of customer segments and channel opportunities, more and more companies are adopting a multi-channel distribution system for their products and services, i.e., an individual firm establishes two or more market channels to capture one or more customer segments.
For example, McDonald's sells through a network of independent firms in its franchise system, but owns more than a quarter of their total profits. Thus, restaurants that are wholly owned by McDonald's compete to some extent with restaurants that have received the right to use the trademark McDonald's franchise system.
The omnichannel marketer, while gaining additional sales opportunities with each new channel, runs the risk of affecting the interests of existing channels. After all, they can claim "unfair competition" and threaten to remove such a specialist if he does not soften the competition policy or compensate them in another way. For example, channel members who have obtained a franchise have sometimes taken legal action against franchisors who have developed competition in their market territory.
Making decisions on the design of the distribution channel
Now let's consider what problems of channels for the distribution of goods and services must be solved by merchants. When designing distribution channels, entrepreneurs choose between the ideal and the practical. Before designing distribution channel systems, it is necessary to analyze the requirements and requests of the consumer, determine and analyze the goals and restrictions of the channel, as well as the main channel alternatives and evaluate them.
Analysis of the needs and requests of the consumer in the field of services
Designing a service distribution channel begins with identifying the services that consumers in different market segments need. Victoria House in Belize serves clients from the United States. Customers don't want to call Central America to make a reservation at Victoria House - they want an easier way to get in touch with the hotel. So Victoria House was connected to a travel agency in Houston by a free phone line. Representatives of this agency reserve seats for guests and other travel agents located throughout the United States.
Large resorts like Fiesta Americana in Puerto Villarta in Mexico can target a wholesaler who puts together a travel package including flights, hotel reservations, ground transportation, and distributes it through travel agents. This wholesaler provides a package that gives travelers everything they can do without when traveling abroad.
But in order to develop an effective distribution channel, the company must only understand what services the customer needs, but also provide more customer needs and opportunities to satisfy them and the costs of satisfying them. The hotel must be able to cover the costs associated with the operation of the distribution channel and maintain an attractive price level.
Determination of the goals and restrictions of the distribution channel
Through the distribution channels from the manufacturer, the product is delivered to the consumer. Distribution channels for the hospitality and tourism business lead the customer to a hotel, a cruise ship, or a restaurant. They provide the right information to the right people at the right time and enable them to make purchasing decisions. Those who want to buy a ticket for a Caribbean cruise in February can go to the travel agency office in Atlanta, get information about various Caribbean cruises and reserve a seat.
Most hotels have identified several different (according to needs) customer segments. The company must decide which segment to serve and which distribution channels to use. The company seeks to minimize the total cost of operating the channel. A company's distribution channel objectives are also influenced by the products and services themselves, the characteristics of the company and its policies, the characteristics of intermediaries, and factors in the marketing environment.
Product characteristics. A large hotel that hosts meetings and conferences needs distribution channels that can provide technical information to host such a range of events. The hotel may hire a representative to distribute its services in cities not covered by their sales system. A limited food and beverage hotel chain has a simple product aimed at the mass market. It may decide to distribute services by developing horizontal systems with an automobile association or an association such as AARP (American Association of Retired People - American Association of Retired People).
Characteristics of the company and its policy. The size of the company determines the distribution channel design. An independent chain or a small hotel chain joins the consortium to increase the impact of marketing efforts. A large company can benefit from the development of a controlled vertical marketing system. For example, some airlines have conference departments or companies that meet customers in the cities they serve, thus creating internal reserves in the business travel market.
characteristics of the intermediary. The company must find intermediaries who are willing and able to perform the tasks required by the company. Intermediaries must be capable of organizing promotional activities, establishing contacts with clients and providing credit. for example, hotel representatives will offer low prices to customers, and how several customers will add up to a large total cost. However, the efforts of intermediaries to increase the sale of goods and services are less effective than the company's own commercial force in the implementation of sales.
Marketing Environment Factors also influence the decision-making on the formation of the distribution channel. For example, the increase in the use of home computers and the development of online consumer databases have opened up new marketing channels for travel companies and hotels. Consumers can make and pay for travel reservations using their computers. They can also receive information on travel itineraries via the Internet, including color illustrations of sights and hotels.
Responsibilities of Channel Participants
The company and intermediaries must agree on the rules and responsibilities of each participant in the distribution channel. For example, hotels explain to travel agents what rates and amounts of commissions will be paid for rooms, and on which specific days commission payments are guaranteed. McDonald's provides the restaurants of its franchise system with an accounting system, relevant training and general management assistance. Restaurants must embody the standards of the company's image and brand when designing and building their premises, work with new sales promotion programs, provide the required information and buy specified food items To avoid disputes and conflicts, companies and channel participants must have a specific written agreement.
Evaluation of the main distribution channel alternatives
Suppose that a company has identified several alternatives for building a distribution channel and intends to choose the one that can achieve better long-term goals and objectives. The firm must evaluate each alternative according to economic criteria and criteria of adaptability and control.
Economic criterion
Each channel has a different level of sales and costs. For example, a hotel is considering hiring an independent sales representative to work in a particular market segment. First of all, she needs to determine the expected level of sales by the company itself and compare it with the expected level of sales of a potential sales representative. The work of the hotel's own sales department can be more efficient if there is a tendency for the department to increase activity based on excellent knowledge of the product and services, if the hotel sales policy is usually more aggressive, since the future of the company depends on the success of the market; if department employees are patriots, they take pride in their firm's products and services and enthusiastically offer them to customers.
An independent sales representative is more useful in markets unfamiliar to the company. For example, a Mexican sales rep in Mexico City has a better understanding of the culture of the market and how to approach it. Customers in Mexico City may prefer to deal with a Mexican than a foreigner.
Some clients prefer to deal with a company that represents several different hotels.
The possible level of sales that a member of the distribution channel achieves should be evaluated relative to the costs of its creation and operation. Contracting a sales representative in Mexico can be much more efficient and less expensive than sending a salesperson to Mexico City. Through a commercial representative, the hotel has telephone contact with an office in Mexico City. Maintaining a commercial office in Mexico would be inefficient for most hotel chains. Although the largest hotel chains based in the United States can afford to have their own sales office in New York due to the large size of the market.
Control criterion
An important criterion in choosing the structure of distribution channels is the degree of its control. The work of sales representatives involves a lesser degree of control than the work of their own sales department. Sales representatives will prefer jobs that require less effort from them. They may prefer to work with large companies that can use most of the hotels they represent.
Control is also an important criterion in the franchising system and in the selection of participants in the combined distribution channel structure. A company that works with its franchisees is sacrificing some control for greater distribution of its products and services. A company can get in trouble forcing those who have acquired franchise rights to increase their product range or participate in sales promotions. Franchisees have concerns about meeting quality control standards.
If the firm includes new channels in the distribution system, it must take into account the rights of existing participants in the distribution channel. Often existing members of the channel limit their work with the advent of new members. Recall the situation with the conclusion of a sales promotion agreement between Embassy Suites and Hertz. The promotion policy was canceled because it did not meet the interests of other channel members - travel agents.
Adaptability criterion
The long-term commitment of each distribution channel makes it inflexible. A hotel that uses a sales representative in Mexico City may have to sign a five-year contract. During this period, the hotel could form an alliance with an airline or a hotel affiliate in Mexico and would not need a commercial representative in Mexico City, but the company would not be able to terminate the relationship with him until the contract expired. As a rule, the benefits gained from the development of a long-term alliance are replaced by a loss of flexibility. Understanding the meaning of transactions and the possibility of market changes in the future can help the manager decide on the duration of agreements with channel participants.
Making decisions on channel management
Once a company has considered alternative distribution channel options and selected the best one, it gets to work and manage the chosen channel. Channel management requires the selection and motivation of individual intermediaries and the evaluation of their performance.
Teamwork, organizational management actions, an effective marketing policy, close cooperation with all participants in the distribution channel ensure a high quality of customer service.
Channel member selection
Companies have different abilities in attracting qualified intermediaries. Hotels that have a good reputation, promptly paid commissions and freely provide reservation services to travel agents, have no difficulties and difficulties in attracting agencies. A new chain with a small number of hotels may struggle to sell its rooms through 32,000 travel agents. It would be better for her to choose one network of transport agencies or work in those cities where the sale of tourist services is most likely.
A company's choice of channel participants for goods and services must be as careful as its choice of employees. After all, these firms will represent the company on the market and be responsible for maintaining its image. The management of the company, when selecting channel participants, must evaluate the development opportunities of each applicant company and its profit over the past period, income level, cooperation opportunities and reputation. When entering into an agreement with a representative of its sales department, the company should investigate the number and type of other hotels that the company represents. You will also need to know the number and quality of the workforce.
Motivation of channel participants
The company must constantly encourage effective work channel members. It must motivate not only its own employees, but also independent intermediaries. Most firms use positive incentives during periods of low demand for their services. For example, a hotel or car rental company increases the percentage of commission it pays to agents. Informing channel members about the company's new offerings and services is another way to motivate their efforts. Hotels must inform commercial representatives of changes in equipment, facilities and services.
Evaluation of the performance of sales participants
The company should regularly evaluate the performance of intermediaries. McDonald's, for example, has about 300 consultants who visit franchisee firms daily, encouraging them if they are doing a good job and making suggestions to eliminate deficiencies (for example, round the corner of a cookie a few degrees). Checking the work of intermediaries is a matter Subtle: Insufficient supplier support can sometimes cause problems.Companies must evaluate the support that channel members provide to others and adjust these relationships as needed.
Modification of the distribution channel structure
The manufacturer must not only design good system distribution channel, but also set it in motion. However, in order to better meet the requirements of the market, periodic modifications are necessary. The consumer model is changing, markets are expanding, the goods and services themselves are becoming more complex, new competitors and new, innovative and creative distribution channel structures are emerging.
There are three levels of channel modification:
Increasing or decreasing the number of individual participants in the distribution channel
- increase or decrease in the number of specific marketing channels
- development of a completely new way of selling goods in all markets. Modification of the channel structure requires careful preliminary analysis. It is necessary to solve the question of how the company's profit will change during the transition from the existing system of distribution of goods and services to a modified one.
The hotel can replace representatives who do not give the proper return. It can be new or employees of the hotel sales department. An independent hotel may decide to enter into a membership, such as Leading Hotels of the World, in order to gain access to new markets. The other may switch to a new reservation system, and so on.
Replacing channel members is not always easy. In some foreign markets, especially markets like El Salvador, there is the problem of the potential for monetary payment of independent representatives who have been fired. In the United States and Canada, a commission-only independent representative is not considered an employee of the company. In some countries, courts may hold that an independent representative was in fact dependent (in terms of livelihood) on a foreign firm, although he was paid in the form of a commission. Therefore, the replacement of such a representative may cause serious economic difficulties and the foreign company will be forced to pay tens of thousands of dollars for the termination of the agreement.
Business location
The Waldorf Astoria advertises its location. The Waldorf Astoria is located in the heart of the world's meeting place; Hilton's flagship hotel is a marvelous and soothing place where the quality of service of yesteryear still exists today. Come to Park Avenue and stop for a moment, look around. You are in the center of this area, surrounded by the theaters of Broadway, the most fashionable shops on Fifth Avenue, the United Nations building, the world's select retail outlets.
One of the most important aspects of the system of distribution and marketing of services for organizations hotel service- business location. A convenient location is of great importance for the level of profitability of a business. Many retailers will tell you that there are three secrets to successful retail - "location, location, location." There is no single formula for a good location. A good location for a Ritz-Carlton hotel will be different than a Motel 6 or Burger King. Lots of restaurant locations are usually priced differently depending on the business opportunities in the area. The location of hotels is judged by the attractiveness of their location for people arriving there. In both cases, the location depends on the firm's marketing strategy. Each firm has its own set of characteristics for estimating location.
There are usually four steps in choosing a location.
The first is determined by understanding the marketing strategy and target market of the company. La Quinta motels base their business on serving commercial travelers and other middle-class guests arriving by car. These hotels are traditionally located along highways outside the territories of the main metropolitan areas. They are close enough to the CBD to offer easy access, yet far enough away to save on site costs. Hyatt, on the other hand, caters primarily to tour groups and business travelers, who most often arrive by plane. Hyatt hotels are usually located in the heart of the central business district. The location decision, like other marketing decisions, cannot be separated from the marketing strategy.
The second stage of selection is a regional analysis, which includes the selection of a geographic market. A restaurant chain may plan to expand sales and enter a new market in a major city. Initially, they will need to find a region that will support at least five new branches. A business hotel chain expanding into southeast Asia could include cities like Singapore, Bangkok, Kuala Lumpur and Jakarta. The chain intends to have its branches in the main cities of the region so that business people traveling around the region can stay at the hotel of this chain.
The firm must make sure that the region has sufficient and stable demand to ensure the occupancy of the hotel or restaurant. The most attractive is a rapidly developing region with a diversified economic structure. Houston hotels and restaurants opened in the 1980s suffered when oil prices plummeted due to the area's heavy reliance on one industry. Within 10 years, creditors took over many hotels. Regions with a single industry are often attractive when that industry is on the rise, but highly vulnerable when it is in decline.
This is equally true if tourism and hotel business- the main business sectors of such regions. Miami's beaches were in trouble when several European tourists were attacked and killed. The state of the business of ski resort towns largely depends on the whims of nature - too little or too much snow can create big economic problems.
The next stage is the choice of territory within the inner region. If a restaurant chain intends to open five restaurants in a metropolitan area, it must select sites for its restaurants. Network management should analyze the demographic and psychographic characteristics of the area, assess the competitive conditions and development potential of various areas, and select five areas within the region that seem to be the most promising.
Finally, the firm selects specific sites. A key consideration when analyzing a site is the compatibility of different business areas. The restaurant or hotel will look for potential sources of demand. For a hotel, this could be major office complexes, airports or integrated retail, residential and business complexes. The restaurant will target the location of residential complexes, shopping centers or motels that do not provide food and beverages. The sources of demand are highly dependent on the nature of the business's target markets. If firms are sourcing clientele within a given territory, it is important for them to have a good understanding of the client profile of their business market.
When choosing, the firm must take into account the presence and characteristics of competitors. If there is a similar offer from similar restaurants or hotels, the site will be rejected. Hotels enter saturated markets in order to have a presence in a given city. Competition is not always a negative factor. Restaurants often tend to merge, creating a row of restaurants. This can be beneficial. Customers who come to one restaurant have the opportunity to visit others in the chain.
Evaluation of the location site includes the concept of reachability. Is there an unobstructed access to this site from the highways of public transport or uncrossed routes create a barrier? Does the site allow the driver of the car to turn around? Movement speed is also an important factor. The slower the movement, the longer the time during which the area can be observed. Restaurant sites at traffic light intersections are also advantageous, as waiting drivers can get a closer look at the restaurant.
The desired environment is another aspect of choice. Is this place attractive? If the site is in a shopping center, is it well maintained? Other considerations for site selection include drainage, wastewater, utilities, and size.
Companies often develop their own set of requirements for their chosen sites. For example, the fast food restaurant Carl's Jr. - offering hamburgers, has defined the following selection criteria:
Standalone location in a mall
- standalone corner location (with traffic lights at the intersection)
- interior area at least 125 feet wide
- shopping center included in the complex
- Population over 12,000 within a 1 mile radius (Developing areas preferred)
- free access to the restaurant
- heavy traffic of vehicles and pedestrians
- an area where the level of income of the population is estimated as average and above average
- proximity to offices and other sources of demand
- size from 30,000 to 50,000 square feet
- distance not less than 2-3 miles from other existing branches of the company.
Site selection is often determined by a checklist, statistical analysis, or a combination of the two. The checklist usually contains the items listed above, as well as specific requirements for the buildings themselves. Items such as building code, restriction designations, utility facilities, parking and drainage availability are also included in the checklist. The main type of statistical analysis used in site selection is regression analysis. The dependent variable in the equation is sales, and the independent variables are factors that contribute to sales growth. Typically, the explanatory variables may include the size of the population within the market territory, the size of the market, the presence of competitors, and location characteristics.
Location is a key aspect for a hotel or restaurant. The location must be suitable not only for the present, but must remain so throughout the life of the business.
Chapter Summary
I. The essence of distribution channels. Distribution channel - a set of independent organizations involved in the process of making a product or service available to a consumer or business user.
II. Reasons for using market intermediaries. The use of intermediaries is necessary for the marketing of products to be more effective, making them available to the target market. Through their contacts, experience, specialization and scale of operations, intermediaries usually have more to offer than the firm itself.
III. Distribution channel functions.
1) Information. Collection and provision of marketing research results of information about the marketing environment.
2) Promotion. Creation and dissemination for promotional purposes of persuasive information regarding the offer.
3) Contact. Acquisition of prospective customers and establishment of appropriate relationships with them.
4) Adaptation. Formation and adaptation of the offer to the needs of buyers.
5) Negotiations. The process of negotiating a price and other items of an offer in order to transfer ownership or ownership rights.
6) Physical distribution. Transportation and storage of goods.
7) Financing. Purchase of goods and use of funds to cover the cost of maintaining the channel.
8) Taking risk. Taking financial risks, such as not being able to sell a product at full profit.
IV. The number of channel levels. The number of channel levels can be different - from direct marketing, when the producer sells goods directly to the consumer, to complex distribution systems that include four or more channel participants.
V. Market intermediaries. Market intermediaries in the hospitality and tourism industry include travel agencies, tour operators, travel wholesalers, professionals, hotel sales representatives, travel agents, government travel associations, consortiums, reservation systems and electronic marketing systems.
VI. Behavioral distribution channel systems
1) Conflict in the distribution channel. Although channel participants are dependent on each other, they often act alone in their own interests. They often do not agree on the roles assigned to them - who should do what and for what reward.
a) Horizontal conflict- conflict between firms at the same level of the distribution channel.
b) Vertical conflict- conflict between different levels of the same distribution channel.
VII. Distribution channel organization. There are various distribution channels, from free associations of independent companies to joint systems.
1) Usual traditional marketing system. Consists of one or more independent manufacturers, wholesalers and retailers. Each represents a separate business trying to maximize its own profit even at the expense of a shortfall in the overall profit for the system as a whole.
2) Vertical marketing system (VMS). Includes manufacturers, wholesalers and retailers operating as an integrated system. The BMC was designed to manage channel behavior and conflicts, achieve savings through high sales volumes, trading power and the elimination of duplication of services. There are three main types of CPAs: corporate, managed, and contractual.
a) Corporate- combines successive stages of production and distribution under the auspices of a single property.
b) Managed- coordinates the successive stages of production and distribution, but not with the help of systems of common property or contractual ties, but with the size and strength of the influence of the parties.
c) negotiable- consists of independent firms at various levels of production and distribution that come together through contracting to achieve savings or influence sales.
- Franchising - a method of trading in which the franchisee is granted the right to participate in the offer, sale or distribution of goods or services in accordance with a single marketing strategy developed by the franchisor. The franchisor allows the franchisees to use their trademark, name and advertising.
- Unions- allow two organizations to benefit from cooperation.
3) Horizontal marketing system. Two or more companies at the same channel level are teaming up to take advantage of new marketing opportunities. Companies can pool their capital, production capabilities, or marketing resources in order to operate more efficiently.
4) Multi-channel marketing systems. One firm establishes two or more marketing channels to reach one or more market segments.
VIII. Making decisions about the structure of the distribution channel
1) Analysis of the needs and requests of the consumer. Distribution channel design begins with the definition of a set of services for which there is a demand from consumers.
2) Determining the goals of the distribution channel and restrictions. Factors are taken into account, including the characteristics of the product or service, the characteristics of the company and market intermediaries.
3) Responsibilities of channel participants. The producer company and distribution intermediaries must agree on the rules and responsibilities of each participant in the distribution channel.
4) Identification of the main alternative options for the distribution channel. The firm must evaluate all channel alternatives in terms of economics, control, and adaptability.
IX. Making decisions on channel management
1) Selection of channel members. When selecting channel participants, company management must evaluate the potential development opportunities for each channel participant, its profit, profitability, ability to cooperate and reputation.
2) Motivation of channel participants. The company must continuously motivate the members of its distribution channels.
3) Evaluation of participants in distribution channels. The company should regularly evaluate the work of its intermediaries and help them with recommendations.
4) Modification of the distribution channel structure. Necessary when the consumer's buying model changes, markets expand, goods and services become more complex, new competitors emerge, and new, creative distribution channel structures emerge.
X. Location of business. There are the following aspects of choosing a location for a business:
1)
Understanding the marketing strategy - the company's target market.
2)
Regional analysis - selection of the geographic region of the market.
3)
The choice of a market territory within the region - taking into account demographic, psychographic, competitive factors.
4)
Site Selection - Business Compatibility, Competitors, Site Accessibility, Drainage, wastewater, utilities and size are factors influencing site selection.
Issues for discussion.
1
. How do you think technology will change the distribution channels of hospitality and tourism businesses?
2.
Explain how international tourism has changed the distribution channels of hospitality and tourism businesses.
3.
What are the main differences between the distribution channel of a physical goods company and a travel or hospitality company?
4.
Can a business have too many channel members? Explain the answer.
5.
Explain the difference between a travel wholesaler and a travel agent.
6.
Why is franchising a rapidly growing form of retail organization?
Key terms
Agent (agent). A wholesaler that represents buyers or sellers on a more or less permanent basis and performs several functions without having ownership of the goods.
Broker (broker). A non-ownership wholesaler whose function is to connect buyer and seller and assist in negotiations.
Vertical marketing system (vertical marketing system - VMS). A distribution channel structure in which manufacturers, wholesalers, and retailers operate as an integrated system, or where one channel member owns or has contracts with the others, or has such power of influence that they all cooperate.
Horizontal marketing system (HMS). It is a contractual channel in which two or more companies at the same sales level come together to create new marketing opportunities.
Negotiated Navy (administered VMS). A vertical marketing system in which independent firms at different levels of production and distribution come together in a contract to achieve greater savings or impact on sales.
Integrated direct marketing (integrated direct marketing). Direct marketing companies that use multiple links and multiple stages to raise prices and increase profits.
Intensive distribution. Accumulation of stocks of goods in order to sell them as much as possible.
Direct marketing channel. A marketing channel that does not have a level of intermediaries.
Distribution channel, marketing channel (distribution channel, marketing channel). A set of independent organizations involved in the process that makes a product or service available to a consumer or business user.
Channel conflict. Disagreements among channel participants about goals, distribution of roles and remuneration.
Corporate Navy (corporate VMS). A vertical marketing system that combines the successive stages of production and distribution under the auspices of a single property; channel leadership is established on the basis of common ownership.
Direct mail marketing, direct mail marketing. Direct marketing through individual mailings, including letters, advertisements, samples, etc. sent to mailing lists.
Marketing database (marketing database). A specially compiled list of data about individual buyers or prospects used to identify categories of customers, sell products and services, and maintain relationships with customers.
Multichannel marketing (multichannel marketing). Multi-channel distribution, when a single firm establishes two or more marketing channels to serve the needs of one or more market segments.
Wholesale trade (wholesaleing). All activities for the purchase of goods and services and their subsequent resale or business use.
Wholesalers (wholesalers). Firms primarily engaged in wholesale trade.
Direct marketing (direct marketing). Marketing using a variety of advertising media that enables the manufacturer to interact directly with consumers by contacting the consumer for a direct response.
Retail trade (retailing). All activities involving the sale of goods or services directly to the final consumer for their personal, non-business use.
Retailers (retailers). A business that profits primarily from retail.
Telemarketing (telemarketing). Selling goods and services directly to the consumer using the phone.
Managed Navy (contractual VMS). A vertical marketing system that coordinates the successive stages of production and distribution, not through common ownership or contractual ties, but as a result of the size and power of influence of one of the parties.
Channel level. A layer of intermediaries who carry out some work to promote goods and services and ownership of them to the final buyer.
Franchise. A contractual association between a manufacturer, wholesaler, or authorized service organization (franchisors) and independent companies (franchisees) that buy ownership and operate alone or with more businesses under authorization systems.
franchise organization. A contractual vertical marketing system in which a channel participant, called the franchisor, is responsible for several stages in the production-distribution process.
Exclusive sales (exclusive distribution). Giving a limited number of dealers the exclusive right to sell the company's products in a given territory.
Electronic commerce (electronic shopping). Direct marketing through a two-way system linking consumers to a merchant's computerized directory via cable or telephone lines.
State unitary enterprises
Economy of Italy Issued in Italy
Conglomerate definition. What is a conglomerate? See the meaning of Conglomerate in other dictionaries
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