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Inter Continental Case Study
According to Rust et al (2004) given the increasing importance of customer expectations from
the products and...
when the organization selects subgroups from the market and develops the products and services
in a way that will appeal t...
but also the helps the organization in setting the prices of the product based on the
purchasing power of the target marke...
- Travelling: The consumers prefer to travel regardless of the economic and political
situations for the luxury segment of...
Having more brands in the portfolio allow the
organization to diversify the risk of having one
business. This protects the...
that the organization is offering to its customers throughout the world. These services include the
food and accommodation...
Draw a perceptual map for any one of the brands of the InterContinental
Through the case study it has bee...
1. Ferrell,O.(2012). MarketingStrategy.6th
Ed. USA: Cengage Learning.
2. Kotler,P.(2009). MarketingManagement.1...
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Inter continental marketing case


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Inter continental marketing case

  1. 1. Inter Continental Case Study Contents Introduction.......................................................................................................................................2 What type of market segmentationstrategyisInterContinental Hotelsfollowing?Isitmarket differentiation,niche marketing(focused),ormarketintegration(combinationof differentiationand niche)?...............................................................................................................................................2 Reviewthe variablesthatcanbe usedtosegmentconsumermarkets.Descriptionthe variablesusedby InterContinental Hotels to segment their market..................................................................................3 Is InterContinental’sportfolioof brandsanadvantage or disadvantage?Assessthe prosandcons of operatingin so many segments of the market......................................................................................5 What kind of positioning strategy should the company adoptfor Holiday Inn and Holiday Inn Express? ..6 Draw a perceptual map for any one of the brands of the InterContinental Group...................................8 Conclusion .........................................................................................................................................8
  2. 2. Introduction According to Rust et al (2004) given the increasing importance of customer expectations from the products and services of the organization and the ever changing business environment it is crucial for the managers to integrate the findings of market research, industry performance and consumer expectations with the effective utilization of resources. According to the authors, having a marketing orientation is not an option for business anymore as the level of global competition is increasing and it is vital to have superior product and service quality so that the customer remain loyal to the organization and the flow of revenue is stable and growth oriented. The case in consideration for this study is of the Inter Continental Hotels Groups. It has been seen through the case presented that this group is one of the top most groups in the global tourism and hospitality industry and is in its growth phase in its lifecycle (Kotler 2007). In regards to the importance of business growth Day, Reibstein, and Shankar (2009) say that for business managers of today profit growth is still the most important priority and for this the managers have to be well aware of the market trends that exist, the economic and political situations and their business rivals in the industry. The Inter Continental Hotels Group case integrates all of these marketing strategy issues and presents a practical business issue that needs to be catered to through application of theoretical marketing knowledge and related research. What type of market segmentation strategy is InterContinental Hotels following? Is it market differentiation, niche marketing (focused), or market integration (combination of differentiation and niche)? Before explaining the strategy that the Inter Continental Hotels Group is following, it is important to elaborate on the three marketing strategies. In regards to the issue of generic marketing strategies Kotler (2007) says that Michael Porter has developed three generic marketing strategies. These are: i) Cost Leadership ii) Differentiation iii) Niche or Focused strategy Kotler (2007) notes that the cost leadership strategy has the basic agenda to keep its operating costs low and to sell their products or services at the cheapest possible price in the market such that the consumers are forced to purchase those products and services that give them the highest value for money. The focus of the business managers in a cost leadership strategy is to invest in mass production and in efficient operations. On the other hand, differentiation strategy believes that the consumers will be willing to pay a premium price for better quality or a unique product thus implying that the organization needs to develop and market a product which does not already exist in the market and then based on its non substitutability, the consumers will pay whatever the organizations charges. Finally the third strategy is the niche or focused strategy is
  3. 3. when the organization selects subgroups from the market and develops the products and services in a way that will appeal to that targeted subgroup. This market strategy is basically targeted at meeting the needs of specific consumers in the market and the products and services are sold on the prices that that target market can afford. However in this marketing strategy with carefully market segmentation along with a unique product can help the organization in having an integrated marketing strategy that allows it to charge the price on the basis of its set profit margins. Inter Continental group can be seen to be following an integrated strategy in which it is highlighting the characteristics of different market segments globally and then is developing its product to motivate the consumers to pay the maximum price for its products and services. The evidence of the fact that Inter Continental is following an integrated strategy is that it has developed its operations in the three market segments internationally that is the luxury segment, the mid price segment and finally the economy segment. All of these are individually following a distinct business strategy that is overall contributing to the corporate strategy of being the global market leader in the hospitality industry. This shows that the organization is pursuing a market development strategy in which it is offering the same product in different market segments as well as different geographic locations of the world. However the competition according to the case study is increasing and given the after effects of the 9 /11 incident the market as a whole is suffering from reduced consumer travelling. Through its market strategy then the organization has to attract the maximum customers in all segments. Review the variables that can be used to segment consumer markets. Description the variables used by InterContinental Hotels to segment their market. Perdue, Immermans and Uysal (2004) emphasize on the importance of market segmentation in the overall marketing function and say that market segmentation has become a standard concept in strategic marketing as it allows the organization to split the individuals on the basis of per defined criteria and data driven approaches. According to the author through the use of market segmentation the researchers and market use the survey information to develop better strategies that will help the organization in reaching the right customer in the right manner. In regards to te variables that are used to segment the consumer markets, Perdue, Immermans and Uysal (2004) say that the following bases are used for marketing segmentation: i) Behavioural: This category deals with the variables such as the product benefits derived by the customers, the consciousness of the customers to the price at the point of purchase, the rate of usage and the status of usage. ii) Demographic: Demographic segmentation of the customers deals with the age, gender, education, social class, family size, religion, and occupation of the consumers. This is important because it not only gives the size of the target market
  4. 4. but also the helps the organization in setting the prices of the product based on the purchasing power of the target market. iii) Geographic: This set of variable deals with the nationality, ethnicity, population and geographical region of the potential customers. This is important because the climate and size of the market has a strong impact on the marketing directions and product distributions of the organization. iv) Psychographic: This category of variables deals with the opinions, brand perceptions and status consciousness, the self image and values and the attitudes of the consumers and how they can impact the usage of the products or services. The Inter Continental Group now has entered three market segments: i) Luxury market segment, ii) Mid Price Market segment and iii) Economy oriented market segment. For each of the following segments, the organization has developed three different segmentation strategies that allow the organization to choose their target market effectively. The important variables chosen by the organization under each category for segmentation are: Demographic - Age: People of ages 21 and above are targeted. The significance of this age bracket is that only individuals with their national identity card can check into the accommodation services of the organization. - Education: This is a relatively less important variable however given the brand value of the organization education is an indication of the socio economic class and status therefore is considered as an important division for targeting. - Family Size: Individual with any marital status or families of any family size - Occupation: Working individuals especially working for the corporate sector or business owners. Psychographics - Attitude: The consumers have a positive attitude towards the organization - Self Image: The consumers have a high self esteem and are confident in their choices. - Brand Perception: The consumers are well aware of the brands in the market and prefer to live in a branded setting rather than a same priced and same serviced non branded set up. This will be a major opportunity for the organization as a whole because the brand is globally well developed therefore consumers who value the power of brand will be targeted for all three segments Behavioural - Lifestyle: The consumers have a comfort and style oriented lifestyle in which education and networking is an important part of their lives. The targeted individuals are employed and have frequent travelling requirements both for personal and professional purposes.
  5. 5. - Travelling: The consumers prefer to travel regardless of the economic and political situations for the luxury segment of the organization. The consumer for the economy segment have to travel frequently and because of this they need to look for places which provide cost advantage along with excellence of service Geographic - The market of Canada is covered. The climate is colder in Canada therefore the customers being targeted are those who are either used to or can accommodate in the cold set up effectively. Is InterContinental’s portfolio ofbrands an advantage or disadvantage? Assess the pros and cons of operating in so many segments of the market. According to Luxin (2007) through a developed brand an organization can extend its business further by developing brand extension based on the brand equity and recognition developed for the previous brand already. Luxin (2007) quotes the famous paper of Aaker and Keller (1999) who find that the stronger the association of the customers with the brand and the stronger the association of the parent brand with the extension, the larger the likelihood of the brand extension being successful. These findings are in strong relevance to the case of Inter Continental Hotels as it is operating a portfolio of products whose brand equity and performance significantly impact the brand perception (Ferrell, 2012) as well as the financial performance of the other brands in the portfolio. However it can be analysed through the case presented that there are a number and pros and cons for the Inter Continental group of having a portfolio of brands. Pros of having a portfolio of brands Cons of having a portfolio of brands The larger the number of brands, the larger the opportunities the organization has to attract customers and to gain revenue from the market. With a single product following a single lifecycle the saturation point of the brand is likely to come sooner which will eventually lead to decline in the competitive advantage of the organization. Investing in and launching more brands requires more capital and expensive. More brands raise the overall cost of operations of the organization which adversely impact the profitability of the organization. Through different brands the organization can target more than one target markets and customer types. Through the increase in number of brands in a portfolio the control of the organization on the quality and operations of the organization declines as there are more than one things for the managers (owners) to focus one which eventually leads to the customer dissatisfaction.
  6. 6. Having more brands in the portfolio allow the organization to diversify the risk of having one business. This protects the organization from economic and industrial fluctuations and gives the organization an opportunity to effectively manage the business cycles through which a more stable and sustainable revenue stream can be assured. With the greater exposure to the external environments the cost of getting information about all the products in different markets and different economies is not only a complex procedure but is also expensive for the organization. Operating and managing a brand helps the organization in building a value for the brand and allow to gain intangible assets through goodwill, brand value and organization value. Through increasing the n number of brands in the portfolio, this intangible value of the brand can actually be capitalized upon and financial benefit can be achieved from it. Even though increase in the number of brands in the portfolio can help the organization in monetizing the brand values of previous brands, mismanagement of this relationship or the dissatisfaction of the consumers from one brand can have a negative impact on the value of the total portfolio and thus the risk of having many brands in the portfolio is huge. This shows that with the presence of Holiday Inn, Holiday Inn Express and Holiday Inn selecting, the Inter Continental Group in Canada is facing a mixed situation in which effective management of each brand is crucial as it will not only have a financial impact on its own performance but also on the performance of the other brands in the portfolio. For example if the experience of a customer in Holiday Inn express is not good because of some reason, then the customer is likely to perceive that Holiday Inn will also have the same quality of service and neither will prefer to go him or herself nor will recommend the hotel to other people in his or her social circle. This means that given the importance of word of mouth and individual experiences in the field of tourism and hospitality because of the flaw of one brand in the portfolio, the other will suffer too. On the other hand however if the customer experience was good, then the benefits of it will also accrue to other brands in the same portfolio. What kind of positioning strategy shouldthe company adopt for Holiday Inn and Holiday Inn Express? According to Ferrell (2012) positioning is basically the marketing activity that identifies the market problem and the opportunities and threats available in the market and then based on the market research, the supporting qualitative and quantitative data to make a strategy that will help the organization in achieving its business and marketing objectives. In developing the positioning strategy for a brand the organization has to answer the following questions for the brand: i) What: This asks the question that what the organization will offer to the customers in return for their money. This is the most critical question as it is the entire idea around which the business revolves. For Inter Continental group this “what” is the hospitality and tourism services
  7. 7. that the organization is offering to its customers throughout the world. These services include the food and accommodation provided to the customers as the point of parity features and then offers the differentiated experiences and environments as points of differentiation. These point of differentiation are the “what” that separate the business from its competitors. ii) Where: This question of the brand positioning strategy asks where the product will be placed. This looks at both the market as well as the geographic opportunities. Since the group under study is a global organization answering the question of where is extremely important. iii) Who: The next important “w” in the positioning strategy development is to answer “who” will be targeted through the products and services. In this the marketing manager answers the question of who does the organization want to sell its products to. This is a vital question because only the purchasing power in the issue of brand management is not important. For example the management of Inter Continental Hotel Group would not want a person with the purchasing power but with no style of speaking, eating and behaving at all to come and be present in Crowne plaza. The reason for this is that the harmful impact that the presence of this client has on the overall brand equity of the organization costs far more than the benefit in the form of revenue that he is bringing in the organization. Thus in developing the positioning strategy it needs to be carefully decided who to sell this product to so that the marketing, advertising and sales efforts can be targeted to that group. According to the case study, Holiday Inn is operating in the mid price segment of the Canadian market and Holiday Inn express is operating in the economy segment of the market. The positioning statements for each are as under: Holiday Inn [Holiday Inn offers comfortable and classy accommodation and services to consumers who prefer to have a comfortable stay belonging to upper middle and upper socio economic classes] Holiday Inn Express [Holiday Inn is a convenient accommodation solution for extensive travellers seeking highest value for money]
  8. 8. Draw a perceptual map for any one of the brands of the InterContinental Group Conclusion Through the case study it has been seen that the Inter Continental group is a strong group internationally and even in Canada is has a competitive positioning. However the organization is still on number three in the Canadian market which means that it is not leading the domestic market and needs to be more aggressive about its marketing strategy. Canada is an important market mostly because it is growing both in terms of the economy and in terms of the population. According to the case study presented the revenue of the hospitality industry in Canada grew from 10.6 billion dollars in 2000 to 11.0 billion dollars in 2004. This is a massive increasing considering that for most of the year the geographical and climatic condition of Canada are harsh and living there is a problem. This means that Holiday Inn as a brand and the Inter Continental group as a whole is operating as a “Star” performer in the Canadian market in the BSG matrix. This is because both the industry as well as the organization in terms of its revenues is growing.
  9. 9. References 1. Ferrell,O.(2012). MarketingStrategy.6th Ed. USA: Cengage Learning. 2. Kotler,P.(2009). MarketingManagement.13th Ed. India:Pearson. 3. Rust etal. (2004). Measuringmarketingproductivity:Currentknowledge andfuture directions., Journalof Marketing, Vol.68 (4) Available through:EmeraldInsight[Accessed5Oct14] 4. Perdue,R.,Immermans,M.andUysal, M. (2004). Consumer Psychology.USA:CABI.