Marketing essay help online: Seven P’s of Service marketing – Intercontinental Group – IHG
Introduction
The report analyzes the seven Ps of the service marketing of InterContinental Group (IHG). IHG is a global hospitality chain. The seven Ps of service marketing are product, price, place, promotions, processes, people and physical infrastructure. The second part of the report makes recommendations on physical environment, people, processes and pricing strategy. These recommendations can improve the efficiency and effectiveness of service marketing of IHG if they are implemented.
A. InterContinental Hotels Group
Intercontinental Hotels Group (IHG) is a British multinational hospitality service company. Management of luxury and business hotels is the core competency of the group. It manages over 4500 hotels located in more than 100 countries around the world.
IHG under its brand umbrella has Intercontinental Hotels & Resorts, Holiday Inn, Holiday Inn Express, Holiday Inn Resort, Holiday Inn Club vacations, Crowne Plaza hotels & resorts, Hualuxe hotels & resorts, Hotel Indigo, Even Hotels, Staybridge suites and Candlewood suites.
IHG doesn’t own all the properties which bear its brand names. In most cases the property of the hotel is owned by another party while IHG is entrusted with the responsibility of managing and running the hotel. For this IHG takes a percentage of revenues as its management fees.
Why is IHG a service company?
A service company is one which delivers its customers services rather than products. A service can be defined as any act or performance which one party can offer to another and which is essentially intangible and doesn’t result in the ownership of anything. Its production may or may not be tied to a physical product (Philip Kotler, 2005).
IHG’s hotels business fulfills all the criteria laid down by the above definition of service. It is a service company which delivers essentially accommodation, food and beverages to its customers; none of these three result in the ownership of any tangible product.
Besides hospitality, other industries which can be classified as service industries include banking, insurance, courts, government services, public utilities, law firms, restaurants, software and information technology services etc (Lovelock, C., Gummesson, E. 2004.).
My experience with IHG:
My experience with IHG hospitality happened while I was visiting New Delhi, the capital city of India. I stayed at the Delhi intercontinental hotel which is located near Connaught Place, the heart of the city. It is a five star hotel and is one of the oldest IHG managed properties in the country. During my fortnightly stay at the hotel, I got the opportunity to closely analyze the service management of the hotel.
The seven Ps of service marketing are: Product, Price, Promotion, Place, People, Processes and Physical environment (Trout, J,2003). I analyzed my experience of staying at an IHG hotel on these parameters and have made recommendations based on this analysis.
The Seven Ps
Product:
The product is a luxury located in the green environs of Lutyens’ Delhi. The ten storey property has around 200 rooms and 30 suites. The rooms are large with spacious toilets attached to them. I was staying in one of the rooms. Every room is equipped with modern amenities like plasma TVs, private bar, refrigerator, air conditioners, wi-fi connection and telephones. The floors are covered with beautiful and luscious oriental rugs. The architecture of the rooms and the inside of the hotel building are done in Art Deco style. Modern paintings by contemporary artists line the walls of the rooms.
Large mahogany doubled beds dominate the rooms. Every room has a large wooden cabinet besides a few side-tables. My room also had a couch that lined one of the walls. The French windows of the room opened into a large overhanging balcony which overlooked the sprawling green lawns of the hotel. Beyond the lawn the swimming pool of the hotel is located. All day long one could see many guests from around the world lounging by the side of the pool in the warm Delhi sun.
The hotel has three restaurants located on the ground floor of the building. These restaurants serve continental cuisine, Indian cuisine and Asian cuisine respectively. Each of them is equipped with a bar. There is additionally a bar and dancing floor in the hotel.
Customers can order food from the kitchen of the hotel all day long. This kitchen is exclusively devoted to room service orders. The main lobby of the hotel is decorated with artworks of masters like M.F.Hussain. Installation arts of artists like Anish Kapoor adorn the lawns of the hotel.
The hotel has a very good spa. The spa has a mineral spring. There are exercise rooms and sauna bathhouses inside this spa. Various kinds of Thai and Indian massages are offered in the spa.
The hotel has three floors of underground parking. Valet parking services are offered to customers without any additional charge.
Price:
A room in the hotel cost me $ 270 per night inclusive of all taxes. The suites are priced much higher with the most expensive Maharaja suite priced at around $ 800 per night. The Delhi hotel is as expensive as any of its counterpart in Paris or London. I was staying during the lean season of September. The peak season is around November and December and prices are likely to be much higher than. The hotel’s pricing strategy relies on price discrimination on the basis of season traffic.
The food & beverages served in the restaurants of the hotel are of good quality and charge a premium price. Majority of the wines served are imported. The government charges hefty custom duties on these imported wines. Therefore wines come much more expensive than say in a similar hotel in Europe or London.
Overall the pricing strategy is to charge a premium price for services offered. The hotel markets itself as a product leader in the luxury segment rather than as a price leader.
Promotions:
The promotional strategy is one that is a mix of standardization and customization. The hotel to a greater extent relies on the promotions and advertising of the global intercontinental brand. Besides this, though to a much smaller extent, promotions are undertaken at the local level. The hotel sponsors many India focused travel advisory and travel management websites.
The Delhi Intercontinental hotel promotes itself as one of the best luxury hotels in Delhi. Its promotional tagline is, “ Luxury Redefined.” The hotel is a big sponsor of wine and food festivals.
The target customer segment is the up-market customer from around the world who can afford to pay the premium prices and desires a luxury experience. The hotel also has tie-ups with many international travel agents. Rooms in the hotels are offered at lower prices as part of packaged tours by these travel agents.
The hotel also lies on good word-of-mouth marketing by existing or former customers. This word-of-mouth marketing seems to be quite effective. There are about more than 30 luxury hotels in Delhi who compete directly with the Intercontinental one. However after landing on Delhi airport I headed straight for this hotel because a friend of mine who had stayed here before recommended it strongly to me.
The hotel’s vision is to not stop only at creating satisfied customers but to strive for creating delighted customers.
However, my feeling is that much of the international guests who throng to Delhi Intercontinental come because of the good brand image that the Intercontinental brand enjoys globally. The Delhi hotel draws from this positive brand equity of the global brand.
The brand equity of the Intercontinental brand is one of the major intangible assets of the Intercontinental Hotel Group. The IHG at the global level has invested heavily in its brands.
Place:
A famous hotelier once remarked: “When it comes to hotels three things are most important: place, place and place.”
Place or location is of utmost importance in the case of a luxury hotel like the hotels run and managed by InterContinental Hotel Group (Sharp, Byron; Dawes, John ,2003). It is key to IHG’s global strategy to choose properties which are located in the most prime of locations. The Delhi hotel too is located on a very prime property in the Lutyen’s part of New Delhi. It is surrounded by lush green environs. It is not very far from the airport or the railway station.
Having properties in the best of locations in major cities around the world is one of the key assets of Intercontinental Hotel Group. A good hotel located in a bad location is doomed to be a failure.
Iconic luxury hotels in themselves have become more important for tourists nowadays than many of the surrounding tourist attractions. Good locations often distinguish good hotels from iconic ones like New York’s Waldorf Astoria.
However in spite of its good location, many of the competitors of Delhi Intercontinental are located in better locations. I have come to observe that when it comes to locations rival chains like Four Seasons and Aman are faring better than Intercontinental. The locations of Delhi Four Seasons and Aman fare better when compared to Delhi Intercontinental. It is one aspect of global strategy that the hotel management chain should focus more on.
People:
The importance of the people aspect increases in any services business because it is people who ultimately deliver services to the customers. The biggest competitive advantage of a service company like a hotel chain comes from the people it employs (Lovelock, C., Gummesson, E. 2004.)..
It is people who serve the guests in a hotel; it is people who cook the food in the kitchens of the hotel restaurants and it is people who wait on the table, take the orders and serve the customers inside the restaurants.
The employees have played the most important role in the success that Intercontinental group has enjoyed over the years. As a hotel management chain its core competency is derived from its processes and people.
At the Delhi Intercontinental the employees play the most significant role in delivering the experience that customers enjoy. Unlike many of its European and American counterparts, this hotel gives its guests the privilege to order food in their rooms at any time of the day or night. So one can order a full course meal in his room even at 3 a.m. in the morning. This is made possible by the staff in the 24 hour room service kitchen of the hotel. The staff at the Delhi intercontinental was friendly and hospitable. They were efficient in the job tasks that they were responsible for. Such kind of efficiency comes only with long on-the-job training.
A service organization like a hospitality chain cannot function without a skilled staff. Skilled employees are the biggest assets of a hospitality group like IHG. No wonder then that IHG invests heavily in the training and development of the employees.
The Delhi hotel of the group also employs a number of expatriate staff. The chefs who work in the continental restaurant of the hotel are originally from Europe. Those working as chefs in the Asian restaurant are also mainly from Asian countries like Hong-Kong and Thailand.
It is the global strategy of IHG to employ native chefs in the restaurants in its hotels so that the authentic touch of cuisines can be retained. Except for the chefs most of the other people employed in the hotels are natives of the country in which the hotels are located. So most of the people employed in the Delhi Intercontinental Hotel are Indians.
Processes:
Processes are as important for a service organization as they are for a manufacturing one. Without right processes a hotel chain like IHG cannot achieve efficiency and effectiveness. Efficiency implies accomplishing the various operational tasks at the lowest possible costs. Effectiveness is about serving the customers in the best possible way. The mission of IHG is to create not only satisfied customers but delighted ones. Without right processes in place it cannot achieve this vision.
A luxury hotel company needs to be very process oriented. Managing a luxury hotel is a process intensive activity. The processes are one of the biggest competitive advantages that a hotel chain like IHG has over its rivals. I observed that the Delhi Intercontinental is an intensely process oriented hotel. There are well established processes for even the smallest and most insignificant tasks. For instance, there are fixed processes even for routine tasks like changing the flowers in the vases that line the central lobby.
Hotel business is all about taking care of the detailed processes. Quality in service cannot be delivered without the right processes. IHG has mapped out in detail the entire range of processes that are needed for managing a luxury hotel. One can find a high degree of standardization in terms of processes across all hotels managed by the IHG group. These processes have come to define the hotel chain worldwide.
The whole operations management at the IHG hotels is hinged on processes. There are separate set of processes for each aspect of operations. The room service department has its unique set of processes; the food & beverages department relies on another set of processes; there are very detailed process guidelines for customer service in the restaurants.
Physical Environment
Physical infrastructure and environment are crucial for service marketing and service delivery. For a luxury hotel the importance of physical environment and physical infrastructure is much more because physical environment is part of the service experience. The quality of physical infrastructure and environment is one of the biggest value propositions offered by a luxury hotel to its customers (Kaplan, A.M, Haenlein, M ,2006).
For many luxury hotels their physical environment and infrastructure are the biggest sources of competitive advantage. Hotel properties command a premium solely because of their property and surrounding environs. Physical environment in the case of a hotel is the architecture of its property, the décor of its interiors and rooms and the location in which it is located. Every service has some tangible component to it which is also the physical evidence of the service. The ambience of a luxury hotel plays a critical role in the quality of the service being delivered by it.
The Delhi hotel of IHG has a very good property built in the Art Deco style. It is not a heritage property; it was built only in late 60s. Most other hotel properties under the Intercontinental brand are similar properties built on the lines of modern styles of architecture. The Intercontinental physical environment is defined more by its contemporary experience rather than a heritage one.
B.Recommendations based on 4 of the 7Ps of service marketing
The above analysis of IHG is based on 7Ps of service marketing. The analysis also gives insight into areas where improvement can be made so as to increase the efficiency and effectiveness of service delivered to customers.
Recommendation on Physical Environment aspect of service marketing of IHG
The physical environment of many Intercontinental Hotels including the one in Delhi can be improved further. Many competitors like the Four Seasons have better properties located in better environments than IHG. When it comes to the architectural quotient of properties, InterContinental’s hotel properties lag behind some of its competitors. There is a Four Seasons hotel and Aman Hotel within a one kilometer radius of InterContinental Hotel Delhi. Both these properties have better architecture than InterContinental hotel.
It is also recommended that IHG changes its strategy when choosing the locations of its future hotels. Some of IHG properties are located in poor locations and give a bad name to IHG brand image.
Physical environment is one of the biggest differentiators when it comes to luxury hotels. It is recommended that IHG invests in future in only those hotel properties which can hone this differentiation of the hotel chain.
Recommendation on Processes aspect of service marketing of IHG
Another area of recommendation is processes. Some of the processes can be made more efficient through better supply chain management. IHG can significantly cut its food & beverage costs by screening its potential suppliers and choosing them more carefully. Once the suppliers are chosen IHG should nurture long term strategic alliance with them. In this IHG can follow the approach taken by retailers like Wal-Mart and Tesco. These retailers rely heavily on supply chain management processes for achieving efficiency in operations.
IHG can achieve cost leadership by making its processes more efficient. It can retain the subsequent cost savings in the form of higher profits or it can pass these savings to customers by charging lower prices from them than its competitors. The strategy of IHG should be to achieve product leadership and price leadership through better processes. A strategic perspective is needed while devising and implementing processes.
Recommendations on the People aspect of service marketing of IHG
Besides processes improvements are also recommended on the people aspect of service marketing of InterContinental Hotel Group. Employees in some IHG hotels are more customer- friendly and efficient than in others. This has the effect of causing variance in the quality and standard of service in hotels that operate under the brand name of InterContinental. Employees should be trained so that a common standard and level of service can be achieved in all the hotels of InterContinental. The hotel chain can take a cue here from global restaurant chain McDonald’s. McDonald’s has successfully achieved standardization in service across the globe (Kaplan, A.M, Haenlein, M ,2006).
Recommendation on Pricing aspect of service marketing of IHG
The pricing strategy of IHG can be improved. Currently the pricing strategy practices only one kind of price discrimination; in this the hotel chain varies the rates of rooms based on the inflow of guests. So in a peak season, like winters in Delhi or summers in Europe when tourist flow is high , the room rates in InterContinental Hotels are higher.
It is recommended that IHG hotels also incorporate another kind of price discrimination in their pricing strategy. It should charge higher prices from customers who make last moment reservation in rooms and should charge lower prices from customers who make reservations much beforehand. This kind of price discrimination is practiced by many airline companies around the world. Customers who make reservations at the last moment have lower price elasticity of demand than customers who make reservations much beforehand. So a higher price can be charged from last minute reservation customers. Such a pricing strategy can increase the revenues of IHG.
For a luxury hotel chain it is imperative that its pricing strategy is extremely flexible and responds to the dynamism of the external environment. A rigid pricing strategy cannot work in a luxury hotel. In the current economic environment where major countries are struggling with slowdowns flexibility in pricing has become even more important.
Conclusion:
The strategy of a service company like InterContinental Hotel Group should be woven around the 7 critical Ps of service marketing. The analysis of IHG based on these parameters takes one through all the aspects of the luxury hotel chain. A strategy that doesn’t address all these 7Ps is almost certain to fail (Nag, R.; Hambrick, D. C.; Chen, M.-J,2007). The analysis of the 7Ps of IHG is based on my personal experience of staying at one of the hotels of the chain. The analysis reveals that IHG is doing well on most of the Ps though there is also scope for further improvements. Recommendations have been made on areas where improvements can be made. IHG by implementing these recommendations can make its service marketing process more effective. Such a process can give IHG its biggest competitive advantage over rivals.
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