Tourism Marketing II: The P's of Tourism Marketing (Product, Place, Price, Promotion, Physical Evidence, People, Process and Packaging), Designing, Branding and Packaging the Tourism Product, the Product Life Cycle, Pricing Strategies, the Promotion Mix, Distribution Channels and Channel Conflict, and Global, Direct, Digital and Green Marketing, CSR, Marketing Ethics and Consumerism

The second paragraph of Unit VII is the marketing mix as the tourism marketer uses it. This chapter sets out the extended mix the syllabus lists, product, place, price, promotion, physical evidence, people, process and packaging; the design of a tourism product, its branding and packaging and its development through the product life cycle; pricing strategies and approaches, with a tour's break-even point worked; the promotion mix of advertising, sales promotion, publicity and personal selling; tourism distribution channels and the management of cooperation and conflict among them; and global, direct, social media and digital, and green marketing, corporate social responsibility, marketing ethics and consumerism. NET Management and Commerce teach the general theory of the mix; the examples here are tourism's.

1. The P's of tourism marketing

ElementMeaning in tourismExample
ProductThe experience offered: the destination, hotel stay, tour or flight, with its features and qualityA seven-day Kerala backwater and Ayurveda holiday
Place (distribution)How the product reaches the buyer: direct sales, agents, OTAs, GDSsSelling through a UK tour operator and the hotel's own website
PriceWhat the customer pays, including discounts, seasonal rates and termsPeak, shoulder and lean-season rates
PromotionCommunication with the market: advertising, sales promotion, publicity, personal selling, digitalA social media campaign and a trade fair stand
Physical evidenceThe tangible cues that signal quality: buildings, décor, uniforms, brochures, the websiteA resort's landscaped entrance and clean vehicles
PeopleStaff who deliver the service and other customers who share itGuides and drivers as the face of the tour
ProcessThe procedures and flow by which the service is deliveredOnline check-in, a smooth airport transfer
PackagingCombining complementary services into one offer at one priceFlight, hotel, transfers and sightseeing sold together

The first four were set out by E. Jerome McCarthy in 1960 for goods. Bernard Booms and Mary Jo Bitner added people, process and physical evidence for services in 1981, making the seven Ps, and tourism writers such as Alastair Morrison added packaging, programming and partnership, because tourism is sold as bundles, animated by events and activities, and delivered by many cooperating suppliers. The syllabus's list, ending with packaging, follows that tradition.

2. Designing the tourism product: branding, packaging, product development and the product life cycle

A tourism product is designed in layers. The core product is the essential benefit the customer seeks (rest, adventure, business connection); the facilitating products are the services without which the core cannot be delivered (check-in, a restaurant); the supporting products add value and differentiate (a spa, a business centre); and the augmented product includes access, atmosphere, customer interaction and participation. Stephen Smith (1994) described the tourism product as five concentric elements: the physical plant at the centre, then service, hospitality, freedom of choice and involvement. Branding gives the product a name, a symbol and a promise that customers recognise and trust, which matters doubly for intangible services; a destination brand such as Incredible India (launched in 2002) or a hotel brand carries expectations of quality. Packaging combines complementary components into a single offer, which gives the buyer convenience and value and gives the seller a way to spread demand and sell weaker components with stronger ones.

Stage of the product life cycleSales and profitMarketing emphasis
IntroductionLow sales, losses from launch costsAwareness and trial: publicity, fam trips, introductory prices
GrowthRapidly rising sales, rising profit, competitors enterBuild preference and distribution, improve the product
MaturitySales peak and level off, profits under pressure from competitionDefend share, differentiate, find new segments, modify the product
DeclineFalling sales and profitsRejuvenate with a new product or market, harvest, or withdraw

Product development in tourism means creating new products or renewing existing ones: new circuits, themed packages, heritage hotels in restored buildings, events that fill the off-season, or adding activities to a beach resort. It follows idea generation, screening, concept testing, business analysis, development, test marketing and launch, and it is how a destination avoids the decline stage of Butler's cycle, which is the product life cycle applied to places.

3. Pricing strategies and approaches

Approach or strategyHow the price is set
Cost-based (cost-plus, break-even)Cost plus a mark-up, or the price at which revenue covers fixed and variable costs
Demand- or value-basedWhat the customer is willing to pay for the perceived value; includes prestige pricing (high price signalling luxury) and psychological pricing (₹9,999 rather than ₹10,000)
Competition-basedIn line with competitors (going-rate pricing), above them for a premium position, or below them
Skimming and penetrationFor a new product, a high initial price to skim the less price-sensitive segment, or a low initial price to penetrate the market and build volume quickly
Differential (discriminatory) pricing and yield managementDifferent prices for the same product by season, day, booking time, segment or channel, adjusted continuously to demand so as to maximise revenue from fixed capacity (dynamic pricing)
Bundle and promotional pricingOne price for a package lower than the parts bought separately; early-bird, last-minute and group discounts

Break-even analysis tells an operator how many passengers a departure needs before it makes a profit. The break-even point in passengers is the fixed costs of the departure divided by the contribution per passenger, which is the price minus the variable cost per passenger. If a departure's fixed costs (coach, guide, escort, marketing) are ₹1,20,000, the price is ₹30,000 and the variable cost per passenger is ₹22,000, each passenger contributes ₹8,000, and the tour breaks even at 1,20,000 ÷ 8,000 = 15 passengers; the sixteenth passenger earns the first profit. Operators set a minimum group size near the break-even point and reserve the right to cancel below it.

4. The promotion mix, distribution channels, and channel cooperation and conflict

Element of the promotion mixWhat it isTourism use
AdvertisingPaid, non-personal communication by an identified sponsor through mediaDestination campaigns on television, print, outdoor and online
Sales promotionShort-term incentives to buy or sellEarly-bird discounts, free nights, contests and agent incentives
Publicity and public relationsUnpaid media coverage and the management of relations with publicsPress trips, media releases, events, crisis communication after a disaster
Personal sellingFace-to-face or direct presentation by a salesperson to prospective buyersHotel sales calls on corporate clients, operators at trade fairs

Promotion aims to move the customer through the stages of the AIDA model, attention, interest, desire and action, and the mix is chosen for each stage: advertising and publicity build attention and interest, sales promotion and personal selling close the sale. Tourism distribution channels link suppliers with customers. A zero-level (direct) channel sells straight to the traveller through the supplier's website, app, call centre or counter; a one-level channel uses a retail travel agent or OTA; a two-level channel uses a tour operator or wholesaler and a retailer; and most suppliers now use many channels at once. Channels need cooperation, since each member depends on the others, but they also produce conflict: vertical conflict between levels, as when a hotel undercuts on its own website the rate it gives an online agency, or an airline cuts agents' commissions to sell directly; and horizontal conflict among members at the same level, such as agents undercutting one another. It is managed by clear contracts and roles, rate parity or agreed differentials, fair commissions and incentives, communication, and a channel leader strong enough to set rules.

5. Global, direct, digital and green marketing, CSR, marketing ethics and consumerism

Global marketing sells across many countries and must decide between standardisation (one brand and message everywhere, cheaper and consistent) and adaptation (messages, products and prices tailored to each market's culture, language and season); national tourism organisations combine a global brand with market-specific campaigns run through their overseas offices. Direct marketing reaches identified customers individually, by e-mail, mail, telephone or messaging, using a customer database, and measures their response. Social media and digital marketing now dominate tourism promotion: search engine optimisation and paid search, content and video marketing, social media platforms, influencers and bloggers, user-generated content and online reviews, metasearch and OTA listings, mobile apps and personalised offers driven by data. Green marketing promotes products on their environmental merits, energy-efficient hotels, eco-certified tours, plastic-free destinations, and is credible only when the claims are true; claiming an environmental benefit that is not real is "greenwashing".

Corporate social responsibility is a firm's commitment to act for the benefit of society and the environment beyond profit. In India it is also a legal duty: under section 135 of the Companies Act 2013, a company with a net worth of ₹500 crore or more, a turnover of ₹1,000 crore or more, or a net profit of ₹5 crore or more in a financial year must spend at least 2 per cent of its average net profit of the preceding three years on CSR activities listed in the Act, which include the protection of national heritage, art and culture and environmental sustainability, areas where hotel and travel companies are active. Marketing ethics requires honest advertising and pricing without hidden charges, truthful descriptions in brochures and on websites, respect for customer data and privacy, and fair treatment of intermediaries. Consumerism is the organised movement to protect buyers' rights, often traced to President John F. Kennedy's statement of four consumer rights in 1962: to safety, to be informed, to choose and to be heard. In India it is backed by the Consumer Protection Act 2019, in force from 20 July 2020, which created the Central Consumer Protection Authority to act against unfair trade practices and misleading advertisements, and under which rules for e-commerce, including online travel bookings, were made in 2020.

⚠️ Publicity is unpaid, advertising is paid
A newspaper travel feature written after a press trip is publicity: the destination did not pay for the space, though it paid for the trip. An advertisement in the same newspaper is paid for and controlled by the sponsor. Sales promotion is a short-term incentive, not the same as promotion in general, which is the whole mix.

Key takeaways

  • The tourism mix is product, place, price and promotion (McCarthy, 1960) plus people, process and physical evidence (Booms and Bitner, 1981) and packaging, with programming and partnership in Morrison's version.
  • The product has core, facilitating, supporting and augmented levels (Smith's five elements: physical plant, service, hospitality, freedom of choice, involvement); branding carries a promise (Incredible India, 2002); packaging bundles components; the PLC runs introduction, growth, maturity and decline.
  • Prices are cost-, demand- or competition-based; skimming starts high, penetration low; yield management varies prices with demand; break-even passengers = fixed costs ÷ (price − variable cost), 15 in the example.
  • The promotion mix is advertising (paid), sales promotion (short-term incentives), publicity and PR (unpaid coverage) and personal selling, moving buyers through AIDA; channels are zero-, one- or two-level, and vertical and horizontal conflicts are managed by contracts, parity and a channel leader.
  • Global marketing balances standardisation and adaptation; digital marketing runs on search, content, social media, influencers and reviews; green claims must be true, not greenwashing; CSR is mandatory under section 135 of the Companies Act 2013 (2 per cent of average profit); consumerism rests on Kennedy's four rights (1962) and the Consumer Protection Act 2019.

Practice questions (10)

Attempt each one before opening the answer. Every explanation names the tempting wrong option as well as the right one, because that is where marks are lost.

  1. Which three elements did Booms and Bitner add to the four Ps in 1981 to form the services marketing mix?

    1. Packaging, programming and partnership
    2. Positioning, promotion and profit
    3. Planning, performance and publicity
    4. People, process and physical evidence
    Show answer

    Answer: D — People, process and physical evidence

    Booms and Bitner added people, process and physical evidence, making the seven Ps. Packaging, programming and partnership are the tourism additions associated with Morrison.
  2. A new luxury resort sets a very high opening price to attract guests who value exclusivity and are less sensitive to price, planning to lower it later. This is

    1. price skimming
    2. going-rate pricing
    3. penetration pricing
    4. psychological pricing
    Show answer

    Answer: A — price skimming

    Skimming takes the top of the market first with a high price. Penetration does the opposite, entering low to gain volume; going-rate pricing follows competitors; psychological pricing uses figures such as ₹9,999.
  3. A tour departure has fixed costs of ₹1,20,000. The price per passenger is ₹30,000 and the variable cost per passenger is ₹22,000. How many passengers are needed to break even?

    Numerical answer — type the value.

    Show answer

    Answer: 15

    Contribution per passenger = 30,000 − 22,000 = ₹8,000; break-even = 1,20,000 ÷ 8,000 = 15 passengers. Dividing the fixed costs by the full price (giving 4) ignores the variable costs each passenger brings.
  4. A tourism product whose sales have levelled off and whose profits are squeezed by many competitors is in the product life cycle stage of

    1. growth
    2. decline
    3. introduction
    4. maturity
    Show answer

    Answer: D — maturity

    At maturity sales peak and flatten and competition presses on price, so marketers differentiate, seek new segments and modify the product. In decline sales are actually falling; in growth they are rising fast.
  5. Which of the following are elements of the promotion mix? Select all that apply.

    1. Yield management
    2. Advertising
    3. Personal selling
    4. Channel conflict
    Show answer

    Answer: B — Advertising; C — Personal selling

    The promotion mix is advertising, sales promotion, publicity and public relations, and personal selling, with direct and digital marketing often added. Yield management is a pricing practice, and channel conflict a problem of distribution.
  6. The AIDA model describes the stages through which promotion moves a customer. AIDA stands for

    1. advertising, incentive, distribution, after-sales
    2. attention, interest, desire, action
    3. attitude, intention, demand, acquisition
    4. awareness, information, decision, adoption
    Show answer

    Answer: B — attention, interest, desire, action

    AIDA is attention, interest, desire and action. Advertising and publicity work mostly at the first stages; sales promotion and personal selling push the customer to action.
  7. A hotel offers on its own website a lower rate than it has agreed to give an online travel agency. This is an example of

    1. vertical channel conflict
    2. market penetration
    3. channel cooperation
    4. horizontal channel conflict
    Show answer

    Answer: A — vertical channel conflict

    The conflict is between different levels of the same channel, the supplier and its intermediary, so it is vertical. Horizontal conflict is between members at the same level, such as two agencies undercutting each other.
  8. Assertion (A): A large Indian hotel company with a net profit of ₹50 crore a year must spend part of its profit on corporate social responsibility. Reason (R): Section 135 of the Companies Act 2013 requires a company with a net profit of ₹5 crore or more, among other thresholds, to spend at least 2 per cent of its average net profit of the preceding three years on CSR.

    1. Both A and R are true, and R is the correct explanation of A
    2. Both A and R are true, but R is not the correct explanation of A
    3. A is true, but R is false
    4. A is false, but R is true
    Show answer

    Answer: A — Both A and R are true, and R is the correct explanation of A

    Both are true and R explains A: the company crosses the ₹5 crore net-profit threshold, so the statutory 2 per cent obligation applies, and activities such as protecting heritage and the environment qualify.
  9. Which of the following were among the four consumer rights set out by President John F. Kennedy in 1962? Select all that apply.

    1. The right to a guaranteed discount
    2. The right to be heard
    3. The right to safety
    4. The right to be informed
    Show answer

    Answer: B — The right to be heard; C — The right to safety; D — The right to be informed

    Kennedy's four rights were to safety, to be informed, to choose and to be heard, the foundation of modern consumerism. A discount is a commercial offer, not a consumer right.
  10. A resort advertises itself as "eco-friendly" on the strength of a request to reuse towels while it discharges untreated sewage into a river. This practice is known as

    1. demarketing
    2. cause-related marketing
    3. greenwashing
    4. green marketing
    Show answer

    Answer: C — greenwashing

    Greenwashing is claiming environmental benefits that are not real or are trivial compared with the harm done. Genuine green marketing rests on true, substantial environmental performance, and misleading claims can be acted against under consumer protection law.