Market Segmentation Strategy of the InterContinental Hotels
The InterContinental Hotels Group is following market differentiation and niche marketing by creating a series of products that target different markets and unique to each targeted market. With many customers looking for good value for their money, quality and affordability of the hotel service packages have remained the main basis upon which customers make their final decision to purchase products in the dynamic and stratified Canadian hotel market. The Intercontinental Hotels Group has put measures in place to ensure it attracts more customers and therefore expand their market share through the creation of different products that target different markets.
In order to penetrate and competitive position its interests in the dynamic Canadian hotel market, the InterContinental Hotels Group has different products that target specific customer segments. Through focused and differentiated business strategies, the InterContinental Hotels Group has created hotel brands such as the Crown Plaza to serve the luxury customer segment, Holiday Inn to serve the mid-price segment, Holiday Inn Express to serve the economy segment, and the Holiday Inn Select to serve the business travel segment. This section discusses the market differentiation strategy that the InterContinental Hotels Group has adopted for each of their brands within the Canadian market.
Crown Plaza: Luxury Segment
At present, the luxury market of the InterContinental Hotels Group is served by the Crown Plaza Hotel. The products offered are premium, excellent, quality in meeting the needs of customers within the luxury market. Among the products within the luxury segment include fitness, dining, conference, and complimentary business services. In the process of market differentiation, the company has also adopted a focused positioning strategy to remain competitive in the Canadian market. The Crown Plaza focuses its market to high-end customers by creating expensive and classy services to super-rich clients (Kotler and Keller 263).
The products meant for the luxury segment are customized to appeal to each potential client. This has ensured that the Crown Plaza Hotel is known for its unique targeting, segmenting, and positioning of the high-end products, which has helped it to maintain its position as a market leader. Besides, it has made the Crown Plaza Hotel take credit for making customized hotel services a popular hotel statement for the high-end market segment.
The Crown Plaza Hotel brand has specialized in niche marketing by focusing on the utmost premium brand quality that customers demand. The strong market position has positioned the Crown Plaza Hotel to meet customer demand since it has a resounding knowledge of global consumer trends. The high-end focus has enabled the Crown Plaza Hotel to target customers within the 5% super-rich global population who live or visit Canada and want high-end hotel services (Kotler and Keller 264).
As a result, the Crown Plaza Hotel has no need to spend a lot on advertisement and promotion since its customers are known and make purchases based on the trend. In addition, the Crown Plaza Hotel has been proactive in sponsoring Canadian events such as luxury hotel accommodation shows to tap into the 5% target population. Through this strategy, the Crown Plaza Hotel has been able to maintain visibility and regional leadership position through widening the number of customers who can afford its products since clients associate them with a class statement.
The Crown Plaza Hotel has introduced a special loyalty card and private membership of the hotel services, especially for the loyal and frequenting customers as part of the niche marketing strategy. This strategy has ensured that using the Crown Plaza Hotel products gives customers the opportunity to belong to the high-end private club that only admits the super-rich customers (Lee and Emile 84). The company has taken advantage of the high-end brand association to further penetrate the market.
Holiday Inn: Mid-Price Segment
The positioning strategy for the Holiday Inn is to increase customer awareness of the products since this brand targets mid-price segment across the globe on holiday in Canada through market segmentation. The primary objective is to create complete and explicit customer awareness and attract the mid-price customers market. The objective aims at packaging the Holiday Inn products as a favorite of the mid-price customers. Properly modified Holiday Inn product advertising has reassured the customers on the quality of the products (Bowden 66). Through proper advertisement presentation, the Holiday Inn has benefited from an increased traffic compliments and recorded high rates of customer loyalty as most customers are influenced by reactions from other clients.
The selling point of the Holiday Inn products is presented as being is unique, comfortable, and highly affordable in the niche marketing strategy. Through a timely appeal to emotions and self prejudice, the Holiday Inn products are packaged to engage the ‘perceived goodness’ and need to identify with ‘the ideal’ in the functionality and comfort (Lee and Emile 84). Customers are given the power to make a better and rational judgment on the basis of personal preferences from different categories of the Holiday Inn products since the targeted clients are holiday goers who want products that mid-priced but high-end.
Holiday Inn Express: Economy Segment
Currently, the Holiday Inn Express target customers within the economy segment by offering relatively affordable services, especially for value-oriented customers as part of the market differentiation strategy. The hotel has carried out strategic market differentiation as a positioning strategy. The differentiation strategy is implemented in the Holiday Inn Express through the creation of diverse-low-cost products and services for customers in the middle class and high-class market segments who do not want luxury but are driven by the value against the cost of each service (Bowden 69).
The Holiday Inn Express has created unique brands that can remain rivaled in most parts of Canada to target the corporate traveler segment. At present, Holiday Inn Express has a competitive brand name, which has inspired the business to improve its products and services as the investment capital keeps increasing. Strengths that place the firm at the top include an established brand name because Holiday Inn Express provides relatively affordable high-end hotel products for the economy segment.
Unlike its competitors that target the rich and sophisticated customers with interest in high-end services, Holiday Inn Express targets the middle class in the new corporate strategy of the year 2016-2017 to ensure that it maximizes gains through increased customers. This has enabled the Holiday Inn Express to diversify its products as part of the portfolio balance strategy and gain in the long-term through economies of scale within the differentiated market.
The Holiday Inn Express has taken an initiative to customize the hotel services to consumer needs, depending on the type of traveler. For instance, the Holiday Inn Express has introduced the corporate packages for companies interested in conference services that come with an affordable price tag. The most obvious objective of this proposal is to support the corporate-Holiday Inn Express partnership business as a product differentiation strategy (Malhotra and Agarwal 345).
Proactive engagement with the corporate segment is extremely important, especially with an increase in the cases of organized vacation cum training services for corporate firms across Canada. Fortunately, the creation of the strategic Holiday Inn Express-corporate partnership memorandum has differentiated its market selection approach as being value-driven and offering customers the opportunity to enjoy high-end hotel services without having to spend a fortune.
Although it is possible for a company to produce differentiated goods or services yet fail to achieve much success, the market differentiation in the case of the Holiday Inn Express has been effective to the extent that it gives the hotel a great success in its marketing. One of the major reasons why this differentiation has been successful is corporate involvement through pre-negotiated packages. The Holiday Inn Express has been involved in campaigns that advocate for corporate packages to appeal to small and medium companies that might need affordable conferencing services for their employees (Malhotra and Agarwal 345).
Another factor that has strengthened this market differentiation position is the many outlets that the Holiday Inn Express has opened across Canada. This has helped the Holiday Inn Express to expand its consumer base, increase sales, and generate more profits. As suggested by the Ocean Blue strategy, the Holiday Inn Express has increased its competitive advantage through entering the uncontested pre-negotiated corporate package market within Canada to tap into the value-driven customers who are in need of high-quality services.
The Holiday Inn Express has utilized this strategy to create high-end and middle-end products to appeal to different corporate customer segments that are not served by other competitors (Malhotra and Agarwal 345). In fact, the Holiday Inn Express has an opportunity to revolutionize the economy segment market through implementation of the corporate packages that does not necessarily result in high pricing tag.
Holiday Inn Select: Business Traveler Segment
The Holiday Inn Select have products that are developed for the business traveler and are located near airports and business centers. The current services offered by the Holiday Inn Select are conferencing facilities, 24-hours business services, and comfortable business-class accommodation. In order to improve the visibility of the Holiday Inn Select among the targeted business travel market segment, there hotel has adopted the cost-leadership strategy to benefit from firm specific advantage, location specific advantage, and internalization advantage due to very low cost of production, thus low cost of final products to target the travel market segment.
The Holiday Inn Select has penetrated the business traveler segment in Canada through its high quality and very affordable customized services to the business travelers market (Malhotra and Agarwal 345).
At present, the Holiday Inn Select controls more than 10% of the Canadian high-end business traveler accommodation services since its products are classified as luxurious pocket friendly hotel products for a typical traveler. The low cost price tag proposed on its products can be associated with developing the lowest cost of production since the Holiday Inn Select has initiated efficiencies in each product unit as a business strategy.
The Holiday Inn Select has adopted the cost leadership strategy to improve its efficiency through streamlining operations. As a result, this venture has developed a cumulative experience, optimal performance, quality assurance, and is in full control of their operational chains. In order to cut down cost of service delivery for the targeted business traveler segment, the Holiday Inn Select has fully embraced the modern technology in its service delivery, logistics, and customer care through conducting a third party to do this on its behalf. The Holiday Inn Select has also entered into a partnership with ticketing, travel and tours agent, and taxi agents rather than engaging its resources in obtaining and selling to its customers (Malhotra and Agarwal 345).
As a result, the general over head cost of operation has been reduced substantially. Besides, the Holiday Inn Select is successful in engaging in foreign direct investment in different regions across Canada and other markets. The initial motive for establishing the Holiday Inn Select brand within Canada was informed the existence of cheap labor and wide market for the business travel hotel segment. Therefore, the Holiday Inn Select has introduced a series of efficiency monitoring systems such as performance valuation, target management, and franchise business approach, which has greatly reduced cost of product, thus cheap business traveler hotel services.
These strategies aim at enabling the Holiday Inn Select to optimize profits through efficiency in sales, benefits from economies of scale, and use of company resources at the least possible cost while maintaining quality (Rhim and Lee 169). The cost leadership strategy for the Holiday Inn Select has fused cost-effectiveness and high value for business travelers who want ideal accommodation and hotel services within Canada and beyond.
InterContinental’s Portfolio of Brands an Advantage or Disadvantage
InterContinental’s portfolio of brands within the Canadian market has its advantages and disadvantages, since the corporation targets different markets. The pros and cons of portfolio of brands are discussed below.
Advantages
Since the Intercontinental Hotels Group products have existing market distribution channel in Canada, the existence of many brand has enables the InterContinental Hotels Group to effectively use the costing strategy to reduce the prices to a certain minimum in order to attract customers from the targeted market segments and achieve the aim of the quantity maximization by increasing number of services sold. This has ensured that the InterContinental Hotels Group brand is more visible and sustainable within the Canadian market. Since the target markets are specific, the success variables for the Canadian market share expansion strategy for the InterContinental Hotels Group brands can be measured through an increase in sales from different brands.
Currently, the main challengers of the InterContinental Hotels Group are the Choice Hotels Canada, Best Western International, Westmount Hospitality Group, and Travelodge Canada Corp within the Canada hotel market. However, these competitors concentrate on a single or very few brands to the advantage of the globally competitive InterContinental Hotels Group brand, which has a series of brands for different markets.
For instance, through market differentiation, the penetration strategies have been realistic since marketing resources (distribution patterns) are fully operational to facilitate a market exercise on target and segmenting position for the InterContinental Hotels Group brands (Bowden 69). Besides, increasing products is within reach since the projected market share growth can support and sustain expanded product lines for different brands.
Through balancing different brands, the InterContinental Hotels Group is in a position to further penetrate the luxury, business travel, economy, and mid-range clients and succeed in creating an environment of own competition. The InterContinental Hotels Group is also in a position to develop strategies that can emphasize on creating trends by ensuring that the InterContinental Hotels Group brands become a symbol of status and culture across the Canadian hotel market (Rhim and Lee 169).
This will guarantee increased product preference to the advantage of the InterContinental Hotels Group over its competitors such as Choice Hotels Canada, Best Western International, Westmount Hospitality Group, and Travelodge Canada Corp within the Canada hotel market. For instance, having many brands has enabled the InterContinental Hotels Group to attract customers from different market segments and achieve the aim of the quantity maximization by increasing number of products sold within the Canadian hotel market.
Disadvantages
The existence of many brands comes with demerits such as inability to balance different marketing and production performance indicators, since each market is unique. For instance, the InterContinental Hotels Group might become a victim of strategy and product duplication in a bid to satisfy the demand for each product brand. Besides, since the different brands are differentiated by their cost, the InterContinental Hotels Group might become a victim of generalization or confusion of product brands.
For instance, a client might refer a customer to test a specific brand. The referred customer might find the brand non- appealing and might generalize that all the InterContinental Hotels Group are non-appealing. This negative perception after an experience with one brand might actually affect the performance of other brands.
Proposed Positioning Strategy: Holiday Inn and Holiday Inn Express within the Canadian Hotel Market
The objective of the revised marketing strategy is to encourage business and recreational travels to prefer the two hotels whenever they are in Canada. The marketing communication plan proposed for the two hotels will encompass promotion of positive brand image through pricing, product, and quality mixes as discussed below.
Revised Positioning Strategy: Holiday Inn
In order to encourage the recreational travelers to prefer the Holiday Inn, there is need to adopt price optimization to introduce the aspect of value for money. For instance, in order to optimize prices, the Holiday Inn should manage its pricing mechanism through adaptation of multiple-pricing strategy for different products to target clients with different need brackets. The pricing mechanism should be applied in hotel reservation, capacity utilization, and categories of customers to create a permanent perception of value since customers who make early booking might be given a percentage discount. This strategy is likely to increase the performance of the hotel.
Beside, the Holiday Inn should be more proactive in improving its supplementary services. For instance, the Holiday Inn might offers free laundry, pick and drop to group customers, free guide, and free information on various services that a customer staying in the hotel may be interested in (Malhotra and Agarwal 345). As a result of the improved supplementary services, the Holiday Inn will be able to expand its operations and build a brand of meeting customer expectations.
The price optimization strategy proposed is based on a customized model which rates the elasticity of prices, occupancy, and annual calendar. For instance, the festive period should attract higher fees that the non festive season. The concept can applied at the Holiday Inn where charges are based on the number of customers, frequency of travel, and the period of travel (Bowden 71). The strategy can be effective in creating positive brand image among the targeted holiday goers since they will perceive the Holiday Inn as an ideal hotel with affordable price tag and quality services.
As a strategy for proactive customer engagement, the Holiday Inn should initiate several support services to customers and communities surrounding its branches. These initiatives can enable the Holiday Inn to expand rapidly due to improved customer loyalty. Moreover, the Holiday Inn will be able to penetrate the traditional markets because the hotel’s model of running the customer assurance strategies will allow for the customer preference tracking process and live feedbacks. For instance, adoption of the hybrid system of management by the Holiday Inn might ensure direct contact with customers within the shortest time possible.
The hybrid system is very successful in contact management and positive attitude reassurance. In order to present the above strategy, the Holiday Inn should consider utilizing the local media, social media, and travel agencies in order to spread the message within Canada and across the globe (Malhotra and Agarwal 349). The message to be advertise is: come you magnificent customer, who longs for comfort and the best holiday accommodation and services at no sweat!
Revised Positioning Strategy: Holiday Inn Express
As part of the market segmentation strategy, the Holiday Inn Express should utilize its innovative and expertise capabilities in product development by offering multiple brands of the current products to appeal to different classes of business travelers with different needs. For instance, the Holiday Inn Express should deal in exclusive brands that might appeal to a business traveler such as the pick-and-drop service, executive conferencing services, and a unique accommodating plan for frequent business traveler (Tynan and McKechnie 513).
As a result, the group was able to create an environment of own competition since customers will be offered a variety products with different price tags. Another key aspect positioning strategy envisions creation of a simultaneous but independently functioning cost balancing matrix that keep the hotel in the competitive edge. However, before implementing this recommendation, market research should expand into the territory of acquiring knowledge on prevailing market needs, especially when dealing with a product that is already in the market.
In order to penetrate the highly segmented business travel hotel market in Canada, the Holiday Inn Express should negotiate for discounts, competitive pricing, and flexible distribution network to ensure that the targeted customers are able to get value for their money. Through this strategy, the Holiday Inn Express will be able to implement the high-quality low-prices strategy to outperform any form of competition in the Canadian hotel market (Rhim and Lee 169). Since the target market is dynamic, the Holiday Inn Express should use the business to business and business to customer contact management strategies in order to reach the business travels within and without Canada.
The Holiday Inn Express should have strategic and effective customer relationship management approaches to guarantee customer loyalty. For instance, the Holiday Inn Express should have a series of annual promotion activities such as discounts for frequent business travelers in the form of private membership and redeemable service credit card. Through the laggard activism strategy, the Holiday Inn Express will be able to guarantee customer loyalty in the short-term by offering premium customer experience and compact customer care support. In the long-term, the Holiday Inn Express many establish a contact management system that integrates the standard operating procedures that promote consistency in customer service (Bowden 71). These strategies are aimed at ensuring continuous expansion and customer satisfaction.
The Holiday Inn Express can use series of promotion strategies to enter and penetrate the Canadian market. The promotion strategies should involve personal selling, advertising, and sales promotion to ensure that the targeted clients are brought on board. The promotion messages can further be customized to incorporate the aspect of Canadian business travel culture in product marketing and branding (Tynan and McKechnie 513).
The Holiday Inn Express can use social media, traditional media, and travel agents to spread this message since these sources can reach the expansive market. The message for this proposed marketing objective is: Are you the busy businessman who wants a caring hotel to take care of your need? Just make reservation and we will do the rest from airport transfer, accommodation, tour guide, and ideal conferencing services with quality in mind and friendly price tag!
Perceptual Map: Crown Plaza Luxury Brand
Marketing involves building friendly partnership and working relationship with a market segment without necessarily having physical contact with it. In fact, the main source of exchanging information and advertising products is through written words in a social media such as television. Reflectively, success of marketing is deeply entrenched in the principle of keeping reliable and professional reputation in exchanging ideas and convincing customers in buying or being part of a product.
Unlike the main competitors, the Crown Plaza Luxury Brand has customized services with a very effective customer care. Besides, the products and services of the Crown Plaza Luxury Brand are designed for only the high-end customers who want quality and opulence. The focused approach on the high-end customers makes the Crown Plaza Luxury Brand to be more appealing to the super rich clients because they are assured of only meeting and interacting with similar people whenever they go to the Crown Plaza Hotel. The perception map is summarized in the table below.
Works Cited
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Malhotra, Kim, and John Agarwal. “Internet Users’ Information Privacy Concerns (IUIPC): The Construct, the Scale, and a Causal Model.” Information Systems Research 15.4(2007): 336-355. Print.
Rhim, Hosus, and Chan Lee. “Assessing potential threats to incumbent brands: new product positioning under price competition in a multi segmented markets.” International Journal of Research in Marketing, 22.1 (2010): 159-182. Print.
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