Inter Continental Case Study

Contents Introduction .......................................................................................................................................2

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)?...............................................................................................................................................2

Review the variables that can be used to segment consumer markets. Description the variables used by

InterContinental Hotels to segment their market..................................................................................3

Is InterContinental’s portfolio of brands an advantage or disadvantage? Assess the pros and cons of

operating in so many segments of the market. .....................................................................................5

What kind of positioning strategy should the company adopt for Holiday Inn and Holiday Inn Express? ..6

Draw a perceptual map for any one of the brands of the InterContinental Group ...................................8

Conclusion .........................................................................................................................................8

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

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

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.

- 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 of brands 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.

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 should the 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

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]

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.

References

1. Ferrell, O. (2012). Marketing Strategy. 6th Ed. USA: Cengage Learning.

2. Kotler, P. (2009). Marketing Management. 13th Ed. India: Pearson.

3. Rust et al. (2004). Measuring marketing productivity: Current knowledge and future directions.,

Journal of Marketing, Vol. 68 (4) Available through: Emerald Insight [Accessed 5 Oct 14]

4. Perdue, R., Immermans, M. and Uysal, M. (2004). Consumer Psychology. USA: CABI.