Marketing in Practice Individual Assignment

Prepared ByAnum Ali

HF0861BAKR002478

LecturerKiran Akberali

Due Date22nd September 2008

Word LimitNo more than 2000 words

Acknowledgements

In due recognition of Miss Kiran Akberali; my lecturer for Marketing in Practice, I

express gratitude for her dedicated efforts in conducting the lecture sessions. Challenging case

studies and trivial exercises and a complete audio/visual demonstration of television

commercials have kept me motivated throughout the module. The informative sessions enabled

me to research tricky areas of marketing planning, as they were covered. Last minute time

concessions for fine-tuning the conclusive areas of the plan have been greatly helpful.

Finally, I am thankful to Almighty God for granting me the intellect to

understand, comprehend and apply the concepts taught to me and deliver a detailed marketing

report.

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Executive Summary

A marketing plan for Tune Hotels, Kuala Lumpur, being launched under the strategic

vision of Tony Fernandes, Chief Executive Officer Air Asia, has been developed. Planned

utilization of a budget allocation of $100,000 has been made to develop product, pricing,

distribution and promotions strategies. Detailed research has been conducted of the overall

Malaysian and the specific Kuala Lumpur environments to mark the feasibility and opportunistic

areas. Internal calibre of Air Asia has been assessed to evaluate how it can form a promising base

for its sister concern, Tune Hotels. Market offerings have been designed, keeping in mind the

target markets and positioning ideologies developed through extensive research and planning.

Together with a product concept, a crux of the service concept has also been applied. Price

structures have been designed and profitability and returns have been calculated to suit the

qualitative objectives set. Critical considerations in measuring performance and tapping clientele

behaviour have been made to ensure guaranteed customer value.

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Table of Contents

Situation Analysis............................................................................................................................1

a- Air Asia (AIRA) Berhad Company Profile – “Now everyone can fly”...............................1

b. The internal and external environmental influences..............................................................1

c. The Competitive Environment.................................................................................................4

d. SWOT analysis......................................................................................................................6

Marketing Objectives.....................................................................................................................10

I – Quantitative objectives.........................................................................................................10

II – Qualitative objectives..........................................................................................................10

Marketing Strategy........................................................................................................................11

(a) The Segmentation Process..............................................................................................11

b. The appropriate targeting strategy.......................................................................................15

c. The Positioning strategy and a perceptual map...................................................................17

Marketing Tools.............................................................................................................................18

(a) Product Decisions...........................................................................................................18

Tune Hotels’ market offering................................................................................................18

Physical Evidence and Presentation......................................................................................18

Tune Hotels Service-Performance Process Map...................................................................19

(b) Price Decisions................................................................................................................20

Pricing Objective:..................................................................................................................20

Determining Demand.............................................................................................................20

Pricing Method......................................................................................................................21

Analyzing Competitors Price Mix.........................................................................................22

Price Adaptation Strategies....................................................................................................23

(c) Place Decisions...............................................................................................................24

Customer Needs Analysis......................................................................................................24

Channel Alternatives.............................................................................................................24

Channel Management............................................................................................................25

(d) Promotions Decisions.....................................................................................................26

Communication objectives (brand awareness and purchase intention).................................26

Communications Design........................................................................................................26

iv

Communication Channels......................................................................................................28

Budget Allocation..........................................................................................................................30

Implementation..............................................................................................................................31

Controls..........................................................................................................................................32

Sales Analysis............................................................................................................................32

Market Share Analysis...............................................................................................................32

References......................................................................................................................................35

Appendix........................................................................................................................................vi

Appendix A – Porter’s 5 Forces Model......................................................................................vi

Appendix B – VALS Framework..............................................................................................vii

v

Situation Analysis

Situation Analysis

a- Air Asia (AIRA) Berhad Company Profile – “Now everyone can fly”

As its tagline boasts, the company is committed to provide “low fare low frills”, safe,

comfortable, convenient and enjoyable flight experience to its customers since 1993. Established

in Sepang, Malaysia, AIRA has a fleet of 70 aircrafts (as at December 31, 2007) and 3,474

employees. 100+ routes are served in Malaysia, Thailand, Indonesia, Cambodia, Veitnam,

Phillipines, Laos, Myanmar, Brunei and Singapore. It is a conglomerate offering tour operating,

publishing, aircraft leasing and inflight meals provision services through its subsidiaries.(Air

Asia Bhd: Stock Quote and Company Profile, 2000-2008) Generous revenue growths have been

achieved from 1.1 – 2.2 billion. (Air Asia Bhd: Financial Statements, 2000-2008) In 2003, AIRA

pioneered the world’s first mobile booking system in airlines which enables seat reservations and

flight inquiry through the convenience of cell phones.

b. The internal and external environmental influences.

PEST Analysis (Tables 1.0 – 1.3) conclude that in conjunction with the Malaysian

government, Malaysian Tourism Industry has initiated several hotel and destination development

schemes under the slogan: “Malaysia, Truly Asia”. Malaysia’s economic stability, scenic beauty,

the metropolitan extravaganza offered at cities like Kuala Lumpur (KL) and the government’s

generous incentives and tax cuts for hoteling operations, together make up an ideal environment

for Tune Hotels. Heavy tourist influx secure promising demand and technological advancements

in the country cater to the needs of communications and distribution mixes for the hotel.

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Situation Analysis

Table 1.0

POLITICAL ENVIRONMENT

Investment tax allowance has been granted by the Ministry of Finance, Malaysia.

Cooperative operating relations with Thailand and Indonesia.(A New Year Brings New Fortunes and Opportunity, 2005)

Government incentives are given to low and moderately cost hotel businesses (Malaysian Industrial Development Authority, 2004)

Government has relaxed foreign investment restrictions (Index of Economic Freedom 2008 – Malaysia, 2008)

Politically stable country for investment and peaceful for tourism (Report: Opportunities in Malaysian Tourism Industry (2007-2009), 2008)

Table 1.1

ECONOMIC ENVIRONMENT

Malaysia has a heavy tourist influx which is continuously incrementing every year. (Flights to Malaysia, Malaysia Flights, Malaysia Bound Flights, Malaysia, 2008)

Economic slowdown in the airplane industry is seen due to surging fuel prices and inability to keep fares low. High fares are diverting tourists.

Level of personal disposable income in Malaysia is increase. (Report: Opportunities in Malaysian Tourism Industry (2007-2009), 2008)

A double deduction is granted to companies that wish to operate and promote tourism overseas. Deduction is granted on advertising, marketing, market research and maintenance of sales offices. (Malaysian Industrial Development Authority, 2004)

Industrial Building Allowance (IBA) grants initial 10% allowance and annual 3% allowance on constructing hotels.

Generous exemptions on import and sales tariffs is granted on machinery and equipment.

Malaysia’s literacy rate is 94%+ and 11 years of basic education is compulsary. (Malaysian Industrial Development Authority, 2004)

Double deductions are given to promote Malaysian brandnames. (Malaysian Industrial Development Authority, 2004)

Table 1.2

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Situation Analysis

SOCIAL ENVIRONMENT

Budget hotels in Malaysia become over-booked and there is a need for more

500 million people in southeast Asian region, huge travelling potential

Kuala Lumpur is an ideal tourist detination with eateries, cafes, branded and budget stores (Tune Hotels Budget Hotel (RM 9.99), Air Asia Hotels, in Kuala Lumpur, Malaysia, 2007)

Tourist events like Malaysia’s Mega Sale Carnival (5th July-1st September), International Fireworks Competition and International Climbathon attract tourists. (Welcome to Tourism Malaysia’s Official Site, 2008)

Medical tourism is increasing – people are coming for medical checkups

Education tourism is on the rise – international students are coming to Malaysia (Report: Opportunities in Malaysian Tourism Industry (2007-2009), 2008)

Tourism Malaysia recorded 10.9 million tourist arrivals from January to June compared with 10.7 million last year. (Flights to Malaysia, Malaysia Flights, Malaysia Bound Flights, Malaysia, 2008)

Table 1.3

TECHNOLOGICAL ENVIRONMENT

Malaysia has well developed telephone systems; both, landline and cellular domestic and international

Radio broadcast stations AM/FM TV broadcast stations ISPs

(PEST Analysis, Exercise, 2000-2008) 5 International and 15 domestic airports

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Situation Analysis

c. The Competitive Environment

Competitive analysis through Porter’s 5 Forces Model (Appendix A) suggests that

despite the bargaining power of customers and suppliers being low, Tune Hotels is setting foot in

a highly competitive environment of a prospering low-frills hotel industry. Indirect competition

comes from hotel giants and attractive substitutes exist which offer competitive benefits.

Threat of New Entrants

Strong market potential exists in Malaysia for hotel entrepreneurs due to boomin tourism

and over-booked hotels during peak seasons. Also, the traditional guesthouses, lodges and

hostels are structured to provide minimalistic and usually self-service to low budget customers.

There is potential to invest in mid-range guesthouses.

Malay cities besides KL, like Langkawi, etc. have luxurious beach resorts and hotels. There is a

strong need for budget hotels or mid-rangers. (Holiday Villa hotel Langkawi, Malaysia, n.d.)

Bugdet hotels are booming and new entrants are emerging fast. The Klang Valley alone has 500

budget hotels. There is a major threat here.

Threat of Substitute Accomodation

Kuala Lumpur has a stronghold of thematic guesthouses, lodges and hostels available at

budget prices as low as RM29. Malay families and groups of travelling students during summer

breaks prefer the price. (Top 10 hotels in Kuala Lumpur | Travel | guardian.co.uk, 2008) Bed-

and-breakfast inns and motels are sprouting up. Rooms are available for below RM 100 and are

high in demand by students and backpackers. (Out with frills,in with comfort and facilities,1995-

2008)

Bargaining Power of Customers

Since, Tune Hotels would offer the lowest price yet in the low-frills industry, the clients

would not bargain any lower.

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Situation Analysis

Bargaining Power of Suppliers

Table 1.4

Commercial PartnersPensonic AC, plasma TV, ceiling fanSenses ToileteriesKing Koil BedNippon PaintCIMB Bank Cell phone bankingOrlando

Commercial partners of Tune Hotels, namely Pensonic, Senses, King Koil, CIMB Bank,

Orlando and Nippon Paint have limited bargaining power due to the lowest cost operations

philosophy of Tune Hotels. Suppliers with the lowest market bids but adequate quality standards

have been selected and in case of bargaining, and any cost overheads, they would be dropped.

(Malaysia Hotel News: Pensonic in strategic pact with Tune Hotels, n.d.)(Cuti-Cuti MALAYSIA

Tour and Hotel Reservation Center: Langkawi, Pengkor, Redana, Kuala Lumpur, 2000-2008)

(Welcome to Tune Hotels, Asia’s 1st no frills hotel, 2007)

Competitive Rivalry within the Hotel Industry

Kuala Lumpur (KL); the innaugration city for Tune Hotels, is a cosmopolitan thriving on

tourism. It has an array of hotels ranging from luxurious resorts to medium cost and budget

hotels which make the hotel industry cut-throat competitive. Hotel Seasons View, Hotel Agora

and Hotel Fortuna enjoy ideal locations at prime KL attractions; the Petronas Towers and food

street, and cheapest rates. RM82 – 120 is the price range/day starting from single and upto

deluxe rooms. Their strategic location at the hub of shopping, food and sightseeing attractions in

KL give them a competitive edge. (Budget Hotels, 2001-2009) 5 star hotels; Ritz-Carlton,

Shangri-La, The Ascott, Concorde, and Hliday Villa, occupy ideal locations and offer attractive

packages in collaboration with Tourism Malaysia for which customers are willing to pay more.

(Best Malaysia Hotels, Reviews of Popular Malaysia Hotels Accomodations, 1995-2007)

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Situation Analysis

d. SWOT analysis

SWOT analysis (Tables 1.5-1.8) shows AIRA is found to be a resourcefully rich

company with innovative sales channels and a dedicated and skilled management team under a

highly motivated, inspirational CEO. Customer loyalty is strong and service offered to clients is

excellent.

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Situation Analysis

Table 1.5

Strengths Tony Fernandes, the CEO, has accounting qualifications and excellent selling skills. His

job experience has been with Virgin Records in London and 12 years with Turner in Malaysia. He is highly committed and devoted. (Spotlight: Asian tycoon reaches for the sky, 2008)

Democratic, casual and hardworking CEO, management and staff relations. Enjoyable work environment where everyone from pilots to the marketing personnel, crew, engineers, etc., share the same office. (Welcome to AirAsia.com … now everyone can fly, 2007-2010)

Sufficient funds till 2009

Presented with the Best Airline for 2007 Award by the Center for Asia Pacific Aviation (CAPA).

Extensive networks around Asia – over 80 routes (Welcome to AirAsia.com … now everyone can fly, 2007-2010) 50 million+ customers have been served to date

Successful joint ventures: In Thailand through Thai AirAsia and in Indonesia through Indonesia Air Asia (Welcome to AirAsia.com … now everyone can fly, 2007-2010)

Fares are 80% lower than that of other flight operators. ZOOM promotion lowered rates to as low as RM 9 to selected destinations.

Fastest flight turnaround time (25 minutes) – high capacity utilization

High staff productivity and Low operational costs

Natiowide Call Center (180 phone lines), ticketless service, Internet bookings, convenient sales offices for walk-in customers, mobile booking via cell phones

Direct B2B through authorized travel agents and 30 Boeing 737-300 aircrafts – fine quality planes

Customized Low Cost Carrier Terminal (LCCT) – the first of its kind in the world (upgradeable, caters 10 million passengers, 30 parking bays. (Welcome to AirAsia.com … now everyone can fly, 2007-2010)

Comfortable aircrafts with leather seats and 5 star service (Welcome to AirAsia.com … now everyone can fly, 2007-2010)

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Situation Analysis

Table 1.6

Weaknesses Tony Fernandes is heard to be financially conservative to the extents of telling his pilots

to land lower and slower to save tire maintenance costs. (Spotlight: Asian tycoon reaches for the sky, 2008)

No frills are a disappointment for passengers who look for flyer miles, exchange lounges and in-flight meal service (Welcome to AirAsia.com … now everyone can fly, 2007-2010

Air Asia is known to fluctuate prices by being very low and sometimes high which frustrates customers specially students who find tickets very expensive as holiday season starts. (Online Consumer Community Portal, 2004-2008)

LCCT gets very crowded due to heavy customer loads and inefficiency arises. (Air Asia << Jaime’s life, n.d.)

Customer complaints during high tourist seasons. (Air Aisa Rude and Aggressive Check In Staff – Thailand Forum, 2008)

Table 1.7

Opportunities Tourism Ministry of Malaysia is promoting domestic tourism and facilitating the

exposure of must-see attractions for tourists across the country. (Welcome to AirAsia.com … now everyone can fly, 2007-2010)

Investment tax allowance has been granted by the Ministry of Finance, Malaysia.

Cooperative operating relations with Thailand and Indonesia. (Welcome to AirAsia.com … now everyone can fly, 2007-2010)

Economic slowdown in the airplane industry due to surging oil prices is making competitors leave gaps which are potential areas for expansion. (Channelnewsasia.com, 2008)

Young, educated and productive workforce is available at affordable costs for investors. (Malaysian Industrial Development Authority, 2004)

22.5 million tourists are estimated to hit Malaysia in the year ahead. (Rolling out the red carpet | Malaysian Business, 2008)

Table 1.8

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Situation Analysis

Threats Adam Air and Tiger Airways are moderately priced airliners offering light frill benefits

(Adam Air: A threat to Air Asia?, n.d)

Rising jet fuel prices

Big players like Malaysian Airlines cutting in into the low cost business

British Airways, Qantas Airways, Cathay Pacific, Singapore Airlines, and the Emirates etc. provide tough competition on international routes. (Flights to Malaysia, Malaysia Flights, Malaysia Bound Flights, Malaysia, 2008)Deputy Minister of Transport confirms that Air Asia is under RM110 million of debt (AirAsia owes MAHB RM 110 million, n.d.)

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Marketing Objectives

Marketing Objectives

I – Quantitative objectives

1- To achieve 10% sales growth within one year of operations.

2- To capture 15% marketshare in the hotel industry.

3- To generate 48% return on sales

4- To generate at least 5% return on investment on $100,000 worth of investment.

II – Qualitative objectives

1- To become the one-of-a-kind innovation market leaders of budget hotel industry.

2- To become the lowest cost price leaders in the budget hotel sector of Malaysia.

3- To guarantee customer satisfaction through high quality service and customer facilitation.

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Marketing Strategy

Marketing Strategy

Clustered preferences of Malaysia’s hotel industry

Malaysia’s hotel industry shows clustered preferences (Figure 1.0). While 5 stars hotels

and resorts and other high-range options attract groups of frills-demanding guests, budget hotels

form a significantly developed segment. Majority of economy travellers prefer low-cost, low-

frills alternatives.

Figure 1.0

(a)The Segmentation Process

Segment identification using segmentation variables

Malaysia is a simple market with easily identifiable variables available for segmentation.

(Table 1.9 – 2.3) It has high potency cities to lodge a budget hotel, potential customer groups

available demographically, psychographically and behaviourally to divide the market.

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Marketing Strategy

Table 1.9

GEOGRAPHIC

Cities: Kuala Lumpur (capital)

PenangIpoh

MalaccaJohorBaruShah Alam

KlangPetaling Jaya

Table 2.0

DEMOGRAPHIC

Life stage:Children

Young singlesYoung couples (honeymooners, etc.)

Married without childrenMarried with children

Retirees and senior citizensOccupation:Businessmen

TradersStudentsTraineesIncome:

> RM3000RM3000-RM5000

>RM5000(New Malaysia: Don’t forget the middle class, n.d)

Nationality:ASEAN (Thailand, Indonesia, Singapore, etc.)

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Marketing Strategy

Table 2.1

PYCHOGRAPHIC

Lifestyle type:Simple, desiring minimalistic and comfortable service

Elaborate, requiring large space, decor, and additional services and facilities.

Social class:Lower-lower class

Lower classMiddle classUpper class

THE VALS FRAMEWORK(Appendix B)

InnovatorsThinkers

Believers (low resource group, modest incomes, clear brand preferences)Achievers

Strivers (low resource group, trendy and stylish)Experiencers

Makers (low resource group, practical)Survivors (few resources, buy at discount, lowest incomes, oldest

of all segments)

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Marketing Strategy

Table 2.2

BEHAVIOURAL

Product usage:Extended stayOne-night stay

Short stayLoyalty status:

Hardcore Air Asia loyalsSplit loyals

Shifting loyalsSwitchers of budget hotels

User type:Commercial travellerConvention attendee

Casual touristBackpacker

(Is segmentation in the hotel industry new?, n.d.)OccassionsSummers

Festive eventsExhibitionsChristmasNew YearWinters

Buyer ReadinessAware

InterestedReady-to-buy

BenefitsHigh frillsLow frillsNo frills

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Marketing Strategy

b. The appropriate targeting strategy.

Pattern of target market selection

Figure 1.1

Tune Hotels is product specialization strategy which is designed

to cater different market segments. (Figure 1.1)

Target segments

Catering to the lower and middle class, Kuala Lumpur’s market is selected for Tune

Hotels. (Table 2.3 – 2.4)

Table 2.3

GEOGRAPHIC DEMOGRAPHICCities: Kuala Lumpur (capital)

Life stage:Young singlesYoung couples (honeymooners, etc.)Married without childrenMarried with little kidsRetirees and senior citizensOccupation:StudentsTraineesIncome:> RM3000RM3000-RM5000Nationality:ASEAN (Thailand, Indonesia, Singapore, etc.)

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Marketing Strategy

Table 2.4

PSYCHOGRAPHIC BEHAVIOURALLifestyle type:Simple, desiring minimalistic and comfortable serviceSocial class:Lower classMiddle classTHE VALS FRAMEWORKBelievers (low resource group, modest incomes, clear brand preferences)Strivers (low resource group, trendy and stylish)Makers (low resource group, practical)

Product usage:One-night stayShort stayUser type:Convention attendeeCasual touristBackpackerOccassionsSummersFestive eventsExhibitionsBuyer ReadinessInterestedReady-to-buyBenefitsLow frillsNo frillsLoyalty status:Hardcore Air Asia loyalsSwitchers of budget hotels

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Marketing Strategy

c. The Positioning strategy and a perceptual map

Value proposition

Figure 1.3

In the low-frills hotel industry, Tune Hotels aims to

provide the same low-frills at a lesser price than

others.

Positioning statement

“Tune Hotels is the first of its kind one star hotel with a five star lodging experience at

low frills, and lowest costs among an array of budget hotels. Ideal option for those who seek a

five star sleeping experience at a one star price”

Associations

The basic room, without room service but daily housekeeping continue to be the Points of

Parity (POP). The Points of Difference (POD), however, is the lowest price alternative provided

to the client with high quality reservations handling and a five star bed, and plasma tv

unavailable at any other low frills hotels.

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Marketing Tools

Marketing Tools

(a) Product Decisions

Tune Hotels’ market offering

Peripheral to the naked solution of low-cost, limited service room, there are discretionary

options in areas of order-taking, safekeeping, information, etc. at additional charges. (Table 2.5)

Table 2.5

Naked solution (core offering)Room (single/double) with limited facilities:

5 star King Koil bed Pillow and bedsheet Bathroom with “power shower” Ceiling fan Chip card access keys for security CCTV monitoring of the hotel’s public areas

Discretionary options (additional charges apply) Air-conditioning Toiletries, amenities and towels Lockers for luggage storage WiFi Internet connection 24 hours convenience shop Money changer kiosk Café

(Tune Hotel, n.d.)

Physical Evidence and Presentation

A service-oriented approach helped defined the aesthetics and tangibles for Tune Hotels.

Deliverables of customer value are decided. (Table 2.6)

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Marketing Tools

Table 2.6

Place Kuala Lumpur city, close to the Low Cost Carrier terminal. Good location, proximal to the Petronas Towers and shopping complex

People CEO, Sales and Marketing leadership from Air Asia. Competant and courteous personnel hired

Equipment ACs, plasma TVs, ceiling fans, toiletries, King Koil beds, wall paint, furniture and accessories by suppliers (Chapter One)

Communication Material

Interiors of the hotels also communicate with clients. Posters and photos are lined throughout the corridors to attract loyals.

Symbols “Tune” the name suggests the spark of leisure and recreation. The symbol font and colour follows Air Asia’s themes

Price Lowest cost option in Malaysia starting at RM9.99

Tune Hotels Service-Performance Process Map (Figure 1.2)

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Marketing Tools

(New Service Development, n.d.)

(b) Price Decisions

Pricing Objective:

‘Survival’ would be the initial objective for Tune Hotels in Malaysia’s hotel industry

comprising of giant 5 stars and several direct budget hoteling competitors. However, once about

6 months of stability are secured, it would move towards being the “Lowest Cost Market

Leader”. 250 ROOMS LCC pricing. (Now everyone can stay at Tune Hotels,2008)

Determining Demand

Nature of demand

On one hand, for 5 star hotels, the demand is more than supply as rooms are proving

inadequate. (For the good times, n.d.) However, for middle rangers and budget hotels the

demand is elastic and price sensitivity is high. A major segment of middle and low income

tourists seek lowest price lodging to be able to spend on shopping and sightseeing. So, they opt

for low cost alternatives wherever available. A price war to cut to the lowest rates exists in the

budget hotel industry. (No Frills/Thrills Hotel, 2000-2008)

Figure 1.3

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Marketing Tools

RM29 is the lowest cost figure recorded among guesthouses and lodges which are second

options for budget-hotel seekers promises a strikingly large demand.

Demand Forecasting

A simple, yet crucial, calculation estimates that Kuala Lumpur expects a tourist influx of

16.9 million tourists in the year ahead. The low and mid-income tourists have been estimated for

catering. A demand of 9.3 million tourists has been established for a basic idea of a promising

plan.

Table 2.7

Tourists coming to Malaysia for the year ahead = 22.5 million *KL tourist estimate = 75% of tourist influx*KL tourist influx = = 22.5 million (75%) = 16.9 million*Low and mid-income tourists = 55% = 16.9 million (55%) = 9.3 million* Assumed values

(Rolling out the red carpet | Malaysian Business, 2008)

Pricing Method

Average Daily Rate (ADR)

In compliance to the objective of getting an 8% return on $100,000 worth of investment, the

Average Daily Rate (ADR) is set to $32.

Table 2.8

Calculating Average Daily Rate ( Dividing the desired revenue by no. of rooms)6% return on $100,000 = $6000 revenue is to be generatedNo. of rooms = 250Average Daily Rate = $6000/250 = $24(Definition of average room rate, 2008)

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Marketing Tools

Analyzing Competitors Price Mix

Hotel Seasons View, Hotel Agora and Hotel Fortuna enjoy ideal locations at prime KL

attractions; the Petronas Towers and food street, and cheapest rates. RM82 – 120 is the price

range/day starting from single and upto deluxe rooms. Their strategic location at the hub of

shopping, food and sightseeing attractions in KL give them a competitive edge. (Definition of

average room rate, 2008)

Pricing Method

Markup Pricing

To obtain the desired 48% return on sales, a markup price of $1.39 was added to the basic

unit price per room which was $1.50.

Table 2.9

Markup PricingCost per room = $1.50Desired return on sales = 48%Markup Price = Unit cost / (1 – desired return on sales)$1.50 / (1 – 0.48)= $2.89(Kotler, 2002)

Breakeven Analysis

Table 3.0

Breakeven AnalysisTotal Cost = $100,000Room cost = $2.89Variable cost per unit = $0.50Fixed Cost = $5,000Breakeven Point = Fixed costs / (Per unit cost – variable cost per unit)= $5,000/ ($2.89 - $0.50)= 2092 rooms(Kotler, 2002)

Return on Investment

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Marketing Tools

From the final price set up, the return on investment generated is 6% which satisfies the

quantitative objective of at least 5% ROI.

Table 3.1

ROI calculationFinal cost per room = $2.89Cost per room = $1.50Total invested capital = $100,000

Final price = Unit Price + ( (Return x Invested capital) ) / Unit sales$2.89 = $1.5 + ( (Return x $100,000) ) / 2092 rooms= 0.0604= 6% Return on Investment(Kotler, 2002)

Price Adaptation Strategies

For customers making advance bookings through the Tune Hotels website, cash discount is

given to reduce the room price to $2.86 (RM9.90). Seasonal discounts would be given in off

tourist seasons like winters.

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Marketing Tools

(c) Place Decisions

Managing Value Networks and Channels

Primarily, Tune Hotels would adopt a wide-scale ‘Pull Strategy’ whereby promotion and

personal selling would not be focused towards through channels members like commissioned

travel agents, but to ‘high value deal seeker’ clients. (Pull Starategy, n.d.) However, once

financial stability and profitability is secured, agents in countries reached by Air Asia would be

commissioned.

Customer Needs Analysis

Channels are integrated to match client expectations of low price and high quality and

comfort.

Channel Objectives Maintain the low cost proposition

Maintain quality standards

Channel Alternatives

E-commerce has been incorporated for a ‘brick-and-click’ marketing practice. ‘Selective

distribution’ of the service would be done through few channels. (Selective distribution, n.d.)

Tune Hotels Website

Advance bookings can be made, 3 months prior and cancellation charges apply if booking is

changed 24 hours before the booked date. (Tune Hotel, n.d.)

Tune Hotels Call Center

It entertains bookings via telephone from Monday to Friday 9AM-9PM. (Asia Best Value

Hotels, 2008)

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Marketing Tools

Air Asia Partnership

Being Air Asia’s hotel partner, Tune Hotels reservations can be made through Air Asia

offices while booking flights to KL. (AirAsia’s Hotel Partners, n.d.)

Front-desk Reservations

Clients aware of Tune Hotels can walk in to reserve a room through easy processing.

Reservation Counters at the LCC Terminal

Bookings can be made on landing at the LCC Terminal at the Tune Hotels desk. (Phuket

Gazette, online English newspaper, 2008)

Channel Management

Distribution channels would be managed by company’s own sales force, headed by Air

Asia’s former Director of Sales & Distribution, Kaneswaran Avili, now the Head of Commercial

at Tune Hotels. Under his supervision, the team works towards low cost distributions. Selecting,

training and motivating channel members that is the representatives at LCC reservation counters

and the front-desks, and later on the commissioned travel agents would be performed by Avili in

conjunction with Ambikah Sabratnam, Head of Finance & Human Resources. They would work

with ‘expert’, ‘reward’ and ‘coercive’ power. (Phuket Gazette, online English newspaper, 2008)

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Marketing Tools

(d) Promotions Decisions

Integrated Marketing Communications

“Tune-ifying” the Target audience

The target audience, identified through segmentation would be subjected to the

communications strategies in order to “Tune-ify” them to attract clientele. (Asia’s Best Value

Hotels, n.d.)

Communication objectives (brand awareness and purchase intention)

To establish recognition of Tune Hotels brand in Kuala Lumpur

To develop purchase intention of the potential clientele

The Familiarity-Favourability Analysis of Air-

Asia puts it at a high familiarity-favourability area

within its high-value deal seeking markets.

Tune Hotels communications strategies would be

inclined towards achieving the same as its sister

concern.

Affective stage of Hierarchy of Effects model where a preference has to be built

Familiarity Favouribility analysis

Communications Design

A combination of message strategies, incorporating catchy taglines has been designed for

Tune Hotels, using glimpses from the target markets. Some adverts are kept minimal with a

rational theme, using the informational appeal of notifying potential clients of the amazingly low

rates and start of booking seasons and also providing website address. Whereas, other adverts

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Marketing Tools

follow the sensory message strategy, and the transformational appeal, stirring up emotions of the

targets. E.g. Father-Son pillow fight showing how life would be like at Tune Hotels.

Taglines have been designed to hit the market with the brand name. They comply with

the sparky, leisure and fun-oriented theme of the hotel.

“Check-in and Tune Out”

“Get Tune-ified”“Get in Tune”

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Marketing Tools

Communication Channels

Advertising

Television commercials displaying members of the target

market e.g. a young Malay girl on a scootie showing surprise

over the low price. She is an ideal representative of the low

earning student market. (RM 9.99 Tune Hotel, Budget hotel in

Kuala Lumpur, 2006-2008)

Inflight advertisement video would be shot to be screened to

all Air Asia passengers from Malaysian and international

destinations.

Print ads would be given in The Star, Malaysia’s

most widely-read newspaper being printed in KL.

Billboards; one at each location, would be

positioned at the LCC terminal exit and in main KL.

Mobile vans for transporting Tune Hotels staff would have painted advertisement.

(Leonalim.com >> Air Asia’s Tune Hotel, n.d.)

Sales Promotion

Discounted price on advance bookings or through the online reservation or call center would

be announced.

28

Marketing Tools

Events and Experiences

In vibe with Malaysia’s Mooncake Festival; celebrated each year in Autumn, Tune Hotels

would offer mooncakes, the festive Chinese confectionary treat at the mini-café in its lobby –

John’s Kopitiam. The event shall take place from August – October. The lobby shall be

decorated with festive lanterns. (Mooncake Festival/Mid-Autumn Festival 2001-2008)

Public Relations

Tune Hotels management would deliver speeches and send representatives to seminars under

Tourism Malaysia’s “Malaysia Truly Asia” tourism promotion program. It would seek to make

its signature in the tourism industry as the best low cost accommodation alternative.

Personal Selling

Travel agents of Air Asia, the first at hand, would be approached.

Direct Marketing

The customer databases maintained by Air Asia would be used to email potential corporate

clients who have travelled for business purposes.

29

Budget Allocation

Budget Allocation

Budget allotted for Tune Hotels

= $100,000

Cost Breakdown by Percentage

Function Percentage Allotted (%)

Amount ($)

Advertising 55 55,000Direct Marketing 10 10,000Personal Selling 8 8000Events and Experiences 5 5000Sales Promotion 12 12,000CONTROLS 10 10,000

30

Implementation and Controls

Implementation

The due timings when each activity to develop a marketing plan are planned by using a

Gantt Chart. (Gantt Chart on next page)

31

Implementation and Controls

Controls

Sales Analysis

Sales would be checked quarterly (every 3 months) to investigate factors which might be

causing a lower revenue generation than estimated. E.g. it can be calculated what percentage of

sales decline was due to cutting down prices. Changes in marketing action can be made

accordingly.

As estimated in Pricing Decisions:The annual revenue to be generated = $6000 at unit price of $2.89Quarterly revenue, therefore = $6000 / 4 = $1500Suppose,The quarterly revenue was targeted to be generated at the sale of 200 roomsIf at the quarters end,Only 100 rooms are sold at a price cut of unit price $2.50Then:Variance due to price decline would be calculated as:

= ($2.89 - $2.50) (100)= 39%

Market Share Analysis

Annual overall, served and relative market shares would be calculated to check

performance. Corrective actions in promotion and pricing would be taken if shares show critical

estimates. Pie charts show how results would appear. Performance would be checked comparing

stance in the hotel industry, the low-frills market and with its lead competitors.

32

Implementation and Controls

Contrary to the 15% market share target set by Tune Hotels, the share in hotel

industry is 10%. Planning should be done to further increase it.

A check on served market share shows Tune Hotels is perfoming at peak and is a

market leader in the low-frills hotel industry. The marketing plan is working to its best. No

changes are needed.

33

Implementation and Controls

The check shows that Seasons View Hotel is coming close in capturing relative

market share of Tune Hotels with 33% current capture. Marketing strategies have to be revised to

differentate Tune Hotels from Seasons View to level off its close tie.

34

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38

Appendix

Appendix

Appendix A – Porter’s 5 Forces Model

vi

Appendix

Appendix B – VALS Framework

vii