Marketing Strategies Of Travel Agencies 602v5a

Evaluation of Marketing Strategies and Business Performance of Selected Travel Agencies in Paranaque City

Undergraduate Thesis Submitted to the Faculty of the Cavite State University Bacoor City, Cavite

In Partial fulfillment Of the requirements for the degree Bachelor of Science in Business Management (Major in Marketing)

Estrada, Jacqueline V. October 2014

Evaluation of Marketing Strategies and Business Performance of Selected Travel Agencies in Paranaque City

THE PROBLEM AND ITS BACKGROUND This chapter presents the introduction, statement of the problem, objectives, significance of the study, definition of and the conceptual framework. This chapter will present a better understanding of the study made by the researcher. Introduction A marketing strategy is a written plan that includes marketing topics like product development, promotion, distribution and pricing approach that identifies the company's marketing goals and explains how will achieve those goals. It can also help to identify strengths and weaknesses of the company and competitors to know where to focus the marketing tactics. Travel agency is a private retailer that provides travel and tourism related services to the public on behalf of suppliers such as airlines, car rentals, cruise lines, hotels, and package tours. In addition to dealing with ordinary tourist most travel agencies have a separate department devoted to making travel arrangements for business travelers and some travel agencies specialize in commercial and business travel only. There are also travel agencies that serve as general sales agents for foreign travel companies, allowing them to have offices in countries other than where their headquarters are located.

A travel agency is a commercial enterprise where traveler can secure information and expertise, make arrangements to travel by air, sea or land to any point in the world. It is basically a retailer as it conducts business transactions directly with individual supplier as agent, and with each individual traveler.

Francisco, (2005) stated that travel agency acts an agent of the different suppliers in the tourism industry, such as the transportation companies, hotels, resorts, car rental companies, tour operators and sight-seeing companies. It also provides assistance in securing travel documents, such as ports, visas and immigration clearance. It processes travel arrangements by placing reservations, obtaining confirmations and issuing corresponding tickets or tour vouchers on behalf of the suppliers assists in cases of refunds and cancellations, acts as agents of the different suppliers in the tourism industry Nowadays, Travel Agency is the most common business that continuously increases in the City of Paranaque. Undoubtedly, that’s the reason why this study was conducted to know their marketing strategies and business performance. This study wants to determine the evaluation of marketing strategy and business performance of selected travel agencies in Paranaque City.

Statement of the Problem The main objective of this study is to evaluate the marketing practices and business performance of the selected travel agencies in Paranaque City.

It sought to answer the following questions: 1. What are the business characteristics of the travel agencies in of: a. years in operation, and b. type of business ownership? 2. What are the marketing strategies presently employed by the travel agencies in Paranaque City in of: a. product; b. price; c. place, and d. promotion? 3. What is the business performance of the travel agencies operation in of the following: a. number of Clients (Monthly); b. number of Clients Travelled (Monthly), and c. sales income? 4. Is there any significant relationship between the marketing strategies and business performance of the travel agencies?

Objectives of the Study This study sought to discover answers to the aforementioned specific problems guided by the following objectives:

1. determine the business characteristic of travel agencies in Paranaque City. 2. determine the marketing strategies presently employed by the travel agencies. 3. determine the business performance of the travel agencies. 4. ascertain if there is significant relationship between marketing strategies and business performance of travel agencies.

Significance of Study The following will benefit from the study. Travel Agencies. The study will greatly help to provide more knowledge and ideas regarding travel marketing strategies that they will be provided not only with some alternatives but also the latest trends in business. Entrepreneurs. It also help entrepreneurs who are planning to put up travel agencies because the study would come up with the most effective marketing strategies of the four P’s of Service Marketing (Product, Price, Place and Promotion) that will guide them in the conduct of their business operation. Researcher. This study will satisfy the curiosity with the marketing strategies and business performance of travel agencies. This will also serve as final requirement for the degree in BS Business Management Major in Marketing. Future Researchers. The study is essential for future researchers to make related studies about this topic. This study can help future researchers

since they can use as a guide in making study similar to this and help them to have an idea to improve this study.

Definition of The term listed below were defining in a manner they are used in the study. Business Characteristics. The characteristics of travel agency which include years in the operation, and type of ownership. Business Performance. In this study refers to the current status of travel agencies in relation to their marketing strategies. Evaluation. Refers to the assessment of the business performance of travel agencies with regards to its operation. The evaluation focuses on the inputs, processes and outputs of the said company. Marketing. Is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives. Marketing Strategy. Is the selection of course of action from arriving several alternatives that involves specific customer groups, communication methods, distribution channels and pricing structures. As most experts say, it is a combination of target market and marketing mixes. Marketing Mix. Includes all controllable factors that have been chosen to satisfy customer needs. They comprise the product, promotion, price and place.

Place. Or distribution, refers to channels of distribution that serve as the means for getting the product to the target customers. Price. Refers to profit margins and the probable pricing response of competitors. Pricing includes not only the list of price, but also discounts, financing, and other options such as leasing. Product. Is the physical product or service offered to the customer. In the case of physical products, it also refers to any services or conveniences that are part of the offering. Promotion. Is the communication part of marketing which includes advertising, personal selling, sales promotions, merchandizing and public relation publicity. Travel Agencies. Are retail outlets where the services of various suppliers, carriers, destination and tour wholesalers are merchandized.

Conceptual Framework This conceptual framework explain how marketing strategies and business performance will be identified through giving of survey questionnaires to the (30) thirty respondents of selected travel agencies in Paranaque City. Using descriptive research and survey method, managers will answer questions stated in questionnaire. Questionnaire will focus in factors, such as business characteristics, marketing strategy and business performance of travel agencies. The paradigm that guided the conduct study is presented in figure 1. Illustrate the relationship between the Marketing Strategies and Business Performance of Travel Agencies. The input in the study is the marketing strategy used in travel agencies, Product, Price, Place, and Promotion. The output in the study is the business performance of travel agencies, Number of Clients (Monthly), Number of Clients Travelled (Monthly) and Sales Income. This study will determine if there is a relationship between marketing strategies and business performance of travel agencies.

INPUT Marketing Strategies

OUTPUT PROCESS Survey

 Product  Price  Place

Questionnaire

Business Performance a. Number of clients (Monthly) b. Number of Clients Travelled (Monthly) c. Sales Income

 Promotion

Figure1.The paradigm showing the relationship between the marketing strategies and business performance of travel agencies in Paranaque City.

Hypothesis of the Study There is no significant relationship between the marketing strategy and business performance of the travel agencies in Paranaque City.

Review of Related Literature This section of the study presents some related literature and describes the framework of this study. Business Characteristics Statistics about business characteristics include number of years, the initial capitalization, monthly income and location of businesses in New Zealand. They provide an annual snapshot of New Zealand businesses and include details about geographic area, industry, the type of the business and business size at employee level. (Stats government, 2012) The simplest form of business entity is the sole proprietorship. If you choose this legal structure, then legally speaking, you and the business are the same. You can continue operating as a sole proprietor as long as you're the only owner of the business. Establishing a sole proprietorship is cheap and relatively uncomplicated. If you're going to conduct your business under a trade name such as Smith Furniture Store rather than John Smith, you'll have to file an assumed name or fictitious name certificate at a local or state public office. This is so that people who deal with your business will know who the real owner is. In addition, you may have to obtain a business license to do business under state laws or local ordinances (Siegel, 2001).

Marketing Mix

The 4p’s of the marketing mix that a marketing manager can manage to achieve company’s target. Changes happening on these parameters are subject to changes in companies inside or outside environment (Kotler & Armstrong 2002). The marketing mix is like a recipe of a products strategic position in the market. So to achieve success in a company’s strategic approach the 4p’s of marketing are the main tools (Culliton, 2000). In the Figure below, I have indicated the 4p’s of the marketing mix: PRODUCT

PRICE

PROMOTION

PLACE

Figure 2: Marketing mix (Kotler &Armstrong, 2002)

Product A product is a good or service or the combination of both which is made to satisfy a group of people in a market where people can give a value in exchange of any specific goods and services. Commercially, a product means something that belongs to a company or a person who is produced a delivered for a certain market with a certain process and in exchange of a value is called product. This can be tangible or intangible.

Considering customer’s needs marketers must deliver a descriptive package quoting what a customer really buys when they purchase a product. This kind of understandings means that every product has value in its pricing which provides benefits to satisfy customer needs and wants. Only this method ensures that marketers formulate strategies effectively (Griffin & Ebert, 2004). Today buyers expect to receive products or services with a greater value and with a reasonable price. Marketers call this the “value package”. Below are some possible attributes of a package trip (travel agency product) that a customer might consider in time purchasing the services: -

Crystal clear trip itinerary

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Choices from a variety of destination

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Choices of accommodation and transportation

-

Reasonable price image

-

Simple process of purchasing

-

Credit card protection

-

Comfortable and safe

-

Insurance services, etc.

Though package trips from a travel agency is work in involving different media such as Airline Company, hotel and others. In that case from the customer goes to the travel agency as well as service provider too (Griffin & Ebert, 2004). Classifying Goods and Services

There are two types of buyers according to different groups of products: (a) Consumer products interest group and (b) Service interest group. But surprisingly the methods of marketing are quite similar. Both types of products market to the customers through newspapers, magazines, radio, television, billboards, etc. (Griffin & Ebert,2004). Goods The definition of goods refers to a tangible object that is economically benefited and made for consumption and to satisfy a certain group of people. More specifically, when people go into a shopping mall, what they put in shopping are all tangible goods. Purchases from online stores seem to be good as long as this product is shipped to the buyers address (Griffin & Ebert, 2004). Service Services are kind of activity that one party can offer to another. This kind of product may or may not be related with a physical touch. Activities such as renting a hotel room, buying a flight ticket, consultancy, etc. are service related products (Kotler & Armstrong, 2002) Service intangibility means, that service cannot be seen before they are bought or served. For example, an airline ticket bought before the flight is nothing but a promise of a safe and comfortable journey of a enger from one destination to another.

Service Inseparability means that a service cannot be separated nor from the customer or from the provider. For example, consultants who consult to their customers both party affects with the outcome of the service. Service Variability means, the quality of service at the time it is given. For example, in a travel agency one may be fluent and faster than another agent, in delivering customer service and solving their queries. Service Perish ability means that a service cannot be stored for later sale. For example if a patient missed his or her doctor’s appointment, a doctor may charge an extra fee because the service value existed only at that point of the time scheduled (Kotler & Armstrong, 2002). Price In this process of them marketing mix, pricing comes after preparing the product. In pricing managers decide the value of a product according to its cost and profit margin. The discussion below is about the objective of product pricing and then elaborate on some major segments and tools that companies follow in pricing their products. Objectives of pricing Usually a company makes pricing to meet business objectives but it also includes satisfying other objects related to building up a product. Pricing of a product differs in different markets. Some companies have a monopolized market with their unique product and some have only the right to do business on a

specific market. Pricing also depends on corporate image, social value, market condition and geographical condition or situation (Ricky & Ronald, 2004). Profit-Maximizing Objectives Maximizing profit is sometimes very tricky. Low prices sometimes give a bad image about the company or on the other hand it can lead to high volume. A high price sells low volume of products but keep a standard of quality and company image. For example, low prices from Tale communication service providers enable them to sell more, but places huge pressure on their network in regards to volume. But high price can attract more customers with a high quality of services and benefits. On the other hand high prices return a company’s cost and effort within a short time but low prices take time and often take longer than expected. To reduce this kind of problem companies try to set a reasonable price which can return minimum profits but will keep the value of the company and customer (Ricky & Ronald, 2004). Market Share Objectives Establishing market share in different markets often differs from one market to another. Sometimes it’s easier than expected and sometimes it’s take time to achieve this objective. In the long run, a business must make profit to keep it running. A new company can set their prices lower in the beginning to attract more customers and to offer their customer to have a try, but they might have to be ready to make losses too. But for some established and well-known

companies this is easier than new comers, because customers are more likely to buy a product that they are used to regardless of prices (Ricky & Ronald, 2004). Other objectives In some conditions neither maximizing profit nor market share is the main objective. For example, in the time recession in 2009 companies have tried to stay in the market which with their maximum effort to keep company running and overcome the situation. Price Setting Segments and Tools Regardless of the objectives, the company’s managers measure the potential impact on deciding the final pricing. This may include all cost of producing a product and estimated profit of the company. Managers worldwide normally use two tools for this purpose: cost-oriented pricing and breakeven analysis (Ricky & Ronald, 2004). Cost-oriented pricing Cost oriented pricing considers the desire of making profit by covering product costs. A travel manager will make their trip pricing by calculating cost of fares, worker wages, etc. Managers may include also rent, utility costs, insurance and other fixed and variable costs. Breakeven analysis To cover variables cost, a manager of a firm uses cost oriented pricing that changes with every single unit of products produced and sold. It will also

produce money to cover firms fixed costs that are fixed regardless the number of product produced or sold. Break-even analysis costs versus revenues of various volumes. It shows, at any particular selling price, the financial result, the amount of loss or profit for the company (Ricky & Ronald, 2004) Place Place refers to the channel of product distribution. It may be from factory to outlet or from outlet to final customer or from factory to customer. Selecting an appropriate distribution channel is a strategic process. This determines both the amount and cost of a product and market demand. Normally marketers are determined to keep the enough flow of their product. Below there are three strategies: intensive, exclusive and selective distribution that provide different forms of products distribution channels. -

Intensive distribution: Intensive distribution means distributing products through as many different channels as possible. These may vary from product to product. Retail products like milk and sugar can enter into the market through different channel of .

-

Exclusive distribution: Here the manufacturer has the right to distribute its products to a specific channel. This kind of distribution only applies in cost products such as distributing Audi cars. An airline product also belongs to this category as only the manufacturers have the right to select its distribution channels.

-

Selective distribution: This kind of distribution channels only specified on one kind of product. Such as furniture or electronic items displayed in a furniture shop or electronic shops respectively.

Moreover, internet based online shops are becoming very popular nowadays. Customers feel very comfortable to order or purchase a product online shop rather than going to supermarket. As online shops are a place where customers from all over the world can visit and buy products and get information about any product. It is getting popular for all types of products now a day. In addition to this, it has low costs and set-up fees as well as low barriers to enter into the market. The medium payment through credit cards or from direct bank s is also raising the demand of internet based shops (Ricky & Ronald, 2004). Competitor analysis In this ever changing business environment competitor analysis in needed in all levels of business. Some firms may find it difficult to cope up with their competitor’s strategy and may form their own strategy targeting a certain group of customers. On the other hand, some may think this is only the way that a firm may bring business if they can complete with their competitors given prices in the market. However, a company has two strategies to analyze whenever they formulate a competitors approach: (a) Who are the competitors and (b) What are their motives? (Li, 2002). To find out who are the competitors of one’s business you have to look at the market and the similarities between products or services. Here they can

additionally look for the same manufacturer, service provider, what are their value prices and the customers’ response to their products etc. From customers’ loyalty and comments on another company’s product, a company can sort out the reason why their competitors are providing this or that service. Also a company can identify what they want their pricing and how they can achieve their breakeven point, along with what are the future changes coming from any specific ment (Ricky & Ronald, 2004). However, knowledge of competitors’ resources and capabilities is necessary to perform competitively. Before starting a big change in acquiring an additional resource there must be different modifications and ments in operation. From analyzing the competitors’ SWOT we know the competitors’ capabilities (HRM advice & NetMBA.com, 2008 online). Finally, to analyze competitors’ future target and strategy, it is easier to look on what are the new technologies and new product or services in competitor’s product line is going to add. In addition with that, a company itself should be stable with enough funds and financial stability, necessary resources so that they can compete with competitor’s market strategy (HRM advice & NetMBA.com, 2008 online). Promotion Promotion is a way to , to attract and finally to sell a product to customers. It is a part of the communication mix: the total message any company sends to its future customer concerning any product development or to launch

any new product or to have some seasonal sale. For customers, this is nice to have their expected product with a lower price but it is when prices so come down and the amounts of products rise or come with some extra features (Ricky & Ronald, 2004). Promotion, the final variable of the marketing mix, is the coordination of marketing communication efforts to influence the attitudes or behavior of the consumers (Solomon & Stuart, 2000). Promotion is employed as a means of creating awareness making your consumers learn of your products and the benefits that go along with it. It is virtually everything an organization says and does. The functions of promotion include the following, namely: Informs consumers about new goods and where they can purchase them. Reminds consumers to continue using certain products. Persuades consumers to choose one product over others. Builds relationships with customers. These functions are employed by marketers in such a manner that the consumers will always to buy their products and that the marketers are able to build and maintain brand image and goodwill as well. It is therefore important for marketers to know what exactly to promote and why. If relayed improperly, the communication that the marketer sends to the consumers may generate a negative response and would shy them away from buying your products instead. Relationship marketing is also needed in strengthening your promotion; a good relationship with your customers can result to a long- standing patronage of your products.

Promotional Mix Within the marketing mix, marketing utilizes various promotional elements for the purpose of effectively providing information to consumers about their products, increase the demand, differentiate the products, accentuate the products value and stabilize sales. A marketer achieves these objectives by blending the personal and non-personal selling activities in the form of a promotional mix (Solomon & Stuart, 2000). The promotional mix focuses on one more than one element and works in harmony with the overall marketing mix. The elements of the promotional mix include the following, namely: Personal selling a direct interaction between a company representative and a customer either in person, by phone or even an computer link. Advertising a paid nonpersonal communication from an identified sponsor that can establish and reinforce a distinctive brand identity and inform or persuade of a particular audience using the mass media. Sales promotion programs that marketers design to build interest in or encourage purchase of a product during a specified period of time. It is also an action-focused marketing event whose purpose is to have a direct impact on the behavior of a firm’s customer. Travel industry develops consumer sales promotion as part of their objectives of attracting the final consumers. The types of consumer promotions that are generally employed by the said firms are as follows: Sampling consumers are offered regular or trial sizes of the product, either free or at nominal price. Price deals consumers are given discounts from the products regular price. Coupons offered as cents- off or added value incentives for purchasing specific products.

Direct marketing refers to any direct communication to a consumer that is designed to generate a response in the form of an order, a request further information’s, and or a visit to a store or other place of business for purchase a product. Publicity and public relations portrays an organization and its products positively by influencing the perceptions of various publics. Guerilla Marketing involves “ambushing” consumers with promotional content in places they are not expected to encounter the kind of activity. Business Performance Business performance management is a set of management and analytic processes that enables the management of an organization's performance to achieve one or more pre-selected goals. According to Bititci, Carrie & McDevitt, 1997 they define business performance as a “process by which the company manages its performance in line with its corporate and functional strategies and objectives”.

This

definition

is

often

used

in management

research

studies. According to Bititci, Carrie & McDevitt, it is the objective of that process to provide an integrated control system, where the corporate and functional strategies are deployed to all business processes, activities, tasks and personnel, and is obtained through the performance measurement system to enable appropriate management decisions. The ultimate purpose of that process is to improve company performance. Performance measurement is an essential part of the performance management. By measuring, people transform complex reality into simplified

numerical concepts that can be easily communicated and acted upon (Lebas, 2008). According to Lebas, the simplification of reality by measuring is the prerequisite of successful management. Similarly, Bititci et al., argue that performance measurement is at the heart of the performance management process and it is of critical importance to the effective and efficient functioning of performance management. Performance measurement (PM) can be defined from different perspectives (Lebas, 2008).

Methodology This chapter explained the methods that the researcher used in order to allocate and evaluate the data in accordance to the goal of the study. Relevant data were gathered through internet sites, related thesis, and books which could justify documents concerning the study. Time and Place The researcher will start to conduct the research on November 2014, the data gathering will be conducted from December 2014 to February 2015 and the end of the study will be on March 2015 in Paranaque City. Sampling Procedure The study will be using the purposive sampling technique to determine the specific number of respondents in Paranaque City to ensure that the populations were adequately in the study. The researcher has drawn using Slovin’s formula with ten percent of margin error.

Where: n = number of sample N = total population e = 10%, number of error

Collection of Data The researcher will gather the data of the respondents in Paranaque City. The main source of the study was to obtain information that relevant to the evaluation of marketing strategy and business performance of travel agencies in Paranaque City. The primary source of data was questionnaires that were given to the respondents. The secondary sources of data were taken from books, internet and thesis. Methods of Analysis The researcher will utilize the descriptive method in the study using survey approach that will based on the true data that was collected and analyzed. Descriptive statistical tools such as percentage, weighted mean, likert scale and chi-square to assess the purpose of the study. Percentage. This will utilize to describe the marketing strategy used by the travel agencies.

Formula: P=

x 100%

Where, P = percentage f = frequency N = total number of respondents

Weighted mean. This will utilize to identify the business performance of the travel agencies. Formula: WM= Where, W.M. = weighted mean X = frequency W = weight Likert Scale. This will be used to determine the level of satisfaction of the managers based on marketing strategies of the travel agencies.

Five Point Likert Scale for the Level of Needs Questionnaire

RATE

EQUIVALENT

INTERPRETATION

5

4.20-5.00

Excellent

4

3.40-4.19

Very Good

3

2.60-3.39

Good

2

1.80-2.59

Fair

1

1.00-1.79

Poor

Chi-square. This will use to ascertain the relationship between the marketing strategy and business performance of travel agencies. Formula: X2= Where, X2 = chi-square test E = expected value O = observed value

Scope and Limitation This study will be conducted from December 2014 to February 2015. The respondents of the study were limited only to the (30) thirty managers. Data will be gathered through the distribution of survey questionnaire. It also analyzed the business characteristics of travel agencies including the years in operation and type of ownership. The study focused on the Marketing strategies and Business Performance of Travel Agencies. The results of the study greatly rely on the information that will give by the employees who serves as the respondents of the study.

Republic of the Philippines CAVITE STATE UNIVERSITY- BACOOR CAMPUS Phase II, Soldiers Hills IV Molino 6, Bacoor Cavite

Dear Respondents,

Good day! I, Jacqueline V. Estrada, BS Management major in Marketing student of Cavite State University- Bacoor City Campus is undertaking a research regarding "Evaluation of Marketing Strategies and Business Performance of Selected Travel Agencies in Paranaque City". In this regard, may the researchers ask a little favor from you by answering this questionnaire. It will seek information regarding the research study.

Jacqueline V. Estrada Researcher

Name (optional): ________________________

Date: _________________

Direction: Please put a check (/) on the space provided in each item.

I.

Business Characteristics

1. Name of Business (optional) : _________________________ 2. Years in operation ( ) 6months- 1 year ( ) 1year- 5years ( ) 6years- 10 years ( ) 10years- Above 3.

Type of Business Ownership ( ) Sole Proprietorship ( ) Partnership

II.

Marketing Strategies

Directions: Read the following questions and choose your answer by filling up the blanks or putting a check beside the chosen answer. I encourage you to answer the questions sincerely and truthfully. 5-Stong Agree 4-Agree 3-Neither agree nor Disagree 2-Disagree 1-Strongly Disagree

a. b. c. d. e.

A. PRODUCT The agency offers package tours The agency offers personalized tours The agency offers hotel Reservations The agency offers car Rentals The agency offers sightseeing tours

5

4

3

2

1

5

4

3

2

1

5

4

3

2

1

D. PROMOTION 5 The agency have an advertising The agency provides a communication materials about their products The agency have a effectiveness of promotion activities The agency maintain the retention of promotion to the memory of the customers The agency give promo Packages The agency give sales promotion programs

4

3

2

1

B. PRICE a. The agency gives discounts to the customers b. The agency provides travel insurance c. The agency based the price to their competitors

a. b. c. d. e. f. g. h. i.

a. b. c. d. e. f.

C. PLACE The agency provides the accessibility of the business The agency have an wide area space The agency have availability of the parking space The agency have a convenience location The agency have overall look of waiting and receptions area The agency provides safety and security The agency provides Sanitation and Cleanliness The agency have a good temperature The agency provides visibility of entrance and exits

III.

Business Performance

4. How many customer you get per month? Domestic ( ) Below 40 ( ) 40-60 ( ) 60 – 80 ( ) 80 Above Foreign ( ) Below 40 ( ) 60 – 80

( ) 40-60 ( ) 80 Above

5. How many clients travel per month? Domestic ( ) Below 40 ( ) 40-60 ( ) 60 – 80 ( ) 80 Above Foreign ( ) Below 40 ( ) 60 – 80

( ) 40-60 ( ) 80 Above

6. What is your estimated monthly income? ( ) Php 20,000 & Below ( ) Php 20,001 - Php 50,000 ( ) Php 50,001 - Php 100,000 ( ) Php 100,001 - Php 200,000 ( ) Php 200,001 - Php 300,000 ( ) Php 300,001 - Php 400,000 ( ) Php 400,001 & Above

Thank you for your cooperation and God Bless!