EXAMINING UNIQUE SELLING POINT (USP) AND CUSTOMER PATRONAGE IN BUSINESS ORGANIZATION
CHAPTER TWO
LITERATURE REVIEW
This chapter shed light on the empirical literature and theoretical literature on the importance of a unique selling proposition; which is a marketing tool to identify several factors that affect consumer purchase decision. It also describes different conceptual frameworks and identifies the research topics.
2.1 Unique selling proposition (USP)
Blythe (2005), as cited in Bobrov (2016), has the following definition for Unique Selling proposition:
“contains the one feature of the product that most stands out as different from the competition, and is usually a feature that conveys unique benefits to the consumer.”
The chartered institute of marketing (2009) states that USP is one of the key tools of marketing that have stood the test of time.
Felix et al. (2012) studied how to make USP’s beneficial to both advertisers and consumers. They defined USP as dramatically improving the positioning and marketability of the company and products by accomplishing following objectives:
- Unique - It clearly sets you apart from your competition, positioning you the more logical choice
- Selling - It persuades another to exchange money for a product or service.
- Proposition - It is a proposal or offer suggested for acceptance.
2.2 Marketing mix
The marketing mix is one of the main concepts in modern marketing. As defined by Wikipedia from Marketing mix (2017), the Marketing mix is a set of marketing tools that companies use to pursue its marketing objectives in the target market. When a company is making decisions on marketing they typically are related to four categories known as the 4 P’s: product, price, place and promotion. According to Kotler and Armstrong (2004) the main idea of marketing is to influence and persuade the customers to buy and use the company’s products or services. In order to attract customers, the companies use the four P’s.
Figure 1: Marketing Mix adapted fromArmstrong, G., Kotler, P., & Silva, G. d. (2006)
Product
A product refers to an item that satisfies the consumer's needs or wants. Products may be tangible (goods) or intangible (services, ideas or experiences) (Needham, 1996). The products of the hospitality industry are primarily designed to satisfy the needs of travelers, either business or leisure.
Place
Refers to providing customer access and in a convenient manner. In hospitality industry, the hotel’s location is the main factor for visitors. The location of the hotel affects proximity of tourist attractions or other points of interest, the transportation options and accessibility of nearby locations. (Bowie & Buttle,2004)
Promotion
Promotion refers to marketing communications and may comprise elements such as: advertising, PR, direct marketing and sales promotion (Needham,1996). A hotel can use different websites and magazines for advertisement (Bowie & Buttle, 2004). Hotel Brand also helps customers in identifying the hotel especially large hotel chains which have strong brands which affect customer behavior.
Price
Price refers to the amount that a customer pays for a product. Price may also refer to the sacrifice consumers are prepared to make to acquire a product (e.g. time or effort). Price is the only variable that has implications for revenue. (Needham, 1996)
In hospitality industry the official advertised prices, discount rates and pricing in hotel broker sites are key factors to consider as far as pricing Is concerned.
The different combinations of services a hotel provides define the total market concept for the hotel as consisting of five elements: facilities, service, price, location and image Medlik & Ingram (2000). The services that a hotel provides vary significantly. At the simplest, a hotel provides just a room to its clients. The elements of the hotel's marketing concept have different significance depending on the visitor's profile and reason for travel.
Figure 2: Hotel Marketing Concept Medlik, S., & Ingram H. (2000).
Location
Hotel visitors start their purchasing process from selecting a location where they are selecting a hotel to stay in. To reflect the importance of location, it is located in the middle of the above diagram and is considered the most important factor of a hotel. The more suitable the location, the more appealing the hotel is by default. Many factors such as proximity of tourist attractions, surroundings and mass transit options influence the attractiveness of the hotels location
Facilities
Hotels provide a variety of facilities in addition to bedrooms. The facilities typically include different recreational facilities such as gyms, spa, swimming pools and outdoor facilities. Additionally, bars, restaurants, and meeting rooms are provided, especially in conference hotels. Depending on the type of the hotel, the facilities vary in type, number, size and decor. Different visitors have diverse needs and expectations from the hotel and its facilities, based on personal preferences as well as preferences depending on the reason of travel.
Services
A hotel can have many different services such as concierge services, 24-hour desk, room service, transportation services, laundry services, and typically tourist information services are provided.Once again, the service portfolio depends on the type of the hotel.
Image
Hotel's name, brand and aesthetics play an important part in the image of the hotels. In addition, all the other fundamentals of the marketing concept have impacts on the overall image (location, facilities and services)
2.3 Consumer purchase decision
Market Metrix (2013) is a study on consumer purchase decision in hospitality index. The study has indicative results on relative importance of the unique characteristics of a hotel. The study found that location is the most important factor, and pricing is second. Third is past experience. This study has a different research focus, as the focus is to identify within the 4P's which factors are relevant, and how relevant each factor is overall seen by customers.
Figure 3: Market Metrix in hospitality (consumer purchase decision). Market Metrix (2013)
2.4 Effects of hotel facilities on consumer purchase decision
Researcher Eliwa, conducted a study on customer loyalty and the image of the fine dining restaurant. He argued that “restaurant loyalty is the most important competitive survival tools for fine dining restaurants since loyal customers provide repeat business, higher market shares, referrals, and competitive merits.
Understanding customers’ desires to attract, maintain, and satisfy those customers to maintain this continuous source of income is therefore important. The restaurant operators must understand the effect of both the customers’ level of satisfaction and the restaurant image on the customers’ loyalty. Therefore, the driving force for each component of the customer loyalty should be investigated. Customers may differ in the way they become loyal to a restaurant; for some customers, restaurant image may be of importance, whereas for others quality of service and food are of more importance. The outcome of the study regarding the customer’s satisfaction level and the image attributes could help the operators of the fine dining restaurant operators to develop customers’ loyalty.” (Eliwa, 2006)
2.5 Effects of image on consumer purchasing decision
Image is represented by Medlik & Ingram (2000) as being defined by hotel brand, promotion and aesthetics.
According to Borden (1984), promotion is defined as public relations, direct marketing, sales promotion, advertising and personal selling. Danaher et al. (1998) define promotion as a decision on how best to introduce the product to the target market and influence the market to buy the product. Behera (2008) states that promotion includes diverse ways of communicating the hotels offerings to customers. As cited by Williams (2010), John (2007) defines promotion as information that encourages customers to a make buying decision of a product or service available in the market. Armstrong & Kotler (2009) structures promotion as a marketing mix with five components, which are advertising, sale promotion, publicity &public relations and personal selling. According to Ogeniy (2009) promotions usually develop an interest in the customers for purchasing a product or service that is available in the market. The company or organization uses promotion tools to convince people to buy products.
Klepsch and Schneider (2012) studied the influence of sustainable hotel practices on consumer buying decision. The study concluded that price is the main factor influencing the decision, but that sustainable practices have surpassed the star-rating system in influencing consumer buying decision. Thus, also sustainability should be considered while developing a hotel’s image.
2.6 Effects of service quality on customer purchasing decision
Watiki (2014) conducted a research to measure the influence of service quality to satisfying consumer needs in hotels in Nairobi, Kenya. The research utilized, descriptive statistics to express the relationship between the five service quality variables as perceived by the customers. The results achieved in the study were indicative that service quality was strongly correlated with customer satisfaction and the higher the service quality, the higher the customer satisfaction. The results further indicated that reliability was the strongest aspect contributing most towards customer satisfaction followed by Empathy, Tangibles and Responsiveness. It was also established that service quality has a statistically significant effect on customer satisfaction. According to the study, service quality contributes 74.2% of customer satisfaction while the other factors contribute 25.8%.
Tsiotsou (2006) conducted a study on the impact of perceived product quality and overall satisfaction on purchasing intentions. The study utilized sport shoes as the product subject of examination. The sample of the study consisted of 197 student participants of the survey questionnaire. From the hypotheses that were tested, the data confirmed that; Perceived quality had both direct and indirect impact on customer’s intention to make a purchase, Overall satisfaction had a direct effect on purchase intentions and involvement had an indirect effect on purchase intentions through overall satisfaction and perceived quality.
Murasiranwa et al. (2011) Studied hotel service quality and business performance in five hotels belonging to a UK Hotel Chain. The results in this study suggested that service and quality are sacrificed at the altar of profits as senior managers appear to hope for quality but reward financial performance. Overall the study determined that the quality aspect remains largely attractive to the hotel industry, and therefore service quality is a vital factor to consider ensuring customer purchase decision and satisfaction.
Jansinskas (2016) studied the impact of hotel service quality on the loyalty of customers. The research discovered that the impact of hotel services’ quality on customer loyalty was positive: customers highly evaluating service quality were more loyal, tended to use the hotel services repeatedly and recommend it to friends and acquaintances.
2.7 Effects of unique pricing on customer purchasing decision
According to Kenesei and Todd (2003) price awareness is often measured by price knowledge. The study provided a broader view of price awareness using three distinct factors, price knowledge, price search in the store and price search between stores, a methodology that was developed by Dickson and Sawyer (2001). Results from the study showed that price awareness of supermarket customer´s in Hungary are relatively high and they are much more aware of prices and less aware of promotions. The study found it Interesting in that the demographic factors have no relevant relationship with any price awareness concept. Price awareness was measured by checking the ability of recalling prices immediately after selection, observation and questions concerning search of price information in the store, and habits of comparing prices between stores. These three factors showed a very strong relationship in the product categories investigated.
Price as an element of the marketing mix requires special attention. One of the reasons was that the price, unlike other marketing elements, have an effect on the income of consumers. The company as a legal entity must determine the goals that were to be achieved before determining the price. Taking into account the goals set by each company, the next upgrade was the pricing policy. Each policy has its merits and demerits, and with the combination of different policies and knowledge of the existing market situation, the company could make profit. Although, traditionally customer’s purchase decision mostly depended on price, the conducted research has shown how important element for purchasing decision was price and how it could have affected the company. The results also revealed how non-price elements have been gaining significance in purchasing decision over the past decades and that customers always follow the activities of company related to price and that they will continue to follow them. Therefore, companies must always keep in mind that consumers are the ones who should be in the center of their attention and that should always bear in mind their wishes, needs and preferences, but also their possibilities.
2.8 Effects of location on customer purchasing decision
In the marketing mix the key element of location is place. It is defined as being a set of interdependent organizations that caters to the process of making a product available to consumers. (Armstrong & Kotler, 2006: 14) Place can also be described as availability of a product/service, where availability is defined as how the product is located in the market, or how frequently the product can be found by consumers (Williams, 2010:14). Good characteristics for the place include availability of transit options (e.g. bus station, railway station or proximity to city Centre) with which the tourists can transit conveniently. Location is also highly dependent on the nature of travel. McKercher et al. (2011) studied the hotel location’s effect on tourist movements in travel destinations by tracking 557 tourists with GPS. The study concluded that hotel location has a significant effect on where tourists move in the destination, and also indicated that hotel location is therefore significant factor for customers.