CHAPTER 7: ADVERTISING, ALTERNATIVE AND DIRECT MARKETING Eat2Eat.com Fat2Eat.com was developed asan Internet-based restaurant reservation service It was ocated in the Pacific Rim. The company’s technology, business model, and relationships with restaurants were well established. Ovsner and founder Vikram Aggarwal was concerned that his company had not been able to grow past the 12,000 registered users that it maintained, He was looking for cost- efficient ways to tract new registered users in orde to continue to grow the company. The promo: tions needed to convince prospects that they would have access to a wealth of information sbout restaurant choices and would beable to make reservations onlin, receive discounts, and participate in loyalty programs. His revenues came from commissions on booking. stomers and private individuals that were registered users. The prima nding it in ways that would build the customer ba: corporate included raising capital and then By Neeta Kh Ttvas the morning of January 7, 2004, and Juanita Garcia, vice-president of administration of La Hacienda del Sol, a resort hotel in San Felipe Mexico, was reviewing the fiscal 2003 financial records. The hotel catered primarily to American tourists during the country’s hot summer months, but it had experienced another winter of los sales levels Garcia had this problem each winter season and wondered how to better promote the hotel, Garcia considered targeting the Mexican market to improve sales levels in the off-season! San Felipe a Hacienda del Sol (Hacienda) was located in San Felipe, Baja San Felipe was approxi imately 230 miles from the United States/Mexican border. See Exhibit 1 fora map of Baja California, Duc to its location in the northern part of the California Gulf, San Felipe attracted tourists who sought and enjoyed a be ion of two to four days in length, ‘The city was known for its oppight © 2005, hey Manageme Services he market consisted of y challenges La Hacienda del Sol | under the supervision of Professor Elizabeth M. A. Grasby erson: (4) 2009-09-24‘green-bhue waters, clean beaches, and comfortable climate and, as a result, was the most popular tourism spot, offering 1,600 hotel rooms, in Baja California, With a population of 25,000, the city attracted approximately 250,000 tourists each year See Exhibit 2 fora breakdown of the resort accommodations available in San Felipe. ‘Accommodations Available itz [strat | Ne | Resorts fi Condominiums Bed and Breakfasts 1 {RV and Canipatoundes Le Source: Company fies La Hacienda Del Sol Activities and Events Hacienda offered a wide range of activities to tour- ists of all ages including sivimming, surfing jet- skiing, parasailing, jogging, and whale-watching. On the beach itself, there were many independent vendors who sold hair braiding services, horseback rides, ATV' rentals, and souvenirs, The hotel’ premises included to outdoor pool, children’s playgrounds, pool tables, table tennis, racquetball courts, gardens, and shopping facilites. Additional activities during the summer months included bingo games, contests, and arts and craft, to name a few a Haciends del Sol 189 Dining Facilities There were two restaurants and three dining hlls located on-site. One ofthe restaurant offered both American and Mexican food, with the focus mainly on traditional Mexican meals. This restaurant served food in wo locations:a fallservce sit-down room and a bufietstyle room with both rooms providing a wide variety of foods. The sit-down Tocation had a casual atmosphere, and customers could come in and out of the restaurant at convenience. The buffet-style lcation had speci- fied hours for breakfast, lunch and dinner. During the summer months, there were often regular per- formances on a stage during dinner (eg. trali- tional Mexican dances) and, on some nights of the week, the room served as a nightclub after dinner Consequently, it characteristically exhibited a fun and energetic atmosphere. “The second restaurant, adjacent tothe hotels main building, focused on a fine-dining experience and served French and Continental for lunch and dinner only. The restaurant was located in the founder’ original mansion, with most of the mansions original drapery, carpets, floors lighting and furniture originating from the 1920s. Oc sionally, a pianist would play on a grand piano to cteate a mellow ambiance. In addition to the two restaurants, the hotel had three bars. The bars were the second-largest source of income, representing 25 percent of rev- enue? The Spa ‘The hotels European-style spa offered a v services, which were growing in popular though many customers were unaware of the hotel’ spa prior to arrival, Garcia recenly intro dluced a promotional offering that included a oom and spa deal which helped encourage the growth in spa sales. The spa, located inthe second half ofthe founder's mansion, offered hairstyling, wa types of body treatments, rllexol pedicures, and facials. The pleasant ogy, manicur190 CHAPTER 7: ADVERTISING, ALTERNATIVE AND DIRECT MARKETING -coloted walls an furniture, and soft added to the spa's service, paste! muse playing in the backgroun relaxing atmosphere and sophisticated ambiance. Many wedding packages were made available by the hotel to suit customers’ needs. For example, a package that included a three-course meal for 50 guests, champagne, a reception site by the gar- den oF ocean, soft drinks, linens and seat covers, waiters, and flower arrangements forthe reception tables cost $1,260 Between the months of Julyand October, the hotel held, on average, one per week. Many brides and thei advantage of the spa before their wedding cere- ‘mony atthe hotel, Hotel Rooms The price of the rooms changed each season depending on the expected demand, See Exhibits 3 and 4 for a breakdown and prices of the rooms. Each room included a full bath, telephone, cable television, and bottled water. The price of the room also included one margarita per person and dinner for two from the hotel’s Special Getaways ment For families with up to two children, the childret ‘were given free accommodations and three meals ‘each day from the children’s menu, Rates were also. Sexe: Company Hes lowered for seniors. Parking was available on-site 10 customers at $3 per ear per night “he hotel operate ata 90 percent to 100 percent cceupancy rate from the list week of June to the first week of September. The weekends were gener- ally fully booked, while some rooms were available luring the weekdays. Due to the seasonality of the business, the hotel depended on its success in July and August to carry it through the est ofthe yea. After Labor Day weekend,’ occupancy levels dropped dramatically, reaching 30-percent on \weekdays and betiveen 60 percent to 80 percent on some weekends. From November to March, occu iged 20 percent all week. TI ‘would reach 90 percent accupancy’only during the ‘weeks that college students had their spring break holiday (typically in late February); the hotel con- tinued to average an occupancy rate of 20 percent between the end of spring break and the lst week of June. US. holidays typically put the resort at fll capacity regardless of the time of year. Juanita Garc ‘The hotel had been a private, family-run business for over 75 years. Juanita Garcia was the thirdPEI nas La Hacienda del So! 194 ro) (Ocean front rooms ‘ioe sites Cone bedroom suites apaen ‘Two bedroom suites Presidential suite Poi eres $9720 12520 suii30 14030 12530 sir4a0 13230 18620 | $3930 20930 14020 say730 317430 #24430 30030 $7020 wren) (Ocean front rooms Pir siies (One bedroom suites [Apattinents Two bedroom suites ie Presidential suite suite nec EE cou fee esll@sole iia ney juia0 ees Guess Tiss sitibo ar $8839 TE sabe © $23030 3 a 3isa0 Source: Cospany is, 1A pices ein U.S. dans peng (eu of ecupane) {generation family member to operate the business, with her father holding the position of chief execu- tive officer (CEO) for over 20 years. Garcia's father, his two daughters, and his three sons were the only sharchokders of the business. Garcia and her siblings were approached by their father to take over the family business in the summer of 1999, Juanita Garcia was the only one interested, since the other children knew how dif- ficult the task would be from witnessing the aur: ber of hours worked by their father. She stepped into the role of vice-president of admi and vas initially responsible for promoting the hotel, creating new marketing strategies and ation192 CHAPTER 7: ADVERTISING, ALTERNATIVE AND DIRECT ‘managing communications between the company and its shareholders. Juanita knew that if she was going to takeover the business one day, she needed to understand the company and what would make it success Running a family business provided the Aenbilty needed to make quick operational deci- sions; however, all recommendations had to be approved by Garcia's father. If her father sas not tially or was remotely skeptical, he completely dismissed any. recommendations. All proposed recommendations had to be well supported. Hotel Guests From fate June to early September, Hacienda tar- geted families who spent, on average, $500 during Ahir stay at the hotel (typically three days and two nights). During the off-season, the hotel attracted seniors and couples who were looking fora peace: ful getaway. The highest spending consumers were between the ages of 28 and 49, primarily due to their liquor purchases, ee wore (Bamana Source Gyo os Angeles oor a cas, bran 7,200 and US, Cen MARKETING Avone time the hotel attracted lar ‘of college students during the spring break se Garcia wondered if this market was suitable given the hotel’s reputation. Ninety-five percent of the hote’s customers ‘were from the United State, half from Los Angeles and the other half from San Diego. See Exhibit 5 for selected information on the two cities. OF the remaining five percent, two percent were from the state of Baia California with the remaining three percent from the other parts ofthe United States. The Mexican Market Garcia was hopeful that targeting the Mexican mar- ket during the off-season woukd help boost sales. Hotel management had never considered enteri this market since it was believed that Hacienda’s rates woul be too high. Furthermore, it was well ovr that Hicienda catered to the American mar- leaving Mexicans with the perception that they ‘were not welcome, Garcia knew that if the compa ‘were to enter this market, she would have to address this perception. 1 wr census. govsaalowr, Febuary 72005,la Hacienda a ee Total population (2003) ‘verge personal income per capita Unemployment cate $6 of family households 4% of fais with eilren under the age of 18, ‘of people 65 years and older Distance from San Felipe ; = | 45 diving hours Source: hy of San Deo: waresanteo a. ebany 72005 and US. Cen Baw vorcensus posta Febuary 7,200, Mexical Mexicali, the capital of Baja California, was 124 les from Hacienda and was well known for its agriculture and Maquiladoras;* however, half the working population was employed in the tourism industry with 44 percent employed by hotels and restaurants, OF Mesicalis 813,853 population, 14 percent lived in rural areas. See Exhibits 6 and 7 for additional information on the Mexicali population. Mexicali was also known for its extreme cli mate, See Exhibit § for typical annual temperatures Aige Distibution of Mexicali Residents | AgeBracket | Percentof Population 151024 20 Bios) 8 SS.and over 10 Source: Coon Center Borde and Raina annie Ses esac, Jy 19, 2008 ‘ial Household income of bisimal exical Fares Sa GUC aut be ess than $1174) 51174 t0 $1388 $1389 (0 32669 52.6700 $3.49 $3950 1035037 $5938 1 $10,674 $19s75 to §t@ol $16,012 t0 $2149 ‘Mowe tan 321390 Suse Cole Cemet or Bode and Rei eonemic Sie sets de, 192008, oe: Convene rom pees 1S, dels on December 3,202 3 2 rato 08SIps0,194 CHAPTER 7: ADVERTISING, ALTERNATIVE AND DIRECT MARKETING ial Weer MS 003 a ‘analy TE Febuary Ber Narch at psi 20°F May ot June 105° July ieee Pugust 96eF September 05% October 98% Novetiber wet December ort ‘ote The manu enpertre onthe 1th of each emt Residents were always looking to get away during the hot months, Those who could afford it gener ally owned a second home where the not as uncomfortable, Hotel Rates Mexicans viewed the hotel as overpriced, so Garcia knew that she needed to come up with a pi dea to attract these customers tothe hotel; never- theless, she was uncertain whether a lower rate should be offered just to Mexicali residents. A mar- keting. manager who used a similar strategy in another hotel suggested advertising at a rate equal to half the season’ average monthly temperature (in Fahrenheit) for 2 garden view room, The rates of all other rooms would have tobe priced accord ingly. Garcia wanted to consider this pricing strat- egy due to the hotel’s vacancy rates. She did not want to limit her analysis to this pricing strategy and was open to any alternatives. Promotion Timing Garcia also needed to decide when to offer such a promotion. She wanted to focus only on one of the seasons initially: summer (June to August), autumn {September to November), winter (December to February), or spring (March to May). Consider: ation would need to be given to the S20 daily cost to maintain each room, regardless of size, which included employee wages, linens electricity, water, costs and any other amenities. These costs ‘were only incurred while the room was occupied. Promotion The hotel spent on average, $150,000 to $200,000 onadvertising during its off-season each year. Cur rently, Hacienda promoted through newspaper, press releases, radio and on its website, The hotel could not afford the expensive television adverts- ing in the United States. “The hotel’s website was the first of its kind to belisted on the Internet in Mexico, Although the site was not aesthetically appealing it was known ashing user-friendly and received approximately 1,000 its per day: It had been the most up-to-date hotel website in Mexico until December 2003 ‘when one of its competitors had upgraded its site. Garcia suggested to her father on numerous ocea- sions thatthe website should be upgraded, but he remained unconvinced. He thought that since the hotel reached 100 percent capacity during the summer months, the website upgrade could not be justified from financial perspective Approximately five percent of the Mexicali population had access to a computer, Garcia esti- ‘ated that only one percent of the population in Mexicali had access both to a computer and to the Inernet and, of those who had access to the TInter~ net 0.5 percent of targeted consumers would visit the hotel by viewing the hotel's Website, per season. ‘Television was very common in Mexicali regarles of the income level ofthe househoé. Gar- cin estimated that 85 percent of Mexicali residents had access to a television and watched regulary‘She predicted thot 15 percent of targeted television ‘viewers would visit the hotel in the summer months. and 2. percent would visit during the offseason. ‘There were two local television stations in Mexicali, I Hacienda were to advertise on television, Garcia thought it would bebest to pay for airtime during the peak times of the day: 7 at to 8 at. and 7 na.t0 9 eat. During these time periods, the cost was at highest: $41.25° for each 30-second advertisement, “There were also two popular radio stations to ‘consider, Each 30-second ad cost $10.50. Statistics indicated that 45 percent of the population listened to the radio. Garcia predicted six percent to 83 percent of targeted listeners would visit the hotel in the summer, and one percent would vst the hotel in the off-season, ‘Although newspaper was a popular form of advertising to Americans, Garcia believed distrib- uti flyers in a local mall would bea more viable ‘option. Since there was only one air-conditioned mall in Mexicali, a large portion of the popula- tion shopped at ths mall during the hot months, ‘The cost to produce 1,000 flyers would be $2.30. For every 1,000 flyers, there was an additional distribution cost of $27.50. A response rate between two percent and three percent of the target market was expected per season, {a Hacienda del Sol 195 Garcia necded to estimate a reasonable budget in order to promote to this market segment, and she wanted to initially use one type of promotional medium for one season to test the new market She knew that her father would not agree to spend tore than $50,000 per season on additional pro- rmotions, She had to assess how best to spend the trudget—all on radio ads all on television ads, ot ‘$10,000 per season on flyers. Decision Garcia knew that the hotel needed a solution toits low sles in the offseason, She wondered whether it was viable to target the Mexicali market and ‘whether it was a good fit with the company’s mat- keting strategy If s0, she needed to decide on the ‘room rates, the type of promotional media to use and when to start advertising, he knew she had to give some incentives to the Mexicans to entice them to come to the hotel in addition to heavily promoting specific services that would cater to this new market. She had to have a convincing argu- ‘ment to give to her father if some positive changes ‘were to be madeto the company’s current financial position,