Practise IB Business Management HL 4.5.9 by evaluating how tangible physical evidence builds confidence in an intangible service.
Once a year the hotel manager and a GP representative calculated the break-even quantity, set target profits and determined the margin of safety. Break-even analysis compares fixed costs, variable cost per room and selling price to identify the output at which total revenue equals total costs. Martin believed in empowerment: supervisors and employees were allowed to take responsibility and resolve problems rather than waiting for him. For a hotel, place includes Mombasa’s seaside location, private beach, access to the airport and channels through which customers book; physical evidence includes the building, grandiose architecture, rooms, elegant décor, housekeeping standards and other visible service cues. Martin’s three choices were Option 1, closing for a year to renovate and relaunch the hotel for similar customers; Option 2, converting rooms into self-contained apartments for business travellers staying at least one week; and Option 3, forming a strategic alliance with KenSafar to offer package tours.
Explain the following two elements of the marketing mix in the case of a hotel such as The Imperial: place and physical evidence.
Place refers to distribution channels, ie how the business (the hotel) can ensure that customers gain access to its products (the rooms); put another way, how potential guests book a room at The Imperial. Option 3 (strategic alliance with KenSafar) is a new distribution channel for The Imperial; the tour company would ensure a steady flow of guests staying at The Imperial, though of course there are conditions attached, such as paying KenSafar a 20 % commission, which is high. Alternatively, for its distribution, The Imperial could use online tour operators (websites such as Expedia are often used by hotels).
Physical evidence refers to the aspects of the hotel that guests directly experience, for example the lobby and reception area, the old-fashioned furniture and their old colonial style. Although The Imperial does not offer the same facilities as some of its competitors (lines 50-51), the physical evidence itself seems very good overall, as noted by the journalist who praised the housekeeping at the hotel (lines 106-107).
Accept any other relevant explanation.
Mark as 3+3.
Award [1 mark] for each correct definition (of place / physical evidence), and [1 mark] for each development/exemplification of that element of the marketing mix, up to [2 marks]. Award up to a maximum of [3 marks] for each element.