The internet can offer a powerful competitive advantage for hotels the world over however very little is known on how effectively hotels based in Ghana are using the internet to market their facilities and services globally. It is argued that smaller accommodation establishments in developing countries can equally increase their competitive edge the same as developed nations do (Anckar & Walden, 2001; Paraskevas & Buhalis, 2002; Kilic & Okumus, 2005; Migiro & Ochalla, 2005).
Challenges abound in the industry and so taking advantages of other channels of marketing through the use of the internet will help Ghanaian hotels to improve on their occupancy rate.
It is envisaged that findings from this research will be useful for the hotel industry. Especially, managers of Ghanaian hotels will get the opportunity to learn about new internet marketing strategies they can adopt to make their businesses more successful.
The hotel industry in Ghana is a major sector providing livelihood for many families as well as a source of foreign exchange earner to the economy of Ghana therefore this study will make the sector more competitive and more sustainable in the long run in the face of global challenges.
The potential benefits of using the Internet as a marketing tool in the hospitality industry have been well documented by various authors. These benefits include cost savings in terms of advertising, accessibility and communicating to a large number of people at the convenience of the potential customer. The implications of these benefits for smaller hotels are extremely important as it makes it possible for these businesses to compete in markets that were hitherto inaccessible (Haynes, et al., 1998).
1.4 Organization of the Thesis
The study is organized into six chapters. Chapter one is the introductory chapter that covers the background to the study, problem statement and purpose of the study, and finally the organization of the thesis.
Chapter Two was used to review relevant literature on the study. It covers hotel industry and the Internet, advantages and challenges of the internet and finally a review of internet marketing models and Tools.
Chapter Three contains the frame of reference for the study. It includes the Research Questions, Procedure for answering the research questions and the adopted Conceptual Frame Work to guide the study.
Chapter Four is made up of the research methodology. It covers the Research Perspective, Data Collection, Data Analysis, Access Strategies and the Credibility of the study.
Chapter Five is Presentation of Data and Analysis.
Chapter Six covers Discussions of Findings, Conclusions and Implications
2.0 Literature Review
This chapter reviews related literature. Based on the research problem; hotel industry and the internet, advantages and challenges of internet marketing are presented. Finally Internet marketing models and internet tools are presented.
2.1 Hotel Industry and the Internet
Currently, there are 1.96 billion Internet users in the world, up 444.6% from the year 2000 Africa has 110 million internet users while Ghana has 1.29 million users growing at 4,223.3% since the year 2000 (Internet World Stats, 2010).
The internet has increased the productivity and efficiency of hotels’ marketing effort (Porter, 2001).Hotels will lose their competitive edge where they do not have a significant presence on the internet (Van Hoof & Combrink, 1998). According to Anckar & Walden, (2001) hotels that do not have a web presence cannot bridge the gap between their existing and potential customers and also become competitively disadvantaged. It is argued by Migiro & Ochalla, (2005) that the advantages that the internet offers such as cost reduction, improved efficiency among other things can be equally enjoyed by smaller accommodation facilities in developing countries.
Armijos, et al., (2002) contend that technology applications and Internet usage have assisted hotel companies in the realization of increases in most major industry indicators, such as gross revenue, average daily rate, revenue per available room, and net profitability. Older British travelers are increasingly using the Internet and prefer an online relationship rather than offline interactions (Graeupl & McCabe, 2003).
The International Hotel and Restaurant Association (IH&RA) has discussed the importance of technologically-induced changes in hospitality in its “Think Tank” sessions at their annual conference (Connolly & Olsen, 2000). The findings suggest that e-commerce and information technology would be the most important competitive advantage for any hospitality company to compete successfully and create value for both the customer and the firm (Connolly & Olsen, 2000; Dev & Olsen, 2000; Elliott-White & Finn, 1998).
The use of the Internet is becoming a positive trend and an important core competency for hospitality businesses (Connolly, Olsen,&Moore,1998; Van Hoof & Combrink, 1998; Vanucci & Kerstetter, 2001).
For hospitality practitioners, the establishment of an effective company web site will provide their company a competitive position in a global environment (Gregory & Breiter, 2001)
2.2 Advantages and Challenges of Internet Marketing
On the benefit side, there is no doubt that the Internet gives access to a great number of people, as well as it offers the opportunity of building closer relationships with customers (Buhalis & Licata, 2002; Wang et al., 2002). The Internet is an exposure of property by which advertising and marketing opportunities occur (Baloglu & Pekcan, 2006). It creates faster and better communication, which makes it easy to identify and target that base. The Internet reduces the time and costs associated with delivery and postage (Gursan, 2002).
Through the Internet, the hospitality industry has been able to market services in a variety of methods ranging from mass-marketing to mass-customization where customers’ needs and wants are targeted individually (Ismail & Mills, 2001; Paraskevas & Buhalis, 2002). Furthermore, the Internet works in cyberspace, which brings the opportunity of being free from geographical and national borders (Anckar & Walden, 2001). Finally, with its equalizing effect the Internet creates a level playing field where size does not matter (Sigala, 2003).
Online advertising, in all its forms, offers a chance to brand and inform, not just sell also although it is unique, it is related to offline branding. The Web has become the single most important medium for people at work. Most such users view it as a place where successful, modern, up-to-date brands advertise. (Demarse 2002)
On the drawback side, the financial cost and time spent setting up and maintaining the fundamental system can be mentioned (Heung, 2003; Van Hoof & Combrink, 1998). According to Palumbo and Herbig (1998), security, confidentiality, and privacy issues in financial transactions are important and common problems on the Internet.
Another drawback that many potential consumers have is the low speed access or low bandwidth connection to the Internet via modems (Anckar &Walden, 2001). Besides its potential benefit of reaching a large audience, your competitors do have the same benefit, which forces your website to compete with thousands of others (Gilbert & Powell-Perry, 2002). Alienation of potential customers and losing that personal touch are some of the fears of both customers and hoteliers (Blikom, 1996).
2.3 Internet marketing models
Marketing is regarded as a creative and adaptive discipline that is constantly regenerating itself. According to Zott, et al., (2000) there are three major capabilities of the internet;
Interactivity: Relationship between organizations and customers is increasingly becoming interactive due to the real time nature of the internet. The internet presents businesses and customers with two way and information rich channel.
Connectivity: The open and global reach nature of the internet is spearheading the creation of a global market space where businesses and customers can do business irrespective of their location. Over the past decade there has been an exponential increase in connectivity resulting in new communication mechanism across businesses and customers and even among customer groups.
Convergence: Digital technologies are converging at a faster rate making internet more accessible. An example is the emerging of wireless application protocol (WAP) which permit mobile internet access (Zott, Amit, & Donlevy, 2000 ; cited in Zigala, 2003)
The unique capabilities of the internet are creating new marketing concepts and paradigms (Sigala, 2003). The changes in marketing concepts is confirming the point of view of Zott, et al., (2000) In view of this, some Authors like; Chen, (2001) and Hanson, (2000) are calling for the very principles of marketing to be changed and developed. Others strongly believed that the traditional 4Ps of marketing practices will not change; but what are changing are the ways by which the traditional marketing mix dimensions are utilized to exploit the enhanced and new capabilities of the internet (Brandy, et al., 1999; Mahajan & Venkatesh; Leeflang & Wittink, 2000). Some scholars are of the view that; internet and ICT, coupled with the increased power of consumers, has given rise to new marketing concepts such as viral, contextual, interactivity, community and relationship marketing (Hagel, 1999; Hardaker & Graham, 2001; Werbach, 2000; Gilbert, Powell-Perry, 1999).
In view of the transformation of marketing activities on the internet and the level of website functionality the following models are discussed.
2.3.1 Internet Value Chain Model
Cronin (1995) developed value chains that followed Porter’s value chain thinking and was based on virtual principles. The internet value chain is divided into three separate components; “inputs from suppliers”, “internal operations” and “customer relations”.
22.214.171.124 Inputs from suppliers
Figure 2.1 illustrates the impact of the internet on inputs from suppliers and vendor. According to Vanharanta and Breite (2003) “the internet has reduced the meaning of time and location”. This is to say, the internet provides organisations with the opportunity to add value in its acquisitions activities; the internet provides fast, reliable connections among businesses. Hence, organisations irrespective of their location can reliably and quickly communicate with different suppliers and vendors for different reasons without incurring additional cost as compared to other means of communications (Cronin, 1995)
Internet Value Chain: Internal Operations (Cronin 1995, p. 60)
126.96.36.199 Internal Operations:
Figure 2.2 emphasized how organizations can leverage on the effectiveness and reliability of the internet to effectively and reliably share and acquire information within the organization. Vanharanta and Breite (2003) pointed out that, information plays a major and an important role in any organisation hence it’s important for organisations to effectively managed the acquisition and sharing of information. According to Cronin (1995) the global connectivity of the internet offers organisations with the opportunity to share and acquire information on a global scale at a lower cost well as exchange information quickly and easily thus facilitating relationships with business partners and customer
Figure 2.3 Internet Value Chain: Customer Relations Marketing and product Sales and Distribution Support and customer
Source: Internet Value Chain: Customer Relations (Cronin 1995, p. 61)
188.8.131.52 Customer Relations
Figure 2.3 emphasizes how the internet can be used by companies to build strong relationship with customers. To build strong relationship with customers, companies must get hold of information about customer’s needs and attitudes. The internet provides an easy way of doing this, for instance through discussions groups, blogs, bulletin boards, web survey and polls, companies can collect customers view of a product or service (Cronin, 1995)
The three units of the internet value chain illustrate how the internet can be applied in all marketing functions from presales, sales and after sales activities. According to Sigala (2003) the model identifies three areas of internet marketing functionality, namely marketing and product research, sales and distribution, and support and customer feedback.
Zott et al., (2000) argued that, the internet value chain does not consider the three internet capabilities, thus studies investigating the internet use by companies operating in the tourism and hospitality industry using the internet value chain as their frame of reference to list websites features into specific business functions (example, Baker et al., 1999, Weeks & Crouch, 1999) failed to incorporate internets transformational impact. (ibid)
2.3.2 The Web-Marketing Mix (WMM) Model
Constantinides (2002) developed the Web-Marketing Mix model (4S) based on the weakness of the traditional marketing mix (4Ps) not being able to address marketing activities on the web. One obvious weakness is the fact that the model does not explicitly include any interactive elements while interactivity is the basis of the Internet Marketing.
According to Constantinides (2002) The Web-Marketing Mix (4s) identifies four online marketing strategic, operational, organisational and technical critical factors: the Scope (strategic issues), the Site (operational issues), the Synergy (integration into the physical processes) and the System (technical issues) as show in figure 2.4
Figure 2.4 Web Marketing Mix (WMM)
Source: Constantinides 2002 Web Marketing Mix
The content of this element is of primarily strategic character and outlines the decisions to be made on four key areas:
The strategic and operational objectives of the online venture; The online activities must pursue their own, clearly defined strategic objectives, in line with the corporate mission and strategic goals in order to generate additional value.
The market definition includes measuring the market potential and the identification of potential competitors, visitors and customers of the site.
The degree of readiness of the organisation for E-Commerce; According to Christensen, (1998) adoption of new technologies can have sustaining or disruptive effects on organisations, depending on the firm’s resources, processes and values. Porter (1985) claims that internal analysis should be focused on these three factors (resources, processes, and value) in order to identify the degree of company readiness to assimilate E-Commerce.
The strategic role of E-Commerce for the organization; the strategic role describes the tasks assigned to the online activity and must reflect on the firm’s online model.
The Web Site is primarily the company–customer interface, the prime source of customer experience and therefore the most important communication element of E-Commerce. Hence the Web site is the functional platform of communication, interaction and transaction with the Web customer (Constantinides, 2002)
The main objectives and tasks of web site depending on defined strategic role include:
• communicating and promoting the E-business image, labels and products/services;
• providing company information to customers and stakeholders;
• effectively communicating the firm physical or virtual promotional activities;
• providing customer service and helpdesk functionality in order to enhance the customer loyalty and retention;
• allowing direct sales and facilitating online payments (transactional sites).
Synergy is viewed as the integrating processes necessary for realising the virtual organisation’s objectives. Such synergies can develop between the virtual and the physical organisation as well as between the virtual organisation and third parties (Constantinides, 2002).
Synergy highlights a wide range of issues classified into three main elements: the front office, the back office and the third parties.
Front Office synergy refers to the conventional corporate communication and distribution strategies. The Front Office element underlines the need to examine and identify ways that would facilitate the full integration of the Web operation into the company’s communication plan, corporate style as well as the existing physical retail channels.
The Back Office synergy includes a wide set of issues:
the integration of E-Commerce physical support activities (customer service, order processing, fulfilment and reverse logistics) into the existing organisational processes;
legacy integration; Integration of online activities into the existing Information Infrastructure
integration of the online operation into the company’s value system (Porter 1980)
The Third parties Synergy embraces the co-operation with Internet partners outside the organisation and its value system. This networking aim at strengthening the competitive position of virtual organisations and the network must be seen as complementary to the traditional promotional activities. Examples of partners for online synergies are: Search engines and Web directories, Affiliate networks and online advertising.
2.3.3 The E-commerce Service Index Framework
According to Sigala (2003) “the ecommerce service index framework has two dimensions: the existence of different services (that is dissemination of information, communication, order, payment, and delivery) and the development of services of services towards more sophisticated and integrated process between the customer’s actions and the suppliers Information Technology Systems (example, traditional processes, personalised or customised services)”. The EC framework overcomes the limitation of the internet value chain due to the more sophisticated internet tools (ibid)
Dussart, (2000) and Zott et al., (2000) both argued that, though the EC framework incorporates customer services elements and more sophisticated IT tools, it still fails to mention how the internet’s capabilities have changed marketing strategies.
2.3.4 Information Communication Distribution and Transaction (ICDT) Model
According to Angehrn, (1997) a key point of the use of the Web, is how fast one is able to move information. In view of this, Anghern (1997) developed a model for internet marketing strategies incorporating both the number and types of services and the level of sophistication of websites. This model was called ICDT - Information, Communication, Distribution and Transactional. The model is to provide an understanding as to the different stages organizations can make use of the internet to develop a strategy The ICDT model divides the Virtual Market Space in four components as shown in Figure 5.
According to Sigala, (2003) the ICDT model provides the fundamentals of differentiating four separate types of marketing strategies. Businesses striving at increasing the visibility as in who’s who, what is available, how much it costs and improving the perception of products or services could achieve it by internet either internet based marketing initiatives – VIS or by influencing the business communication strategy – VCS. Hagel (1999), also support Sigala’s view by saying, the access to information is the key point to bargain for the power in any commercial transaction. Commercial transactions do not show so many possibilities of innovation and increase of sales as online transactions do. Nowadays businesses are presented with the situation whereby customer’s loyalty to a website is lacking. Hence for companies to build loyal visitors to their websites and build up an on-going relationship, then it needs to regularly update the content of its pages (ibid)
According to Hagel (1999), there are three different situations:
- Generating traffic: get the site visited by the target public.
- Concentrating traffic: make the site to be visited for a longer time.
- Keeping traffic: make more difficult to site users to leave the virtual community.
Figure 2.5 ICDT Model The ICDT Model Source: Anghern (1997)
The VDS and VTS presence is aimed at reducing costs, lead times, improving quality and innovating product or services through the possibility of using the internet for distribution as well as using the internet as medium to carryout transaction (Sigala, 2003)
According to Angehrn and Meyer, (1997) and supported by Sigala, (2003) the ICDT induces further classification of the four basic types of internet presence. As illustrated in figure 2.6, for each type of virtual presence (VIS, VCS, VDS, and VTS) – two further dimensions are considered; level of sophistication in terms of technical sophistication (simple or advanced) and level of customization (low or high). Sophistication reflects the degree to which specific characteristics of the underlying virtual space are exploited. On the other hand, customization indicates the level to which the internet is used to provide individualized products and services. In both cases (sophistication and customization) Sigala (2003) opined that they can be classified as low or high depending on the level of exploitation of the interactivity, connectivity and convergence capabilities of the internet as well as the nature of internet tools or IT tools and the mechanism being put into use.