Holiday Inn, Case Study Example

Introduction

Branding and focusing on the target market is one of the greatest challenges of businesses. External market forces often make brands to change their profile, and target new markets. The below literature review will focus on branding strategies that are related to re-targeting and diversifying the brand on a highly competitive market. The review of literature is relevant to the current case study examined, as Holiday Inn’s brand rejuvenation project required a new approach, a re-branding, and seeking new customer segments to attract.

Literature Review

When a brand becomes “average” and customers are no longer able to distinguish it from other companies, it is important that the management takes time to reposition the brand on the market. Several authors (Holt, 2004; Morgan & Rego, 2009) talk about the importance of positioning the brand on the market to create a competitive advantage. Most authors state that changing markets and customer preferences requires constant management of the brand and repositioning of the products. Product innovation is found to be one of the main sources of competitive advantage. The above ideas will be presented in detail below.

Morgan & Rego (2009) talk about brand portfolio strategy, which involves the development of new products to match the needs of the target market better. The main aspects of the strategy are scope, positioning, and competition.

Going back to the principles and theories related to market segmentation and product differentiation, it is also worth reviewing Dickson & Ginter’s (1987) study. The authors also confirm that product differentiation is a form of “function modification”, focusing on changing the customer’s perception about the product. Differentiation can be based on market segment, or aligned with the changes in customer demand.

Holt (2002) talks about the relationship between branding strategies and customer culture, highlighting the fact that consumers are cultural producers, and marketing, as well as product features have to be created in a way that they enable self-production through brands. The idea is innovative, and can help aligning product development strategies with customer demand and expectations.

Aggarwal (2015) examines the relationship between brands’ behavior norms and customer behavior. According to the author, brands are relationship partners, therefore, products need to be developed in a way that customers can relate to them. The comprehensive study created by the researcher revealed that “the type of consumer-brand relationship influences the evaluations consumers make about the brand and its actions” (Aggarwal, 2015, p. 99).

Looking at a broader marketing issue: product positioning, Karadeniz (2009) found that correct positioning can contribute towards the success of the entire marketing strategy. Defining a product’s market position as “its relative location in customer’s mind among opponent products”, the author provides a framework for developing strategies that focus on differentiating the product on a competitive marketplace. Positioning, after a careful development of product features can create a change of mind in the target customer, and change their perception about the brand’s value. The framework for developing a product positioning strategy can be useful for analyzing current branding initiatives in firms. According to the study (Karadeniz, 2009), product positioning consists of three steps: revealing the potential competitive advantages the product can have, selecting the advantages to use in marketing communication, and choosing a  brand positioning strategy.

Roper, Love & Vahter (2012) examined the evidence related to the correlation between product development and design. Product development should always include an appealing design that matches customers’ preference.

Vukasovi? (2012) discusses brand extension strategies, and states that they are useful in re-focusing brands and making brands more appealing to smaller customer segments. Brand values, characteristics should be preserved when extending the brand directly (middle markets) and indirectly (distant markets).

Newton’s (2008) historical review of British banks’ product innovation shows some valuable examples of connecting the brand with customers.

Smith’s (1995) comprehensive review of product differentiation strategies is a useful resource given the fact that it highlights the close relationship between market segmentation, product differentiation, and the success of marketing strategies.

Key Issues Identified

The above review of related literature has revealed that there is a close correlation between building products, aligning them with customer expectations, as well as brand image. Even though brands can be extended and refocused to create a competitive advantage, they need to be relevant to customers’ expectations, and have a diverse feature that is more appealing for the market segment than other brands. Market segmentation has also been found to be useful when developing products and repositioning brands. The literature review is relevant to the current case, as it focuses on repositioning and re branding strategies that can create a competitive advantage on a saturated market, like the global mid-market hotel industry.

Case Analysis

In the case presented, the strategy to reposition the brand Holiday Inn has gone through several states, and was not free from pitfalls, like failed advertisements (Alexander, 1997). Initially, all brands focused on the “average” traveler, and this made the market extremely competitive. The product development strategy of the company focused on building a new image, and reconnecting with customers.

Product Development Elements

One of the main product development actions undertaken by Holiday Inn was to update the chain’s hotels, offering better comfort and sleep quality for customers (Adweek, 1999). However, this was still not a strong enough diversifying feature of the brand, and getting rid of the “great sign” reduced the strength of the brand: Holiday Inn. As the case study confirms, the chain had to add value that appealed to its target market. One of the main issues that the company faced back in the 1990-s was that the brand persona of the hotel chain was considered to be dated, and the hotels could not appeal to younger, upmarket travelers. In order to address this issue, the company decided on investing a substantial amount of money into renovating the hotels, however, this was still not enough. There was a need for reconnecting with the target market, and repositioning the brand on the market. The “Mark “ campaign became a success because it provided details of the product innovation results, and highlighted the competitive advantages created though the re branding strategy that appealed to the new market segment.

One other challenge that the management of Holiday Inn tried to overcome was to find new, profitable market segments, as the hotel industry was facing recession and increased competition. While Holiday Inn was a powerful player on the American and international market back in the end of the 20^th  Century, other chains have entered the competition through the decades, all competing for the same customers. This means that the chain had to create diverse offerings for various types of travelers. The creation of sub-brands in the 1980-s was an attempt to attract smaller segments of the market, however, this attempt failed for one very clear reason. The sub brands were not recognized as a part of Holiday Inn, and lacked the core values of  the main brand. They were not clearly communicating quality, tradition, customer focus, and other strengths of the Holiday Inn. The  lack of the clear signage also made customers become disconnected from the brand and the product itself. While moving into the specialty lodging segment, the company failed to preserve its core values and messages. Given that many customers had a sentiment towards Holiday Inn, remembering family holidays from their childhood, this tradition and heritage could have been used to create a competitive advantage, but Holiday Inn decided to abandon it instead.

After re-focusing the marketing strategy and repositioning the brand on the competitive market, the company could select the right competitive advantages to use for making the brand appealing for target customers again.

Competitive Advantage Analysis

Focusing on the competitive advantage offered to customers, the management of Holiday Inn did not only focus on building an image, but also creating offerings that differentiated the brand from other chains, and this resulted in increased brand value. The Mark campaign highlighted more than the renovated buildings’ attractiveness. The main product differentiation strategy that was used by Holiday Inn to create a competitive advantage was based on adding extra value, such as free places for kids, and a quality choice of breakfast.

One of the main challenges that the marketing team of Holiday Inn had to overcome was the outdated image of the brand. This means that the company had to change its product and offerings, as well as its brand image to become more appealing to the new target market. The importance of building a connection and relationship with the target customer has already been discussed in the above literature review. The success of the “Mark” marketing campaign (Merrill, 1996)  lay in the fact that the communication was able to get the message through answering the unasked question: why is Holiday Inn better than other hotels? The answers were given in a humorous way: convenient location, free kids’ places, WiFi, and breakfast.  This method of contrasting the brand with competitors resulted in greater brand  value. While brand recognition was already high, scrapping the “big sign” reduced it temporarily, it was re-introduced in the beginning of the century  (Lodging Hospitality, 2003). This step also contributed towards the success of re branding and product differentiation, as Holiday Inn was able to reconnect with its traditions, and appear as a trusted, reputable company again.

The main competitive advantages identified based on the above review of the case, therefore, are:

– Value-added services, such as free breakfast, comfortable service, free kids’ places, and WiFi

– Heritage and high brand recognition, due to the brand having strong American roots, and being a traditional roadside traveler hotel chain

Overall, it is clear that while selecting a brand’s competitive advantage, it is important to review the offerings and marketing communication of the competition, and align the diversifying messages with the customers’ preferences. Holiday Inn was able to complete this task, by utilizing customer surveys, resulting in the company understanding the target market better.

Points Identified

Based on the above literature review and case study analysis, it is evident that diversifying offering through product development is a powerful way of creating competitive advantage on a highly saturated market. It has also been found that Holiday Inn took the right strategy to create competitive advantages through product improvements. Some problems have also been identified, based on maintaining the brand’s identity and the relationship with the target market. As it has been noted in the literature review section, connecting with customers on an emotional level has a positive impact on branding. Holiday Inn – getting rid of the “great sign” and building a more modern image almost lost connection with customers who held emotional connection with the brand based on sentiments. The lesson learned from Holiday Inn’s mistakes is that when repositioning a brand on the market and creating product improvement strategies, a brand needs to maintain its core identity, and make only small adjustments that are more appealing to the target market than the previous ones.

Through product diversification, the company was finally able to stand out from the group of hotels, and the marketing strategy was successful because it could clearly communicate the competitive advantages provided by Holiday Inn.

Holiday Inn’s market position has improved, due to going back to the company’s heritage, reinforcing core values, and tailoring the marketing communication to the needs of the new market targeted. As the company wanted to become more appealing to younger business travelers, it had to select competitive advantages that appealed to them: comfort, free breakfast, and free WiFi among all. The marketing communication and product development, therefore, should always be aligned to the needs of the target market. Providing distinguishing features that are not appealing to customers might make the brand appear different, but not better.

Regarding the question of market segmentation and focus, it is also important to note that Holiday Inn became a “budget hotel for professionals and families”, instead of remaining an outdated “everyman” accommodation. This means that the marketing strategy had to be refocused, to diversify the offer from that of competitors, such as Accor Economy Lodging and Cendant’s Days Inn. The observation of the competition’s marketing strategy and communication is also a valuable tool when focusing on re-branding and product positioning. By featuring an advertisement that connected with the target customer, the company could reinforce customers’ previous perceptions of the brand’s persona, (Ghodeswar, 2008). As the author (Ghodeswar, 2008. p. 5) confirms: “to be effective, a brand identity needs to resonate with customers, differentiate the brand from competitors”.

Conclusion

The above literature review and case analysis has revealed how Holiday Inn (Intercontinental Hotels Group) used its product development strategy to create competitive advantages on a highly saturated marketplace that appeal to the target market. The success of the strategy lay in successfully identifying the challenges, the product innovation strategies that can create competitive advantages, and selecting the right advantages to appeal to customers as “different and better”. Value added services were developed as a part of the product diversification strategy, and the management was able to build on existing competitive advantages, such as high brand recognition, heritage, and existing emotional /sentimental connection with customers. However, without a successful marketing campaign that focuses on the competitive advantages that might influence customer behavior, the Holiday Inn brand would not have achieved the same success.

References

Alexander, Keith L. (1997) Hotel ad may get early checkout.  USA Today, January 28, 1997.

Aggarwal, P. (2004). The effects of brand relationship norms on consumer attitudes and behavior. Journal of Consumer Research, 31(1), 87-101.

Baar, A. (2000) Holiday Inn Offers More Mark. Adweek.

Dickson, P. R., & Ginter, J. L. (1987). Market segmentation, product differentiation, and marketing strategy. The Journal of Marketing, 1-10.

Fallon Hospitality. (2003) Hello again,, great sign. Lodging Hospitality;7/15/2003, Vol. 59 Issue 10, p10

Ghodeswar, B. M. (2008). Building brand identity in competitive markets: a conceptual model. Journal of Product & Brand Management, 17(1), 4-12.

Holt, D. B. (2002). Why do brands cause trouble? A dialectical theory of consumer culture and branding. Journal of consumer research, 29(1), 70-90.

Karadeniz, M., & Cdr, N. (2009). Product positioning strategy in marketing management. Journal of Naval Science and Engineering, 5(2), 98-110.

Lhotáková, M., & Klosová, A. (2009). Identification of a target consumer in process of positioning-theoretical and practical aspects. Acta Oeconomica Pragensia, 17(3), 3-24.

Merrill, Ann (1996) Ad Agency Fallon McElligott Captures Holiday Inn account: Minneapolis company will get foot in door of travel market as it creates campaign to shed hotel firm’s outdated image. Minneapolis Star Tribune.

Morgan, N. A., & Rego, L. L. (2009). Brand portfolio strategy and firm performance. Journal of Marketing,73(1), 59-74.

Newton, L. (2008). Branding, marketing and product innovation: the attempts of British banks to reach consumers in the interwar period. Economics & Management Discussion Papers, Henley Business School, Reading University.

Roper, S., Love, J. H., & Vahter, P. (2012). The value of design strategies for new product development: Some econometric evidence.University of Tartu Faculty of Economics and Business Administration Working Paper, (85-2012).

Smith, W. R. (1995). Product differentiation and market segmentation as alternative marketing strategies. Marketing Management, 4(3), 63.

Vukasovi?, T. (2012). Launching of a New Product with the Brand Extension Strategy.