|The Case||Theories & Concepts||Things to Consider||Questions|
Midnight Motel is a single-storey, independent
60-room motel located 20 miles from a major, family resort area. The
offers clean, basic accommodation
the traveler, including colour, cable television and in-room,
direct-dial telephones. Local calls are free. The motel is located
at the exit of a major highway. In fact, the motel is visible from the
highway. The highway exist at which the motel is located is the main route to the resort area.
For a fee of $125 a month in each case, the motel has arranged to have billboards placed on farm land along the highway about one mile from the exit in both directions. The bright yellow (background) and black (text) signs identify the name of the motel, its location at the next exit, and the price for a single room per night. All of the information is clearly visible to the cars passing the locations, even at night, since the billboards are illuminated from above. The motel does not use any other form of advertising and it does not maintain a website.
Nightly room rates are $49.95 for a single, $54.95 for a double, and $3.00 more for each additional person. Children under 12 stay free. There is a weekly rate which is set at the equivalent of 7 nights for the price of 6. A monthly (30-day) rate is available for the regular rate for 21 single-night stays. A corporate discount of 10% is also available for each of the rates. Payment can be made by means of cash or any major credit card (i.e., Visa, MasterCard, American Express, Diners Club, Discover). Cheques (checks) of any type are not accepted for payment.
While much of the business is walk-in in nature (i.e., no advance booking), many of the regular clientele make future reservations before checking out during a previous stay. Telephone reservations are also accepted, if guaranteed by a major credit card. Cancellations up to 6:00 p.m. of the scheduled day of arrival are allowed without penalty. The one-night single rate is charged for non-arrivals under the guaranteed option. The motel does not belong to any corporate franchise reservation system, and it does not pay travel agent commissions for bookings through such a channel.
Although checkout time is 11:00 a.m., the motel is almost empty by 8:30 a.m. during the week. On the weekends, most customers check out between 9:00 a.m. and 11:00 a.m. Most customers check in after 7:00 p.m. on any day, even though check-in time starts at 1:00 p.m. The motel offers a complimentary continental breakfast of donuts, muffins, coffee, tea, and orange juice from 6:00 a.m. until 11:00 a.m. each day of the week.
The motel is three years old. Since opening, the occupancy rate has steadily increased to and stabilized at 65%. Ninety-three percent of the customers stay only one night at a time; 4% stay for two to six nights at a time; 2% stay for a week at a time; and 1% stay for more than a week to a month at a time. No one has stayed for more than a month at a time.
The motel has many regular customers. The majority of the customers are sales representatives who either service the resort area or are just passing through the area. Approximately 75% of the clientele for the motel is traveling on business.
The closest stores, gas stations, and restaurants are at least 5 miles from the motel. Occasionally, but very rarely, the motel owner or his staff will notice a pizza delivery or similar vehicle making a delivery to one of the rooms. The motel has no laundry or dry-cleaning services available to the customers. There are no other motels or hotels within 10 miles of the motel in any direction.
An interesting, yet somewhat annoying, event which happens throughout the day, evening, and late at night is the flow of traffic into the parking lot of the motel. The traffic enters the parking lot, pauses for a few seconds, and then leaves. Most often, there are parents and young children in the cars.
The motel generally enjoys a stable
occupancy level throughout the year and during weekdays.
However, business drops
quite a bit on the weekends and there is a bit of a slowdown
during the winter months. At no time during the year does the motel
achieve the 100% occupancy level, but it does reach 95% occupancy an
average of 30 nights throughout the year, but it does so only within
the Monday to Thursday time period.
Business during the winter months has been helped by two changes in the resort area.: the implementation of the annual Festival of Lights celebration and the recent opening of a casino. The new casino draws up to 20,000 visitors per day. These changes make it worthwhile for many of the businesses in the area to stay open during this time. In the past, many of the motels in the area closed during the winter months because of the lack of business. Nonetheless, the few days around Christmas and New Year's Eve are the most serious down periods for the Midnight Motel, with occupancy dropping to an average of 20% during this time and reaching the 10% level, the lowest level at any time during the year, on some nights.
The owner of the motel runs the operation with his wife, two part-time workers who take turns on the 5:00 p.m. to midnight and the midnight to 7:00 a.m. shifts, one maid who works Monday to Friday on a full-time basis, and one part-time maid who works on Saturdays and Sundays.Financially, the motel is earning a very small profit. The owner, however, would like to improve the the profit performance of the motel, but without jeopardizing the simplicity of the operation. He is quite concerned that a significant number of rooms remain empty night-after-night. He has surveyed the typical motel/hotel operations in the region and has determined that his room rates are quite a bit lower than those of the other establishments. The closest daily competitive-rate for a single is $70. However, he also realizes that these establishments are located closer to the resort and business areas and other retail establishments, such as restaurants and convenience stores.
|The Case||Theories & Concepts||Things to Consider||Questions|
|Business Goals||Market Segmentation||Marketing Strategy||Target Market|
|Demographics||Attitude||Initial/Repeat Purchase||Marketing Mix|
|Product Life Cycle||Consumer Goods Classification||Convenience Good||Shopping Good|
|Specialty Good||Industrial Market Buying Process||Straight Rebuy||Quantity Discount|
|Price-Level Policy||Flexible Price Policy||Odd-Even Pricing||Breakeven Analysis|
|Advertising||Consumer Market Buying Process||Direct Channel||Traffic-User/Parasite|
|-||Adoption Process||Irregular Demand||-|
|Return to Case|
goals are qualitative
statements of what one wants to achieve.
this case, the owner has some very clear business goals. Specifically,
he wants a simple operation
and he wants to improve his overall
In this case, performance focuses on the level of occupancy (i.e., the
percentage of rooms occupied, on average, per night) and on the level
profit. (Business objectives are quantitative statements of what one
to achieve. No quantitative values are presented in this case with
to what the owner wants to achieve; hence, the focus must be on
goals rather than on business objectives.)
Market segmentation is an
approach by which the marketer divides
the consumer market into homogeneous
groups, called segments, based on a consumer
The individuals in each group are similar (i.e., homogeneous) on the
characteristic (or characteristics). This process also
creates heterogeneous groups across
(i.e., the consumers across groups are different). Segmentation
based on what are referred to as organismic
[i.e., a characteristic that is inherent to the individual, which, by
very nature, cannot be randomly assigned to the individual (e.g, age,
hair color, shoe size, ethnic origin)]. Market segmentation is
used in the business-to-business market
industrial marketing). In the latter case, firms, institutions,
organizations are used as the units of segmentation, rather than
A marketing strategy consists
of the target
market and the marketing mix.
The marketing mix comprises the four P's: product,
price, place (distribution), and promotion. The target
is generally considered to be the noncontrollable dimension of the
strategy and the marketing mix, under normal circumstances, is
to be the controllable dimension of the marketing strategy.
decisions are at the policy level versus at the tactic level.
reflect very specific decisions designed to implement strategy
(e.g., actual price, actual color, actual retailers to sell product).
The target market represents
the market segment to which the
seeks to offer its market offering (e.g.,
product, service). A marketer may seek to attract more than one
segment. This concept implies that a market does not normally try
to satisfy all consumers. By developing a marketing mix to
a particular target market, the marketer will automatically repel other
market segments (i.e., those for which the marketing mix isnot
Demographics are variables
that are inherent to individuals (organismic
variables); they cannot be randomly assigned to the individual
(e.g, age, sex, income, education, ethnic origin, shoe size). The
level or nature of the demographic characteristic varies across
(e.g., male vs. female, age over 40 versus age 40 and under).
variables are used to segment the market.
An attitude is defined as a
predisposition to respond in a consistent
manner. Consumers form attitudes toward products and
etc. It reflects what a consumer believes about this external
and how the consumer feels about the object. Based on this
the consumer will be attracted toward or will be repelled from the
in question. The existence of attitudes indicates that market
is not random in nature -- it is directive in nature (i.e., knowing a
attitude can help the marketer predict the consumer's behavior).
Generally, attitudes are relatively stable
The three basis types of consumer goods are: convenience goods, shopping goods, and specialty goods. Convenience goods are those items that are generally low priced, bought on a regular basis, and involve the expenditure of very little effort on the part of the consumer in their acquisition. There are four types of convenience goods: staples (milk, butter, bread, eggs, sugar, light bulbs, toothpaste, crackers - where brand preference is not important), emergency goods (gasoline when the tank is almost empty), impulse goods (snack food, candy, magazines), and unsought goods (encyclopedias, funeral services, life insurance). The staple goods classification best fits the convenience goods definition, but the other three types of convenience goods also fit to the extent that minimal shopping effort is expended for their acquisition. Inter-brand comparisons are not part of the shopping process for convenience goods. If a purchase decision is to be made in this case, the consumer focuses on the acquisition of the product (i.e., the most readily available item that satifies the consumer's need or want).
There are two types of shopping goods: homogeneous shopping goods and heterogeneous shopping goods. In this case, the consumer expends shopping effort by comparing the different brands within a product category. From the consumer's perspecitve, a homogeneous shopping good is an item where the different brands are perceived to be the same and the consumer's decision is based on the lowest price (e.g., gasoline). In the case of a heterogeneous shopping good, the consumer perceives the different brands within a product category to be different on various attributes and makes a decision on the all relevant attributes, not just price (e.g., cola drinks, furniture, clothing).
good is an item that is
chosen by a consumer for reasons other than price because the item is
to be unique in some way. Brand preference is important in this
Inter-brand comparisons are not part of this shopping process.
consumer seeks out the desired product/brand.
Consumer buyers (B2C: business-to-consumer market) and industrial buyers (i.e., business, government, organizations - B2B: business-to-business market) face the same (types) levels of problem solving, only the terms differ. [See the three levels of consumer problem solving below].
The three levels of problem
solving for the B2B market are: straight
rebuy, and new task. In a straight
rebuy situation, the business buyer buys the same product from
same supplier as before. This is an automatic decision without
new information processing, The buyer has complete information to
make a decision. In the case of a modified
rebuy decision, the buyer has most, but not all information to
a final decision. Additional informational search is therefore
(e.g., new brand, new supplier, new attribute, change in
In the case of a new task situation, the
has very little information to make a decision (e.g., buying a
for the first time). A great deal of information search is
In a flexible price policy,
the price charged to a customer
on the bargaining power of the buyer or the status of the buyer (e.g.,
senior citizen rates, negotiating a house or car price, corporate car
and hotel rates). A one-price policy, where everyone is charged
same price, is a more common market practice.
The first time a consumer
tries or purchases a product or service
is considered to be the initial trial or purchase.
Any further purchases of the product or service are considered to be repeat
purchases. Almost all products require repeat purchases to
This concept represents one of
the levels of problem solving in
B2B (business-to-business, industrial) mrket. In this case, the
buyer has complete information to make a decision. No additional
market information search is required. The buyer buys the same
from the same supplier as before. [See Industrial
Market Buying Process for further details.]
Odd-even pricing is based on
the premise that the ending digits
a price influence how a consumer responds to the price of an
Pricing items at $5.95; $199.99; $9,999; or $299,999 instead
$6.00; $200.00; $10,000; or $300,000 respectively is expected to lead
higher sales because the consumer is expected to perceive the
(i..e., those ending in "9") as being significantly lower than the
even-prices (i.e., $6.00; $200.00; $10,000; and $300,000), even though
the actiual price differences are minimal. Odd-pricing is used
a marketer wants to reflect a low-price image. However, if a
wants to reflect a higher price/quality image, then even prices are
The marketing mix is one of
the two dimensions of a marketing
(the target market is the other dimension). The marketing mix
the 4 P's: product, price, place (distribution),
and promotion. Promotion comprises advertising, sales
personal selling, and publicity.
Quantity discounts are price
reductions based on the quantity of
a product/service purchased. A non-cumulative
quantity discount is based on the quantity purchased at a given
time (e.g., the price of a dozen donuts is less than the price of a
donut x 12). A cumulative quantity discount
is based on the quantity of a product/service purchased over a given
period (e.g., government and business corporate car rental and hotel
are based on an expected purchase level during the year).
The basic breakeven analysis
approach identifies the number
of units and the value in dollars [i.e., the breakeven point (BEP)]
total revenue (TR) equals total cost (TC). [i.e., where TR = TC].
At this point, there is no profit. If the marketer is operating
the breakeven level, there is a profit. If the marketer is
below the breakeven level, there is a loss. Above the breakeven
the profit is equal to the number of units sold above the breakeven
times the fixed cost contribution per unit [(Actual Unit Sales -
Unit Level) x (Unit Price - Variable Cost Per Unit)]. The total
facing a marketer operating below the breakeven level is calculated in
the same way, with the fixed cost per unit representing the loss per
below the BEP.
The product life cycle (PLC)
reflects the sales (in $ or units)
a product or service over time. The PLC comprises five sequential
stages: Introductory, Growth, Maturity,
and Decline stages. During the introductory stage, sales
During the growth stage, sales are increasing at an increasing
During the maturity stage, sales are increasing at a decreasing
During the saturation stage, sales are stable. And during the
stage, sales are decreasing.
A marketer can set one of
three price levels: above
market, at market, and below
market. With an above market
price level, the marketer's prices are intentionally higher than its
competitors (i.e., those firms selling to the same target
With a below market pricing policy, the
prices are lower than its direct competitors. Finally, with an at-market
pricing policy, the marketer's prices are the same as its direct
Marketers tend to advertise whether they have the lowest prices in the
market (i.e., a below market pricing policy) or will match the prices
competitors (i.e., an at-market pricing policy). The actual price
set represents a marketing tactic.
Advertising is that component
which identifies the advertiser and which is paid for buy the
Advertising is part of the marketing mix of the firm. Advertising
is considered to be a catalyst: It is
to get something to happen which would not have happened had it not
(e.g., customer becomes aware and/or purchases the product because of
into contact with an advertisement.)
This concept parallels the
similar concept identified for the
market. There are three levels of problem solving in the consumer
market: routinized response behavior
(habitual response behavior), limited problem
and extensive problem solving. In
case of routinized response behavior, the
consumer has complete information to make a purchase decision; there is
no need for any external search for additional information. Most
market behavior of consumers reflects this level of problem solving;
just purchase the same products and brands as was done in the past. Limited
problem solving means that the consumer has most but not all
to made a purchase decision. In this case, the customer needs to
engage in some external search for information to obtain the necessary
information. This situation may be due the market entry of new
the development of new characteristics for the brands product category
under consideration, or a change in the characteristics in currently
brands. Extensive problem solving
means that the consumer has very little, if any, information about the
products and/or brands under consideration. In this case, the
needs to engage in a great deal of external information search in order
to make a decision. This situation occurs when the consumer has
made a purchase decision in the area of consideration.
A direct channel means that a
marketer directly controls the
within the channel, there are no independent intermediaries to take
account. The marketer can gain control in a channel by taking
its competitors (i.e., through horizontal
and/or by taking over intermediaries at other levels in the channel
through vertical integration). An
channel means that the firms at the different levels in the channel
manufacturers, wholesalers, retailers) are independent firms.
Retailers that survive by
drawing on the customer traffic
by other retailers are considered to be traffic-users
or traffic-parasites. Such retailers need to intercept
the traffic that passes by their location. Retailers that attract
their own customer traffic are known as traffic
The adoption process
identifies the different stages the
consumer goes through with respect to the adoption of a brand, product,
or service. The sequential stages are as follows: (nonawareness),
awareness, interest, evaluation, trial, decision, confirmation.
While the first stage of the adoption process is considered to be awareness,
logically, the consumer must be unaware of the brand, product or
before becoming aware of its existence. Interest
means the consumer is paying attention to communications pertaining to
the product or service. Evaluation
that the consumer is processing information about the product or
in order to form an attitude. Trial
means the consumer has decided to try (i.e., to use) the product or
for the first time. Decision means
consumer has decision to use the product or service on a regular basis.
is the stage at which the consumer reevaluates the decision as to
or not to continue using the selected product or service or to change
another product, service, or brand.
Irregular demand is one of the eight demand stages a marketer can face. Irregular demand means that the timing of the level of demand is not the same as the timing of the level of supply of the market offering. Seasonal demand is one form of irregular demand where the demand level varies from the supply level during a period of time of the year.
[Return to theory/concept list] [Return to Case]
|Things to Consider - The Midnight Motel|
Your task with this case is to serve as a consultant for the owner of the motel. It is essential that you take into account the desires of the owner. If you try to suggest a solution that is contrary to the owner's wishes, you may run into some very strong resistence, unless you can present the argument that there is no other solution. Nonetheless, it is always best to take the route of least resistance, if it is possible.
In this case, you will actually find three problem areas. One is very minor, one will become very complex if you try to deal with it, and one which will deal with the major concerns in the case. Focus on the latter problem. Only if it is impossible to solve the the third problem would you even consider the second problem.
The first problem deals with a tactical issue. The second problem deals with a strategic issue. The third problem also deals with a strategic or policy issue. Once the strategic issue is dealt with, focus must then be directed toward the related tactical issue.
Above all else, evaluate the case situation objectively, don't let your personal desires guide your analysis. Your role is that of a consultant, not that of a consumer.
As a final note, this case may appear to be simple to solve, but it is not, unless you gain the appropriate insight of the situation under consideration. It is easy to be misguided during the analysis of this case. Start with a complete theoretical and conceptual analysis of the case; then attack the problem.
|Return to Case|
|Questions - The Midnight Motel|
|1.||Conceptually describe the nature of the target market attracted to this motel.|
|2.||Describe the nature of each of the components of the market mix for this motel.|
|3.||What are the business goals of the owner of the motel?|
|4.||Conceptually, describe the profit situation of the motel.|
demand state does the motel
face on a
yearly basis? [e.g., no demand, negative demand, latent demand, full
demand, overfull demand, faltering demand, irregular demand,
|6.||What pricing concepts are relevant to the case? Ilustrate.|
|7.||Using the consumer goods classification, describe the consumer market attracted to the motel.|
|8.||Using the industrial market buying process, describe the purchase behavior with respect to motel selection of the sales representatives who stay at the motel.|
the attitude of the patrons
motel? What are their beliefs and what motel attributes are
to them? What motel attributes are not or are less important to them?
||What are the fewest
number of rooms occupied during the year? What is the highest
number of rooms occupied during the year?
the occupancy levels achieved by the motel do not change and
an accurate forecast when the motel was being built, how many rooms
should have been built? Explain.
|12.||What are the three problems in the case? One of the problems is very minor; the other two problems are major problems. One of the latter problems is relatively easy to solve. If this problem cannot be solved appropriately, then consideration of the other problem would be necessary in order to address the concerns in the case. This latter effort, however, would be very complex.]|
are the symptoms to each of the
problemsin the case? Explain how the symptoms relate to each of
|14.||Identify the alternative solutions for each problem. [Maintaining the current nature of the operation is always one of the alternative solutions.]|
each alternative solution, what
are the advantages, disadvantages, and
implications if the alternative is implemented? What is the
decision with respect to each alternative
[i.e., accept, reject, or hold (i.e., unable to make final decision due
to lack of information or other reason)]? Suggesting that more
information is required is usually not a sound alternative; all it
means is that you are delaying making a final decision.
|16.||Identify the recommended solution for each problem.|
|17.||Develop the plan of action for implementing the recommended solution for each problem.|
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