Business idea
The business idea is the establishment of a Bed and Breakfast (B&B) business to be located in a resort town in Southern Italy. This proposal would begin with the ownership of a property with 8 rooms within a reasonable distance from both the shore and the countryside, and the goal is to offer lodging and breakfast to customers who want to avoid the high costs of hotels in major cities and who appreciate the benefit of relaxing in a more natural environment.
The management will be family-run, where the members contribute their skills and knowledge in management and customer service. The plan is to achieve a position of leadership in the area within 3-5 years.
1. Introduction
The purpose of this report is to identify the appropriate methods of market research to be undertaken for this business proposal. After a clear description of what market research is needed and why is important to undertake it before setting up a start-up business, it will explain the most suitable methods with the reasons why they should be considered. Each method will be critically discussed with its associated advantages and disadvantages. The conceptual framework given in this report will lead to an enhanced understanding of the market awareness that is needed before setting up such an enterprise in Southern Italy and additionally will serve as benchmark for future development.
2. Current trends of B&Bs in South Italy
The number of B&Bs has increased dramatically throughout the world over the last few decades, though there are no exact statistics that show the extent of their growth (Nuntsu, Tassiopoulos and Haydam, 2004). In Italy they began to take hold in the early nineties although they were only regulated roughly which did not facilitate the initial spread of these businesses. The event instead which was the instigator of this market was the Jubilee in 2000 that was held in Rome (Murgia, 2004, p. 14). The planned and peaceful invasion of pilgrims into the capital gave a start to a program of expansion of accommodation facilities. Additional growth in the number of B&B operations is expected for the next several years, particularly in rural areas where the development of hotel and motels business may not be financially feasible (Trunfio, Petruzzelli and Nigro, 2006).
3. Unique selling point
The unique selling point of this business proposal is to provide local products of high quality positioned next to the traditional services provided by the majority of B&Bs. In addition to this, during the summer the business will launch tourist mini-bus excursions around the area.
4. Proposed price
The charged rates will depend on three principle factors:
– The type of bathroom (private or shared)
– Breakfast (included or excluded)
– Special amenities
Pricing strategies vary from business to business. Some business try to maximize their profits by pricing their offering very high. Others use low prices to attract new customers (Krishnan, Bass, and Jain, 1999). After analysing the rates of the competitors located in South Italy, it has been discovered that the average price of a room with double bed is €65 per night (Bed and Breakfast Italia, 2011). The objectives of this proposed idea include social and ethical considerations and image goal rather than volume or high profitability objectives. In order to take the largest share of the market the proposed price for this proposal will also be €65 and included will be the breakfast made with locally sourced high quality products. An extra €10 will be charged for those rooms with a private bathroom. In terms of the tourist excursions, they will be charged at an extra €10 per person.
5. Market segmentation
The B&B can be broken into a number of market segments according to the business location (Nuntsu, Tassiopoulos and Haydam, 2004). The location of the proposed business will be within a reasonable distance from the sea, the countryside and the main city. In this case the market segments will be:
– Pleasure travellers
– Business travellers
– Special occasion or event travellers
6. Market research and its importance
In order to succeed in this project, it is important to establish the potential customers, what they will need, and how to reach them in the best way (Birn, 2000, p. 37).
Market research will help to collect accurate and specific information about customers and competition. This is fundamental in the market where a new business will be launched or when an already existing business is considering how best to expand (Birn, 2000, p. 38).
Market research will allow this business to:
– Better understand the customers’ characteristics and preferences
– Identify opportunities to increase the turnover and grow the enterprise
– Develop strategies to remain in front of the competitors
– Reduce the risk in taking decisions
– Develop and realise the business proposal
– Market research can be classified into various categories: primary and secondary, quantitative and qualitative. The data collection, however, can be census or sample (Birn, 2000, p.38).
The following paragraphs will explain which are the best methods that will enable the business to determine the appropriate information to support the feasibility of this proposed business.
6.1 Secondary market research
Secondary information has already been collected from people, companies and institutions for their own purposes (Arimond and Alfessi, 2001). The secondary market research will be analysed and interpreted so that the results can be made available in a systematic and consistent manner with the goals and problems (Daymon and Halloway, 2002).
The secondary market research, in this case, should concentrate more on quantitative rather than qualitative data, because the latter will be obtained in a better tailored way through surveys.
Secondary quantitative that refers to the average spending of tourists over the past will give a clearer idea of what will be the most appropriate pricing strategy in order to attract the majority of them (Arimond and Alfessi, 2001). It also can provide information in order to locate similar business already existing in the area. Furthermore, this research will help to discover all the services provided by the competition, in order to enable diversification and be unique in selling different services (Davis, Golicic and Boerstler, 2011).
By analysing quantitative data it will be also possible to establish a clearer idea of which are the most attractive places usually frequented by tourist excursions. Websites, tourist brochures, annual reports, customer feedbacks will permit the discovery of which destinations have been the most popular, enabling the business to choose the best of them in order to generate the highest levels of customer satisfaction (Huang, 2008). Such research will take less time and will cost less in terms of money. (Birn, 2000, p. 23)
6.2 Limitations to secondary research
Nonetheless, the secondary market research has limitations. In some cases, for example, secondary data can be unreliable as it may have been collected too far in past and as a result may be incomplete (De Ruyter and Scholl, 1998). Moreover, research can be a “teaser” released by a research supplier (Westegren and Zering, 1998).
6.3 Primary market research
If the results of the secondary market research are not enough, in most cases primary research should be taken. In other words, it will be needed to collect information directly from the target, in a systematic manner that is coherent in terms of the market proposal (Daymond and Holloway, 2002).
The quantitative market research will help to answer questions such as:
– Who are the customers?
– What do they need?
– Where these customers are, when they need these services and how often they are likely to participate
– Often quantitative primary research complements and supports the results of the qualitative market research (Westegren and Zering, 1998).
The qualitative primary market research is the most appropriate tool to understand the complex mechanisms underlying the investment decisions (Birn, 2000, p. 23). It helps to establish the reasons of conduct in the market and to identify expectations and views. Its goal is to explain why customers exhibit a certain type of attitude (De Ruyter and Scholl, 1998).
The structured survey is the most common technique used to conduct this research. In the case of this business proposal, such tool analyse the views, needs and motivations of those people who regularly use lodging facilities. This tool enables marketers to reach certain groups that usually harder to reach, such busy professionals and high-income earners. Surveys can be conducted only once (ad hoc survey), continuously (tracking) or in the form of a survey group (panel survey) In the latter case, the detection is made up of a sample of consumers which is fixed and very broad, and have used lodging services several times and regularly (Cox et al., 2011). The data thus obtained, for example, can provide information about the services used, the expectations and the variety of feedback.
The disadvantages of the survey are the high costs and the considerable time needed to implement it is the most effective manner (Davis, Golicic and Boerstler, 2011). It is also possible that the interviewer influences the respondent with his attitude, moods, and personal opinions.
6.4 Limitations to primary research
While primary data collection results to be the most effective method to acquire information, it does present several significant disadvantages. First of all, primary data can be very expensive, since it involves many marketers and the different techniques can result high in costs (Cox et al., 2011). Moreover, the time needed to present useful data sets is often quite extensive. From making the decision to embark upon a research project to obtaining information that is deemed useful is often considerably longer that needed if secondary data was chosen instead (Birn, 2000, p. 67).
7. Recommandations
Undertaking an online survey that will be created and posted on tourism agencies websites and traveller blogs.
Launching face-to-face surveys during the summer period in the main beach resorts of the area.
This report has demonstrated that online surveys are the most effective way to reach targeted groups and allow the marketers to gain information from certain groups that usually harder to reach, such as busy professionals and high-income earners. However, further research (Cox and Brenda 2011) showed that the most common disadvantage by doing online surveys is that Internet users are not representative of the population as the whole. In order to deal with this kind of disadvantage this report also suggests undertaking face-to-face surveys.
These two techniques will help to obtain information about:
– Customer’s profiles
– Customer’s needs
– Services mostly wanted from customers
– Levels of satisfaction with already existing lodging suppliers in the area
– Levels of price advantage that would be required to persuade the individual to switch
– Tools used to make reservations at lodging facilities
– Issues encountered in the lodging facilities around the area
All of this data would definitely be beneficial in planning the best strategies and will contribute in the success of the business idea.
8. Conclusion
Overall, this report offers an overview of the more appropriate market research methods to undertake in order to launch a B&B in Southern Italy. It highlights the importance of the market research, both before launching a new business and when a new product or service is introduced from an already existing business. The main purpose is to suggest the fact that primary and secondary research should be carried out in order to better understand whether the proposed business idea will match Southern Italian customers. The research must cover the analysis of qualitative and quantitative data. The secondary research will help to find the most appropriate pricing strategy in order to gain the largest market share. It will also serve to illuminate the range of services provided by the competitors in order to differentiate the market with new ideas and services. Such research will also be useful to highlight which have been the most popular tourist destinations over the last few years to establish the best tourist excursions in order to generate the maximum satisfaction levels from customers. Primary research will give a snapshot about the customer, stating who they are, what they need, how often they will need it. The structured survey will be the most useful tool in order to gain all this information and it will be conducted mostly on line. In this way it will be easier to reach the targeted groups. However, Internet users are not representative of the population as the whole and in order to deal with this kind of disadvantage this report also suggests undertaking face-to-face surveys during the summer period in the main beach resorts of the area.
The report takes also into consideration the limitations of these research methods and the relative data. In effect, due to these limitations, it will be impossible to predict the success of the proposed business idea.
International Management 