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Services Marketing Audit

AMB340 Services Marketing

Semester 2, 2016
Word Count: 2,170
Group Project

Table of Contents:

1.0 Introduction
2.0 Service Marketing Mix Analysis
2.1 Service Product and Positioning
2.1.1 Competition
2.2 Pricing, Productive Capacity and Demand
2.3 Physical and Electronic Distribution
2.4 Integrated Service Marketing Communication
2.5 Service Process
2.6 Managing People
2.7 Servicescape and Physical Evidence
3.0 Recommendations
4.0 Conclusion
5.0 References
6.0 Appendices

1.0 Introduction
Airbnb offers consumers a different approach to the traditional service of
accommodation which relies on a shared economy. This peer-to-peer (P2P)
marketplace has successfully disrupted the traditional business-to-consumer (B2C)
hotel model (Moore, 2016). It allows individuals to list their own or rented properties for
short-term accommodation. Private rooms within a residence, shared rooms or whole
residence options are available depending on consumer needs. The primary aim is to
provide consumers with a unique and memorable travel experience. By evaluating the
service using Lovelocks (1995) Flower of Service model, each supplementary petal
contributes to the services overall point of differentiation:

Table 1: Lovelocks Flower of Service (1995)






Airbnb provides comprehensive, simple and easily accessible information through their platforms in the
form of;
Listing and personal profile descriptions.
Pricing and availability information.
Confirmation e-mails and text message reminders.
Tips and pre-arrival guides.
Access instructions.
Previous trip and invoice details.
Host expectations and rules.

Matching demand and supply

Reviews of past guests
Airbnb service staff 24/7 telephone communication center.

Can be done swiftly following the creation of an account using Facebook, Google Plus or through email
sign up.
One-step checkout.
Sign up via Facebook, Google Plus or e-mail.
Hospitality is provided by the host, which is quality checked by Airbnb.
Friendliness of host.
Cleanliness of residence.
It is the responsibility of both Airbnb and the host to ensure that the safekeeping of the customer is
maintained. To ensure safekeeping, customer and hosts are able to rate each other, which instils trust
amongst the Airbnb community between potential hosts and customers.



Airbnb offers refund policies as well as host guarantees terms and conditions.

Verified ID must be obtained before booking. An account history of bookings is kept and can be viewed at
any time.
PayPal, MasterCard, VISA, American Express are all accepted payment methods.
Payments are deducted 24 hours after check-in.
One-step checkout process.

The purpose of this report is to examine Airbnbs service marketing mix and identify key
strategic opportunities within the organisation. Drawing upon services marketing
theories and frameworks, these opportunities aim to improve the overall efficiency and
effectiveness of Airbnbs service delivery for Australian consumers. Finally,
recommendations for future service development will be presented.

2.0 Service Marketing Mix Analysis

2.1 Service product and positioning
Airbnbs scalable P2P model entered the tourism market with a unique value
proposition as cheaper than traditional service providers (Hawksworth, 2014). The P2P
economy is in its infancy, with year-on-year growth outstripping traditional e-commerce
markets. Airbnb has become a market leader within its sector by delivering real-time
accommodation solutions in response to consumer demand.

The organisations market capitalisation of US$30B has an active presence in over 192
countries, with over 500,000 listings on its short-term renting platform (Price
Waterhouse Coopers, 2015). Interestingly, the guest to host ratio sits at 6:1. Table 2
and Figure 1 below position Airbnb in reference to various competition

Table 2: Airbnb vs. Competitors




Expedia (Home-Away)

Global network.
Positive brand reputation.
Assist in facilitating the exchange
between host and consumer.
Ensure secure transaction with
no direct financial outlay
between parties (secure online

Market-based peer review

Basic vetting by company and
Heavily reliant on consumer
Experiential learning and
Insurance policies and
guidelines for hosts and
Not immune to service delivery
Consumer dissonance resulting
out of service not meeting
No physical assets.
Consistent brand message and
consumer advocacy approach

Hilton Network

Global network
Publicly listed company
with privately held
subsidiaries (e.g. HomeAway).
Global reach.
Higher cost for hosts.

Online comparison portal.

Real-time updates.
Greater exposure using
Expedia established supply
change and global
Established technology and
e-commerce expertise.
Long lasting reputation.
Subscription based fee
Pay per booking.
Diversified pricing structure
in comparison.

Both e-commerce and

brick and mortar used.
Consistent brand image

Long-standing brand and

Traditional Brick and Mortar
global brand.
Consistent brand image.
Proprietary service.
Standardised procedures.
Universal terms and
Quality assurance and
service guarantees.
Digital booking platforms
(similar to Airbnb and
Anchored to existing Hotelnetwork locations.
Part of globally recognised
brand with strategic
Less-agile and able to
adapt to changes in market
E-commerce brooking site.
Solely brick and mortar
hotel chain motel.




across regions engages

consumer touch points.
Privately held = current market
valuation is overstated.
Generous predictive marketcapitalisation and growth
projection assumptions.
Strong sense of community.
Brand advocacy with a high % of
repeat business for both host
and consumer.

Service availability is updated in

real time.
Number of hosts and the
availability of the
accommodation is ultimately up
to the host.
Need to ensure the best thirdparty service providers before
allowing hosts to be a part of the
Compounding growth since
Some negative exposure
regarding quality control and

Figure 1: Competition

used between the online

and storefront retail.
Home-Away is solely and ecommerce organisation.
More concentrated listings
in holiday destinations
(entire homes).
Larger brand without sense
of community.
Home-Away however, has
a strong and consistent
brand image that caters to
a different audience.
Partnerships with Jive
network has increased B2C
and P2P communication
Creating unique online
portal that helps boost
brand reputation and
community understanding
(Jive, 2016).

Large brand
Potential to be seen as
faceless or unresponsive
to consumer concerns.

Customer care procedures.

Customer feedback can be
slow and ineffective.
Standardised service
decreases flexibility.

The companys target market is broad and caters for both a diverse demographic and
psychographic consumer base. The brand has differentiated itself by normalizing the
atypical practice. Their focus is centered on creating a sense of community for both the
guest and host (Price Waterhouse Coopers, 2015).

Despite boasting approximately 100 million users, and 640,000 hosts, only 16% of
users are active, leaving a disproportionate number of idle consumers (Moore, 2012).
Brand advocates are considered loyal after 5 or more service interactions. In order to
encourage repeat patronage, the business needs to nurture the customer/host
experience for long-term collaborative consumption (Wegert, 2014). In terms of
consumer psychographics, the only consistently shared theme across its many
offerings, is the need for both the end user and host to have a willingness to engage in
a peer-to-peer transaction, as opposed to more traditional business-to-consumer
exchange (Airbnb, 2016).

2.2 Pricing, Productive Capacity and Demand

Australia boasts some of the highest per-capita consumption of the platform globally,
with capital cities Melbourne and Sydney showcasing the highest localised trends
(please refer to Appendix 1). The supplier can set whatever price they choose.
However, supply and demand ultimately shape the free market. Airbnb charges guests
along a regressive sliding-scale fee between 6-12%, as well as charging hosts a fixed
3% fee. This means their revenue is pegged against occupancy volumes, price and

seasonal fluidity dictated by the host (Tripping, 2015).

Despite historic data and

the wide-held belief that P2P

transactions are more economical to consumers (reference), there are still instances in
high-visitor volume cities such as Barcelona where consumers will actually pay more
using the service than traditional hotels (please refer to appendix 4).
2.3 Physical and Electronic Distribution
Within tourism services, distribution channels serve as the link between the suppliers of
tourism products and their end consumers (Gartner and Bachri, 1994). Both of Airbnbs
platforms are easy to navigate and allow hosts to post descriptions and photographs
of their spaces, communicate with guests, and take reservations and payments with
ease. Furthermore, Airbnbs online platforms enable hosts to effortlessly enter the
tourism accommodation sector and compete with global accommodation enterprises
for worldwide guests (Guttentag, 2015, pg. 1195).
While Airbnbs customers do not consume their core product, A place to stay, until
they arrive at their accommodation, by using an online distribution method Airbnb are
successfully able to facilitate distribution of all the supplementary service information
petals of Lovelocks Flower of Service (Lovelock and Wirtz, 2015), pg. 129). Airbnb
takes their supplementary services one step further by using them as points of
differentiation, which is important in a competitive industry such as tourism (Naipaul
and Parsa, 2000, pg.68). Airbnbs differentiating supplementary services include
interactive maps, which allow users to see where people are travelling, all around the
world, and blogs showing users experiences, further allowing customers to preview
before they book.

While Airbnbs electronic distribution method is very beneficial to its business model,
not all customers find electronic channels easy to use (Lovelock and Wirtz, 2015, pg.
133). Therefore, an opportunity has been uncovered for Airbnb to improve its marketing

mix by introducing a 24/7

live chat function into their

website and app. Not only would this increase Airbnbs market size by allowing it to
reach those who would traditionally struggle to use an online platform, it would also
strengthen the connection the between Airbnbs hosts and consumers.
2.4 Integrated Service Marketing Communication
By using Integrated marketing communications (IMC) Airbnb is able to produce a
strong focus for an offering while accommodating its intangible nature (Grove, Carlson
and Dorsch, 2002). Airbnbs IMC strategy parallels George and Berrys (1981)
recommendation to present a uniform message by continually stressing symbols and
themes to strengthen the services image and differentiate itself from competition.
Airbnb achieves strong synergy throughout its IMC strategy by promoting the essence
of a culture of belonging through three key IMC strategies; branding, overcoming
intangibility, and aligning internal communications.
Firstly, its logo, the Blo aims to unlock the power of belonging by creating a symbol
for the Airbnb community. Airbnbs Blo logo is further reinforced through Create
Airbnb, an online platform where users can create their own unique symbol and tell
their story under their shared banner, thus belonging to the culture of Airbnb (Create
Airbnb, 2015).
Secondly, to overcome one of the issues of intangibility, impalpability, Mittal and Baker
(2002) recommend services present an articulate narration or depiction of a customers
subjective experience. Airbnb achieves this by sharing stories from the Airbnb
community on its website, and through rich imagery and narration. The service process
is demonstrated while spreading a culture of belonging.

Thirdly, internal marketing is an important sector of service IMC as it enables crossfunctional planning across multiple departments and functions, which further improves
the consistency in brand messaging (Luck and Moffatt, 2009, pg.319). Airbnb achieves

strong internal coherency by evolving its mission to reflect a greater purpose of


Furthermore, according to Airbnbs Global Head of Employee Experience, Mark Levy,

Airbnb started their culture of belonging with their employees by shifting them up the
commitment curve, to the point where they now treat them like founders (Levy, N/D).
While Airbnb have created strong internal and external IMC synergy, these efforts are
too general and do not address the needs of specific markets.

2.5 Service Process

Airbnbs role is both as the facilitator and arbitrator for which they collect a nominal
percentage service fee. The organisation is responsible for verifying personal profiles
and listings, enabling transparent communication and information search, and
processing and settling all financial transactions. Airbnb holds guests payment in
escrow until 24 hours after check-in as a means of ensuring both parties contractual
obligations and ensuring mutual satisfaction (Cohen and Sundararajan, 2015).

Hosts begin the process by creating a free profile to list their property, accompanied by
photos as well as property and personal descriptions. They maintain unilateral control
over available dates, price setting and guest approval. Property owners and lessees
can introduce house rules such as security deposits or cleaning fees as a control
Figure 2: Availability Options for Hosts

Travelers search by destination, dates and pricing to discover distinctive places to stay
anywhere in the world, ranging from apartments and houses to castles and
houseboats. They may provide a personal description of themselves, but they must
add a profile picture and may be subject to further vetting and identity verification.

Guests and hosts provide reviews for one another that are permanently linked to their
respective profiles. This establishes a degree of mutual accountability (Folger, 2016),
although the procedure is far from infallible. Reports of opportunistic theft, property
damage and legal conflict surrounding leasing agreements are just several of the
brands challenges. The vast majority of stays occur without incident and Airbnb offers
hosts insurance cover of $1,000,000 in damages for protection. However, more
rigorous background and Police checks would more proactively anticipate potential
incidents and would provide the community with greater reassurance and credibility.

Figure 3: Airbnb Service Blueprint

2.6 Managing People

Airbnb is a highly automated online intermediary, however, in November 2015 had
reported 2368 employees, with notably 1160 of those hired that year. Airbnb drew
recent attention by their management practices after disbanding their human resource
department. The decision came as part of the move from a customer experience focus
to an employee experience focus. This modern approach to vertical integration
recognises each of their hosts, guests and employees as co-creators and part of the
intangible service product. The companys Global Head of Employee Experience, Mark
Levy, defines his responsibility as broader than that of a traditional human resource
management role.

As millennials surpass Generation X to become the largest proportion of the modern

workforce (Meister, 2015; fry, 2015), companies like Airbnb are placing more emphasis
on creating an employee-centric environment. Attractive employee benefits, intensive
training and empowerment practices feed into Airbnbs prominent cycle of success.
Tech savvy top talent are seeking out Airbnb as a preferred employer. In 2016 Airbnb
took out the top spot as the best place to work according to job recruiting marketplace
Glassdoors annual 50 Best Places to Work.
The structural change represents the companys push to instill a sense of community.
Specialisation teams like compensation and benefits, learning and organisational
development, facilities, safety and security all exist to take care of specific functions in
what they call an inside out strategy that seeks to create a sense of belonging. The
strategy is arguably simply part of a branding alignment activity to further embed
stakeholders and enhance word-of-mouth through host and guest advocacy. By
combining human resource management strategy with marketing objectives, the
platforms existing home-sharing network are able to dispel some of the associated
stigma of the uncommon subletting practice. Hosts in particular, are likely to become
productive resources as they themselves perform an integral marketing function by
advertising their accommodation as a viable substitute to traditional competition.

2.7 Servicescape and Physical Evidence

This disconnect between customer and employee, which is referred to as remote
service, makes it almost impossible to apply Bitners (1992) service-scape model to
Airbnb. The core service of matching the demand for a room and its supply has
followed in the mould of virtual stores such as eBay and Amazon.

While there are strengths for virtual platforms, this means the potential to shape
feelings and reactions about the service is lost due to a lack of physical surroundings.
These emotive responses to tangible elements can help build a positive image and
therefore differentiation, as well as becoming part of the value proposition for
consumers. This service-scape is instead created by the hosts of Airbnb rooms, and
while they are connected to the organisation, ultimately they are outside of their control.
These suppliers could be encouraged to create a positive physical environment, which
could include things such as ambient conditions and signs and symbols, ultimately
they cannot be forced to do those things.

So while a recommendation could be to do so, part of the message creating medium

that such a variety of servicescapes within the platform creates is within itself a value
proposition for Airbnb.
3.0 Recommendations
Airbnb as a service provider is constantly evolving to changing market conditions
brought about by shifts in consumer demands and sentiments as well as an
increasingly prevalent competitive landscape, with SMEs and established providers
adapting to the changing marketplace. From an analytical perspective, although the
following recommendations may need to be adjusted based on region specificity,

these recommendations are aimed at improving the service-scape and delivery for
both the host and end-consumer, leading to an increased capacity and utilisation of
the service and helping to mitigate the autonomous quality control measures currently
in place.

Although the productive capacity of Airbnb is not limited to staff volumes, there are
instances of supply-capacity outstripping demand and vice-versa in low-demand
periods. Price fluidity to manage consumer demand in a traditional B2C or B2B
framework would traditionally be used to help manage these demand fluctuations,
however, this is not as easily implemented under the Airbnb model. Therefore, the
business can take advantage of the P2P sphere by ensuring effective marketing
campaigns are readily available and easily implemented in order to utilise assets and
adapt to changes in the market place.

This approach does not need to be solely anchored to the residential short-term
lodging sphere, as the existing infrastructure can be expanded into other industries that
are yet to capitalise on the P2P approach such as; spaces for temporary or short term
office rentals, e.g. Share-desk. Airbnb could even look at offering alternative services or
partnership opportunities in similar industries, with non-competing businesses. For
example, leveraging off consumers travel plans by partnering with established travel
facilitators such as Flight-Centre (an adaption of the Expedia / Home Away approach),
whereby Airbnb offers a consumer-centric experience for their holidays, boosting their
single minded proposition of stay with a local - live like a local.

4.0 Conclusion

As regulatory bodies adapt to the dynamic P2P marketplace, service providers will
need to ensure they are able to adjust to shifts in consumer demands and regulatory
frameworks that govern the service. What was once a Cutting Edge disruptive service
delivery model, can quickly become unviable due to shifts in market conditions or
service technologies (Vandermerwe, S, 2014). Therefore, management silos with a
localised consumer centric approach, whilst maintaining the overarching service
delivery promise and goal, is paramount if Airbnb is to remain a market leader in the
long term (Newton, P, 2015)

4.0 References
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5.0 Appendices

Appendix 1: Density of Airbnb users and hosts Sydney (2016)

Appendix 2: Airbnb Economic Impact (2016)

Appendix 3: Vacation Rental Site Comparison (2016)

Appendix 4: Comparing Airbnb & Hotel Rates Globally (2016)