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2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th editionUpper Saddle River, NJ 07458 Kotler, Bowen, and Makens

Chapter 9

Designing

andManaging

Products

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Profit is payment you get when you take

advantage of change.

-Joseph Schumpeter

Being fed a decent meal in a casual

environment is a commodity in far

more supply than demand.

-Barry M. Cohen


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Chapter Objectives

Define the term product, including the

core, facilitating, supporting, and

augmented product

Explain the elements with which one

needs to be concerned when designinga product


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Chapter Objectives

Understand branding and the conditionsthat support branding

Explain the new product developmentprocess

Understand how the product life cyclecan be applied to the hospitality industry


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What is a Product?

A productis anything that can be

offered to a market for attention,

acquisition, use or consumption thatmight satisfy a want or need

Includes physical objects, services,places, organizations, and ideas


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Product Levels

Core Product

Facilitating Products

Supporting Products

Core Competency


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Core Product

What the buyer is really buying

Every product is a package of problem-

solving services


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Facilitating Products

Goods or services that must be present

for the guest to use the core product


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Supporting Products

Extra products offered to add value to

the core product and help to

differentiate it from the competition


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Core Competency Review

Supporting products offer a competitive

advantage only if they are properly

planned and implemented

They must meet or exceed customer

expectations to have a positive effect


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Augmented Product

The augmented productincludes

accessibility, atmosphere, customer

interaction with the service organization,customer participation, and customers

interaction with each other.


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Product

levels(Adapted from

C. Gonroos, Developing

the

Service Offering

A Source of Competitive

Advantage, in

Add Value to Your

Service,C. Surprenant, ed.,

Chicago:

American Marketing

Association,

1987, p. 83.)


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Atmosphere: The Physical

Environment Can be the customers reason for

choosing, or not choosing, to do

business with an establishment

Multidimensional Visual, aural, olfactory, tactile


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Customer Interaction with

the Service Delivery System Joining stage is when the customer

makes the initial inquiry contact

Consumption phasetakes place when

the service is consumed

Detachment phaseis when the customer

is through using a product and departs


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Customer Interaction with

Other Customers Hospitality organizations must manage

the interaction of customers to ensure

that some do not negatively affect the

experience of others


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Customer Coproduction

Increase capacity

Improve customer satisfaction

Reduce costs


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Brand Decisions

A brand is a name, term, sign, symbol,

design, or a combination of these

elements that is intended to identify thegoods or services of a seller and

differentiate them from competitors


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(Scott Davis, Brand Asset Management)

Brand

Brands are among a companys mostvaluable assets

A Brand represents what the company is andwhat it stands for

A Brand implies trust , consistency, and adefined set of expectations

The strongest brands own a place in the

customers mind


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Advantagesof

Brand Names

BrandEquity

Strong Brand

Association

Attributes

Quality & ValueConsistency

Identification

Perceived QualityName Awareness

High BrandLoyalty

Branding


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Conditions that Support Branding

The product is easy to identify by brand ortrademark

The product is perceived as the best value forthe price

Quality and standards are easy to maintain


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Conditions that Support Branding

The demand for the general product class islarge enough to support a regional, national,

or international chain

There are economies of scale


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Leveraging Brand Equity

Cobranding

Partnerships


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New Product Development

Product life cycle

Product is born

Passes through several phases

Eventually dies as younger products come

along that better serve consumer needs


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New Product Development Process

IdeaGeneration

ConceptDevelopment

and Testing

MarketingStrategyDevelopment

IdeaScreening

BusinessAnalysis

ProductDevelopment

MarketTesting

Commercialization


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Idea Generation

Internal Sources

Customers

Competitors

Distributors and Suppliers

Other Sources


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Idea Screening

The purpose of screening is to spot

good ideas and drop poor ones as

quickly as possible


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Concept Development and

Testing A product ideaenvisions a possible product

that company managers might offer to themarket

A product conceptis a detailed version ofthe idea stated in meaningful consumer terms

A product imageis the way that consumerspicture an actual or potential product


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Concept Development and

Testing The task is to develop an idea into

alternative product concepts, determine

how attractive each is to customers, andchoose the best one

Concept testing occurs within a groupof target consumers


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Marketing Strategy

Includes information such as the target

market and product positioning as well

as both short and long term projectionsin terms of sales, profits and costs


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Business Analysis

Business analysis involves a review of

the sales, costs, and profit projections to

determine whether they satisfy thecompanys objectives


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Product Development

The prototype must:

Have the key features described in theproduct concept statement, asperceived by the customer

Performs safely under normal use

Be produced for the budgeted costs2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th editionUpper Saddle River, NJ 07458 Kotler, Bowen, and Makens

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Test Marketing

The product and marketing program are

introduced into realistic market settings


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Commercialization

In launching a new product, a company

must make four decisions:

When?

Where?

To whom?

and How?


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Product Development

Through Acquisition A method of product development that

reduces the risk considerably for large

companies that have the assets topurchase and then develop a fledgling

chain


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Product Life-Cycle Strategies

Product development

Introduction

Growth

Maturity

Decline


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Product Development

Product developmentbegins when the

company finds and develops a new

product idea

During development, sales are zero and

the companys investment costs add up


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2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th edition

Upper Saddle River, NJ 07458 Kotler, Bowen, and Makens

Time

Product

Develop-ment

Introduction

Profits

Sales

Growth Maturity Decline

Losses/Investments ($)

Sales andProfits ($)

Sales and Profits Over the Products Life From Inception to

Demise

Product Life Cycle



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Introduction

Introductionis a period of slow sales

growth as the product is being

introduced into the market

Profits are nonexistent at this stage due

to high product introduction expenses



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Growth

Growthis a period of rapid market

acceptance and increasing profits



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Maturity

Maturityis a period of slowdown insales growth because the product hasachieved acceptance by most of its

potential buyers

Profits level off or decline due to

increased marketing outlays to defendthe product against competition



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Decline

Declineis the period when sales fall off

quickly and profits drop



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(Martin Bell, Marketing Concepts and Strategy, 3rd ed., p.267, 1979, Houghton Mifflin Company; used by permission, Mrs..

Marcellette (Bell) Chapman. )

Product Deletion Process



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Key Terms

Augmented products

Aural

Brand

Consumption phase

Core product2006 Pearson Education, Inc. Marketing for Hospitality and Tourism, 4th edition


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Key Terms

Customization

Decline

Detachment phase

Drop

Facilitating products



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Key Terms

Growth

Introduction

Joining

Maturity

Olfactory



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Key Terms

Phase-out

Product concept

Product development

Product idea

Product image



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Key Terms

Run-out

Standardization

Supporting products

Tactile

Visual


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