Download new-product development in tourism companies

NEW-PRODUCT DEVELOPMENT IN TOURISM
COMPANIES CASE STUDIES ON NATURE-BASED ACTIVITY
OPERATORS
Raija Komppula
University of Joensuu
Department of Economics
Box 111
FIN-80101 JOENSUU
[email protected]
ABSTRACT
New product development in tourism companies has been a nearly ignored theme in
tourism marketing literature. Research on product development has in major studies
handled destinations, development of resorts or sites as a total tourist product. This paper
will introduce two case studies, which will aim to help us to identify the major problems as
well as key phases of the new product development process in a small tourism company.
The two examples represent Finnish activity operators, which at the moment have the
challenge to innovate more and more attractive activities to fulfil the customers needs for
emotional experiences. The theoretical framework for the study is based on the traditional
product (and services) development theory, which suggests it to be a process of following
stages: idea generation, service concept development and evaluation, business analysis,
service development and testing, market testing, commercialisation and postintroduction
evaluation. Based on the existing literature and our case studies we try to evaluate the
usefulness of the traditional product development model in small tourism business
marketing. We also try to present an advanced model for new product development in a
small tourism company.
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1. INTRODUCTION
In the general marketing literature there has been a considerable amount of research carried out into
new product development, the majority of which is based on manufacturing industries, but
relatively less attention has been given to services (Edget 1994, Jones 1995, Kelly & Storey 2000).
Although product development is a prerequisite for satisfying tourists needs and changing demands
as well as insuring the profitability of the industry, new-product development in tourism companies
has been a nearly ignored theme in tourism marketing literature. There has been very little interest
in the new product development processes in small scale tourism companies, how the new
innovations are developed into product concepts in individual tourism companies, although
especially in rural tourism development projects all over the Europe the authorities and marketing
organisations call for new tourist products.
The research on product development in tourism marketing is dominated by research on destination
development, representing in most cases planning approach (see e.g. Gunn 1988, Pearce 1989). In
the literature of destination development, destination planning and destination marketing a
destination is viewed as an amalgam of individual products and experience opportunities that
combine to form a total experience of the area visited ( Murphy, Pritchard & Smith 2000, 44).
Medlik and Middleton (1973) suggest that the destination product consists of five components:
destination attractions, destination facilities, accessibility, images and price. This ”components
model” has been later borrowed by numerous authors.
Middleton (1989) also has introduced the term total tourist product (1989) or the overall tourism
product (Middleton & Clarke 2001). He suggests that ”from the standpoint of a potential customer
considering any form of tourist visit, the product may be defined as a bundle or package of tangible
and intangible components, based on activity at a destination. The package is perceived by the
tourist as an experience, available at a price” (Middleton & Clarke 2001, 124-125). This tourist
product can be divided in two levels: the total level referring to the complete experience of the
tourist from the time one leaves home to the time one returns, being synonymous with the
components model. The other level is the specific level, which is that of a discrete product offered
by a single business. (Middleton 1989, Middleton & Clarke 2001)
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Although tourism and travelling is regarded as a service industry the authors in tourism marketing
literature (see eg. Middleton 1989, Middleton & Clarke 2001, Holloway & Robinson 1995, Seaton
& Bennet, Smith 1994 ) use the term ”product” instead of the term ”service” when they refer to the
offering of the company targeted for the customer. Authors often refer to the service marketing
literature when introducing the characteristics of the industry but use the traditional marketing
management terminology when discussing the product/service.
In this article we try to combine the terminologies of tourism marketing, services marketing and
product development and focus on the specific tourist products produced by individual tourism
businesses. Our aim is to discuss the product development, especially the new-product formulation
in small tourism businesses. There has been little interest in the research field in new-product
development processes in small scale tourism companies, how the new innovations are developed
into product concepts in individual tourism companies, although especially in rural tourism
development projects all over the Europe the authorities and marketing organisations call for new
tourist products. The aim of this paper is to illustrate the processes through which the companies
manage to satisfy the changing needs of their customers by producing new product offerings.
In chapter two we first discuss the components of the specific tourist product produced by an
individual company as well as the need for new product development. In chapter three we introduce
the traditional model for new-product development suggested in the literature. In chapter four we
introduce two case studies, interviews of two nature based activity operators. Based on these
interviews and the literature we suggest a tentative model for new tourist product development in
chapter five.
2. COMPONENTS OF THE SPECIFIC TOURIST PRODUCT
According to Middleton and Clarke (2001) the tourist product means customer value, which is “the
perceived benefits provided to meet the customer’s needs and wants, quality of service received,
and the value for money”(Middleton & Clarke 2001, 89). The tourist product is fundamentally a
complex human experience (Gunn 1988), which is an output of a production process, where the
tourist utilises the facilities and services to generate the final output, experience (Smith 1994, 590591). Value is added in each stage of the production process and the consumer is an integral part of
the process (Smith 1994). The experience is a customer outcome, which, in the eyes of the
customer, is assosiated with added value and quality. This outcome is created and interpreted during
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the customer process, which have been developed and organised by the service company.
(Edvardsson & Olsson 1999).
The three levels of a tourist product are the core product, the formal (or tangible) product and the
augmented product (Middleton & Clarke 2001; Kotler, Bowen & Makens 1999; see also Levitt
1981, and Grönroos e.g. 1990). The core product, the idea, the key message, is the essential service
or benefit designed to satisfy the identified needs of target customer segments. The formal product
means the specific offer for sale stating what a customer will receive for the money. This tangible
product is a marketing interpretation that turns the core into a specific offer. It contains the
facilitating products, the services and goods that must be present for the guest to use the core
product as well as some extra supporting products. The brochure description of the formal product
forms the basis for the sale. The terms product design or “physical evidence” are identified as one
way to differentiate the formal product. (Middleton & Clarke 2001, 129; Kotler et al. 1999, 274275)
The augmented product comprises all the forms of added value producers build into their formal
product offers to make them more attractive. It comprises the difference between the contractual
essentials of the formal product and the totality of all the benefits experienced in relation to the
delivery of the product. The brand or the image of the product is always part of augmentation.
(Middleton & Clarke 2001, 129) The augmented product may contain supporting products which
are extra offered to add value to the core product and help to differentiate it from the competition.
Kotler et.al. (1999) suggest that accessibility, atmosphere (see also Murphy et. al. 2000, 45-46)
customer interaction with the service organisation and customer participation are components of the
augmented product. ( Kotler et.al. 1999, 274-275)
The model of a generic tourism product presented by Smith (1994 ) poses a product concept that
consists of the elements of the tourism product and the process by which those elements are
assembled. The relative importance of each element varies, depending on the specific type of
product, but all tourist products incorporate all five. The model explicitly acknowledges the role of
human experience in the tourist product. The generic product may take a wide variety of real forms,
but each form of same generic product will provide the same function, which in the case of tourism
is the facilitation of travel and activity of individuals away from their usual environment. (Smith
1994)
According to Smith (1994) the core of any tourism product is the physical plant, which refers to the
place and the conditions of the physical environment, such as weather, water, infrastructure etc. The
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physical plant requires the input of the services to make it useful for tourists. By the services Smith
refers to the performance of specific tasks required to meet the needs of tourists (e.g. front desk
operations at a hotel, food and beverages provisions etc). The third component of the tourist product
is hospitality, which is ”the something extra”, the fulfilled expectation of the tourist. The fourth
component is the tourist’s freedom of choice, which refers to the necessity that the traveller has
some acceptable range of option in order for experience to be satisfactory. The fifth and the
outermost element of the figure 1 is the customer involvement, which refers to the fact that the
customer participation is a relevant part of a service process. The basis for successful participation
by consumers in producing tourist products is the combination of an acceptable physical plant, good
service, hospitality and freedom of choice. Involvement is not only a physical participation, but a
sense of engagement, of focusing on the activity. The progression of elements from the core to the
shell is correlated with declining direct management control, increasing consumer involvement,
increasing intangibility and decreasing potential for empirical measurement.
FIGURE 1. The Generic Tourism Product (Smith 1994, 587)
I
FC
H
S
PP
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Smith’s model seems to accept the argument indicated by Middleton (1989) that the tourist product
is based on some kind of an activity at a destination. The activities are tied to the physical plant, the
place, as well as the services available. The importance of the services (e.g. nature based activities)
and the place element (physical plant) for the customer vary depending on the primary and
secondary needs of the customer. The primary needs (core needs) are those which act as a reason
why the customer experiences a certain need, for instance, one might have a need to meet someone
in an other country for a business reason. This need can be satisfied by several means of travel
opportunities. When a customer has decided to travel for some primary need, the secondary needs
(underlying needs) arise: how to travel, what criterias are used to evaluate the options,
etc.(Edvardsson & Olsson 1999, Middleton & Clarke 2001) Core needs are those which give rise to
the demand for travelling and the underlying needs are implicit in the demand of a particular way of
travelling.
Smith’s terminology and perspective is derived from a production orientated approach, which
emphasizes outputs and phases rather than consumer benefits and outcomes. Lumsdon (1997 offers
an alternative view and argues that the benefits to the customer are delivered only if the service
provider and the customer are central to the model. Instead of a tourist product he uses a term
tourist offering. According to him in tourism the core benefits and service interaction dominate and
therefore they constitute a tourism offering, which can be defined as a combination of services
which deliver primarily intangible, sensual and psychological benefits but also include some
tangible elements. He argues that the concepts of core product and augmented product presented by
Kotler, “..are one and the same in tourism, because of the underlying principle of inseparability, i.e.
consumption and provision occur at the same time and place. The core bundle of benefits accrue
from the degree of satisfactory interaction.” (Lumsdon, 1997, 141-142) A modified framework of
the tourism offering set out by Lumsdon (1997) illustrates the point: it places the service offering
within tourism as a central component (Lumsdon 1997, 142)
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Physical evidence
- Decor
- Staff Dress
- Furniture
- Colour scheme
- Materials
- Iconic features
- Image
Processes:
- Responce systems
- Reception
- Ticketing/billing
- Queuing
- Staff procedures
People:
- Staff training
- Staff responsiveness
- Level of staffing
- Counters
Core service offering:
- Actual level of service
- Customer image and expectations
- Perceptions of value
- Atmosphere, ‘feel good’ factor
FIGURE 2. The tourism offering: a modified framework (Lumsdon 1997, 142)
The arguments of core service offering introduced by Lumsdon (1997) can be supported by findings
of Edvardsson and Olsson (1999), who argue that the service company does not provide the service
but the prerequisites for the various services. The company sells opportunities for services which
are generated in partially unique customer processes. The central goal of service development is to
develop the best and right prerequisites for well-functioning customer processes and attractive
customer outcomes. The prerequisites for the service are the end-result of the service development
process. The right prerequisites can be described by a model with three basic components: service
concept, service process and service system. (Edvardsson & Olsson 1999).
The term service concept refers to the description of the customer’s needs and how they are to be
satisfied. Service process relates to the chain of activities that must function properly if the service
is to be produced. Special attention should be paid to some critical activities so that the customer
process and the customer outcome achieve the right quality at reasonable cost. The service process
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consists of clear description of the various activities needed to generate the service. The service
system constitutes the resources ( staff, the physical/technical environment, organisation structure,
the customers) that are required by or are available to the service process in order to realise the
service concept. (Edvardsson & Olsson 1999)
The core of the tourist product is the idea of the experience, activities in a destination, which are to
satisfy the primary and the secondary needs of the traveller. This core product can be seen as a
service concept which refers to the prototype for the service, i.e., the customer utility and the
benefits, which the tourist product intents to provide and convey to the customer. The description of
the service process of the tourist product includes the definition of the formal product. For the
customer it is expressed in a form of a brochure or an offer. In the company and for the staff the
formal product might mean the determination and definition of the chain of activities in the
customer process and the production process. This chain can be illustrated as a service blueprint.
The key components of service blueprints are the customer actions, “onstage” contact employee
actions, “backstage” contact employee actions and support processes. The customer actions area
displays the actions that customer performs in the process of purchasing, consuming and evaluating
the service. Employees actions that are visible to the customer are the onstage employee actions.
Contact Employee actions that takes place behind the scenes to support the onstage activities are the
backstage contact employee actions. The support process covers the internal services, steps and
interactions that support the contact employees in delivering the service. The four key action area
are separated by three horizontal lines. The line of interaction represent the direct interaction
between customer and the organisation. Line of visibility separates all service activities that are
visible to the customer from those that are not. This line also separates what the contact employees
do onstage from what they do backstage. Line of internal interaction separates contact employee
activities from those of other service support activities and people. (Zeithaml & Bitner 1996, 206207).
Service system includes the resources available to the service process for realising the service
concept. This means the involvement of the service company’s staff, the customers, the physical
and technical environment as well as the organisation and control of these resources. The hospitality
element of the tourist product is produced mainly by the staff and other customers. Freedom of
choice and the customer involvement are highly dependent of the service process, the customer
himself as well as the physical environment. All these together, the service concept, the service
process and the service system create the prerequisites of the tourist experience, the augmented
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product, the very intangible expectations, which will or will not be fulfilled as the outcome of the
customer process.
3. DEVELOPMENT OF A NEW TOURIST PRODUCT – A PRODUCT FORMULATION
VIEW
To stay ahead of the competition, proactive tourism companies must constantly look for new
product innovations. The traditional product life cycle theory indicates that typically a product will
have a s-curve with stages of growth, maturity, saturation and decline in sales and profits. This
theoretical model seems to hold true also for tourist products, which means that the question of
product development and new- product innovations is important in tourism companies. It is
sometimes difficult to define what is meant by a new product. Improvements to an existing product
can render that product so new as to make it seen by prospective purchasers as a genuinly new
product, and if an existing product is launched to a new market or to other purposes, that product is
also new for the customer.
In most cases the tourist products are advances on and modifications of existing products.
According to Zeithaml and Bitner (1996) the types of new product options vary from major
innovations to minor style changes. Major innovations are new services for markets as yet
undefined. Startup businesses consist of new services for a market that is already served by existing
products that meet the same generic needs. New services for the currently served market represent
attempts to offer existing customers a service not previously available from the company, although
it may be available from other companies. Service line extentions represent augmentations of the
existing service line, service improvements represent the most common type of service innovation.
Style changes represent the most modest service innovations, although they are often highly visible
and can have significant effects on customer perceptions.
The service management literature points out that new-product development in service industries
should follow a structured planning framework (see e.g. Lovelock, Vandermerwe & Lewis 1999,
Zeithaml & Bitner 1996). The fact that services are intangible makes it even more imperative for a
new-product development system to have certain basic characteristics. The development must be
based on objective data about customer perceptions and market needs, not on the basis of managers’
or employees’ subjective opinions. Employees frequently are the service or at least deliver the
service, which makes their involvement in new-product development highly important. Customers
can help the design the service concept and the service process particularly in tourism businesses
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where the customer personally carries out a major part of the service process. (Shostack 1984,
Zeithaml & Bitner 1996)
An underlying assumption of new-product development process models is that new-product ideas
can be dropped at any stage of the process if they do not satisfy the criteria for success at the
particular stage. The process can be divided into to sections: front end planning and implementation
(see figure 4). The front end determines what service concepts will be developed. The organisation
is assumed to have an overall strategic vision and mission, which determine the new-product
strategies of the organisation. (Zeithaml & Bitner 1996, 197-200) The different strategic options for
new-product strategies are presented in figure 3.
Markets
Offerings
Existing Products
New Products
Existing markets/
Current
Customers
MARKET PENETRATION:
modification to existing product for
present market
New markets/
New
Customers
MARKET DEVELOPMENT:
reposition present product to attract
new market
SERVICE DEVELOPMENT:
introduce new product to present
market
DIVERSIFICATION:
launch of new product to new
market
FIGURE 3: New-tourist-product strategy matrix for identifying growth opportunities
(Modified from: Zeithaml & Bitner 1996, 201; Holloway & Robinson 1995, 82)
The first actual step in the new-service development (NSD) is the idea generation, which can be
systematic search of new ideas. Typical sources of ideas may be formal brainstorming, solicitation
of ideas from employees and customers, lead-user research, learning about competitors offerings
etc. According to studies referred by Kotler et.al. 1999 more than the half of the new-product ideas
come from within the company, one quarter comes from customers and the rest mainly from
competitors.
During the idea generation a large number of ideas are often created. The purpose of screening the
ideas is to reduce the number of ideas. The idea screening is the appropriate time to review carefully
the question of product line compability. (Kotler et.al. 1999, 291-292; Zeithaml & Bitner 1996,
202). The key questions to ask when screening product ideas are, if there is a market for the
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product, if the product is a right one for the company product strategy and if the product can be
produced profitably (Morgan 1996).
A clear definition of the service concept should be the outcome of the service development and
evaluation stage. The new service concept would then to be evaluated by employees and customers.
The next step is to determine the feasibility and potential profit implications. Demand analysis,
revenue projections, cost analyses, and operational feasibility are assessed at this stage. The stage
will involve preliminary assumptions about the costs of hiring and training personnel, delivery
system enhancements, facility changes and any other projected costs. (Zeithaml & Bitner 1996)
Once the new service concept has passed all the front-end planning stages, the concept is ready for
the implementation stages. During this phase, the concept is refined to the point where a detailed
service blueprint representing the implementation plan for the service can be produced and tested by
the personnel. The market testing phase is in tourism industry often implemented by introducing the
new tourist product to a certain group of customers or representatives of intermediary stakeholders.
If the product has passed all the former stages the service goes live and is introduced to the
marketplace (commercialisation). A very important phase is the postintroduction evaluation. At this
point, the information gathered during commercialisation can be reviewed and changes made to the
delivery process, staffing or marketing-mix variables. (Zeithaml & Bitner 1996)
In the next page the figure 4 illustrates the New-Service development process (Zeithaml & Bitner
1996, 200), which represents a traditional model for NPD.
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•
Business Strategy Development or Review
•
New-Service Strategy Development
•
Idea Generation
Front-End
Planning
Screen ideas against new service strategy
•
Concept Development and Evaluation
Test concept with customers and employees
•
Business Analysis
Test for profitability and feasibility
•
Service Development and Testing
Conduct service prototype test
Implementations
•
Market testing
Test Service and other marketing-mix
elements
•
Commercialization
•
Posintroduction Evaluation
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4. DEVELOPING A NEW TOURIST PRODUCT – CASE STUDIES AMONG NATURE
BASED ACTIVITY OPERATORS
In this chapter we will introduce two short case descriptions. The aim of the interviews was to find
out how the small activity operators in nature-based tourism industry in Finland develop their
product line and how is their new-product development process like in reality. The two cases were
chosen to represent similar kind of businesses: both companies offer nature based activity services
for the same target group, business sector. Their product are divided into corporate entertainment
products, incentive products and nature-based activities for other groups of customers. For both
companies the local based corporate entertainment means nearly half of the income. Both
companies operate from and have their base (office) in the same town. These companies are both
limited companies and are run by two male entrepreneurs. In the nature-based activity service
sector these types of companies are common in Finland in terms of size, mode of operations, age of
the company and the background of the entrepreneurs. In this branch of tourism businesses the
customer involvement and the activity itself is crucial. Co-operation with the accommodation
business is inevitable, if the operator does not have own accommodation facilities.
Case 1.
This company was founded in the middle of 1990s, when an old company, which had been one of
the pioneers in nature-based activity sector in the area, had gone bankrupt. A couple of friends of
the former entrepreneur bought the base of the company as well as the equipment and founded a
new company to continue the operations. During the last two years the ownership as well as the
operative management of the company concentrated to the two guys who run the business today.
The new company had “inherited” a good and successful product line with a core product based on
a certain physical plant, a river with rapids, by which they have a base with smoke sauna, shelters
etc. The base is situated about 100 km from the office base, were the equipment are stored. The
office situates in the town where the main demand for the corporate entertainment products is
originated. At the moment the company has another base near the airport in that town. The third
base is situated in a national park about 60 km from the town.
According to the entrepreneurs the basis of their new-product development lies on their business
mission, which refers to producing nature-based experiences for the chosen target groups in a
certain area. The need for new-product development arises from the customer needs: in most of the
cases the existing customers need new experiences. The marketing strategy and the promotion
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budgets have been modest: the entrepreneurs have concentrated in answering inquires rather than
looking for new clients. The word-of-mouth promotion as well as the loyalty of existing customers
has directed their strategy to service development (introduce new products to present customers)
and market penetration (modification of existing products for present customers). Market
development (repositioning present products to attract new markets) has been considered and
practised within a couple of tourism networking and marketing projects run by consultants and
funded by the regional development authorities. These projects have targeted to European markets,
but the limited staff resources have been the reason for the minor opportunities to make larger
inputs in market development.
The new-product ideas are in most cases based on the opportunities of the three bases or other
physical plants available. The idea generation is derived from the capabilities of the owners as well
as their own interests. The company has also conducted a market research on the trends in naturebased activity interests in Finnish business markets. In most cases the need for new-product
development comes from an existing client who wants to do something else than before.
The service concept, the core product is build on an idea of e.g. hard adventure, soft adventure,
water sports etc. The concept is then developed in accordance to the limiting factors of the
company resources, what is possible. The next step is the development and evaluation of the
service process. First the blueprint of the processes is built and then the process is tested by own
staff and family members or friends. Modules such as transportation, accommodation, meals and
different activities are scheduled. During this process also the costs are evaluated. After the first
testing the formal tourist product for the customer, the offering, is created and the first customer
testing group is invited to evaluate the product. In most cases the test groups consist of staff from
local or regional tourist organisations, which serve as intermediaries of the products.
The market testing and commercialisation phases can in this company not be separated. When a
new product has got its formal form, it is offered for the customers. Some products sell as such,
most of the offerings have to be modified, modules have to be changed etc. The core product may
live and the modifications of it, the formal products, may form a new product line. But in most
cases the core as well as the formal products sell only a couple of times and the company keeps on
the basic old products. The entrepreneurs do not pay much attention to the reasons of these failures
but keep on generating new ideas.
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Case 2.
The company in case 2 has started the operations in the area a couple of years ago. The enterprise is
run by two guys who both are trained wilderness guides. The other guy is originally foreigner but
has lived a long time in Finland and speaks fluent Finnish. This means that certain segments in his
home country constitute a great part of their targeted marketing, although at the moment the
companies in the nearby region still represent the major part of their clients. The company has no
own base for the activities but the office and equipment store is situated in connection with a hotel
in the city centre. This gives the company a great competitive advantage in terms of groups living at
the hotel.
The need for new-product development process usually starts from either a client or a travel agency
asking for something new or different for groups that already have tried everything. A lot of the
new products start from clients’ questions. The other reason comes from the company: they have to
have new products for customers that constantly use their services. The client, which is normally a
company, may come back only two or three times after the same kind of activity. The operator have
to create new products every year for certain clients, which means that many of the new products
have been once tailored for a certain company. About 50 % of the turnover consists of certain basic
programs, which are more or less variations of specific products.
When a new-product need arises, the operator must first narrow down the possibilities: safety
parameters, budget, limits of implementation, time factors. Very often the clients are looking for a
product, which is short ( maximum a day), sharp and attractive. How for example short is defined,
is dependent on the customer. In most cases the formulation of a product is only a question of
presenting an activity or activities, not practising it properly. Sharp means that the idea has to
appeal. If we think for example a four hours canoeing, the activity itself is not yet attractive, but the
idea comes from where the customer is going to canoe and why. The objective of the trip is
according to the entrepreneur as important as the activity itself. The presentation of the core
product, the idea of the product, has to appeal. One can almost sell an old activity with a new
presentation and a new aim, the same activity for a different reason, which comes then a new
activity.
This operator emphasises the significance of the activity and the experience rather than the place,
the physical plant. The client’s needs determine the place where the activities are implemented. But
an old programs in a new place or terrain may be a new product, although in most cases the
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company operates in its’ home area. According to the entrepreneur the physical plant is always easy
to find through partners and networks.
The idea generation is in this company based on client requirements. The core products are created
as mobile as possible, as user friendly as possible and for as many persons as possible. The
modifications of the core product are then developed following the resources of the customer. The
service concept is dependent on the company resources (staff, equipment) as well as availability of
suitable partners and their resources. In the summer time the equipment is normally not a problem
but in the winter time it often is a limiting factor. The entrepreneurs use different kinds of sources
for idea generation. Most of the service concepts require very little investments in equipment or
physical plant, but the most difficult thing is to invent the core idea of the product. Ideas may come
from the literature, travel books, heritage and traditions of the region, the culture or the history of
the place, old movies, documents, television etc. A good imagination is a real gift for an activity
operator. Part of the ideas come from competitors or clients.
The idea is then developed to a theoretical program around the idea, meaning a rough molecular
model of the service , the process with a time schedule and requirements for the physical plant and
equipment, safety factors etc. This rough program has to be tested by own staff. After this first
testing the core product, the service concept is ready for further development. Once the core product
is reported in a rough blueprint there will also be an idea of what the actual production costs will
be.
The operator sells about 40 % of its turnover directly to the corporate entertainment customers.
About 40 % of the income comes through intermediaries. The importance of the intermediaries
brings the new-product commercialisation an important question. The company has to have a
proper selection of products with prices and a good presentation of the product. The discussions
with the intermediaries are a means of post-introduction evaluation of the product: if the product
does not sell it will be changed or skipped for the next years catalogue.
The fact is that most of the products that sell well, are easy: cooking coffee and making sausages
and pancakes by the fire. Behind all the product development procedures there is the underlying
business mission of the company: the company must not be cheaper than others, not the most
“visible” in the market but the best in customer service. This indicates that the equipment does not
have to be better, the places do not need to be better, but the customer service must be the best,
because that is what the customer will remember. The customer needs to remember that he had a
great time. The customer service means all the activities aiming at a best possible customer care
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during the customer process, including the pre-purchase phase and the presentation of the product in
the brochures.
5. DISCUSSION
In a nature-based activity operator company a core tourist product, the service concept, consists of
modules, which are based on the needs of the customer. Basic types of the modules are
transportation, accommodation, food and beverage as well as activities. A single tourist product is
an experience processed during different kinds of activities within a bundle of modules within a
service system of the company. Each module can also be handled as a service concept, service
process and a service system.
The underlying prerequisite for successful tourist product development is a continuous service
system development, which involves continuing development of the company strategy. So the
“augmented tourist product” mentioned by e.g. Middleton and Clarke (2001) is actually the
company itself, its reputation and image. According to Seaton (1996) the firm is just as much of a
product as the individual packages of offerings it makes. The corporate image refers to the kinds of
ideas and impressions people have of the organisation in general. The corporate identity is made up
of the perceptions formed by external audiences of everything a company is seen to do. Branding
does, at the level of the product, what corporate identity does at the level of the firm. (Seaton 1996,
126-127) When a customer turns to the activity operator, he or she expects the company to offer
experiences, which are created together with the customer and company. The task of the company
is to provide the best possible prerequisites for the experience, an attractive idea and description of
the product, successful service process and reliable, functioning service system. The tourist
experience product could be illustrated as in figure 5.
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The Service concept
description of the
customer’s needs
the idea of the
experience
customer utility,
customer benefits
service modules
The Service Process:
- chain of activities in
the customer process
- formal product,
brochyre
- formal product,
blueprint
The service system
- business mission
- Staff
- the physical plant
- equipment
- organisation
FIGURE 5: The tourist experience product
The tourist experience
- Actual level of service
- Customer image and expectations
- Perceptions of value
- Atmosphere, hospitality,‘feel good’
factor
Based on the case studies reported above as well as the theoretical discussion of the tourist product
we will suggest a new framework for new-product development in tourism (figure 6). This
framework must be considered as a first preliminary proposal and it needs much more investigation
among different kinds of tourism businesses.
In the framework we state that the new service development occurs in a service system
environment, which consists of the company’s physical plant, the environment, staff, network of
partners, competitors and customers. The service system creates the corporate image and identity of
the company as well as limits and the opportunities for the NSD. The company has to pay great
attention to the service system development, which enables or prohibits the new innovations.
The first stage in our NSD-framework is the service concept development, which can be divided in
four phases: idea generation, core product screening, concept testing, and concept development. The
service concept is the answer to the customers question of new experience, what is the new benefit
and value. The sources of idea generation for the for the experience can be divided into internal and
external. The main determinant should be the customer need and expectation. The core idea may
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get a form of key modules, which then are to be screened against the service system available. The
rough customer processes of the modules have then to be tested by the staff, after which they are
developed by e.g. skipping some modules and taking new ones instead. When the core idea is ready
the next stage of the NSD will start.
Service process development indicates the precise planning and pricing mode of the tourist product.
Every single module have to be blueprinted as a chain of activities, with time scheduling, costs,
identifying all the service quality factors and possible gaps in the delivery system (see Zeithaml,
Parasuranam & Berry 1990). The process prototype must once more be tested by the personnel,
after that the final formal product can be developed as a blueprint for the producers. In the market
testing stage the service concept and the process are tested by an external group of people, e.g.
members of intermediary. During the market testing stage the key components of the experience
are tested and the key message of the promotion, the “appeal” is identified for the
commercialisation of the product. After launching the product to the market it should be important
to investigate the sources of the success or unsuccess of the product in order to use the information
in further NSD processes.
There are also researchers, who argue that the new service development initiation strategies are
largely informal processes. Few firms systematically involve contact or operations staff in the
process. (Kelly & Storey 2000). Claude and Horne (1993) even suggest, relying on their empirical
data, that the entire service development outcome is a random event. Sometimes the venture will be
successful, sometimes not. According to them the pattern for NSD is not well defined and does not
adhere to conventional empirical mechanisms. They suggest that the entire new service
development becomes more entrepreneurial: the differences in services like individualised versus
group experiences, customised versus standardised and active versus passive customer participation
might influence how a new service is conceptualised and then commercialised. (ibid 62-63)
Nevertheless, for different branches in service industry some kinds of frameworks for NSD are
possible to be found and trial-and-error methods of new-product development must be replaced by
more scientifically based modern marketing research techniques Hodgson (1990). We argue that the
more a company pays attention to its’ new product development procedures the better chance it has
in succeeding with the product strategy in the changing markets. But in tourism industry the
different branches (e.g. accommodation, transport, activities) have different risks in their service
systems, which propably makes the NSD processes branch specific. The framework presented in
this paper may be applied in activity operator businesses but must be much more investigated in
other branches of the industry.
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