Download What is a Product?

Chapter 9
Designing
and
Managing
Products
©2006 Pearson Education, Inc.
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Marketing for Hospitality and Tourism, 4th edition
Kotler, Bowen, and Makens
“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
©2006 Pearson Education, Inc.
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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 designing
a product
©2006 Pearson Education, Inc.
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Chapter Objectives
• Understand branding and the conditions
that support branding
• Explain the new product development
process
• Understand how the product life cycle
can be applied to the hospitality industry
©2006 Pearson Education, Inc.
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What is a Product?
• A product is anything that can be
offered to a market for attention,
acquisition, use or consumption that
might satisfy a want or need
• Includes physical objects, services,
places, organizations, and ideas
©2006 Pearson Education, Inc.
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Product Levels
• Core Product
• Facilitating Products
• Supporting Products
• Core Competency
©2006 Pearson Education, Inc.
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Core Product
• What the buyer is really buying
• Every product is a package of problemsolving services
©2006 Pearson Education, Inc.
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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 product includes
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.)
©2006 Pearson Education, Inc.
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Atmosphere: The Physical
Environment
• Can be the customer’s 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 phase takes place when
the service is consumed
• Detachment phase is when the customer
is through using a product and departs
©2006 Pearson Education, Inc.
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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 the
goods or services of a seller and
differentiate them from competitors
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Brand
• Brands are among a company’s most
valuable assets
• A Brand represents what the company is and
what it stands for
• A Brand implies trust , consistency, and a
defined set of expectations
• The strongest brands own a place in the
customer’s mind
(Scott Davis, Brand Asset Management)
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Branding
Consistency
Quality & Value
Attributes
Advantages
of
Brand Names
Identification
High Brand
Loyalty
Brand
Equity
Strong Brand
Association
Name Awareness
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Perceived Quality
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Conditions that Support Branding
• The product is easy to identify by brand or
trademark
• The product is perceived as the best value for
the price
• Quality and standards are easy to maintain
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Conditions that Support Branding
• The demand for the general product class is
large enough to support a regional, national,
or international chain
• There are economies of scale
©2006 Pearson Education, Inc.
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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
©2006 Pearson Education, Inc.
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New Product Development Process
Marketing
Strategy
Development
Concept
Development
and Testing
Idea
Screening
Idea
Generation
©2006 Pearson Education, Inc.
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Business
Analysis
Product
Development
Market
Testing
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 idea envisions a possible product
that company managers might offer to the
market
• A product concept is a detailed version of
the idea stated in meaningful consumer terms
• A product image is the way that consumers
picture an actual or potential product
©2006 Pearson Education, Inc.
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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, and
choose the best one
• Concept testing occurs within a group
of 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 projections
in 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 the
company’s objectives
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Product Development
• The prototype must:
– Have the key features described in the
product concept statement, as
perceived by the customer
– Performs safely under normal use
– Be produced for the budgeted costs
©2006 Pearson Education, Inc.
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Test Marketing
• The product and marketing program are
introduced into realistic market settings
©2006 Pearson Education, Inc.
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Commercialization
• In launching a new product, a company
must make four decisions:
When?
Where?
To whom?
and How?
©2006 Pearson Education, Inc.
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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 to
purchase and then develop a fledgling
chain
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Product Life-Cycle Strategies
•
•
•
•
•
©2006 Pearson Education, Inc.
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Product development
Introduction
Growth
Maturity
Decline
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Product Development
• Product development begins when the
company finds and develops a new
product idea
• During development, sales are zero and
the company’s investment costs add up
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Product Life Cycle
Sales and Profits Over the Product’s Life From Inception to
Demise
Sales and
Profits ($)
Sales
Profits
Time
Product
Development
Introduction
Growth
Maturity
Decline
Losses/
Investments ($)
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Introduction
• Introduction is 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
• Growth is a period of rapid market
acceptance and increasing profits
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Maturity
• Maturity is a period of slowdown in
sales growth because the product has
achieved acceptance by most of its
potential buyers
• Profits level off or decline due to
increased marketing outlays to defend
the product against competition
©2006 Pearson Education, Inc.
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Decline
• Decline is the period when sales fall off
quickly and profits drop
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Product Deletion Process
(Martin Bell, Marketing Concepts and Strategy, 3rd ed., p.267, 1979, Houghton Mifflin Company; used by permission, Mrs..
Marcellette (Bell) Chapman. )
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