Chapter 9 Designing and Managing Products 2006 Pearson

Chapter 9 Designing and Managing Products © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th 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. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

Product Levels • Core Product • Facilitating Products • Supporting Products • Core Competency © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

Core Product • What the buyer is really buying • Every product is a package of problemsolving services © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

Facilitating Products • Goods or services that must be present for the guest to use the core product © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

Supporting Products • Extra products offered to add value to the core product and help to differentiate it from the competition © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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

Augmented Product • The augmented product includes accessibility, atmosphere, customer interaction with the service organization, customer participation, and customers’ interaction with each other. © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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

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. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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

Customer Coproduction • Increase capacity • Improve customer satisfaction • Reduce costs © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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

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

Branding Consistency Attributes Quality & Value Advantages of Brand Names High Brand Loyalty Name Awareness © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Brand Equity Identification Strong Brand Association Perceived Quality Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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

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. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

Leveraging Brand Equity • Cobranding • Partnerships © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

New Product Development Process Marketing Strategy Development Concept Development and Testing Idea Screening Idea Generation © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Business Analysis Product Development Market Testing Commercialization Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

Idea Generation • Internal Sources • Customers • Competitors • Distributors and Suppliers • Other Sources © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

Idea Screening • The purpose of screening is to spot good ideas and drop poor ones as quickly as possible © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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

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

Business Analysis • Business analysis involves a review of the sales, costs, and profit projections to determine whether they satisfy the company’s objectives © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

Test Marketing • The product and marketing program are introduced into realistic market settings © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

Commercialization • In launching a new product, a company must make four decisions: When? Where? To whom? and How? © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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

Product Life-Cycle Strategies • • • © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Product development Introduction Growth Maturity Decline Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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

Product Life Cycle Sales and Profits Over the Product’s Life From Inception to Demise Sales and Profits ($) Sales Profits Time Product Development Introduction Growth Maturity Decline Losses/ Investments ($) © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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

Growth • Growth is a period of rapid market acceptance and increasing profits © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

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. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

Decline • Decline is the period when sales fall off quickly and profits drop © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens

Product Deletion Process (Martin Bell, Marketing Concepts and Strategy, 3 rd ed. , p. 267, 1979, Houghton Mifflin Company; used by permission, Mrs. . Marcellette (Bell) Chapman. ) © 2006 Pearson Education, Inc. Upper Saddle River, NJ 07458 Marketing for Hospitality and Tourism, 4 th edition Kotler, Bowen, and. Makens