Chapter 9

Designing
and
Managing
Products
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Marketing for Hospitality and Tourism, 4th edition

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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 designing
a product
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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
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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

2006 Pearson Education, Inc.

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Supporting Products
Extra products offered to add value to
the core product and help to
differentiate it from the competition

2006 Pearson Education, Inc.

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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.)

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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 phase takes place when
the service is consumed
Detachment phase is 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 the
goods or services of a seller and
differentiate them from competitors

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Brand
Brands are among a companys 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
customers mind
(Scott Davis, Brand Asset Management)
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Branding
Consistency
Consistency

Quality
Quality &
& Value
Value

Attributes
Attributes

Advantages
Advantages
of
of
Brand
Brand Names
Names

Identification
Identification

High
High Brand
Brand
Loyalty
Loyalty

Brand
Brand
Equity
Equity

Strong
Strong Brand
Brand
Association
Association

Name
Name Awareness
Awareness
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Perceived
Perceived Quality
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

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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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Marketing
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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
companys 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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Marketing
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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 to
purchase and then develop a fledgling
chain

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Product Life-Cycle Strategies

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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 companys investment costs add up

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Product Life Cycle

Sales and Profits Over the Products 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
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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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Key Terms
Augmented products
Aural
Brand
Consumption phase
Core product
2006 Pearson Education, Inc.
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Key Terms
Customization
Decline
Detachment phase
Drop
Facilitating products
2006 Pearson Education, Inc.
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Key Terms
Growth
Introduction
Joining
Maturity
Olfactory
2006 Pearson Education, Inc.
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Marketing
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Key Terms
Phase-out
Product concept
Product development
Product idea
Product image
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Marketing
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Key Terms
Run-out
Standardization
Supporting products
Tactile
Visual
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Marketing
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