1. Designing and Managing Products
Marketing for Hospitality and Tourism
Kotler, Bowen and Makens
Designing and Managing Products
Chapter 9

2. Learning Objectives
Define the term product, including the core, facilitating, supporting, and augmented product.
Explain how accessibility, atmosphere, customer interaction with the service delivery system, customer interaction with other customers, and customer coproduction are all critical elements to keep in mind when designing a product.
Understand branding and the conditions that support branding.
The new product development process.
Understand how the product life cycle can be applied to the hospitality industry.

3. 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.
It includes physical objects, services, places, organizations, and ideas.

4. Facilitating Products
Product Levels
Core Products
Facilitating Products
Supporting Products
Augmented Products
Hospitality managers need to think about the product on four levels: the core product, the facilitating product, the supporting product and the augmented product
Core Products
The most basic level is core product
Marketers must uncover the core benefit to the consumer of every product and sell these benefits rather than merely selling features
Facilitating Products
Facilitating products are services or goods that must be present for the guest to use the core product
Facilitating products for one market segment may be supporting products for another
Supporting Products
Core products require facilitating products but do not require supporting products
Supporting products are extra products offered to add value to the core product and help to differentiate it from the competition
Supporting products offer a competitive advantage, only if they are properly planned and implemented
Augmented Product
The augmented product includes accessibility, atmosphere, customer interaction with the service organization, customer participation, and customers’ interaction with each other
These elements combine with the core facilitating and supporting products to provide the augmented product (See Slide 5)

5. Customer Participation
Augmented Product
Augmented Product
Accessibility
Atmosphere
Customer Participation
Customer Interaction
The augmented product includes accessibility, atmosphere, customer interaction with the service organization, customer participation, and customers’ interaction with each other
Accessibility
If a product is not accessible it has no value
Two barriers to accessibility are hours of operation and lack of knowledge
Products must be accessible when the guest wants to use them
Atmosphere: The Physical Environment
Atmosphere is a critical element in services
It can be the customer’s reason for choosing to do business with an establishment
Atmosphere is appreciated through the senses
Sensory terms provide descriptions for the atmosphere of a particular set of surroundings
Customer Participation
The customer participates in the delivery of most hospitality and travel products
There are three phases to this involvement: joining, consumption, and detachment (See Slide 7)
Customer Interaction
An area that is drawing the interest of hospitality researchers is the interaction of customers with each other
Hospitality organizations must manage the interaction of customers to ensure that some do not negatively affect the experience of others

6. Atmosphere’s Effect on Purchase Behavior
Attention-Creating Medium
Message-Creating Medium
Effect-Creating Medium
Mood-Creating Medium
Atmosphere can affect purchase behavior in at least four ways
First, atmosphere may serve as an attention-creating medium
Second, atmosphere may serve as a message-creating medium to the potential customers
Third, atmosphere may serve as an effect-creating medium
Colors, sounds, and textures directly arouse visceral reactions that stimulate the purchase of a product
Finally, environment can be a mood-creating medium
An environmental psychologist has described environments as high load and low load
High and low refer to the information that one receives from the environment
Bright colors, bright lights, loud noises, crowds, and movement are typical elements of a high-load environment, whereas their opposites are characteristic of a low-load environment
A high-load environment creates a playful, adventurous mood, whereas low-load environments create a relaxing mood

7. Customer Interaction with the Service Delivery System
Joining
Consumption
Detachment
The customer participates in the delivery of most hospitality and travel products There are three phases to this involvement: joining, consumption, and detachment
Thinking through these three stages helps management understand how the customer will interact with the service delivery system, resulting in a product designed to fit the needs of the customer
Joining stage
The customer makes the initial inquiry contact
When designing products we must make it easy for people to learn about the new product
This information must be delivered in a professional way
Consumption phase
Takes place when the service is consumed
Designers of hospitality products must understand how guests will interact with the product
The employees, customers, and physical facilities are all part of the product
Physical features, layout, and signage can also be used to help customers interact with the product
Detachment phase
The customer is through using a product and departs

8. Elements of Branding Strategy
Brand Equity
Brand
Portfolios
Brand
Positioning
Building Strong Brands
Brands are powerful assets that must be carefully developed and managed
Some analysts see brands as the major enduring asset of a company, outlasting the company’s specific products and facilities
Brand Equity
Brands are more than just names and symbols, they are a key element in the company's relationships with consumers
Brands represent consumers' perceptions and feelings about a product and its performance—everything that the product means to consumers
Brand equity is the differential effect that knowing the brand name has on customer response to the product and its marketing
It's a measure of the brand's ability to capture consumer preference and loyalty
Brand Positioning
Marketers need to position their brands clearly in target customers' minds
Brand Portfolios
The brand portfolio is the set of all brands and brand particular category or market segment
The hallmark of an optimal brand portfolio is the ability of each brand in it to maximize equity in combination with all the other brands in it
Marketers carefully monitor brand portfolios over time to identify weak brands and kill unprofitable ones
Managing Brands
Companies must manage their brands carefully
Companies need to periodically audit their brands' strengths and weaknesses

9. Brand Positioning Beliefs and Values Benefits Attributes
Marketers need to position their brands clearly in target customers' minds
When positioning a brand, the marketer should establish a mission for the brand and a vision of what the brand must be and do
A brand is the company's promise to deliver a specific set of features, benefits, services, and experiences consistently to buyers
The brand promise must be simple and honest
They can position brands at any of three levels:
At the lowest level they can position the brand on product attributes
However, attributes are the least desirable level for brand positioning
Competitors can easily copy attributes
A brand can be better positioned by associating its name with a desirable benefit
The strongest brands go beyond attribute or benefit positioning - they are positioned on strong beliefs and values
Successful brands engage customers on a deep, emotional level
Attributes

10. New Product Development
Idea
Generation
Idea
Screening
Concept
Development
and Testing
Marketing
Strategy
Business
Analysis
Product
Development
Test
Marketing
Commercialization
To create successful new products, a company must understand its consumers, markets, and competitors and develop products that deliver superior value to customers
It must carry out strong new-product planning and set up a systematic, customer-driven new-product development process for finding and growing new products
Idea Generation
New-product development starts with idea generation—the systematic search for new-product ideas (See Slide 11)
The purpose of idea generation is to create a large number of ideas
Idea Screening
The purpose of screening is to spot good ideas and drop poor ones as quickly as possible
Product development costs rise greatly in later stages, so the company wants to proceed only with ideas that will turn into profitable products
The idea or concept screening stage is the appropriate time to review carefully the question of product line compatibility
Concept Development and Testing
Surviving ideas must now be developed into product concepts
It is important to distinguish between a product idea, a product concept, and a product image
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
Marketing Strategy
The next step is marketing strategy development: designing an initial marketing strategy for introducing the product into the market
The marketing strategy statement consists of three parts
The first part describes the target market, the planned product positioning, and the sales, market share, and profit goals for the first few years
The second part of the marketing strategy statement outlines the product’s planned price, distribution, and marketing budget for the first year
The third part of the marketing strategy statement describes the planned long-run sales, profit goals, and marketing mix strategy
Business Analysis
Business analysis involves a review of the sales, costs, and profit projections to determine whether they satisfy the company’s objectives
Product Development
If the product concept passes the business test, it moves into product development and into a proto type
One problem with developing a prototype is that the prototype is often limited to the core product
Many of the intangible aspects of the product, such as the performance of the employees, cannot be included
Test Marketing
The product and marketing program are introduced into realistic market settings
Market testing allows the marketer to gain experience in marketing the product, to find potential problems, and to learn where more information is needed before the company goes to the great expense of full introduction
Commercialization
If the company goes ahead with commercialization, it will face high costs (See Slide 12)

11. Idea Generation Idea Generation External Environment Internal Sources
External Sources
Crowdsourcing
New-product development starts with idea generation—the systematic search for new-product ideas
Awareness of External Environment
All members of the hospitality industry are highly dependent on the external environment
Recession, inflation, economic growth, terrorists, an aging population, and other external factors all directly affect this industry
Internal Sources
Using internal sources, the company can find new ideas through formal R&D
A danger with this source is that managers and employees may say yes the idea is good when in fact they believe it is abysmal
External Idea Sources
Companies can also obtain good new-product ideas from any of a number of external sources
For example, distributors and suppliers can contribute ideas
Crowdsourcing
More broadly, many companies are now developing crowdsourcing or open-innovation new-product idea programs
Jeff Howe is credited with developing the term
He defines crowdsourcing as “The application of open source principles to fields outside of software”

12. Commercialization Where? To Whom? When? How? Commercialization
Decisions
When?
The first decision is whether it is the right time to introduce the new product
Where?
The company must decide whether to launch the new product in a single location, a region, several regions, the national market, or the international market
To Whom?
Within the rollout markets, the company must target its promotion to the best prospect groups
Management should have determined profiles of prime prospects during earlier market testing
It must now fine-tune its market identification, looking for early adopters, heavy users, and opinion leaders
How?
The company must develop an action plan for introducing the new product into the selected markets and spend the marketing budget on the marketing mix

13. Product Life Cycle
Strategy changes are often the result of changing market and environmental conditions as the product moves through the product life cycle (PLC)
Product development
Begins when the company finds and develops a new product idea
During product development, sales are zero and the company’s investment costs add up
Introduction
A period of slow sales growth as the product is being introduced into the market
Profits are nonexistent at this stage because of the heavy expenses of product introduction
Growth
A period of rapid market acceptance and increasing profits
Maturity
A period of slowdown in sales growth because the product has achieved acceptance by most of its potential buyers
Although sales are still high, profits level off or decline because of increased marketing outlays to defend the product against competition
Decline
The period when sales fall off quickly and profits drop

14. Product Deletion Phase-Out Drop It Run-Out
The product life cycle illustrates that most products will become obsolete and have to be replaced
If a product is no longer profitable, it is important to terminate it rather than continue to pour time and resources into reviving it
If the analysis indicates that the product should be deleted, there are three choices: phase-out, run-out, or drop it immediately
Phase-out
The ideal method; it enables a product to be removed in an orderly fashion
Run-out
Used when sales for an item are low and costs exceed revenues drop
This option is usually chosen when the product may cause harm or complaints
Drop it
It is best to drop the item rather than continuing to create unhappy customer

15. Key Terms
Augmented products Additional consumer services and benefits built around the core and actual products.
Aural The dimension of atmosphere relating to volume and pitch.
Brand 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.
Brand equity The added value endowed on products and services. It may be reflected in the way consumers think, feel, and act with respect to the brand, as well as in the prices, market share, and profitability the brand commands for the firm.
Branding The process of endowing products and services with the power of a brand. It’s all about creating differences between products.
Brand promise The marketer’s vision of what the brand must be and do for consumers.
Consumption phase Takes place when the customer consumes the service.
Core product Answers the question of what the buyer is really buying. Every product is a package of problem- solving services.
Crowdsourcing An open-innovation new-product idea program.

16. Key Terms (cont.)
Decline The period when sales fall off quickly and profits drop.
Detachment phase When the customer is through using the product and departs.
Drop The action taken toward a product that may cause harm or customer dissatisfaction.
Facilitating products Those services or goods that must be present for the guest to use the core product.
Growth The product life-cycle stage when a new product’s sales start climbing quickly.
Introduction The product life-cycle stage when a new product is first distributed and made available for purchase.
Joining stage The product life-cycle stage when the customer makes the initial inquiry contact.
Maturity The stage in a product life cycle when sales growth slows or levels off.
Olfactory The dimension of atmosphere relating to scent and freshness.

17. Key Terms (cont.)
Phase-out The ideal method of removing an unpopular or unprofitable product; it enables a product to be removed in an orderly fashion.
Product concept A detailed version of a product idea stated in meaningful consumer terms.
Product development Developing the product concept into a physical product to ensure that the product idea can be turned into a workable product.
Product idea Envisioning a possible product that company managers might offer to the market..
Product image The way that consumers picture an actual or potential product.
Run-out Removing a product after existing stock has been depleted; used when sales for an item are low and costs exceed revenues, such as the case of a restaurant serving a crabmeat cocktail with sales of only one or two items per week.
Supporting products Extra products offered to add value to the core product and to help to differentiate it from the competition.
Tactile The dimension of atmosphere relating to softness, smoothness, and temperature.
Visual The dimension of atmosphere relating to color, brightness, size, and shape.