1. Chapter 9 Designing and Managing Products

2. “Profit is payment you get when you take advantage of change
“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 Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

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

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

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

6. Product Levels Core Product Facilitating Products Supporting Products
Core Competency
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
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7. Core Product What the buyer is really buying
Every product is a package of problem-solving services
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
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8. Facilitating Products
Goods or services that must be present for the guest to use the core product
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

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

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

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

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

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

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

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

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

18. (Scott Davis, Brand Asset Management)
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
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

41. Decline
Decline is the period when sales fall off quickly and profits drop
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
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42. Product Deletion Process
(Martin Bell, Marketing Concepts and Strategy, 3rd ed., p.267, 1979, Houghton Mifflin Company; used by permission, Mrs.. Marcellette (Bell) Chapman. )
©2006 Pearson Education, Inc Marketing for Hospitality and Tourism, 4th edition
Upper Saddle River, NJ Kotler, Bowen, and Makens