DESIGNING AND MANAGING PRODUCTS

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.
PRODUCT LEVELS

Facilitating
Core Products Products

Supporting Augmented
Products Products
 Core Products

 What is the customer REALLY buying

 Buying a Benefit
 Plane ride, hotel room, taxi, food…
 OR
 Cultural enrichment, lifelong memories, a return to one’s roots, adventure,
romance…
 “Don’t sell the Steak, sell the Sizzle”
 Facilitating
Products

 Services or goods that must be present for the guest to use the core
product
 Check-in and check-out services, business center, restaurant, valet…
 Facilitating products for one market segment may be supporting products
for another
 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
• In-room ipod
• Full service spa
Supporting • Hyatt bathroom amenities Supportingfacilitating
• Family don’t require valet and restaurant, but business clients do
Products • Bob Burns and Regent Int Hotels: oversie bathroom, shower products, fresh oj
• Jogging at the Swiss hotel
 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
 What is offered + how it is delivered
Augmented
Products
Accessibility Atmosphere
Augmented
Product
Customer Customer
Participation Interaction
AUGMENTED PRODUCT:
ACCESSIBILITY

 If a product is not accessible it has no value

 Two barriers are hours of operation and lack of knowledge
 Products must be accessible when the guest wants to use them
 AUGMENTED PRODUCT:
ATMOSPHERE
Attention- Message-
 The Physical Environment
Creating Creating
 Atmosphere is a critical element in Medium Medium
services
 It can be the customer’s reason for
choosing to do business with an
establishment
 Atmosphere is appreciated through Effect- Mood-
the senses Creating Creating
 Sensory terms provide descriptions Medium Medium
for the atmosphere of a particular
set of surroundings
 Attention-
AUGMENTED PRODUCT: Creating
Medium
ATMOSHPERE
 Message-
Creating
Medium
 Aloft hotels
 Walls have been knocked
down to create a space
that is open in design and
open to possibilities. A
place where energy
flows, personalities
mingle, and opportunities
abound, A place where
anything can happen.
 Effect-
Creating
Medium
 Scented area revenue 45% greater than non in Casino
 Mood-
Creating
Medium

High load and Low load environments: refers to amount of

information received from environment
Bright lights, loud noises, crowds, movement, bright colors
Spa vs Ibiza or Carnivale
ATMOSPHERE:
CUSTOMER INTERACTION WITH SERVICE DELIVERY SYSTEM

Joining Consumption Detachment

Pre Encounter Encounter Post Encounter

ATMOSPHERE:
CUSTOMER INTERACTION WITH OTHER CUSTOMERS

Construction worker sitting in first class on overbooked flight

Large GITs in same area as FIT
Shangri-La Hotel in Singapore has 3 separate buildings
Skiing culture vs snowboarding culture
 ELEMENTS OF BRANDING STRATEGY
 Brand: 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
 Represent consumers’ perceptions and feelings about a product and its
performance
Former CEO McDonald’s: “If every asset we Brand Equity
own, every building, every piece of equipment
were destroyed in a terrible natural disaster, we
would be able to borrow all the money to replace Brand Brand
it very quickly because of the value of our brand.. Portfolios Positioning
The brand is more valuable than the totality of all
these assets.”
 Brand Equity
BRANDING STRATEGY
 The added value endowed on products and services
 Reflected in ways consumer think, feel, and act with respect to the brand, as well as in
prices, market share, and profitability the brand commands for company
 Present when consumers react more favorably to it than generic or unbranded version of
product
 Young and Rubicam Brand Asset Valuator
 Differentiation – (what makes it stand out)
 Relevance – (how consumer feels it meets their needs)
 Knowledge – (how much consumer knows about brand)
 Esteem – (how highly consumers regard and respect brnad)
 http://www.forbes.com/powerful-brands/list/
BRANDING STRATEGY:
BRAND POSITIONING Brand
Positioning

Beliefs and Values

Benefits

Attributes
 BRANDING STRATEGY:
BRAND POSITIONING

 Co-branding: taking advantage of complementary strengths

 Tim Hortons + Cold Stone Creamery
 BRANDING STRATEGY:
Brand
BRAND PORTFOLIOS Portfolios
 Brand portfolio: set of all brands in a particular category or market segment
 Reasons for introducing multiple brands
1. All segments of target markets do not view the same brand equally or favorably
2. Attracting consumers seeking variety who may otherwise have switched to another brand
3. Increasing internal competition
4. Yielding economies of scale in advertising, sales, merchandising, and physical distribution
NEW PRODUCT DEVELOPMENT PROCESS
Concept
Idea Idea Marketing
Development
Generation Screening Strategy
and Testing

Business Product Test

Commercialization
Analysis Development Marketing

 Companies need to continually develop new products

 Risk is high
IDEA GENERATION

External
Internal Sources
Environment
Idea
Generation
External Sources Crowdsourcing
 IDEA GENERATION
 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: TGIF Fridays and Whataburger (own test kitchens at corporate HQ, try
out 5 new items a year, good ones become permanent)
 -- casual dining restaurants try out about 15 per year
 External sources: distributors, suppliers, competitors, trade magazines,
marketing research firms, university and commercial labs
 Crowdsourcing: invites broad communities of people into the innovation process
– customers, employees, independent researchers, the public at large
 -- web communities
 Idea
Screening

How will the product help us:

 Fulfill our mission
 Meet corporate objectives
 Meet property objectives
 Protect and promote our core business
 Protect and please our key customers
 Better use existing resources
 Support and enhance existing product lines
 Concept
Development
and Testing

 Product Idea: envisions a possible product that might be offered to

consumers
 Product Concept: detailed version stated in meaningful terms
 Product Image: the way consumers picture an actual or potential product
 CONCEPT DEVELOPMENT: CASE OF COURTYARD BY MARRIOTT
 Urban market becoming saturated, so decided to utilize core lodging business to create new
product for secondary sites and suburban locations  Product Idea
 Marketer’s job is to develop this idea into alternative product concepts, determine the
attractiveness of each, and choose the best one
 Conducted research to outline a conceptual framework and product image
 Focused on transient market
 Less than 150 rooms
 Residential image
 No significant cannibalization of other Marriott brands
 Limited-menu restaurant
 Limited public and meeting space
 Standardized product with 5-8 per region
 Marriott “halo” effect
 CONCEPT TESTING
 Conducted within a group of
target consumers
 Word or picture descriptions,
attitude surveys, ranking
configurations
 Marketing
Strategy

1. target market, product positioning, sales goals, market share

goals, profit goals for first few years
2. planned price, distribution, marketing budget for the first year
3. long-run planned sales, profit goals, marketing mix strategy
 Business
Analysis

Review of sales, costs, profit projections to determine whether

they satisfy company objectives
Sales forecast
Cost estimates: from R&D, operations, finance, accounting
departments
 Product
Development

Make one or more physical

prototypes
Guest room prototypes, menu
items run as specials
Courtyard Marriott: Standard,
short and narrow room prototype
 Test
Marketing

 After passing functional and consumer tests

 Introduce product into real market settings
 Gain experience, find potential problems, learn what more info is needed
 Positioning strategy, advertising, pricing, distribution, branding,
packaging, budget levels are all evaluated
 KFC 3 years on grilled chicken
 Commercial-
ization

 Expensive decision to make

 McCafe $100million in first year on ads and promo
 When
 Where
 Few companies able to do immediate national launch
 Regional rollout
 To whom
 How
PRODUCT LIFE CYCLE

 Can describe a
 product class
(fast food
restaurants)
 product form
(fast food
chicken)
 Brand (popeyes)
 PRODUCT LIFE CYCLE
PLC

 Useful for describing how products and markets work but difficult to use for
forecasting product performance or developing marketing strategies
 Hard to know exactly when a product is in each stage
 Way to conceptualize the effect of the market, the environment, and competition and
how product may react to various stimuli
 INTRODUCTION

 Few competitors, basic product versions

 Pioneers advantages and risk
 GROWTH

 Sales grows beyond early adopters

 Competition grows
 Features develop and quality
 Prices remain about the same or drop a little, profit coming from volume
 Enter new segments
 Ads shift from awareness to conviction
 MATURITY
 Typically longest stage
 Supply exceeds demand as sales slow
 Only way to increase sales is price wars and heavy ads
 Most marketing management decisions made in this stage
 Promotional creativity, reinvention, new items, new features
 Market Modification: try to increase consumption
 McD salads, breakfast
 Reposition to attract faster growing segment or larger one
 Product Modification: change product characteristics, quality, features, or style
 Marketing Mix Modification: cut price, creative promo
 DECLINE

 Maintain, harvest, or drop weak products

PRODUCT DELETION

Phase-Out

Drop It Run-Out