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Product Development With In The Hospitality Environment Marketing Essay

2600 words (10 pages) Essay in Marketing

5/12/16 Marketing Reference this

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Price is the only marketing mix element that produces Revenue. All other represent cost. Some experts rate pricing and price competition is the number one problem facing marketing executives. Pricing is the least understood of the marketing variables. Pricing changes are often quick fix made without proper analysis The most common mistake include that is too cost oriented. Pricing that does not take the rest of the marketing mix into account; a pricing mistake can lead to a business failure, even all other element of the business sound. Simply Price is the amount of money charged for a good or service. More broadly price is the sum of the values consumers exchange for the benefits. 7

Use appraisal techniques to analyse and to improve operational performance:- 9

References 10

Analyse the nature of the product:-

People satisfy their needs and wants with products .A product is anything that can be offered to satisfy a need or want. Suppose that an executive feels the need to reduce the stress of his and her job in a highly competitive industry. So the nature of the products that may satisfy this need include a concert, dining at a restaurant, a four day Caribbean vacation, and exercise classes. These products are not desirable .the more available and less expensive products are likely to be purchased.

The concept of product is not limited or physical objects. Anything capable of satisfying a need can be called a product. More broadly defined products include experiences, persons, places, organizations, information, and ideas. Marriott vacation club international, Marriott’s time share resort division, focuses on creating customer experiences. Customers remember vacation experiences. Marriot differentiates itself by creating guest experiences. For example a water rafting trip for its Utah property. Marriott uses the resources of the destination to create guest experiences the guest member for lifetime.

Thus the product includes much more than physical goods or services. Consumers decide which events to experience, which tourist destinations to visit, which hotels to stay in, which restaurant to patronize.

The different influences affecting patterns of demand with in hospitality organization

People have almost unlimited wants, but limited resources .they choose products that produce the satisfaction for their money .human wants that are backed by buying power, wants become demands.

Consumers view products as bundles of benefits and choose those that given them the best bundle for their money. Thus Motel 6 and Sleep inns mean basic accommodations, a low price and convenience the four seasons and Kempinski hotels means luxury, comfort and status .so people choose the product whose benefits add up to the most satisfaction, given their wants and resources .now there are different influences demand for travel and recreation Has become basic to the life styles of people throughout the world. In times economic recessions or gasoline problems people still travel; they may shorten their number of days and length of travel, substituting nearby destinations to more distant ones, but travel does not cease.

Price Elasticity Demand:

Marketer also needs to understand the concept of price elasticity, how responsive demand will be to a change in price considered the two demand curves:

P2

P1

Q1 Q2

Figure 1 Inelastic demand

In figure 1price increases from p1 to p2 leads to small drop in demand from Q1 to Q2.

P2

P1

Q1 Q2

Figure 2 Elastic demand

In figure 2 however the same price increase leads to large drop in demand from Q1to Q2 If demand hardly varies with small change in price we say the is inelastic .if demand changes greatly we say demand is elastic.

%change in quantity demanded

%change in price

Price elasticity of demand

=

Average Spending Power:

The spending power features available income after tax and social contributions. Average spending power depends on every person average income after tax contributions and family income as well. Gross domestic product growth has vastly effected by average spending power.

Product Development with in the hospitality environment:

A company has to be good at developing new products .it has also to be good at managing them in the face of changing tastes, technologies, and competition. Every product seems to go through a life cycle: it is born passes through several phases and eventually dies as younger products come along that better consumer needs. All hospitality companies and travel destinations must continuously be alert to trends and ready to try new products. A company can obtain new products in two ways .one is through

Acquisition – buying a whole company, a patent or a license to produce some else product. As the cost of developing and introducing major new products climbs, many companies acquire existing brands rather than create new ones. Thus Accor acquired Motel 6; Choice acquired Rodeway, Econo lodge, and friendship Inns; and Carnival acquired Holland America, Windstar, Costa, and Seaburn.

A company can also obtain new products through new product development by setting up its own research and development department. Max Schnallinger has been involved in the development of 200 restaurants. He claims that nine out of ten restaurant in the united states fail due to poor market research ,market size has been overestimated, or actual product has not been developed as well it should be. The solution lies in strong new product planning and in setting up a systematic new product development process for finding and maturing new products.

Concept Developing and Testing

Marketing Strategy

Idea Screening

Idea Generation

Commercialisation

Business Analysis

Product Development

Test Marketing

Figure 3 Major stages in new product development

Idea Generation:

New product development starts with idea generation, the systematic search for new ideas. A company typically has to generate many ideas to find a few good ones the search for new product should be systematic rather than haphazard. Otherwise the company risks finding new ideas that will not be compatible with its type of business.

Internal Sources:

One study shows that more than 55 percent of all new product ideas come from with in the company .Companies can find new product through formal research and development .Company brainstorm sessions also produce new product ideas. The company’s sales people are another good source because they are in daily contact with customer.

Customer:

Almost 28 percent of new product ideas come from watching and listening to customers. Consumer needs and wants can be examined through consumer surveys. The company can analyze customer question and complaints to find new products that better solve consumer problems. Company management and sales people can meet with customer to obtain customer suggestions and customer feedback.

Tourism destination planners and marketers must have a system to obtain feedback from visitors .they must also be aware of national and international trends affecting visitors choices of vacation destinations.

Ecotourism has become a product line for hospitality companies and visitors destinations .The demand for ecotourism has forced visitor destinations to find a way to blend this new product with traditional product offering and to preserve the essence of ecotourism.

Competitors:

About 27percent of new product ideas come from analyzing competitors products .Many competitors buy competing new products, see how they are made, analyze their sales ,decide whether they should bring out new products of their own .A company also watch competitors ads and other communications to obtain clues about new product.

Distributors and suppliers:

Distributors are close to the market and can pass along information about consumer problems and new product possibilities .Suppliers can tell the company about new concepts, techniques and materials that can be used to develop new products.

Other sources:

Other idea sources include trade magazines ,shows, and seminars; government agencies; new product consultants ;advertising agencies; marketing research firms; university and commercial laboratories; and inventors.

Idea Screening:

The purpose of screening is to spot good ideas and drop poor ones as quickly as possible. The idea or concept screening stage is the appropriate time to review carefully the question of product line compatibility a common error in new product development Is to introduced products that are incompatible with the company.

How will the product assist us to:

Fulfil our mission?

Meet corporate objectives?

Meet property objectives?

Protect and promote our core business?

Protect and please our key customers?

Better utilize existing resources?

Support and enhance existing product lines?

Concept Development and testing:

Surviving ideas must now be developed into product concepts. It is in important distinguish between a product idea and product concept, and product image .A product concept is a detailed version of the idea stated in meaningful consumer terms. A product image is the way that customers picture an actual or potential product.

In the late 1970’s Marriott recognized that the urban market of its current hotel produces was becoming saturated .They needed a hotel concept that would work in secondary sites and suburban locations. Marriott decided to focus its assets on the company’s core business, lodging, through the development of anew product.

Concept testing occurs within a group of target consumers. New product concepts may be presented through word or picture descriptions. Marriott tested Courtyard motel using a statistical technique called conjoint analysis.

Marketing Strategy:

The next steps marketing strategy development designing an initial marketing strategy for introducing the product into the market. The marketing statement consists of three parts. The Target Market, The planned Product positioning, and the sales, market share and profit goals for the first few years.

Business Analysis:

Once management decides on the product concept and marketing strategy, it can evaluate the business attractiveness of the proposal. Business analysis involves a review of the sales, costs, and profit projections to determine whether they satisfy company’s objectives. If they do, the product can move to the product development stage.

Pricing and Profitability concepts with in the hospitality operations:-

Price is the only marketing mix element that produces Revenue. All other represent cost. Some experts rate pricing and price competition is the number one problem facing marketing executives. Pricing is the least understood of the marketing variables. Pricing changes are often quick fix made without proper analysis The most common mistake include that is too cost oriented. Pricing that does not take the rest of the marketing mix into account; a pricing mistake can lead to a business failure, even all other element of the business sound. Simply Price is the amount of money charged for a good or service. More broadly price is the sum of the values consumers exchange for the benefits.

Hospitality marketers must consider when setting prices, general approaches, pricing strategies for new product, product mix pricing, initiating and responding to price changes and adjusting prices to meet buyer and situational factors. Internal and external factors affect a company’s pricing decisions. Internal factors include the company’s marketing objectives, marketing mix strategy, costs, and organizational consideration. External factors include the nature of the market, demand Competition and other environmental elements.

Internal Factors affecting pricing decisions:

Before establishing price, a company must select a product strategy. If the company has selected a target market and positioned itself carefully, its marketing mix strategy, including price, will be more precise. For example four seasons hotel position its hotel as luxury hotels. The clearer a firm is about its objectives, the easier it is to set price .examples of common objectives are survival short run profit maximisation, market share maximization, and product quality leadership. There are some different concepts for pricing

Such as Brand equity Growth that brand equity can cause a significant increase in revenue and that lack of brand equity in hospitality firms can damage potential cash Flow result less profit .And Product -Quality leadership such as Ritz-Carlton and Groen charge more for their products, but they also reinvest in their operations continuously to maintain positions as quality leader. Costs take two forms Fixed and variable cost in the long run management must charge a price that will at least cover total costs at a given level of sales.

External factors Affecting Pricing decisions:

Market and demand:

Although costs set the lower of prices ,the market and demand set he upper limit .both consumer and channel buyers such has tour wholesalers balance the product’s price against the benefits provides, thus before setting prices ,a marketer must understand the relationship between price and demand for product.

Cross-Selling and Up Selling:

A hotel can cross sell F&B, exercise room services, and executive support services such as fax and can even retail products ranging from hand dipped chocolates to terry cloth bathrobes. Up selling also part of the effective revenue management. This occurs through training of sales and reservations employees to continuously offer a higher -priced product, rather than settling for the lowest price.

Consumer perception of price and Value:

In the End it is the consumer who decides whether a products price right .When setting the prices, management must consider how consumer perceive price and the ways that these perceptions affect consumer buying decisions.

Segmented pricing:

‘The right product to the right customer at the right time at right price’. Like Galveston opera house company’s ticket service manager and staff sat in every one of the opera house’s 2200 seats and gave each value according to the view and acoustics. Airlines, hotels and restaurant calls it yields management. Then the opera company has 9% profit increased than previous year of traditional pricing.

Use appraisal techniques to analyse and to improve operational performance:-

Appraisal is a systematic assessment of how effectively each job is being performed. Appraisal also tries to identify the reasons for particular level of performance and to seek ways to improve future performance.

As far as the personal determinants of job performance are concerned, the first stage in any appraisal system is to identify how the individuals’ abilities, skills and motivations interact to determine his and her effectiveness. Since a key objective of any appraisal system is to find mutually agreed ways of improving performance, it is vital that Appraiser and appraisee agree not only current performance but on what needs to be done to improve it.

Appraisal interview:

The success of any appraisal system depends on the appraisal interview such interviews are understandably delicate ,since the appraiser has to discuss perceived shortcoming and inadequacies, as well as strengths, with individuals with whom a good relationships has to be maintained in the future.

Training:

Many organizations allocate a substantial proportion of their budget to training and development. Identifications of training needs, design of training programme, Training content, training process and learning principles, Evaluation of training, Management training is the key stages of the appraisal system.

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