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Chapter 4: PRODUCT DEVELOPMENT, Stages in Product Development, Nguyen Linh…
Chapter 4: PRODUCT DEVELOPMENT
Itinerary Development (or Review)
planning a new itinerary is a complex, critical procedure
operator need to provide maximum satisfaction while remain profitable
operator must acertain component of the package, logistics, transport, activities, excursions and suppliers
TO design new package and review current offering => make changes
Stages in Product Development
Planning a Packaged Holiday
small, specialist TO will create an itinerary in shorter development time
the construction needs to follow a similar process
takes on average 18 months to develop
1. Review, research and planning
Review company strategy and objectives, profitability and performance
creation should meet the needs of long term business objectives
the principal short-term objective is to stay in business and make a profit for the owners
it is essential for TO to conduct research to determine the destinations, prices, capacity and type of holiday to be offered
research include review of the company's performance + identify changes/trends in demand
review of the market
: predict growth opportunities and changes in consumer demand
DESTINATION:
traditional -> popular; political instability -> decline; Asia -> good value remain popular
TRANSPORTATION:
the accessibility => the type of holiday that can be offered
ACCOMMODATION:
varies in attractiveness to different markets
DURATION:
packages and tours must be planned with a specific duration
HOLIDAY TYPE:
technology changes => further afield are more readily access
Identification of trends:
is key to develop new products
analysis
of company's existing product(s) and competitive position
INTERNAL SALE DATA
examination and detailed analysis of previous year's sale
acertain consumer trends
identify destinations and products that are exceeding expectation and products fail to meet target
EXTERNAL DATA AND COMPETITOR ANALYSIS
identify trends in provision
MARKET RESEARCH REPORTS AND MEDIA
CUSTOMER SATISFACTION AND FEEDBACK
originate from the strategic direction of the company and their business objectives
Review current portfolio
Portfolio: a range of products aimed at different markets
board portfolio
offer many products to different market group
spread the risk if a downturn in one destination's attractiveness or demand
narrow portfolio
run the risk of being susceptible
focuses on few, even one, market segment
MANAGEMENT TOOL
BCG Matrix
useful, albeit simplistic tool
help companies focus and allocate their resource efficiently
CASH COW:
high market share, low market growth; mature products needing little amendment or investment
DOGS
low market share and little opportunity for growth => require major rethinking and rejuvenating/best deleted
STARS
high market share, growing rapidly market; require substantial investment; long-term desire to become cash cow
QUESTION MARK:
product of uncertain future; have high market growth and low market share; high-risk strategy
Product life cycle
describe the growth trajectory for the product from their introduction to their decline
product at different stages will vary
2. Second stage of research
mass market operator are looking for suitable destinations
evaluate the available options
small operators will invest less in the destination and may be able to switch destination if the product fails
3.Product planning
Itinerary planning
the core, tangible product, augmented product (Kotler)
tangible product
transport from the generating area to the destination
accommodation
transfer from the accommodation and return
ancillary services
Costing
identify the approximate price of the package
operator may review the proposed package and compare
provide information about how customers will perceive the product
Capacity
refers to number of holidays, decided 12-18 months ahead the holiday
confirmed 12 months prior to departure date
poorly planned can lead to overcapacity or under capacity
Overcapacity
TO contracts to provide more package than there is a demand
any reduction will affect the profit margin
Under capacity
TO has fewer holidays to supply than market demand
TO loses sale and repeat booking
adding can be problematic. Smaller TO may be able to negotiate but not will discounted price
Marketing material
provisional plan for marketing materials will be costed
initial tender for design, production and printing
4. Contracting
carried out by senior members
require negotiate skill, in-depth knowledge
large TO: have specialist, contracting department
small TO: don't have specific department => TO's role
contract fails => company unlikely to achieve the market share extend; maintain customer loyalty be problematic
Accommodation
Identified through site visits, promotional events, staff
negotiated directly with owners/managers
large TO => cheap price; small TO => may not be able to secure the price
hotelier will spread room => reduce the risk of being reliant on one company
Types of contract
Commitment
TO agrees to buy a predefined number of beds, regardless the sell number. TO will pay
offers very little flexibility
used by operators in well-established destinations in mass market
Allocation
TO will agree with the hotel a defined number of room, which they will use
can be used for specific period
used by small and medium-sized operators
reduce financial risk for operators, more expensive than a commitment contract
(for hotelier) riskier
Ad hoc.
costliest
no risk to TO
buying room when needed
used by organizers offering tailor-made itineraries and specialist operator
TO may have to use when overbooking
need to specify the exact requirement: board basis, additional service, further additions added
Transport
FLIGHTS
account for 40% overall package hoiday package price
majority of TO do not own their own aircraft => need to reserve seats on scheduled airline or charter craft
Whole season chatering
part chartering - booking a block of seats on specific flights
ad hoc chartering - an arrangement for single return-trip
time series chartering - contract for regular sequence of flights
Whole season/time series chartering
TO charters a whole aircraft for a specific period
do not operate due to published schedule
planned in a way that air time is maximized
problematic due to delay one destination -> delay subsequent flights
expensive and high-risk
low-cost per seat
flexibility in terms of destinations
Part charter
LCC
more flexible
greater levels of differential pricing
enabling customer to build their own travel experience
facilitate the growth in dynamic packaging for TO and TA
Scheduled flights
used by long-haul operator, specialist
operate regard of number
allows greater flexibility
Landed-based airport
transfer from airport to accommodation, excursion,...
Tranfers
Car hire
Ancillary products and service
may work with the local
contracted for season/allocate
5. Brochure production
key element of promotional material
take time to prepare
6. Finalize sales and marketing plan
Sales staff training
for in-house sale and travel agencies retailing
staff can share their experience with sale team
agents are knowledgeable about specific product => likely to recommend to customers
Program: webinar, fam trip, online program traning
7. Operations and administrative staff training
Operations staffs training
: ensure staff are aware of the new product, confirm to make sure products are ready
Administrative staff training:
additional staff to deal with anticipated demand
Recruit specialist staff:
reps from generating region understand culture; local reps have better insight ; rep within the destination may be less expensive
8. Product launch and subsequent evaluation of scale
deal with any issues
immediate feedback are essential
operator reviews booking stantaneously
season commence: TO think how to increase sale
relaunch brochures, use allocation on arrival, cheaper hotels
9. Product review and post tour management, including quality review
comparing predicted sales with achieved sales and reflect on discounting
make decision about capacity for the next season
assess how holiday performing
amend product if there have been repetitive difficulties
Nguyen Linh Phuong - 1114030