NEW-PRODUCT DEVELOPMENT IN TOURISM COMPANIES CASE STUDIES ON NATURE-BASED ACTIVITY OPERATORS Raija Komppula University of Joensuu Department of Economics Box 111 FIN-80101 JOENSUU Raija. [email protected] fi ABSTRACT New product development in tourism companies has been a nearly ignored theme in tourism marketing literature. Research on product development has in major studies handled destinations, development of resorts or sites as a total tourist product.

This paper will introduce two case studies, which will aim to help us to identify the major problems as well as key phases of the new product development process in a small tourism company. The two examples represent Finnish activity operators, which at the moment have the challenge to innovate more and more attractive activities to fulfil the customers needs for emotional experiences.

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The theoretical framework for the study is based on the traditional product (and services) development theory, which suggests it to be a process of following stages: idea generation, service concept development and evaluation, business analysis, service development and testing, market testing, commercialisation and postintroduction evaluation. Based on the existing literature and our case studies we try to evaluate the usefulness of the traditional product development model in small tourism business marketing. We also try to present an advanced model for new product development in a small tourism company.

Raija Komppula 1. INTRODUCTION 1 In the general marketing literature there has been a considerable amount of research carried out into new product development, the majority of which is based on manufacturing industries, but relatively less attention has been given to services (Edget 1994, Jones 1995, Kelly & Storey 2000). Although product development is a prerequisite for satisfying tourists needs and changing demands as well as insuring the profitability of the industry, new-product development in tourism companies has been a nearly ignored theme in tourism marketing literature.

There has been very little interest in the new product development processes in small scale tourism companies, how the new innovations are developed into product concepts in individual tourism companies, although especially in rural tourism development projects all over the Europe the authorities and marketing organisations call for new tourist products. The research on product development in tourism marketing is dominated by research on destination development, representing in most cases planning approach (see e. . Gunn 1988, Pearce 1989). In the literature of destination development, destination planning and destination marketing a destination is viewed as an amalgam of individual products and experience opportunities that combine to form a total experience of the area visited ( Murphy, Pritchard & Smith 2000, 44). Medlik and Middleton (1973) suggest that the destination product consists of five components: destination attractions, destination facilities, accessibility, images and price.

This ”components model” has been later borrowed by numerous authors. Middleton (1989) also has introduced the term total tourist product (1989) or the overall tourism product (Middleton & Clarke 2001). He suggests that ”from the standpoint of a potential customer considering any form of tourist visit, the product may be defined as a bundle or package of tangible and intangible components, based on activity at a destination. The package is perceived by the tourist as an experience, available at a price” (Middleton & Clarke 2001, 124-125).

This tourist product can be divided in two levels: the total level referring to the complete experience of the tourist from the time one leaves home to the time one returns, being synonymous with the components model. The other level is the specific level, which is that of a discrete product offered by a single business. (Middleton 1989, Middleton & Clarke 2001) 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 2 Although tourism and travelling is regarded as a service industry the authors in tourism marketing literature (see eg.

Middleton 1989, Middleton & Clarke 2001, Holloway & Robinson 1995, Seaton & Bennet, Smith 1994 ) use the term ”product” instead of the term ”service” when they refer to the offering of the company targeted for the customer. Authors often refer to the service marketing literature when introducing the characteristics of the industry but use the traditional marketing management terminology when discussing the product/service. In this article we try to combine the terminologies of tourism marketing, services marketing and product development and focus on the specific tourist products produced by individual tourism businesses.

Our aim is to discuss the product development, especially the new-product formulation in small tourism businesses. There has been little interest in the research field in new-product development processes in small scale tourism companies, how the new innovations are developed into product concepts in individual tourism companies, although especially in rural tourism development projects all over the Europe the authorities and marketing organisations call for new tourist products.

The aim of this paper is to illustrate the processes through which the companies manage to satisfy the changing needs of their customers by producing new product offerings. In chapter two we first discuss the components of the specific tourist product produced by an individual company as well as the need for new product development. In chapter three we introduce the traditional model for new-product development suggested in the literature.

In chapter four we introduce two case studies, interviews of two nature based activity operators. Based on these interviews and the literature we suggest a tentative model for new tourist product development in chapter five. 2. COMPONENTS OF THE SPECIFIC TOURIST PRODUCT According to Middleton and Clarke (2001) the tourist product means customer value, which is “the perceived benefits provided to meet the customer’s needs and wants, quality of service received, and the value for money”(Middleton & Clarke 2001, 89).

The tourist product is fundamentally a complex human experience (Gunn 1988), which is an output of a production process, where the tourist utilises the facilities and services to generate the final output, experience (Smith 1994, 590591). Value is added in each stage of the production process and the consumer is an integral part of the process (Smith 1994). The experience is a customer outcome, which, in the eyes of the customer, is assosiated with added value and quality. This outcome is created and interpreted during 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland

Raija Komppula 3 the customer process, which have been developed and organised by the service company. (Edvardsson & Olsson 1999). The three levels of a tourist product are the core product, the formal (or tangible) product and the augmented product (Middleton & Clarke 2001; Kotler, Bowen & Makens 1999; see also Levitt 1981, and Gronroos e. g. 1990). The core product, the idea, the key message, is the essential service or benefit designed to satisfy the identified needs of target customer segments.

The formal product means the specific offer for sale stating what a customer will receive for the money. This tangible product is a marketing interpretation that turns the core into a specific offer. It contains the facilitating products, the services and goods that must be present for the guest to use the core product as well as some extra supporting products. The brochure description of the formal product forms the basis for the sale. The terms product design or “physical evidence” are identified as one way to differentiate the formal product. (Middleton & Clarke 2001, 129; Kotler et al. 999, 274275) The augmented product comprises all the forms of added value producers build into their formal product offers to make them more attractive. It comprises the difference between the contractual essentials of the formal product and the totality of all the benefits experienced in relation to the delivery of the product. The brand or the image of the product is always part of augmentation. (Middleton & Clarke 2001, 129) The augmented product may contain supporting products which are extra offered to add value to the core product and help to differentiate it from the competition.

Kotler et. al. (1999) suggest that accessibility, atmosphere (see also Murphy et. al. 2000, 45-46) customer interaction with the service organisation and customer participation are components of the augmented product. ( Kotler et. al. 1999, 274-275) The model of a generic tourism product presented by Smith (1994 ) poses a product concept that consists of the elements of the tourism product and the process by which those elements are assembled. The relative importance of each element varies, depending on the specific type of product, but all tourist products incorporate all five.

The model explicitly acknowledges the role of human experience in the tourist product. The generic product may take a wide variety of real forms, but each form of same generic product will provide the same function, which in the case of tourism is the facilitation of travel and activity of individuals away from their usual environment. (Smith 1994) According to Smith (1994) the core of any tourism product is the physical plant, which refers to the place and the conditions of the physical environment, such as weather, water, infrastructure etc. The 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland

Raija Komppula 4 physical plant requires the input of the services to make it useful for tourists. By the services Smith refers to the performance of specific tasks required to meet the needs of tourists (e. g. front desk operations at a hotel, food and beverages provisions etc). The third component of the tourist product is hospitality, which is ”the something extra”, the fulfilled expectation of the tourist. The fourth component is the tourist’s freedom of choice, which refers to the necessity that the traveller has some acceptable range of option in order for experience to be satisfactory.

The fifth and the outermost element of the figure 1 is the customer involvement, which refers to the fact that the customer participation is a relevant part of a service process. The basis for successful participation by consumers in producing tourist products is the combination of an acceptable physical plant, good service, hospitality and freedom of choice. Involvement is not only a physical participation, but a sense of engagement, of focusing on the activity.

The progression of elements from the core to the shell is correlated with declining direct management control, increasing consumer involvement, increasing intangibility and decreasing potential for empirical measurement. FIGURE 1. The Generic Tourism Product (Smith 1994, 587) I FC H S PP 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 5 Smith’s model seems to accept the argument indicated by Middleton (1989) that the tourist product is based on some kind of an activity at a destination. The activities are tied to the physical plant, the place, as well as the services available.

The importance of the services (e. g. nature based activities) and the place element (physical plant) for the customer vary depending on the primary and secondary needs of the customer. The primary needs (core needs) are those which act as a reason why the customer experiences a certain need, for instance, one might have a need to meet someone in an other country for a business reason. This need can be satisfied by several means of travel opportunities. When a customer has decided to travel for some primary need, the secondary needs (underlying needs) arise: how to travel, what criterias are used to evaluate the options, etc. Edvardsson & Olsson 1999, Middleton & Clarke 2001) Core needs are those which give rise to the demand for travelling and the underlying needs are implicit in the demand of a particular way of travelling. Smith’s terminology and perspective is derived from a production orientated approach, which emphasizes outputs and phases rather than consumer benefits and outcomes. Lumsdon (1997 offers an alternative view and argues that the benefits to the customer are delivered only if the service provider and the customer are central to the model. Instead of a tourist product he uses a term tourist offering.

According to him in tourism the core benefits and service interaction dominate and therefore they constitute a tourism offering, which can be defined as a combination of services which deliver primarily intangible, sensual and psychological benefits but also include some tangible elements. He argues that the concepts of core product and augmented product presented by Kotler, “.. are one and the same in tourism, because of the underlying principle of inseparability, i. e. consumption and provision occur at the same time and place. The core bundle of benefits accrue from the degree of satisfactory interaction. (Lumsdon, 1997, 141-142) A modified framework of the tourism offering set out by Lumsdon (1997) illustrates the point: it places the service offering within tourism as a central component (Lumsdon 1997, 142) 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 6 Physical evidence - Decor - Staff Dress - Furniture - Colour scheme - Materials - Iconic features - Image Processes: - Responce systems - Reception - Ticketing/billing - Queuing - Staff procedures People: - Staff training - Staff responsiveness - Level of staffing - Counters

Core service offering: - Actual level of service - Customer image and expectations - Perceptions of value - Atmosphere, ‘feel good’ factor FIGURE 2. The tourism offering: a modified framework (Lumsdon 1997, 142) The arguments of core service offering introduced by Lumsdon (1997) can be supported by findings of Edvardsson and Olsson (1999), who argue that the service company does not provide the service but the prerequisites for the various services. The company sells opportunities for services which are generated in partially unique customer processes.

The central goal of service development is to develop the best and right prerequisites for well-functioning customer processes and attractive customer outcomes. The prerequisites for the service are the end-result of the service development process. The right prerequisites can be described by a model with three basic components: service concept, service process and service system. (Edvardsson & Olsson 1999). The term service concept refers to the description of the customer’s needs and how they are to be satisfied. Service process relates to the chain of activities that must function properly if the service is to be produced.

Special attention should be paid to some critical activities so that the customer process and the customer outcome achieve the right quality at reasonable cost. The service process 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 7 consists of clear description of the various activities needed to generate the service. The service system constitutes the resources ( staff, the physical/technical environment, organisation structure, the customers) that are required by or are available to the service process in order to realise the service concept. Edvardsson & Olsson 1999) The core of the tourist product is the idea of the experience, activities in a destination, which are to satisfy the primary and the secondary needs of the traveller. This core product can be seen as a service concept which refers to the prototype for the service, i. e. , the customer utility and the benefits, which the tourist product intents to provide and convey to the customer. The description of the service process of the tourist product includes the definition of the formal product. For the customer it is expressed in a form of a brochure or an offer.

In the company and for the staff the formal product might mean the determination and definition of the chain of activities in the customer process and the production process. This chain can be illustrated as a service blueprint. The key components of service blueprints are the customer actions, “onstage” contact employee actions, “backstage” contact employee actions and support processes. The customer actions area displays the actions that customer performs in the process of purchasing, consuming and evaluating the service. Employees actions that are visible to the customer are the onstage employee actions.

Contact Employee actions that takes place behind the scenes to support the onstage activities are the backstage contact employee actions. The support process covers the internal services, steps and interactions that support the contact employees in delivering the service. The four key action area are separated by three horizontal lines. The line of interaction represent the direct interaction between customer and the organisation. Line of visibility separates all service activities that are visible to the customer from those that are not.

This line also separates what the contact employees do onstage from what they do backstage. Line of internal interaction separates contact employee activities from those of other service support activities and people. (Zeithaml & Bitner 1996, 206207). Service system includes the resources available to the service process for realising the service concept. This means the involvement of the service company’s staff, the customers, the physical and technical environment as well as the organisation and control of these resources.

The hospitality element of the tourist product is produced mainly by the staff and other customers. Freedom of choice and the customer involvement are highly dependent of the service process, the customer himself as well as the physical environment. All these together, the service concept, the service process and the service system create the prerequisites of the tourist experience, the augmented 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 8 product, the very intangible expectations, which will or ill not be fulfilled as the outcome of the customer process. 3. DEVELOPMENT OF A NEW TOURIST PRODUCT – A PRODUCT FORMULATION VIEW To stay ahead of the competition, proactive tourism companies must constantly look for new product innovations. The traditional product life cycle theory indicates that typically a product will have a s-curve with stages of growth, maturity, saturation and decline in sales and profits. This theoretical model seems to hold true also for tourist products, which means that the question of product development and new- product innovations is important in tourism companies.

It is sometimes difficult to define what is meant by a new product. Improvements to an existing product can render that product so new as to make it seen by prospective purchasers as a genuinly new product, and if an existing product is launched to a new market or to other purposes, that product is also new for the customer. In most cases the tourist products are advances on and modifications of existing products. According to Zeithaml and Bitner (1996) the types of new product options vary from major innovations to minor style changes.

Major innovations are new services for markets as yet undefined. Startup businesses consist of new services for a market that is already served by existing products that meet the same generic needs. New services for the currently served market represent attempts to offer existing customers a service not previously available from the company, although it may be available from other companies. Service line extentions represent augmentations of the existing service line, service improvements represent the most common type of service innovation.

Style changes represent the most modest service innovations, although they are often highly visible and can have significant effects on customer perceptions. The service management literature points out that new-product development in service industries should follow a structured planning framework (see e. g. Lovelock, Vandermerwe & Lewis 1999, Zeithaml & Bitner 1996). The fact that services are intangible makes it even more imperative for a new-product development system to have certain basic characteristics. The evelopment must be based on objective data about customer perceptions and market needs, not on the basis of managers’ or employees’ subjective opinions. Employees frequently are the service or at least deliver the service, which makes their involvement in new-product development highly important. Customers can help the design the service concept and the service process particularly in tourism businesses 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 9 where the customer personally carries out a major part of the service process. Shostack 1984, Zeithaml & Bitner 1996) An underlying assumption of new-product development process models is that new-product ideas can be dropped at any stage of the process if they do not satisfy the criteria for success at the particular stage. The process can be divided into to sections: front end planning and implementation (see figure 4). The front end determines what service concepts will be developed. The organisation is assumed to have an overall strategic vision and mission, which determine the new-product strategies of the organisation. Zeithaml & Bitner 1996, 197-200) The different strategic options for new-product strategies are presented in figure 3. Markets Existing markets/ Current Customers MARKET PENETRATION: modification to existing product for present market SERVICE DEVELOPMENT: introduce new product to present market New markets/ New Customers MARKET DEVELOPMENT: reposition present product to attract new market DIVERSIFICATION: launch of new product to new market Offerings Existing Products New Products FIGURE 3: New-tourist-product strategy matrix for identifying growth opportunities (Modified from: Zeithaml & Bitner 1996, 201; Holloway & Robinson 1995, 82)

The first actual step in the new-service development (NSD) is the idea generation, which can be systematic search of new ideas. Typical sources of ideas may be formal brainstorming, solicitation of ideas from employees and customers, lead-user research, learning about competitors offerings etc. According to studies referred by Kotler et. al. 1999 more than the half of the new-product ideas come from within the company, one quarter comes from customers and the rest mainly from competitors. During the idea generation a large number of ideas are often created.

The purpose of screening the ideas is to reduce the number of ideas. The idea screening is the appropriate time to review carefully the question of product line compability. (Kotler et. al. 1999, 291-292; Zeithaml & Bitner 1996, 202). The key questions to ask when screening product ideas are, if there is a market for the 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 10 product, if the product is a right one for the company product strategy and if the product can be produced profitably (Morgan 1996).

A clear definition of the service concept should be the outcome of the service development and evaluation stage. The new service concept would then to be evaluated by employees and customers. The next step is to determine the feasibility and potential profit implications. Demand analysis, revenue projections, cost analyses, and operational feasibility are assessed at this stage. The stage will involve preliminary assumptions about the costs of hiring and training personnel, delivery system enhancements, facility changes and any other projected costs. Zeithaml & Bitner 1996) Once the new service concept has passed all the front-end planning stages, the concept is ready for the implementation stages. During this phase, the concept is refined to the point where a detailed service blueprint representing the implementation plan for the service can be produced and tested by the personnel. The market testing phase is in tourism industry often implemented by introducing the new tourist product to a certain group of customers or representatives of intermediary stakeholders.

If the product has passed all the former stages the service goes live and is introduced to the marketplace (commercialisation). A very important phase is the postintroduction evaluation. At this point, the information gathered during commercialisation can be reviewed and changes made to the delivery process, staffing or marketing-mix variables. (Zeithaml & Bitner 1996) In the next page the figure 4 illustrates the New-Service development process (Zeithaml & Bitner 1996, 200), which represents a traditional model for NPD. 0th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 11 • Business Strategy Development or Review • • Front-End Planning • New-Service Strategy Development Idea Generation Screen ideas against new service strategy Concept Development and Evaluation Test concept with customers and employees • Business Analysis Test for profitability and feasibility • Service Development and Testing Conduct service prototype test Implementations • Market testing Test Service and other marketing-mix elements • Commercialization Posintroduction Evaluation 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 12 4. DEVELOPING A NEW TOURIST PRODUCT – CASE STUDIES AMONG NATURE BASED ACTIVITY OPERATORS In this chapter we will introduce two short case descriptions. The aim of the interviews was to find out how the small activity operators in nature-based tourism industry in Finland develop their product line and how is their new-product development process like in reality.

The two cases were chosen to represent similar kind of businesses: both companies offer nature based activity services for the same target group, business sector. Their product are divided into corporate entertainment products, incentive products and nature-based activities for other groups of customers. For both companies the local based corporate entertainment means nearly half of the income. Both companies operate from and have their base (office) in the same town. These companies are both limited companies and are run by two male entrepreneurs.

In the nature-based activity service sector these types of companies are common in Finland in terms of size, mode of operations, age of the company and the background of the entrepreneurs. In this branch of tourism businesses the customer involvement and the activity itself is crucial. Co-operation with the accommodation business is inevitable, if the operator does not have own accommodation facilities. Case 1. This company was founded in the middle of 1990s, when an old company, which had been one of the pioneers in nature-based activity sector in the area, had gone bankrupt.

A couple of friends of the former entrepreneur bought the base of the company as well as the equipment and founded a new company to continue the operations. During the last two years the ownership as well as the operative management of the company concentrated to the two guys who run the business today. The new company had “inherited” a good and successful product line with a core product based on a certain physical plant, a river with rapids, by which they have a base with smoke sauna, shelters etc. The base is situated about 100 km from the office base, were the equipment are stored.

The office situates in the town where the main demand for the corporate entertainment products is originated. At the moment the company has another base near the airport in that town. The third base is situated in a national park about 60 km from the town. According to the entrepreneurs the basis of their new-product development lies on their business mission, which refers to producing nature-based experiences for the chosen target groups in a certain area. The need for new-product development arises from the customer needs: in most of the cases the existing customers need new experiences.

The marketing strategy and the promotion 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 13 budgets have been modest: the entrepreneurs have concentrated in answering inquires rather than looking for new clients. The word-of-mouth promotion as well as the loyalty of existing customers has directed their strategy to service development (introduce new products to present customers) and market penetration (modification of existing products for present customers). Market development (repositioning present products o attract new markets) has been considered and practised within a couple of tourism networking and marketing projects run by consultants and funded by the regional development authorities. These projects have targeted to European markets, but the limited staff resources have been the reason for the minor opportunities to make larger inputs in market development. The new-product ideas are in most cases based on the opportunities of the three bases or other physical plants available. The idea generation is derived from the capabilities of the owners as well as their own interests.

The company has also conducted a market research on the trends in naturebased activity interests in Finnish business markets. In most cases the need for new-product development comes from an existing client who wants to do something else than before. The service concept, the core product is build on an idea of e. g. hard adventure, soft adventure, water sports etc. The concept is then developed in accordance to the limiting factors of the company resources, what is possible. The next step is the development and evaluation of the service process.

First the blueprint of the processes is built and then the process is tested by own staff and family members or friends. Modules such as transportation, accommodation, meals and different activities are scheduled. During this process also the costs are evaluated. After the first testing the formal tourist product for the customer, the offering, is created and the first customer testing group is invited to evaluate the product. In most cases the test groups consist of staff from local or regional tourist organisations, which serve as intermediaries of the products.

The market testing and commercialisation phases can in this company not be separated. When a new product has got its formal form, it is offered for the customers. Some products sell as such, most of the offerings have to be modified, modules have to be changed etc. The core product may live and the modifications of it, the formal products, may form a new product line. But in most cases the core as well as the formal products sell only a couple of times and the company keeps on the basic old products. The entrepreneurs do not pay much attention to the reasons of these failures but keep on enerating new ideas. 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula Case 2. 14 The company in case 2 has started the operations in the area a couple of years ago. The enterprise is run by two guys who both are trained wilderness guides. The other guy is originally foreigner but has lived a long time in Finland and speaks fluent Finnish. This means that certain segments in his home country constitute a great part of their targeted marketing, although at the moment the companies in the nearby region still represent the major part of their clients.

The company has no own base for the activities but the office and equipment store is situated in connection with a hotel in the city centre. This gives the company a great competitive advantage in terms of groups living at the hotel. The need for new-product development process usually starts from either a client or a travel agency asking for something new or different for groups that already have tried everything. A lot of the new products start from clients’ questions. The other reason comes from the company: they have to have new products for customers that constantly use their services.

The client, which is normally a company, may come back only two or three times after the same kind of activity. The operator have to create new products every year for certain clients, which means that many of the new products have been once tailored for a certain company. About 50 % of the turnover consists of certain basic programs, which are more or less variations of specific products. When a new-product need arises, the operator must first narrow down the possibilities: safety parameters, budget, limits of implementation, time factors.

Very often the clients are looking for a product, which is short ( maximum a day), sharp and attractive. How for example short is defined, is dependent on the customer. In most cases the formulation of a product is only a question of presenting an activity or activities, not practising it properly. Sharp means that the idea has to appeal. If we think for example a four hours canoeing, the activity itself is not yet attractive, but the idea comes from where the customer is going to canoe and why. The objective of the trip is according to the entrepreneur as important as the activity itself.

The presentation of the core product, the idea of the product, has to appeal. One can almost sell an old activity with a new presentation and a new aim, the same activity for a different reason, which comes then a new activity. This operator emphasises the significance of the activity and the experience rather than the place, the physical plant. The client’s needs determine the place where the activities are implemented. But an old programs in a new place or terrain may be a new product, although in most cases the 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland

Raija Komppula 15 company operates in its’ home area. According to the entrepreneur the physical plant is always easy to find through partners and networks. The idea generation is in this company based on client requirements. The core products are created as mobile as possible, as user friendly as possible and for as many persons as possible. The modifications of the core product are then developed following the resources of the customer. The service concept is dependent on the company resources (staff, equipment) as well as availability of suitable partners and their resources.

In the summer time the equipment is normally not a problem but in the winter time it often is a limiting factor. The entrepreneurs use different kinds of sources for idea generation. Most of the service concepts require very little investments in equipment or physical plant, but the most difficult thing is to invent the core idea of the product. Ideas may come from the literature, travel books, heritage and traditions of the region, the culture or the history of the place, old movies, documents, television etc. A good imagination is a real gift for an activity operator.

Part of the ideas come from competitors or clients. The idea is then developed to a theoretical program around the idea, meaning a rough molecular model of the service , the process with a time schedule and requirements for the physical plant and equipment, safety factors etc. This rough program has to be tested by own staff. After this first testing the core product, the service concept is ready for further development. Once the core product is reported in a rough blueprint there will also be an idea of what the actual production costs will be.

The operator sells about 40 % of its turnover directly to the corporate entertainment customers. About 40 % of the income comes through intermediaries. The importance of the intermediaries brings the new-product commercialisation an important question. The company has to have a proper selection of products with prices and a good presentation of the product. The discussions with the intermediaries are a means of post-introduction evaluation of the product: if the product does not sell it will be changed or skipped for the next years catalogue.

The fact is that most of the products that sell well, are easy: cooking coffee and making sausages and pancakes by the fire. Behind all the product development procedures there is the underlying business mission of the company: the company must not be cheaper than others, not the most “visible” in the market but the best in customer service. This indicates that the equipment does not have to be better, the places do not need to be better, but the customer service must be the best, because that is what the customer will remember.

The customer needs to remember that he had a great time. The customer service means all the activities aiming at a best possible customer care 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 16 during the customer process, including the pre-purchase phase and the presentation of the product in the brochures. 5. DISCUSSION In a nature-based activity operator company a core tourist product, the service concept, consists of modules, which are based on the needs of the customer.

Basic types of the modules are transportation, accommodation, food and beverage as well as activities. A single tourist product is an experience processed during different kinds of activities within a bundle of modules within a service system of the company. Each module can also be handled as a service concept, service process and a service system. The underlying prerequisite for successful tourist product development is a continuous service system development, which involves continuing development of the company strategy. So the “augmented tourist product” mentioned by e. . Middleton and Clarke (2001) is actually the company itself, its reputation and image. According to Seaton (1996) the firm is just as much of a product as the individual packages of offerings it makes. The corporate image refers to the kinds of ideas and impressions people have of the organisation in general. The corporate identity is made up of the perceptions formed by external audiences of everything a company is seen to do. Branding does, at the level of the product, what corporate identity does at the level of the firm. Seaton 1996, 126-127) When a customer turns to the activity operator, he or she expects the company to offer experiences, which are created together with the customer and company. The task of the company is to provide the best possible prerequisites for the experience, an attractive idea and description of the product, successful service process and reliable, functioning service system. The tourist experience product could be illustrated as in figure 5. 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 7 - The Service concept description of the customer’s needs the idea of the experience customer utility, customer benefits service modules The Service Process: - chain of activities in the customer process - formal product, brochyre - formal product, blueprint The service system - business mission - Staff - the physical plant - equipment - organisation FIGURE 5: The tourist experience product The tourist experience - Actual level of service - Customer image and expectations - Perceptions of value - Atmosphere, hospitality,‘feel good’ factor

Based on the case studies reported above as well as the theoretical discussion of the tourist product we will suggest a new framework for new-product development in tourism (figure 6). This framework must be considered as a first preliminary proposal and it needs much more investigation among different kinds of tourism businesses. In the framework we state that the new service development occurs in a service system environment, which consists of the company’s physical plant, the environment, staff, network of partners, competitors and customers.

The service system creates the corporate image and identity of the company as well as limits and the opportunities for the NSD. The company has to pay great attention to the service system development, which enables or prohibits the new innovations. The first stage in our NSD-framework is the service concept development, which can be divided in four phases: idea generation, core product screening, concept testing, and concept development. The service concept is the answer to the customers question of new experience, what is the new benefit and value.

The sources of idea generation for the for the experience can be divided into internal and external. The main determinant should be the customer need and expectation. The core idea may 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 18 get a form of key modules, which then are to be screened against the service system available. The rough customer processes of the modules have then to be tested by the staff, after which they are developed by e. g. skipping some modules and taking new ones instead. When the core idea is ready the next stage of the NSD will start.

Service process development indicates the precise planning and pricing mode of the tourist product. Every single module have to be blueprinted as a chain of activities, with time scheduling, costs, identifying all the service quality factors and possible gaps in the delivery system (see Zeithaml, Parasuranam & Berry 1990). The process prototype must once more be tested by the personnel, after that the final formal product can be developed as a blueprint for the producers. In the market testing stage the service concept and the process are tested by an external group of people, e. g. embers of intermediary. During the market testing stage the key components of the experience are tested and the key message of the promotion, the “appeal” is identified for the commercialisation of the product. After launching the product to the market it should be important to investigate the sources of the success or unsuccess of the product in order to use the information in further NSD processes. There are also researchers, who argue that the new service development initiation strategies are largely informal processes. Few firms systematically involve contact or operations staff in the process. Kelly & Storey 2000). Claude and Horne (1993) even suggest, relying on their empirical data, that the entire service development outcome is a random event. Sometimes the venture will be successful, sometimes not. According to them the pattern for NSD is not well defined and does not adhere to conventional empirical mechanisms. They suggest that the entire new service development becomes more entrepreneurial: the differences in services like individualised versus group experiences, customised versus standardised and active versus passive customer participation might influence how a new ervice is conceptualised and then commercialised. (ibid 62-63) Nevertheless, for different branches in service industry some kinds of frameworks for NSD are possible to be found and trial-and-error methods of new-product development must be replaced by more scientifically based modern marketing research techniques Hodgson (1990). We argue that the more a company pays attention to its’ new product development procedures the better chance it has in succeeding with the product strategy in the changing markets. But in tourism industry the different branches (e. g. ccommodation, transport, activities) have different risks in their service systems, which propably makes the NSD processes branch specific. The framework presented in this paper may be applied in activity operator businesses but must be much more investigated in other branches of the industry. 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 19 REFERENCES SERVICE CONCEPT DEVELOPMENT Edgett, S. 1994. The Traits of Successful New Service Development. Journal of Services Marketing, Vol. 8, No. 3. generation for the core product • Idea pp. 0-49. • Core product screening, rough process • Concept testing (internal) Edvardsson, B. & Olsson, J. 1999. Key concepts for new service development. In: Lovelock. C. , • Concept development Vandermerwe, S. & Lewis, B. (1999). Services Marketing. A European Perspective. Berwick-uponTweed: Prentice Hall Europe.. pp. 396-412. Gronroos, C. 1990. Service Management and Marketing. Lexington Books, Lexington, MA. SERVICE PROCESS DEVELOPMENT SERVICE SYSTEM DEVELOPMENTr Gunn, C. 1988. Tourism Planning. 2nd and development • Module creation Edition. New York:Taylor and Francis. Service blueprinting • Prototype testing (internal) Hodgson, P. 1990. New tourism product development. Market research’s role. Tourism • Business analysis • Formal product blueprinting Management. Vol. 11, No. 1. pp. 2-5. Holloway, J. C. & Robinson, C. 1995. Marketing for Tourism. Third Edition. Singapore: Longman. MARKET TESTING Jones, P. 1995. Developing new products and services in flight catering. International Journal of Contemporary Hospitality Management. Vol. 7, No. 2/3. pp. 24-28. • Product testing (external) • Financial evaluation Kelly, D. & Storey, C. 2000.

New Service development: initiation strategies. International Journal of Service Industry Management Vol. 11, No. 1. pp. 45-62. Kotler, P. , Bowen, J. & Makens, J. 1999. Marketing for Hospitality an Tourism. Second Edition. Upper Saddle River:product) Prentice-Hall. • Formal product offering (presentation of the COMMERCIALISATION Lumsdon, L. 1997. Tourism Marketing. Oxford:International Thomson Business Press. Martin Jr. , C. R. & Horne, D. A. 1993. Services Innovation: Successful versus Unsuccessful Firms. POSTINTRODUCTION EVALUATION International Journal of Service Industry Management, Vol. , No. 1. pp. 49-65. Medlik, S. & Middleton V. T. C. 1973: Product Formulation in Tourism. In: Tourism and Marketing, Vol. 13. Berne:AIEST. 10th Nordic Tourism Research Symposium, October 18-20 2001, Vasa, Finland Raija Komppula 20 Middleton, V. T. C. 1989. Tourist Product. In: Witt, S. F. & Moutinho, L. (eds. ). Tourism Marketing and Management Handbook. Hempel Hempstead:Prentice- Hall. Middleton, V. T. C. & Clarke, J. 2001. Marketing in Travel and Tourism. 3rd Edition. Oxford: Butterworth-Heinemann. Morgan, M. 1996. Marketing for Leisure and Tourism.

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