Supply of Experience Goods

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Theoretical Framework

This section discusses the definition of branding and how it is associated to experience goods. Followed by looking into both demand and supply of experience goods and ser-vices. In the later sections, previous studies indicate that expectations play an important role in both demand and supply when determining the consumption of experiential goods.

Destination Branding

According to Kolb (2006, p.219)
„branding is the process of creating a slogan from a message and then designing a symbol or logo that together with the slogan will communicate to potential visitors the image of the city along with the features, benefits and values it has to offer.‟
It is essential that the displayed logo or symbol is consistently presented through various communication channels so that consumers can easily associate them with the city. Kolb (2006) also indicates that the consumers self identity and travelling preferences are linked. Consumers tend to choose destinations which reflect themselves the most.
City image and atmosphere is something which can be channelled through successful branding. There are both long-term and short-term implications. Short-term branding can be used for some specific campaign or happening, such as Lake Vättern Festival, an event/concert which takes place by the lake before the schools start. Long-term implica-tions could be concentrating on the city‟s attractions which are constant, such as John Bauer Museum, HV71 or A6 Centre and upcoming Scenkonst hus (Hankinson, 2005).
The supply of experiential and cultural goods in this study fall under 4 different catego-ries introduced by Peter, Weiermair & Katawandee (2006) in their „Destination Product Dimension‟ (p. 66-67): Destination-oriented dimensions and atmosphere (A), Service-infrastructure and service-oriented dimension (B), Social and cultural attrac-tion/characteristics/factors (C) and Symbolic Associations (D). In Table 3-1, one can see the distribution of variables within each category which can later on be adapted to any destinations‟ experiential product development. Within this study, the following variables act as input (supply) for city‟s capacity and resources in the model based on Middleton and Clarkes (2001, p.77) Stimulus response model for buyer behaviour. The model looks at how consumers make their decisions and the consumption process as a whole. (See Appendix 1)

Supply of Experience Goods

It is often implied that supply is related with demand. And as the law of supply states:
„the quantity of a well-defined good or service that producers are willing and able to offer for sale during a particular period of time increases as the price of the good or service increases and decreases as the price decreases, everything else held constant.‟ (Boyes and Melvin, 2005, p. 51)
According to Butler (2006) supply creates demand instead of vice versa. He uses the example of cheap airlines such as Easyjet and RyanAir which have enable the consumer to visit destinations which they did not know was possible before. Due to increase in mobility within cities and countries, more disposable income is used for travelling and consuming experiential goods. Therefore, this implies that due to new supply, demand has followed. This same idea can be applied to the modern theatrical show, Cirque du Soleil. Before this new form of entertainment theatre, acrobatics, circus shows, and mu-sicals were separate art forms. Now all these different forms have been combined to create new demand in the entertainment sector (Kim and Mauborgne, 2004). Caves (2000) indicates that consumers‟ willingness to pay, in this case new demand created, is essential for the innovation process for the creative industry.
One should not neglect that the supply of entertainment and similar recreational goods and services are constrained by the following barriers: capital, know-how, regulations and price competition (Vogel, 2007). In order to compete effectively, the supplier need to invest capital and time to obtain additional competitive edge and technical knowl-edge. In the film industry, based on the increase in the amount of released 3D movies, one can assume that improved technology has raised the interests of movie-goers and increased their willingness to consume a 3D movie. As Caves (2000) suggests, consum-ers are more likely to pay more for new experiences. Lack of technology, know-how, may therefore act as a constraint for suppliers attempting to maximise revenues. Gov-ernment regulations on certain experience industries such as broadcasting, cable, and casino constrict the entry of new suppliers even though demand may be drastic. Price competition of current suppliers may hinder new entrants of experience goods, and ser-vice providers entering the market, due to the existing suppliers tendency to protect their market shares. New entrants of experience goods may therefore have little room for profit and survival (Vogel, 2007).
Due to the uncertain and intangible features of experience goods as mentioned in the later section (3.3.1), a supplier of experience goods attempt to maximize the expectation of consumers in order to increase return. Expectation comes from the quality of the product (Andersson and Andersson, 2006). In the example of film making, a producer tends to choose A-list creative inputs to secure the possible outcome of the movie. Al-though recent research shows that choosing an actor who has won an Oscar is more likely to have a negative impact on the success of their next movie (Eriksson, 2008).

Demand of Experience Goods

Demand of experience goods can be further divided into two parts: demand and expec-tations and demand and constraints. Previous studies suggest that these two aspects are interlinked with each other before and during consumption of experience goods (Andersson and Andersson, 2006).

Demand and Expectations

The formation of expectations depends on the characteristics of a specific market within a certain economy. These characteristics can serve as predictions for the success of that particular market (Muth, 1961). In order to understand the perception and expectation of branding city image in the consumers‟ mind, an interrogation of the market of experi-ence goods and its production has to be defined. Andersson and Andersson (2006) de-scribed that experience goods have four distinguishable characteristics: Intangibility, In-separability, Heterogeneity and Perishability.
The most important and fundamental characteristic of experience goods is Intangibility. Unlike tangible goods such as cars, clothes and food which consumers can test, touch, taste and smell before purchasing, experiential goods such concerts, tours, and books cannot fully be perceived before making the decision of purchasing. It is generally im-possible to evaluate one‟s perception of a book before actually reading it; same condi-tion applies to other experience goods. However, the consumption plan of purchasing an experience good is based on positive expectations of consumers even though they are facing uncertain results. This expectation of the future output when consuming experi-ence goods can be regarded as part of the process of experience goods‟ consumption and production (Andersson and Andersson, 2006).
Cities in this way act as intangible goods, because they cannot be consumed without be-ing present. Even though one does not know the outcome until they have visited, the messages set forward through branding may enhance the expectations consumers make before visiting the city. Therefore, in the hope of increasing demand, enhancing the city‟s image plays an important role; the consumers base a lot of their decisions on what is marketed. Caves (2000) mentions that creative suppliers tend to “puff” or over exag-gerate the products, to raise the consumers‟ expectations and willingness to consume.
The process of consuming experience goods and cultural products are inseparable from the production process (Inseparability) (Andersson and Andersson, 2006). An opera goer enjoys the product they buy during the production of the opera, together with all the other opera goers and the whole setting (ambiance) of the opera. In some particular cases, other social contexts and the surroundings are parcels of the cultural consump-tion. Rainforest Café, Hard Rock Café, Planet Hollywood and Starbucks are restaurants and cafés which are not just for food and drink, but for the experience of atmosphere and environment, as well as the interaction with other customers and employees; it is the experience which is weighted in this case. The experience of taking part in Lake Vättern Festival in Jönköping where people gather at Lake Vättern to enjoy music and take part in other activities cannot be participated in a different time and place.
Heterogeneity of the product is the third distinguished characteristic of experience goods. Efficiency in production and consumption in creative and cultural goods is corre-lated with the suitability of the characteristics and personalities of its consumers (Andersson and Andersson, 2006). The experience one gets from consuming creative and cultural goods is unique and special to every consumer. When it comes to cities, heterogeneity could be present by suppliers offering different levels and depths of cul-tural and experiential goods and services for its various consumers, and by interacting with them before, during and after consumption (Grönroos, 2007).
Perishability is the fourth characteristic of experience goods. Taken together with in-separability, experience products and services cannot be stored for later use hence the product would be expired after the frame of time promised for consumers to enjoy it. This can explain why last minute musical tickets on Broadway are usually cheaper than normal price. To maximize profit, companies usually use price discrimination to capture consumer surplus (Courty, 2000; Vogel, 2007).
Because of the four characteristics described above, the problem a consumer faces when purchasing an experience is like investing in the stock market, “nobody knows” how the outcome is going to be (Caves, 2000). The uncertain nature of experience goods and causes consumers to rely on previous experiences shared by social contexts together with credible certifiers, such as critics or achieved awards. With the development of internet information can be shared worldwide and thus make the market of experience goods more available to consumers. The internet enhances knowledge which could not be reached before and, therefore, it acts as an important source during the „pre-evaluation process‟ (Andersson and Andersson, 2006, p. 108). One can now make price comparisons on a certain good or service and check the changing prices of the comple-mentary and substitute goods (Butler, 2006). Travel tips and experiences can now also be shared through various websites which can influence the consumers‟ decision to pur-chase.

Demand and Constraints

The demand for cultural goods can be influenced and constrained by price of the prod-ucts, level of income, demographic factors, time limitation, level of education, health and etc. (Andersson and Andersson, 2006). The general concept is that the higher a product price is, the lower the demand is for that product. In the case of live performing arts, if the ticket price for the concert of Pavarotti increases, the willingness to pay and to attend the concert will decrease, causing a decrease in demand for that certain con-cert. One should not neglect the price of complimentary goods (goods which are associ-ated to each other) or the price of substitute goods (goods which are similar to each other and can be replaced) (Boyes and Melvin, 2005), since they both have an effect on the demand of experiential products. An increase in the cost for transportation (e.g. price of fuel) from point A to Pavarotti‟s concert (complimentary goods) will have a negative impact on demand for the concert tickets, due to people not willing to pay as much for the travelling. A decrease of price for other performing arts like ballet or opera (substitute goods) would also have the same effect on the demand of Pavarotti‟s concert tickets. These two factors of the performing arts suggest that the facilities for perform-ing arts need to be supported with convenient transportation and accessibility. This could explain why most cultural centres are clustered in big cities all over the world (Florida, 2002; Andersson and Andersson, 2006).
Besides the general concept of relative prices, individual characteristics such as level of education has a substantial effect on the demand for experiential goods; this effect is proved to be stronger than income factor (Caves, 2000). Empirical data shows that teachers and students are the most frequent attendees to arts and entertainment activities such as performing arts, jazz, folk music and cinema. Formal (academic) and informal (self-learning) ways of education serve as the „stock of information‟ for the consumer. This stock of information will enhance the searching and appreciation process of cul-tural goods. Caves (2000) also argues that the more time and knowledge one has when experiencing music, the higher satisfaction one would achieve from a given hour of listening to music. As a result, this pushes one to consume more music related goods than other cultural products.
Opportunity cost of time and time constraint of individuals has a significant impact on demand. According to Caves (2000) young people are more likely to spend more time listening to music due to free time and lower wages. Opportunity cost of listening to music is therefore lower now than comparing to their later age assuming that their working hours and wages have increased. However, this amount of time spent on music in the younger age builds up the tastes of what music will be consumed later on in their lifetime (2000). Andersson and Andersson (2006) mention with regards to time con-straint of an individual, there is limited time which can be allocated to leisure (including sleeping) and working hours during a given lifetime. Due to development in technology and improvement in productivity, the working time of developed economies has been decreasing, thus we can say that people nowadays have more leisure time to consume experiential products (Vogel, 2007).
Disposable income acts as a constraint for the demand of experiential goods. Tradition-ally economists split consumer goods into necessary goods, normal goods and luxury goods (Andersson and Andersson, 2006; Vogel, 2007). An increase in disposable in-come is positively correlated with demand and supply of experiential goods. National per capita income growth is an important factor for observing the increasing expenses on cultural goods and recreational activities of individuals and of households (2006). Empirical data (see Table 3-2) suggest that the percentage of disposable income dedi-cated to arts, entertainment and other cultural goods has been growing in many eco-nomically advanced countries (2006).
Changes in the demographic structures influence the demand for arts, entertainment and other leisure activities and, in the long run, distinct trends can be observed throughout the history of the cultural industry. According to Andersson and Andersson (2006) the decline in family members per household suggests that households can now afford much higher quality of leisure goods and services. The increase of “double incomes, no children” households leave great room for consuming art and entertainment in metro-politan areas, and even for travelling around the world in monetary terms. The increase in average lifetime and the reduction of working hours indicate more time is being dis-tributed to the consumption of leisure and recreational activities. The implication of in-creased leisure time and income has given a great opportunity to consume arts and en-tertainment and other recreational products more than ever before (Andersson and Andersson, 2006).
Appreciation and gratification from consuming an experiential good or service is differ-ent for each and every individual. Therefore, it is challenging to measure the satisfaction degree of general consumer goods, let alone to measure the satisfaction of an experience good that cannot be enjoyed before purchasing. Economists use utility to facilitate measurability in satisfaction (Vogel, 2007; Andersson and Andersson, 2006; Heilbrun and Gray, 2001). It is well accepted that rational individuals attempt to maximize utility, despite of constraints (time, income, etc.) to find a solution or a decision which offers the most pleasure to them in the given situation. Because of the uncertain nature of ex-perience goods mentioned in the previous section, individuals tend to maximize their expected utility instead of utility described above when considering purchasing an expe-riential good. This concept of expected utility could explain the willingness to pay for a certain creative and experiential good (Vogel, 2007).
When looking at the concept of branding a city, one must take into account that it has several different aspects. Branding can be used to increase the knowledge of the con-sumer, which will affect the buyers decision later. Lack of knowledge often acts as a constraint as discussed in the prior section, and therefore, through efficient ways of branding, this constraint can be minimized. Branding can also serve as a communication channel between city marketers and their potential consumers. Today we live in an „in-formation society‟ which implies that information is in our grasp at all times (Solomon, 2009). A previous study (Solomon, 2009) shows that 30 years ago, an average adult was exposed to about 560 pieces of advertising information a day, when today it has in-creased to over 3,500. So what suppliers have to keep in mind is to differentiate them-selves from competitors, as well as, measure the effectiveness of their branding mes-sages. So for a city to be successfully branded in the eyes of consumers it needs to find a way to become unique and memorable. And remember not to make promises which cannot be kept.


Empirical Studies: Methodology

The purpose of this paper is to understand the perceptions of people within and outside of Jönköping regarding Jönköping‟s branding factors and city image. A model was de-veloped based on the previous chapter to capture the process from the construction of branding factors, formation of expectations, actual consumption to post-consumption perceptions and utility. This model will be explained in section 4.1 in detail and it serves as the foundation of this research. Followed by 4.2 which discusses the research questions. In order to find out whether the factors Jönköping lists as important when it comes to tourism and attracting new people, a questionnaire was formed. Sections 4.3 and 4.4 discuss the survey in more detail and the data collecting methods used.

Model Description

To define the main branding factors and city images the Jönköping municipality associ-ates with, approximately 40 brochures were looked at. (See Appendix 2) The branding factors were gathered from the various brochures and information present at the tourist office and municipality office. The categories for Jönköping‟s branding factors were based on these 9 subjects which were filtered through the previously mentioned Desti-nation Product Dimension list (see Table 3-1):
b1- HV71: Jönköping‟s local ice hockey team
b2- Elmia: Internationally recognised Conference and Exhibition Centre (Jönköping munici-pality, 2009c)
b3- Nature/Lake Vättern
b4- Cultural: Architecture, cultural heritage, arts and museums, local history and diversity
b5- Accessibility: Transportation system and hotel capacity
b6- Recreation: Organised events by Jönköping municipality and local inhabitants
b7- University: Consists of approximately 9000 students; both national and international
b8- Atmosphere: Religious, industrial and other symbolic associations
b9- Science Park: Support entrepreneurs and help in setting up new companies
Based on the theory discussed in previous section, a new model (Figure 4-1) was con-structed to combine city branding, consumer demand and formation of expectations. In this model, the process of city branding and consuming the branded experiential prod-ucts can be divided into 6 processes: consumers perception on the supplied branding factors (Process 1 and 2) , the formulation of consumer expectations (Process 3), evaluation of consumer‟s willingness to pay according to their constraints (Process 4), actual consumption (Process 5) and post-consumption perceptions and perceived utility (Process 6).
In Process 1, based on the four dimensions of destination products displayed in Table 3-1, suppliers can evaluate which of those resources the city possesses in terms of tour-ism. Jönköping city‟s marketers should begin by taking a deeper look into what factors and attributes can be developed to sustain experiential goods and services throughout the year. It is important to note that at this stage promises are built and exposed to later influence the consumers‟ expectations (Middleton and Clarke, 2001; Peters, Weiermair and Katawandee, 2006).
From these four destination product dimensions, nine different branding factors for Jönköping are formed for testing (Process 2), as can be seen in the questionnaire (Ap-pendix 3) these branding factors have also been used again to depict 22 different asso-ciations people have regarding Jönköping. As mentioned in Process 1 promises are formulated, and the purpose of Process 2 is to carry out those promises and distribute them through various communication channels to attract as many consumers as possi-ble.
According to previous studies (Andersson and Andersson, 2006), demand for cultural goods can be determined by consumer’s expectations (Process 3) as well as consumer’s constraints of consumption (Process 4). Consumers‟ perceptions and expectations of branding factors promoted by regional marketers are derived from different communica-tion channels such as different promotional media, previous experience and knowledge, information shared from friends, family and other social context. At the same time, con-sumer‟s constraints, for example, income, time, knowledge and expected utility (which has already been maximized in given situations of income, time, health, etc.) affect their willingness to pay (Andersson and Andersson, 2006; Vogel, 2007).
It is suggested that current demand is correlated with future demand, due to short-term expected demand based on perceived expectation could suddenly be increased by mass media and word-of-mouth (previous experiences) or vice versa. One of the key issues for a successful city branding strategy is sustaining the quality of the supply of the branding factors ( 1- 9) to meet with the changing expectations of the demand force.
Process 5 concentrates on the actual consumption. It is the foundation for the current demand, as it is being determined during the actual purchase or use of the experiential good. During the process the consumer experiences the quality of the experience prod-uct or service, and from that links it to his or her original expectations which were made before consumption (Process 3). Process 6 focuses on the post-consumption percep-tions and utility gained. These post-consumption perceptions and utility will lead to ei-ther positive or negative experiences. A positive experience would lead to an increase in future demand and therefore resulting in growth of expected revenues, and vice versa. Expected profit of city branding derives from total expected revenue of branding minus total expected cost of branding. Expected revenue equals the sum of the price of each factor multiplied by expected quantity of demand while total expected cost of branding consists of total expected fixed costs plus total variable costs.
City marketers and experiential good and service suppliers should also keep in mind that the task is to maximize the expected profit. One way is to minimize the gap be-tween expectations and post-consumption perceptions and utility in order to increase expected revenues as mentioned in the previous paragraph. An idea is that after con-sumption of an experiential or cultural good or service (Process 5) the consumer should be encouraged to offer feedback (Process 6) which can be used to improve future prom-ises provided by the supplier. Could quality equal to quantity when determining de-mand? One effective way of gathering feedback is through customer satisfaction sur-veys and keeping in touch with the customer after the consumption (Grönroos, 2007). In the Amsterdam Dungeon, after the experience is consumed, one is able to fill in a cus-tomer satisfaction questionnaire through an interactive computer which has been situ-ated in the exit area; this could increase the willingness to answer.

Research Questions

The conducted questionnaire aims at answering four main questions. The first two focus on the current situation of Jönköping and how consumers perceive the city. The last two look at the possibility of forming new demand.
1. Does the general perception of Jönköping being a religious city have a negative impact on the consumer‟s willingness to visit Jönköping?
2. When branding „Destination Jönköping‟, should marketers focus on the core city attributes and attractions or enhancing the city image?
3. Can packaged deals increase consumer‟s willingness to visit Jönköping?
4. Could The Las Vegas Entertainment Concept increase consumer‟s willingness to visit Jönköping.

Table of Contents
1 Introduction
2 City Backgrounds
2.1 Jönköping
2.2 Las Vegas
3 Theoretical Framework
3.1 Destination Branding
3.2 Supply of Experience Goods
3.3 Demand of Experience Goods
4 Empirical Studies: Methodology
4.1 Model Description
4.2 Research Questions
4.3 Survey Design
4.4 Data Collecting Method
5 Empirical Findings and Discussion
5.1 Sample Description Travelling Preferences
5.2 Travelling Preferences
5.3 The Perception of Jönköping
5.4 Las Vegas Entertainment Concept
6 Conclusion
List of references

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