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New Product Development Process and Targeting
- 1. New Product Development Process Targeting and Segmentation Food Marketing APEC 4451 Fall Semester 2010 Food Marketing APEC 4451 Fall Semester 2010 Dennis J. Degeneffe The Food Industry Center University of Minnesota
- 2. Why Introduce New Products? • The Case For Introducing New Products – “Organic Growth” - Shareholder value – Competitive Position – Capacity Utilization • The Case Against Introducing New Products – Risk – the odds against success • High Odds of Failure* • High Cost of Failure – “Cannibalization” of existing business. • Therefore introducing new products is a risky business!
- 3. New Product Development Process • A systematized approach for the development of new products to manage risk. • A general approach that is followed by most major consumer goods companies. – Includes the infusion of creativity… – … and the rigor of evaluative decision points – or “Stage Gates”
- 4. Concept Testing Test Marketing New Product Development Process Opportunity Identification Idea Generation Concept Development Product Development Positioning Development STM Confirmation Advertising Testing Concept Testing Test Marketing Overall Process is made up of 8 stages. Commercialization
- 5. Concept Testing* Test Marketing* New Product Development Process Opportunity Identification Idea Generation Concept Development Product Development Positioning Development Commercialization *”Stage Gates” STM Confirmation Advertising Testing … Some are “developmental” sages, and some are “evaluative” stages.
- 6. Developmental Stages About how to … • Is more constructive than evaluative - provides guidance. • Fosters creativity and innovation • Generates ideas • Obtains insights from consumers/customers on what they want.
- 7. Stage Gates • Evaluative stages –“go/no go” decisions • Requires an objective assessment of the marketing initiative prior to proceeding further: – Will it fit: • Manufacturing system • Distribution system • Consumer/Customer expectations • Brand equity – Will it likely sell – What kind of financial resources will it require – Will it provide an adequate pay-back/return on investment (ROI) • Often involves Marketing Research Testing to answer these questions. • Usually involves a meeting with Senior Management
- 8. Opportunity Identification • Secondary Research - Data that has been previously gathered for a more general purpose. – Secondary market information – Trend information – Can come from a lot of directions: • Consumers • Competitors • Technologists • Primary Research – or “Custom Marketing Research” Sources of Information::
- 9. 9 Types of Secondary Data • External Secondary Data: – Government data – Trade and industry associations – Publications – Reference Sources – Internet sites – Libraries/archives – Commercial databases (E.g. National Eating Trends) – Don’t forget the Food Institute Student Learning Service!!!
- 10. General Market Data Datamonitor Mega-Trends • Convenience – Quick meals • Health – 90% of Americans feel improving health is important • Age Complexity – Greater spending power among children/teens, Growing senior population • Gender Complexity – Blurring of traditional gender roles • Lifestage Complexity – Empty nesters, “boomerang children” • Individualism & Customization – “Custom tailored solutions” • Sensory Experience • Comfort Seeking • Connectivity – Social media
- 11. 1994 Strategic Insights at Pillsbury • Mom’s life is a hassle – 9-5 job – No time to plan or prepare meals – Fussy kids – Off to soccer practice • Important to get kids to eat vegetables – Kids won’t eat vegetables – Stress & guilt • Opportunity – an easy one dish fully assembled meal that the kids will eat, and adults will enjoy too.
- 12. End Game
- 13. Who Executes New Product Development Process • New Product Development Team - a collaborative, cross functional brand management group focused on specific opportunity area, reporting to senior management. New Product Development Team Marketing Manager Finance Sales Advertising Agency Research & Development Promotions Marketing Research
- 14. When Does it Begin and End? Concept Testing* Test Marketing* Opportunity Identification Idea Generation Concept Development Product Development Positioning Development Commercialization *”Stage Gates” STM Confirmation Advertising Testing
- 15. Case - Lunchables • Lunchables was originally introduced in 1989, by Oscar Mayer (Kraft Foods). • As a concept it had been around for 10 years before it was introduced… • Outstanding success story, but not without problems along the way…
- 16. The History of Lunchables • How Lunchables became a 10 year growth engine. Lunch Combinations Historical Growth Trend 0 100 200 300 400 500 600 700 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Year Ending in March $MM OM Category National Roll Out End of Year I Louis Rich Lunch Breaks Trial Volume Attrition Lunchables w/Dessert Fun-Pak (Drink Box) “Bad Week” Ad Platform Defined Pizza Tacos & Nachos Swirls Hot Dogs & Hamburgers Breakfast Lunchables w/ Spreadable Cheese Source: A. C. Nielsen
- 17. New Product Development Process Key Points • Introducing new products is a two edge sword. – Big reward, but many times a big risk. – Using the Stage Gate Approach helps manage risk. • The Stage Gate Approach provides a “road map” for new product development, integrating: – Creativity and innovation – Evaluative Rigor • It is composed of several stages – some developmental, and some “Stage Gates” • Determining the consumer target is a key first step.
- 19. • Fundamental Elements of Marketing Positioning: –Target – The Who –Benefit – The When –Frame of Reference – The context – With respect to what –Support - The How Example of Positioning Statement: To “Time Pressured Moms”… Hamburger Helper is a great way to get an fresh hot meal on the table in only a few minutes, that the entire family will love. That is because Hamburger Helper includes all the fixins – just add it to one pound of hamburger, simmer and serve. Fundamental Importance of Targeting
- 20. Ways to Segment Consumers • Geography – Southeast, Metro areas, etc. • Demographics – Households with children, Seniors, etc. • Lifestage – College students, expecting moms • Behavior – Heavy brand users, competitive brand users • Attitudes…
- 21. Attitudinal Segmentation Benefits of Attitudinal Segmentation: – The basis for why consumers behave the way they do – the driving motivation behind behavior. – Provides the insight to develop effective Marketing programs. • Products • Services • Advertising
- 22. Targets?
- 23. HWE2001 Consumer Segments 17% 16% 12% 13% 14% 14% 14% Study found seven different types of consumers Mainstream Nurturing Cooks Healthy Traditional Cooks Healthful ExplorersWeary Providers Food On Demand Mobile Munchers Traditional Recipients Excerpts from ADA Conference Example: Pillsbury How America Eats Study (2000)
- 24. How America Eats Food Segment Profiles Mainstream Nurturing CooksMainstream Nurturing Cooks •• Nurture their family through foodNurture their family through food •• Meal time = quality timeMeal time = quality time •• Good taste is #1 considerationGood taste is #1 consideration •• Want to make the occasion specialWant to make the occasion special Healthy Traditional CooksHealthy Traditional Cooks •• Also nurtures through foodAlso nurtures through food •• Emphasis is on balanced nutritionEmphasis is on balanced nutrition •• Favor wholesome, traditional foodsFavor wholesome, traditional foods •• Discourage snackingDiscourage snacking Weary ProvidersWeary Providers •• Dinner time is family timeDinner time is family time •• Meals are a balancing act, and stressfulMeals are a balancing act, and stressful •• Prefer easy, quick, familiar foodsPrefer easy, quick, familiar foods •• Tend to cater to kids tastesTend to cater to kids tastes Each Segment has a distinctly different approach to eating. Healthful ExplorersHealthful Explorers •• Actively trying to eat healthyActively trying to eat healthy •• Focus on quality/freshnessFocus on quality/freshness •• Creative & Experimental tastesCreative & Experimental tastes •• Frequently too busy to cook, need easilyFrequently too busy to cook, need easily accessible alternativesaccessible alternatives
- 25. How America Eats Food Segment Profiles, Continued Traditional RecipientsTraditional Recipients •• Want good tasting, wholesome traditional foodWant good tasting, wholesome traditional food •• Rely on someone else to prepareRely on someone else to prepare MobileMobile MunchersMunchers •• Busy, active, onBusy, active, on--thethe--gogo •• Meals and snacking blur togetherMeals and snacking blur together •• Looking for portable foodsLooking for portable foods Food on DemandFood on Demand •• Other activities tend to have a higher priorityOther activities tend to have a higher priority •• Do enjoy foodDo enjoy food •• Food must be easy, accessibleFood must be easy, accessible •• …or not at all.…or not at all. Each Segment has a distinctly different approach to eating…
- 26. HWE2001 Consumer Segments 17% 16% 12% 13% 14% 14% 14% Food Segment Summary Mainstream Nurturing Cooks Healthy Traditional Cooks Healthful ExplorersWeary Providers Food On Demand Mobile Munchers Traditional Recipients Love Balance FreshCompromise Later Grazing Catered Food Is …
- 27. Scratch Pie ala ModeScratch Pie ala Mode Lighter Fruit TartLighter Fruit Tart Frozen PieFrozen Pie Pie to GoPie to Go Good PieGood Pie -- Any PieAny Pie MainstreamMainstream Nurturing CooksNurturing Cooks Healthful ExplorerHealthful Explorer Weary ProviderWeary Provider TraditionalTraditional RecipientsRecipientsMobileMobile MunchersMunchers More Examples
- 28. Weary Providers Mobile Munchers Healthy Traditional CooksMainstream Nurturing Cooks Examples
- 29. Approaches to Attitudinally Based Market Structure • Consumer/Customer Segmentation – Identify groupings of consumers with similar attitudes out of a diverse population. • Need States – Identify product usage situations with similar set of consumer needs. The When • Affinity Segmentation – Identify groups of consumers with similar degrees of commitment to a brand.
- 30. Dinner Need States – The When Kid Pleasing Dinners Traditional Family Meals Budget Stretchers Healthful Dinners Time Constrained DinnersQuality Time Dinners
- 32. Affinity Consumer Structure • Divides consumers up into groupings with varying strengths of commitment to the brand: – Devoted … Staunchly loyal to the brand. – Adopters … Use the brand along with others. – Acceptors … Willing to try the brand, or infrequent user. – Available … Know little or nothing about the brand. – Rejecters … Brand is irrelevant, no intention to try it. • Identifies the proportion of the volume coming from each group • Identifies reasons for their commitment level.
- 33. Key Points • Targeting, and rationale is one of the most critical elements in New Product development. • Targets should have some attitudinal element in order to be effective. Hint …hint (class project).