9-11 New Product Develpment Process

New Product Development Process

Targeting and Segmentation

Food Marketing APEC 4451Fall Semester 2012

Food Marketing APEC 4451Fall Semester 2012

Dennis J. Degeneffe Consumer Centric Solutions LLC

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Why Introduce New Products?

• The Case For Introducing New Products– Grow business - “Organic Growth” = Shareholder

value– Competitive Position – Asset Utilization

• The Case Against Introducing New Products – Risk, risk, risk

• High Odds of Failure*• High Cost of Failure

– Even more risk - “Cannibalization” of existing business.

• Therefore introducing new products is a riskybusiness!

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• 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”

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Concept Testing

Test Marketing


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

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Concept Testing*

Test Marketing*



Idea Generation

Concept Development

Product Development

Positioning Development

Commercialization

*”Stage Gates”

STM Confirmation

Advertising Testing

… Some are “developmental” sages, and some are “evaluative” stages.

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Developmental Stages

Developmental Stages are about “how to…”

• Build, not evaluate – to provide guidance.

• Foster creativity and innovation

• Generate ideas

• Obtain insights from consumers/customers on what they want.

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Stage Gates

Stage Gates are…• Evaluative stages – each a “go/no go” decision• Requires an objective assessment of the new product prior to

proceeding further:– Will it fit the company’s competencies:

• Manufacturing system• Distribution system• Brand equity

– Will it meet consumer/customer expectations– Will we likely sell enough– What kind of financial resources will it require– Will it provide an adequate pay-back/ ROI

• Often requires Marketing Research to answer these questions.• Prerequisite for gaining the approval of Senior Management

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Who is Involved in Creating New Products• The 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

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Early Stages in the New Product Development Process

Concept Testing*

Test Marketing*


Idea Generation

Concept Development

Product Development

PositioningDevelopment

Commercialization

*”Stage Gates”

STM Confirmation

Advertising Testing

Often called “The Fuzzy Front End”

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• 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• Government• Trade groups

• Primary Research – or “Custom Marketing Research”

Where to start: Market Information:

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Types of Secondary Data

External Secondary Data:– Government data

– Trade and industry associations

– Publications

– Reference Sources

– Internet sites

– Libraries/archives

– Syndicated Databases (E.g. National Eating Trends)

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Example of a Syndicated Data Source

Trends Sighted by Datamonitor:• 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

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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.

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Idea Generation

• Frequently uses a form of brainstorming called Ideation.

• Typically involves the New Product Development Team and possibly other stakeholders.

• Uses techniques to foster creativity –initially suspend judgment, build on everyone’s ideas.

• Can generate a huge number of ideas…

• but challenge then is to narrow down to a small number of viable ideas – or themes.

Resulting Green Giant Theme “Meal Starters”

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Concept Development

• A step or series of steps - usually using Marketing Research - to flesh out an idea/theme. What is it physically:– Ingredients

– What does it do for the consumer – Consumer Benefits

– How is it different

– Varieties

– Packaging

– Price

• Typically depicted as a “Concept Board”

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Concept Testing

• A Stage Gate step to determine whether the concept warrants development ... Are enough consumers interested in the concept?

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Concept Testing Methodology

Essentially a poll on the new product concept.• Most conducted on-line using a national panel of

consumers.• Samples usually 200-500.• Respondents are shown the concept board and

asked a series of questions:– Liking– Uniqueness– Price/Value Rating– Buying Intent

• Results compared to a database, benchmarks and/or norms to determine if it is a winner or loser.

• Many provide the ability to forecast “Trial”

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Intermediate & Later Stages

Create-A-Meal!

Getting From …

Here To Here

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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”

• The Early Stages involve the generation, development and testing of Concepts.

But… Another topic is a critical factor in developing a successful new product…

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TargetingAnd Segmentation

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• 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 onthe 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

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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 and Needs…

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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

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Targets?

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HWE2001 Consumer Segments

17%

16%

12%13%14%

14%

14%

The study found seven different types of consumers

Mainstream Nurturing Cooks

Healthy Traditional

Cooks

Healthful ExplorersWeary ProvidersFood On Demand

Mobile

Munchers

Traditional Recipients

Excerpts from ADA Conference

Example:

Pillsbury How America Eats Study (2000)

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How America Eats Food Segment Profiles

Mainstream Nurturing Cooks• Nurture their family through food• Meal time = quality time• Good taste is #1 consideration• Want to make the occasion special

Healthy Traditional Cooks• Also nurtures through food• Emphasis is on balanced nutrition• Favor wholesome, traditional foods• Discourage snacking

Weary Providers• Dinner time is family time• Meals are a balancing act, and stressful• Prefer easy, quick, familiar foods• Tend to cater to kids tastes

Each Segment has a distinctly different approach to eating.

Healthful Explorers• Actively trying to eat healthy• Focus on quality/freshness• Creative & Experimental tastes• Frequently too busy to cook, need easily

accessible alternatives

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How America Eats Food Segment Profiles, Continued

Traditional Recipients• Want good tasting, wholesome traditional food• Rely on someone else to prepare

Mobile Munchers• Busy, active, on-the-go• Meals and snacking blur together• Looking for portable foods

Food on Demand• Other activities tend to have a higher priority• Do enjoy food• Food must be easy, accessible• …or not at all.

Each Segment has a distinctly different approach to eating…

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HWE2001 Consumer Segments

17%

16%

12%13%14%

14%

14%

Food Segment Summary

Mainstream Nurturing Cooks

Healthy Traditional

Cooks

Healthful ExplorersWeary ProvidersFood On Demand

Mobile

Munchers

Traditional Recipients

LoveBalance

FreshCompromiseLater

GrazingCatered

Food Is …

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Scratch Pie ala ModeLighter Fruit Tart

Frozen Pie

Pie to Go Good Pie - Any Pie

Mainstream Nurturing Cooks Healthful Explorer

Weary Provider

Traditional RecipientsMobile

Munchers

More Examples

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Weary Providers Mobile Munchers

Healthy Traditional CooksMainstream Nurturing Cooks

Examples

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Approaches to Attitudinal 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.

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Dinner Need States – The When

Kid Pleasing Dinners Traditional Family Meals Budget Stretchers

Healthful Dinners Time Constrained DinnersQuality Time Dinners

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Need State Examples

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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.

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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).

Documents

9-11 New Product Develpment Process