Food Marketing APEC 4451 Fall Semester 2009

My New Products Career

Lunchables Pizza, Nacho Lunchables Progresso Soup (National Expansion) Green Giant Create-A-Meal! Mc Chicken Sandwich McDonalds Biscuits Louis Rich Carving Board Kraft Healthy Favorites Donrus Baseball Cards Oscar Mayer Light Hot Dogs & Cold Cuts Oscar Mayer Fat Free Hot Dogs & Cold Cuts Select Slices Oscar Mayer Deli Favorites Gortons Fish Filets Veggie Burgers

New Product Development Process

Dennis J. Degeneffe The Food Industry Center University of Minnesota

Lessons
McRib Sandwich McSteak Sandwich Body Buddies Protein Plus Cereal Donut Cereal Saluto Pizza Reintroduction Toms Potato Chips Billy Bologna International Sausage Paul Prudhommes Cajun Magic Meats Louis Kemp Sirimi Veggie Nuggets Progresso Pasta Favorites Body Buddies

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.

*The failure rate for new product introductions in the U.S. retail grocery industry has recently been state as 70-80 percent.

Therefore introducing new products is a risky business!

New Product Development Process

New Product Development Process

Overall Process is made up of 8 stages.
Opportunity Identification Idea Generation Concept Development Concept Concept Testing

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

Product Development Positioning Development

STM Confirmation Advertising Testing

Test Test Marketing

Commercialization

New Product Development Process

Some are developmental sages, and some are evaluative stages.
Opportunity Identification Idea Generation Concept Development Concept Testing*

Developmental Stages
Provides guidance for development. Fosters creativity and innovation Generates ideas

Product Development Positioning Development

STM Confirmation Advertising Testing

Test Marketing*

Commercialization

Obtains insights from consumers/customers on what they want. Is more constructive than evaluative Focuses on how to

*Stage Gates

Stage Gates
Evaluative stages a go/no go decision Require 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)

Opportunity Identification

Sources of Information:: Secondary Research - Data that has been previously gathered for a more general purpose.
Secondary market information Trend information Tools to identify market opportunities: Consumers Competitors Technologists

Often involves Marketing Research Testing to answer these questions. Usually involves a meeting with Senior Management

Primary Research or Custom Marketing Research

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)

Types of Secondary Data

Internal (to an organization) Secondary Data:
Product registrations Customer databases Call reports Financial reporting systems Internal publications Business tracking databases - e.g. Shipments

Dont forget the Food Institute Student Learning Service!!!

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Advantages of Secondary Data

Low or no cost May be sufficient, at least add insight May help in research process:
Can provide background to help frame an issue or define a problem. May help in designing research May add perspective around research findings

Limitations of Secondary Data

May not be entirely relevant
What was the context?

May not be accurate

Who gathered data, did they have a vested interest? How was the information collected? Is it consistent with other types of information?

Therefore a secondary data search should be the routine first step in any business analysis.
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Secondary Data on the Web

Search engines:
Google, Yahoo!, Lycos, MSN, AltaVista, Ask, HogSearch, Teoma, All The Web, WiseNut, DMOZ, Exicte, Northern Light, IX Quick, Kanoodle, NBCi/Snap, Overture, etc. Usually list web-sites by hit frequency. Requires artful approaches

Useful Government Sites

U.S. Census U.S. Department of Commerce Federal Reserve Banks Bureau of Labor Statistics CIA FDIC

News groups Library services (Lexus-Nexus, Dialog Profound, Etc.) Government

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Hundreds of Others for more specific subjects.

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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 Gender Complexity Blurring of traditional gender roles Lifestage Complexity Empty nesters, boomerang children Individualism & Customization Sensory Comfort Connectivity

1994 Strategic Insights at Pillsbury

Moms 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 wont eat vegetables Stress & guilt

Opportunity an easy one dish fully assembled meal that the kids will eat, and adults will enjoy too.

End Game

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.
Research & Development Marketing Manager Advertising Agency

Promotions

New Product Development Team

Finance

Sales

Marketing Research

When Does it Begin and End?

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

Opportunity Identification

Idea Generation

Concept Development

Concept Testing*

Product Development Positioning Development

STM Confirmation Advertising Testing

Test Marketing*

Commercialization

*Stage Gates

The History of Lunchables

How Lunchables became a 10 year growth engine.

New Product Development Process Key Points

Introducing new products is a two edge

sword.
Lunch Com binations Historical Grow th Trend
700 600
B rea kfast

Big reward, but many times a big risk. Using the Stage Gate Approach helps manage risk.

500 $MM 400 300 200

Na tional R oll O ut Tac os & Nac hos End of Ye ar I Lunc ha ble s w/Dessert B ad Week Ad P latf or m Def in ed F un-P ak (Dr ink B ox) Louis Rich Lunc h B rea ks Tr ia l Volume Attr ition Luncha ble s w/ S prea dable Che ese P izz a Hot Dogs & Ham bur gers Sw ir ls

The Stage Gate Approach provides a road map for new product development, integrating:
OM Category

Creativity and innovation Evaluative Rigor

100 0
1989 1990 1991 1992 1993

1994

1995

1996

1997

1998

1999

Year Ending in March

Source: A. C. Nielsen

It is composed of several stages some developmental, and some Stage Gates Determining the consumer target is a key first step.