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THE MYSTIQUE AND MYTHOLOGY OF NEW PRODUCT DEVELOPMENT
ToAPO Training Course on Value Addition
to Agricultural ProductsJuly 22 – 24, 2009
From
Dr. Navam HettiarachchyUniversity Professor
Department of Food ScienceUniversity of Arkansas Fayetteville, AR, USA
Email: [email protected]
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OVERVIEW What you will learn
Characteristics of classes of new products
Innovative and creative new products
Product line extension and reformulation
Development process as an integrated system
Summary
References
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LIFE BLOOD OF FOOD COMPANIES
REWARDS OF NEW PRODUCTS
FAILURES – SEVERE FINANCIAL
LOSSES, ENDURE LOSS OF FACE
WHAT YOU WILL LEARN
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HOW WILL YOU DEFINE A NEW PRODUCT?
“A PRODUCT NOT PREVIOUSLY MANUFACTURED BY A COMPANY AND INTRODUCED BY THAT COMPANY INTO ITS MARKETPLACE OR THE PRESENTATION BY A COMPANY OF AN ESTABLISHED PRODUCT PERHAPS IN A NEW FORM OR INTO A NEW MARKET PREVIOUSLY EXPLORED BY THAT COMPANY” Fuller, 2005
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CHARACTERISTICS OF CLASSES OF NEW PRODUCTS
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WHAT ARE THE CHARACTERISTICS OF A NEW FOOD PRODUCT AS INTRODUCED BY A
SPECIFIC COMPANY?
NEVER BEEN MANUFACTURED, AND DISTRIBUTED BY THAT
COMPANY BEFORE
AN OLD ESTABLISHED PRODUCT: IS INTRODUCED INTO A
GEOGRAPHICALLY NEW AREA
INTRODUCED EITHER IN A NEW PACKAGE OR A NEW SIZE
OR FORM
INTRODUCED INTO A NEW MARKET NICHE WITH A NEW
FUNCTION
Fuller, 2005
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General Characteristics of Classes of New Food Products
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Types of New Product
General Characteristics
Line Extensions Little time or research is required for development.No major manufacturing changes in production lines or
major equipment purchases are required.Relatively little change in marketing strategy is
required.No new purchasing skills (commodity trading) or raw
material sources are required.No new storage or handling techniques for either the
raw ingredients or the final product are needed. This means regular distribution systems can be used.
Repositioned existing product
Research and development time is minimal.Manufacturing is completely unaffected.Marketing must develop new strategies and
promotional material to interpret and penetrate the newly developed market niche.
Sales tactics require re-evaluation to reach and make sales within the new market places. Cont’…
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General Characteristics of Classes of New Food Products cont…
Types of New Product General Characteristics
New form or size of existing product
Highly variable impact on research and development.
Highly variable impact on physical plant and manufacturing capabilities.
Major equipment purchases may be required if manufacturing to be done in-house.
Marketing and sales resources require extensive programming.
Reformulation of existing product
Moderate research and development required with reformulation goal.
Generally little impact on physical facilities.Generally little impact on marketing and sales
resources unless reformulation leads to repositioning of product.
Cont’…
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General Characteristics of Classes of New Food Products cont…
Types of New Product General Characteristics
Repackaging of existing product
The novelty of repackaging will dictate the amount and degree of research and development required.
Slight impact on physical facilities. New repackaging equipment will be required.
Little impact on marketing, sales and distribution resources.
Innovative products Amount of research and development dependant on the nature on innovation.
Highly variable impact on manufacturing capabilities.
Possible heavy impact on marketing and sales resources.
9Cont’…
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General Characteristics of Classes of New Food Products cont…
Types of New Product General Characteristics
Creative products Generally heavy, need for extensive research and development; therefore a costly venture.
Extensive development time may be required.May require entirely new plant and
equipment. Degree of creativity may require development de novo or unique equipment.
Will require total revision of marketing and sales force. Creation of a new company or brand may be required.
Risk of failure is high.
10Fuller 2005
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INNOVATIVE AND CREATIVE NEW PRODUCTS
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INNOVATIVE PRODUCTS WHAT IS AN INNOVATIVE PRODUCT?
“one resulting from making changes to an existing product”
Can be costlier and riskier
New ingredients can be the basis for innovative products
E.g. Simulated crab legs, shrimp – based on Surimi technology – sea food dishes
http://www.handsofhopedisasterreliefservices.org/b2b/pics/Surimi__Pure_Meat_Fish_.jpghttp://img1.tradeget.com/lynnhaha/1D5JQV6B1imitationsurimicrabflakes1.jpg
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CREATIVE PRODUCTS THE ONE NEWLY BROUGHT INTO EXISTENCE: THE
RARE NEVER-BEFORE-SEEN PRODUCT
EXAMPLES: TOFU, BEAN CURD, REFORMED MEAT PRODUCTS, EXTRUSION FOR PUFFED PRODUCTS
TRULY CREATIVE PRODUCTS HAVE GREATER COSTS AND DEVELOPMENT TIMES THAT MAY BE MEASURED IN YEARS RATHER THAN WEEKS OR MONTHS
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ADDED VALUE DEGREE OF INNOVATION OR CHANGE THAT MAKE A PRODUCT
MORE DESIRABLE TO CONSUMERS
BETTER COLOR, TEXTURE, CONVENIENCE
IMPROVED STABILITY, FUNCTIONALITY, ETC. EXAMPLE: PRE-PEELED FRENCH FRY-CUT POTATOES
WHAT ARE THE PROBLEMS?
SPOILAGE, MARKETING AND SALES TECHNIQUES
PREPARED HASHBROWN, BAKED POTATOES, PARTIALLY COOKED FRENCH-FRY STYLE CHIPS, STUFFED POTATOES ETC.
BRAND NAME
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CUSTOMERS AND CONSUMERS
WHO IS A CUSTOMER? ONE WHO BUYS IN A MARKET PLACE
WHO ARE THE GATEKEEPERS? FAMILY MEMEBRS, PURCHASING DEPARTMENT OF COMPANIES, CHEF’S, OWNERS – PET FOODS
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WHO IS A CONSUMER? ONE THAT USES THAT WAS PURCHASD BY
THE CUSTOMER
MARKETING AND SALES PERSONNEL MUST UNDERSTAND THE DISTINCTION BETWEEN A CUSTOMER AND A CONSUMER
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MARKETS AND MARKET PLACES WHAT IS A MARKET? A NEED DISCOVERED IN
CUSTOMERS AND CONSUMERS THAT MARKETING PERSONNEL HOPE TO DEVELOP INTO A WANT, A POTENTIAL TO SELL PRODUCT – ORGANICALLY GROWN PRODUCE, LOW-CALORIE FOODS ETC.
WHAT IS A MARKET PLACE? REAL PHYSICAL ENTITIES – FARMERS MARKET TO GIANT FOOD STORES
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WHAT ARE THE MARKETING CHARACTERISTICS OF NEW PRODUCTS? Cont…
NEW FOOD LEGISLATION AND REGULATIONS OR MARKETING CUSTOMS NEED TO BE FOLLOWED
THE GENERAL ECONOMY OF THE COUNTRY AND SPECIFIC ECONOMIC FACTORS IN THE AREA BEING SERVICED ARE ALTERED DRASTICALLY
THE LEVEL, AVAILABILITY, OR LACK OF MARKETING SKILLS WITHIN THE COMPANY TO MEET THE ABOVE CHALLENGES
THE GEOGRAPHY OF THE MARKET AREA AS WELL AS THE DIFFICULTY OF SELLING NOVELTY, OR EDUCATING THE CONSUMER PRESENT PROBLEMS
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PRODUCT LIFE CYCLE
Fuller, 2005
Characteristics of products, and their life cycles. (a) typical product life cycle; (b) the profit picture
Time
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INTRODUCTORY PERIOD – SUPPORTED BY PROMOTIONS, IN-STORE DEMONSTRATIONS, AND ADVERTISING
STRONG GROWTH PERIOD – FIRST TIME CUSTOMERS BEGIN REPEAT BUYING AND NEW CONSUMERS ARE ATTRACTED
DECLINE IN SALES VOLUME. GROWTH ACCELERATES NEGATIVELY
NO-GROWTH PERIOD. SALES ARE CONSTANT – SIGN OF STAGNATING MARKET
PRODUCT LIFE CYCLE
Fuller, 2005
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WHY UNDERTAKE NEW FOOD PRODUCT DEVELOPMENT?
BETTER MARKET AND CONSUMER RESERCH – HELPED COMPANIES REMOVE POTENTIAL PRODUCT FAILURES MUCH EARLIER IN THE DEVELOPMENTAL PROCESS
RETAILERS ARE GIVING MORE ATTENTION AND SPACE TO THEIR OWN PROVATE LABEL PRODUCTS
PRODUCT SATURATION IN SOME PRODUCT CATEGORIES
Fuller, 2005
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WHY UNDERTAKE NEW PRODUCT DEVELOPMENT? ALL HAVE LIFE CYCLES. EVENTUALLY THEY DIE AND MUST BE
REPLACED OR REVIGORED BY HEAVY MARKETING, CONSUMER ACCEPTANCE
OFFER THE OPPORTUNITY FOR AGGRESSIVE GROWTH FOR LONG RANGE GOALS
NEW MARKETS MAY BE CREATED. EG. ORGANIC OR FUNCTIONAL FOODS
NEW KNOWLEDGE AND ADVANCING TECHNOLOGIES – NEW PRODUCTS FOR HEALTHY LIFE STYLE
CHANGES IN GOVERNMENT LEGISLATION, HEALTH PROGRAM, AGRICULTURAL POLICY, OR AGRICULTURAL SUPPORT PROGRAMS - DEVELOPMENT OF NEW PRODUCTS.
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TECHNOLOGICAL REASONS FOR NEW PRODUCT DEVELOPMENT
MARKET PLACE REASONS FOR NEW PRODUCT DEVELOPMENT
TECHNOLOGICAL PRESSURES FORCING NEW PRODUCT DEVELOPMENT
GOVERNMENTAL INFLUENCES PUSHING NEW PRODUCT DEVELOPMENT
WHY UNDERTAKE NEW PRODUCT DEVELOPMENT? Cont’…
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Various Food Business Activities over Which Goverments in Different Forms and at Different Levels
Exert Influence
Activity InfluenceFiscal policy Interest rates for development loans
Grants–in-aid; research fundingTaxation policy
Patents and Copies Copy right protection and licensingResearch funding if guarantee of patent protection
Trade barriers Tariff and protectionismStandards of food product identityAvailability and cost of ingredients
Environment protection Waste disposalRecycling or reuse requirements of
packaging materialsEnergy utilization and disposal
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Cont’…
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Various Food Business Activities over Which Goverments in Different Forms and at Different Levels
Exert Influence Cont’…
Activity Influence
Marketing and trade practices
Product or advertizing claimsBillboard and advertising placementsStore hoursContainer sizes
Employment practices OSHA and worker safetyUnemployment benefitsMinimum wage levels
Health policy Nutritional guidelinesNutritional labeling
Agricultural policy Support programs for commoditiesAvailability of commodities
Consumer protection Product safety; safety of agricultural chemicalsLabeling; product names; comparative advertisingInspection services
25Fuller, 2001
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PHASES IN NEW FOOD PRODUCT DEVELOPMENT
DEVELOPMENT OF A BUSINESS STRATEGY THAT DESCRIBES THE PROJECT
RESEARCH AND DEVELOPMENT PHASE – MANUFACTURING DESIGN
DEVELOPMENT OF PROGRAMS FOR MARKETING, PRODUCTION, AND QUALITY ASSURANCE
ORGANIZATION OF THE PRODUCTION AND DISTRIBUTION FOR THE LAUNCH AND THE ANALYSIS OF LAUNCH SALES DATA
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sodfather/images/timeline66.jpg
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PRODUCT LINE EXTENSION AND REFORMULATION
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WHAT ARE LINE EXTENSION PRODUCTS?
EXTENSION OF A FAMILY OF SIMILARLY POSITIONED PRODUCTS
A FAMILY OF CONFECTIONERY PRODUCTS – CHILDREN TO ADULTS
FLAVORS. DIFFERENT PROMOTIONS, ADVERTISEMENTS, AND STORE PLACEMENTS FOR THE ADULT PRODUCTS CONSIDERATIONFuller, 2005
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REPOSITIONING EXISTING PRODUCTS
CONSUMERS IDEA FOR A NEW USE
ARM & HAMMER BAKING SODA – NEW USE –BODY DEODORANT AND DEODORANT FOR FOOD ORDORS-REFRIGERATORS
WHAT DO THESE REQUIRE?
EXTENSIVE MARKETING DEVELOPMENT – NEW MARKETS –BRAND EXTENSION MAY NOT BE SUITABLE Fuller, 2005
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NEW FORM OR SIZE OF EXISTING PRODUCTS
EXISTING PRODUCT INTO A NEW FORM: A PASTE PRODUCT INTO A POWDER – MUST BE CONSIDERED AS AN ADVANTAGE BY CUSTOMERS AND CONSUMERS Fuller, 2005
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REFORMULATION OF EXISTING PRODUCTS
“NEW IMPROVED” PRODUCTS
WHAT ARE THEY?
BETTER COLOR, BETTER FLAVOR, MORE FIBER, LESS FAT, GREATER STABILITY, FEWER CALORIES, TO MATCH THE COMPETITOR OR FIT IN WITH TRENDS
UNAVAILABLITY OF A RAW MATERIAL – REFORMULATION TO OVERCOME SCARCITY
NEW TECHNOLOGIES AND CHEAPER INGREDIENTS – IMPROVED CHARACTERISTICS AND PROPERTIES
TO LOWER THE COST OF THE PRODUCT TO COMPETE WITH CHEAPER PRODUCTS
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REFORMULATION OF EXISTING PRODUCTS Cont…
REGULATORY AGENCIES HAVE ALTERED THE LEGAL STATUS OF AN INGREDIENT OR ADDITIVE – COLOR ADDITIVES, AND ARTIFICIAL SWEETENERS. SAFETY OF NUTRACEUTICALS – KAVA KAVA, St JOHN’S WORT
CREATE NEW MARKET NICHE FOR EXISTING PRODUCTS – FEWER CALORIES Fuller, 2005
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http://static.howstuffworks.com/gif/artificial-sweeteners-1.jpg
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NEW PACKAGING OF EXISTING PRODUCTS NEW TECHNOLOGIES: CONTROLLED AND MODIFIED
ATMOSPHERE –CREATION OF NEW PRODUCTS- SHELF LIFE EXTENSION
BIOBASED MATERIALS – SAFETY OF PACKAGING FILMS
METAL TO GLASS CONTAINERS – A NEW PACKAGING LINE
GLASS CONTAINERS TO PLASTIC SQUEEZE BOTTLES WITH SNAP-CAP LIDS FOR DISPENSING MUSTARD, KETCHUP
CYLINDRICAL CONVENTIONAL CAN TO THE POUCH - THERMALLY PROCESSED FOOD REQUIRE REFORMULATION - FASTER HEAT PENETRATION – RECALCULATION OF THERMAL PROCESS-EXTENSIVE CHANGES TO THE PACKAGING LINE REQUIRED
Fuller, 2005
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DEVELOPMENT PROCESS AS AN INTEGRATED SYSTEM
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DEVELOPMENT PROCESS AS AN INTEGRATED SYSTEM
ANALYZE SOCIO-ECONOMIC DEVELOPMENTS IN A PARTICULAR MARKET
TRANSFER PREFERENCES AND PERCEPTIONS OF CONSUMERS INTO CONSUMER CATEGORIES
CHANGE CONSUMER CATEGORIES INTO “PRODUCT ASSORTMENTS”
GROUP “PRODUCT ASSORTMENTS IN PRODUCT GROUPS INTO DIFFERENT STAGES OF THE FOOD SUPPLY CHAIN”
IDENTIFY PROCESSING TECHNOLOGIES REQUIRED FOR PARTICULAR PRODUCT GROUPS
ANALYZE THE STATE OF THE ART IN REQUIRED PROCESSING TECHNOLOGIES
COMPARE THE STATE OF THE ART OF REQUIRED PROCESSING TECHNOLOGIES WITH FUTURE NEEDS
Fuller, 2005
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PHASE IN NEW FOOD PRODUCT DEVELOPMENT
Company Objective
Ideas
Perceived Needs of Market
Development- Bench-top- Pilot plant
Consumer Trials
Screening
Consumer Research
Financial Review
Feasibility Studies
Production
Test Market
Product ProgressionData Flow
Fuller, 2005
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SCREENING CRITERIA USED
IS THE IDEA FEASIBLE WITHIN THE TIME FRAMEWORK REQUIRED BY THE MARKETING DEPARTMENT – ANSWERS FROM MARKETING, MANUFACTURING, ENGINEERING, AND RESEARCH AND DEVELOPMENT DEPARTMENTS
DOES THE IDEA MEET PERCEIVED CONSUMER AND CUSTOMER NEEDS? DOES IT RESOLVE THE CONFLICT OF “I WANT” VS. THE CUSTOMER’S “I NEED”?
WILL A FINANACIALLY SOUND BUSINESS PLAN BASED ON THESE NEW PRODUCTS STAND UP TO CRITICAL ANALYSIS AND MEET OBJECTIVES SET BY MANAGEMENT?
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Idealized representation of activities flow in product development
CONCEPTObjective Testing
Consumer Preference
Testing
Process Design
Product Design
Pilot Plant Production
Bench-top Product
Subjective Testing
Commercial Plant
Production
Market Test &
Evaluation
Pilot Process
Plant Production
Fuller, 2005
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SUMMARY
PURPOSE OF DEVELOPING A PROCESS: MOVE A DESIRABLE PRODUCT TO THE
MARKET
WITH SUCCESS IN THE SEGMENT OF THE MARKETPLACE WHERE IT IS GOING TO COMPETE
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References Fuller, G.W. 2001. Food, consumers, and the food industry: Catastrophe or
opportunity? Boca Raton: CRC Press LLC. Fuller, G.W. 2005. New food product development: From concept to
marketplace, 2nd edition. Boca Raton: CRC Press LLC. Friedman, M. 1990. Twenty-five years and 98,900 new products later …. Prep
Foods 159:23- Harris, J.M. 2002. New food product introductions continue to decline.
FoodReview, Economic Research Service, USDA. 25:24-27. Kantor, D. 1991. New product proliferation: are the benefits worth the cost?
Prep Foods 160:28
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