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An Introduction to New Product Development

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  1. An Introduction to New Product Development Lynsey Woods

  2. Lesson Objectives • Definition of New Product Development (NPD) • Importance of NPD • Factors influencing NPD • Areas of NPD • Stages involved in NPD • Sources of Product Ideas • Success or Failure • Current Trends for NPD

  3. What is New Product Development? NPD is a combination of: • Investigating new ways of presenting food • Giving food a new & unique context • Mirroring other peoples’ new ideas • Improving food quality • Creating innovative foods

  4. Why is NPD important? • NPD is the lifeblood of companies • It creates profit • Ensures food retailers stay competitive against each other in a tough market • Keeps customers alert and prevents ‘sleep shopping’ by providing an exciting experience • Consumers are more concerned about their health and the role of food & nutrition in the prevention of disease

  5. Why undertake NPD? • Every product has a life cycle (PLC) • There are 5 distinct phases in the life cycle: - Introductory Phase • Strong Growth Phase • Decline in Growth Phase • No-Growth Phase • Decline in Volume Phase

  6. PLC Curve 4 3 5 Profit / Volume of Product Sold 2 1 Measure of Time

  7. PLC Phases • Introductory Phase (1): huge promotions, demo’s & advertising to build awareness - low sales • Strong Growth Phase (2): repeat purchasing & more customers attracted due to on-going heavy promotion • A decline in Growth Phase (3): sales start to drop as other companies release new products

  8. PLC Phases continued • No-Growth Phase (4): sales are constant due to regular customers making routine purchases • A decline in Volume Phase (5): More competition from new products, promotions too costly to maintain

  9. Factors Influencing NPD • Diet and Health • Europeanisation / Internationalisation • Niche areas • Increasing demand for quality • Profit • “Greying” of the population • Less time and increasing demand for convenience • Environmental concerns • Food safety • Animal welfare • Demographic factors

  10. NPD - Diet & Health Concerns • A major force for NPD in the food industry • Identified nutrition concerns: - Obesity – adults and children - Insufficient intakes of certain nutrients (e.g. folic acid – NTD’s) - High intakes of salt (increased consumption of processed foods) - Low fibre intakes - High sugar intakes - High fat intakes (trans) • Manufacturers have attempted to appeal to the health-conscious consumer with foods low in fat and sugar, high in fibre or made with beneficial bacterial cultures

  11. NPD – Environmental Concerns • Water pollution – nitrates, phosphates, pesticides, herbicides • CO2 emission • Loss of biodiversity through pollution and destruction of terrestrial ecosystems • CFC from aerosol cans • Food miles • Non-degradable packaging - Recycling and biodegradable packaging - Organic and low-intensity farming products • - Sourcing local suppliers

  12. NPD – Other Influences • Food Safety: • Food poisoning • Food additives • Food Irradiation • Animal Welfare: • Battery Chickens • Slaughtering/Transport of animals • Demographics: • Working women - Cash Rich/Time Poor Society • Convenience/snacking products

  13. What is 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 not previously explored by that company” (Fuller, 2004)

  14. Areas of New Product Development • Line Extensions – a variant of an established line • Repositioning of existing products – new use for an existing product • New form or size of an existing product • Reformulation of existing products – healthier alternatives

  15. Areas of NPD continued • New Packaging of existing product – advances in technology • Innovative products – change an existing product • Creative products – to bring a product into existence • Added Value products - the degree of innovation or change that makes a product more desirable to customers and consumers

  16. NPD – Customers & Consumers • Customers are those that purchase • Consumers are those that use what the customer has purchased • Customers choice therefore depends on consumers preference: • Likes and dislikes - Allergies • Disposable income - Packaging

  17. NPD – Markets & Marketplaces • A market is conceptual – represents a need discovered in customers and consumers that marketing personnel hope to develop into a want, a potential to sell • A marketplace is a real physical entity – products are sold here e.g. farmer’s roadside stall or a supermarket

  18. Stages of NPD • Can be divided into distinct stages however number and order can change • NPD is a sequence of stages from idea to finished on-the-shelf product • Many stages overlap but should always start & end with the Consumer in mind therefore Market Research is crucial

  19. NPD - Stage 1 • Establish objectives – ensure everyone knows what is planned and why • Identify customer and consumer needs

  20. NPD – Stage 2 • Market & marketplace research is needed to find out the needs & wants of the customer & consumer (expensive!!) • Identify a gap in the market to reveal new product opportunity • Beware of: • ‘me too’ & ‘me too late’ products! • novelty product’s: a necessity = repeat purchase! • gimmick products: you must reinforce credibility!

  21. NPD – Stage 3 • Ideas should be reduced to those most worthy of customer & consumer satisfaction • Screening criteria used: • Is the idea feasible with the time frame and skills available (all depts. need to be involved) • Does the idea meet perceived customer and consumer needs • Will a financially sound business plan based on these new products meet the objectives set by management

  22. NPD – Stage 3 continued • Screening improves odds of success • Product Specification should be completed & cover: - raw materials, recipe - method / process flow chart - critical control points (HACCP) - analytical and microbiological standards - pack declarations, customer & consumer instructions - export considerations - packaging spec., shelf life (time & temperature) - finished product weights / volumes & tolerances

  23. NPD – Stage 3 continued • Development Brief should be completed & cover: • origination date, ref. no., version no. • names & authorisation, project title & objectives • product description • target price • capital availability • projected volume • pack size • shelf & storage life requirements • packaging & mode of distribution • target customers • labelling claims • time scale

  24. NPD – Stage 4 • Development of Product business plan to include refined details of ingredient sourcing, processing techniques & the marketing strategy • Draft labels and packaging ideas for final product are drawn up

  25. NPD – Stage 5 • Production scaling: Kitchen Sample : Pilot Scale : Factory Scale 1-2kg : 10-20kg : 100kg+ BEWARE: This can go horribly wrong!! • Company may wish to conduct: • Mini market trial • Trials in 1 or 2 cities • Regional Launch

  26. NPD – Stage 6 • At the launch of a product it is important that the consumer knows about it! • Companies must also know about the consumer: • Who buys the product? Accompanied by what? • Product recognition? • Where it is bought – personal & regional tastes? • Price? • Weaknesses must be determined & corrected • Strengths must be recognised & applied to other potential products for the company profile

  27. Successful NPD • Must be: • on time (especially seasonal product launches) • within budget • within specification • Need: • company wide commitment • broad use of resources & involvement • good communication & motivation • creative synergy • commercial awareness • clearly understood objectives & a good brief

  28. New Products - Idea Criteria • Must satisfy needs & desires of consumers & at the same time attract customers (the gatekeepers!) • Ideas must be within skills level, technical capabilities, managerial & financial resources of the producing company • Ideas must be implementable!

  29. Sources of Ideas – The Marketplace • Customers & consumers found in a broad range of marketplaces: - Convenience stores • Grocery store • Independent stores eg. butchers • Catering outlets, restaurants • Company must decide in which marketplace the product will be positioned (launched & sold)

  30. Sources of Ideas – Customer & Consumer • Get to know your potential client base • Access: • Census data (age, sex, income etc.) • Magazine subscriptions in-store (house, food, garden etc.) • Loyalty Cards (previous info. on purchases) • Surveys (interview, postal, telephone, email)

  31. Customer & Consumer continued • Complaints • Enquiries • Suggestions • Nutritional Clarification eg. specific dietary client group

  32. Sources of Ideas - Retailer • What sells well? Seasonal? • What items are purchased together – perhaps offer curry with rice as opposed to curry and rice as separate items • Which retailer has highest average purchase?

  33. Sources of Ideas – Gap Analysis • Select a product category/client group and examine the marketplace for an empty space

  34. Sources of Ideas - Company • Sales personnel act as sensors & monitor what products sell quickly • Managers should report to NPD team • Also watch for potential rivalry competition from other retailers/manufacturers

  35. Sources of Ideas - Competition • Inspect other rivalry products: • Sensory/compositional analysis • Ingredient costing (estimate profits) • Assess quality characteristics • Evaluate flavour preferences • Evaluate packaging & labelling • How can we produce a cheaper & better product?

  36. Sources of Ideas – Food Conferences & Trade Shows • Showcases for new development and technologies • Access to vast arrays of food products, ingredients and technology becoming available throughout the next 6 months - 1 year • Research conferences will reveal latest research well ahead of it being published • Networking with other suppliers

  37. Sources of Information - Other • Libraries – cookbooks etc • Internet – various databases on food related issues • Trade Literature – new products and processes • Travel, eating out, visiting retailers, .... • Government publications – useful for demographic data • At least 6 sources of ideas should be researched to get an idea for the market

  38. Success or Failure? • Success or failure usually associated with marketing technique if research & development (R&D) have been carried out strategically • Important that you consider the 4 P’s when marketing a product: • Place • Price • Promotion • Product

  39. External reasons for Failure • Market is too small – growth potential limited • Market controlled by a dominant competitor – fast food leader McDonalds • Me-too product • Where technical novelty has been designed into a product e.g. coloured ketchup - customer may not see the difference or point of the development • Product ahead of time – too advanced for consumers to understand

  40. Internal reasons for Failure • Poor management • Lack of communication • Lack of awareness of strengths and weaknesses within the company • Lack of company objectives • Lack of production capacity – company has to be able to supply on demand • Unnatural adherence to and support for a project - i.e. pet projects • Technical reasons – product did not live up to the standards promised • Expecting too much • Not being lucky

  41. Current Food Trends What factors influence your purchase decision most? • Convenience • Taste • Appearance • Sell-by-date • Brand • Healthy version • Non-GM • Home grown • Free range • Ingredients • Assurance • Organic (IGD 2002)

  42. Trend - ‘Do-it-for-me-foods’ Ready-to-eat, packaged food for on-the-go consumers no utensils required • Fresh-heat and serve • Pre-cut, cleaned, ready-to-cook veg. items • Pasta sauces/soups • Fresh-cut salads • Stir-fry’s/Meal kits • Pre-prepared fresh fish /poultry • Marinated meats. • READY MEALS – big business! Reported that 30% adults in the UK eat a ready-made meal once a week

  43. Trend - Super Savoury & Sophisticated • More people well travelled • Better technology • More disposable income • “flavour fortification” of cheeses, tortillas, breads, pastas, rice and soups • 6 cuisines have enjoyed significant growth in popularity in the last few years – Italian, Mexican, Japanese, Thai, Caribbean and Middle Eastern – healthy noodles, rice etc. • 4 cuisines have shown a decline – French, German, Scandinavian and Soul food (gumbos, stews etc.) – high fat rich foods

  44. Trend - Balance • Increased protein trends • Increased fish / shellfish consumption • More-health conscious shoppers are looking for greater balance and nutritional convenience in prepared meals

  45. Trend – Form follows Function – Bits, Bites & Bags • Appetizers represent one of the most versatile food forms for the decade ahead • They’re bite sized - convenient • Vehicle for socialising and sharing • Economical way to sample new tastes • Consumers more mobile than ever – eating from desk-side to road-side (dashboard dining), hand held foods are projected to rapidly increase • Examples: tapas, spring rolls, mini-skewers, grilled veggies, mini meat pies, mini quiches….. 20% Kcals are from snacks throughout the day

  46. Trend – a new kind of ‘Home Span’ • Renewed emphasis on family, friends and food – Bisto Gravy TV advert • More than 70% of men say they would give up some of their pay to spend more time at home with their families • Home is still the favourite place to eat – home delivery service • Family sized portions – perfect for sharing – Chinese meals for 4-6 people • Examples – big bowls, stir-frys and pasta lend themselves to this friendlier form of communal dining style

  47. Trend – Kid-influenced • Kids have always been big business • Often the supermarket is the first store a child will visit • Children can influence family spending on food by as much as 30% • Many kids always or often influence the purchase of: - snacks (75%) - breakfast (72%) - lunch (62%) - dessert (47%) • However, rising numbers of overweight/obese kids has put a new spin on children’s food products e.g. sunny delight – no sugar, mini pack of fruit and veg, low-sugar/salt ready meals…. • Ban on TV advertisements targeted at kids at certain times of the day

  48. Trend – Light & Lively • Shift from classical French techniques to those of the Pacific Rim – fresh fruit • Demand for more natural and fresher products, ingredients and presentation • Freshness - Trends for raw foods, seasonal and regional foods • Herbs – basil, dill, ginger, coriander, rosemary, lemon grass, fennel will be used far more • Cooking methods will include poaching, stir-frying etc. • Visual presentation to make food look fresh and healthy - “layered look”

  49. Trend – Crossover Meal Patterns • Meal time is any time, and just about anything goes! • Curry / pizza for breakfast, cereals for dinner! • Contrary to popular belief the vast majority of Europeans and Americans eat some form of breakfast • 2003 – 85% of adults UK & N.I reported to eating breakfast (cooked and un-cooked) • The most important criteria seems to be no – or very limited preparation. Breakfast sandwiches and non-traditional sandwiches, breakfast bars and yoghurts • Lunch – more workplaces have microwaves – hence frozen dinners, pizza, pasta and chicken nuggets are becoming popular • Snacks - With 20% of Kcals coming from snacks, it is obvious that the distribution between snacks and meals is blurring

  50. Trend – Health / ‘Do-it-Yourself’ • Consumers continue to take more and more responsibility for their own health • Natural, fortified, functional and performance enhancing foods are soaring • 60% of Americans believe that the kitchen cupboard offers the best treatment • In the U.S. 74% are more likely to treat themselves before seeing a Doctor • Usage of avoidance products is high (e.g. fat, sugar, calories) • High-protein, low-CHO regimens are still quite popular • Dietary fibre • Salt