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An Introduction to New Product Development. Lynsey Woods. 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.

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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