MARKETING RESEARCH AND NEW PRODUCT DEVELOPMENT SUCCESS IN THAI FOOD PROCESSING

Dr. Prisana Suwannaporn Department of Food Science and Technology Faculty of Agr
o-Industry Kasetsart University Bangkok, Thailand email: fagipss@ku.ac.th and Dr
. Mark Speece School of Management Asian Institute of Technology P.O. Box 4, Klo
ng Luang Pathumthani 12120, Thailand tel: (66-2) 524-5652 fax: (66-2) 524-5667 e
mail: speece@ait.ac.th
Agribusiness April 2002

MARKETING RESEARCH AND NEW PRODUCT DEVELOPMENT SUCCESS IN THAI FOOD PROCESSING A
BSTRACT Marketing plays an important role in new product development (NPD) throu
gh several mechanisms. One is cross-functional communication and collaboration s
o that marketing issues are integrated into the NPD process. Another is the stra
tegic orientation of NPD, which includes marketing strategy issues such as custo
mer orientation and market fit. Third, marketing research plays a specific role,
as it provides the information and knowledge which marketing brings into its NP
D roles. We show that use of marketing research is the most important determinan
t of higher NPD success in Thailands food processing industry. Crossfunctional co
mmunication is also an important success factor, but strategy and planning are n
ot very critical. EconLit classification: M310; Q130. Keywords: new product deve
lopment; marketing; food processing; Thailand 1.0 INTRODUCTION Food processing c
ompanies invest in new product development (NPD) to ensure future success in the
market. However, new food products are often more likely to fail than to succee
d. Many observers cite failure rates as high as 90 to 95 percent (e.g., Business
Week 1993; Matthews 1997; Young 1998). Hoban (1998) uses a much more restrictiv
e definition of new products and says that up to one-third of new food products
are successful. Whatever the failure rate, a substantial amount of NPD spending
can be wasted; by one estimate, 46 percent of all new product development costs
go into products which fail (Power et al 1993). Further, little is spent on new
food product development in the first place. Various estimates place NPD spendin
g in USA food companies at between one and four percent of gross sales (Hollings
worth 1998; Gorski 1994; respectively). Low spending and high new product failur
e rates can easily put companies at a big disadvantage in the increasingly compe
titive marketplace. 1998; Tyler 1998). The food industry in recent years has bee
n characterized by rapidly changing consumer tastes (e.g., Sloan Addressing chan
ging tastes with new products is essential in maintaining customer loyalty, so t
hat good NPD becomes a key factor in
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competitiveness (Hoban 1998; Jeffery 1998). Surak (1996) has suggested that more
new products can succeed if food processors change the way they do NPD. Holling
sworth (1996, 1998) and Jeffery (1998) recommended that NPD strategies and proce
ss should change to follow changes in market and technology. Given volatile mark
et conditions, one key recommendation has been stronger integration of the marke
ting function into food NPD (e.g., Viaene and Januszewska 1999). Problems in con
ducting effective NPD are magnified in many other major food industry countries,
where spending on R&D, and management of NPD may be even less favorable than in
the USA. However, while some research on NPD in the developing world has begun
to appear, most still comes from the West. Further, while NPD success factors ha
ve received some research attention, usually higher technology industries provid
e the context. Developing countries are quite competitive in some industries, su
ch as food processing, which do not require advanced technology, but they still
need to do NPD to keep up with market trends. Success factors for high tech NPD
in the West may not necessarily be applicable in non-Western countries, or in th
e lower tech industries where these countries hold competitive advantage (e.g.,
Karakaya and Kobu 1994 for different industries; Mishra, Kim, and Lee 1996 for d
ifferent countries). We examine the role of marketing in NPD in Thailands food pr
ocessing industry. Inter-functional coordination can add a marketing orientation
to NPD, and can bring marketing considerations in strategy and planning. Perhap
s most importantly, marketing research can bring in customer views. A stronger r
ole for marketing should translate into these elements contributing to more succ
essful NPD. In particular, we show that marketing research is critical in such a
market driven industry as food processing. We use statistical methods to demons
trate the broad applicability, rather than the frequently used qualitative and c
ase study approach. Thailand provides a good context for examining food NPD. The
local food processing industry is strong and internationally competitive (e.g.,
APFI 1994). Agroindustry represented 56.3 percent of total manufacturing in Tha
iland in 1990, and food and beverage processing accounted for more than a quarte
r of larger agro-industry (FAO 1992). The country ranks among the worlds five big
gest suppliers of food
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products, with exports valued at US$ 6 billion in 1995 (BP 1996). About 70 perce
nt of total food exports consisted of processed food. However, recently exports
have been hit by tough price competition from lower wage Asian countries (BP 199
6; Nation 1997). To remain competitive internationally, Thailand will have to fo
cus more on value added food products in the future, which will require increase
d investment in R&D. Better NPD is also becoming important in domestic food mark
ets. Modern retailing and changing consumer preferences foster demand for produc
ts with better quality, longer shelf life, and better packaging. Foreign brands
which were previously imported for a high income minority are now manufactured l
ocally and affordable to the average Thai. Thailand. Localization of MNC operati
ons brings in world standard NPD into Even if the most innovative NPD is not don
e inside Thailand, local
subsidiaries and joint ventures (JVs) have access to new products developed anyw
here in the MNC. Many food MNCs have major R&D facilities in Asia, some have loc
al facilities in Thailand, so that products can easily be adapted to local marke
ts. This has all forced some local companies to upgrade R&D, but many have not.
Thus, the level of NPD expertise is quite varied, even though Thailand as a whol
e is not particularly strong in R&D (Suwannaporn and Speece 1998). 2.0 MARKETING
AND SUCCESS FACTORS IN NPD Recent reviews of and research on NPD success factor
s make it clear that many marketing-related activities contribute substantially
to NPD. The marketing role can come in many forms. For example, Brown and Eisenh
ardt (1995) summarized research on NPD success factors into three broad research
streams, which can be roughly characterized as rational planning, communication
webs, and disciplined problem solving. Each of these contains a number of eleme
nts, but the discussion about disciplined problem solving is often essentially j
ust the imposition of a careful, structured, disciplined approach upon the eleme
nts related to strategy and planning, and internal and external communication of
the respective first two areas. Success factors in Poolton and Barclay (1998) r
oughly correspond, although they divide factors into tactical and strategic cate
gories.
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Most of this research has been done in technology driven industries. Even in thi
s context, discussion routinely includes marketing as an important function in N
PD. Though much research on food NPD is from practitioner viewpoints, it suggest
s that many of the same concepts apply, but that NPD is much more market driven
in the food industry than in some other industries (e.g., Fordham 1993; Taylor a
nd Hurley 1993; Karakaya and Kobu 1994; Hollingsworth 1994, 1995, 1996, 1998; Ma
nnion 1996; Surak 1996; Hoban 1998; Jeffery 1998; Ilori, Oke, and Sanni 2000). F
or the Thai food processing industry specifically, an overview of NPD may be fou
nd in Suwannaporn and Speece (1998). Thus, marketing in general may be even more
important than in some other industries, and marketing research, in particular,
should play a very critical role. Key success factors related to marketings role
the NPD process are summarized here: 2.1 Internal Communication and Marketing B
rown and Eisenhardt (1995) show that most research considers crossfunctional par
ticipation and communication among several internal functions, especially R&D, m
arketing, and manufacturing, to be important for successful outcomes of the NPD
process. Poolton and Barclay (1998) regard communication and information flow is
sues as tactical, but nevertheless necessary for good NPD. Moenaert et al (1995)
concluded that success rates in NPD were related to the inter-functional transf
er of information between R&D and marketing. Moenaert et al (2000) discuss how t
o structure NPD teams to enhance communication flows. Song, Xie, and Dyer (2000)
also showed that cross-functional involvement and the quality of cross-function
al information flow increase NPD success in Japan, Hong Kong, USA, and UK. All o
f this inter-departmental cooperation is important because the different departm
ents are involved in different stages of the NPD process, and success rates decl
ine if the stages are not performed well. Some observers go further. Griffin and
Hauser (1996) stress that communication between marketing and R&D is necessary
but not sufficient, and actual coordination between the two departments is criti
cal, across all stages of the NPD process. Atuahene-Gima and Li (2000) and Li an
d Atuahene-Gima (1999) similarly say that marketings influence is more important
than simply its interaction with other functions,
4

or its participation in the NPD process.

Kahn and McDonough (1997) discuss
marketings integration with R&D and manufacturing in terms of interaction versus
collaboration. They basically distinguish between simple communication or inform
ation exchange and a stronger relationship-based interaction, sometimes expresse
d structurally in a team organization of NPD. In the food processing industry, p
oor communication can lead to costly mistakes and loss of time. Technical people
must often educate marketing people, about recent advances in technology, curre
nt packaging concepts, materials and designs, and new ingredients and formulatio
n, as well technical aspects of production (Taylor and Hurley 1993). Marketing m
ust also have substantial influence with R&D people, to keep potential new produ
cts oriented toward market needs and customer acceptance. Communication and info
rmation flow in both directions is necessary for NPD to function efficiently (Vi
aene and Januszewska 1999). Teamwork across the three key functions of R&D, mark
eting, and production, as well as several others, is seen as a key success facto
r in Nigeria (Ilori, Oke, and Sanni 2000). Key elements for internal communicati
on, then, include such things as knowledge sharing (information flow) within NPD
teams, among various functions involved in NPD, across NPD teams, and the abili
ty to track and bring new product information into the communication flow. Thus:
H1: Stronger internal communication among the NPD team (R&D, manufacturing, mar
keting functions) will lead to higher success rates in NPD. 2.2 Marketings Strate
gic Role in NPD Brown and Eisenhardt (1995) discuss a rational planning approach
to NPD, and note that planning, frequent milestones, and senior management invo
lvement are some of the critical issues. Poolton and Barclay (1998) see a whole
set of elements, including top management support, integration into strategy, bu
t also flexibility. The NPD process must be well planned (though this is a tacti
cal issue to them), well implemented, and receive appropriate support. Successfu
l NPD is seen as a balance between relatively autonomous problem solving by the
project team, and the discipline of a heavy-weight
5

leader, strong top management, and overarching product. Cooper (1994) also cites
the need for early strategic thinking about the new product, its role in the co
mpany, and its positioning. In addition, he discusses planning and organizing th
e NPD process as a separate success factor. Moorman and Miner (1998) similarly s
tress the importance of planning and strategy, but point out again that it shoul
d not be too rigid, so that companies can adapt the NPD process to changing cond
itions and new information. Many of these authors do not necessarily focus speci
fically on marketing, but marketings role is implicit. Brown and Eisenhardt (1995
) and Poolton and Barclay (1998) show that much NPD research discusses the need
to understand customers. Fit with market needs is considered a strategic issue, on
e of the success factors in good NPD. Gatignon and Xuereb (1997) consider custom
er orientation to be one Cooper and Kleinschmidt (2000) element of the firms stra
tegic approach to NPD.
include marketing synergies within the firm as part of the strategic orientation
. Song, Montoya-Weiss, and Schmidt (1997) explicitly talk about marketing resour
ces synergy and marketing skills synergy in NPD, essentially, an orientation of
NPD toward the marketing competencies in the firm. In the food industry, insuffi
cient resources are often cited as a cause of failure (Fordham 1993; Hollingswor
th 1994, 1995, 1996). Companies are often tempted to cut NPD costs when they fac
e budget constraints. Further, established brands are often the first priority,
followed by cost reduction issues, while NPD ranks behind these in management at
tention. Top executives often oversee core brands, while new products are delega
ted to junior managers. NPD which is not supported properly can lead to higher l
evels of product failure. Thus, management commitment is critical. Companies wit
h the most successful NPD have found that excellent NPD and successful new produ
ct introduction demands more finesse and experience than does maintaining the su
ccess of an established brand. Katz (1998) argues that focus on core competency
is an integral part of best strategy. Most of this work is in the USA. Based on
in-depth interviews and study in food processing companies in Nigeria, Ilori, Ok
e, and Sanni (2000) cite both sufficient resource allocation to R&D and synergy
between technical and product capabilities, i.e., core competencies, as two of t
hree key success factors in NPD. In-depth research in
6

the Thai food industry shows that much NPD is even led by top management. Whatev
er other problems may still exist, managers report that NPD gets good attention
and support, and strategic consideration of NPD seems to contribute to more new
product success (Suwannaporn and Speece 1998). Some of the key elements of plann
ing and strategy, then, include integration of NPD into corporate strategy, focu
s on company competency, the plan itself, explicit and measurable goals, and top
management involvement. The impact of planning and strategy on new product perf
ormance can be summarized as: H2: Stronger use of strategy and planning elements
in NPD will lead to higher success rates of NPD. 2.3 Marketing Research for Cus
tomer Information Many models of NPD success factors incorporate market characte
ristics, and, as noted, strategic elements of NPD include customer orientation o
r market fit. Implicit in these models is the assumption that companies must con
tinuously acquire market information for such adaptation to the market to actual
ly work. Certainly, some work specifically on food NPD stresses the need for thi
s market orientation (e.g., Biemans and Harmsen 1995). Of course, this implies a
major role for marketing research in NPD. In fact, some of the discussion of ma
rketings importance in NPD really focuses on the specific role of marketing resea
rch. Interaction with marketing can give R&D more of a customer orientation, whi
ch actually brings customers needs, wants, and perceptions into the NPD process
at various stages. Of course, such information is transmitted to R&D through com
munication with marketing. Effective use of marketing research would seem to imp
ly strong cross-functional integration, just as the desire to use it would imply
a strategic orientation in NPD. Many of the activities which Cooper and Kliensc
hmidt (2000) discuss are actually marketing research, and bring in customer info
rmation at many different stages of the NPD process. Among computer and medical
equipment manufacturers, successful new products incorporated greater use of mar
ket information in the NPD process, while failed products used less (Ottum and M
oore 1997). Comparison of two specialty
7

chemical producers shows that one company has strong customer involvement in NPD
, and enjoys a much higher success rate. The less successful company mainly focu
ses on technology development, with little attention to customers until the late
stages of NPD (Tomes, Erol, and Armstrong 2000). A few studies on food NPD also
specifically cite use of MR as a distinguishing success factor (e.g., Juhl et a
l 1998). Integration of marketing research into the whole NPD process is importa
nt. Traditional test marketing usually comes in the later stages, and cannot hel
p keep early parts of the process on track. Under cost pressure and the need to
justify sunk NPD costs, test market data is often stretched to find the most pos
itive interpretation. New product managers are already emotionally involved near
the end of the process and want to get the new product to market (Hardin 1981).
In the food industry, Viaene and Januszewska (1999) show that marketing researc
h, which discerns market perceptions toward new products at various stages of th
e NPD process, uses quite different methodologies from traditional food research
such as sensory studies. They argue for closer integration of marketing and R&D
, in part because sensory studies are more a part of the technical development s
ide, and not really valid for bringing consumer perceptions into the process. In
a specific application to the food industry, Bogue et al (1999) show how market
ing research can be used to guide R&D on cheeses. This role for marketing resear
ch should be enhanced, if, as noted above, NPD in the food industry is quite mar
ket driven. In Thailand, many examples can be cited of both success and failure,
depending on how well the NPD team integrated marketing research to learn about
consumer perceptions. One MNC came up with a soy protein substitute-milk powder
which was very sound nutritionally, and substantially cheaper than genuine milk
powder. The target market was low income Thai mothers. However, after introduct
ion, it became apparent that low income mothers did not believe the lower priced
soy milk powder could be as good as more expensive genuine milk powder, and the
y did not buy it. While they were quite price oriented when buying food for them
selves, they wanted top quality for their babies (Suwannaporn and Speece 2000).
Another company uses marketing research extensively in every stage of the NPD pr
ocess, and has accumulated an extensive knowledge base of flavor and taste prefe
rences for potato chips among various age groups. It also knows what forms and
8

textures consumers like (ruffled, ridged, or flat chips), and even what combinat
ions of taste and texture. Product personalities and perceptual maps are constru
cted. All of this substantially improves the chances of success, as well as redu
ces the amount of R&D needed to come up with a successful product, because many
unfavorable prospects can be eliminated even at the concept stage, before any pr
ototype is developed (Suwannaporn and Speece 2000). These examples are represent
ative, and show that food NPD in Thailand, as elsewhere, is likely to be market
driven and more successful if marketing research is well integrated. Thus: H3: H
4: More use of marketing research will lead to higher success rates in NPD. Beca
use food is strongly market driven, the use of marketing research will be the mo
st important of the factors in distinguishing success rates.
2.4 Supplier Linkages and Collaboration External communications are also sometim
es cited as a success factor in NPD. Moenaert et al (2000) say that strong commu
nication with suppliers as very important. Langerak, Peelen, and Commandeur (199
7) show that firms can be distinguished by how they organize internal vs. extern
al communication and information flow in NPD. Optimal coordination of each depen
ds on market and competitive conditions. Ragatz et al (1997) stress the need for
effective integration of suppliers into NPD, although they point out that how b
eneficial this is depends substantially on how the integration is managed. Sever
al other studies look specifically at external linkages, and show that they are
important for NPD success (e.g., Comer and Zirger 1997). From the food processors
viewpoint, moving more R&D to suppliers saves both money and time. The R&D is d
one by specialists who have expertise, product Suppliers do the basic technology
such as knowledge, ideas, and commitment.
developing new packaging, ingredients, processing equipment. They may be brought
in from the beginning of NPD, sharing in market research and formulation develo
pment. (Hollingsworth 1995). Martinez and Burns (1999) even talk about a supplier
dominated Spanish food industry because the supplier role in R&D. For suppliers,
advantages of such alliances are that they gain clear and specific knowledge of
what 9

the customer wants to achieve in the market, and can work more effectively to he
lp deliver it (Mannion 1996). However, such advantages do not always get impleme
nted. In Thailand, some MNCs and a few large Thai companies have good supplier l
inkages, gaining access to outside R&D expertise and knowledge. Collaboration al
so allows intermediate R&D involvement between simply buying the technology embo
died in products, and developing new products completely with own R&D. Finally,
limited resources and shortened product cycles put great pressure on R&D, and so
me food companies meet the challenge through shared NPD responsibilities with th
eir suppliers. However, the strong tradition of business secrecy inhibits widesp
read adoption of collaborative R&D with suppliers. Many companies are afraid of
disclosing information which could be leaked to competitors (Suwannaporn and Spe
ece 1998, 2000). Thus, while not critical to our discussion of marketings role in
NPD, supplier linkages are known to be important in some NPD contexts. We inclu
ded them in our research, but we do not expect them to be a very important deter
minant of NPD success in Thailand. H5: Better communication with suppliers will
lead to higher success rates in NPD.
2.5 Knowledge Management and Continuous Learning These different roles of market
ing (and suppliers) are really just different ways of viewing marketings integrat
ion into a continuous learning process. Successful NPD requires knowledge sharin
g across a broad knowledge base, and barriers to information flow damage the abi
lity to do good NPD (Purser, Pasmore and Tenkasi 1992). Some researchers even cl
aim that NPD is essentially a knowledge management process (e.g., Madhavan and G
rover 1998). Strong internal linkages facilitate the knowledge flow upon which c
ontinuous learning depends (Bartezzaghi, Corso and Verganti 1997). NPD as a cont
inuous process is oriented toward the long term, i.e., it is strategic (e.g., Hu
ghes and Chafin 1996; Caffyn 1997). According to Poolton and Barclay (1998), well
-planned corporate strategy provides the building blocks for innovation, so that
past knowledge provides the basis for new and emerging strengths (p. 202). Platf
orm strategies incorporate strategic aspects of a continuous learning process. R
ather than focusing on specific new products, a company would focus on a platform,
which is an
10

area of NPD interest. The continuous work within the platform area provides a br
oad knowledge base that can quickly be applied to specific products (Muffato 199
9). Continuous learning enables the NPD team to learn from success and mistakes
in the past, and such information should be retained and contribute to the next
cycle of NPD. Moreover, continuously generating ideas keeps the organization clo
se to the needs of the market. It is cost efficient and can speed up the NPD pro
cess (e.g., Perls 1996; Caffyn 1997). On the other hand, discontinuous learning,
or a start-stop NPD process, creates many problems. One hidden cost is lost tim
e to get the NPD team up to speed when the process is started anew from the begi
nning. Loss of current readyto-go ideas is also a possibility. Sometimes the NPD
team may pursue the idea nearest at hand, rather than good ideas which may have
come up previously but were forgotten. If NPD teams do not incorporate prior le
arning well, the same mistakes may be repeated as in the previous cycle (Perls 1
996). Suwannaporn and Speece (2000) discuss NPD as information flow in a continu
ous learning process in the Thai food processing industry. Customer information
comes into the accumulated knowledge pool through marketing research. Marketing
digests this information, and integrates it into the broader context of all its
accumulated learning about marketing issues in NPD. Information flow from market
ing to R&D brings such information, duly translated into an R&D thought mode (Fi
gure 1). Of course, information also flows from R&D to marketing, and must simil
arly be translated. [Griffin and Hauser (1996) call these different ways the two
departments view things the cultural thought worlds and languages of marketing
and R&D.] This continuous learning process and accumulation of knowledge allows
the strategic approach to NPD through making sure that NPD fits within the firms
competencies. But given the strong market driven nature of the food industry, ex
tensive marketing research is also strategic it keeps the firm aligned with the
long-term trends in consumer demand. Of course, strong marketing after the new p
roduct launch is also a major factor in success. In particular, consumers may ne
ed to be educated in use of new food items (if they are actually new, rather tha
n simply line extensions). Often, without this, the product fails because it is
not perceived as anything particularly new, and consumers do not know about the
new benefits that it offers (Oates and Crippen 1995). However,
11

here we will only consider marketings role in the NPD process, not what it does a
fter the process is finished and the product is on the market. We focus only on
the four success factors in the NPD process, cross-functional communication, str
ategy and planning, marketing research, and supplier linkages. The four factors
(communication, strategy, marketing research, supplier linkages) are all commonl
y cited success factors in the organization of the NPD process. However, applica
tion to actual practice has been somewhat less common. Poolton and Barclay (1998
) even suggest that much research on NP success factors is too generic, and has
not actually been applied to specific contexts very well. They say that success
factors and their importance depend heavily on industry and firm characteristics
. They also suggest that much research focuses too heavily on variable by variab
le analysis. Further, because NPD research has not translated very strongly into
managerial practice, managers are still relying on gut-feel with respect to best
practice in development (Poolton and Barclay 1998, p. 210). Thus, it is important
to look more carefully at success factors within the specific context, and more
at the basic concepts, rather than at many specific variables. We do this for th
e Thai food processing industry. 3.0 METHODOLOGY A quantitative questionnaire wa
s designed to capture elements of practice related to the success factors. Eleve
n questions in the survey were about NPD practice in Thailand, based on previous
analysis from in-depth qualitative interviews among food manufacturers (Suwanna
porn and Speece 1998, 2000). question asked about use of sensory testing. Four a
dditional questions asked about usage of marketing research at different stages
of the NPD process. A fifth (These questions and their 5-point horizontal scales
can be seen in Table 5, which reports results later in the discussion.) Several
other questions about how important new products are in overall sales, what kin
d of targets were set, and general use of MR are also relevant here, and are rep
orted in Tables 2-4. Some questions covered various other aspects related to NPD
, but were not relevant to the discussion here and are not reported. Questionnai
res were sent to 650 medium to large Thai and MNC food processors in Thailand, b
ased on categorization of food company size by the Thailand
12

Development Research Institute (TDRI 1996). Previous research indicated that sma
ll food companies very rarely do any NPD in Thailand (Suwannaporn and Speece 199
8, 2000), so small companies by the TDRI measure were excluded in this study. Th
e mailing was random from company lists obtained from the Thailand Company Infor
mation 1998-1999. Any of three functions related to NPD (marketing, R&D, and man
ufacturing), as well as top managers, could answer. The instructions requested t
hat the recipient direct the letter to someone who had played a major role in a
recent NPD project. In practice, respondents tended to be from the function whic
h led the NPD project reported by the respondent. (In the Thai food industry, NP
D almost always comes under one of these three functions or top management, depe
nding on how NPD is organized in different companies; Suwannaporn and Speece 199
8.) Respondents were asked to base their answers on their own past experience wi
th NPD, and to think specifically about NPD projects in which they had participa
ted, not all NPD in the company. A total of 114 questionnaires were returned (17
.5 % of companies). Eighty percent of respondents were from one of the three key
functional areas or top management (Table 1). Approximately 80 percent of the c
ompanies had over 100 employees, one-third had more than 500. Only one-fifth of
companies had under Baht 200 million annual revenues (approximately US$ 4.5 mill
ion), while nearly one-fifth had over Baht 1 billion (US$ 22.4 million). However
, 40 percent of the respondents did not answer this question about revenues. Sin
ce TDRI categories are based on assets, information which we could not collect o
n this questionnaire, we categorized companies with either revenues of under 100
0 million Baht, or less than 500 employees (or both) as medium, and those with o
ver 1000 million Baht and more than 500 employees as large. By this classificati
on, approximately sixty percent of the respondents worked in medium sized compan
ies (Table 1). Two-thirds of respondents worked in wholly Thai owned companies,
and one-third worked in companies with some degree of foreign influence, ranging
from minority foreign owned, to majority and wholly foreign owned. The success
rate of new product introductions was not outstanding among most companies repre
sented by these respondents. Forty-three percent of them said that one-fifth or
fewer new product introductions were successful. Still, the figures in Table 1
13

indicate a new product success rate in our study which is rather high compared w
ith data from some other studies on the food industry in the USA. For example, o
ne source says that approximately thirteen new product introductions are needed
to gain one success, or about a 7.7 percent success rate on average (Gorski 1994
). Other observers cite success rates of only five to ten percent (e.g., Power e
t al 1993; Matthews 1997; Young 1998). However, Hoban (1998) says that up to one
-third of new food products are successful. Of course, differences in estimated
success rates are likely to depend on different criteria used in defining new pr
oduct success. Criteria used by food manufacturers in Thailand may be less stringe
nt than those in the USA in terms of market share or sale volume. However, our s
ample also probably excludes companies which are more likely to have very low su
ccess rates medium to large companies are somewhat more sophisticated at NPD. (I
ndeed, small companies rarely do any R&D in Thailand.) Given that success rates
are quite low according to the literature, and because we found no statistical d
ifferences in NPD practices between medium and higher success rates, we created
a dichotomous variable and categorized anything over twenty percent success rate
as high for the purposes of further analysis. 4.0 RESULTS AND DISCUSSION Using
crosstabulation, we can see that there is a relationship between the selfreporte
d extent of market research activities (a categorical variable in our data) and
the level of NPD success. Only about one-quarter of companies in our sample use
marketing research intensively in the NPD process. However, three-fourths of the
se companies fall into the higher success rate category (Table 2). By the time t
hey launch new products, they are quite sure they will succeed because they have
used research at every stage of the process. The proportion of companies fallin
g into the high success category is lower for companies which only use some mark
eting research, and thus are only somewhat sure about consumer response. Success
declines somewhat from that for companies which rush products out without much
knowledge of customers at all. Companies which have little experience with NPD a
nd new product launches are even
14

less likely to achieve high success rates when they do decide to introduce new p
roducts. Moreover, companies with more experience in NPD are more likely to use
marketing research. About one-third of companies in which new products are a maj
or part of sales use marketing research intensively, and are quite sure about co
nsumer response by the time the product is launched. Only ten percent of compani
es where new products are a minor part of sales use marketing research intensive
ly. Only about one-quarter of companies for whom new products are a major part o
f sales do not know much about their markets or have little experience in NPD, c
ompared to over one-third of companies reporting that new products are a minor p
art of sales (Table 3). The companies using marketing research more intensively
are better able to set specific, immediate sales targets to measure whether the
new product is successful. definite goals or very long-term goals for their prod
ucts. Only sixteen percent of companies using marketing research intensively do
not have any Over one-third can set immediate targets, and the rest set sales ta
rgets to be reached within one to two years. Very few companies who use marketin
g research less intensively or not at all can set immediate targets, and a high
proportion of such companies cannot set goals at all, or set only very long-term
targets (Table 4). Examining practices in the NPD process, one thing which stan
ds out about companies in the food processing industry in Thailand is the strong
role of top managers. This is consistent with much of the literature. Companies
also apparently stay close to their core competencies, and communication is fai
rly strong, internally and with food ingredient suppliers. The companies are som
ewhat weaker on many other elements of strategy and planning for NPD and in syst
ematic tracking of new product information, though the respondents still report
mild agreement that their companies do these things. The respondents think that
knowledge sharing across teams is relatively poor (Table 5a). These results are
consistent with previous qualitative work (Suwannaporn and Speece 2000). The que
stions about use of marketing research are on a different scale (frequently to n
ever, rather than strongly agree to strongly disagree about usage). We included
sensory testing for comparison, although many observers argue that sensory
15

tests by R&D are more of an internal technical issue, have poor external validit
y, and are not comparable to marketing research (e.g., Viaene and Januszewska 19
99). At any rate, use of sensory testing is much more common than use of marketi
ng research at any stage of the NPD process. There is not much difference in fre
quency of usage of marketing research in various NPDstages (Table 5b). Principle
components factor analysis of the eleven questions about practice in the NPD pr
ocess yielded three factors, which together account for almost 60 percent of var
iance. At 0.984, the third eigenvalue was just under 1.0, but the third factor w
as included because a two factor solution was difficult to interpret, several of
the communalities were quite low, and two factors accounted for only 50 percent
of variance. These conditions all suggest that the third factor should be inclu
ded (Hair et al 1995). The first dimension is about new product strategy and pla
nning. The second concerns internal information flow and communication on the ne
w product development project, while the third dimension is about linkages with
suppliers (Table 6a). Most variables in all three factors load unambiguously, ex
cept for new product ideas focus on company competency. Its loading of 0.459 on th
e new product strategy and planning dimension is not much greater than on the in
formation flow and communication dimension. Most variables also have communaliti
es above 0.5, indicating that the majority of variance on each variable is captu
red in the three factors. However, communality for new product ideas focus on com
pany competency is only 0.43, and the variable top managers are involved and suppo
rt NP projects is even lower, indicating that the three dimensions do not entirel
y capture information in these two variables. Nonetheless, the three main dimens
ions are generally what the questionnaire was designed to measure, and correspon
d well with three of the success factors discussed above. We analyzed the questi
ons about use of marketing research separately, because they are on a different
scale, but more importantly, conceptually they deal with flow of consumer inform
ation into NPD, rather than organization of the NPD process itself. An initial f
actor analysis including the question on sensory testing yielded two factors, on
which the sensory testing question was a single variable factor, confirming tha
t NPD managers view it as something different from marketing research. A new fac
tor
16

analysis of the four questions on marketing research yielded a single factor on

which all four variables loaded strongly with high communalities (Table 6b). for
H1), strategy (H2), and supplier linkages (H5) from above. represents use of ma
rketing research (H3). independent variables to predict low vs. high success rat
es in NPD. As the dependent variable (low vs. high success rate) is categorical,
we used discriminant analysis. The discriminant function was significant (at p=
0.023), and was able to correctly predict success rate category in about 69 perc
ent of cases. The two factors of internal communication and marketing research w
ere the most important in distinguishing low from high success rates. Internal c
ommunication had a slightly higher discriminant function coefficient, but market
ing research had a slightly higher correlation with the function (Table 7), whic
h is perhaps the best way to decide relative importance (Hair et al 1995). Strat
egy and planning had a small coefficient, but its correlation with the function
was about 0.4, which is above the level of 0.3 which Hair et al (1995) say is th
e minimum for significance in a practical sense. The supplier linkages factor wa
s not useful in predicting success rates. Thus, H1, H2, and H3 from above, conce
rning the impact of internal communication, strategy and planning, and marketing
research, are supported. H5, about supplier linkages, is not supported, but we
noted in the discussion above that we did not expect it to be supported because
business secrecy would restrict information flow with suppliers. Support for H4
is only partial. By one measure of importance (correlation with the discriminant
function), marketing research did come out slightly higher than any of the othe
r three success factors. However, the margin over the information flow and commu
nication factor is not large, and the function coefficient on the marketing rese
arch factor is slightly smaller than for information flow and communication. We
can say that marketing research is quite important, but probably not, as H4 stat
es, that it is the most important. Looking at the difference in means across the
individual variables which make up the marketing research factor, Table 8 indic
ates that the use of marketing research in several stages of NPD is more importa
nt than use afterwards simply to determine the Thus, the three This fourth facto
r factors above should represent three key success factors, internal communicati
on (used Together, the four were used as
17

positioning and price of the finished product. Companies with higher success rat
es use marketing research more often at the concept stage before starting NPD, t
hey use it more often to guide formulation and recipes of food products, and the
y use it more to test the prototype. We also tested whether use of sensory testi
ng differs across success rate categories; apparently, it does not. Companies wi
th higher success rates also have much stronger internal information flow within
NPD teams, across NPD teams, among functions, and they have better ability to t
rack new product information. Among the variables constituting the strategy and
planning factor, only the setting of milestones was more common among high succe
ss companies. Supplier linkages did not differ. 5.0 CONCLUSION NPD in the food i
ndustry is strongly market driven, and consumer tastes change rapidly. Under suc
h conditions, many observers have recommended that marketing must be strongly in
tegrated into food NPD, and some specifically cite the need for extensive market
ing research at every stage of NPD (e.g., Viaene and Januszewska 1999). However,
there is little empirical verification of these assertions that more extensive
use of marketing research improves NPD success in the food industry. This exampl
e in Thailand, which is a major competitor in world agribusiness and a top expor
ter of processed food products, shows that more extensive integration of marketi
ng research into the NPD process does indeed result in higher success rates in n
ew product introduction. The key hypotheses in this paper (H3 and H4) stated tha
t more use of marketing research would lead to higher NPD success, and that the
integration of marketing research would be the most important of the factors con
tributing to success in NPD organization. H3 was supported by our data from food
processors in Thailand. The more Companies which use marketing research intensi
vely and understand consumer response in great depth are more likely to have hig
her success rates. extensive use of marketing research appears to be related to
more experience in doing NPD and a larger role for new products in the companies
. Use of marketing research
18

also allows companies to set quantitative goals for new products, and more caref
ully evaluate performance after launch. H4 was only partially supported. In the
NPD process itself, marketing research is the single most important determinant
of higher success rates among the set of NPD organization variables investigated
here, by one measure of importance, but it is not substantially more important
than internal information flow and communication. The critical times for integra
tion of marketing research are early and during NPD, not after the NPD but befor
e launch simply to help decide how to position and market the new food product.
In addition to marketing research, better inter-functional communication, which
gives the marketing department stronger influence in NPD, also has a major impac
t on success rates. Strategic orientation, which includes a marketing assessment
of the role of the new product in the company, is somewhat important. rates. Th
ese results are quite strong in showing the advantages of integrating marketing
research (and marketing) deeply into the NPD process at every stage. Clearly, su
ccess in a market driven industry such as food processing does require extensive
knowledge of customer needs at every stage of NPD. Adapting new products to cus
tomers must begin very early, even at the product concept stage, by testing conc
epts through marketing research. More successful companies continue using more m
arketing research to guide formulation, and in prototype testing. Using marketin
g research at the end of the NPD process is too late if the product does not fit
the market, it is difficult for marketing research to do much to help adjust th
e positioning and marketing actions in new product launches. Supplier linkages w
ere not useful in the Thai context in distinguishing low from higher success
19

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24

Customer
Sensory Evaluation
Technology
Supplier Tech. Corporate Tech.
Marketing (Existing Product)
Market Trend Customer Need Competitor Activity
Accumulated Knowledge Pool
NP Idea/concept Product Definition Market Plan NP Idea New Product Development
Market Research
R&D (Existing Product)
Customer Taste Preferences Product Trend Product/Process Improve/Development Cost Re
duction Quality Standardization
Manufacturing (Existing Product)
Production Process Improve/Development Cost Reduction
Accumulated Knowledge Pool
New Process/Product Development
New Process Development Production of NP
NPD Process/Management
NPD Process/Management
Marketing (New Product)
R&D (New Product)
Manufacturing (New Product)
New Product and Process Development
Figure 1:
Continuous Learning Process Model for NPD
Source: Suwannaporn and Speece (2000)
25

Table 1: Summary of Company Characteristics characteristic Size of company (assi

gned by researchers) annual turnover (million baht) number of employees classifi
cation medium large 1-200 201-999 over 1000 1-100 101-500 501 up 100% local owne
r Thai major share holder Thai minor share holder 100% foreign investment R&D ma
nufacturing marketing top manager 0-20% 21-40% 41-60% 61-80% 81-100% frequency 6
9 42 24 25 21 20 49 41 77 14 15 4 34 27 15 14 49 22 26 10 4 percent 60.5 36.8 21
.2 22.1 18.6 17.7 43.4 36.3 67.5 12.3 13.2 3.5 29.8 23.7 13.2 12.3 43.0 19.3 22.
8 8.8 3.5
ownership (degree of foreign influence)
position of respondent
new product success rate
note: frequencies do not always sum to 114 or 100 % because of missing data.
26

Table 2: Use of Marketing Research and Success Rate use of marketing research co
unt row % intensive market / consumer studies; quite sure about response when ne
w products launched some market / consumer studies; somewhat sure about response
when new products launched rush to introduce new product without much knowledge
of markets / customers dont develop many new products, not much experience colum
n totals column total percent Pearson chi-square significance likelihood ratio s
ignificance low success high success rate rate 6 23.1% 21 44.7% 7 53.8% 12 63.2%
46 43.8% .046 .040 20 76.9% 26 55.3% 6 46.2% 7 36.8% 59 56.2% row totals (row t
otal %) 26 24.8% 47 44.8% 13 12.4% 19 18.1% 105 100.0%
Note: Row labels represent the categories in the question on the questionnaire.
Column categories are merged from the categories noted in Table 1.
27

Table 3: Use of Marketing Research by Role of New Products in Sales role in sale
s use of marketing research count column % intensive market / consumer studies;
quite sure about response when new products launched some market / consumer stud
ies; somewhat sure about response when new products launched rush to introduce n
ew product without much knowledge of markets / customers dont develop many new pr
oducts, not much experience column totals column total percent Pearson chi-squar
e significance likelihood ratio significance 4 10.3% 21 53.8% 4 10.3% 10 25.6% 3
9 36.8% .032 .024 22 32.8% 28 41.8% 9 13.4% 8 11.9% 67 63.2% 26 24.5% 49 46.2% 1
3 12.3% 18 17.0% 106 100.0% minor part of sales major part of sales row totals (
row total %)
Note: Both row and column labels represent the categories in the question on the
questionnaire.
28

Table 4: Use of Marketing Research by Definition of New Product Success definiti

on of immediate sales new product success target at launch use of marketing rese
arch count row % intensive market / consumer studies; 9 quite sure about respons
e 36.0% when new products launched some market / consumer studies; somewhat sure
about response when new products launched rush to introduce new product without
much knowledge of markets / customers dont develop many new products, not much e
xperience column totals column total percent Pearson chi-square significance lik
elihood ratio significance 2 11.1% 16 16.0% .026 .019 5 11.1% sales target withi
n 1-2 years no specific row totals (row total target or %) only after 3 or more
years 4 16.0% 18 40.0% 4 33.3% 9 50.0% 35 35.0% 25 25.0% 45 45.0% 12 12.0% 18 18
.0% 100 100.0%
12 48.0% 22 48.9% 8 66.7% 7 38.9% 49 49.0%
Note: Both row and column labels represent the categories in the question on the
questionnaire.
29

Table 5a: Means of NPD Practices practice top managers involved & support NP pro
jects new product ideas focus on company competency informal communication among
functions communication with food ingredient supplier knowledge sharing within
team tracking new product information has a new product plan new product is anno
unced as company strategy communication with food process machine suppliers mile
stones for new product are set knowledge sharing across teams notes: scale: n 11
4 114 114 113 114 113 114 114 112 114 113 mean ** 1.63 2.12 2.29 2.29 2.47 2.54
2.54 2.54 2.66 ** 2.84 3.35 std dev 0.90 1.04 1.03 1.13 1.13 1.06 1.17 1.28 1.08
1.31 1.29
** = significantly different from the mean below at p = 0.05; differences of app
roximately 0.26 are significant, depending on specific standard deviation. 1 = s
trongly agree, 5 = strongly disagree, with the statement that your company uses t
he following practices in NPD
Table 5b: Use of Marketing Research in Stages of NPD stage of NPD when use marke
ting research use sensory testing use MR to evaluate prototype use MR to guide f
ormulation / recipe in R&D use MR before start R&D use MR to determine positioni
ng / price notes: scale: n 114 114 114 114 113 mean ** 1.83 2.81 2.85 3.00 3.04
std dev 1.09 1.35 1.30 1.35 1.26
** = significantly different from the mean below at p = 0.05; differences of app
roximately 0.26 are significant, depending on specific standard deviation. 1 = v
ery frequently, 5 = not at all, with the statement how often does your company us
e marketing research and sensory testing in NPD
Note: sensory testing was included in the questionnaire for comparison with mark
eting research activities.
30

Table 6a: Factor Loadings of NPD Practices in the Thai Food Processing Industry
practice new product strategy and planning new product is announced as company s
trategy milestones for new product are set has a new product plan top managers i
nvolved & support NP projects new product ideas focus on company competency info
rmation flow and communication knowledge sharing within team knowledge sharing a
cross teams informal communication among functions tracking new product informat
ion supplier linkages communication with food ingredient supplier comm. with foo
d process machine suppliers variance in rotated solution cumulative variance not
e: eigenvalue3 = 0.984 fac1 .748 .722 .710 .543 .459 .247 .108 .125 .420 .133 .0
93 21.67 21.67 fac2 -.028 .259 .351 .148 .435 .796 .700 .629 .592 .088 .287 21.4
7 43.13 fac3 .293 .073 -.084 .164 -.164 .128 .146 .394 .144 .846 .810 15.79 58.9
3 comm .646 .594 .635 .344 .426 .711 .523 .566 .548 .742 .746
Table 6b: Factor Loadings of the Marketing Research Usage Factor loading use MR
before start R&D use MR to guide formulation / recipe in R&D use MR to evaluate
prototype use MR to determine positioning / price variance .888 .860 .882 .814 7
4.23 comm .789 .740 .779 .662
31

Table 7: Discriminant Function Coefficients and Correlations discriminating vari

ables discriminant function coefficients .586 .648 .194 .058 pooled within group
s correlations .764 .726 .403 .074
use of marketing research information flow and communication new product strateg
y and planning supplier linkages
notes: significance of the discriminant function (from Wilkes Lambda) = 0.023; th
e function correctly predicts 66.7 % of low success, and 70.5 % of high success,
for a combined rate of 68.8%.
32

Table 8: Differences in New Product Success Factors by Low vs. High Success Rate
s practice use of marketing research factor score use MR before start R&D use MR
to guide formulation / recipe in R&D use MR to evaluate prototype use MR to det
ermine positioning / price information and communication factor score Knowledge
sharing within team Knowledge sharing across teams Ability to track new product
information Informal communication among functions new product strategy and plan
ning factor score New product is announced as company strategy Milestones for ne
w product are set in the company Top managers involved and support NP projects H
as a new product plan New product ideas focus on company competency supplier lin
kages factor score Communication with food ingredient supplier Communication wit
h food process machine suppliers use sensory testing sig .009 .004 .035 .014 .13
0 .010 .002 .021 .033 .081 .154 .389 .002 .890 .103 .352 .846 .346 .563 .619 3.3
1 2.53 mean low .296 3.43 3.16 3.16 .284 2.86 3.67 2.79 2.49 mean high -.212 2.6
9 2.65 2.53 -.207 2.21 3.11 2.35 2.15
notes: means are only reported when significantly different (at least p=0.10); f
or overall means see Tables 5a, 5b; reported significance is for pooled or separ
ate variance according to results of Levenes test for equality of variance; senso
ry testing is reported for comparison.
33

Brief Bios Dr. Prisana Suwannaporn is assistant professor in the Department of F

ood Science and Technology at Kasetsart University, Bangkok, Thailand. Prior to
beginning her graduate work and then joining academia in 1992, she spent six yea
rs in R&D in the food processing industry in Thailand. Though she still does tec
hnical research, much of her research now focuses on management of R&D and new p
roduct development in Thailands food processing industry. She consults to local c
ompanies on both technical and management issues. Dr. Suwannaporn earned her PhD
in Management at the Asian Institute of Technology in Bangkok, and holds an MAp
pSci. in Food Science from the University of New South Wales in Australia. Dr. M
ark Speece is associate professor in the School of Management, Asian Institute o
f Technology, and adjunct faculty at Bangkok University and the National Institu
te of Development Administration. He has been at these universities for eight ye
ars, except for a recently completed a two year visiting term at Nanyang Technol
ogical University, Singapore. Earlier he spent five years in Hong Kong, partly a
t Chinese University of Hong Kong, and for several years as a full-time, free-la
nce consultant. His research and consulting for nearly 15 years has focused on m
arketing issues in East and Southeast Asia, frequently in a food industry contex
t. Dr. Speece earned one PhD in marketing from the University of Washington, Sea
ttle, USA, and a second PhD in Middle East economic geography from the Universit
y of Arizona.
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