Food Marketing APEC 4451 Fall Semester 2010 New Product Development Process Targeting and Segmentation

Dennis J. Degeneffe The Food Industry Center University of Minnesota

Why Introduce New Products?

The Case For Introducing New Products
Organic Growth - Shareholder value Competitive Position Capacity Utilization

The Case Against Introducing New Products

Risk the odds against success High Odds of Failure* High Cost of Failure Cannibalization of existing business.

Therefore introducing new products is a risky business!

New Product Development Process

A systematized approach for the development of new products to manage risk. A general approach that is followed by most major consumer goods companies.
Includes the infusion of creativity and the rigor of evaluative decision points or Stage Gates

New Product Development Process

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

Product Development Positioning Development

STM Confirmation Advertising Testing

Test Test Marketing

Commercialization

New Product Development Process

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

Product Development Positioning Development

STM Confirmation Advertising Testing

Test Marketing*

Commercialization

*Stage Gates

Developmental Stages About how to

Is more constructive than evaluative - provides guidance. Fosters creativity and innovation Generates ideas Obtains insights from consumers/customers on what they want.

Stage Gates
Evaluative stages go/no go decisions Requires an objective assessment of the marketing initiative prior to proceeding further:
Will it fit: Manufacturing system Distribution system Consumer/Customer expectations Brand equity Will it likely sell What kind of financial resources will it require Will it provide an adequate pay-back/return on investment (ROI)

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

Opportunity Identification
Sources of Information:: Secondary Research - Data that has been previously gathered for a more general purpose.
Secondary market information Trend information Can come from a lot of directions: Consumers Competitors Technologists

Primary Research or Custom Marketing Research

Types of Secondary Data

External Secondary Data:
Government data Trade and industry associations Publications Reference Sources Internet sites Libraries/archives Commercial databases (E.g. National Eating Trends)

Dont forget the Food Institute Student Learning Service!!!

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General Market Data Datamonitor Mega-Trends

Convenience Quick meals Health 90% of Americans feel improving health is important Age Complexity Greater spending power among children/teens, Growing senior population Gender Complexity Blurring of traditional gender roles Lifestage Complexity Empty nesters, boomerang children Individualism & Customization Custom tailored solutions Sensory Experience Comfort Seeking Connectivity Social media

1994 Strategic Insights at Pillsbury

Moms life is a hassle
9-5 job No time to plan or prepare meals Fussy kids Off to soccer practice

Important to get kids to eat vegetables

Kids wont eat vegetables Stress & guilt

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

End Game

Who Executes New Product Development Process New Product Development Team - a collaborative, cross functional brand management group focused on specific opportunity area, reporting to senior management.
Research & Development Marketing Manager Advertising Agency

Promotions

New Product Development Team

Finance

Sales

Marketing Research

When Does it Begin and End?

Opportunity Identification

Idea Generation

Concept Development

Concept Testing*

Product Development Positioning Development

STM Confirmation Advertising Testing

Test Marketing*

Commercialization

*Stage Gates

Case - Lunchables
Lunchables was originally introduced in 1989, by Oscar Mayer (Kraft Foods). As a concept it had been around for 10 years before it was introduced Outstanding success story, but not without problems along the way

The History of Lunchables

How Lunchables became a 10 year growth engine.

Lunch Combinations Historical Growth Trend

700 600
Breakfast

500 $M M 400 300 200

National Roll Out Tacos & Nachos End of Year I Lunchables w/Dessert Bad Week Ad Platform Defined Fun-Pak (Drink Box) Lunchables w/ Spreadable Cheese Pizza Hot Dogs & Hamburgers Swirls

OM Category

100 0
1989
Louis Rich Lunch Breaks Trial Volume Attrition

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Year Ending in March

Source: A. C. Nielsen

New Product Development Process Key Points

Introducing new products is a two edge

sword.

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

The Stage Gate Approach provides a road map for new product development, integrating:
Creativity and innovation Evaluative Rigor

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

Targeting And Segmentation

Fundamental Importance of Targeting

Fundamental Elements of Marketing Positioning: Target The Who
Benefit The When Frame of Reference The context With respect to what Support - The How Example of Positioning Statement: To Time Pressured Moms Hamburger Helper is a great way to get an fresh hot meal on the table in only a few minutes, that the entire family will love. That is because Hamburger Helper includes all the fixins just add it to one pound of hamburger, simmer and serve.

Ways to Segment Consumers

Geography Southeast, Metro areas, etc. Demographics Households with children, Seniors, etc. Lifestage College students, expecting moms Behavior Heavy brand users, competitive brand users Attitudes

Attitudinal Segmentation Benefits of Attitudinal Segmentation:

The basis for why consumers behave the way they do the driving motivation behind behavior. Provides the insight to develop effective Marketing programs. Products Services Advertising

Targets?

Example: Pillsbury How America Eats Study (2000)

Study found seven different types of consumers

HWE2001 Consumer Segments

Traditional Recipients Mainstream Nurturing Cooks

14% 14%
Mobile Munchers

17%
Healthy Traditional Cooks

16% 14% 13%

Weary Providers

Food On Demand

12%
Healthful Explorers
Excerpts from ADA Conference

How America Eats Food Segment Profiles

Each Segment has a distinctly different approach to eating. Mainstream Nurturing Cooks
Nurture their family through food Meal time = quality time Good taste is #1 consideration Want to make the occasion special

Healthful Explorers
Actively trying to eat healthy Focus on quality/freshness Creative & Experimental tastes Frequently too busy to cook, need easily accessible alternatives

Healthy Traditional Cooks

Also nurtures through food Emphasis is on balanced nutrition Favor wholesome, traditional foods Discourage snacking

Weary Providers
Dinner time is family time Meals are a balancing act, and stressful Prefer easy, quick, familiar foods Tend to cater to kids tastes

How America Eats Food Segment Profiles, Continued

Each Segment has a distinctly different approach to eating Food on Demand
Other activities tend to have a higher priority Do enjoy food Food must be easy, accessible or not at all.

Mobile Munchers
Busy, active, on-the-go on-the Meals and snacking blur together Looking for portable foods

Traditional Recipients
Want good tasting, wholesome traditional food Rely on someone else to prepare

Food Segment Summary

HWE2001 Consumer Segments

Traditional Recipients

14%
Mobile

Food Is
Catered

Mainstream Nurturing Cooks

17%
Healthy Traditional Cooks

14%

Grazing

Love

Munchers

Balance Later Fresh Compromise

16%

14%
Food On Demand

13%
Weary Providers

12%
Healthful Explorers

More Examples

Scratch Pie ala Mode Mainstream Nurturing Cooks

Frozen Pie Weary Provider

Lighter Fruit Tart Healthful Explorer

Pie to Go Mobile Munchers

Good Pie - Any Pie Traditional Recipients

Examples

Mainstream Nurturing Cooks

Healthy Traditional Cooks

Weary Providers

Mobile Munchers

Approaches to Attitudinally Based Market Structure

Consumer/Customer Segmentation Identify groupings of consumers with similar attitudes out of a diverse population. Need States Identify product usage situations with similar set of consumer needs. The When Affinity Segmentation Identify groups of consumers with similar degrees of commitment to a brand.

Dinner Need States The When

Quality Time Dinners

Healthful Dinners

Time Constrained Dinners

Kid Pleasing Dinners

Traditional Family Meals

Budget Stretchers

Need State Examples

Affinity Consumer Structure

Divides consumers up into groupings with varying strengths of commitment to the brand:
Devoted Staunchly loyal to the brand. Adopters Use the brand along with others. Acceptors Willing to try the brand, or infrequent user. Available Know little or nothing about the brand. Rejecters Brand is irrelevant, no intention to try it.

Identifies the proportion of the volume coming from each group Identifies reasons for their commitment level.

Key Points

Targeting, and rationale is one of the most critical elements in New Product development. Targets should have some attitudinal element in order to be effective. Hint hint (class project).