FST 253 Research & Development of Food Products

FST 253 Research & Development of Food Products Launching New Product Phase Evaluating The Result

Launching New Product Phase • Test Market • Launches of new products into regions selected for geographical, marketing and company reasons • Results are analyzed, then decision is made on whether to continue or extend marketing into other regions, or to drop product launch and reevaluate project

Test Markets • Examples • Native fruit jellies marketed in 2 stores first year • Expand to 3 other outlets and 2 cities in 2nd year • Evaluations done with every gift pack sold • Information obtained revealed why product was purchased, what attracted the purchaser to the product, whether the purchaser would repeat purchase the product, and how the purchaser would rate the product

Test Markets • General Foods Corporation example • Conducts in-home testing before moving into test market • Depending on market data, decision is then made to expand product nationwide to evaluate consumer reaction and awareness of advertising and promotional campaigns

Test Markets • Test Markets • Large scale commercial marketing experiments in a geographic area of the country chosen for very specific market-related reason • Complex experiment involving: • Food technologists • Production staff • Marketing staff • Management-level personnel • Traffic department staff • Financial department personnel

Test Markets • Consumer research is active during test market period • Nature of test markets depends on the type of product tested and the goals of the companies • Improved (reformulation) or repackaged (established) products • Line extensions

Test Markets • Large companies vs. small companies • Large companies • Conservative development teams • Small companies • Introduce products at county fairs or local sporting events • Immediate feedback and response

Test Markets • Omitting a test market • Daring gamble, but may be justified • Allows company to get into market first • Company has to be financially stable • Does not allow company to evaluate its advertising and promotional campaigns

Test Market Concerns • Where to introduce 1. Test Market area • Is the area chosen peculiar to the company? • Is it peculiar to the competitor? • Outcomes can affect a large company more than a small company • Small companies usually do not test market very far from their home base

Test Market Concerns • Where to introduce 2. Introducing in a market heavily saturated by the competition • Purpose is to collect as much data as possible • Possible retaliation by competitor is possible • Will be costly to penetrate

Test Market Concerns • Where to introduce 3. Select an area where there is already a good sales force already in position and a good distribution system already established 4. Evaluating the effectiveness of advertising, promotions, and sales • May be difficult if market is already dominated

Test Market Concerns • Where to introduce • Do not test market in areas dominated by mono-economies • Consumers may not be willing to try new items • Ensure that targeted consumer is in that area • Is the product peculiar to that area • Distinct biases towards different flavors, colors, forms, or styles of products have very specific regional preferences

Test Market Concerns • When to introduce • Seasonality of products dictates when to test market • Need to also consider length of test market • Until reliable data has been obtained • Must be long enough to measure consumer’s reaction to product • Too long of a time will result in loss of lead time • Unexpected events can disrupt the best plans

Test Market Concerns • How to introduce • Difficult for large and small companies • Stores are much more discriminating with new products • New product introduction usually accompanied by extensive marketing and promotion, usually introductory

Test Market Concerns • What product to market • Test market must use the same product as the final • Special promotions can be used during introductions • However, they are not permanent, thus their impact on consumers must be fully understood

Evaluating The Results • Many factors can influence the interpretation of the data • Need to understand consumers’ behavior and activity of the competition during test market period • Personal feelings and emotions of product managers • Science of consumer research is still not precise enough

Evaluating The Results • Criteria for evaluating success or failure • Payback • Sales volume • Consumer reactions • Tactics

Evaluating The Results • Payback • Will it meet the financial objectives of the company as measured by the expected return on investment projected from sales? • Sales volume • More units of a product is usually cheaper to make, which will influence the rate of return on investment

Evaluating The Results • Consumer reaction • Why and how the consumer uses the product • Tactics • Business tactics of the company • Whether the product was intended to counter the activity of the competitor or to establish a position in a particular niche

Evaluating The Results • Small companies can be more flexible about which criteria to apply • Most use sales volume and consumer reaction • Large companies more concerned with market share • Budget for R & D is combined with quality control or production expenses in small companies, thus unable to determine development costs with accuracy

Evaluating The Results • At the conclusion of test market, data on both product and consumers are gathered and analyzed • Questions on product, including packaging, etc • Salesmen need to be interviewed • Consumers need to be surveyed • If reasons for success can be crystallized, then perhaps the same can be applied to another

Evaluating The Results • Failures in the marketplace • Most new products fail in the first year • Loss is staggering when considered in terms of time, effort, and money spent • Hindsight better than foresight

Evaluating The Results • Causes of Failures • Difficult to predict success or failure of any product • Causes can be broadly classified as • Those that company could not have done anything about (external) • Those they might have done something about (internal)

Evaluating The Results • Causes of Failure • Difficult to isolate any single one factor • An external factor could be the cause of an internal factor

Evaluating The Results • External reasons • Discovery of market size after product introduction • Dominance of market by a single competitor • Dominance of market by single customer • Product related reasons • “Me-too” product • Product’s novelty • Products ahead of their time

Evaluating The Results • Internal reasons • Bad management • More bad management • A little mixture of bad communication • Lack of clear company objectives • Affects marketing and R & D resources • Lack of production capacity • High R & D costs most common reason

Evaluating The Results • Product can fail because of technical reasons • Oversimplification to state that failures are due to • Expecting too much • Not being lucky

FST 253 Research & Development of Food Products