From concept to shop: Marketing and new product development An interactive PowerPoint presentation for A-level students meatandeducation.com 2013

From concept to shop: Marketing and new product development

An interactive PowerPoint presentation

for A-level students

meatandeducation.com 2013

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Information

1. Consumer market

2. New Product Development

3. Product life cycle

Questions EndExtension questions


1. What is the consumer market?

The consumer market refers to a group of people or organizations that are interested in, or are in need of, a product and have the resources to purchase the product.

Over time the size of the population of a particular country may not change dramatically, so the consumer market is fixed in size, resulting in manufacturers and retailers competing for business to maintain or increase their share of the market.


What is marketing?

Marketing is a process which identifies, anticipates and satisfies customer needs efficiently and profitably.

It also communicates with the customer in a way that creates competition. This helps maintain a fair or acceptable pricing policy.

The aim of marketing is always to create a preference for one product over another.


Saturated markets and segmentation

Popular food products which have been available to purchase over an extended period of time can eventually reach a point where the sales cannot be improved. In this situation, the market is said to have become saturated.

Diversification of product lines with special features, e.g. beef steak marinated in different sauces or altering the label can help to create new markets and increase sales.

A greater selection of products with different specifications to meet different consumer needs will reach a larger portion of the consumer market, e.g. low fat or salt versions of a product.


Segmentation in the food marketConsumers differ widely in their particular needs, motivations or preferences and buying capacity.

One supplier cannot provide one product suitable for the entire market. Alternatively, one supplier cannot provide a wide enough range of products to suit each individual consumer’s needs within the market.

However, the consumer market can be segmented into groups who share similar characteristics or purchasing needs. This allows suppliers to create different products which would suit different consumer needs according to their: age, income, taste, lifestyle, health or beliefs.


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Segmentation in the food market

Health – modifications to nutrition content

Convenience – in response to changing lifestyles

Indulgence – for people to treat themselves

Currently three growth trends include health, convenience and indulgence. Consumers will often buy products which meet all three needs during a shopping occasion.

Other growth trends include consumer ethics (some becoming mainstream): •Fair Trade•Animal Welfare•Sustainability•Provenance•Quality schemes, e.g. Red Tractor Food Assurance



Examples of market segmentation

The market can be segmented into:Geographic: characteristics of consumers differ across nations, states, geographic areas reflecting cultural interests.

Demographic: variables such as age, sex, family size, income, occupation, education, religion, race and nationality are used widely, e.g. ethnic minority foods have increase in popularity in the UK.

Psychological: personality, lifestyle, social class

Behavioural: knowledge, attitude, use or response to a product.


Reasons for new product development

Food is an essential aspect for maintaining life. Red meat in particular provides many nutrients essential for life.

The purpose for developing new red meat products could be due to:•A gap in the market, e.g. organic farmed food products•New consumer pressures, e.g. economic crisis•Drop in customer loyalty or loss of market share•New ideas or technology•An emerging consumer demand, e.g. convenience, health or indulgence.


Niche market

Some product lines are not sold in large quantities, but are considered financially viable as they fill a special gap or ‘niche’ in the market.

A ‘niche market’ is not created, but identified by segmenting the market into groups of consumers with a specialised need or want which can be identified by monitoring consumer purchasing or demand.

Sometimes the opportunity arises for a retailer to increase margins by developing a new range.


Niche market

A recent trend where consumers are developing a greater interest in the way products and packaging are made, has led to many manufacturers responding by producing organic or farm assured ranges of food products.

Another example is, ‘premium priced’ or luxury products, being developed to meet the need of a specific group of consumers aspiring for status and/or have a higher disposable income. This is referred to tiering system in order to meet different consumer needs.


Consumer decision to buyResearch suggests consumers proceed through five stages when making a purchase. Food manufacturers need to consider the buying process, rather than the purchase alone. The stages include: 1. Need recognition or problem awareness, e.g. an empty carton of milk.2. Information search – passive or active research which could include:

a) internal search, e.g. past experiencesb) personal sources (friends or family), public sources (public

rating reports) c) marketing sources (advertising).

3. Evaluation of alternatives4. Purchase decision5. Post purchase evaluation, e.g. a consumer could decide that an alternative product would have been preferable and may choose to select an alternative manufacturers product when the need arises again.

Profit and growth is achieved through repeat purchases of food manufacturers products by loyal customers.


Increasing market share

Food companies compete with one another to sell their products, influencing the consumer decision to buy and increase their market share.

Companies need to keep up to date information about factors affecting patterns in consumer purchasing, such as:• price• consumer preferences• availability and level of demand for products in different areas of the country.


Increasing market share

Market research is carried out to obtain information about why consumers buy some products in preference to others, to discover their attitudes and purchasing behaviours.

Food companies continually review their sales figures and product ranges in order to keep and increase their share of the market.

The research helps to make decisions concerning the type of product, the price, channel of distribution and sale promotions.


Market research

Market research which investigates consumer purchasing attitudes and behaviour can include a variety of methodologies.

Different types of market research include:•telephone or online surveys •customer loyalty cards•group discussions or focus groups•home product trials•regular household purchase monitoring


This provides information about what customers are buying, whether they like certain products and whether they would buy a particular product again.


Market research

Market research can be focused on a wide variety of aspects including the product, sales, buyer behaviour, promotion, distribution, pricing, packaging.


Different types of quantitative surveys include: • Focus group discussions can also be used to gain insight

into consumer attitudes, preferences, buying behaviour• Consumer surveys “Omnibus” market research – 1000+ adults• Diary data: continuous research– e.g. Family Expenditure Survey. HM Government• Panel data: large-scale sample– e.g. Kantar World panel researches 25,000 households who

scan bar codes of food products. This data can be extrapolated to represent the whole UK population.

– Expenditure and Food Survey (DEFRA) which provides information on trends in food consumption.

Tiering system

Historically premium and value ranges have provided consumers with a choice between different food products.

A mid- range tiering has developed providing food manufactures with the ability to offer a wider product range and consequently cater for a greater number of consumers.

Consumers will often shop across the tiers rather than in just one. Adding value to food products is one example of product differentiation.

Retailer 1 2 3

Best Finest Taste The Difference Extra Special

Better Standard Standard Standard

Good Value Basics Smart Price


The marketing mix The marketing mix explains a combination of marketing activities or tools to ensure customer satisfaction and profits for the food company. It is often referred to as the ‘4 P’s’.

1.Product - the product specification including packaging, branding, quality and identifying the target consumer market.

2.Price - this must reflect the cost of production and marketing and target profit margins. Pricing mix includes competition, cost, mark-ups, discounts and geography.

3.Place - this includes where the product is sold including online purchasing (type of retailers, shelf location), market exposure (increasing the consumer awareness about the product), transportation, distribution, coverage and location.

4.Promotion - how to promote the product in-store and out-of-store including advertising, publicity, selling and the message conveyed.


The marketing mix

Recently a fifth ‘P’ has been raised - people. This includes people from the fields right through to the sales areas ensuring correct procedures and attitudes are in place.




Develop concept ideas

Accept

Test on a small scale with samples

Organoleptic analysis (sensory testing) Reject

Consumer testing

Finalise product specification

Produce product on a large scale

Promote product

Launch new product

Organoleptic analysis (sensory testing)

Accept

Reject

Modify product

Pilot plant

Reject

Accept

2. New product development

New product development (NPD) is an important process for food companies to undertake in order to meet consumer needs and remain competitive in the food market.

Many product ideas fail at different stages of the process.

Many food companies will continuously have a variety of products at different stages of development.

Develop concept ideas

Concept ideas can arise from a variety of different sources.

New product concepts can be developed and informed through:• market research • consumer trends• customer feedback• new industry regulations• new technologies available• target customer profiles• replacement of products at the end of their life cycle• creating a product which will compete with a current product already on the market.

Background research is conducted to identify opportunities for a new product. This can include researching current products produced by competitors or consumer attitudes and behaviour with market research.


Small scale testing and organoleptic analysis

New product ideas are initially screened in order to asses: • manufacturing practicality• cost viability• how it compares with competitor products


Small scale testing and organoleptic analysis

Modelling or creating different versions of the product is carried out using slightly different ingredients or processes. The variations of the concept idea are often produced by professional chefs, home economists or food consultants. These can be made in the food company’s test kitchen or sent to an off-site facility if the company does not have the facilities available.

These samples will be undergo organoleptic analysis (sensory evaluation). If the concept is successful it will be produced by the pilot plant.



Pilot plant and consumer testing

Concepts that are successful in the test kitchen will proceed to the pilot plant to be produced with small scale manufacturing equipment.Although the product would be produced on a small scale, the same technical processes would be applied as would happened in large scale production.

This allows companies to test the technical viability of the product and to conduct market research and sensory evaluation on a larger batch. Consumers sharing particular traits will be selected if the new product is targeted at a segment of the market, alternatively consumers with different characteristics will be selected to conduct sensory evaluation tests on the product.

Recipe modification can be undertaken to address sensory or technical manufacturing problems which are identified at the pilot plant stage.


Product specificationAfter testing and modifying the product in small batches on the pilot plant, a final product is created and approved for large scale production.

A product specification records the stages of the production process, the details of the exact ingredients, including standard components or pre-prepared ingredients and characteristics (shape, size, weight, sensory characteristics, colour or shelf life) required in the final product.

The specification is very important as it will be used for the production of each batch of the product to ensure consistency.

Regular tests during manufacture which analyse the quality of the product will refer to the product specification in order to benchmark the product.


Consumer testingA variety of methods are used to conduct consumer testing.

• Group discussions – usually up to 8 people are involved in a discussion run by a trained facilitator. The aim is to hear detailed opinions of a new product. The group may also be exposed to various media messages to test marketing strategies for the product.

• Street interviews – people are asked to taste samples of the product and say what they like or dislike providing a wide range of opinions about the test product.


Consumer testing●Home trials - consumers are provided with a product and asked to try it at home. This gives the opportunity to sample the product in a ‘real life’ situation and to have a response from the whole family. The trial may result in minor changes to the product specification and the manufacturing process.

•Standard market test - the new product is distributed in selected test market areas. Stockists would monitor sales and return at periodic intervals to restock the shelves and count the movement.


Part 2Part 1

Production on a large scale


An artisan sausage producer provides an insight into new product development and large scale production of sausages.

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Launch

Marketing strategies are developed alongside the product development process. Promotion of the product begins to take place after the launch. After a fixed period of time, products are always reviewed to see how well they are performing.

Decisions on price must consider a variety of costs (handling, packaging, transport, storage and processing) involved in the manufacture of the product in order to be profitable.

Sometimes products are launched in different regions of the country to measure their performance. This may indicate whether the product could be launched at a national level or should be dropped from production.


Some products do not pass the NPD process

Many products may fail at different stages of the NPD process and may never be launched. Products which are launched may only be on sale for a short period of time, before a new product replaces it.

Reasons for failure may include:• tough competition• cost of ingredients, production and packaging• low profits• ineffective advertising• food scares• poor product positioning on shelf.

Although many products may fail, the NPD process remains a crucial part of any successful food company to ensure it remains competitive against other companies.


3. Product life cycle


Time (months/years)

Volu

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New product is launched

Product matures – sales are steady

Plateau

Sales grow

Sales decline

Development

Saturation

0

The lifecycle of a product includes its time in development and the time it is available for sale in the market.

Sales boosting strategies


To boost sales and prevent a decline in a product life cycle, food companies implement marketing strategies such as:

• advertising, e.g. television, billboard, online

• price reduction, e.g. vouchers or buy-one-get-one-free

• adding value – new features, e.g. limited edition varieties, new pack sizes

• exploring new markets, e.g. international markets

• new packaging – subtle changes or completely new design

• consumer competitions.

These strategies can help the sales of particular products remain relatively level for long periods of time.

Product life cycle – sales boosting strategies


Time (months/years)Volu

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(how

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New product is launched

Sales boosting or extension strategies are implemented

Sales grow

Development

0

Question 1Select the term which best represents a group of people or organizations that are interested or are in need of a product and have the resources to purchase the product.

3. Marketing

2. Retailers

1. Consumer market

4. Segmentation



Question 1Correct, well done.

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Question 1Incorrect, try again.


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Question 2Which term describes when the consumer market is divided into groups of consumers with similar traits or characteristics?

3. Market segmentation

2. Food product tiering

1. Value adding

4. Market channels



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Question 3True or false? Sales boosting strategies are used to extend the life cycle of a product.

2. False

1. True









Question 4Which of the following is not an increasing product trend?

3. Luxury/Indulgence

2. Convenience

1. Health

4. Frozen foods









Question 5True or false? New product development process ensures that every new concept idea will be tested and reformulated until each idea is produced and placed on the shelf for consumers.

2. False

1. True









Question 6Fill in the gaps.The market is said to be saturated when a food product has been available for a _____ period of time and sales are no longer ________.

3. long, decreasing

2. short, increasing

1. long, increasing

4. short, decreasing









Question 7Which of the following would not be included in the product specification records?

3. Sensory characteristics

2. Ingredient details

1. Production process details

4. Sales boosting strategies









Question 8Which aspect of the marketing mix would describe considerations for different channels of communication for the product?

3. Place

2. Price

1. Product

4. Promotion

5. People









Question 9What has happened at the point where the arrow is indicating on the product lifecycle graph?

3. The product is under development.

2. The product has been launched.

1. The sales are in decline.

4. The market is saturated. Time (months/years)

Volu

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0









Question 10Why are products tiered to provide a basic, mid-range and premium products for consumers?

3. To help retailers fill their shelves with products.

2. To save the food manufacturer money.

1. To provide consumers with a diverse range of products.

4. To save money when marketing products.



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Extension

Q1. Discuss how the following factors may influence product choice.a) Ethnic and religious groupsb) Environmental concernsc) Current dietary guidelines

Q2. Describe the stages of food product development.

Q3. Explain the key stages in a product life cycle.



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Marketing and new product development.

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From concept to shop: Marketing and new product development An interactive PowerPoint presentation for A-level students meatandeducation.com 2013