Food Marketing APEC 4451

Fall Semester 2012

New Product
Development Process
Targeting and
Segmentation

Dennis J. Degeneffe
Consumer Centric Solutions LLC

Why Introduce New

Products?

The Case For Introducing New Products

The Case Against Introducing New Products

Grow business - Organic Growth = Shareholder

value
Competitive Position
Asset Utilization

Risk, risk, risk

High Odds of Failure*
High Cost of Failure
Even more risk - Cannibalization of existing
business.

Therefore introducing new products is a risky

business!
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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
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New Product Development Process

Overall Process is made up of 8 stages.
Opportunity
Identification

Idea
Generation

Product
Development
Positioning
Development

Concept
Development

STM
Confirmation
Advertising
Testing

Concept
Concept
Testing

Test
Test
Marketing

Commercialization

New Product Development Process

Some are developmental sages, and some are evaluative stages.
Opportunity
Identification

Idea
Generation

Product
Development
Positioning
Development

Concept
Development

STM
Confirmation
Advertising
Testing

Concept
Testing*

Test
Marketing*

Commercialization

*Stage Gates

Developmental Stages
Developmental Stages are about how
to

Build, not evaluate to provide guidance.

Foster creativity and innovation
Generate ideas
Obtain insights from consumers/customers on what
they want.

Stage Gates
Stage Gates are
Evaluative stages each a go/no go decision
Requires an objective assessment of the new product prior to
proceeding further:
Will it fit the companys competencies:
Manufacturing system
Distribution system
Brand equity
Will it meet consumer/customer expectations
Will we likely sell enough
What kind of financial resources will it require
Will it provide an adequate pay-back/ ROI

Often requires Marketing Research to answer these questions.

Prerequisite for gaining the approval of Senior Management
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Who is Involved
in Creating New Products

The New Product Development Team - a

collaborative, cross functional brand management
group focused on specific opportunity area,
reporting to senior management.
Marketing
Manager

Research &
Development

Promotions

Advertising
Agency

New Product
Development
Team
Finance

Sales

Marketing
Research
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Early Stages in the

New Product Development Process
Often called The Fuzzy Front End
Opportunity
Identification

Idea
Generation

Product
Development
Positioning
Development

Concept
Development

STM
Confirmation
Advertising
Testing

Concept
Testing*

Test
Marketing*

Commercialization

*Stage Gates

Opportunity Identification
Where to start: Market 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
Government
Trade groups

Primary Research or Custom Marketing

Research
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Types of Secondary Data

External Secondary Data:

Government data
Trade and industry associations
Publications
Reference Sources
Internet sites
Libraries/archives
Syndicated Databases (E.g. National Eating
Trends)

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Example
of a Syndicated Data Source
Trends Sighted by Datamonitor:

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

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1994 Strategic Insights at Pillsbury

Moms life is a hassle

Important to get kids to eat vegetables

9-5 job
No time to plan or prepare meals
Fussy kids
Off to soccer practice

Kids wont eat vegetables

Stress & guilt

Opportunity an easy one dish fully assembled

meal that the kids will eat, and adults will enjoy too.

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Idea Generation
Frequently uses a form of brainstorming called
Ideation.
Can generate a huge number of
ideas
but challenge then is to narrow down to a
small number of viable ideas or
themes.

Typically involves the New Product

Development Team and possibly other
stakeholders.
Uses techniques to foster creativity
initially suspend judgment, build on
everyones ideas.
Resulting Green Giant Theme

Meal Starters

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Concept Development
A step or series of steps - usually using Marketing
Research - to flesh out an idea/theme. What is it
physically:
Ingredients
What does it do for the consumer
Consumer Benefits
How is it different
Varieties
Packaging
Price

Typically depicted as a
Concept Board

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Concept Testing
A Stage Gate step to determine whether the
concept warrants development ... Are enough
consumers interested in the concept?

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Concept Testing Methodology

Essentially a poll on the new product concept.
Most conducted on-line using a national panel of
consumers.
Samples usually 200-500.
Respondents are shown the concept board and
asked a series of questions:

Liking
Uniqueness
Price/Value Rating
Buying Intent

Results compared to a database, benchmarks

and/or norms to determine if it is a winner or loser.
Many provide the ability to forecast Trial
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Intermediate & Later Stages

Getting From
Here

To Here

Create-A-Meal!
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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
The Early Stages involve the generation, development and
testing of Concepts.
But Another topic is a critical factor in developing a successful
new product
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Targeting
And Segmentation

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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.

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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 and Needs
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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

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Targets?

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Example:

Pillsbury How America Eats Study (2000)

The study found seven different types of consumers

HWE2001 Consumer Segments

Traditional Recipients

Mainstream Nurturing Cooks

14%

17%
Healthy
Traditional
Cooks

14%
Mobile
Munchers

16%
14%

12%

13%

Food On Demand

Healthful Explorers

Weary Providers

Excerpts from ADA Conference

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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

Healthy Traditional Cooks

Also nurtures through food

Emphasis is on balanced nutrition
Favor wholesome, traditional foods
Discourage snacking

Healthful Explorers

Actively trying to eat healthy

Focus on quality/freshness
Creative & Experimental tastes
Frequently too busy to cook, need easily
accessible alternatives

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

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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
Meals and snacking blur together
Looking for portable foods

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

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Food Segment Summary

HWE2001 Consumer Segments

Traditional Recipients

Food Is

14%
Mobile

14%

Grazing

Munchers

Catered

Later

Mainstream Nurturing Cooks

Love

Balance
Fresh
Compromise

14%
Food On Demand

17%

13%
Weary Providers

Healthy
Traditional
Cooks

16%

12%
Healthful Explorers

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More Examples

Scratch Pie ala Mode

Mainstream
Nurturing Cooks

Pie to Go
Mobile
Munchers

Frozen Pie

Lighter Fruit Tart

Weary Provider

Healthful Explorer

Good Pie - Any Pie

Traditional
Recipients
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Examples

Mainstream Nurturing Cooks

Weary Providers

Healthy Traditional Cooks

Mobile Munchers
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Approaches to
Attitudinal 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.

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Dinner Need States The When

Quality Time Dinners

Kid Pleasing Dinners

Healthful Dinners

Time Constrained Dinners

Traditional Family Meals

Budget Stretchers
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Need State Examples

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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.

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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).
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