Issues in Retailing Food Products by 6IrEI1


									            Product Life Cycle

“…in addition to nonstop advertising, food companies must
bring out a constant stream of new products to keep sales up
and revenue high.” (The End of Food)
      Why new product development?
  •    Impacts the future
  •    Role of the sales professional
  •    New products more broadly defined
  •    In developing a product, a firm is
       determining a lot about its future

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             Question #5
5 New Product Classes?
• New-to-the-World
• New Product Lines
• Additions to Existing Product Lines
• Product Improvements
• Repositioning

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                  New to the World
• Innovative products→ create a new market
• “the thoroughbreds of product innovation”
• Examples:
– Kellogg’s Pop Tarts (1963)
– Oscar Mayer’s Lunchables (1988)
– Dreyer’s Slow-Churned Light Ice Cream (2003)

Creating “new to the world” products is expensive but potentially quite lucrative.
           New Product Line
• Allows a company to enter an existing market for
  the first time - often copies a rival’s product
             Line Extension
• Company makes additions to existing product
• Wendy’s Homestyle Chicken Strips

• Heinz green and purple ketchup (2000)
        Product Improvements
• Quality, feature, service enhancements toward
  greater value -Different flavor, change in
  packaging (i.e. tamper proof)
• Existing products targeted to a new market
• Cereal becomes a portable snack (Kellogg’s)
• 7-Up – the “un-cola”
    List & Classifying New Products

•    New-to-the-World: Innovative products.
     Create a new market. Monsanto’s blue                Be able to list example
                                                             new products by
•    New Product Lines: Allows the company to
     enter an established market for the first time.
                                                             class or label one
     Gerber life insurance, private label                   given you with the
•    Additions to Existing Product Lines:                    correct category
     Extensions. Vanilla Pepsi, Vanilla Diet
     Pepsi, Ocean Spray’s grapefruit juice
                                                        1. ______________
•    Product Improvements: Quality, feature,
                                                        2. _______________
     service enhancements toward greater value.
     Soft drink refrigerator packs                      3. ______________
•    Repositionings: Existing products targeted to      4. _______________
     a new market. Gerber graduates, Hilton and
     professional businesswomen                         5. ______________
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          New Product Type and Development
   Based on the previous classifications of new
    products, which would you expect to take the
    longest to get to the market?

Repositioning   Improvements   Extension   New lines   New-to-the-world
Q#5 (b):       Development Time by New
                Product Type
 Which would you expect to take the longest to get to
        market? The shortest time to market?
• New-to-the-World: Innovative products.
• New Product Lines, new to the Co.
• Additions to Existing Product Lines: Extensions.
• Product Improvements: modifications
• Repositionings: new market existing item

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                   Product Life Cycle
Life Cycle Stage                    Role of Sales          Advertising
                   Competition      Professional
                       None          Input on demand         Focus on awareness
                                    for various features
                                       Raising client
                     Increasing         Gather                   Trial/loyalty
                      Intense       Differentiation                Loyalty

                       Less          Tie in to other         Less return to adv.
                                        products           Difficult to differentiate

                       Less            Look for niche                ditto
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                        AEC 320-Fall 2008- Robbins                           12
 Q#4: Activities in New Product Development

                             1st step of product
                                    life cycle

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   Where do new product ideas come from?
• Opportunity Identification
  – Market Intelligence: Understand changes in the market
    and the best segments (profitable, growing) to enter

  – Internal Intelligence or idea Generation: Generate new
    product ideas to enter these markets.
• Product or Service Design
     – Consumer Value Measurement
     – Other tools: Product Positioning3,
       Forecasting4, Perceptual Mapping5,
       Conjoint Analysis6,Test Marketing7
     Product Positioning:

     Helps set goals.

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            Perceptual Mapping
• Objective: getting feedback from customers.
• Identify holes
• Helps see opportunities
• Axes derived from surveys to see how primary
  attributes valued.
(conjoint analysis)
• How is our product is perceived and the
  competitive density of the space

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       Organic Food Stores (like Wild Oats)

•    Whole Foods Market, a fast growing US
     food retailer
•    How is their Price and Quality
•   Supermarkets are suffering
•   US Household with incomes are changing
•   Organic Food Stores are not high volume

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            Organic Food Stores
Whole Foods Market has elite fare

Compare to the ‘30’s King Kullen’s store
Who, “Piled it high and sold it low”

Supermarkets are suffering because of Wal-Mart &
  similar stores

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            Conjoint Analysis
• Define demand at the at the attribute level

• People drink wine not just because it’s wine

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   The (Modified and Simplified)
      McFadden Case - Dr. Hu
  List attributes
  – In-vehicle time
  – Outside-vehicle time
  – Cost
• List “levels” within each attribute
     Attributes and Levels - Dr. Hu
• How to determine attributes and levels?
• Then what?
  – Design and implement a survey
  – Analyze data
  – Draw conclusion
            Data Collected - Dr. Hu
• Attributes associated with each
  transportation mode; i.e., product (X
• Choices people made (Y variables)
• Individuals’ characteristics (age, income,…)
  (another set of X variables)

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            - Dr. Hu -   Luckily…
• Attributes associated with each
  product (alternative)
• Choices people made
• Individuals’ characteristics
  (age, income,…)

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               Results - - Dr. Hu
• Individuals’ preferences for each level within
  each attribute
• Individuals’ willingness to pay for each level
  within each attribute
• Individuals’ overall WTP for a product
• What and why different people like (dislike)
  different levels and attributes
• Particularly Useful for…
            Conjoint Analysis

– Statistical tool that helps us to understand
  consumer preferences of product
– Typical approach

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             Conjoint Analysis
     Allows developers to estimate the marginal value
      of each attribute—

     Pros & cons?

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  Q#1: What is Supply Chain Management and the
                advantages of using it?
• A strategy that integrates the various organizations’
  objectives in order to increase the efficiency of the entire
  supply chain
• The channel members must behave as if they are part of
  the same company

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 Q#3: What is OUTSOURCING and what
are some of the advantages and drawbacks
                of using it?

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     Best Management Practices in NPD   1

• 1) Systematic Process
• 2) Early involvement
• 3) Parallel Processing
Advantages and disadvantages

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ADVANTAGES & Disadvantages
• Shortens the product development cycle time;
• Reduces delays caused by failure to include necessary
• Encourages frequent interaction
• Maintains continuity across phases
• There is a need for significant changes in the corporate culture

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             Cross-Functional Teams in NPD

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              Development Time Matters
Strategy making has changed...The premium now is on
moving fast and keeping pace...The best strategies are
irrelevant if they take too long to formulate.
                                   ----Kathleen M.

Speed kills competition.
                                   ----Richard D. Stewart

As a strategic weapon, time is the equivalent of
money, productivity, quality even innovation.
                                   ----George Stalk, Jr.

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        First to Market

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                  The challenge is:
 “To achieve speed without cutting corners, sacrificing
   quality or eliminating steps”
“Today’s climate is characterized by increased competition,
   changing customer requirements, rising product
   development costs and an increasing dependence on
   external organizations.”
                                     (Gupta and Souder, 1998)

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            Misconceptions of NPD
• Two misconceptions of NPD
     – It worked over there, it will work over here
     – It worked once, it will work again
• Each organization will need to develop a flexible
  & unique NPD strategy that works for them

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