Keys to new product success and failure The aim of this chapter is to identify the important factors in food product development to be studied in detail in the succeeding chapters. Firstly the different groups of food products are identified as a basis for organising product strategy. Then the published research on the factors in product failure and product success in all types of industries is used to identify the key factors in food product development. This leads into the management of product development at three different levels 1. Business strategy 2. Product development programme Finally specific aspects of food product development are identified as the basis of the book and the structure of the book is outlined 1. 1 Food products- the basis of innovation What are food products? What are new food products? Everyone agrees that a food is material eventually consumed by humans to satisfy physiological and psychological needs, but the food company and the consumer can have quite different descriptions of the food product presented for sale. The comp defines a basic functional product to which it has added packaging, aesthetics, brand, price and advertising, to give a total company product. The consumer describes the product as a bundle of benefits, relating its tangible and intangible attributes to their needs, wants and behaviour. For a basic food product, for example flour, the description can be simple and pragmatic, but for products
The aim of this chapter is to identify the important factors in food product development to be studied in detail in the succeeding chapters. Firstly the different groups of food products are identified as a basis for organising product strategy. Then the published research on the factors in product failure and product success in all types of industries is used to identify the key factors in food product development. This leads into the management of product development at three different levels: 1. Business strategy. 2. Product development programme. 3. Product development project. Finally specific aspects of food product development are identified as the basis of the book, and the structure of the book is outlined. 1.1 Food products – the basis of innovation What are food products? What are new food products? Everyone agrees that a food is material eventually consumed by humans to satisfy physiological and psychological needs, but the food company and the consumer can have quite different descriptions of the food product presented for sale. The company defines a basic functional product to which it has added packaging, aesthetics, brand, price and advertising, to give a total company product. The consumer describes the product as a bundle of benefits, relating its tangible and intangible attributes to their needs, wants and behaviour. For a basic food product, for example flour, the description can be simple and pragmatic, but for products 1 Keys to new product success and failure
4 Food product development such as a meal at a restaurant, it can be complex and emotional. The company defines a new product as having some difference in the basic functions and aesthetic presentation; but consumers compare it with the old product and competing products and if they recognise a difference then it is a new product to them(Schaffner et al., 1998 ). Product development is all about reconciling these two points of view There are many thousands of food products and they can be grouped together into product categories according to food system position market they serve processing technology used to manufacture them basic common characteristics such as nutrition and health level of innovation Grouping products is a useful method of developing new product ideas using techniques such as product platforms, product morphology and gap analysis One can identify spaces for new developments, methods of product improve ment and indeed innovation related to changes in food system or technology 1.1.1 Food products and the food system Products interact with every part of the food system from primary production to the consumer as shown in Fig. 1. 1. The new cereal, high in protein, may go to the processor to produce a specialised protein product for bakers, or to a food manufacturer to make a high-protein breakfast cereal, or to a vegetarian fast food outlet as a meat replacer, or to a supermarket as an ingredient for home prepared muesli or directly to the consumer for us home breadmaker a new product in one part of the food system can cause new products in other There is a need to distinguish the three groups of products 1. Primary products from sea and the land 2. Industrial ingredients from food processors 3. Consumer products from food manufacturers and food service They basically have the same product development process, but there are activities and techniques specific to each area. There is a need to recognise the total product in each case. There is a formal product with its associations such as service, know-how and image as identified by the company( Crawford, 1997), and then the product concept of the consumer or customer. A McDonald's hamburger may seem a simple product but it has strong associated benefits such as convenience, price, fast service and hygiene, along with a very powerful allure especially for young people of the good things in American life. Food service products usually have a high proportion of services, but so do industrial products and increasingly primary products
such as a meal at a restaurant, it can be complex and emotional. The company defines a new product as having some difference in the basic functions and aesthetic presentation; but consumers compare it with the ‘old’ product and competing products and if they recognise a difference then it is a new product to them (Schaffner et al., 1998). Product development is all about reconciling these two points of view. There are many thousands of food products and they can be grouped together into product categories according to: • food system position; • market they serve; • processing technology used to manufacture them; • basic common characteristics such as nutrition and health; • product platforms; • level of innovation. Grouping products is a useful method of developing new product ideas using techniques such as product platforms, product morphology and gap analysis. One can identify spaces for new developments, methods of product improvement and indeed innovation related to changes in food system or technology. 1.1.1 Food products and the food system Products interact with every part of the food system from primary production to the consumer as shown in Fig. 1.1. The new cereal, high in protein, may go to the processor to produce a specialised protein product for bakers, or to a food manufacturer to make a high-protein breakfast cereal, or to a vegetarian fastfood outlet as a meat replacer, or to a supermarket as an ingredient for homeprepared muesli or directly to the consumer for use in a home breadmaker. A new product in one part of the food system can cause new products in other parts. There is a need to distinguish the three groups of products: 1. Primary products from sea and the land. 2. Industrial ingredients from food processors. 3. Consumer products from food manufacturers and food service. They basically have the same product development process, but there are activities and techniques specific to each area. There is a need to recognise the total product in each case. There is a formal product with its associations such as service, know-how and image as identified by the company (Crawford, 1997), and then the product concept of the consumer or customer. A McDonald’s hamburger may seem a simple product but it has strong associated benefits such as convenience, price, fast service and hygiene, along with a very powerful allure especially for young people of the good things in American life. Food service products usually have a high proportion of services, but so do industrial products and increasingly primary products. 4 Food product development
Keys to new product success and failure 5 Industrial ingredients processor → Food service Primary production Consumer products manufacturer Consume Consumer Fig. 1.1 The food system The industries upstream from the food manufacturer are important contributors of innovation(Rama, 1996). Both the ingredient suppliers and the equipment suppliers can have a pivotal role in innovation in the food innovaton Agricultural and now marine farming are also major sources of both of fresh products, and of materials designed for processing. So the innovation spectrum broadens and deepens 1.1.2 Food products and the markets The basic principle of product development is to identify the needs of the buyers nd the users, and design the products towards meeting these needs. This means that the market segments for the products are an important basis for grouping products. There are five main market segment 1. Consumers: mainly branded products 2. Retailers: branded products, ingredient mixes 3. Food service: partially prepared meals, meal ingredients 4. Industrial processors and manufacturers: differentiated ingredients 5. Primary processors: commodities, undifferentiated raw materials It is important to recognise that there are major differences in the development of products for these different segments. If a company moves from differentiated ingredients for food manufacturers to consumer products to be sold through retailers, there is a need for new knowledge and new resources in the company Each of these five main segments can be divided into further segments. There are five common consumer market-segmentation categories · Geographic Sociocultural Demographic e User behaviour Regions, social classes, ethnic groups, households, age, sex and income are typical groupings for which statistical census data can be found, but consumer targeting can be more accurate if psychographic segments based on life style, behaviour, personality and attitudes are used. User behaviour segmentation on usage rates, brand loyalty status, purchase occasion and benefits sought are useful for targeting product development. In industrial segmentation, two stages
The industries upstream from the food manufacturer are important contributors of innovation (Rama, 1996). Both the ingredient suppliers and the equipment suppliers can have a pivotal role in innovation in the food industry. Agricultural and now marine farming are also major sources of innovation both of fresh products, and of materials designed for processing. So the innovation spectrum broadens and deepens. 1.1.2 Food products and the markets The basic principle of product development is to identify the needs of the buyers and the users, and design the products towards meeting these needs. This means that the market segments for the products are an important basis for grouping products. There are five main market segments: 1. Consumers: mainly branded products. 2. Retailers: branded products, ingredient mixes. 3. Food service: partially prepared meals, meal ingredients. 4. Industrial processors and manufacturers: differentiated ingredients. 5. Primary processors: commodities, undifferentiated raw materials. It is important to recognise that there are major differences in the development of products for these different segments. If a company moves from differentiated ingredients for food manufacturers to consumer products to be sold through retailers, there is a need for new knowledge and new resources in the company. Each of these five main segments can be divided into further segments. There are five common consumer market-segmentation categories: • Geographic. • Sociocultural. • Demographic. • Psychographic. • User behaviour. Regions, social classes, ethnic groups, households, age, sex and income are typical groupings for which statistical census data can be found, but consumer targeting can be more accurate if psychographic segments based on life style, behaviour, personality and attitudes are used. User behaviour segmentation on usage rates, brand loyalty status, purchase occasion and benefits sought are useful for targeting product development. In industrial segmentation, two stages Fig. 1.1 The food system. Keys to new product success and failure 5
6 Food product development can be used: firstly companies are grouped according to location, size and type of processing, and secondly by company factors such as technical expertise, product needs and service needs. It is important that both the product and service needs are recognised in segmentation for industrial product development. Food service is divided into two broad groups- commercial and institutional; but of course there are important internal segments in these such as large chain fast food companies, fine food restaurants, family restaurants(Schaffner et al 998). The segmentation strategy depends on the company's overall business and marketing strategies. But it is important that the market segments are clearly recognised in developing gro products for product strategy 1.1.3 Food products and processing technology Food products in the past have often been grouped according to their preservation technology frozen foods, canned foods, chilled foods, dried foods, ambient foods. For example milk products are grouped asfresh, UHT (ultra-heat treated), canned, dried; fruits as'fresh, canned, dried, frozen. The main reason for this grouping was that the preservation method was dominant in processing, distribution and retailing, and therefore to change the preservation method was a major undertaking in resources. The first three, freezing and chilling, are thermal processes controlling food quality by temperature and time. Non-thermal processes, controlling water activity, atmospheric gases and packaging, preserve dried and ambient foods. In recent years, there has been increased interest in non-thermal preservation of food for example by irradiation and by high pressures(Knorr, 1999). Both processes have arisen in an effort to avoid damage to food quality in processing, but both have their own difficulties Products are also grouped according to processing technologies such as baking, extruding and fermentation, and according to the form of the food such as liquids, emulsions and powders. This is useful because it recognises the basic technologies and the knowledge of them in the company. If the greatest knowledge in the company is in emulsions, then the product groups include cooking oils, salad dressings, margarines, ice creams, sauces, and new products can be developed from basic emulsion knowledge. Other typical groupings are bread, rolls and cakes, biscuits and crackers; confectionery; sauces and pickles A new process technology can start a family of products and indeed several families of products. For example, extrusion technology was the basis for many new snack products from flavoured, puffed snacks to muesli bars. Knowledge of products and processing is important in product development because it can lead to major innovations- the 'new-to-the-world products 1. 1. 4 Nutrition and health An important grouping is related to the function of the products in nutritio health. Provision of calories has dominated the food industry for many firstly the basic need was to provide calories and then in recent years, the push to
can be used: firstly companies are grouped according to location, size and type of processing, and secondly by company factors such as technical expertise, product needs and service needs. It is important that both the product and service needs are recognised in segmentation for industrial product development. Food service is divided into two broad groups – commercial and institutional; but of course there are important internal segments in these such as large chain fastfood companies, fine food restaurants, family restaurants (Schaffner et al., 1998). The segmentation strategy depends on the company’s overall business and marketing strategies. But it is important that the market segments are clearly recognised in developing groups of products for product strategy. 1.1.3 Food products and processing technology Food products in the past have often been grouped according to their preservation technology – frozen foods, canned foods, chilled foods, dried foods, ambient foods. For example milk products are grouped as ‘fresh’, UHT (ultra-heat treated), canned, dried; fruits as ‘fresh’, canned, dried, frozen. The main reason for this grouping was that the preservation method was dominant in processing, distribution and retailing; and therefore to change the preservation method was a major undertaking in resources. The first three, freezing, canning and chilling, are thermal processes controlling food quality by temperature and time. Non-thermal processes, controlling water activity, atmospheric gases and packaging, preserve dried and ambient foods. In recent years, there has been increased interest in non-thermal preservation of food for example by irradiation and by high pressures (Knorr, 1999). Both processes have arisen in an effort to avoid damage to food quality in processing, but both have their own difficulties. Products are also grouped according to processing technologies such as baking, extruding and fermentation, and according to the form of the food such as liquids, emulsions and powders. This is useful because it recognises the basic technologies and the knowledge of them in the company. If the greatest knowledge in the company is in emulsions, then the product groups include, cooking oils, salad dressings, margarines, ice creams, sauces, and new products can be developed from basic emulsion knowledge. Other typical groupings are bread, rolls and cakes; biscuits and crackers; confectionery; sauces and pickles. A new process technology can start a family of products and indeed several families of products. For example, extrusion technology was the basis for many new snack products from flavoured, puffed snacks to muesli bars. Knowledge of products and processing is important in product development because it can lead to major innovations – the ‘new-to-the-world’ products. 1.1.4 Nutrition and health An important grouping is related to the function of the products in nutrition and health. Provision of calories has dominated the food industry for many years: firstly the basic need was to provide calories and then in recent years, the push to 6 Food product development
Keys to new product success and failure 7 reduce calories. Early products in small groceries at the beginning of the 20th century were bread, butter and margarine, sugar, jam, bacon, beef suet-all high energy foods. In contrast at the end of the century, supermarkets now sell low-fat milks, diet colas, trimmed pork and so on. There will always becalorie' foods but the question is what calories they should provide in the next 50 years? Together with calorie foods, came protein foods-legumes, dairy products, meat and fish. It has taken leveloped countries there are poor people who are not getting adequate amounts of protein. Legumes and cereals are the cheapest protein foods and these may be stronger areas for protein product development, but of course dairy products, meat and fish will remain major areas for product development for more affluent consumers. There are many more nutrients needed as well as the basic calories and protein, and there have been specific foods designed with fibre, vitamin and mineral enrichments. There is recent re-emphasis on what might be termed the older deficiencies such as calcium, iodine and iron. There will always be foods designed with this supplementation as there have been in the past(Deutsch, 1977) Recently, the emphasis has shifted from foods supplying the essential nutrients to sustain life and growth to foods for prevention or indeed curing of isease,what have been termed nutriceutical or functional foods(Sloan, 1999) These functional foods have expanded from the health-food stores to the supermarkets, but there is some difficulty in defining what they are. One British definition is ' processed foods containing ingredients that aid specific bodily functions in addition to being nutritious'(Aldrick, 1997)and an American definition is foods that encompass potentially healthful products, including any modified food or food ingredient that may provide a health benefit beyond the traditional nutrients it contains'(Platzman, 1999). These definitions are very broad and cover a wide variety of products. If functional foods are to survive in the future they need to be based on scientific evidence and not emotional effects 1.1.5 Product platforms A useful method of organising food products is to link them on product atforms(Meyer and Lehnerd, 1997). This is based on the fact that families of products can be grouped together because they have a common architecture or common morphology (Schaffner et al., 1998). Product morphology is the breakdown of a product into the specific characteristics that identify it to the consumers, by analysis of the product family and the individual product. A oroduct platform is formed by a set of linked products, which are distinctive but also have a strong common linkage, such as fresh fruit juices, nutritional breads cold breakfast cereals for children. The product platform is defined as a set of subsystems and interfaces that form a common structure from which a stream of derivative products can be efficiently developed and produced(Meyer and Lehnerd, 1997). Product platforms are a useful basis for developing a product tegy for the company, and also for creating ideas for new products. If platform is started, derivative products can be based on this platform, and ther
reduce calories. Early products in small groceries at the beginning of the 20th century were bread, butter and margarine, sugar, jam, bacon, beef suet – all highenergy foods. In contrast at the end of the century, supermarkets now sell low-fat milks, diet colas, trimmed pork and so on. There will always be ‘calorie’ foods but the question is what calories they should provide in the next 50 years? Together with calorie foods, came protein foods – legumes, dairy products, meat and fish. It has taken some time to raise the amount of protein in the diet and even in the developed countries there are poor people who are not getting adequate amounts of protein. Legumes and cereals are the cheapest protein foods and these may be stronger areas for protein product development, but of course dairy products, meat and fish will remain major areas for product development for more affluent consumers. There are many more nutrients needed as well as the basic calories and protein, and there have been specific foods designed with fibre, vitamin and mineral enrichments. There is recent re-emphasis on what might be termed the older deficiencies such as calcium, iodine and iron. There will always be foods designed with this supplementation as there have been in the past (Deutsch, 1977). Recently, the emphasis has shifted from foods supplying the essential nutrients to sustain life and growth to foods for prevention or indeed curing of disease; what have been termed nutriceutical or functional foods (Sloan, 1999). These functional foods have expanded from the health-food stores to the supermarkets, but there is some difficulty in defining what they are. One British definition is ‘processed foods containing ingredients that aid specific bodily functions in addition to being nutritious’ (Alldrick, 1997) and an American definition is ‘foods that encompass potentially healthful products, including any modified food or food ingredient that may provide a health benefit beyond the traditional nutrients it contains’ (Platzman, 1999). These definitions are very broad and cover a wide variety of products. If functional foods are to survive in the future they need to be based on scientific evidence and not emotional effects. 1.1.5 Product platforms A useful method of organising food products is to link them on product platforms (Meyer and Lehnerd, 1997). This is based on the fact that families of products can be grouped together because they have a common architecture or common morphology (Schaffner et al., 1998). Product morphology is the breakdown of a product into the specific characteristics that identify it to the consumers, by analysis of the product family and the individual product. A product platform is formed by a set of linked products, which are distinctive but also have a strong common linkage, such as fresh fruit juices, nutritional breads, cold breakfast cereals for children. The product platform is defined as ‘a set of subsystems and interfaces that form a common structure from which a stream of derivative products can be efficiently developed and produced’ (Meyer and Lehnerd, 1997). Product platforms are a useful basis for developing a product strategy for the company, and also for creating ideas for new products. If a new platform is started, derivative products can be based on this platform, and then Keys to new product success and failure 7
8 Food product development the next generation of products is started on a new but related platform. They can be considered as generation 1. Generation 2 Generation 3 of the product Family. In Case Study 1, Chapter 7, the development over 15 years of a new duct platform in the apple industry is described s The first stage is to identify the present product platforms and to show how ley have developed in the past; clearly showing the generations of product platforms and the derivative products on each platform. It would be useful if these were identified as successful and failed product changes, so that a historical picture could be built up as a basis for the future. The second stage elates each product platform with the different market segments to which the products were aimed and to which they were finally related in sales. The third stage identifies the building blocks that were used to achieve these changes in the product platforms: consumer insights, product technologies, manufacturing processes and organisational capabilities. An example of a general systematic grouping is shown in Fig. 1. 2 read company Market applications Large households Smal households Hot bread shop Supermarket Market Medium Bread mix platform Derivative products Product platforms Frozen dough platform Successive generations of the product platform mmon building blocks fracturing processes Fig. 1. 2 Systematic grouping of food products for use in product development (Source: After Meyer and Lehnerd, 1997)
the next generation of products is started on a new but related platform. They can be considered as Generation 1, Generation 2, Generation 3 of the Product Family. In Case Study 1, Chapter 7, the development over 15 years of a new product platform in the apple industry is described. The first stage is to identify the present product platforms and to show how they have developed in the past; clearly showing the generations of product platforms and the derivative products on each platform. It would be useful if these were identified as successful and failed product changes, so that a historical picture could be built up as a basis for the future. The second stage relates each product platform with the different market segments to which the products were aimed and to which they were finally related in sales. The third stage identifies the building blocks that were used to achieve these changes in the product platforms: consumer insights, product technologies, manufacturing processes and organisational capabilities. An example of a general systematic grouping is shown in Fig. 1.2. Fig. 1.2 Systematic grouping of food products for use in product development (Source: After Meyer and Lehnerd, 1997). 8 Food product development
Keys to new product success and failure 9 The company can combine this product knowledge with knowledge of the predicted social and technological changes to identify the changes in the product mix for the near and distant futures 1.1.6 Level of innovation In product development, there is a variety of new products' and it is necessary to define 'newness' at the beginning of the project since the activities, risk costs and indeed the product development process vary with the type of new product. The designation of a product as new is used to cover a wide range of product changes from major innovations to cost reduction leading to a lower- priced product(Fuller, 1994). Some of these categories are shown in Table 1.1 Generally the major innovation is followed in time by product improvements as product quality increases with production improvements, then perhaps new packaging, followed perhaps by repositioning in another market segment or a relaunch of the product, and finally ending in pr ce reductions New product development provides a wide range of product changes, many of which may not be very marked either technologically or to the consumer. Innovation is most dramatically represented in the new-to-the-world product. Even in cost reduction, however, there can be major innovations in processing to achieve the lower costs. In considering new products, it is necessary to look at the total product mix and to decide how this could be changed over time to maximise growth or return on investment or some other company objective There is a need to develop a product strategy for the future. The innovation strategy defining the overall new directions for the company, and the product strategy defining the product changes and additions, are the bases for the new product development strategy. Both the product strategy and the innovation strategy need to be embedded in the company's business strategy. In this book, k about product development and not new product development, as the company always needs to be aware of the effects of new product development to the product mix Table 1.1 New product categories New-to-the-world Products are innovations to society New product lines Products are new to the company. roduct line extensions Additions to company's existing product lines Replacement of a present product with an improved version Products are targeted for a new use or application and ually a new market segment. Product cost reductions Repositioning as a cheaper product, with similar benefits but cheaper costs and therefore lower price. Source: After Cooper, 1993 and Crawford, 1994
The company can combine this product knowledge with knowledge of the predicted social and technological changes to identify the changes in the product mix for the near and distant futures. 1.1.6 Level of innovation In product development, there is a variety of ‘new products’ and it is necessary to define ‘newness’ at the beginning of the project since the activities, risks, costs and indeed the product development process vary with the type of new product. The designation of a product as new is used to cover a wide range of product changes from major innovations to cost reduction leading to a lowerpriced product (Fuller, 1994). Some of these categories are shown in Table 1.1. Generally the major innovation is followed in time by product improvements as product quality increases with production improvements, then perhaps new packaging, followed perhaps by repositioning in another market segment or a relaunch of the product, and finally ending in price reductions. New product development provides a wide range of product changes, many of which may not be very marked either technologically or to the consumer. Innovation is most dramatically represented in the ‘new-to-the-world’ product. Even in cost reduction, however, there can be major innovations in processing to achieve the lower costs. In considering new products, it is necessary to look at the total product mix and to decide how this could be changed over time to maximise growth or return on investment or some other company objective. There is a need to develop a product strategy for the future. The innovation strategy defining the overall new directions for the company, and the product strategy defining the product changes and additions, are the bases for the new product development strategy. Both the product strategy and the innovation strategy need to be embedded in the company’s business strategy. In this book, we talk about product development and not new product development, as the company always needs to be aware of the effects of new product development to the product mix. Table 1.1 New product categories New-to-the-world Products are innovations to society. New product lines Products are new to the company. Product line extensions Additions to company’s existing product lines. Product improvements Replacement of a present product with an improved version. Product repositioned Products are targeted for a new use or application and usually a new market segment. Product cost reductions Repositioning as a cheaper product, with similar benefits but cheaper costs and therefore lower price. Source: After Cooper, 1993 and Crawford, 1994. Keys to new product success and failure 9
10 Food product development Think break 1. Innovation is a predictable process. Do you agree or disagree with this statement? How can a company organise to give 70-80% predictability to product development but allow 20-30% for the unknown? 2. Take one product family in your company, and identify the generations in the product platforms, and then the derivative products on each platform. What have you used as the basis for the family and for each platform-preservation method, other technology, nutrition and health, place in the food system or some other general family characteristic If you have not used nutrition and health, try building up the platforms on this basis 3. Identify the market segments that your company targets for this family of products, and relate them to the different platforms and if necessary particular products What building blocks has the company used to form these platforms? 1.2 Measures of product success and failure If a company is to build a successful product mix and product strategy, there is a need to study the companys history and current performance and also the history and current performance of the industry and indeed of other industries The food industry can learn from successes and failures in other industries. The measures for determining success and failure can be for: individual new products(financial, market, production, consumer accept duct development projects(efficiency and effectiveness) overall product development programme(success rate, sales and profits from new products, innovation level) The measures are detailed in Table 1.2 1. 2.1 Individual product success Individual product success can be measured by financial success, consumer and market success, production success, product/consumer(customer)success. Financial measures are usually the profits and return on investment. These pear quantitative but they are often fraught with problems. How is the measurement made? Is it the return on investment over one, five or ten years? Does it include the basic research that preceded the product development and perhaps spreads over several present and future products? What is the method of discounting the returns over the 10-year period? There is a great deal written in the uct development literature about predicting financial success before launching but not a great deal on financial evaluation after the launch( Crawford, 1997) Obviously at the company level, the annual balance sheet for shareholders is where
1.2 Measures of product success and failure If a company is to build a successful product mix and product strategy, there is a need to study the company’s history and current performance and also the history and current performance of the industry and indeed of other industries. The food industry can learn from successes and failures in other industries. The measures for determining success and failure can be for: • individual new products (financial, market, production, consumer acceptability, targets); • product development projects (efficiency and effectiveness); • overall product development programme (success rate, sales and profits from new products, innovation level). The measures are detailed in Table 1.2. 1.2.1 Individual product success Individual product success can be measured by financial success, consumer and market success, production success, product/consumer (customer) success. Financial measures are usually the profits and return on investment. These appear quantitative but they are often fraught with problems. How is the measurement made? Is it the return on investment over one, five or ten years? Does it include the basic research that preceded the product development and perhaps spreads over several present and future products? What is the method of discounting the returns over the 10-year period? There is a great deal written in the product development literature about predicting financial success before launching but not a great deal on financial evaluation after the launch (Crawford, 1997). Obviously at the company level, the annual balance sheet for shareholders is where Think break 1. ‘Innovation is a predictable process.’ Do you agree or disagree with this statement? How can a company organise to give 70–80% predictability to product development but allow 20–30% for the unknown? 2. Take one product family in your company, and identify the generations in the product platforms, and then the derivative products on each platform. What have you used as the basis for the family and for each platform – preservation method, other technology, nutrition and health, place in the food system or some other general family characteristic? If you have not used nutrition and health, try building up the platforms on this basis. 3. Identify the market segments that your company targets for this family of products, and relate them to the different platforms and if necessary particular products. 4. What building blocks has the company used to form these platforms? 10 Food product development
Keys to new product success and failure 11 Table 1. 2 Measures for product development success and failure Individual new product measures Sales volumes and revenues Profits Financial performance Qualitative targets Competitive position against other companies' products Extending or completing a product line Aiding a promotional effort Product development project measures Effectiveness in achieving product success Overall product development programme measures Comparison between old and ne productses Number of new products in the last five years Number of improved products in the last five years Growth of market due to new product introductions Proportion of sales related to new and improved products Profitability of new products compared to old products Contribution to net margins of new products The effect on company innovation level Newness of production technology compared with the industry norm Newness of marketing technology compared with the industr Newness of markets for the companys products Innovative advance of companys new products on competing products Customers' view of the company as innovative Source: After Earle and Earle. 2000 the company is judged. But how does this relate specifically to the development? If it has a product family financial analysis, showing oroduct families as percentages of the profits, then how the product chang different ffecting profitability can be analysed. If the investments in the various product families are recorded then the return on investment in various product families can be determined. But it is seldom possible to track individual products from the annual balance sheet. In product development, a financial benchmark is set which takes into consideration not only the company's own financial needs from a product amily but also the financial standards being set by other companies. All the individual products in a product family are often set, for simplicity, the same financial targets, but this may be a false assumption as specific products may have different aims
the company is judged. But how does this relate specifically to the product development? If it has a product family financial analysis, showing different product families as percentages of the profits, then how the product changes are affecting profitability can be analysed. If the investments in the various product families are recorded then the return on investment in various product families can be determined. But it is seldom possible to track individual products from the annual balance sheet. In product development, a financial benchmark is set which takes into consideration not only the company’s own financial needs from a product family but also the financial standards being set by other companies. All the individual products in a product family are often set, for simplicity, the same financial targets, but this may be a false assumption as specific products may have different aims. Table 1.2 Measures for product development success and failure Individual new product measures Quantitative targets Sales volumes and revenues Market share Profits Financial performance Qualitative targets Product qualities Customer acceptance Competitive position against other companies’ products Extending or completing a product line Aiding a promotional effort General company benefits Product development project measures Efficiency in time and cost Effectiveness in achieving product success Overall product development programme measures Comparison between old and new products Number of new products in the last five years Number of improved products in the last five years Growth of market due to new product introductions Proportion of sales related to new and improved products Profitability of new products compared to old products Contribution to net margins of new products The effect on company innovation level Newness of production technology compared with the industry norm Newness of marketing technology compared with the industry norm Newness of markets for the company’s products Innovative advance of company’s new products on competing products Customers’ view of the company as innovative Source: After Earle and Earle, 2000. Keys to new product success and failure 11
12 Food product development Market success, achieving target sales volumes and revenues, is often measure of success and failure for the overall company, the product families and the individual product. They are usually easy to measure - or are they? Sales are related to time, the marketing effort and the conditions in the market. A simple yearly sales achievement may not relate to the quality or the uniqueness of the oduct, nor give a true indication of the product development success. Sales over time need to be measured, along with any competing products in the market, and also the other products in the companys product family, together with a breakdown to the different market segments. In industrial marketing to the food manufacturer and the food service company, not only are the actual ingredient sales monitored but also the sales of the resulting consumer products to confirm if the company is achieving its percentage of a growing or static market. The efficiency of the marketing effort to achieve these sales is also a product success measure the costs of the marketing effort including distribution, advertising and promotion and selling are measured and related to the sales achieved Production success is usually analysed by quantity, quality and costs. It has to achieve the product quality in the product specification consistently with only a prescribed variation, to ensure product safety, and also to produce at the correct quantity and time. It has basic production costs that have to be achieved and the investment capital and the working capital of the process and production development have to be within budget and time. One of the most important measures is the production yield, the ratio of the product output to the raw materials input. The distribution losses and the returns from the retailers are also measured and are very important in the food industry Product and consumer (customer) success is measured by the level of consumer or customer acceptance and also by the position of the new product against the competing products. The total product success is determined by how quickly it is bought, how often it is bought and how much is bought, but there needs to be more detailed analysis. The product is set target standards in the product design specifications, and its success is rated according to how it achieves these specifications. It is not just a consumer rating of the products acceptance but in particular how much it has incorporated the benefits identified as the consumer needs, how much it has achieved uniqueness to the consumer how much value it is to the consumers. There will also be specific quantitative measures of the product characteristics as identified in the company's product pecifications- have they been met? The consumer and the manufacturers benefits as shown in Fig. 1.3 need to be identified and measured In the case of the industrial product, the criteria for success are based on how the product performed in the buyers process and how it related to the quality of the final consumer product. Very often for industrial ingredients for food manufacturers and for large food service companies, there are strict product specifications and the product quality has to be within a specific range
Market success, achieving target sales volumes and revenues, is often the measure of success and failure for the overall company, the product families and the individual product. They are usually easy to measure – or are they? Sales are related to time, the marketing effort and the conditions in the market. A simple yearly sales achievement may not relate to the quality or the uniqueness of the product, nor give a true indication of the product development success. Sales over time need to be measured, along with any competing products in the market, and also the other products in the company’s product family, together with a breakdown to the different market segments. In industrial marketing to the food manufacturer and the food service company, not only are the actual ingredient sales monitored but also the sales of the resulting consumer products to confirm if the company is achieving its percentage of a growing or static market. The efficiency of the marketing effort to achieve these sales is also a product success measure – the costs of the marketing effort including distribution, advertising and promotion and selling are measured and related to the sales achieved. Production success is usually analysed by quantity, quality and costs. It has to achieve the product quality in the product specification consistently with only a prescribed variation, to ensure product safety, and also to produce at the correct quantity and time. It has basic production costs that have to be achieved, and the investment capital and the working capital of the process and production development have to be within budget and time. One of the most important measures is the production yield, the ratio of the product output to the raw materials input. The distribution losses and the returns from the retailers are also measured and are very important in the food industry. Product and consumer (customer) success is measured by the level of consumer or customer acceptance and also by the position of the new product against the competing products. The total product success is determined by how quickly it is bought, how often it is bought and how much is bought, but there needs to be more detailed analysis. The product is set target standards in the product design specifications, and its success is rated according to how it achieves these specifications. It is not just a consumer rating of the product’s acceptance but in particular how much it has incorporated the benefits identified as the consumer needs, how much it has achieved uniqueness to the consumer, how much value it is to the consumers. There will also be specific quantitative measures of the product characteristics as identified in the company’s product specifications – have they been met? The consumer and the manufacturer’s benefits as shown in Fig. 1.3 need to be identified and measured. In the case of the industrial product, the criteria for success are based on how the product performed in the buyer’s process and how it related to the quality of the final consumer product. Very often for industrial ingredients for food manufacturers and for large food service companies, there are strict product specifications and the product quality has to be within a specific range. 12 Food product development
