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Musings on the Foodservice Industry

New Product Development – A Recipe for Success

“9 out of 10 products are introduced, to fill a void in the company’s product line, not to fill a void in the market.” Al Ries & Jack Trout- authors of “Positioning”.

Not much about new product development has changed since 1981, when the marketing classic, “Positioning”, introduced a generation to the concept. This was the first book to deal with the problems of communicating to a skeptical, media-blitzed public. “Positioning” described a revolutionary approach to create a “position” in a prospective customer’s mind – one that reflected a company’s strengths and weaknesses as well as those of its competitors. My favorite line from the book is in the forward; “This book is dedicated to the second-best ad agency in the world, whoever they are.” THAT is positioning.

To develop new products today, takes vision, capital and guts. Food manufacturers are more sophisticated, spend more on R&D and go to greater lengths than ever before to introduce new products. However, for most companies, the elusive “Great New Product” remains a mystery to develop.

In the past, inventors had ideas and took risks to develop new products. As huge consumer product companies grew, the inclination to take risks and spend millions on development, led to a shift from inventor-led initiatives to marketer-centric events. Inventors used the theory of product segmentation as their guide to find the voids in the market. New products developed to create a new set of attributes for consumers to try. The marketers developed market segmentation as a method to gain market share or block competitors on the grocery store shelves.

What customers want has nothing to do with bragging rights or strategic moves on market share. Consumers want benefits and value.

Traditional market research developed to understand the consumer. Field-tests and focus groups became the mantra of the marketers. The failure with these methods is that marketers test products that are nearly complete. The research occurs too late in the game when most of the assumptions are already baked into the product.

A notable example was the launch of peanut butter and jelly in a single jar. What stopped this from success? The consumer eliminated jars and simplified the sandwich making and clean-up process. But the product failed. Consumers were asked if they like the idea. Of course, they did. So, the assumptions were built into the product. The disappointment was that consumers like their own ratio of PB to J. The product was convenient but ultimately didn’t match consumers’ flavor assumptions.

So, what are dairy companies to do? Consumer studies work if used properly. Hold the study early in the process and challenge the assumptions. The best results come from focus groups with a mission. Great ideas come from passion not harmony. Many focus groups reinforce the proposition put before it. The hope is to tinker on the edges. But the political reality is that too many marketing careers come to abrupt ends to take too many risks. That is how assumptions get programmed into product introductions.

How can cheese companies create successful new products? The first step is to understand your company strategy. Who are you? What do you do? Where do you want to go? How will a new product support that goal? What is the purpose of the new product? Proactive products are designed to create expansion and diversification. Reactive developments occur because consumer behavior changes or innovative technologies develop. Defensive products are released simply because the competition did it first and the firm wants to catch up.

Decide in advance how to measure success. Key metrics include R&D and marketing cost payback. Company 1 expects a payback and positive cash flow in one year. Company 2 measures the same parameters but over a three-year period. By definition and perspective, the second company has a much higher rate of a successful new product launch. This is an executive and cost accounting decision. Set these parameters to clearly define success.

Customers respond to the word “new”. Additionally, sales people need reasons to call on customers; new products offer those opportunities. There is intense pressure on manufacturers to create and maintain this environment of newness. But new for no reason, creates line extensions with no strategic significance. Witness the french fry industry. Each company offers literally hundreds of items with microscopic differences; a terrible problem for their own production efficiencies and for their distributor partners.

I believe that successful new products have a significant role. Find the void in the market, product segmentation, is the key to this success. Customers buy benefits. Build better benefits into new products and use technology to create consistency and value and the world will beat a path to your door. Marketers have it right also. Market segmentation based on research and strategy creates pain for your competition.

As the manager of a wholesale bakery, our production team motto was; “you sell it, we’ll make it”. This put enormous pressure on us. The sales department would challenge production with a new raspberry chocolate pie that required a specific retail price point. We would back-engineer prototypes until we discovered the right combination of ingredients, line time and packaging. We succeeded most of the time. As stated above, “the best results come from focus groups when you challenge people”. I got the best results from my R&D team when I made them mad. Not abused, not mistreated, but challenged with difficult outcomes. When they succeeded, the team earned perks and time off. As a company, we responded to customers’ deepest desires, fulfilled our professional challenges and had a lot of fun in the process.

Inventions must lead successful new product development, not marketing analytics. Find a way to bring invention and enthusiasm to your new product process and successful new products and delighted customers are the reward.

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