New Product Development - PLMA

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PLMA 2011 Executive Education Program | Center for Food Marketing. Haub School of Business | Saint Joseph's University.
Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

New Product Development Mark Lang Professor, Food Marketing Haub School of Business Saint Joseph’s University 5600 City Avenue Philadelphia, PA 19131 610-660-3431 [email protected]

Mark Lang, SJU

Background: A Perfect Storm is building for the PL business ƒ ƒ ƒ ƒ ƒ ƒ ƒ

Higher category coverage Higher consumer awareness and acceptance Higher consumer penetration Higher quality and value reputation with consumers Higher satisfaction with consumers Weakening dominance of national brands and advertising Slowed economy triggering saving behavior

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

June 13-16, 2011

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

June 13-16, 2011

Big Question: Will the industry capitalize on the storm or allow it to just pass over? ƒ What will happen when the economy improves? ƒ What will PL retain consumer purchases? ƒ Will PL have the necessary quality and interest to retain consumers? ƒ Will PL have the necessary infrastructure sustain growth?

Mark Lang, SJU

This session’s agenda ƒ Why and how the PL development process needs can be challenged ƒ Ways the PL development process can be enhanced Growth Strategy

Product Development

Marketing Strategy

Assortment

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

Growth Strategy

Mark Lang, SJU

Where can PL growth come from? Short Term growth: ƒ There is already high awareness, acceptance, and penetration ƒ The slowed economy is driving consumers to try PL products

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

June 13-16, 2011

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

Where can PL growth come from? Long Term growth: ƒ What will happen when the economy improves? 1. 2.

Consumers shift back to brands Consumers continue to include more PL products in their baskets

ƒ What will cause consumers stick with PL products for the long term? ƒ What causes consumers to stick with any products long term?

Mark Lang, SJU

Where can PL growth come from? ƒ If there are already high awareness and acceptance with consumers, future growth must come from higher rates of repurchase Textbook Consumer Buying Process: 9Awareness 9Acceptance 9Interest 9Availability 9Trial ? Repurchase

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

June 13-16, 2011

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

Where can PL growth come from? To achieve higher rates of repurchase, the typical consumer must ƒ buy from more PL categories ƒ buy PL products more routinely ƒ buy PL products in higher quantities For example: Not only do they need to start buying PL cereal, they also need to buy it routinely and buy more than one item.

Mark Lang, SJU

Where can PL growth come from? ƒ With high awareness, acceptance, and penetration, higher rates of repurchase must come from higher consumer motivation to purchase more PL Consumer Buying Process 9Awareness 9Acceptance 9Interest 9Availability 9Trial < Motivation Repurchase

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

June 13-16, 2011

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

June 13-16, 2011

Increasing motivation to buy more PL ƒ The market is made up of different customers with different needs and quality and price expectations Low SES

Medium SES

Higher SES

Lowest Price Basic Quality Basic Variety

Good Price Good Quality Good Variety

Fair Price Better Quality Interesting Variety

This is where new trial is coming from

Mark Lang, SJU

Increasing motivation to buy more PL Value =

Basic Quality + Something Extra Quality = Price + Effort Cost

Basic Quality – Already achieved the as good as or better threshold Price – Already a noticeable discount (maybe too much) Effort – High levels of availability create shopping convenience Something Extra – ?

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

Increasing motivation to buy more PL Providing Something Extra to the consumer? Delivering beyond basics of availability and comparable quality ƒ Products that are more interesting and appealing ƒ Additional features and benefits ƒ New, innovative, well designed products ƒ Unusual, unique, exotic, cool, fun products ƒ Products that consumers might see as “WOW”

Mark Lang, SJU

Increasing motivation to buy more PL Products that consumers might see as “WOW”

WOW = “Hey! Look at this product, I love this, this is so cool they did this!”

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

June 13-16, 2011

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

Product Development

Mark Lang, SJU

Product Development Idea Generation, Capture, Screening

Concept Analysis Concept Development

Testing, Go Decision

Implementation

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

June 13-16, 2011

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

June 13-16, 2011

Product Development Idea Generation, Capture, Screening

Concept Analysis Concept Development

Testing, Go Decision

Formulation / Format Packaging / Labeling Spec’s / Sourcing Financials

Implementation

Mark Lang, SJU

New thinking in Product Management ƒ Experiment with lots of ideas: P&G CEO “More at bats equals more hits” – –

Start small: collect, nurture, and expand winners Be comfortable with failures, cull losers

ƒ Be comfortable with changing assortment, rotation, seasonal items, LTOs ƒ Think about making what is needed vs. buying what is available

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

New thinking in Product Management ƒ Rise above traditional PL mindset of meeting minimum quality specifications ƒ Don’t launch a program (death by its own weight), string together a series of surprising successes ƒ Product test, market test - retailers should use their own shelves to experiment in a real world lab they control

Mark Lang, SJU

Fuel Ideation ƒ Adopt a mindset and methods to stimulate new thinking within your organization ƒ Get out of your comfort zone, challenge your organization’s thinking ƒ Question everything: why, says who?, what if, why not! ƒ Work with outsiders ƒ other business, industries, perspectives, stimuli ƒ P&G CEO success comments: 10-50% projects w/ outsiders

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

June 13-16, 2011

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

Fuel Ideation ƒ Adoption vs. invention mindset ƒ Employ existing ideation tools, then develop your own ideation exercises ƒ Familiarize, learn, practice, borrow…

Mark Lang, SJU

Organize to support innovation ƒ Diversity: if there’s a bunch of the same people in the room, a breakthrough idea is much less likely ƒ Create a team of your best people, interesting people, young people ƒ The more different perspectives the better, cross-functional

ƒ Stream line processes and procedures: get out of their way ƒ Don’t create a formal innovation process ƒ Death by its own weight ƒ Start small, quietly, away from the spotlight

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

June 13-16, 2011

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

Organize to support innovation ƒ Give extra support resources and easy access to minor funds ƒ Establish independence but with accountability ƒ Back off financials at first: figure $$ out later ƒ Start with consumer insights but don’t over research in early stages ƒ Make it fun, sought out, rotate the experience, rewards

Mark Lang, SJU

Marketing Strategy

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

June 13-16, 2011

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

June 13-16, 2011

Follow brand practices ƒ Focus on differentiation rather than just price ƒ Think about developing points of difference: Attributes > Features > Benefits > Image ƒ Don’t talk generically about quality, fresh, variety, value ƒ Be specific with yourselves and the consumer

ƒ Tap into consumer desire for new and interesting products ƒ Unusual, unique, exclusive products have extra attraction

ƒ Recognize consumers have rational and emotional needs ƒ Things like cool, fun, exciting really do count

Mark Lang, SJU

Follow brand practices ƒ Recognize the importance of packaging and merchandising for PL products ƒ Think of brand image, use a consistent brand design, better materials, reduce clutter

ƒ Start to promote leading PL items and lines like national brands do ƒ Start in the store, the most impactful communications environment

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

Retailers still subordinate private label to the promotional strategies of the national brands, rather than building their retail franchise by promoting private label first. - RetailWire

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

June 13-16, 2011

Focus on a target consumer ƒ Understand market segmentation and why the mass market no longer exists ƒ Be more consumer centric ƒ Study and understand consumers like CPG brands do (needs, motivations, psychology) ƒ Decide on who your consumer is (and is not) ƒ It can’t be everyone (retail paradigm) ƒ Target consumer, Primary/secondary, Key segments

Mark Lang, SJU

Focus on a target consumer ƒ Develop products with a consumer problem solving mindset ƒ Save time/effort, provide ideas, assemble parts, remove steps, convenient packaging, easier selection… ƒ Assess fit or alignment of PL offering with target consumer(s) Consumer 1

Consumer 2

PL Brand A PL Brand B PL Brand C

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

Consumer 3

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

June 13-16, 2011

Focus on a target consumer Immediate opportunity segments - defined by age/generation, ethnicity/race, income, and need: 1. 2. 3. 4. 5. 6. 7. 8.

Aging boomer/retiree Young middle income families Gen Y Higher income, educated, experience seekers Lower income value seekers Hispanic African American Health and Wellness consumer

Mark Lang, SJU

Monitor your marketplace ƒ Get a perspective from outside of your organization ƒ Collect outside information sources ƒ Reports & studies from associations, research firms, brands, consulting firms, websites

ƒ Talk to outside experts ƒ Consultants, agencies, universities, suppliers, retailers, chefs, journalists

ƒ Work with consumer insights ƒ Panels, reports & studies, suppliers, retailers, interviews, surveys

CPG brands have done this for years

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

June 13-16, 2011

Monitor your marketplace ƒ Study changes in consumers’ lives, needs, wants, consumption ƒ Track your category and other categories (eg. restaurants) for innovations and changes ƒ Track competitors and substitute products for innovations and changes (single serve milk) ƒ Track other markets for innovations and changes ƒ International > CA > Metros ƒ Individual Rest > Chain Rest > Spec Retail > Traditional Retail

Mark Lang, SJU

Work with consumer trends Influences Macro Environment Society & Culture Economy Technology Political Natural Environment

Consumer Mind Set

Consumer Behavior

Think Act Needs, problems, wants, Purchase perceptions Consumption/Use Price Permission Feel Repurchase /Loyalty Attitudes, values, Advocacy beliefs, preferences

Life Context Demographics Family, Home, Work Lifestyle

There are experts to help with this… Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

June 13-16, 2011

Work with consumer trends Trends that provide something extra to consumers Convenience Premium Natural/ Organic International / Exotic Sustainable Fair Trade

PL products can also participate in these trends.

Mark Lang, SJU

Assortment

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

June 13-16, 2011

Think strategically about assortment ƒ Think of PL’s role as not only a low price alternative but also as source of differentiation for the retailer’s overall brand ƒ Creates relevancy, interest, attractiveness, value, and excitement for the retailer’s brand ƒ Develop “products you can only get here” (President’s Choice)

“Over-reliance on price, subverts retailers' efforts to create high quality private label programs” – Retailwire “The image of private label has changed in consumers’ minds from purely a low-price option to a set of products that offer quality and value.” - PLMA

Mark Lang, SJU

Think strategically about assortment ƒ Think beyond category coverage and knocking off national brands ƒ Targeting NB fragments PL presence and meaning in store ƒ Targeting NB reduces variety perceptions and complicates PL shopping

“Many retailers still follow national brand equivalency as a fixation on "me-too" private label, even after a number of retailers have demonstrated they have the capability to do better than national brands.” – RetailWire

Doing something different in higher profile categories can earn greater interest in PL and credibility for the retailer

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

June 13-16, 2011

Think strategically about assortment ƒ Use portfolio thinking to plan PL product strategy ƒ Break out of one-size-fits-all programs ƒ Different products serve specific roles, for certain consumers, within different categories, and earn different returns

Mark Lang, SJU

Think strategically about assortment ƒ Have an organized and conservative brand structure for PL lines and products ( Features > Benefits > Image/Design ƒ Spark consumer news, interest, enthusiasm, fun, and appreciation ƒ Earn disproportionate credit for innovation and new and interesting products ƒ Think Key Interest Builders for PL program

Mark Lang, SJU

Create symbolic products ƒ Only a few needed, higher involvement/profile categories ƒ Create a halo effect on overall quality perceptions ƒ Provide these items profit relief for their unique role ƒ Leverage in marketing efforts to build overall reputation

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

June 13-16, 2011

Property of Mark Lang Professor of Food Marketing | Saint Joseph’s University

Enhancing the PL development process Strategy for growth Product Development New thinking in Product Development Fuel Ideation Organize to support innovation Marketing Strategy Follow brand practices Have a target consumer Monitor your marketplace Work with consumer trends Assortment Think strategically about assortment Create symbolic products

Mark Lang, SJU

PLMA 2011 Executive Education Program | Center for Food Marketing Haub School of Business | Saint Joseph’s University

June 13-16, 2011