New Product Development – a Vital Component
No company can rely on mature products for its future. The commonly accepted ratio in FMCG is that at least 30% of your sales should be from products less than 3 years old.
Almost without exception, therefore, companies in an innovative and exciting business like confectionery should be involved in the new product development process.
Although existing products may still be selling well and may even be growing, it will be too late to start thinking of replacement or complementary products when existing products go into reverse. Not only does it take time to develop and introduce new products, but the company’s share of the customers minds will have deteriorated in the interim and precious resources will have been used supporting declining products rather than promoting a new ones.
Of course many companies have “staples” which have provided them with sales and profits over many years and these are important. However, even these staples should not be ignored, they will need regular refreshment to keep them in consumers minds and to attract new consumers to them.
Know your Market
The first and perhaps most obvious point is to fully understand what market you are in, because only then can you understand your own position, strengths and weaknesses within that environment.
None of us are simply in the business of “selling sweets”. We may be in the business of providing gifts, delivering indulgence, offering refreshment, aiding relaxation or “just” making people happy amongst many other things, but we don’t just “sell sweets”
So, if you don’t already know, identify what your company and its products offer to the consumer, how you are perceived, what strengths and weaknesses you have. This is not a static thing which can be take for granted, it will change over time and with external influences (particularly competitor activity). Therefore even if you have a good knowledge of the market historically, be prepared to refresh that on a regular basis.
To do this you will have to do use some resources, but it will be a worthwhile investment. Do some canvassing, talk to customers who sell the product and use social media to listen to what people think you and your products are there for. Look at what your competitors are doing – and remember that your competitors are anyone – in whatever business – who is in competition for the consumers attention and disposable income.
People have a lot of choice when it comes to spending their money – you may be competing with toys, lottery tickets and mobile phone top ups as much as other confectionery products. Be prepared for some surprises and take the lessons on board, they won’t go away if you ignore them.
Once you understand where you stand you can hopefully consider what opportunities your new products should address and how they will strengthen and add value to your business.
Be willing to accept and embrace innovation and do something different, because if you get it right it will strengthen your competitive position relative to your competitors of all kinds.
Know your Competition
Every business has competition of one sort or another – see the comments on understanding the market above – and it is important to be a leader rather than a follower.
Your competition may range from major global companies to small local ones, but you need to see competition in the context of your own business. For example are there new entrants in the sector which will attract consumers away from you, is another company building a new factory to increase range, market pressure or radically reduce costs. Mergers between companies can often lead to a rash of new products being launched sourced from other regions and even changes in rival sales forces which can impact your position
It is also important to be totally honest about quality and value. Are you really satisfied that your products are perceived by the consumer as representing the best quality and value in the sector on a product for product basis. If not, you need to understand why this is and – of course – do something about it. Quality and value are what the consumer looks for above all else and are key decision makers in purchasing decisions.
There are endless examples of companies improving the quality and value of their offering and seeing an immediate commercial advantage. Equally there are many examples of companies degrading a product and consumers turning away from not just that product but from the brand. This can be an area of real opportunity if you can see and exploit an advantage.
You need to spend time on studying your competition, not just what they are doing now, but what they might be planning for the future. It is unlikely that you will be 100% right in your conclusions, but anything you can do to anticipate competitor activity will be valuable and may guide you to a new opportunity in developing new products.
Know your Target Consumer and Customer
There is very little point in developing a product without knowing exactly who you are expecting to buy it. NPD, like all a company’s activities, needs to be focussed on the needs of the business and following a clear strategy.
This does not mean that all or even most NPD should be “more of the same” (although sometimes line extension can be valuable). You should be thinking widely about what the needs of the consumer may be in the future (be that a seasonal opportunity or something more of a long term trend which you may have identified). Beyond that there may be a whole new consumer group or usage opportunity which you can exploit and which could expand your business. If you have a local or regional sales area there may be an opportunity to expand to a wider market.
A powerful tool in getting to know and understand the customer and consumer is social media and a well (and probably professionally) run social media presence can be invaluable to both small and large companies. However, you do have to be willing to sort and evaluate the crude information flow and not pre-judge results to align with your own ideas – the whole point is to find out things you don’t know, not to reinforce what you already thought!
An even more powerful tool as far as customers (in general the people who actually sell your products as opposed to those who buy them) is concerned is to get out there and talk to them. They will be impressed and you will get really good feedback on what sells, stock levels, even ideas for new products. These people are your consumer interface so they deserve lots of care and attention!
This sort of information will be invaluable in shaping your thoughts, but almost equally importantly it will demonstrate to your customers, and through them your consumers, that you are looking to the future and listening to what they want.
Know your Strengths
All companies have things that they are good at and things that they shouldn’t even think about. Whilst radical new ideas are always a great thing to have, the emphasis should probably be first and formost on using to the maximum the assets and strengths – physical and intellectual – that you already have.
How well do you understand the potential of the manufacturing facilities that you already have – and are they being used to the maximum. Get thinking about what else you can do to enhance and exploit this core resource. There are about 8000 hours in a year, how many of those is your plant actually using efficiently?
Close co-operation and a bit of original thought between manufacturing and marketing can often give rise to useful ideas from both sides – marketing finding that there is the capacity to make just the very thing they want and manufacturing finding that marketing believe they can sell something which is easy to make with a little adaptation. Too often marketing and manufacturing think of each other as having very little common interest, whereas joined up thinking between the two can pay enormous dividends. This kind of relationship needs to be nurtured from the top down and to be founded on mutual respect and collaboration.
New Product Development should not become an exercise which fragments and multiplies the product range into a lot of small lines with minor differences. All that achieves is a loss in production and distribution efficiency and potentially a lot of confusion and stale product in the market place. Much better to rotate products (eg different flavours) for example seasonally within a range which maintains consumer excitement and interest.
There can be situations where a “great leap forward” is worth considering, particularly if a real new opportunity presents itself. It still needs to fit into an overall marketing/corporate strategy, rarely is it a good idea for a confectionery business to start building houses, but it may be worth looking at a co-operative venture with a bakery business for example giving greater exposure of the brand name.
Culling the Pensioners
Most if not all companies have products which they have always made and have made a significant contribution to the value of the business. It is important to constantly review this sort of product to ensure that in its present format it fits with the company’s current and future strategy and plans and that it continues to appeal to the target consumers.
Development of these staple products to keep them fresh and exciting is an important aspect of new product development as they can then continue to contribute to growth rather than absorbing resources to support an ageing and possibly dying product.
There does come a point where a product has no real future and it has to be discontinued. The “defence committee” will immediately make its presence felt, siting one of a number of arguments, including:-
- It’s part of the company history
- Look how much we will loose in sales if we discontinue it
- It’s still profitable
- All it needs is to be relaunched with a new wrapper
Getting through this phase can require a certain amount of determination. Products need to be appropriate to their time and market and just being “part of history” doesn’t make people buy the product or make it profitable. There must be a proper programme of product redundancy with new products ready and waiting to take over and grow in the market place.
New products should not only be designed and developed with the consumer in mind, but should also be more profitable for the company and be designed for ease of manufacture. The availability of ingredients going forward should also be considered.
A change of strategy may also be provoked by the age and condition of manufacturing facilities. The cost of upgrading premises and replacing worn out machinery for an existing product may well move that product from profit to loss and force a decision on its future.
Conclusion
The planning and development of new products is an essential function for businesses in the confectionery industry. The target consumer is volatile and changing constantly in what they are looking for in products, and businesses must adapt to that or accept decline.
Developing, launching and promoting new products is time consuming but is typical of the sort of area where innovative thinking can be such a benefit. There must be constant review of how current products are aligned with market requirements and how and when that may change in both the long and short term future. Decision making can also be influenced by other issues such as long term trends in ingredient pricing and availability and the company’s manufacturing base.
New product development is an essential business tool but it must be aligned with the overall needs of both the business and the market and plans for the general development of the business.