Marketing Insights: September 2009

If you’re looking for a magic bullet when it comes to increasing your
sales, creating something new is one of the best ways to get consumers
to try and buy. However, successful product introductions generally
don’t happen by chance.

If you’re looking for a magic bullet when it comes to increasing your sales, creating something new is one of the best ways to get consumers to try and buy. However, successful product introductions generally don’t happen by chance. They’re well planned and executed. One doesn’t have to be a large corporation to follow a formal protocol when unveiling a new product.  In fact, smaller operations have the advantage of speed and flexibility when bringing new concepts to market. It’s not about skipping steps or flying by the seat of your pants. It’s about following the same steps as the big companies, but with less official bureaucracy.

Preliminary market assessment
Where are there unmet needs that your business can fill? This is a high level view. Consider economic conditions, culinary trends and what competitors are doing. Is there a customer segment you’re missing? If your customer base contains young and old but is missing that 36 to 49 year old consumer, you may want to find out where they’re eating instead and why. If we use this market as an example and you discover that this segment is keen on Thai food then you’ll perhaps want to introduce a Thai pizza. The opportunity may lie in an unmet need addressing a health issue. If nobody in your competitive landscape offers a gluten-free pizza then that may be one to consider launching.

Technical evaluation
Once you have a new product in mind, look at your production and sales capabilities and see what it would take to get in the game. Does the new product require special equipment to make it or unique delivery systems to serve it? Do you have the manpower or expertise on staff to make and sell it? If we take gluten-free pizza as an example, perhaps your analysis determines that the extra cost and hassle to store the special ingredients and to mix the dough in a segregated area may not be worth the aggravation if it’s a fairly niche market. In this case, consider a value-added format such as frozen dough balls or par-baked crusts. You’ll get to access the opportunity with ease.

Source-of-supply-assessment
Where will the ingredients come from? Are there seasonal challenges that may affect supply or cost of the final product? If you’ve determined that a value added format will be the most profitable way to introduce the new product (at least to test the waters) then you’ll want to work with your distributor to indentify those product options and costs. 

Market research / VOC (voice of customer)
Who will this product appeal to? Realistically, will you pull customers from afar or are you really fishing in a five kilometre radius surrounding your operation? Look at the demographics of your market area. Try to gauge how many potential consumers live there and what percentage of them would be interested in your new product. If you want to introduce a gluten-free pizza, you could contact City Hall to determine how many people live in your market area. Statistics on celiac disease (an auto-immune disease involving an inability to absorb gluten) indicate one per cent of the population suffers from it, yet many other people also often choose to eliminate gluten voluntarily. So, if you assumed that one per cent to five per cent of your market would be highly motivated to try your product it would be a solid assumption. If there are 10,000 people within your client base, then that’s 100 to 500 new potential customers.

Product concept testing
Once you have the recipes and ingredients on hand, try different variations and hold blind sampling sessions where customers can vote for their favourite. This is consumer involvement in the process and it’s a great way to engage your market up front. How long does it stay fresh and how does it taste served cold the next day? Try to use the product yourself as the consumer would to determine where there are opportunities for improvement.

Product definition
What will you name the product? What is the final direct cost of the item? How will you package it, advertise it and what price can you charge for it to strike that balance between volume and profitability? Will this be a signature product around for the long haul or a limited time offer?

Business and financial analysis
Now that you know the product cost, price and estimated sales volume, determine what the gross and net profit will be on the item. Is it still a good idea to introduce it? Even if the product isn’t as profitable as others on your menu, it may still help you draw in new consumers who will purchase other key items as well. 

Launching a new product successfully takes more than a flash of inspiration. It’s a discipline that when thought out carefully will dramatically increase your chances of success. After all, everybody likes to shake things up a bit with something new. If you hit the sweet spot, you may just find a treasure-trove of opportunity.