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FST 253 Research & Development
of Food Products
Launching New Product Phase
Evaluating The Result
Launching New Product Phase
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Test Market
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Launches of new products into regions selected
for geographical, marketing and company
reasons
Results are analyzed, then decision is made on
whether to continue or extend marketing into
other regions, or to drop product launch and
reevaluate project
Test Markets
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Examples
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Native fruit jellies marketed in 2 stores first year
Expand to 3 other outlets and 2 cities in 2nd year
Evaluations done with every gift pack sold
Information obtained revealed why product was
purchased, what attracted the purchaser to the
product, whether the purchaser would repeat
purchase the product, and how the purchaser
would rate the product
Test Markets
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General Foods Corporation example
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Conducts in-home testing before moving into test
market
Depending on market data, decision is then made
to expand product nationwide to evaluate
consumer reaction and awareness of advertising
and promotional campaigns
Test Markets
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Test Markets
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Large scale commercial marketing experiments in
a geographic area of the country chosen for very
specific market-related reason
Complex experiment involving:
Food technologists
 Production staff
 Marketing staff
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Management-level personnel
 Traffic department staff
 Financial department
personnel
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Test Markets
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Consumer research is active during test
market period
Nature of test markets depends on the type of
product tested and the goals of the companies
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Improved (reformulation) or repackaged
(established) products
Line extensions
Test Markets
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Large companies vs. small companies
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Large companies
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Conservative development teams
Small companies
Introduce products at county fairs or local sporting
events
 Immediate feedback and response
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Test Markets
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Omitting a test market
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Daring gamble, but may be justified
Allows company to get into market first
Company has to be financially stable
Does not allow company to evaluate its
advertising and promotional campaigns
Test Market Concerns
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Where to introduce
1. Test Market area
Is the area chosen peculiar to the company?
 Is it peculiar to the competitor?
 Outcomes can affect a large company more than a
small company
 Small companies usually do not test market very far
from their home base
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Test Market Concerns
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Where to introduce
2. Introducing in a market heavily saturated by the
competition
Purpose is to collect as much data as possible
 Possible retaliation by competitor is possible
 Will be costly to penetrate
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Test Market Concerns
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Where to introduce
3. Select an area where there is already a good sales
force already in position and a good distribution
system already established
4. Evaluating the effectiveness of advertising,
promotions, and sales
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May be difficult if market is already dominated
Test Market Concerns
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Where to introduce
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Do not test market in areas dominated by monoeconomies
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Consumers may not be willing to try new items
Ensure that targeted consumer is in that area
Is the product peculiar to that area
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Distinct biases towards different flavors, colors, forms,
or styles of products have very specific regional
preferences
Test Market Concerns
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When to introduce
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Seasonality of products dictates when to test
market
Need to also consider length of test market
Until reliable data has been obtained
 Must be long enough to measure consumer’s reaction
to product
 Too long of a time will result in loss of lead time
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Unexpected events can disrupt the best plans
Test Market Concerns
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How to introduce
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Difficult for large and small companies
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Stores are much more discriminating with new
products
New product introduction usually accompanied
by extensive marketing and promotion, usually
introductory
Test Market Concerns
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What product to market
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Test market must use the same product as the
final
Special promotions can be used during
introductions
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However, they are not permanent, thus their impact on
consumers must be fully understood
Evaluating The Results
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Many factors can influence the interpretation
of the data
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Need to understand consumers’ behavior and
activity of the competition during test market
period
Personal feelings and emotions of product
managers
Science of consumer research is still not precise
enough
Evaluating The Results
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Criteria for evaluating success or failure
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Payback
Sales volume
Consumer reactions
Tactics
Evaluating The Results
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Payback
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Will it meet the financial objectives of the
company as measured by the expected return on
investment projected from sales?
Sales volume
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More units of a product is usually cheaper to
make, which will influence the rate of return on
investment
Evaluating The Results
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Consumer reaction
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Why and how the consumer uses the product
Tactics
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Business tactics of the company
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Whether the product was intended to counter the
activity of the competitor or to establish a position in a
particular niche
Evaluating The Results
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Small companies can be more flexible about which
criteria to apply
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Most use sales volume and consumer reaction
Large companies more concerned with market share
Budget for R & D is combined with quality control or
production expenses in small companies, thus
unable to determine development costs with
accuracy
Evaluating The Results
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At the conclusion of test market, data on both
product and consumers are gathered and
analyzed
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Questions on product, including packaging, etc
Salesmen need to be interviewed
Consumers need to be surveyed
If reasons for success can be crystallized,
then perhaps the same can be applied to
another
Evaluating The Results
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Failures in the marketplace
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Most new products fail in the first year
Loss is staggering when considered in terms of
time, effort, and money spent
Hindsight better than foresight
Evaluating The Results
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Causes of Failures
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Difficult to predict success or failure of any
product
Causes can be broadly classified as
Those that company could not have done anything
about (external)
 Those they might have done something about
(internal)
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Evaluating The Results
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Causes of Failure
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Difficult to isolate any single one factor
An external factor could be the cause of an
internal factor
Evaluating The Results
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External reasons
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Discovery of market size after product
introduction
Dominance of market by a single competitor
Dominance of market by single customer
Product related reasons
“Me-too” product
 Product’s novelty
 Products ahead of their time
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Evaluating The Results
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Internal reasons
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Bad management
More bad management
A little mixture of bad communication
Lack of clear company objectives
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Affects marketing and R & D resources
Lack of production capacity
High R & D costs most common reason
Evaluating The Results
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Product can fail because of technical reasons
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Oversimplification to state that failures are
due to
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Expecting too much
Not being lucky