Assessing the Viability of a New Product Idea

New Product example

Fresh Take was held out as an example of an innovative new product. I disagree. This article describes what you should think about when evaluating new product ideas.I have

By:  Karen Pelletier

I have recently read a number of articles decrying the dearth of innovative new products.  The articles imply that companies should push more products out the door and not over-analyze them.  I beg to differ.  Someone has to pay to develop and introduce those new products, and that’s usually the stockholder.  I’d rather focus my efforts and my dollars on the ideas that have the best chance of success.

One of those articles was a blog post from Marketing Pilgrim, “Roadblocks to Innovation: How to Keep Moving Forward in Business” by Cynthia Boris.  Marketing Pilgrim normally has pretty good articles, but this one, made my blood boil.

Cynthia touts Fresh Take (a bread crumb-cheese mixture) as an innovation by Kraft Foods and a worthwhile product to introduce.  I think Fresh Take is a sad excuse for a new product;  it’s more a line extension of their shredded cheese and Shake N Bake franchises than a new product, and is not innovative at all.  In fact, I predict that Fresh Take will not be able to sustain distribution and will be gone from the market within 2 years.

First a little background.  I spent 5 years at Kraft, most of them working on new products.  I introduced Miracle Whip™ Light reduced calorie salad dressing, which won the Kraft President’s Award for most successful new product, and worked on many new products as Group Brand Manager in the Venture Division.  Finding a product concept that people seem to like is only the very first step in assessing whether a new product concept should be developed and introduced.

1.  Volume Potential:  Is this idea big enough to justify the massive investment required to introduce a new product?

Fresh Take is an idea that people can do readily with pantry or staples they currently have on hand.  Most people keep bread crumbs and shredded or grated cheese on hand.  Do they really need another product to create the cheese-breaded coating effect?  I doubt it.  It’s like Dijonaise (a combination of mayonnaise and Dijon mustard).  Most people have mayonnaise and Dijon mustard on hand.  Why buy another product and take up valuable real estate in the refrigerator door with another product that they could easily recreate themselves, if and when they wanted it?  No matter what the “packaging innovation” is in the Fresh Take product, I doubt it’s enough to warrant purchasing yet another product that duplicates ingredients you already have on hand.

Secondly, among people who do like the Fresh Take product concept, I question how frequently they would plan to make it.   Companies often over-estimate how often a concept-positive respondent is likely to buy a product—reducing the projected volume even further.

The investment necessary to introduce a new brand in the grocery channel is massive—not only must Kraft spend money on advertising and promotion to generate awareness to get the product moving off the shelf, the grocery trade often requires slotting allowances.  The grocery trade does this because the cost of getting all these new products on the shelf is very high.  According to the USDA, there were 19,047 new food and beverage products introduced in 2009 (down from 24,236 in 2007).  It includes the cost of buying inventory, figuring out where the new item should go in the planogram, and working the new item into the shelf in 30,000 stores.  So many new products fail that the trade, in self-defense, starting charging manufacturers slotting allowances to get onto the shelf.  This raises the cost of entry for a new brand or item, and makes sure that the manufacturer is really serious about its new product.  Even with the payment of slotting allowances the manufacture gets, at best, 6 months to show that the new product generates enough movement and profit for the grocer to warrant being kept on the shelf.

To summarize, I question whether Fresh Take product concept is big enough to justify the time and investment.

2.  Cannibalization:  Will Fresh Take cannibalize sales of Kraft’s existing products? If so, what would that do to profitability?

Kraft has the Shake N Bake brand as well as a significant share of the shredded cheese category.  I would bet that a substantial portion of the Fresh Take volume will come out of the Shake N Bake brand and/or Kraft shredded cheese. The profitability and viability of the Fresh Take brand should be assessed net of cannibalization.

When I introduced Miracle Whip™ Light I assumed a 99% cannibalization rate.  That dictated how much I could spend on marketing support, how I marketed the brand, and ensured that the company and shareholder would benefit from the introduction.

3.  Competition:  Are there enough barriers to entry (for example patents, technical know-how, spending) to give you enough time to establish a large market for your brand before competitors figure out how to duplicate it and get their own version out in the market?  In this case the shredded cheese competitors might try to duplicate Fresh Take, but I don’t think the competitive issue is as important as the limited size of the opportunity and cannibalization in light of what you have to spend to introduce the brand.

Unlike Cynthia Boris, I think that the Fresh Take brand shows so little innovation that I’m amazed it has seen the light of day and made it to the shelf.  I would argue that the introduction of Fresh Take shows just how tough it is to find a meaningful new product opportunity for Kraft.  DiGiorno rising crust pizza was the last major innovative new product, that I can think of, that Kraft introduced.  It had a meaning point of difference—a crust that rose, like bread in the oven and produced a pizza that was far superior to the existing frozen pizza competition.  It had a technical point of difference that took competitors time to duplicate, giving Kraft an opportunity to gain distribution and market share before competitors came out with their own versions.  And finally, it was in a big enough category (around $800M – $1B) that taking a meaningful share of the category was more than worthy of the investment.

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About Karen Pelletier

Karen Pelletier is an independent Marketing Consultant. She has over 30 years of experience in consumer packaged goods, new product development, technology marketing, and Internet Marketing. She can be reached at kjpelletier@marketing-consultant-k-pelletier.com.
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