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EDITIONS
Education Wednesday, 27 November, 2002, 14:03 GMT
Lunch Lesson 12 - New product development
Product developers at Tesco
Analysis, research and tastings are vital
New product development is a vital part of the marketing mix for the UK's biggest retailer, Tesco.

Seaneen O' Neill is one of the product development managers with the chain.

She's responsible for the chilled food products, and is constantly on the lookout for the latest trends in eating that can be developed into a new line at the store.

Each year there are 1,000 new product launches in chilled foods alone.

Seaneen is part of team of nine who work in this category.

Spotting the trend

For most products, the process is the same.

People like Seaneen have to be one step ahead of the game trying to spot what is new and fashionable in food, with the potential to appeal to a broad market.

Seaneen O' Neill, product development manager for Tesco
Seaneen: looks for new trends
"I visit restaurants and delis in London, I look at new trends in food and try and come up with new ideas for our customers," says Seaneen.

Product review

But a new product can also be a replacement for an old one or produced solely to compete with a rival store's own product.

At the beginning of each year the targets are set for each category and an agenda worked out for the year ahead.

This is based on analysis and research, product tastings and a review of the current products and ranges.

The teams will then decide on how many new products are to be introduced and what the specific sales aims for each of them will be.

Researching new product ideas takes Seaneen all over the world.

For one new range, she actually spent time in a cookery school in Italy because she wanted the products to have a real taste of Italy.

Next steps

Once Seaneen is taken with an idea she'll write up a brief for her supplier who then in turn does his or her own research before making the product in their kitchens.

Helen Fraser is the product development manager with Katsouris Fresh Foods, one of Tescos's suppliers.

a Tesco products
Research sometimes takes place abroad
"When we get the brief we go out into market and buy the products that are already out there, or are similar to the ones which fit the brief," says Helen.

"We log the prices of similar lines and see what price range we should be working to. Then we start putting something together."

Tasting

Each food product goes through many different tastings before it's actually launched on the market.

There's a preliminary tasting with the supplier after he or she has put the product together from scratch.

If that gets the client's approval the supplier will then look at how the product can be mass-produced in its factory.

There's then another tasting after this stage to make sure that the product has transferred successfully.

Besides the manufacturer's tastings, there are usually in-store product tastings just prior to product launch.

With the Tesco vegetarian range, Seaneen conducted a customer panel in the store where 100 customers scored the product against a number of criteria.

Technical matters

As well as the product tasting, someone like Seaneen also has to consider the technical side to each new product.

She must ensure that the product is safe, that it is easy to cook and serve and, with the healthy eating options, it doesn't exceed its fat limit or calorie count.

Seaneen is also involved in the design of the packaging.

"The packaging sells the product so it's vital that we get it right," she says.

Risks

With each new product there is always an element of risk involved. The failure rate with new products is very high.

"Success and failure is part of the job," says Helen.

"For every 10 new products developed only one or two are launched, and probably half of those fail.

A product from Tesco's Finest range
Tesco's Finest range has recently been relaunched
"Some of the more fashionable products have a very short life cycle."

With the Taste of Italy Risotto, which is part of Tesco's Finest range, Seaneen was concerned that sales might not take off.

"We took a risk with this one," she admits.

"Not many of our customers have actually been to Italy and tasted risotto like the Italians make it.

"But we wanted to bring the taste of Italy to our customers and it sells really well."

Constantly changing

Supermarkets like Tesco are always trying to look ahead.

One of the chilled food category's key targets is to grow Tesco's own brands.

They also want to make sure their own brands are in keeping with the current advertising and marketing.

This might mean a change in the packaging to refresh the look of an established product.

Timescales

The products on the shelves now were developed more than six months ago.

Seaneen has recently been involved with the relaunch of Tesco's Finest range - the premium brand from Tesco.

Her team started work on that in January 2002 for a September launch.

The products have to be "signed off" 16 weeks before they get to the stores.

Sales

Of course the deciding factor for the success rate of a product is how well it sells.

A production line for a Tesco product
Developers monitor products at every stage
"Sales projections are done as the concepts are being signed off," explains Seaneen.

"Then soon after launch we look at the sales to make sure that the product is living up to its expectations.

"When targets are not met they are discontinued."

Getting harder

With any business that's dependent on fashion, it's very difficult to stay on top and catch the mood before it's too late.

And with our increased sophistication as consumers, originality is sometimes hard to find.

"It's much harder to innovate now than it was four years ago," says Helen.

"It's much harder to come up with new range ideas."

But with the average product life cycle only 18 months, it means that people like Seaneen will be kept busy for some time to come.


Student guide

Seaneen O'Neill is a product development manager with Tescos. She has to keep her eye on the ball.

The food market is affected by many trends and can move at the speed of light.

Some new ideas arrive and stay - others are gone before the taste buds have twitched.

Can you imagine life without the supermarket pizza? But whatever happened to the baby avocado that was on every supermarket shelf 10 years ago?

Ideas now come from all over the world.

There are concerns about our health and changes in our lifestyles - so new products often need to be fast, healthy and interesting.

Tesco's Finest range is influenced by all these ideas.

There is a growing place in the market for people who are looking for extra quality - but how did this range reach the chill cabinet?

Just think...

Make a list of food products that have reached the supermarkets recently.

Can you think of any products that have come and gone from the supermarket shelves?

New ideas

Any business that is in search of new products needs to do some research. It can fall into four categories.

  • What are other businesses doing?
  • Are there any bright ideas about?
  • What products can be developed further?
  • What do customers want?

    Market research is important to the success of a new product.

    It helps to reduce the risk of investing a lot of money in the development process.

    Seaneen and her team:

  • carry out gap analysis to work out what other businesses were selling. By comparing Tesco's product ranges with other supermarkets, she could see if opportunities were being missed.

  • travel around the world to investigate new food ideas

  • survey Tesco's product range to decide which ones should go, which should be developed and which gaps should be developed.

    Just think...

    Think about one range of foods in your local supermarket.

    Make a list of any factors which you think might influence the development of this product range.

    How would you develop the range?

    Getting it right

    Once all the ideas come together, the supplier is given a brief.

    This sets out the objective of the new product, the gap it should fill and any information that has been gathered from the research.

    The product developers then go to work.

    They will probably produce several versions of the dish and offer them to tasting panels who give their views.

    It's important that the panel represents the likely make up of shoppers.

    There is no point in picking people who all like powerful vindaloo curries if the average supermarket customer prefers a milder product!

    Many businesses involved in new product development carry out testing.

    How will children respond to new toys? How does a new vacuum cleaner suit its users? What do people think about the shape of a new car?

    Just think...

    What do you think was in the brief for Tesco's Finest range or their Healthy Eating range?

    If a testing panel come up with a range of responses, how should a business decide which ones to use?

    More than just a product

    Everyone in marketing knows that a product is more than just the item itself.

    The packaging and customer care, for example, can be just as important as the price of the product.

    The packaging should tempt you to pick the product up.

    There is so much to choose from that it really has to be eye catching.

    It's very important to know who the customer is.

    The Finest range is aimed at a different sort of customer from the buyer of economy pizzas.

    Tesco is trying to sell a premium product in its Finest range.

    The packaging needs to reflect this.

    Designers will be given a brief to produce a range of designs, which will also be tested on customers.

    Just think...

    Draw up a brief for the packaging for the Finest range.

    Explain how the brief fits with your target market.

    Success?

    Months of work go into developing a new product, but success is never guaranteed.

    The objective is to increase profits by keeping the customer visiting the store.

    Many people get bored if there is no innovation. New ideas keep us coming back.

    Exciting new products may attract new customers too.

    Tesco has won market share over the last few years by expanding not only the number of stores but also the range of products it sells.

    Just think...

    How is the success or failure of a new product measured?

    Why does innovation help a business to keep customers coming back?

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