Creating New Foods. The Product Developer's Guide - Product Design and Process Development

CREATING NEW FOODS
THE PRODUCT DEVELOPER'S GUIDE

CHAPTER 5
Product Design and Process Development

5.9 PRODUCT AND PROCESS SPECIFICATIONS AND MARKETING STRATEGY

Outline process plans include raw material specifications and quantities, process flow charts and processing conditions, product quality specifications, process control points and product testing methods. From this information, product and process specifications can be written and an approximate product cost determined. If necessary, legal or governmental approval is sought for the product or/and the process. An approximate idea of the customer and consumer acceptance of the products is already known; from this and historical sales data, sales forecasts can be determined. From the consumer and market studies, the marketing strategy can developed.

5.9.1 Product and process specifications

Final specifications include the raw material specifications, the product formulation, the process flow chart, the processing conditions in the individual unit operations, a preliminary HACCP analysis of the process, the testing of the intermediate and the final products, and the final product qualities. These are based on only preliminary production runs and can change during the commercialisation.

5.9.2 Costs and prices

Costs and prices are predicted from the trial production runs and from the consumer test. These will be ranges at the present time, as the production yields are only based on the small-scale tests, and the prices are only based on consumer comments, not actual buying. Usually pessimistic, most likely, optimistic, predictions are made for the costs and the prices.

5.9.3 Sales forecasts

Sales forecasts are based on the consumer test results: the target market segments, the total number of potential customers and the potential consumption rate. There will also be a proportion of potential consumers who will not buy the product and this is also known from product test results. From this type of data and allowing for direct competition, it is possible to make an estimate of the probable sales. However, this estimate must only be used in conjunction with estimates from other sources, since the details of buying intentions given by consumers to market researchers are notoriously inaccurate.

Sales forecasts for most products can be made by considering sales levels of similar products in conjunction with past and current socio-economic trends. Past records can, in general, be used in two main ways. First, a past trend can be directly extrapolated on the assumption that the causes which led to its occurrence will be maintained at the same level in the future. Second, an analysis can be made of the chief determining factors of any trends, and an attempt made to estimate future trends in accordance with any variations expected as a result of those factors.

A broader approach to sales forecasting includes the factors which have an overall effect on the economic behaviour of the nation.

Most new products are in the non-staple food class; they are convenience products, impulse products, or alternative food choices, and sales levels of these can be affected by changes in total consumer expenditure.

Detailed discussion of forecasting is not possible here but all the above factors will need to be considered to make reasonable forecasts. Sales forecasting is now a scientific technique which has been developed to make predictions as rational as possible, exploring every conceivable factor which could affect sales. Sales forecasts are sometimes wrong but all efforts must be made to ensure they are incorrect only for the most unexpected or unusual reasons.

5.9.4 Marketing strategy

The marketing strategy is built up, to outline and integrate the product, the packaging, the price, the distribution methods and the promotional message. At this stage, these are still general descriptions, and the two most important decisions to be made concern the objectives of the market strategy, and the product concept developed from the final product prototype and earlier research. At this stage the product concept is being developed into a product proposition, which is the basis for the product communications in selling and promoting the product during the commercialisation.

5.9.5 Financial analysis

This is based on the costs predicted by the processing and marketing research, and the prices and sales forecasts from the market research. From these, the future cash flows and profits are predicted. Capital investment for the production plant and maybe the distribution system are estimated, and the working capital for the commercialisation and product launch predicted. From this information can be predicted rates of return on investment and also break-even times for development costs to be recovered. At this stage, these predictions have quite a high range of inaccuracy, and risk of being wrong; therefore probabilities of accuracy are placed on the predictions

The product and process specifications, the sales forecasts, the marketing strategy and the financial analysis, although at this time not exact, give excellent information for a feasibility study and for the evaluation of the product before the very expensive step of commercialisation is attempted.