Product Launch and Evaluation
7.8 EVALUATION OF THE LAUNCH
It is very important to monitor not just the sales of the product, but also to check how the product is performing in distribution, storage and the supermarket, the retailers' attitudes to the product and their placement and promotion of it, and of course consumers' attitudes and behaviour towards the product. How much are they buying? Are they re-buying? What do they like/dislike in the product? Would slight modifications improve it?
So there is a need for qualitative research on the product, production, distribution and marketing as well as the technical research on product quality and the quantitative research on the efficiency of the launch. Many of the studies on the efficiency of production, distribution and marketing are carried out continuously for the company's day-to-day activities. If there is only a small change in the new product, then this data is sufficient. But a major change of product, production, distribution or marketing needs more detailed evaluation of the launch. Timing is most important and there is a need to check the timing and schedules detailed in the operational plan to see that they are being met and nothing is falling behind – raw materials, production, distribution or marketing.
Quantitative analysis should be undertaken to determine the success or failure of the launch. The company will have set targets for the launch: short-term targets of volume of sales units, sales revenue and market share, and long-term targets of a certain profit and return on investment and a time to recover the launch and development costs. Obviously as the launch proceeds, the evaluation will become more definitive as more accurate data accumulates and better predictions of future cash flows can be made. The data which are necessary for the evaluation include production and distribution costs, prices, unit sales, sales revenues, marketing costs, company costs and finance costs.
The evaluation after the launch needs to consider carefully the operational, marketing and product plans detailed in Chapter 6, but some important areas to consider are identified in Table 7.1.
Table 7.1 Important evaluation areas
7.8.1 Production and distribution: quality and efficiency
On the production side, the raw material quality and quantity must be monitored, the process variations studied and, most important, the yield and quality of the product checked. Equipment breakdowns and the response of employees need to be monitored. Distribution and marketing are also monitored. This monitoring usually leads directly to improvements in the product, in production, in process control limits and in quality assurance, and also often to changes in distribution and marketing methods. The time after launching is a time of constant improvement of the product, reduction in production costs and increase in the effectiveness of the marketing methods.
Measurements of these factors are followed in many companies during the launch. The raw materials and direct processing costs are continuously watched to check if they are improving and are within or better than target. The variation in the quality of the raw materials, the process conditions and the distribution conditions are recorded and analysed, and most important the technical standards for the product continually monitored. The wastes from the production and costs of their disposal also need to be measured.
The distribution costs, delivery times and product losses are recorded so that improvements can be made. Also retailers can be surveyed to see how they regard the distribution. An important consideration is the return of product because it is damaged, too near the use-by date, or not as specified. Such returns are costly in terms of both money and company reputation, but also the acceptance of the product in the market as summarised in Example 7.2, and the production and distribution has to be controlled to reduce them to a minimum.
7.8.2 Product and marketing: quality and efficiency
The advertising and promotions are checked in consumer surveys, usually by telephone, to determine if they have been seen, whether the message was remembered, and whether consumers were encouraged to buy. Prices are monitored continuously to record what the actual retail prices were and whether any price specials had taken place; these are then related to sales. A more practical relationship between price and demand can be developed, in particular if there are any psychological effects of pricing on consumer buying. The total marketing costs also need to be recorded and reviewed, particularly the sales and promotional costs.
The sales analysis only provides the overall sales, and if there is a need to know who is first-buying and who is re-buying, then information compiled from buyer diaries can be obtained. Consumer panels record purchases, and from this data companies can determine the re-buying pattern, the timing and the amounts for each purchase. They can also determine from what particular other brands it is gaining customers, to what other brands the product is losing customers, what types of customers are showing the most interest in the new product, and which type of customer has never bought it, and so on.
There is also need for information on consumers' behaviour and attitudes towards the product and the marketing mix. A survey of buyers can be made either just outside the supermarket after they have made a purchase or later after they have used it. Another method is to attach a return card on the package, perhaps with some inducement such as a free sample or a discount voucher. This survey will indicate how the product can be improved and how the marketing mix can change to improve sales.
The competitors' reactions to the new product should be constantly surveyed to see what tactics they are using either to prevent success or to attach their products to the success. Also the reactions of the retailers should be studied - are they enthusiastic, or do they only want to give the product a month's shelf space? How can their aspirations for the product be fulfilled?
7.8.3 Nutrition, health and safety
These are important evaluations as regards both the consumer and society. If the nutrition is not what is expected of the product, then suspicions about the product may be raised. As shown in Case Study 7, the nutritional value of a product is becoming more and more important, and the company needs to have sufficient knowledge to recognise, control and communicate the nutritional value during the launch. Are the right values being emphasised to fit current market aspirations or should they be re-jigged? Are the claims backed by scientific evidence? Do they agree with changing regulations?
Today with the increase in specific health claims, particularly with functional foods and nutriceuticals, there is a need to carefully monitor any changes that are occurring in acceptance, both by the consumer and the society. There may arise disagreements between individual nutritionists and health professionals on the validity of some health claims as more research results become available. This may become serious and the food regulators may ban a product or at least not allow claims.
Safety is of course a factor which needs to be checked very carefully. Obviously, it will have been considered during the development, but it must be monitored in the distribution system, in the retail outlets and in the home. If there are any doubts, then the product has to be withdrawn. Any adverse effects of the product on the consumers' health will 'kill' a new product, perhaps forever. In the USA, a product liability study is especially important in new product development.
7.8.4 Environment: physical, social and legal
These include assessments of the effects on the physical, social and legal environments. Are there waste/effluent problems which are affecting the community? Is the new technology in some way threatening to the society, for example biotechnology at the present time? Are the products obeying the legal regulations and known cultural or religious taboos for foods, for environment, for the geographic area? These especially must be monitored when launching in an overseas country with which the company is not very familiar.
The wastes are not only the wastes from the production facilities but the waste occurring in the distribution and also with the consumers. Packaging is a waste area which causes controversy and there are regulations in some countries to control it. Another type of waste today is ‘energy’ – some supermarkets may view foods which are transported over long distances as wasteful.
‘Technology’ may cause suspicions about the product, especially if this is a new technology which the consumers and the society do not have a great deal of knowledge. Genetically designed products may be accepted in some countries and be banned in others.
7.8.5 Customer response
The most basic analysis is to study the consumers and customers’ responses as the acceptability is what will make this a long-term product or just a ‘one day wonder’. In the case of industrial and food service products, the service as well as the product has to be studied. Who are buying the product? How much are they buying? Are they re-buying once, two, three times? What is the interval between re-buying – a week, a month, a year? These are the important demand questions to ask so that one can predict future sales. But it is useful to know which customers are migrating to the new product and what are the products that the new product is replacing,
Especially with an innovative product, it is important to survey the consumers and discover what are the product attributes and benefits that have caused them to buy the product and if the product delivered their expectations in cooking, serving and eating. Was there anything that they disliked about the product? What improvements would they like to see in the product? How does this product compare with other products they have bought? eaten?
It is useful to know how the consumer heard about the product – advertising, in-store tasting or from a friend - so that the communication can be improved and made more noticeable and attractive.
Such an evaluation includes how the product is affecting the total product mix or the category product mix, the product's relationship to the other new product introductions, its relationship to the company image and the effect on strategic planning. Any launching difficulties or problems should be studied and the method used to overcome then recorded for future use.
An important consideration for the company is the future for the product - is it to become a long-term member of the product mix? Will it be either an important member giving a large share of the profits or only a minor product as regards sales but useful for marketing and maybe filling production capacity?
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