3.5.3 Industrial food products and services

There are two different groups in industrial business-to-business relationships - the industrial buyer (food processor or manufacturer) who employs raw materials and food ingredients in manufacturing a food product, and the industrial supplier of raw materials or ingredients (farmers, primary processors, ingredients processors). There is a great variety of buyers and suppliers, and also a wide variety of products. The product development varies from a branded coffee for one-person coffee bars, which is similar to consumer product development, to the highly specific ingredient for one large multinational food manufacturer. But there are some general factors to consider in developing new industrial products (Schaffner et al., 1998).

The types of products
These could be raw materials from farm and sea, specialised commodities, bulk industrial products, partially processed materials, processed products, processed speciality products.

The industrial food-product characteristics
The industrial product can be divided into the tangible product, the uses of the product and the services that are marketed with the product. Some important features of industrial food products are shown in Fig. 3.18.

Fig. 3.18 The industrial food product (Source: From Schaffner, Schroder and Earle, Food Marketing: An International Perspective, © 1998, by permission of the McGraw- Hill Companies).

There is a tangible product that has specific composition, microbiological levels, physical properties and sensory properties, and there is the customer's product which includes the qualities directly related to the buyer - their uses and also the quality of the derived product made from the raw materials, usually the consumer product. In the customer's product there are also special features, quality and specifications, packaging and branding. Services included implicitly or explicitly with the industrial product can be reliability, safety, availability and replacement, technical information and help, delivery and credit. The service product can also include some or all of the features in the service augmentation and marketing support shown in Fig. 3.15. Products are not just a physical entity but an array of economic, technical and personal relationships between buyer and seller.

Industrial buyers
Industrial buyers can be grouped together as market segments. The buying company can be buying directly for their own use or for reselling to the users. The users can be segmented as shown in Table 3.8.


Table 3.8 Methods for segmenting industrial buyers

Stage in the food chain: primary processor, secondary processor, caterer, retailer. Type of processing: for example baking, freezing, dry mixing, sterilisation. End consumer products: for example snack foods, takeaways, breakfast foods. Size: number of employees, amount of capital, turnover per year, production volume. Technical knowledge and skills: high technology, average technology, craft. Usage rate: large, medium, low; regular, variable. Type of purchaser: new, old, repeat, contract, casual. Organisational structure: private or multinational company, farmers' cooperative.

Think Break A large oils and fats ingredient company plans to develop a new pastry margarine product and is trying to identify a target market and new products. Possible target markets are pie manufacturers, frozen pastry manufacturers, croissant manufacturers, biscuit manufacturers, cakeshops, small retail bakers, supermarket bakeries and hotel patisseries. 1. Choose some suitable segmentation factors from Table 3.8 and assign     the target markets into the segments. Select what you think are the     two most suitable segments for a new pastry margarine product. 2. Identify possible new products, both incremental and innovations, for     each segment. 3. Evaluate these new products and select the two most promising ideas. 4. Identify the most important 'customers' to include in the design process     for these two new product ideas. 5. What tangible product qualities would they need? 6. What services would they need? 7. Sketch the complete product concepts for the two products.

The needs and wants of the buyers
All buyers are interested in firstly the ease of using the ingredient in the process and secondly the cost and quality of the final products. Although the buying action is logically based on these needs, there are still some psychological reasons for buying. Basic needs and wants of the industrial buyer are shown in Table 3.9.


Table 3.9 Needs and wants of the industrial buyer

Availability Ease of delivery Ease of storage Ease of ordering Use Convenience in processing Uniform, stable, processing Technical simplicity in processing Reduced risks Safety Financial losses Product failure Staff failure Equipment failure Costs Costs, discounts Value Payment method Payment time Knowledge Technical information Formulations New and improved consumer products Help in processing Information on derived products Marketing help with derived product Outcome Production of uniform, acceptable products Satisfactory sales and profits Competitive advantage Few equipment problems Efficient staff use

Actual needs and wants do vary with the different people in the buyer's company.

For example:

     Production personnel - delivery time, reliability in supply, constant quality,
        ease in processing.

     Product development personnel - ease and shorter time for development,
        final product qualities.

     Quality assurance personnel - raw material specifications, ISO
        standards, narrow range of quality variation.

     Purchasing personnel - reliability of supply, price, size of delivery,
        regular deliveries.

In looking at these needs, one can see that there is an emphasis on service as well as the product, and this reinforces the need to develop the service with the product. In developing industrial products, there is a need to identify the important people in the buying company as regards this type of ingredient and to find from them their needs and wants in the new ingredient, and decide how their needs and wants relate to the buying company's critical needs. In other words, the product development team in the supplier's company needs to understand the buying company's overall needs in product and services, and also the needs and wants of some individuals.

The PD Process
The PD Process is therefore a combination of product and service development. In the past, these have been done in sequence, completing the product development process, and then starting the service development. This leads to an increased time for development and also sometimes to a lack of harmony between the product and the service. In Fig. 3.19, there is an attempt to combine the product and service development processes to give an integrated product and service.

Fig. 3.19 The product/service development process for industrial products
(- click to enlarge).

The integrated product/service development process is particularly useful when new products are being introduced with a new service process and a new service system. The service system may already be in place and a new product and a new service process will be developed. This still means integration of the two development systems.

De Brentani (1995) has suggested three successful scenarios for industrial service development:

     Customised expert service: expert capabilities and resources
        providing customers with customised and high-quality service.

     Planned pioneering venture: pioneering new service ventures aimed at
        attractive, high-volume markets.

     Improved service experience: enhanced speed, good service quality
        and reliability.

Think Break The sales office of a large flour miller has just received a bread-baking mix from the production department. Recently there was a marked increase in the number of small hot-bread shops and the salespeople think that these small bakers might be a good market for this product. A salesperson knows a small baker and takes a bag of the mix to him. The baker promises to try it and in a day or two the salesperson has a telephone call from the baker to say that the product was a failure - there were difficulties in processing and the final loaf was small and hard. 1. How might the salesperson have handled this better? 2. How did the company go wrong in its industrial product development     process? 3. Suggest a product/service integrated product development process for     this company to ensure more successful new industrial products.