By Joe Bailey, Food and Beverage Product Lifecycle Management Subject Matter Expert.
Effective strategies for new product launches and product line extensions in the food and beverage industry are essential for not only building product sales and gross margin, but also long-term growth and profitability.
Ask yourself though, if my customer saw the steps I follow for a new product launch or extension would they find value in it and be willing to pay for it? You might say, if the customer is willing to buy my product, isn’t that enough? Well, you definitely need the customer to buy your product, but the steps you are following may not be the most effective way to meet your customer needs while improving your bottom and top line. A lot of times there is waste in the process that if avoided can help companies realize strategic advantages.
Here are some lessons learned and recommendations to improve your product launch strategies:
1. Identify and understand the problem statement your product solves.
Questions to ask yourself:
- Why is this problem worth working on considering things such as how big is this market?
- What margins can I achieve and what barriers to entry exist?
After answering these questions, document and make the problem statement clear and available to all project team members and stakeholders.
2. Start with the end in mind seeing the product in the shoes of the end customer. Set clear requirements, ensuring the right players are involved early on to prevent rework & risks.
For example, it happens frequently in companies where regulatory and quality are brought into the process too late. This can surface missed opportunities and challenges that present roadblocks to product launch efforts and timing. Most roadblocks could have been easily avoided had a discussion taken place early on in discovery phases.
Consider the following:
A. What customer requirements exist?
Assemble user stories related to the problem statement and envision how the user would solve the problem using your product. These user stories should address topics such as:
What type of individual/company want this product?
How does the product benefit the end user?
What value do they find in my product?
What channels are those customers located in and where are they spending their time?
Why will the customer want to purchase my product over competitor products?
Does the customer have a do not use list (i.e. artificial colors, ingredients, etc.)
Are there allergen free requirements?
Does the customer require certain claims and certifications? It is not always clear the impact claims and certifications has on daily operations. These can take time and resources so it is important to understand timelines as early as possible and plan accordingly.
B. What internal constraints exist?
What are my material lead times? Understand if any market conditions are impacting them. Material Shortages due to weather, political or other reasons can cause lead times to be significantly longer. Be aware of the external environment and risks related to it.
How complex is the product to manufacture impacting operations and gross margins? Is the added complexity worth the sales and profit that you are getting?
Do specification and testing requirements cause operational inefficiencies? For example, if the new product requires new tests or unique testing frequencies from other products on the same production line how does that impact training and standard operating procedures such as when I grab my product samples?
How does your new product impact allergen cleaning and planning for production?
What impact does it have to food safety and quality requirements? Are new suppliers and/or new supplier locations needing to be approved?
C. What regulatory requirements exist?
Which country is the product going to?
How does that impact label requirements/approvals?
Do I meet production requirements? For example, if I use an “e -“ mark in a product for the European Union does it comply with regulation on volume or weight and the measuring methods for the product?
What food safety requirements are required for the market?
The more you understand up front the better you will be in estimating and planning a successful product launch.
3. Be willing to question your go-to-market strategy and think outside the box on what you can do better.
Ask yourself: Is this the most effective way to do it? I bet you would be surprised how much your business can save money, gain flexibility and a strategic advantage with a willingness to question the status quo and work collaboratively across departments.
I was a project manager on the implementation of a new PLM system and its interaction with an ERP system. Most of the new product launch system effort was happening in the PLM system and varied in timing from weeks to several months depending on a variety of factors.
Once all PLM process steps were complete and we were ready to manufacture and sell a new product, each new product needed to be transferred to our ERP system and have additional information added by multiple departments. Initially the ERP additional setup steps were taking on average 24 days per product. The executive leadership team discussed and determined they needed the ERP setup steps on a new product to take on average 2 days or less. Initially going from 24 to 2 seemed impossible, but sometimes working together and thinking outside the box impossible becomes reality. We assembled a kaizen team with stakeholder representatives from across the company. As a result the ERP process went down to 6 days in a matter of weeks and within two years on average down to less than 2 days. In fact the process was so flexible that in an emergency we could have the new product setup in our ERP system within an hour involving multiple functions.
4. Implement a SKU rationalization process for long–term business success.
- What are your underperforming products in key areas such as sales and margins?
- Do you have products creating unintended operational inefficiencies not outweighed by product revenue and margins?
- Do you have forecasted product sales? Are industry trends negatively impacting sales?
- What are your write-off costs and how can I limit them? Are there opportunities to use materials from discontinued products in other products?
- What frequency should you do SKU rationalization?
Develop consistent best practices across your company. This can streamline training and reporting for departments impacted. Are you consistent in how customers and internal departments are communicated to on discontinued products and is there consistency on how internal departments communicate to customers about discontinued products?
5. Understand your KPIs and how they are impacted at each product launch stage.
Are you focused on the right things to impact the metrics? This requires you to understand where you are at today and how are you going to get to where you and your customer needs your product to be. It is also critical to understand if your KPIs align with organization and customer objectives.
It is best practice with new product launches to do a retrospective and monitor for the goals that were set whether or not the product continues to meet expectations. If the answer is no or yes try to understand why to see if you can take any lessons learned into other product launches. It is always good, if there is time, to do a lessons learned with cross-functional team members throughout the product development and commercialization process to ensure you learn from experiences and get better over time.
Overall, understand who your customer is and what they are willing to pay for. Don’t be afraid to question the status quo and how it could be improved in your go-to-market strategies while delivering a successful product launch.
Contact us if you have questions and want to learn more. We would love to partner with you to improve your product launch strategies.
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