Developing a New Product Or Service
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This assignment concentrates on the development of new flavour Yakult in the UK market. As a probiotic drink, Yakult is well-recognised by consumers. However, when competing with competitors, such as Actimel and Vitality, the weakness of the company is that the product line is relatively weak. After carefully screening the new product ideas, fruit flavours Yakult can be the most profitable product to develop. The new product not only can improve digestive system, but can also improve the vitamins intake because the fruit element. In addition, the Yakult lady system, which is free delivery service, can be developed to improve brand reputation and communicate with consumer directly. The new Yakult should be positioned as a tasty health-enhancing drink, which can attract more potential consumers, and increase sales volumes. In addition, the target consumers are woman between 25-49 years old, who pay more attention health diet and also are the main family shoppers. Market testing is an important step for new product development; the drink can be sold in certain cities before entire launching to collect consumers’ opinions. The best launching time is summer, and the company should pay more attention to promotion and advertising.
The functional drink market is growing rapidly in recent years. More and more companies try to introduce new kind of product to enlarge market share. Yakult, which is the first manufacturer to sell probiotic drink, face fierce competition in the UK market. This report will focuson the new product development for Yakult. After choosing the most profitable idea, the new product attributes and positioning will be analysed. Then, the business analysis of new product can be implemented, including competitor analysis and sales prediction.
2. Idea generation and screening
New product development is an innovation activity to bring the new products to the market. Moreover, idea generation and idea screening arethe key stone of the new product development process (Ulrich and Eppinger, 2008). 2.1 Idea generation
Idea generation is a continuous systematic search for new product opportunities whichinvolves generatingsources of new ideas and methods(Brooke and Mills, 2003). Ideas for new products can be obtained from basic research by understanding consumer trends and analyzingcompetitors.
Yakult dominated the functional drinkmarket for the first few years, but other similar brands are coming up fast frombehind. Huge spending and more aggressive and more consumer-oriented competitors(e.g. Actimel from Danone and Vitality from Muller) havepushed Yakult into thethird place. According to figures from market research company Euromonitor, Actimel took 40% in 2005; Muller took 14.5% and Yakult 10%of the value ofthe UK functional drinkmarket (Marketing, 2010).Yakult comes in one-flavour and one-size bottles as well as in one colour. However, different brands of functional drink haveunique packaging and multiple tastes choices, which is more flexible to consumers.Today, consumers are more concerned withfruit flavourhealth drinks, which can bring more Vitamins to the body. Consequently,taking all these aspects into account,the ideaof generating anew productto expend product line is necessary for Yakult’sfuture development.
2.2 Idea screening
The object of idea screening is to eliminate unsuitable, poor, unattractive ideas, and those ideas are weeded out from the future actions(Robert, 1993). The checklist can be used to evaluate potential ideas; the new-product attributes are considered most important and each idea is compared with those attributes based on these criteria. For Yakult, this is not a completely new area; the functional drink has been developed for more than 10 years(Yakult, 2010). Therefore, being more successful than other existing competitors is the reason behind developing the new product. There are two ideas which need to be screened.
The first one is to change the flavour of the product by adding different fruit tastes. The second one is to change the product packaging, more specifically, to make a bigbottle. Facing the rapid market growth and strong competitive pressure, both these changes can improve the strength of the company, and fit its long term development. However, financial requirements – such as extra manufacturing cost, promotion spending and many other sectors – can be a risk that should be consider. The important reason why the large bottle cannot be developed is the time constraint. According to the experts, the probiotic will disappear if consumers cannot drink all the bottle of Yakult(Yakult, 2011). Moreover, big bottles may require the company to purchase new packaging machines, which will cost more than developing new flavours. Thus, new flavours may be more profitable and less risky for the company.
3. Product attributes and service
Table 1 Features and Benefits of the New Yakult
Probiotic drink| Health, digestive product|
Fruity flavours| Natural, tasty|
Delivery service| Convenience, direct communication|
Alan Jelly, Yakult’s UK marketing director said:” Probiotics allowed consumers to take simple, positive steps each day to improving their overall health, and specifically their digestive health” (Aroq, 2009). Because of the combination with Probiotics and Vitamins, the new product not only contributes to people digestive system, which is the basic function of the drink, but can also improve the overall health in different aspects. By improving the digestive system to build a good metabolism function of the body that can make people seems more beautiful. Along with plenty of Vitamins in the fruit to maintain the healthy skin and silk hair; it is a very excited benefit to women who care about appearances. Another feature is to fight with disease, avoid future illness, and boost physical and mental strength, people who drink the product every day for the long term; it will show the significant positives effects on the body health. The different needs can be satisfied by the one bottle of Yakult, which is the expected product in consumers’ mind, according to the total product concept (Figure 1).
(Source:Masterson and Pickton, 2010)
Figure 1: The Total Product Concept
In addition, the company can offer more convenient service to consumers. The Yakult lady system, which is a door-to-door delivery service, is the main distribution channel in Japan(Yakult, 2011). This service make the manufacturer communicate with consumers directly and deeply. Therefore, this service should be introduced into the UK market. To sum up, through updating the product and providing nice service, the product can offer healthy lifestyle and convenience at the same time. The new product and new service will make the brand improve product level to augmented product (value-added product), which means more customer loyalty and better reputation.
4. Target Market
Philip Kotler defined the target market is the part of the qualified available market that the company decides to pursue(Kotler, et al, 2009). The consideration of the senior consumer group which have illnesses associated with digestive system. The age over 65-year-old demographic is being increasingly targeted by the functional drinks. In addition, younger consumers are also purchasing functional drink more frequently than before. Functional drink is purchased to improve energy levels and to help support the body’s immune system. New product with extra fruit nutrition may fit their needs appropriately.
Finally, child is also a potential group of consumer for this product. Children always like fruit flavour drinks, so that the new Yakult can draw their attention. Moreover, the probiotics and Vitamins can promote children’s growth with a strong constitution. Therefore, Yakult is a product for everybody.However, the main target consumers that promotion concentrates on are woman between 25 and 49 years old. These group women pay more attention to health diet. They care more about appearance and body shape. According to the research, almost 25 % female purchase food or drink with health benefits regularly(Mintel, 2011). Healthy and tasty Yakult will be more attractive for them. More importantly, this group of women is the major household shopper for family. Their shopping can cover these target consumer mentioned above. Therefore, family concept should be involved into the new product’ packaging and marketing process.
Figure 2: Trends in purchase of food and drink with added benefits
5. Concept Testing
Concept testing presents the consumer with the proposed product and measures attitudes and intentions at this early stage of development(Kahn,2006). Concept testing is a quick and inexpensive way of measuring consumer enthusiasm. Therefore, the new Yakult will ask a sample of potential customers what they think of the idea and the product. The company will prepare some questionnaires to investigate whether the consumers will accept the fruit flavour Yakult concept or not. The questionnaire should include some questions about the consumers’ preferences and the evaluation of the product or other consumer expectations and suggestions. Yakult has been establishing the strong research organization which is to support the technology of designing and manufacturing the product quickly and safely(Yakult, 2010). Finally, after gathering the information, the company will be able to improve the product due to the analysis of the above information. The company will make a clear and complex market strategy for the new product in relation to the result of the concept testing.
6. Business Analysis
(Source: Trott, 2008)
Figure3: The Ansoff Matrix
Successful companies treat NPD as a necessary strategy to make more profits. The Ansoff matrix identifies the new product development options based on two variables: market opportunity and product opportunity. Each new product development can be seen as one of the four types. The new product of Yakult belongs to the product development strategy. The fruity flavour can be a brand extension of the original product. Yakult is a worldwide famous brand. Launching the new product under the brand name not only can attract more new consumers and make more profits, but can also reduce the risk of introducing a brand-new product. The success of new product development highly relies on the combination between the external environment and the company’s internal development. Therefore, identifying business opportunities and threats in the marketplace and confirming the firm’s strengths and weaknesses can be the essential steps to do business, as shown in the SWOT analysis below. Table 2 SWOT Analysis of Yakult
Strengths * Healthy: probiotic product * Long history: since 1966 * Good quality * Global company: Europe, Asia, America * Focused on R&D operation| Weaknesses * More expensive than the same kind of product * Low variety of flavour * Easy packing| Opportunities * Health problems: cancer * Concern with the diet of children * Quick development of functional drink market| Threats * Many competitors: Muller, DANONE * More different kinds of drinks to choose| (Adapted from: Palmer, 2009) According to the analysis, one of the major weaknesses is the low variety of flavour. In the UK market, the company just sell two types of Yakult—original and light. However, other brands have many different product flavoursand update their products continually. Therefore, introducing the new product can be the best way to expand its market and help the company compete with other competitors.
7. Product Positioning
Product positioning is the product’s image and identity in target consumers’minds and the perception of consumers playing an essential role in the buying decision (Ferrell and Hartline, 2010). Thus, marketers need to know how customers think about the product in the market. As a probiotics drink, Yakult is positioned as a health-enhancing drink. The company always deliver the concept that the product can help improve the digestive system and beneficial bacteria are good tofor the body health. The strategy was successful during the early stage of the product development. However, because more and more competitors start to copy the best-selling drink and improve it, Yakult’s positioning seems less attractive than other similar kinds of products. The problem is that the positioning only concentrates on the science involved in the product, not its taste. This problem and its higher price may create distance between consumers and the brand. Hence, the positioning of the new product should reinforce the expertise concept of the product; moreover, the better and more varied tastes also should be emphasised to consumers. Less
Low quality (low health function)
High quality (high health function)
Figure 4: Product Positioning of Yakult
“Positioning issues are especially important when competitors in a market appear to be very similar”(Perreault and McCarthy, 2006). As the pioneer of probiotics drinks, the high product quality is well recognised by consumers. The target of the new positioning is to improve the image of Yakult from a health-enhancing drink to a tasty health-enhancing drink. Thus, its high quality and good flavours will make the product overstep other brands, to become the best choice in consumers’ minds. 7.1 Branding
A successful brand gives the product a specific image, and differentiates it from other competitors. Abrand-distinguishing strategy can illustrate product attributes and functions clearly and help the company achieve ideal market positioning in consumers’ minds. Yakult already has a distinctive brand name, which is well-recognised in more than 30 countries of the world. Therefore, the basic element of the logo should be kept. In addition, the attributes of the new product should be added to the name; the new Yakult can be called “Yakult plus” (Figure 5). It means the new product can offer more benefits than the original product. As regards its visual identity, the special shape of Yakult cannot be changed because it is already distinctive. The colour of the Yakult bottle should be associated with the fruitscolour since certain colours may remind consumers of the certain taste of a fruit (e.g. light red for strawberry flavour, light yellow for orange flavour). This branding strategy is a kind of extension of the original brand, maintaining the advantages of the basic product and highlighting the new features at the same time.
Figure5: The designed Logo for New Product
8. Product fit
The new product development can help Yakult achieveits mission, which is to bring health and happiness to people around the world throughthe benefits brought by research excellence in life sciences(Yakult, not dated).The advanced technology in microorganisms improves human health, and if the new product can be introduced successfully, consumers will feel more satisfied. More importantly, it also can bring significant benefits to the company itself. Firstly, the new product will attract new consumers who did not like the taste of Yakult before, which will earn extra benefits. Secondly, competitive advantage will be enhanced through the variety of products. Comparing with its competitors, Yakult has a longer history in the functional drink industry, and its excellent quality and reputation make it the pioneer in this industry. The new product will stimulate sales and increase market share continually.
9. Competitor analysis and comparison
In the United Kingdom, the functional drink market is dominated by some multinational diary operators, including Danone, Müller, Nestle and Yakult. Except Yakult, all the brands have occupied the leading position in the yoghurt and yoghurt drink market, which means they already have good reputation and loyalty among consumers. Moreover, they also own strong financial power and use a mature supply chain. These great advantages help them enter the probiotic product market quickly and easily. This is the main reason why Yakult continually loses market share in the UK market as well. Yakult lies in the third position in the top of probiotic drink brands, following Actimel of Danone and Vitality of Müller (Jonathan, 2009). As the figure shows, the sales value of Yakult decreased by over 3% between 2008 and 2010, andActimel keeps the increasing trend and control over half of the UK market (Mintel, 2011).
Table 3: Three brands in the UK retail value sales of drinking yogurts, 2008-2010 | 2008£m| 2009£m| 2010£m| Change (%)|
Actimel (Danone) | 110| 116| 112| 1.7|
Vitality (Muller)| 34| 31| 25| -30.9|
Yakult| 26| 24| 23| -3.2|
(Source: Mintel 2011) In addition, it is important to notice that manufacturers pay more attention to scientific research, trying to launch new types of products to improve their competitive advantage. Actimel have more than 10 different flavours, and offer low-fat and fat-free yoghurt types. Various flavours and products are also provided by Vitality of Müller, including probiotic drinks and probiotic yoghurt. Comparing with the two leading brands, the product line of Yakult is relatively weak. It cannot meet different needs of consumers, which restricts the company to enlarge its target consumers. Therefore, the new product development is necessary because of the great pressure from competitors and consumers. 9.1 The Failure of Nestle—-LC1 Go!
Nestle is supposed to be a leading company in this market; however, its probiotic product—LC1 Go!, withdrew from the market less than 3 years ago. The direct reason is that its sales are still poor after 2 million pounds has been spent on TV advertising. Strong competitive pressures canbe another explanation for the product failure. Moreover, the deep reasons for this failure should be analysed. The huge amount of investment in research and promotion has led to an expensive retail price and an overemphasis on the product’s clinical functions, ignoring that the taste is not so good (Anon., 2003). In the end, the product is abandoned by consumers. This experience should be noticed by Yakult and the balance between positioning as a tasty drink and as a healthfunctional drink should be considered carefully. 10. Commercialization
When the new product launched in the market, the external competitive environment becomes a major factors affect its development. Therefore, the company is necessary to make anefficient market strategy to gain more competitive advantages(Rafinejad,2007). 10.1 Market Testing
Yakult will be using the focus group to interview the customers or introduce the new product at a trade show. It can alsoplace the product for sale in a specific area, for example, Yakult can sell its new product in major cities before entire launch, such as London or Birmingham, to collect consumers’ opinion and observe the market reaction. Furthermore, the performance of the proposed marketing plans and the actual consumer behaviour will be observed as these gives the company experience inmarketing the product before going to the great expense of full introduction.After the testing, the company is ready to place the product into the target market. 10.2 Lunching Time
The timing is a key issue for a company to introduce a new product. The time should consider the current market environment, consumer trend, company operation and many sectors to make the decision comprehensively. During these years, Yakult experiencing sales decline in the UK because of competitors pressures. Thecompany needs a new product to stimulate sales and encourage its market. Thus, the current market condition can be a right time for it. For specific time, since summer is fruit season and consumers are more willing to choose fruit element during this season. Therefore, summer can be the best time launching Yakult plus based on consumers’ perception. 10.3 Promotion
The marketing strategy of the new product should mainly concentrate on promotion, in order to keep the current consumers and attract more new consumers. It means the company should invest more money to advertising continually. The aim is mainly to create public awareness and develop interest about the new Yakult; moreover, the content of advertisements should highlight the updated feature—fruit flavours. New consumers who do not like the taste of original taste may be attracted by the new selling point. It is essential to show the concept that Yakult plus is updating product of original product. Then consumer’s perception will be that heath drink Yakult is becoming tasty now, which will encourage them to buy. In addition, different types of advertisements may be effective way. Such as bus ads or interesting posters. The most efficient way to promote is consumer recommendation; hence, activities like free try or buy one get one free should be organised. It can develop new consumers’ interest to try, which means the opportunity of recommendation to other and repeat buying will be improved. The distribution channel of the company is already mature, and can be used to the new product. Yakult lady system that mentioned above can be a good way to enhance communication with consumers. It also can improve reputation of the company. 10.4 Price and Predicted sales
The price of the new Yakult should keep the same level, which is 2.8 pounds for six little bottles, and then the price of each bottle is 42 pennies. The profit of each one may be 30 pennies. In 2011, 226 thousands of bottle Yakult were sold each day in the United Kingdom(Yakult, 2011).The new product is expected to encourage the sales volume over 400 thousands of bottles per day. For the detail sales forecast, the A-T-A-R model will be implemented. Almost 50% of the UK‘s people purchase functional drinks, so the buying units will be 31109381 (the half of the UK’s population). In addition, the percentage of aware consumer is 80%, and then the available consumers of them account for 50%. 30% of available consumers will actual purchase; one in five of them will have repeated buying. According to these predicted number, sales can be predicted. 31109381 Number of functional drink consumers
x 80% Percent awareness of the new Yakult
x 50% Percent of “aware” consumers who will try product x 30% Percent availability at retailers
x 20% Percent of consumers who will have repeat buying x 300number of units repeaters buy in a year
= 150000000 bottles
Profit= 150000000 x 0.3=£45 million
In conclusion, the sales will reach 416 bottles per day, and the year profit will achieve £4.5 million if the new product introduce into the market successfully. 11. Resource Requirements
The most important resource is development investment. The whole process of NPD needs strong financial support, especially on research process and promotion activities. Avariety of advertising may cost the company several million pounds. The essential resource the company needs for the new product is people who have expertise in fruit flavoured drinks. The recipe of the fruity Yakult needs a certain balance between fruit juice and Yakult, to make sure that its taste is better and its whole nutritional value is kept. As a result, fruit juice will be added to the production process. Mature companies have their own production line to produce fresh juice or concentrated juice, such as Muller. Since fruit flavours of Yakult isare still in the early development stage, and the company may not be sure about the consumers’ reaction about the new product, Yakult can purchase ingredients from other suppliers that have good quality ingredients and reputation.
12. Potential problem areas
The first potential problem is the new ingredient may influence the shelf life of the new Yakult. The company needs to apply technologies to make sure that the best period cannot be short. Moreover, since the probiotic is core feature consumers buy it, the fruit juice cannot have negative effect on the function of Yakult. These problems should be solved during the R&D area. Recently, the European Food Safety Authority (EFSA) rejects the health claims that Yakult promote on its advertisements, and the similar rejection also happened to Müller and Danone. As a result, the company cannot illustrate the medical function in advertisements and other promotion activities directly. Therefore, how to increase consumer awareness about Yakult may be a difficult problem the company should consider.
In conclusion, the strategy of introducing the new product should focuses on consumers’ needs. Yakult face difficult period in the probiotic drink market and launching the fruit-flavoured Yakult can be the best way to enhance competitive advantage. The most important target of the new product is to improve the image in consumers’ mind, telling consumers that Yakult can bring both health and happiness. Furthermore, the new product can bring more new consumers to the company, and stimulate the sales volume significantly.
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