Fridgeman's FridgeMaster Product Report

Preface

On the occasion of the module ENA7AD a product report had to be written by every single student. The aim was to reflect upon important questions that occur when a new product has to be introduced into an existing or new market in order to fulfil certain needs or wants. A lot of difficulties have to be faced which might arise from the macroenvironment, from the competitors on the market, the distribution channels or even from problems within the company which wants to launch the new product. Due to the fact that everyday life in a company is very complex it was not possible to consider all factors that might offer opportunities or threats to the new product idea. This is why the author had to concentrate on elementary aspects in product development, product definition, the macro- and microenvironment and the marketing-mix which includes the very important elements of the promotion-mix. In addition to this he tried to present more practical details to the reader which might also be of interest. Nevertheless he paid permanent attention not to depict any theoretical aspects that could turn out to be of no direct use. However all necessary information should be included in this report in order to reach a successful product launch with the help of motivated and enthusiastic people. At least it should be a good basis to discuss further aspects of this concrete product launch.

The author would like to thank especially Mr. Cuypers who tries to motivate every student in order to become a self-confident person within the group of successful marketers in the future. Although this will not work every time he gives his very best - this is why he deserves a big thank-you. In addition to Mr.Cuypers the author would also like to thank Miss Bause and Mrs. Riemer who provided very good lessons concerning the principles of marketing this year and last year.

Moreover a lot of thanks to everybody who gave his or her valuable information or opinion concerning this report!

Table of contents

  Summary page  3

Introduction  page  4

Chapter 1  : product development process  

1.1  Why we need a new product - the market situation page  5

1.2  Generating ideas for a new product page  5

1.3  Product features page  7

1.4  Idea screening page  8

1.5  How we prevented widespread mistakes in new product development page  9

1.6  Results from our customer focus group page  10

1.7  How our new fridge fulfils wishes page  11

1.8  A short description of the target group(s) page  11

Chapter 2  : Fridgeman's macroenvironment  

2.1  Introduction into the German macroenvironment page  13

2.2  The demographic environment page  13

2.3  The economic environment page  14

2.4  The natural environment page  14

2.5  The technological environment page  15

2.6  The political environment page  16

2.7  The cultural environment page  16

Chapter 3  : Market and Competition page  20

Chapter 4  : Marketing-mix  

4.1  The product and the product levels page  22

4.1.1  The core product page  22

4.1.2  The actual product page  22

4.1.3  The augmented product page  24

4.2  Pricing and placing page  25

4.3  Promotion-mix  

4.3.1  Introduction page  27

4.3.2  Advertising page  28

4.3.3  Personal selling page  31

4.3.4  Sales promotion page  32

4.3.5  Public relations page  32

Chapter 5  : Conclusions page  33

IV

Summary

Our company "Fridgeman" has been on the market for refrigerators a very long time. In the last few years a strong competition grew up that made us think about a new product idea in order to prevent any price wars that would possibly have killed our firm.

In a meeting that included members of all different departments of our company we developed the idea of a high-tech refrigerator with a lot of automatic functions that make its user able to save time and money in everyday life. For instance it will be able to order all needs for foods automatically at the next supermarket so that the user just has to pick up a basket full of food when he or she drives home. Moreover it saves energy, has a huge recipes database included and can make its users suggestions for healthy meals they particularly need.

We defined careerists and busy single households to be our main target group but even everyone who wants to save time or who does not have the motivation to do shopping will be in our focus.

The product does not have to face any competition when it is introduced into a brand-new market segment and we will keep a technological lead of one year towards our competitors. This will enable us to come up with new innovations every time the other firms have copied our old product features. Moreover we offer several services to support every customer in case that there is a malfunction of the fridge.

The macroenvironmental forces offer a lot of opportunities to us especially the category of the cultural environment which also includes Faith Popcorn's latest trends. For example the development towards more single households and more people who withdraw into their homes to mind the "big ugly world" offers a great opportunity to us. There is no actual danger that will make the launch of our product very risky due to the fact that we keep control of our production and distribution costs and that we are very experienced in manufacturing fridges.

The "FridgeMaster" will underline our high quality level because our company offers its products on a premium market. Nevertheless our prices are affordable for a broad range of people even for our new product. The standard version will cost 1399 DM within the first 6-8 weeks and after this period 1599 DM have to be paid. A product variation which is smaller and runs on castors will cost 1449 DM.

With the launch of the product we concentrated on a new distribution channel: besides the specialised trade the "FridgeMaster" will be sold in big "Metro" supermarkets. An alliance between our company and the Metro has been established and this cooperation seems to become very successful.

In order to reach our potential customers we have developed a thought out promotion-mix. We will use several media, e.g. television, radio and newspapers to give first impulses and more detailed information to our target group. Special trained salespeople will answer any questions our customers might have. We are going to win new customers by a rewarding system if an existing customer canvasses new customers and as mentioned above we will offer an introductory price. Furthermore our new innovation will be described in several magazines which concentrate on lifestyle or even technology. We are hopefully that people will talk about the "FridgeMaster" and therefore a positive "mouth-to-mouth" propaganda will start.

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Introduction

This report deals with the introduction of a new product into a new market segment. A medium-sized company has to face strong competition in their old market and therefore the management decides to escape from the risk of price wars by developing an innovative product. This product should fulfil at least two main functions: to save the company by providing it a technological lead and to amaze and fully satisfy its customers. Compared to a lot of other product launches several factors and aspects have to be considered. Opportunities and threats occur from all sides which will strongly influence the success the market introduction will have.

The aim of this report is to depict how the management tries to prevent mistakes that are often made and it should even be a kind of guide for other product launches.

The report is structured in a logical way: first the product development process is being described. Here it is shown why no company's management should lose its mind into blind enthusiasm without thinking about hard facts, e.g. costs and expected profit margins. Moreover the target group and its needs or wants have to be defined exactly and a close description of the new product's benefits and features has to be given. Secondly the management has to focus on developments outside their well-known area: the forces of the macroenvironment offer several opportunities but also a lot of threats. In addition to this the current market situation has to be analysed.

The following chapters describe the marketing-mix. Chapter number three deals with the product itself: the product is being divided into three levels and thereby many questions concerning the brand name, the quality or the packaging have to be answered. The fourth chapter provides the most important facts about the pricing and placing strategy: where does the company want to sell the product and at which price?

The fifth part of the report concentrates on the promotion-mix: the company has to make its new product known to the public and potential customers. This can be done by many possible ways which combine the means of advertising, sales promotion, personal selling or public relations. The last chapter gives a summary about the most important aspects that have been mentioned in the previous chapters in order to gain a good overview about the most important results.

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Chapter 1: product development process

1.1 Why we need a new product - the market situation

Our company "Fridgeman" has been in the German market for household appliance since the late 1970s when the first energy-saving refrigerators came up. Since then we produced highquality, ecologically friendly refrigerators in the upper price ranges. Today we are the technological market leader and keep 10% share of the market, which is equivalent to the third market position. We employ about 500 people in our two factories in the areas of Munich and Cologne. Our refrigerators are being sold mainly by the specialised trade.

A lot of competitors are in the market and a rising amount of companies from other European countries and even Japan (e.g. Mitsubishi, Daewoo) want to get into it in order to sell their products to the German consumers. This leads to decreasing market shares and lowers financial returns for each company. There is a hard price fight among the competitors, because the products themselves are not very different from each other. We are still in technological leadership but only with a small lead, because the features of the refrigerators are nearly identical, e.g. in power consumption and isolation. The danger of full substitution towards the other products is very high for our company so that we have to fear losses concerning our market share and profits in the near future.

This is why we have to be different from our competitors in the eye of the consumer. "Fridgeman" can only escape from the current situation if we offer a brand-new product within our main market, because our company knows everything about refrigerators and should not get lost into a totally different business.

1.2 Generating ideas for a new product

Our management team consists of the head manager, the marketing manager and the R&D (research and development) manager. We did not know exactly which new product we should put on the market, because there was no concrete product idea.

We decided to invite a group of 20 employees, who had been selected representatively for several departments of our company (e.g. development, production and administration) in order to exchange thoughts about new product ideas. Salesmen from the specialised trade, who have a lot of contacts to our customers, also joined our conference. Experiences in the past have shown that 55% of new product ideas and improvements of existing products were contributed by employees. We were quite confident that we could receive some good ideas from this meeting - perhaps even a solution to our problem could occur.

We considered an extensive market research not to be useful at this point because our idea generating technique "synectics" made it possible for everybody to utter his thoughts to the others in the meeting. It would even not have mattered if we had invited people who did not know our business at all. So our decision was reasonable, because we did not have the foggiest idea what to develop. It is not possible to steer a person’s thoughts into certain directions of your interest by using a conventional questionnaire. Furthermore our method is quite inexpensive and does not cost too much time. If this would not have led to a solution we would have invited other employees and business partners or we would have asked people spontaneously on the street or in supermarkets on a small scale.

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As we have already mentioned above we used the "synectics" technique for generating ideas. Our subject of discussion was introduced by this question: "What can make life easier for me at home?" The intention was to start from a quite general theme and to proceed towards our special problem: how to be different from the competitors in the eye of the consumer and how to get new market shares. This procedure would be easier than just asking "We need a new product with which we can escape from competition. Please think about it. You have one hour to tell us your solutions." That was why we did not want to create a tense atmosphere but a relaxed exchange of thoughts, which would finally lead to creativity. Moreover we did not want to make our employees and partners feel insecure about their future. Instead of this we would wait for a suitable chance in this discussion in order to admit that we were searching for a new product idea.

We considered two hours to be enough time for this meeting. Secretly we hoped to get useful results within the first hour after everybody had introduced himself / herself. Each member of the meeting was asked to give his / her name and position in the company. Moreover he / she was supposed to tell the others how long he / she had been working for "Fridgeman”. This introduction turned out to be a good method in order to break the ice between the persons present, especially to avoid hierarchical thinking or any fears of the workers to express their opinion towards the management. In this pleasant atmosphere we began to ask everybody to describe what mostly disturbed his / her everyday life.

In particular we received the following answers: "I have to get up so early in the morning", "the traffic is very heavy", "I can not enjoy my breaks, because I’m strained most of the time", "a few colleagues are always in bad mood" and "when I get home a lot of housework awaits me". This last statement aroused our attention and we directed the topic of discussion towards the situation at home after work. The employees said that the laundry had to be made, the lawn had to be mown and the windows had to be cleaned. Moreover they were forced to do their shopping just before the shops were closing or to go shopping one time a week if they did not have the chance to do this on the other days (perhaps the household members were employed too and they wanted to do shopping together). This happened quite often Friday evening within big crowds and that was considered to be an annoying start into a nice weekend. At his point there was a first "click" in the management’s mind. So we asked if somebody had an idea how to avoid this stressful situations. Our concrete question was: "By which means could you avoid to be under shopping stress?"

A lot of answers concerning product concepts were given, for example: let the food and other goods be fetched and delivered by a delivery service. This concept was regarded to be quite expensive and of no use if the service was not able to get directly into the house when nobody was at home. Handing over the door keys to a foreign service required a lot of trust, so this idea was rejected rather quickly. The second concept was to take the whole family into a restaurant, but the costs would have killed the household budget. Concept number three was proposed by a member of the management who thought it should be possible to do shopping on other weekdays or to wait until the "closing time law" was abrogated. This concept was turned down especially by the employees of the production department, who have no flexible working hours. They added that the abrogation of the law could take about two or three years but the problem was supposed to be solved now. The following concept planned not to do shopping in supermarkets or malls but in several shops, e.g. at the greengrocer’s, the butcher’s and the baker’s shop. Most members of the meeting agreed that this would also mean a waste of time although stress could be reduced a little bit. The last concept was to buy only one or two times a month which meant that a huge shopping had to be done. This would lead to a disadvantage concerning the lack of fresh and nutritious food, especially for children, and make it necessary to go shopping for everything that can not be stored at home for more than two weeks. Some of the participants were at a loss, because they did never think about

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alternatives. They said that they understand the problem but they did not know anything else than full supermarkets at the end of a working day.

The most important remark was made by an employee who was only kidding: "A fridge which is never empty but filled with good food would be best." In this moment a new product was born. A high-tech refrigerator for people who have only limited time and nearly no interest in shopping their daily goods. But if they have to buy their food they want to know exactly what they can get where - and at which price - in order to prepare several meals.

1.3 Product features

In the sequel we talked about some of the features such a fridge should offer to its users. We focused on the following functions (product image): the refrigerator should be able to...

...control the contents inside: what food is in the fridge and how much? How many days or weeks are left until it loses quality and goes off? The fridge will be able to receive these information by the barcodes which are printed on the packages. ...know the average consumption of every product and is able to propose which package size should be chosen in the supermarket. In addition to this it takes into consideration what you should consume before you go on holiday in order to empty the fridge until only goods are left which keep their quality quite long. ...offer a huge database with hundreds of cooking recipes, starting with plain snacks which take only two minutes to be prepared by the user, ending with complicated recipes, e.g. how to prepare goose. The user can select several ingredients using various criterion in order to find a meal that he can prepare right now with the things which are already in the fridge. The fridge can tell him / her what has to be bought in addition to the existing products if certain meals should be prepared. And there are nearly unlimited possibilities how to combine the ingredients: for example the fridge shows recipes that need ingredients whose qualities are nearly expired. It can offer recipes with ingredients that all family members like to eat or even a cocktail database for adults.

...know the preferences of all its users: it knows which meals household members like or dislike. It is able to create dietary schedules and plans which fulfil the daily amounts of nutrient each person needs. This preferences and options can be changed any time.

...give you instructions for each step when cooking. It can be connected to the stove in order to control temperatures and cooking times (this could be an important step to a multifunctional kitchen - perhaps a chance for our company!). Every household member should be made able to prepare meals instead of waiting for other members to cook after they came home from a hard working day. Once again this makes life easier.

...communicate with your next supermarket. One of the new product’s main features is to transmit data which contain your needs for food. The supermarket staff will collect all goods which should be added to the fridge. The fridge will send you a message to your mobile phone that informs you where you can fetch the basket with the products, e.g. when you drive home in the evening.

...offer its users easy operation. An easy and quick use will be as important as a rare need for servicing in order not to limit its users’ valuable time. The operating instructions have to be quickly understandable for everybody. ...limit household costs by very low energy consumption. The fridge can control and vary the temperature if it knows that the goods inside do not need intensive cooling.

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