Launching a new product into a developed market

A Cadbury Schweppes case study

Page 1: Introduction
Established markets generate intense competition during which new and innovative marketing strategies are required and new and existing products are developed. As a market develops, consumers become more experienced and discerning and look for more benefits from the products they choose. Although some organisations products may appear unchanged at this developed stage of a market, the more successful businesses re!work existing brands and continue to develop new ones to meet changing consumer needs. "he development of strong brands has always been a feature of the confectionery market

#age $% &ackground to the confectionery market

#er capita confectionery consumption in the '( is among the highest in the world, exceeded only by )reland and *enmark. Chocolate confectionery accounts for around +,of sales value in the '( market, with sales of sweets -sugar confectionery. at around /, per cent. 0istorically, the chocolate confectionery market has been characterised by the dominance of a number of well established brands, such as Cadbury s *airy 1ilk, 1ars &ar and (it (at. Although some brands en2oy a rich heritage, the key need in a busy and developed market sector is innovation, not 2ust of existing brands but also in the development of completely new brands. &rand!led innovation is a vital component in the growth of this market as it enables organisations to build competitive advantage. 3ver recent years, competitors in the chocolate market have made significant investments in new product development. )ndeed, over 45 per cent of volume sales in the last ten years have been generated by new products. 6or Cadbury, this figure is even higher, at $, per cent with new brand launches such as 7ispa 8old and "ime 3ut. "his case study focuses on the launch of Cadbury s 6use. )n the face of strong competition from well!known brands in an already busy market sector, the launch of 6use represented a significant investment in a new brand.

#age 5% 1arket research

1arket research is a process designed to link managers to consumers through information. )t is used to identify opportunities and make better informed decisions about products which have future market potential. 1arket research has revealed that snacks play more of a functional role than one of pure indulgence% they are often a meal substitute. 9esearch also shows that successful snack brands in the confectionery category tend to have more foody values and often contain ingredients such as cereal, wafer, biscuits, peanuts and fruit to break up the chocolate delivery. Cadbury s philosophy is to continue as a driving force in the confectionery market, and thus constantly analyse its offerings for consumers. "he core ob2ective of Cadbury s innovation programme is to generate incremental volume for the company and achieve the vision of market leadership in every segment in which it operates. "he role of innovation is critical as it allows Cadbury to develop ahead of its competitors in those areas of the market which are new or growing.

#age :% #roduct development

Cadbury set out two ob2ectives for the development of 6use% to grow the market for chocolate confectionery to increase Cadbury s share of the snacking sector. "he 6use concept was developed after market research identified the growth of snacking and a definite gap in the market for a more chocolatey snack. A number of ingredients were devised and tested following a survey which questioned consumers about their snacking habits and preferences. A research and development team was then asked to develop a number of product recipes which addressed the needs expressed by consumers. ;ot all products successfully emerge from the product development phase. 9esearch and development involves combining various ingredients to develop potential new products. Considerable development time was spent on 6use, carefully engineering the ingredients in order to deliver the right balance of chocolate, food elements and texture. 1ore than $5, ingredients were tried and tested in various combinations before the recipe was finalised. Any new product in the snacking sector must establish points of difference from existing products within the market ! thus creating a unique selling proposition -'S#. i.e. a product with unique appeal which is not shared by any of its competitors.

Whereas other confectionery snacking products focus primarily upon ingredients, with chocolate used only to coat the bar, the product developers decided to use Cadbury s chocolate to !use together a number of popular snacking ingredients such as raisins, peanuts, crisp cereal and fudge pieces" #age +% Early consumer testing
As products are developed, they must be tested to ensure that consumers would be willing to buy them. As approximately <5 per cent of all new products launched into the grocery and allied trade sectors fail in their first year, extensive research helps to reduce the risk of launching a new product into an already competitive market. 6use went through two extensive in home placement tests. "he results of these tests were multiplied into repeat purchase and purchase frequency figures to allow Cadbury to anticipate the volume of bars required for the launch of 6use and post!launch.

#age 4,% "he launch strategy

"he launch strategy of any new product is critical. Cadbury has two targets for its products ! trade customers who stock the product and consumers who buy it. )n recent years, product launching has become an art which can make or break a product. A successful launch makes potential customers aware of the new product and keen to try it. &efore consumers could try the product, however, it was important for Cadbury to gain the support of its trade customers. 9etailers had to view it as helpful in encouraging customers to visit their shops. )f the product had failed to interest retailers and distributors, the costs of investment would not have been met and they would not have stocked the product. Cadbury conducted one!to!one briefings with over +, key trade customers. "his helped Cadbury build awareness and commitment to the launch and obtain significant orders for in!store displays and merchandising ahead of the launch date. "he trade commitment was reflected in high levels of display support in store during the launch

"raditionally, new confectionery products are initially launched in one region of the country, in order to gauge the product s success, before moving on to other regions over

a period of time. "ime 3ut and 7ispa 8old, for example, were launched in this way. "he commitment to the success of 6use was so great, however, that it was Cadbury s first completely national launch for $, years. "here were certain key requirements to the co!ordination of the launch% Secrecy had to be paramount= 1arketers who had identified the gap in the market had to work closely with individuals from
research and development as well as other external agencies. 1anufacturing operations, in con2unction with marketing and finance, had to evaluate a new factory investment for &oard approval.

0aving a catchy look for a new launch helps to make consumers notice the product. Cadbury and its trade customers managed the first availability of 6use around one day, "uesday $>th September, aptly christened 6useday . "his involved tight management of stock distribution, with more than >, million bars being moved from Cadbury depots into the trade only a few days prior to the launch date. #ress releases were tailored to specific audiences. )n each case, a strict embargo was imposed to ensure that the impact of 6useday was not diluted. "he only exceptions were briefings with "he 8rocer, and 1arketing -trade publications. and "he *aily "elegraph, which reviewed the product in its business pages. #ublic relations -#9. support was substantial. )t told the story of 6use, explained that it had taken five years to develop, involved an investment of ?4, million, the development of a new plant at Somerdale near &ristol and ?> million in advertising costs. "he "@ campaign and #9 campaign were so successful that Cadbury was under pressure to meet repeat orders post!launch=

age 44% #ost!launch results

After a new product launch, it is important to analyse whether the product has managed to meet its launch ob2ectives. *uring 4AA:, the chocolate market grew by A per cent with 4A per cent of this growth attributable to 6use ! a single brand which had only been available for a quarter of the year. 3ne way of evaluating the effectiveness of advertising and promotional campaigns is to ask market research volunteers to identify advertisements using prompts in a recall test. "he 6use launch had created massive awareness of the new brand, achieving greater prompted awareness than the celebrated 7ispa launch. 7ithin 2ust one week of the launch, a record >, million 6use bars were sold into the trade and within eight weeks of sale, Cadbury s 6use was the '( s favourite confectionery line, outselling both 1ars &ar and (it (at by $, per cent and capturing an astonishing :.5 per cent of hand!held confectionery product sales. )t had also contributed significantly to Cadbury s growth in 4AA:. "he launch had exceeded expectations, with consumers buying +, million 6use bars within the first

three months of its launch. Cadbury s competitors reacted to the success of 6use by increasing their own new product activity.

#age 4$% Conclusion

"his case study has examined Cadbury s ability to use innovation in a developed and crowded market!place. "here were three clear elements in this process% the use of consumer research to identify a significant market opportunity product research and development combined with extensive consumer testing massive trade and consumer hype generated by a national launch. Snacking remains the big opportunity to expand the chocolate market even further. As 6use moves through the growth phases of its product life!cycle, the next stage is to move it into the super brand league. As it does so, the key requirement will be to maintain the product s momentum by continuing to develop innovative approaches to marketing it to consumers.