PRODUCT INNOVATION

Product innovation is the creation and subsequent introduction of a good or service that is
either new, or improved on previous goods or services of its kind. This is broader than the
normally accepted definition of innovation to include invention of new products which, in this
context, are still considered innovative.

INTRODUCTION
Product innovation is defined as:
the development of new products, changes in design of established products, or use of new
materials or components in the manufacture of established products
Thus product innovation can be divided into two categories of innovation: development of new
products, and improvement of existing products.

NEW PRODUCT DEVELOPMENT

New product development describes the complete process of bringing a new product or service
to market. There are two parallel paths involved in the process: one involves the idea generation,
product design and detail engineering; the other involves market research and marketing
analysis.
Improvement Of Existing Products
This includes, but is not limited to, improvements in functional characteristics, technical abilities,
or ease of use.

THE PRODUCT INNOVATION PROCESS OF QUICK-SERVICE RESTAURANT

CHAINS
Abstract
Purpose This paper aims to outline the innovation process activities described by quick-service
restaurant (QSR) managers and to compare it with an earlier QSR process model and with those
used in other food service settings.
Design/methodology/approach Six semi-structured interviews with QSR chain executives in
the USA were conducted to better understand the underlying factors and dimensions that
describe successful innovation process practices.
Findings For new QSR menu innovations, the development teams follow a structured approach
to reduce the likelihood of failure due to issues such as poor consumer demand or
implementation. QSR screen new food innovations approximately five times during the
development process. Furthermore, todays QSR innovation process integrates more
sophisticated market research technology and a post-audit is carried out after the new food
concept has been launched. In comparison with studies of Michelin-starred chefs QSR
development teams use an approach that is much more explicitly
structured as a whole due to the larger scale roll-out as well as greater cross-functional and
regional differences to consider in the QSR setting.
Research limitations/implications The study was conducted in only one country and on a small
sample. Based on an analysis of the findings, the innovation development process of QSR can be
broken down into 13 main steps. Compared with earlier hospitality innovation studies, the
process in this setting includes multiple screenings for high-risk innovations, and greater
emphasis on operational and training issues.
Originality/value The study expands the scope of hospitality innovation research and the
findings have important implications not only for QSR settings but also for other restaurant
segments,
and for other hospitality service endeavours.

The importance of innovation as a central component of successful capitalistic

endeavors has been proposed in the literature for more than half a century (Burns and
Stalker, 1961; Schumpeter, 1934). But analysis of innovation management in
foodservice is a much more recent proposition (Jones, 1996; Feltenstein, 1986). The
drivers that influence innovative foodservice products are multifaceted and
challenging, as consumer tastes and food trends change all the time. Although the
overall economy appears to be slowing, the foodservice industry in the USA has grown
continuously in the past 17 years and is expected to continue doing so in 2008. US
restaurants offer jobs to 13.1 million people, and overall restaurant sales are forecast to
reach $558 billion in 2008, a 4.4 percent increase from 2007 (National Restaurant
Every product seems to go through a life cycle: it is born, goes through several
phases, and eventually dies as newer and better products come along. Because all
products eventually decline, restaurants must develop new food items to replace aging
ones. Innovation helps restaurants keep their product portfolio competitive and
thereby achieve competitive advantage. Innovation is a critical issue for prosperity and
growth; it has moved from a strategic option to a mandatory management task. The
dilemma in innovation is that new products are critical for the long-term success of a
restaurant concept, yet the failure rate of new products is alarmingly high (e.g. Cooper,
2001).
For example, McDonalds, with several billion dollars in sales annually, removed
several new menu offerings a short time after their introduction. McLean Deluxe, Arch
Deluxe and pizza have been marketplace flops for McDonalds in the past. Not only
were these fiascos expensive with many wasted resources, the corporate image was
damaged as well. While McDonalds has not been free of innovation failures,
innovation has been described as the key ingredient behind McDonalds recent success
story. After struggling a few years earlier and posting the first quarterly loss in its
history in 2003, recent business press articles have applauded McDonalds increasing
sales and high-flying stock price. More recently, many QSR firms have been inspired
by McDonalds innovation process approach and have mimicked the approach in its
own turnaround plan (Christensen, 2007).
Innovation process models can be defined as a roadmap or thought process for
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driving a new food item project from the idea stage through to market launch and
beyond. While the use of innovation process models does not necessarily guarantee
success, the use of a model does increase the chances of success (Cooper, 2001). Thus,
the purpose of this paper is to outline the latest innovation development process
activities of successful QSR chains. Innovations are often developed for financial
reasons, such as increasing revenues and profits. In addition to financial performance
measures, customer satisfaction and employee feedback are also important
performance measures of innovation success in the hospitality sector (Ottenbacher
and Gnoth, 2005).
As mentioned earlier, innovation is a key activity for QSR; however, the literature
appears to be replete with contradictions and outdated assumptions on the innovation
process used by QSR chains. Innovation comprises the two literature streams of new
product development (NPD) and new service development (NSD). The NPD field
focuses on the development of tangible goods, while NSD concentrates on the
development of new service offerings. NSD involves developing new services such as
financial, health care, telecommunications, and hospitality services (Johne and Storey,
1998). The terms innovation and new product development are often used
interchangeably.
An interesting aspect of foodservice is that the product that is provided is on a
product-service continuum and requires that successful leaders in this field draw from
innovation management techniques from both new service and new product
development (e.g. Harrington, 2004). In general, the innovation process in foodservice
has received little consideration. Recent studies of the culinary innovation process have
used a one case study approach (Svejenova et al., 2007) or used archival data to infer
institutional change relationships over several decades (Ottenbacher and Harrington,
2007).
This manuscript presents a systematic, well-designed innovation process that
provides important insights for not only QSR but also other restaurant organizations
who are seeking to improve their innovation approach. Further this study compares
todays QSR innovation process with an earlier QSR process model (developed some 20
years ago) and contrast the QSR process model to those used in other foodservice
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settings. It is obvious that there exists a need for further understanding of the
innovation process in QSR.
Quick-service restaurants (QSR)
Quick service restaurants offer a relatively limited menu, limited service and low
prices (Ninemeier and Perdue, 2005). These food items can be easily prepared or
processed and served quickly. QSR food is highly processed and prepared on a
large scale with standardized cooking and production methods. In most cases, menu
items are made from processed ingredients prepared at central supply facilities (or
prepared by suppliers) and then transported to individual outlets where the food is
reheated and cooked in a short amount of time. The food innovation process focuses
on consistency of product quality with the keys to success being able to deliver the
order quickly to customers, to eliminate labor and equipment costs in the individual
stores.
Historical growth in the QSR business came from adding more stores to their
portfolio. However, this growth is only meaningful as long as the firms do not saturate
their core markets. A more contemporary growth strategy for QSR focuses on
unexploited niches for expansion beyond simple opening of more restaurants; QSR are
creating new options for innovation. For example, increasing sales during times of the
day when QSR share of food and drink consumption is low; McDonalds introduced a
new food item (the McGriddle), which helped to increase their share of the breakfast
market by targeting the on-the-go breakfast consumer (Christensen, 2007).
QSR have had to cope with many challenges including obesity lawsuits and an
increasingly health-conscious consumer. Although QSR have not been linked directly
to obesity-related illness to date, Werner et al. (2007) warn that further lawsuits will
follow that will try to do so. As a consequence, QSR have responded by offering
low-carb and low-fat products in their operations (Robinson et al., 2005). Yum! Brands
(KFC, Taco Bell and other brands) were one of the first QSR chains to announce major
food product changes regarding trans fats. All fried chicken served in KFC operations
has zero grams of trans fat (Katz, 2008).
Todays QSR are not only competing with other QSR, but also with many quick
casual and casual dining restaurants, such as Baja Fresh, Chilis and Outback.
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Furthermore, QSR are also competing with the increasingly present ready-to-eat
meals available in most grocery stores. A strategic approach for QSR is grounded in
seeing the business through the customers eyes, and focusing on significantly
differentiating the business strategy from that of competitors.
Innovation process in the foodservice sector
There are a number of models of the innovation process. Most are based on new
product development models derived from an engineering perspective and consisting
of six main steps:
(1) Idea generation.
(2) Screening.
(3) Business analysis.
(4) Concept development.
(5) Final testing.
(6) Commercialization (e.g. Cooper, 2001, Booz, Allen & Hamilton, 1982; Urban and
Hauser, 1993).
To evaluate the current innovation process used by QSR chains, this study focused on
early models proposed for this sector and more recent studies that looked at higher-end
sectors of foodservice.
Feltenstein (1986) provided a framework of the innovation process for new menu
items intended to help expand a restaurants market share. He described six key steps
in the process:
(1) Assemble new-product task force.
(2) Set new-product priorities.
(3) Generate new-product ideas.
(4) Screen and select ideas.
(5) Develop products.
(6) Plan marketing and rollout campaigns.
Feltenstein noted the risk involved in new product development success as well as the
risk of ignoring innovation as a growth strategy. As a whole and similar to other
models of new product development (e.g. Booz, Allen & Hamilton, 1982), he proposed a
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structured and carefully orchestrated process to increase the likelihood of success

(Feltenstein, 1986, p. 71).
Harrington (2004) presented a basic product innovation model that appears to be
derived from earlier food product development models. This four-phase framework
appears useful in that it integrates the need to balance and adjust for internal and
external tensions throughout the process. The four phases are:
(1) Culinary innovation formulation.
(2) Culinary innovation implementation.
(3) Evaluation and control.
(4) Innovation introduction.
Additionally, he suggests the need for a more organic model integrating strategic
action planning, marketing considerations, food science and culinary knowledge
perspective.
Ottenbacher and Harrington (2007) considered the new innovation development
process described by one, two and three star Michelin chefs in Germany.
From their analysis, they suggested the foodservice innovation process had both similarities and
differences to traditional new product development. Michelin chefs were less likely to
include several steps perceived as conventional wisdom in traditional new product
models, including an all-encompassing business analysis stage and a thorough
evaluation system. Further, they pointed to the greater importance of frontline
employees in this setting due to the simultaneity of production and consumption and
the importance of human factors in service delivery. Furthermore, top management
commitment and support are critical aspects for the success of the innovation project.
A synthesis of these earlier models provide some important gaps in the research as
it applies to QSR product innovation. First, in general the product innovation literature
did not focus on the hospitality sector (e.g. Booz, Allen & Hamilton, 1982) and the few
studies that concentrated on foodservice investigated either fine dining (e.g.
Ottenbacher and Harrington, 2007), food manufacturing (Harrington, 2004), or may
not reflect the current environment in the QSR sector (e.g. Feltenstein, 1986). A
question remains if this limited view provides an appropriate level of risk reduction for
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firms in the QSR environment. Second, the culinary innovation frameworks derived in
fine-dining situations provide a model that is not explicitly tied to marketing concepts
of customer research and financial considerations as key criteria for business decisions.
Whether or not these theoretical marketing concepts are applied in a QSR product
innovation setting remains a key research question with important implications for
academics and practitioners alike.

1. Category strategy
Most QSR new product developments (five of the six interviewees) start and are guided
by the companys strategy, which is based on the business plan of the organization.
Such a business plan might be yearly, however one large QSR firm develops a business
plan every three years with a specific focus on the product development categories.
These QSR business plans include general strategies but also strategies specific to
different food categories or platforms. A platform shares design, components,
technological and operations capabilities by a set of products in a product family
(Rosenau et al., 1996; Cooper, 2001). Building a platform requires an investment upfront
but from this platform, numerous derivatives can be designed. Thus, the platform
establishes the capability to develop food concepts more quickly and more cost
effective. One interviewee explained that we try to use everything what we have
before we bring in something new. Depending on type of operation, these categories or
platforms might include chicken, beef, salads, finger food, breakfast, beverages, etc.
Category planning is done by analyzing the strengths, weaknesses, opportunities,
and potential threats (SWOT analysis). We identify from a menu standpoint where
there might be gaps in our existing product offering, where there might be an
opportunity to replace a product that has been there for a long time with something
that is much more current and relevant. This provides general direction for our R&D
department to develop concept ideas.
The objective in this stage is to find out which categories have the best
opportunities for the firm, what is happening in society, what are the social trends,
what are hot new ingredients, in summary what is the consuming public looking
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today in regard to food and QSR, what has appeal to them, which need is unmet and
not available in the QSR food segment.
2. Idea Generation
Following the decision on which food category to focus on, the idea generation begins.
Two sources were identified as the most popular sources of inspiration in this study:
suggestions from employees (six of the six interviewees) and visiting other restaurants
(six of the six interviewees). However, ideas were not only generated by visiting QSR
but also from visiting upscale restaurants. For instance, an idea from an upscale
restaurant, such as a specific spice in combination with chicken, may be transformed
from the upscale food idea into the QSR environment. Food trends are often started
within the fine dining restaurant scene and trickle-down to other restaurant segments.
QSR also firmly monitor current food trends (six of the six interviewees). Sources
include reading food magazines, cookbooks and taking food seminars. Traveling also
was indicated as a source to stay current on trends, flavors and spices. One interviewee
revealed that my whole department will go to Mexico. We take a one week course on
Mexican food, which teaches us cooking and regional differences of Mexican food.
Further, inspirations can come from a number of different sources, such as
brainstorming workshops with the management team (three of the six interviewees),
operators and franchisees (five of the six interviewees). For example, owner-operators
invented many of the biggest successes in McDonalds company history, like the Big
Mac and Egg McMuffin (Gubman and Russel, 2006). Because they do a lot of research
on food trends and new flavors, often suppliers are the inspirational source (five of the
six interviewees). One very large QSR chain considers its suppliers as partners and the
suppliers culinary experts as resources. Suppliers have culinary people on staff. For
example, when we want to develop a new salad we ask our suppliers for support.
Depending on the relationship with the supplier, sometimes we hand over the idea or
part of the concept to suppliers and then they come up with items that are appropriate
for us and then combine them with our (existing) ingredients.
Customer comment cards are also a frequent source of new product ideas (two of the
six interviewees). When customer comments cards indicate a strong demand for a
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specific product, such as I would like to see . . . on your menu then QSR companies
might consider this suggestion and work further on this idea.
3. Screening
Financial and operational considerations are the most common screening criteria. All
QSR chains use these screening criteria when developing new food products. Financial
screening includes such aspects as cost of ingredients, overall cost, margins and profit.
As a consequence of the financial analysis, the price point of the food item or the final
sales price is frequently a part of the screening process at this stage (two of the six
interviewees).
All chains screen new food ideas in regard to operational aspects. The best idea is
worth nothing if it is not possible to implement it into a QSR environment. Does the
restaurant chain have the necessary equipment to prepare the dish? Do the employees
have the skills to prepare the dish? Can it be prepared and served quickly? A further
operational and financial criterion is the number of new ingredients needed for the new
dish. More new ingredients means increased cost but also more needed storage space,
which is often sparse in individual units.
Five out of six chains screen ideas in regard to fitting their brand or QSR concept.
QSR chains are concerned about offering food that meets the expectations of the
customers. Restaurant chains that integrate a platform approach into their product
development activities also screen new ideas against their platform strategy.
4. Concept Test
The next step of the development process is the concept test, which relates to concept
research with consumers. However, this step is only implemented by the three largest
chains in this study. QSR chains investigate what QSR consumers want, what they are
looking for and what potential food product(s) can satisfy their need(s). In general, this
involves showing consumers pictures of samples and receiving feedback on the
potential of the new product ideas. Some organizations do this in-house, while others
outsource this assignment to specialized marketing firms.
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New technology allows QSR chains to do this over the internet by showing
consumers pictures of potential new food items on their personal computers. At this
stage, consumers are not eating anything; consumers only visually see potential new
food product ideas. Then consumers rate how appealing the potential food concepts are
to them. One organization solicits consumers to rate the food concepts on a 1-9 scale (on
the internet). In addition, consumers are asked questions in regard to different price
points for these food concepts.
5. Second screening
Followed by the concept test, QSR do a second screening (6/6). This second screening
may include some of the same aspects as in the first screening such as financial and
operational issues. However, the major screening aspect in the second screening is,
generally, consumers liking and purchase intentions. The intention of this screen test
is to analyze how consumers (panel) respond to the food concepts and if consumers
would be interested in purchasing these products. Consequently, QSR chains want to
find out which are the most appealing ideas, if it makes sense for them to develop
specific concepts further, and if they should invest more time and money into it. New
food concepts have hurdles that they need to surpass before they take the product
any further. From a scale of 1-9 we look at the top two highest scores (8, 9) people
must be really interested.
6. Prototypes
During the sixth stage of the new product development process, QSR chains develop
variations of a food concept - creating prototypes. QSR chains might use contractors to
develop prototypes, such as culinary institutions or research chef consultants. How
many prototypes are developed depends not only on the specific food concept and its
complexity, but also on the specific policy of the brand. While most QSR chains
develop two to four variations, larger organizations develop 15-25 prototypes.
However, depending on the project, large QSR chains may develop up to 60 prototypes.
Developing prototypes involves deciding which ingredients to use and consequently
creating recipes, calculating food cost and pricing, and mapping operational issues
11

which are related to preparing and selling this food item. The prototypes are evaluated
by taste panels and focus groups. One respondent stressed that it is critical for the
Quick-Service
prototypes to consider different geographic variations, such as different consumer food
preferences in different regions of the US.
The taste panels and focus groups are targeted audiences, consisting of profiled and
classified customers (e.g. Do you eat fast food? Do you drink milk shakes? How often?
etc.). In this stage, QSR teams complete blind tastings. Chains often use scale responses
for their prototypes in which the panel or group members are asked to indicate their
degree of agreement or disagreement with a number of statements such as just right,
too much, too little, too strong, too weak. The goal is to develop new food items
that have a broad appeal to consumers.
Following the taste panels and focus groups, one organization (which was the
largest QSR chain in this sample) conducts further research with focus groups. They
call it the traveling restaurant. Because consumers need to taste something in our
restaurant environment to be able to give us a true evaluation, the chain will build a
restaurant in the back of the focus group facilities. The traveling restaurant looks
like a normal restaurant. In this setting, they examine 100 people (ten groups) in three
days. The test takes about three hours and consumers get paid $75 per person. We do
it in a few cities to make sure that there are no regional differences, we also test with
Asian, African-American, Hispanic the major ethnic groups.
7. Third screening
Following the prototype stage, QSR chains again screen the food concepts. This third
screening may include further financial and operational issues. Additional criteria in
this screening stage are supply issues (e.g. can it be manufactured for us and can
they supply it to all of our stores), food safety and other risk evaluations. McDonalds,
for example, screened out a new product idea for a salad with shrimp because if
successfully introduced, McDonalds could diminish the nations shrimp supply
(Christensen, 2007).
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8. Concept Refinement/Development
After consumer research with prototypes and further screening, QSR chains refine
their food concepts. QSR chains stress a cross functional approach during this stage,
and thus a variety of departments work together such as marketing, operations, R&D,
supply chain, and packaging. The concept development stage includes four major
aspects:
(1) Product optimization.
(2) Operational procedures.
(3) Training.
(4) Marketing.
These four aspects of the concept development are often tested and fine-tuned
simultaneously.
Product optimization
Product optimization includes not only optimizing the culinary aspects of the food
concept but also involves fine-tuning the recipe, packaging, food safety, and pricing of
the new food innovation. Consequently, chains often do further product and consumer
testing in one or two restaurants of their chain. They want to find out in the real world
if a new food concept is for example salty enough. This further testing helps to refine
the product and the recipe.
In addition, QSR chains further optimize the food product and the recipe by working
closely with their suppliers or manufacturing partners. Obtaining the best quality
ingredients at the right price (being affordable) is critical for QSR organizations. QSR
chains often own the formula of a food supply item, such as a new steak sauce. One
executive stated that in QSR innovation, the heavy lifting is often getting the
manufacturer.
The larger chains often employ a packaging engineer because packaging is critical
for QSR. As one interviewee stressed that we cannot afford not to have one. The
packaging engineer also works closely with the manufacturing partners because he
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speaks their language and asks the right questions. Thus, the manufacturing partner
supports the food concept by designing the right packaging to preserve food quality,
safety, and temperature but he also saves the organization money by cost effective
packaging of the food. However, QSR chains try to use already available packaging
materials within their chain so they do not have to purchase new packaging materials
or develop new packaging.
Operational procedures
Besides optimizing the food product, QSR chains also need to perfect their operational
procedures for the new food concept. The operational aspects are very critical to the
overall success of the innovation project and need to be operations friendly. You can
develop the greatest product, but if you dont have the support of operations then it will
not work. One chain uses the slogan it is not real until it is real in the restaurant
for their new product development activities.
Furthermore, QSR chains must meet consumer expectations; thus, the consistency
of delivering the new product is critical. This includes not only the product quality but
also the speed of delivery. Larger chains often do initial in-house operational testing
(three of the six interviewees) to modify operational procedures. Further operational
testing is then done in one or two restaurants of their chain to perfect working systems
and practices. The development of operational procedures includes both how to
prepare and deliver the food and supply aspects.
In addition, another aspect of the operational procedures is food safety. It is critical
that it is engineered not only into the product but also into the operational procedures.
QSR organizations must not only develop operational procedures to which their
employees cook and deliver the food accordingly to food safety standards but also
ensure the manufacturer supply to individual restaurants achieves food safety
standards. Another operational aspect relates to the packaging and if the new tools or
equipment will be used for preparing the food. Overall, during this activity, chains try
to understand everything that affects the operation of the restaurant and the goal is to
optimize operational issues.
One QSR chain has a company requirement that on average a product has to be
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produced in the restaurant in 35 seconds (in some exceptions up to 55 seconds).

Therefore, new technology and cooking equipment are a key part of operational
procedures. Recently, several QSR chains introduced computer kiosks in their
Quick-service restaurant operations to improve the delivery process. These kiosks not only
improve the speed of the purchasing process but also consumers like to use this technology.
English is only the second language for many restaurant employees, and therefore,
training of employees and communication between employees with the consumer is a
huge challenge for many QSR firms. A kiosk never speaks bad English and is never
rude.
Training
The third part of the concept development stage is training of the employees. Three
QSR chains have their own training department, which develops training materials
(e.g. DVD) and procedures. One interviewee argued that for new food concepts they
always develop a training manual, which is simple (easy to understand) and supported
with pictures. During testing, firms also further develop and refine the necessary
training procedures because it is an iterative learning process. One chain first trains
an area director and his 12 restaurant managers (of his area), who then will train their
employees. QSR chains not only audit their training efforts during the concept stage
but also during the market test. They visit the restaurants several times to find out
what worked and what did not work. The training department might have to rework
the training materials (Where do we have to make changes?) or make the
adjustments and changes to their training materials before they finally launch the food
innovation system-wide. By product launch, their training undertaking is accurate and
refined. It is very important that every employee understands what we want them to
do, we dont want employees interpretations.
Marketing
Marketing is always an important element of new product development of QSR chains.
A first consideration of the marketing plan is the time of the year when the food
concept will be launched. Where does it fit on the calendar? Is it more of a
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summer-type item or is it a heavier item for the cooler months? So, when is the best
time to launch it?. Marketing research is an important part of developing the
marketing concept. QSR might do further sensory evaluations to get guest feedback.
These are small tests where they try the new product in a few stores and get guests
feedback. We want to talk to people before we go on to a bigger test or launch.
The communication strategy for the new food concept is also critical. While smaller
chains prefer to communicate the new food innovation via radio (we cant afford TV),
larger QSR chains, with bigger marketing budgets, choose television to spread the
word (this is a TV-based business). Appealing pictures of the new food concept are
not only an important part of the communication strategy but also critical as
point-of-sales in the restaurant outlets.
Creating point-of-sale material is also a main task of the marketing team. Customers
need to understand what the product is and therefore, chains often include colorful
photographs in their point-of-sale materials. Another aspect of the marketing concept
development is to decide on the right sales price.
9. Fourth Screening
Before the food innovation is market tested, the concept will be screened once again.
The food concept is screened in terms of how it compares with the competition,
financial aspects and fitting with the brand/concept.
Because the new product development team wants to make sure that we have done our
homework and research, they present the food concept to the executive group.

10. Test market

The basic idea of a test market is to try the food concept and its marketing plan to
verify the pricing and the purchase intent of consumers for the new food item. One way
to test market is to conduct a trial sell with a limited set of customers evaluating the
plan prior to a full launch. The test marketing stage is especially beneficial in the case
of higher risk and mass-market innovations. During this stage, chains add marketing
support to the food concept. This support includes point-of-purchase materials (e.g.
banners, window posters menu-boards) and communication strategies. In general,
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smaller chains communicate their new food product to the consumer with radio spots,
while larger QSR chains produce TV commercials. Firms introduce the new food
concept in a specific region similar to a full product launch. The purpose is twofold: to
communicate information about the new food innovation to consumers and to see how
well it sells. The test market also offers further opportunities to test the operational
procedures and the manufacturing partners processes.
During the test market, QSR chains implement a sales analysis of the new food
concept by getting further feedback from consumers. One chain puts stickers on the
new food product to get customer comments. One such sticker asked: what do you
think about our new product? and provided a 1-800 number to call for feedback.
Customers do not get an incentive; however, QSR chains receive great feedback
mostly through cell-phones. Often customers eat the new product in a restaurant and
immediately thereafter provide feedback on the new item. When they call we ask them
about four to five questions, one interviewee explained. QSR organizations investigate
reactions when consumers buy the products because customers love to give
comments and these are often helpful hints. They collect about 50-100 buyer reaction
cards per store. Each buyer reaction card contains about 8 questions to find out what
consumers think about the product and ask questions, such as: Would you buy it
again?. Customer satisfaction is one of our critical decisions if we will go forward to
launch system-wide.
Smaller chains do not always conduct market testing because it is expensive and
resource intensive. However, if the product is complicated (not necessarily expensive),
if new equipment is used or if many new ingredients are used, market testing is also
executed by smaller organizations.
11. Final Pre-Launch Screening
After conducting a trial sale, the results from the test market are evaluated as well as
results from previous tests and screenings. Again, financial and operational
considerations are part of this screening in addition to feedback from managers and
employees. Each QSR chain has specific hurdles for a successful test market
outcome. In addition, QSR chains analyze the product mix to investigate if the new
17

food item is cannibalizing other products on the menu.

Quick-service

12. Launch
After completing all previous process stages, the innovation is launched in the market
QSR chains sell the new food item in all their restaurant outlets. International QSR
chains first launch the new food concept on a national scale and then later, if success is
likely, on an international level. One interviewee of an international chain explained
that the decision to launch a new food innovation is made by each country. Each year
we make international presentations and each county will decide upon introduction of
new products.
13. Evaluate performance
After the commercialization of the innovation, the final activity of QSR chains product
development process is to review of the success of the food item. QSR chains reflect on
three main aspects of the performance of their innovation project. They analyze the
performance in regard to financial measures, customer satisfaction and operational
feedback. Financial aspects are especially analyzed in regard to sales and profitability
(six of the six interviewees). Customer satisfaction (six of the six interviewees) is
evaluated from guest feedback in the form of directly talking to consumers who order
the product in a store, surveys or from monitoring consumer calls from a 1-800 line.
Operational feedback is mainly gained from employees, operational managers and area
managers.

18

BRANDING STRATEGY & PRODUCT DEVELOPMENT

What Is a Product ?
Products can be considered . . .
Tangible physical entity or service
Extended tangible product plus a whole cluster of services that accompany it
Generic the essential benefits the buyer expects to receive from the product

A product is anything that can be offered to a market to satisfy a want or need.

Products that are marketed include physical goods, services, experiences, events, persons,
places, properties, organizations, information, and ideas.

19

BRAND

What is Brand?
A brand represents the holistic sum of all information about a product or group of products. This
symbolic construct typically consists of a name, identifying mark, logo, visual images or
symbols, or mental concepts which distinguish the product or service. It is useful for the
marketer to think of this as a set of aligned expectations in the mind of its stakeholders -- from its
consumers, to its distribution channels, to the people and companies who supply the products and
services.
It is a name, term, design, symbol, or any other feature that identifies one seller's good or service
as distinct from those of other sellers. The legal term for brand is trademark. A brand may
identify one item, a family of items, or all items of that seller.
A brand is a product from a known source or organization. The name of the organization can also
serve as a brand. The brand value reflects how a product's name, or company name, is perceived
by the marketplace, whether that is a target audience for a product or the marketplace in general
(clearly these can have different meanings and therefore different values). It is important to
understand the meaning and the value of the brand (for each target audience) in order to develop
an effective marketing mix, for each target audience.
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PRODUCT DEVELOPMENT AND RELATED BRANDING STRATEGIES

A good marketing strategy helps the product attain the market position that the management
desires. A complete statement of marketing strategy for a product consists of seven parts:

a) Statement of objective
b) Selection of strategic alternatives
c) Selection of target customers
d) Choice of competitor targets
e) Statement of the core strategy
f) Description of supporting marketing mix.
g) Description of supporting functional programs

21

Branding Strategies and Product Brand Strategies go hand in hand and are based on the
companys vision and strategic decision. The product is developed keeping in mind the
objectives, vision, mission and strategic intent of the company. And to supplant and supplement
the growth of the product, the branding strategy is carried out accordingly.

An organization has a variety of objectives with mission or vision and ranging from corporate to
product. Its rare that managers employ a growth objective without some consideration of its
impact on the products profits. One of the important objectives set for a product is cash flow.
But this is dependent on the market share and market penetration. These requirements in turn are
dependent on the way consumer associate themselves with the product or in other words, there is
minimum noise between product identity and product image. Now, what plays an instrumental
role in the achievement of this during the product development is the branding strategy.

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Igor Ansoff Strategy

PRODUCTS

MARKETS

Prese
nt
Prese
nt
Ne
w

Ne
w

Market

Product

Penetrat
ion

Developm
ent

Market
Developm
ent

Diversificat
ion

The output from the Ansoff product/market matrix is a series of suggested growth strategies that
set the direction for the Branding strategy with respect to the product. And branding strategy
depends on many variables which are described below:

23

Market penetration
Market penetration is the name given to a growth strategy where the business focuses on selling
existing products into existing markets.Market penetration seeks to achieve four main objectives:
Maintain or increase the market share of current products this can be achieved by a
combination of competitive pricing strategies, advertising, sales promotion and perhaps more
resources dedicated to personal selling
Secure dominance of growth markets
Restructure a mature market by driving out competitors; this would require a much more
aggressive promotional campaign, supported by a pricing strategy designed to make the market
unattractive for competitors
Increase usage by existing customers for example by introducing loyalty schemes
A market penetration marketing strategy is very much about business as usual. The business is
focusing on markets and products it knows well. It is likely to have good information on
competitors and on customer needs. It is unlikely, therefore, that this strategy will require much
investment in new market research.
Market development
Market development is the name given to a growth strategy where the business seeks to sell its
existing products into new markets.
There are many possible ways of approaching this strategy, including:
New geographical markets; for example exporting the product to a new country
New product dimensions or packaging: for example
New distribution channels
Different pricing policies to attract different customers or create new market segments
24

Product development
Product development is the name given to a growth strategy where a business aims to introduce
new products into existing markets. This strategy may require the development of new
competencies and requires the business to develop modified products which can appeal to
existing markets.

The Product Life Cycle and Related Decisions

STAGES
Introduction Growth

Maturity

Decline

Sales
Volume

Should the
product be
introduced

Should the product strategy

be changed

Should the
product be
deleted

Each stage in a product life cycle calls for a different kind of strategy. The points below throw
light on the relevance of various factors during the four stages introduction, growth,
and decline.

25

maturity

Introduction
IntroductionStage
Stageofofthe
thePLC
PLC
Summary of Characteristics, Objectives, & Strategies

Sales
Sales

Low
Lowsales
sales

Costs
Costs

High
Highcost
costper
percustomer
customer

Profits
Profits

Negative
Negative
Create
Createproduct
productawareness
awareness

Marketing
MarketingObjectives
Objectives

and
andtrial
trial

Product
ProductStrategy
Strategy

Offer
Offeraabasic
basicproduct
product

Price
PriceStrategy
Strategy

Use
Usecost-plus
cost-plus

Distribution
DistributionStrategy
Strategy

Build
Buildselective
selectivedistribution
distribution

Advertising
AdvertisingStrategy
Strategy

Build
Buildproduct
productawareness
awarenessamong
amongearly
early
adopters
and
dealers
adopters and dealers

As we can see in the introduction stage, the product strategy is to offer the basic product using
cost plus aspect. The strategy for distribution is selective and the company aims to build product
awareness among early adopters and dealers for the product to get well registered with the
targeted segment.

26

Growth
GrowthStage
Stageofofthe
thePLC
PLC
Summary of Characteristics, Objectives, & Strategies

Sales
Sales

Rapidly
Rapidlyrising
risingsales
sales

Costs
Costs

Average
Averagecost
costper
percustomer
customer

Profits
Profits

Rising
Risingprofits
profits

Marketing
MarketingObjectives
Objectives

Maximize
Maximizemarket
marketshare
share

Product
ProductStrategy
Strategy

Offer
Offerproduct
productextensions,
extensions,service,
service,warranty
warranty

Price
PriceStrategy
Strategy

Price
Priceto
topenetrate
penetratemarket
market

Distribution
DistributionStrategy
Strategy

Build
Buildintensive
intensivedistribution
distribution

Advertising
AdvertisingStrategy
Strategy

Build
Buildawareness
awarenessand
andinterest
interestin
inthe
the
mass
market
mass market

In the growth stage, the product strategy is to offer product extensions, service and warranty to
reward existing customers. Similarly the price is such that it helps the product penetrate deeper
into the market and establish itself. The advertising people aim at building awareness and interest
mass market.

27

Maturity
MaturityStage
Stageofofthe
thePLC
PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Sales

Peak
Peaksales
sales

Costs
Costs

Low
Lowcost
costper
percustomer
customer

Profits
Profits

High
Highprofits
profits
Maximize
Maximizeprofit
profitwhile
whiledefending
defending

Marketing
MarketingObjectives
Objectives
Product
ProductStrategy
Strategy

market
marketshare
share
Diversify
Diversifybrand
brandand
andmodels
models

Price
PriceStrategy
Strategy

Price
Priceto
tomatch
matchor
orbest
bestcompetitors
competitors

Distribution
DistributionStrategy
Strategy

Build
Buildmore
moreintensive
intensivedistribution
distribution

Advertising
AdvertisingStrategy
Strategy

Stress
Stressbrand
branddifferences
differencesand
andbenefits
benefits

The idea here is brand and model diversification. The company tries to match its competitors in
terms of price. The distribution is made more and more intensive. The advertising department
stresses brand differences and benefits to make its products stand out in the market. This is also a
stage where the company can make maximum profit out of its product.

28

Decline
DeclineStage
Stageofofthe
thePLC
PLC
Summary of Characteristics, Objectives, & Strategies
Sales
Sales

Declining
Decliningsales
sales

Costs
Costs

Low
Lowcost
costper
percustomer
customer

Profits
Profits

Declining
Decliningprofits
profits

Marketing
Marketingobj
obj

Reduce
Reduceexpenditure
expenditureand
andmilk
milkthe
thebrand
brand

Product
ProductStrategy
Strategy

Phase
Phaseout
outweak
weakitems
items

Price
PriceStrategy
Strategy

Cut
Cutprice
price
Go
Goselective:
selective:phase
phaseout
outunprofitable
unprofitable
outlets
outlets
Reduce
Reduceto
tolevel
levelneeded
neededto
toretain
retain

Distribution
DistributionStrategy
Strategy
Advertising
AdvertisingStrategy
Strategy

hard-core
hard-coreloyal
loyalcustomers
customers

During the decline phase, the company gradually phases out the weak items and cuts price.
Distribution too is selective. The company gets rid of all unprofitable outlets and focuses on the
remaining profitable ones to generate whatever income it can. The company, through advertising,
comes down to the level which is needed to retain hard core loyal customers.
CONCLUSION

In an increasingly competitive world market, a key component of a healthy product line is often
the brand that accompanies it. As valuable assets of a business organisation, they realistically
demand the same level of attention as the equipment in a factory or the money placed in lucrative
29

investments. While branding programmes are industry and product specific, the basic steps
necessary to sustain underlying marks demonstrate some consistency.

An overall brand strategy should only be implemented with full recognition that the brand may
traverse numerous different product lines and geographic regions. Effective brand management
strategies also necessitate emphasis on ensuring consistency between the brand licensing strategy
and the enterprises overall business goals. Efforts should be undertaken to ensure that the brand
reflects positively on the company, does not detract from other product lines and remains
profitable with other parts of company.

Companies should be active and not static when undertaking efforts to integrate the brand
strategy into product development and launch activities. A clear and proactive strategy is likely
to generate the most reward. Business organisations must respect the brands that support
products and services as dynamic assets worthy of attention from top management. While the
priorities may shift among the foregoing recommendations from time to time, they all play a role
in developing sand sustaining a successful strategy.

30

BIBLIOGRAPHY
www.managementparadise.com
www.scribd.com
www.study/mode.com
www.wikipedia.com
www.wikileak.com

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