The Kellogg's Case

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En provenance du cours de University of Illinois at Urbana-Champaign

Customer Insights: New Product Development Orientation

15 notes

University of Illinois at Urbana-Champaign

Customer Insights: New Product Development Orientation

15 notes

This course is the first in the Customer Insights and New Product Development (CIPD) specialization. It will introduce learners to the tools and process of gathering customer insights for identifying and developing new product opportunities. Through an integrated set of five modules and hands-on project experiences, learners will acquire the knowledge and skills to turn their ideas gained from understanding customer needs into innovative new products.

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MODULE 2: Product Development Customer Knowledge Requirement

This module will begin by providing an overview of the customer knowledge requirements across stages of the product development cycle. It will then provide a brief overview of qualitative and quantitative research methods and its benefits in understanding customer needs in product development.

Identifying Customer Needs19:40

Stages in New Product Development14:37

Steps in Customer Insight Research22:02

The Kellogg's Case14:54

Rencontrer les enseignants

William Qualls
Professor Emeritus of Marketing
Business Administration, Gies College of Business

[MUSIC]

Today's discussion is about the Kellogg case.

I'm assuming that most of you have had a chance to develop your executive

summaries, and submit your responses and

answers to what you think the problem was, and how you should resolve that problem.

But I wanted to give you a little background on Kellogg.

And just overview some of the major issues that maybe you should've covered,

if you weren't quite sure what the major issues were.

Kellogg is a company, and they produce breakfast cereals.

It's manufactured in 18 countries, and

sold in more than 180 countries around the world.

For more than a 100 years, they've been the leader in both health and

nutrition market as it relates to breakfast food.

The major goal that Kellogg focuses on is sustainable growth.

Now when we look at what type of company Kellogg is,

Kellogg is primarily a market-orientated organization.

Not a product-oriented one.

Now what is the difference between market-oriented and product-oriented?

Is they focus on the needs of the market place,

in determining what products they should offer.

And they add to their product line based upon if those needs change, or

if they identified needs that are not being satisfied in the market place.

So they're truly a firm that focuses on understanding the customer,

and using those insights to better its product portfolio.

And such that it conducts a numerous amount of market research

in order to better understand the customer.

Now with the Kellogg case, the type of case that you are reviewing today,

is more of a decision-oriented case, based upon the techniques that they use.

So there are multiple problems that you could have identified.

And in the evaluation of your problem statement,

there are two major ones that I wanted to see come out in your review.

One is, should Kellogg conduct consumer insight research

on the brand extension development and launch of Crunchy Nut Bites?

A brand extension means that you have current line of products, and

you are extending that brand with a slight modification to reach a new target market.

The second question that you will have to answer is,

what type of research should Kellogg conduct to increase its chances of

success when it launches the product Crunchy Nut Bites.

Now if you have both of these in your problem statement,

then you're probably closer to the ideal answer that I was looking for.

If you have one or more of these particular decision problem,

you're headed in the right direction.

But you may fall somewhat short in terms of your recommendation,

if you don't talk about whether or not they should conduct research.

And the reasons they should conduct it.

And at the same time, what type of research they should conduct.

Consumer insight research is carried out with two major purposes.

It helps firms to make new product and

marketing decisions, such in the case with Crunchy Nut Bites.

We're trying to decide whether or not we should market this brand extension, and

how best to market the brand extension.

The second key objective is, it reduces our risk,

as we're investing in development of this product extension.

Or this brand extension, such that we have identified a market based upon the need.

That coincides with that particular product, in this case, Crunchy Nut Bites.

So we gathered data from a number of different sources to identify

specific needs of the customers today and in the future.

To help understand how to market the product in terms of the price,

how to promote the product, how to distribute the product.

In the long term, we're trying to determine if we can increase the usage

of this particular brand extension,

without killing sales to our current products, but adding additional

sales from consumers that we might not be gathering at this particular point.

So you remember early on in the marketing research process we talked about the need

to have a product development process

that coincides with your consumer insight research process.

So in this particular case, you had to determine how many stages

in the product development process you would want to collect data, and

the types of data you want to collect.

Remember we said you could collect data just to understand the customers,

which is typically done at the very front end of the product development process.

Then we may conduct research to describe what the consumer attitudes may be.

That may lead towards more quantitative data.

And then finally, they may do some type of experimental design or

longitudinal research to predict the behaviors of customers.

In terms of what prices they're willing to pay based upon the size of the particular

cereal product.

So in the Kellogg case, you needed to be able to describe the stages in the product

development process, and what's the appropriate research technique.

And your objective is whether to understand, describe, or predict.

Now, in actuality you want to do all three of those.

But early on you may want to focus more on understanding than describing.

And so it's important to map out the product development process and

then map out the type of research.

Now in Kellogg's case, they conduct both primary research and secondary research.

You may recall that primary research involves finding out new information.

It's firsthand information.

It's called primary data.

And you may use questionnaires, you may use focus groups, you make observations.

But the objective is to find things that you don't already know about the customer.

It could relate to their taste preferences,

in this case, for Crunchy Nuts Bites.

Will they enjoy the taste in terms of a different texture of the cereal.

So primary research would be one way in which you might

direct your marketing research effort.

The second approach would be to use secondary research.

That involves information that already exists in some

other category or some other marketing research report.

You may use this to describe the size of the market, or

to have a better understanding of the different areas in the country

in which people eat breakfast cereals and the types of breakfast cereals they eat.

You may first go to your own sales and

customer records of people buying cereal from Kellogg's.

Or you may use market research reports and

trade journals to get a more general understanding of the sales behavior, or

the market behavior of customers as it comes to breakfast cereal.

So in each of those two types of research, you can either collect it

from a quantitative standpoint or a qualitative standpoint.

So what you would end up is kind of a two by two matrix where you have primary,

secondary, quantitative and qualitative.

And then you can decide which techniques fit each of those categories.

The quantitative research that you collect, you're trying to find facts and

numbers.

You're trying to quantify the data as it relates to the customer behavior.

Quantitative data is generally collected when you have

large samples that you can collect the data from.

Large samples means you're getting a representative sample of the target

market.

And the method for collecting that data, can both be written and

online questionnaires.

But it's probably a more formal way of collecting the data,

such that you can quantify it.

Now the alternative, or the second approach would be qualitative research.

Here you're focusing more on the opinions, attitudes, and feelings of the customer.

Often more useful than quantitative data, but it's difficult to collect.

The methods for collecting qualitative data includes focus group.

As well as in-depth interviews, both observational and participant observation.

Where you are observing the opinions, attitudes, and

feelings of customers as they're enjoying your product.

So each of those techniques,

primary, secondary, qualitative, quantitative,

would be the matrix that you would use to determine what techniques you should use.

So in the end after reading the case,

you'd be able to determine what's the appropriate technique that should be used,

and the advantages and disadvantages of each of those techniques.

From the standpoint of Kellogg's,

they use primarily research when developing the product.

So one of the questions you might have asked as you were reading the case,

why do you think this was favorable to use in secondary research,

even though it's more time consuming and expensive?

Well, given Kellogg's long history in terms of

selling breakfast cereals to the market.

They probably have tons of sales data and the habits of how

people behave when they've introduced a new product into the marketplace.

So given that substantial background of data, they have their own

databases which they can draw from without necessarily collecting additional data.

So secondary research plays a big role in terms of Kellogg's.

Well when we were talking about doing both quantitative and qualitative research,

then that adds to the time frame when you're developing the Crunchy Nut Bites.

So if they're not up under any immediate

time pressure to introduce the product into the marketplace,

they can gather more insight into what the customer's behaviors are, and how they're

likely to react to the introduction of a new product in the marketplace.

Now, you've probably been to a grocery store,

and you see that the number of brands of breakfast cereals, of multiple

brands from multiple companies that gives customers a large variety of products.

What you're trying to do is carve out a niche in that market

that satisfies a unique market segment with respect to the benefits

of a cereal called Crunchy Nut Bites.

One of the benefits is the texture in which you're biting on the product,

and then you get a crunchy sound,

and that leaves a different type of taste in your mouth.

Now, in your case analysis,

what I was looking for is your ability to define the problem.

Then determine a recommendation in terms of what types

of marketing research should be done.

Whether it's qualitative or quantitative, and whether you do primary or secondary.

And then at what stage of the product development process you

would use those particular marketing research techniques.

Now given that Kellogg's objective is growth, sustainable growth,

the way in which you evaluate the alternative that best fits that need,

is can you get more insight into whether or

not you can sustain the growth of this brand extension, based upon

estimating the size of the market, and how many people would adopt the market,

based upon the marketing research that you would do.

So what we find is that Kellogg, in order to reduce the risk of launching the new

brand, carried out both quantitative and qualitative marketing research.

And they looked at the market development of the product in terms of three stages.

Stage one they use more qualitative research, using focus groups to

identify the underlying feelings the consumer's had towards the brand.

Stage two, they use more quantitative research,

using a survey of a large group of customers

to better understand the likelihood of buying that particular product.

And then in stage three, they use both qualitative, and quantitative techniques

to better identify how to carry out the implementation of the product.

And then finally in the fourth stage, they wanted information, and

primarily quantitative information to determine a market test for the product.

And in this case they were testing both the product acceptance

as well as the marketing program in terms of pricing, promotion and distribution.

In the end,

their ability to achieve their objective of sustainable growth was achieved.

Kellogg's launched Crunchy Nut Bites in September 2008.

And sales records shows it was one of the best performing brands

that they launched in breakfast cereal for a long time.

With a sales value of 6.9 million pounds in the first year.

So from the standpoint of Kellogg's, using the additional research techniques

at each stage of the product development process provided them with better

information to make informed decisions about how to best launch the product.

And this is the whole purpose of consumer insight research, to better

produce decisions regarding when to launch the product, how to launch the product,

and how best to launch the product, to ensure success in the long run.

So if you follow the rules of Kellogg's,

you should make sure that you understand the product development process,

as well as the different technique that can be used to gather information, so

that you can make the best decisions to reduce risk in your product launch.

[MUSIC]

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