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FOOD PRODUCT DEVELOPMENT

Factors which impact on food product development:

● External factors (macro-environment) that impact on food product development, including the:
- Macro-environment: broad external environment that influences a company and is
largely out of the company’s control, such as the level of interest rates.
- Economic environment
- The state of the economy can affect food product development
- A great new food product idea may work well when consumers have a high
income level and the economic outlook is prosperous, but the idea may fail in
tougher economic times.
- All economies experience changes in the level of activity and these are
described below:
- Recession: occurs when the economy of a country declines, resulting in
less disposable income, lower capacity to pay for goods and services
(especially imported items) and decreased employment.
- Expansion: During periods of expansion, the economy grows in terms of
production, employment opportunities and introduction of new
products.
- Boom: A boom occurs when consumers spend more money, eat at
better restaurants and try more new products. People travel more and
buy more luxury products, while companies become sufficiently
confident to expand their operations and product ranges.
- Contraction: Contraction occurs in the economic cycle with effect similar
to, but less severe than, those during periods of recession. Disposable
income, consumer spending, business activity and new product
development are all adversely affected during contraction.
- The following economic factors may affect food product development:
- Changes in inflation rates: These cause changes in costs of ingredients,
equipment, wages and processing, Manufacturers may pass extra costs
of increased inflation on consumers by raising their prices
- Changes in interest rates: companies frequently need to borrow money
to enable them to buy new equipment and technology or to upgrade
existing operations in other ways. To cover these higher costs, the
producer may raise the price of its products.
- Exchange rates: Australian food manufacturers frequently import
materials and technology from overseas. If the Australian dollar is
stronger than foreign currencies, the imported goods cost less visa
versa.
- Tax rates: Company taxes can change, usually more often when a new
government is elected at either state or federal level. Changes affect
company profit margins and are reflected in prices paid by customers
- Import and export tariffs: These tariffs may be altered by federal
governments and this can affect the retail prices of food products. It is
important to not such changes by overseas governments also occur and
can affect food prices in Australia.
- Wage agreements and salary levels: If a food manufacturer has to pay
its employees higher wages, these costs are usually passed on to
consumers. On the other hand, as consumers earn more they have
more disposable income to buy food
- Level of unemployment: Low levels of unemployment place less strain
on government social services, and taxes can remain low, so many
consumers have more disposable income to buy food.
- Drought: Australia is a very dry continent because of its low rainfall and
the arid nature of many areas of the continent.
- We experience periods of drought that lead to a decline in
agricultural and horticultural production.
- This decreases the availability of many foods and ingredients
- Increases prices for these commodities
- Importation of water for watering of crops and livestock
- Natural disasters: crop and animal production in australia are
sometimes disrupted by natural disasters, including floods, hail storms,
cyclones, which devastate the production of specific commodities such
as fruit, vegetables, and grain crops.
- Political environment
- Australian manufacturers, producers and distributors of food are all subject to
regulations made by federal, state, and local governments.
- At the federal level, the most prominent regulatory body is Food Standards
Australia New Zealand (FSANZ)
- Coordinates and oversees food regulation throughout Australia and
New Zealand.
- Legislation labelling is looked at when creating a new product (allergies,
weights, ingredients)
- Hazard Analysis Critical Control Points, follow HACCP
- Is a systematic approach, the aim of which is to determine the hazards
related to food, to identify critical control points (CCP), and to put them
under control.
- For the food industry, the HACCP program is currently recognised as the
best approach to control food safety.
- Local government deals specifically with local issues relating to foods such as
zoning laws, planning permits and health inspection matters.
- Government give money towards research, example new packaging techniques
→ can develop something such as edible packaging (e.g Lindt, CSIRO)
- Tariffs on imports, which affect the cost of imported machinery needed for a
new product
- Competition and consumer laws and codes of conduct such as not making false
or misleading claims about a product
- It is essential food manufacturers understand and comply with their legal
requirements when developing new food products - failure to do so can be
costly not only through legal fined but loss of customer confidence
- E.g debating about labelling (milo health star rating) and GMO new food
product development (strawberries)
- Ecological environment
- Ecological environment includes:
- Air we breathe
- Food we eat
- Our waterways
- Biodiversity in both plant and animal species
- Land itself
- Presently there is a concern about endangerment of species and environmental
damage because of issues such as pollution, land degradation, inadequate
waste disposal, and conservation of natural resources
- These issues affect consumer attitudes to such things as recycling,
biodegradability of packaging, pollution of the atmosphere and waterways, use
of pesticides and waste disposal.
- Environmental quality and its conservation are addressed by many international
conventions and treaties, such as the Kyoto Protocol, which Australia signed in
2007.
- New packaging types such as sugar cane, corn starch break down by themselves
and don’t take up space in landfill
- Packaging covenant is a voluntary covenant, they do everything possible to help
the environment → most companies are signed up to say they do everything to
help the environment
- Companies have developed a range of strategies to address consumer concerns
and enhance the marketability of their products.
- These strategies include the use of biodegradable and recyclable packaging,
better air pollution control, environmentally friendly processing and transport
for their products, and more efficient energy use and waste disposal in their
processing operations.
- This needs to be supported by the development of new products, packaging and
processing technology.
- Recycled paper in products (boxes), Paper straws, Crushable plastic water
bottles
- Organic farming → uses less pesticides and creates and easy target market
- Australian grown ingredients to reduce pollution in food milage
- Technological environment
- Changes in science and technology affect the development of new food
products.
- These include new processes such a:
- Extrusion techniques: a method of processing where a viscous liquid is
forced through a narrow opening and becomes a solid in the shape of
the opening.
- Ultra-high temperature (UHT) processes
- New packaging technologies such as modified atmosphere, computer control in
food processing, automated equipment
- Improved distributions systems
- Genetic engineering: involves incorporation of genetic material from one
organism into another to develop living organisms with more desirable
characteristics
- Technological developments lead to new foods and food components.
- This includes food additives, such as those contributing to food flavour and
texture, fat and sugar replacements and processing aids → anticaking stops
from lumping, vegetable gums change the thickness
- Microwavable foods: Lite N’ easy, microwavable broccoli, chicken in a plastic
bag, small cups of rice, quinoa (individual serves for busy people)
- Dual ovenable tray → plastic can be heated up in oven or microwave
- BPA chemical / toxin from plastic bottles can leach into the water
- One of the biggest technological issues in food industry is genetically modified foods.
- GM plants and animals offer advantages such as increased yields, improved
handling and processing properties, greater disease and insect resistance,
higher growth rates and improved sensory properties (such as aroma, flavour,
texture)
- Changes in food technology, whether it be the introduction of new GM foods or simply
better automation in the factory.
- May have some disadvantages such as decreased employment rates
- Result in employees needed retraining to operate advanced processing and
storage facilities

● Internal factors (micro-environment) that impact on food product development, including:


- Personnel expertise
- The expertise of staff is crucial to the operation and development of a business
- The personnel (staff or human resources) employed by a food company include
some or all of the following:
- Production staff on the factory floor
- Financial staff
- Marketing and sales staff
- Purchasing staff
- Product development staff (sometimes called R&D staff)
- Product testing and quality assurance staff
- Maintenance and engineering staff
- Management staff
- Company directors
- Product distribution staff
- Warehouse staff
- The skill level of workers have a direct effect on what can be produced
- These days, many workers are required to be multi-skilled; this allows greater
mobility within and between staff categories and greater flexibility within
company operations, with related advantages for both the company and its
staff.
- It should also be recognised that, while competence in hands-on tasks is crucial,
other skills such as leadership, planning, and operation, decision making, task
management, written and oral communication, initiative, integrity, company
loyalty, and the ability to work collaboratively with other staff are very
important, especially among senior staff.
- While formal training can provide a broad outline of these skills, experience,
capabilities and personality characteristics dictate the level of these skills for
individual employees.
- It is vital that staff in all areas of a business know their role
- Staff in each area should have special responsibilities and functions as well as
specialised knowledge, experience, and training at a sufficient level to allow
optimum performance.
- Training is available at uni, tafe or from within internal sources
- It is increasingly common that training requirements for individual employees
change due to issues such as technological advances, changes in position within
a company (promotion), career path shifts, and movements within and between
companies.
- The impact of any change on what is produced or the production process may
affect staff in the following ways:
- Production workers need to be able to work with new technology to
manufacture new products
- Quality assurance staff need to develop specifications for new raw
materials, quality standards, for new products and processes, and new
analytical methods
- Marketing staff must have the versatility to promote new products,
often to new and different markets.
- When making decisions about new products, a company must be aware
of existing staff strengths and weaknesses and address any
shortcomings either by training or by employing new, appropriately
qualified personnel
- Should the company decide not to take this sort of action, it
may be advisable not to introduce the new product.
- Production facilities
- Company needs to look at what facilities they have, what they need to buy or
change (e.g Ardmona down period, during this time they made extensions on
their factory)
- Tiny Teddies → get maintenance staff and create the teddy shape (costly) line
extension from arnotts
- Golden circle - pineapple cans and use juice in tetra paks
- Personal expertise: who do they have in research, marketing and food
production teams
- Do they need to employ more personnel, or do they need to be
retrained
- Can’t do anything on external factors - environment, economy, government but
internal they can make these decisions
- Financial position:
- A company’s financial position is a major factor in the type of equipment it can
afford and hence its product range and new product development activities.
- The financial position of any company includes the value of its assets (cash,
property, equipment) its cash flow, profit-and-loss balance, value of its shares
(for public companies), amount of borrowings or loans to others, interest rates,
equity in other companies and property, value of stock on hand, market share,
product range and other aspects that vary between companies
- If a company’s financial position is strong this can be a lead in competition with
other businesses
- Company image
- Public perception of a food company is a result of the company's image, which
generally evolves over years of operation
- It is often a result of strategies, products and market that were chosen
deliberately by the company, but it may also develop as an unintended outcome
of long-term operation
- E.g Arnotts have a good company image → won’t come up with a budget line
biscuit
- Properly a quality product to charge a larger amount for the product
- Company image is reflected mainly in its market segment and consumer
attitudes towards the company.
- It may develop through some of the following factors:
1. consumer perceptions of product quality
2. prices
3. form and convenience of products and packaging
4. market availability
5. Labelling.
- A company not known for luxury products (e.g homebrand) will find it difficult
to switch from budget products to luxury products. Conversely, a company with
an image relating to cheaper products should evaluate possible effects of trying
to enter the luxury product market

● SWOT analysis of factors that affect food product development


- Stands for Strengths Weaknesses Opportunities Threats
- SWOT analysis is the single most useful and relevant way of assessing the likely success
or failure of a new product concept.

McDonalds SWOT ANALYSIS

Strengths:
1. Golden arches - one of the most recognizable logos
2. Community orientated - little athletics
3. Socially responsible
4. Fast production/service

Weaknesses:
1. Test marketing for pizza failed
2. High employee turnover

Opportunities:
1. Healthy hamburger
2. Hot specialist coffees
3. Not only secure sales

Threats:
1. Reputation for unhealthy food
2. If consumers decide to be healthier
3. Government changing legislation for companies to show all ingredients etc
4. Major competitors such as; burger king, wendy's, starbucks, taco bell, KFC
Reasons for and types of food product development:

● Drivers (reasons) of the development of food products:

- Market concerns such as health, dietary considerations and the environment


- Supermarket shelves shows many food products that are marketed on the basis
of health-related claims.
- Special products of this type are called functional foods, which are designed to
promote various aspects of consumer health - these may include products such
as yoghurt or foods fortified with vitamins or other nutrients.
- Functional foods: foods that surpass the basic nutrients found in foods
that have proven health benefits.
- Manufacturers may also change packaging types in response to consumer
concerns about environmental pollution, convenience, non-biodegradability and
non-recyclable properties.
- Any food manufacturer who does not respond to such consumer concerns does
so at their own risk.

- Consumer demands such as convenience foods and cost


- Most people want convenient foods at a low price
- Price and convenience are useful new product characteristics that assist food
manufacturers with competitiveness and marketing.
- Two characteristics may cancel each other out since a product with in-built
- convenience usually costs more to manufacture, while lower cost products
generally have no, or limited, inbuilt convenience.
- a manufacturer needs to assess carefully its target market before designing
convenience features into a new food product.
- consumer demands include dietary preferences, preparation methods, different
packaging sizes, the use of organically grown ingredients, local as opposed to
overseas products and ingredients, and cultural preferences.

- Societal changes including increasing ageing population, single person households and
longer working hours
- Health and diet related issues is increasing
- When people have no time consuming more home delivered meals (uber,
deliveroo)
- Eating outside the home more
- Consumers are more aware of the environment
- Australia is a multicultural society → lots of opportunities and trends
- Levels of change in consumers physical activity → altered levels of physical
activity for exercise / changing lifestyle
- Busier lifestyles allow less time for food preparation
- More people are living alone, houses are becoming smaller (people choosing
not to be married, divorce rates)

- Technological developments such as processing equipment and packaging materials


- Technological developments include novel ingredients and raw materials,
advances in processing equipment and methods, biodegradable or recyclable
packaging and 26 and active packaging
- Novel ingredients used in Australian food products include fat and sugar
replacements, fibre supplements such as Hi-maize and indigenous, or bush,
foods such as kangaroo, emu and crocodile meat.
- The approval from FSANZ must be obtained before new ingredients are used in
commercial food production. Examples include - Of recent interest is a fat
replacement know as ‘olestra’. It has been approved for use in the USA but is
yet to be approved for use in Australian foods
- New packaging technology has enabled faster, more consistent packaging of
products, along with greater efficiency, decreased staffing requirements,
improved shelf-life and quality maintenance, greater appeal and more
convenience for consumers, and decreased environmental impact.
- Although it is perhaps more costly, active and modified atmosphere packaging
(MAP) offers special benefits for extended quality maintenance and greater
shelf-life, especially for fruit and vegetables.
- Of recent technological developments, genetically modified (GM) foods are the
highest in profile and certainly have raised the greatest controversy.
- Although they have been recognised for many years, organic farming,
hydroponics and free range eggs are three comparatively recent technological
developments now used during on-farm food production.
- These technologies have consumer appeal principally because of issues such as
health, the environment and animal welfare. Food manufacturers and retailers
often use this sort of technology to promote sales of traditional products such
as eggs, fruit and vegetables.

- Company profitability such as increasing market share


- All companies seek to improve profitability and usually can best achieve this
by increasing market share.
- To do this, they may develop new products or enter new, non-traditional
markets such as Asia.
- Other options include greater automation in production, reduced energy
consumption, cheaper ingredients, aggressive marketing and advertising, staff
reductions, and finding new markets for existing products.
- New product development is a very attractive way of increasing company
profitability and is an important reason for companies to carry on this activity.

● Types of food product development


- Line extensions
- Line extensions involve relatively minor changes to extend the range of a
company’s existing products by incorporating features such as new flavours,
colours, health and diet-related variations, new forms of packaging and
different serving sizes.
- It is not uncommon for a manufacturer to use a number of line extension
strategies for the same basic product
- E.g. product X, product X & added Y, product X with added Y and extra Z
- There are several possible reasons why line extensions of existing products are
developed by food manufacturers, including:
- the market share of existing products declining over time, and changes
to their characteristics may address this issue
- as a response to marketplace trends
- in recognition of new consumer demands and as a response to them
- the identification of a new market segment for the product
- the emergence of new processing technology and packaging
- the availability of new ingredients such as flavours, colours and health-
related additives
- value-adding strategies for existing products.
- The charts above show the beneficial effects of line extension developments on
the sales of 2 different food products
- These line extensions have increased the volume of sales and, therefore have
been beneficial for the manufacturer on two occasions.
- The sales history of a food product is often referred to as product life cycle
- Product life cycle; traces the growth, stationary and decline phases of a
product’s sales revenue history.
- Common form of product development
- Consumer preference of food change time to time with change of lifestyle,
health, global economics, increased population, technology development et.
- In order to meet their preference and/or needs, slightly modified food products
are introduced while original product remains same.
- Examples include milk, up&go, cadbury chocolate

- Me toos:
- Me-too products are essentially direct copies, or with minor modifications, of
existing products available on the market and manufactured by other
companies.
- Direct copies of minor modification of an original food product
- E.g. AussieMite & vegemite

- New to world
- Completely new products, have not been in the market before
- Developed as a result of:
- GM technology
- Packaging developments
- Extrusion technology
- Appliance technology - e.g microwave, new
- Multipurpose oven, nutribullet, cold press blenders
- Using:
- Gm ingredients
- Food additives
- Traditional foods such as bush foods
Examples Include:
- Heston bush food line for coles
- Cassava crunch, avocado chips, almond butter
- Cricket Pasta, Chips containing cricket powder → crickets are high in protein
- Sipaah, Kale chips, Cashew Milk, Shine+

7 Steps in food product development:

● Design brief based on project aims and development criteria:


- Design brief:
- Design brief isn’t apart of the 7 steps
- A useful design brief will enable a food manufacturer to
define consumer market needs and the price the market
will pay for a specific food product
- A component of this is the manufacturers mission
statement. This mission statement relates to company
policies and goals which provide guidance for new food
product development. Mission statements are relatively
brief and relate to company policy, product range and
target markets
- The design brief helps to provide direction to product
development teams which is important because it decides
whether the product should be continued at early stages
which is imperative as it is a costly process and many new products fail.
- A useful design brief will:
- Define consumer market requirement
- Define the price the market will pay
- Define the mission statement - this provides guidance
- (e.g. Arnott’s mission statement)
- 1 - Idea generation and screening
- Idea generation: Sometimes new products arise from market research.
Feedback can provide insight into market needs and gaps in product ranges
- Ideas can also come from recipe books or media items about food. Internally a
company may do brainstorming sessions. This involves research and
development staff and also production, purchasing, managing, and marketing
personnel. All ideas are recorded, no matter how ridiculous, as they may be
useful later, for e.g. when technology improves.
- Screening: Screening is basically about constraints for the development of the
new food product, There are fewer constraints for me-too products. Line
extensions have more constraints and New-to-the world have the greatest
amount of constraints.
- Constraints could be:
- Financial, processing, product, marketing, company, ethical &
legislative
- Constraints could be:
- Skills, recipe, equipment, packaging, ingredients, time, market,
competitors, and distribution (packaging and transportation)
- 2 - Market research (swot analysis)
- Market research assesses the likelihood of consumer acceptance of those
products considered worthy enough to continue to this stage of the process
- Market research involves asking consumers what they want and whether they
should modify the concept or discontinue at this stage
- Market research involves market surveys
- These surveys may use organised consumer discussion groups or focus
groups
- Field reports may be undertaken or example interviews with
salespeople's who can advise about what consumers are buying, levels
of market acceptance and satisfaction with existing ranges.
- It may also involve taste panels e.g. in supermarkets
- Market research is looking for:
- Consumer market characteristics e.g. demographics - age, gender,
family size, economic status, level of education.
- Geographic points of sale e.g. urban, rural, remote, suburban
- Market research involves primary market research which is collection of original
data and secondary market research e.g looking at Australian Bureau of
Statistics. It is less expensive.
- Market research must interview a sufficient number of Consumers to be
statistically meaningful. There are two types of sampling for this reason - Non-
probability (which is what you did for your pie) where you ask friends, relatives
and neighbours or volunteers. Probability sampling is often based on location
(e.g at shopping centres)
- Once market research is undertaken a company may use a marketing
information system to gather data.
- These are the 4 basic components of a marketing information system:
- Collection of internal company data including accounting and sales
records
- Market intelligence regarding competitor products like retail sales and
prices
- Market research using primary and secondary data
- Effectiveness of promotional strategies currently in the marketplace
- E.g. the success of products already on the market
- Market research may indicate that the product will not succeed and thus the
product will discontinue. This may be because the market is too small, too many
competitors, development costs are too high, it is outside of company
experience.
- 3 - Product specifications
- Product specifications are precise descriptions of the characteristics a
manufacturer wants in their product. They are derived from the outcomes of
the first two steps, idea generation and screening and market research.
- Product specifications are for the manufacturers benefit, not just addressing
consumer requirement. The specifications will depend on internal company
factors such as financial status and technology
- Product specifications can be complicated to establish, they may include
processing methods, packaging, quality assurance, quality control, and target
market.
- 4 - Feasibility study
- A feasibility study is conducted after product specifications have been
established. If the product is not technically or financially profitable it would be
discontinued.
- Feasibility study is conducted after product specifications. The purpose is to
determine whether a new product idea will be profitable and if its manufacture
is technically possible. If these 2 questions are no, then the new product is
discontinued.
- The financial feasibility study is the determination of a ‘break even point’ based
on the costs of development, marketing, production, delivery v.s the volume of
sales required to make a profit. One issue here is predicting a realistic level of
sales. Market demand, likely market share and competing products are all
considered.
- The technical feasibility requires knowledge about whether processing
equipment is available, and whether the current staff can produce this new
product.
- The technical feasibility study requires am assessment of both internal and
external factors; analysis of:
- Availability and suppliers of ingredients
- Appropriate staff, equipment, technology
- If it is necessary to develop new technology / equipment
- Time and money requirements
- Time and cost to develop quality assurance procedures

- 5 - Production process development


- Production Process Development involves the necessary changes to adapt
manufacturing resources. In some cases it is minimal, e.g line extensions based
on new flavours. However if the new product is different to the product range
this may involve changed to factory layout, processing methods and level of
training.
- Production process development will go a lot smoother if quality control and
quality assurance are met so that the right ingredients, staff and processing
equipment are used to ensure quality of factory output.
- 6 - Development of a prototype
- Development of a prototype involves the creation of a model of the new
product concept for broad based market testing. Extensive product and market
research can establish whether ingredients will perform well under
manufacturing conditions. Any modifications will then become apparent at this
step.
- Development of a prototype is important as there is a big difference in
processing small batches under kitchen conditions than in larger condition
batches
- Producing larger quantities will enable widespread testing of ingredient
formulation, processing conditions, product specifications like storage
conditions and packaging.
- Can be done on small and large scale
- 7 - Testing product prototype, eg sensory evaluation, consumer testing, packaging tests,
storage trials
- Testing of product prototype occurs when commercial batched of the prototype
becomes available for deeper consumer and market evaluation
- During this final step the prototype is tested to ensure it meets Australian Food
Standards and export regulations (AQIS) as well can consumer and market
needs.
- Testing of product prototype is now in a form which can be felt, tasted in
consumer evaluation and subjected to laboratory testing and modification.
- Packaging and label design may be refined, nutrition and ingredient panels are
formed, testing of the package in a variety of conditions is conducted as in
storage requirements. Sensory testing is completed by small focus groups. Small
scale product launches are often used to check market acceptance and small
changes are made on completion.

Marketing plans:

- Marketing plans identify target market, predict demand for the product and organise the
activities of the marketing mix. - product, price, promotion, place

The marketing mix is made up of 4 organised activities:


● Product planning
- To convince the consumer to purchase the product
- Marketing plans should focus on meeting specific consumer wants / needs.
Health claims, packaging, reduced prices are some marketing strategies.
- The marketing process :
- Planning - marketing objectives and strategies
- Analysing the market - what is already available, what takes up main
share of the marker
- Selecting target market - think why do you want to target a particular
group
- Developing the marketing mix - (product, planning, price, promotion,
distribution)
- Managing the marketing effort - (performance evaluation - sales. What
works and what should be modified)
- Main goal is to increase sales. It is this strategy that matters the most.
- Product life cycle - similar to line extension product cycle

- Reasons for new product failure:


- Consumer point of difference with existing products
- Poor product positioning is about gaining trust in the mind of the target
market
- No point of difference with existing products
- Bad timing of market launch
- Poor product performance
- Wrong market for company
- What can you do when a product fails?
- Discontinue manufacturing the product
- Sell the product to another company / joint companies
- Decrease manufacturing
- Revise marketing strategies
● Price structure
- Product price depending on what the target market is - age, gender,
socioeconomic states, family size and education
- Quality, technology, packaging also adds to the price
- Explanation of some target markets:
- A
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ave a basic list price or suggested price based on the break even point
- Break even point is the point at which total revenue equals total costs or
expenses. At this point there is no profit or loss
- Pricing strategies:
- Penetration pricing ? Launch of a Me-too
- The product price is below that of competitors for long enough
to obtain a foothold in the market.
- This pricing tactic is used when a company enters a new market
segment for the first time when a me-too product is being
launched, or when it is hoped the product will be around for a
long time.
- Price skimming ? New to the world or Line extension (if it has no other
competition)
- Where a product or service is sold at a relatively high price at
first, and then the price falls over time
- It is used when the product is:
- New to the world or a line extension that has no other
competition
- The only one on the market and without substitute
- ‘Positioned’ as an exclusive, high-status brand.
Consumers assume that a high price means high quality
- Not expected to have a long life cycle
- Competitive pricing / status quo pricing? Line extension
- The price is set to match that of the competition
- This pricing strategy is used by market leaders and at places like
Paddy’s markets where all the fruit and vegetable sellers charge
much the same price for their goods.
● Place and distribution system
- Place in the marketing mix refers to where the product will be sold
geographically and to the kinds of outlet in which it will be sold.
- Place is where the target market lives, works, plays and shops
- Marketers have several tactics to consider when placing a product to
reach the target market
- Intensive distribution - means when products are available at
every possible outlet
- For example: chocolate bars are sold in small shops,
serviced stations, grocery stores, newsagents, bakery
shops, vending machines, and online)
- Selective distribution: this is when there is a wide but not
intensive distribution
- For example: some types of cheese are available at
delicatessen chains such as Cut Price Delis rather than
woolworths or coles)
- Exclusive distribution: Limited supply. Sold only in certain
outlets due to expensive ingredients, high technology
- For exam2ple: handmade chocolates - has an elite
image in the consumers mind
- Retailers:
- Company that sells something to the consumer by telephone,
mail, vending machine, on the internet or face to face is making
a retail sale.
- The main function of a retailer is to sell goods and services to
consumers who will use the products for their own use.
- Retail food stores may be small-scale or large-scale operations,
depending on the volume of sales. Ownership may be:
- A corporate chain - e.g. coles
- An independent owner - e.g. sole proprietors corner
store
- Groups of voluntary associations of independent
owners
- A cooperative. A cooperative is a business that is
owned, controlled, and used by its members for their
own mutual benefit. Primary producers such as farmers
and fishing operators sometimes form cooperatives.
- Distribution refers to the process of moving the product from the producer to
the consumer.
- Once a company has chosen its placement strategy, the physical
distribution of the product takes place
- Distribution involves moving the product from the manufacturer to the
point of sale
- The longer the distribution chain the less efficient it is
- Warehousing:
- The correct storage of goods means the consumer
receives the product in the best and safest possible
condition
- Materials handling
- Refers to forklifts, conveyor belts and other methods
that move the cartons of product from the storage area
to pallets ready for shipping
- Inventory control
- Essential because it ensures the quality of the product
and quick filling of orders
- Holding to much stock is expensive, risk of theft, fire,
and water damage
- A recent development concerning checking the quality
of food is the practice of taking digital photos of
rejected produce which can be emailed to growers
within hours
- Order processing:
- Involves the handling and filling of orders, processing of
accounts and collection of credit payments
- Portable data, entered by retailers, identifies when
stock is low and automatically reorders the product
- Transportation
- The type of transportation used - air, water, rail or road
- depends on the type of product, the urgency of the
delivery, the distances to be covered, and the nature of
the product.

● Promotional program
- Promotion informs consumers about new products and persuades customers to
buy a new product or buy more of an existing one.
- The types of activity include:
- Advertising
- Personal selling
- Publicity and public relations
- Sales promotions (sample testing, sales, giveaways)
- To select the right type or combination of activities to promote a product a
company has several important considerations:
- The promotion budget
- The size and maturity of the target market
- The stage of the product’s life cycle
- Advertising:
- Magazines, newspapers, television, radio, internet
- The marketing team uses market research to identify the physical and
buying behaviour of its target market, then selects the media outlet that
best delivers the advertising message to the consumer
- When choosing a magazine in which to advertise a product, a company
can choose different categories of magazines that have different
markets:
- Consumer - for example, Australians Women’s Weekly
- Class - e.g a magazine for a select group interested in a
particular item, such as gourmet cooking
- Trade - for example, hospitality industry magazines such as
Open House
- Technical and professional - for example, the monthly
publications by the Australian Institute of Food Science and
Technology
- To promote a product consider:
- The size and maturity of the target market
- The stage in the product sales ultimately peaks, then slows as the
product becomes popular and competition is increased with other
introduced products by different companies.
- Sales, promotions and demonstrations:
- Contests
- Free samples
- Cash back offers
- Exhibitions
- Personal Selling
- Retail sales - assisting customers to choose a product over another
product
- Publicity and public relations - Celebrities wearing product company
logos, Using products in their shows,