Product Development Process - Tide Pods


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This is my project report for Product Management class. We had to find an article related to an individual company's efforts for developing and introducing a specific new product; then write a report, analyzing and criticizing the mentioned proactive new product development process.

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Product Development Process - Tide Pods

  1. 1. Tide Pods – From Idea to Store Shelf NPD Project Briefs PHAN HANH NGUYEN VU MKTG 541 – Fall 2012
  2. 2. TIDE PODS – FROM IDEA TO STORE SHELF EXECUTIVE SUMMARY ............................................................................. 2 NEW PRODUCT DEVELOPMENT PROCESS ...................................................... 2 CORPORATE STRATEGY ........................................................................ 2 OPPORTUNITY IDENTIFICATION ............................................................... 3 DESIGN ........................................................................................... 3 TESTING .......................................................................................... 4 INTRODUCTION ................................................................................. 5 RECOMMENDATION ............................................................................... 6 APPENDIX ........................................................................................... 7 ARTICLE............................................................................................. 9Tide Pods – From Idea to Store Shelf | MKTG 541 – Fall 2012 1
  3. 3. EXECUTIVE SUMMARYOn February 2012, Procter & Gamble (P&G) introduced their latest invention, Tide Pods, “apalm-size, liquid detergent-filled tablet that are design to be tossed in the washer.” Theproduct can dissolve in hot or cold water, and can be used with any type of washing machines.With its breakthrough features, Tide Pods is Tide’s most technologically advanced answer tocustomers’ requests for laundry solutions that provide excellent results with minimal timeand efforts. However, in order to create such an inventive product, P&G has spent eightyears, drawn 450 sketches, conducted over 6,000 consumer tests, and invested hundreds ofmillions of dollars. The stories behind the design and development process of Tide Pods notonly provide a closer look at how a product in the Consumer Packaged Goods Industry,specifically detergents, was born “from idea to store shelf,” (Appendix 1), but also reveal successesand failures in the product innovation efforts of one of the leading corporations in theindustry. NEW PRODUCT DEVELOPMENT PROCESS Tide Pods – From Idea to Store Shelf | MKTG 541 – Fall 2012Corporate StrategyProcter & Gamble is a multinational manufacturer of product ranges including personal care,household cleaning, laundry detergents, prescription drugs and disposable nappies. Duringtheir 175-year history, P&G is always considered a proactive player in the market. Thecompany constantly looks for hidden customer needs and expectations, then bases on theiradvantages in R&D, production manufacturing, and distribution systems to invent and launchnew products that can satisfy those needs. Each year, they generally spend $2 billion on R&Dand introduce about 27 products with an average success rate of 50 percent. 2
  4. 4. Opportunity Identification Market Definition: The Laundry Detergent Industry in the U.S has a huge market with $6.5 billion in annual sales. The market is very competitive yet also attractive. In 2004, P&G’s current detergent product, Liquid Tide, was the best-selling detergent in the industry, following by Church & Dwight’s “cheaper rival” – Arm & Hammer Oxi-Clean Laundry. The competitive situation, short product lifecycle, and the need for the-next-big-thing at that time made P&G decide to “freshen up” the category. Idea Generation: (Appendix 2) In order to find new ideas for their detergent category, P&G conducted surveys and observations of 6,000 customers. The research indicated three main problems related to detergent usage: First, the detergent bottle was often too heavy for customers to carry back and forth between their house and the laundry room. Second, customers tended to think that the suggested amount of detergent did not get their laundry clean enough. Third, customers usually confused about the detergent products they should use in different situations: regular washers versus high-efficiency machines, big load versus small load, and hot versus cold water. The problem-solver for those issues would be a product that “weighed less, cleaned better and could be used with any washing machine, any size load and inTide Pods – From Idea to Store Shelf | MKTG 541 – Fall 2012 water at any temperature.” P&G had introduced pod-like products on the market in 2000, yet they had not been successful. However, with the development of technology after 4 years, P&G would have been confident to go forward with their product innovation. Design Core Benefit Proposition: Among the revealed product problems, the most critical one was the confusion that regular products caused for customers when they did their laundry in different ways; following by product quality and product weight. Therefore, the core benefit proposition of P&G’s new detergent product was identified as Easy use in any type of washer, with any size load; cold water clean; better clean; easier to carry. 3
  5. 5. Engineering: P&G hired MonoSol, a water-soluble-film manufacturer, to develop a filmthat can dissolve in water at any temperature. The film also had to be soft to the human touch,but strong enough to not break when being stretched over the top of a can of marbles andshaken. Next, the company reduced the amount of water included in the detergent to 10percent in order to prevent the pod to melt before it even got into the wash. Finally, theydeveloped a technology that can sections the pod into three chambers for cleansers,brighteners, and fabric softeners. The pod design helps combine three liquids into oneproduct, while keeping them separate until the pod dissolves in the wash. This allowscustomers to easily bring one or some small detergent pod(s) with them when they golaundry.Marketing Mix: Product - After the engineering process, the actual product was born as“a soft ball with three separate bubbles filled with liquids in Tides trademark white, blue and orangecolors.” (Appendix 3). The product, which was named Tide Pods, has palm size and can dissolvequickly in the hot or cold water after being tossed in the washer. It works in all washingmachines and with any size load. Price - The price set for Tide Pods was $20.89 for 57 pods,more expensive than regular liquid and powder detergents. Promotion - P&G spent about Tide Pods – From Idea to Store Shelf | MKTG 541 – Fall 2012$150 million on a marketing campaign to roll out Tide Pods. TV commercial for Tide Pods,with the tagline “Pop In. Stand Out,” would be first on air during the Academy Awards, one ofTV’s biggest events. Place – Tide Pods would be sold in many supermarkets, conveniencestores, and smaller retailers all over the U.S.Sale Forecasting: P&G expects that Tide Pods will bring $300 million in sales during itsfirst year; that means P&G would be able to sell about 14.3 million 57-pod packages.TestingP&G used laboratory pretest markets, which allowed the full strategy to be tested withoutalerting competitors. 4
  6. 6. First, P&G researchers wanted to understand how consumers do laundry and how they do it using Tide Pods. The tests took place at The Beckett Ridge Innovation Center; the center included a 2,000 square-foot mock clapboard house where participants were observed, videotaped, and analyzed while they are doing their laundry. This method helped the researchers see things that customers might not be able to explain or articulate. The research showed very promising results. 97 percent of the testers were satisfied with their laundry experience using Tide Pods, while only 68 percent of them were satisfied beforehand using regular detergents. The testers also liked how Tide Pods felt in their hands. In order to test product packaging, P&G created a virtual grocery store at the Innovation Center. The participants could see early design of Tide Pods packaging on the virtual shelves along with other detergents. The researchers found that sometimes it was a disadvantage if customers could not see the product inside the package. Thus, P&G decided to design a clear fishbowl-like container that allows customers to see the product insight clearly. Product Introduction P&G planned to launch Tide Pods on September 2011; at that time, Tide Pods would haveTide Pods – From Idea to Store Shelf | MKTG 541 – Fall 2012 been the first dissolvable pods entering in the market. However, they ran into some problems in product manufacturing while the market demand was so high. These issues forced the company to postpone the launch date of Tide Pods to February 2012 and took away their advantages to be an early entry in the market. By the time Tide Pods was introduced, the market was already getting crowed with Henkel’s Purex UltraPacks and Sum Product’s All Mighty Pacs – the two new dissolvable pods with similar prices. Three months later, Church and Dwight also launched its Toss ‘N Done Power Packs which was made of crystals. (Appendix 4) Although not having the early-entry advantages, P&G still has a strong brand name as well as a great product. The company believes Tide Pods would make “a huge wave” in the market. 5
  7. 7. RECOMMENDATIONP&G did a very nice job in developing Tide Pods, starting by discovering customers’ hiddenneeds for laundry, then taking advantages of their technology and investment funds to designa product that can satisfy those needs. However, there is a critical issue that prevented P&Gfrom having a bigger success: Timing. When P&G decided to postpone Tide Pods’ launchdate, they gave other players in the market an alert about their new innovation and allowedtheir competitors to react even before Tide Pods was placed on store shelves.This timing issue happened due to some failures in P&G new product development process.First, the process took an enormous amount of time. During nearly eight years Tide Pods wasdeveloped, P&G’s competitors also moved forward with their ideas, technology, and newproducts. They could introduce new products which made Tide Pods not such a superiorinvention. Second, initial sales forecasting from P&G’s analysts underestimated the marketdemand. Finally, P&G failed in product manufacturing preparation for Tide Pods, whichrequired different equipment from what is used to manufacture regular detergents. The twolater failures were the direct causes for the delay in launching Tide Pods. Tide Pods – From Idea to Store Shelf | MKTG 541 – Fall 2012In order to avoid the above problems, P&G could have shorten the product developmentperiod by overlapping steps in the process. For instance, P&G could initiate preliminarydesign work before they completed 6,000 customer surveys and observations, based on earlyindications of potential. Furthermore, sales forecasting should have been done more carefullyso that P&G could predict accurately the market demand for their first product launch. Lastly,P&G should have adjusted their manufacture equipment earlier after the consumer testsconfirmed the product potential. This would help them be ready to launch Tide Pods on theirfirst expected time and be able to response to the market demand after that/. 6
  8. 8. APPENDIX Appendix 1. New-Product Development Process Opportunity Identification Design Market definition Testing Idea generation Core benefit proposition Introduction Laboratory pretest Engineering market Launch planning Marketing mix Sales forecasting Appendix 2. Idea Generation Sources of Methods of Idea Ideas Generation Market Exploratory user studiesTide Pods – From Idea to Store Shelf | MKTG 541 – Fall 2012 needs (Observation) Primary research (Surveys) Appendix 3. Product Design 7
  9. 9. Appendix 4. Perceptual Map Convenience Tide Pods All Mighty Purex Ultra Toss ‘N Done Liquid Tide Oxi-Clean Economy Tide Pods – From Idea to Store Shelf | MKTG 541 – Fall 2012 8
  10. 10. ARTICLE Anderson, Mae (2012), “From idea to store shelf: A new product is born," The Wall Street Journal From idea to store shelf: A new product is born NEW YORK — It took eight years, 450 product sketches, 6,000 consumer tests and hundreds of millions of dollars for Procter & Gamble to create something that it hopes will be destroyed in the wash. Tide Pods are palm-size, liquid detergent-filled tablets that are designed to be tossed in the washer to take the measuring cups — and messiness — out of laundry. P&G says the product, which hit store shelves last month, is its biggest innovation in laundry in about a quarter of a century. Tide Pods arent the sexiest of inventions, but they illustrate how mature companies that are looking for growth often have to tweak things as mundane as soap and detergent. The story behind Tide Pods provides a window into the time, money and brainpower that goes into doing that. P&G, the maker of everything from Pampers diapers to Pantene shampoo, has built its 175-Tide Pods – From Idea to Store Shelf | MKTG 541 – Fall 2012 year history on creating things people need and then improving them. (Think: Ivory soap in 1879; Swiffer Sweeper in 1999.) Each year, the company spends $2 billion on research and development and rolls out about 27 products worldwide — more than two a month. That focus on innovation has paid off. P&G says 98 percent of American households have at least one of its products in their cupboards, broom closets or bathrooms. And while about 15 to 20 percent of all new products succeed, P&G has claimed a 50 percent success rate. Four of the top 10 new consumer products in 2010 were made by P&G, according to research firm SymphonyIRI. "What theyve gotten very good at is being able to understand consumer expectations," says Robert Passikoff, president of Brand Keys Inc., a New York customer research firm. But improving things like window cleaner and toilet paper can take years. It also can cost hundreds of millions of dollars — or up to 100 percent of first-year sales — to develop, make and market them. And even then, new products are a tough sell to consumers. 9
  11. 11. "You have to develop a product that is meaningfully better than the ones out there, which istough because generally speaking consumer products work pretty well," says Ali Dibadj, ananalyst at Bernstein Research who follows P&G. "You then have to convince the consumer totry the product ... and then get that consumer to break their old habit to make a new one."FIRST LOAD: A PRODUCT IS BORNThe laundry detergent industry, with $6.5 billion in annual sales, is always looking for thenext big thing. Over the years, fruity scents were introduced, along with suds that work incold water. There also were concentrated and super-concentrated detergents that need lesspackaging.Liquid Tide, which costs about $15 for 32 loads, is the best-selling detergent, according toSymphonyIRI, the research firm. But cheaper rivals have been gaining: For instance, thenumber of units sold of Church & Dwights Arm & Hammer Oxi-Clean Laundry, the No. 2detergent brand that costs $8 for 35 loads, rose 13 percent in the past year. Unit sales ofLiquid Tide were flat.In 2004, P&G decided to try to freshen up the category. Surveys and observations of 6,000consumers found that more than a third dreaded doing laundry. A big reason: Manyapartment dwellers hated lugging a seven-pound detergent bottle downstairs to the laundryroom or a Laundromat and back.Researchers also found that people rewashed loads about 20 percent of the time because they Tide Pods – From Idea to Store Shelf | MKTG 541 – Fall 2012thought detergent didnt get their laundry clean enough.And many were confused about which detergent to use when they wash in different ways: inregular washers versus high-efficiency machines; in big loads or small; and in hot or coldwater."We knew people felt laundry was complicated," says Alex Keith, vice president of P&Gsunit that makes laundry detergents and fabric softeners.So P&G set about creating a product that weighed less, cleaned better and could be used withany washing machine, any size load and in water at any temperature.Pod-like products had been on the market before. P&G introduced tablets filled with powderdetergent in 2000, but yanked them from stores shelves two years later. The problem wasthat powder tablets didnt always dissolve completely, leading to messiness. They also workedonly in hot water. 10
  12. 12. To make sure Tide Pods would dissolve in cold water too, P&G turned to MonoSol, a company that makes water soluble films. MonoSol developed a polyvinyl alcohol film that not only dissolves in any temperature water, but even in sweaty palms. The film also is strong — it wont break even when stretched over the top of a can of marbles and shaken — but soft to the touch. The film created another problem, though. Detergents, which mostly consist of water, would cause the pod to melt before it even got into the wash. So P&G made a detergent that is 10 percent water — compared with Liquid Tide, which is 50 percent water. Next, scientists had to figure out how to combine cleansers, brighteners and fabric softeners into one product, while keeping them separate until the pod dissolves in the wash. Doing so would ensure each liquid would work better. After 450 sketches and iterations, P&G developed a proprietary technology that sections the pod into three chambers for all three liquids. The result? A soft ball with three separate bubbles filled with liquids in Tides trademark white, blue and orange colors. INNOVATE, RINSE, REPEAT Making the product was half the battle. Consumer testing is at the heart of product development for P&G, which has more than 25 facilities across the globe where people can use the things it makes.Tide Pods – From Idea to Store Shelf | MKTG 541 – Fall 2012 The Beckett Ridge Innovation Center, about 30 minutes from P&Gs Cincinnati headquarters, is one. Inside, theres a 3,000-square-foot grocery store packed with everything from Charmin diapers to Cascade dishwashing liquid. Theres also a 2,000-square-foot mock clapboard house where researchers analyze how people do laundry, wash dishes, take showers and change babies diapers. About 50 P&G researchers work at the center, watching and videotaping about 20,000 people each year in their "natural" environment. The testers are picked by third-party companies and paid based on the task they complete. "When we watch consumers in action, we can see things they cant otherwise explain or articulate," says Jessica Hall White, director of P&Gs unit that makes fabric care brands like Tide, Gain and Downy. When P&G researchers had consumers test Tide Pods at the center, they found that 97 percent were satisfied with their experience, compared with about 68 percent who were11
  13. 13. satisfied beforehand using regular detergent. People also liked how Tide Pods felt in theirhands.When it came to packaging, P&G took a more futuristic approach to testing. The companyused three screens at the Innovation Center to project 3D images of a virtual grocery store.There, testers could see early designs of Tide Pod packaging on the virtual store shelvesalongside regular detergents.Researchers learned that people sometimes overlooked the product. So P&G determined thatin order to stand out, Tide Pods needed to have see-through packaging. The companydeveloped a clear fishbowl-like container that shows the pods clearly.The product was developed. The consumer tests were done. The packaging was complete.Next, it was time to get Tide Pods to market. P&G was poised to be the first detergent makerto get its new dissolvable pods into stores. They were to cost $20.89 for 57 pods and land onshelves by September 2011.But the company ran into problems making the pods, which require different equipment fromwhats used to manufacture regular detergent. At the same time, P&G was flooded withorders from supermarkets and retailers.P&G declined to detail the manufacturing problems, but it says the issues forced it to pushback the launch date of Tide Pods by five months to February. In the hyper-competitive worldof consumer products, that might as well be an eternity. Tide Pods – From Idea to Store Shelf | MKTG 541 – Fall 2012Tide Pods entered a market that was already getting crowded. Henkels Purex UltraPacks andSun Products All Mighty Pacs came out in February, too. And Church and Dwight plans tolaunch its Toss N Done Power Packs— made of crystals — this month.All of the products are priced similarly — more expensive than liquid or powder detergents.But P&G has a big advantage. The Tide brand is one of the most recognized in the world, soP&G hopes to win over shoppers with performance and brand recognition. The company saysit expects Tide Pods to ring up $300 million in sales during its first year.John San Marco, an analyst with Janney Capital Markets, says P&G is at a slight disadvantagebecause it wasnt first to market its product. But he believes its Tide Pods product is likely tohit its first-year sales goal."It seems when Procter does anything in the laundry category it makes a huge wave," he says. 12
  14. 14. Still, P&G isnt taking chances. The company spent an estimated $150 million on a marketing campaign to roll out Tide Pods. The first commercial debuted during the Academy Awards, one of TVs biggest events. The tagline for the ad: "Pop In. Stand Out." Pods – From Idea to Store Shelf | MKTG 541 – Fall 201213