Fei Talk V5

T. SchultzT. Schultz

Polishing Nuggets into Gemstones, or Focused Innovation Application Methodologies for

Consumer Goods Successes

Thomas Schultz, Ph.D.

Vice President, Product Strategy

HCI Direct, Inc.

215-494-2900 ext 202

[email protected]

3 Case Studies of Successful Competition in the FMCG world

T. Schultz

Innovation & Product Development

Consumer Needs

Technology

Benefit

Innovation

Polish the nugget into a gemstone

Brand

Technology TRUST Relevance

ConsumerNeeds

ProductAttributes

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Successful Products Are Difficult To Make

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What makes a successful product? It’s innovative.

(1) It sells. (2) It has siblings. (3) People like the family.

Case Study 1: reflect.com, Mass Customization

Case Study 2: DuPont, Repurposing commodities into higher value streams.

Case Study 3: Playtex, Inc., Predicting SLOBS and Facing the Brutal Truths

Innovation = Consumer need + technology

Consumer Hedonics Toolset

Open Sourcing & Partnering

Early Stage Gate Disciplines

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Stage Gate Disciplines

I. EXPLORATORY PHASE II. FEASIBILITY PHASE III. DEVELOPMENT PHASE IV. PRE- LAUNCH VERIFICATION

Determine if a business opportunity exists

Evaluate if we have a viable projectDesign the product and process to meet the consumer and business

objectives

Verify the product and process meets the consumer and business objectives

Package Design, Product & PackageInternational Market Want? Product Development Testing Completed &

Initial Marketing & Testing Specs Approved & issuedEvaluation of Concept & Commercialization & Consumer

Market Potential Value Assessment Specs & Art Developed Market Research Finalized(Verify Consumer Value)

Market Research Supply, Quality & "Wet Tests" Supply Chain Plans

Technologies linked to R&D Assessments Qualified & ValidatedConsumer Needs Supply Chain

SWAG Cost, Capital & Timing Plans Developed Finalized Marketing &Mfg. Plans / Options & Business Plans

Viability (R&D / Ops / Qual) Implications Timelines Agreed ToArtwork Completion

Basic Timeline Mapped Out Updated Cost &Capital Needs Launch Timing Finalized

Costs Analysis Prepared

Basic Timeline Alignment

Win the customer

here!

The Process and the Metrics

► Know the customer: Why do they buy what they do? Why buy mine?

Use of Consumer Hedonics= consumer buys my product.

Unless it is a radically new & unknown product idea, your iteration must outperform.

+

-Product Physical & Emotional Attributes

= Target

= To Win!

►What are the winning metrics: Cost of technology entry. Product Power. Product sibling lifetimes.

$

time

Cost of Entry

Product Power =New Sales $

# New Products

Product Siblings = Products in Portfolio with high Consumer Hedonic values

2% NOS

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Consumer Need: People want to personalize their Personal Care Products.

Solution: Let the consumer define their emotional and physical wants and provide a product that “hits” on these Hedonic attributes.

Innovation?: 1. Use web-based interface to allow the selection inputs

2. Develop a supply chain that will make customized products with 2500 variations.

Done: Decision trees, Deep psychographic models on buying needs (~10 US Patents): Company total: 25 employees; partners: 75.

Done: Small batch, short-term fill cycles, proprietary product formulation & processing technologies (~ 15 US patents); partnership with external sub-contractor

Metrics: $ Sales were miserable; notoriety in the web-world and the innovation sectors were great!

Solution: Went back to the consumer and asked, Why no purchase?

Answer: Emotional triggers were high, but could not sample

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What did we learn?

• High emotional products need to be sampled

Put a store in place on Union Square (SF) Sales $$$$$

• Making the decisions takes too much physical time as opposed to mental time.

Reduced the # questions, placed Model against another product line where the consumer base would benefit

Cost of entry > > 2% NOS

Product Power < 0.1

Product Siblings were infinite, and hence did not look like a family

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Case Study 2: DuPont- Repurposing technologies to higher value streams

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Consumer Need: DuPont wanted to move into Personal Care Products.

Solution: Match technologies to address consumer needs

Innovation?: 1. Use Consumer Hedonic toolset to identify needs (i.e. performance attributes

2. Implement FMCG product development methods

Done: Need for a skin car solution: materials identified

Done: Use of subcontractor model, brought team far upstream to consumer insights unmet product needs performance attribute maps useage.

Metrics: $ Sales beat expectations; >$20 MM ongoing. 15 Materials identifed.

Sales to manpower ratio for DuPont was below operational standard.

Answer: Sold business rights to Company X @ 15X; retained supply.

Cost of entry <0.3% NOS Product Power ~ 1


Case Study 3: EPC Multi Brand Global Company

Consumer Need: Bring New Product contribution to sales from 10% 35+%

Solution: Make products more desireable; eliminate SLOBS

Innovation?: 1. Build Product Cupboard of new problem solving technologies with 24 month planned recycling.

2. Teach R&D organization Stage Gate process and Consumer Insights

Created 48 month product portfolio aligned with Global Market Plan

Moved Consumer Insights under R&D; all Cupboard items required top box metric of 65%.

Metrics: New product contribution moved from 11% 38% in 3 years; #1 in market share in Sun care; #2 in Fem Care; #1 in Infant. Care

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Mo & Yr. 2003 2004 2005 2005 2006 2006 2007 2007 2008 2008of Launch Actuals Actuals Plan Actuals Plan Actuals plan Actuals Plan Actuals

New Products

Flushables Tub Feb-2002 2,881 Flushables Refill Feb-2002 1,329 Baby Canister May-2004 769 511 797 36 2 oz. Hand Sanitizer Dec-2005 291 729 270 429 131 8 oz. Hand Sanitizer Dec-2005 49 1,476 418 904 189 16 oz. Hand Sanitizer Dec-2005 12 378 177 220 11 2pk. Hand Sanitizer, 10oz. Dec-2005 518 144 208 92 Big Ones 35 ct. Dec-2005 29 2,000 1,155 2,320 1,208 1,500 1,424 35 ct. Outdoor Unscented WipeDec-2005 91 1,000 327 949 229 890 760 Fresh n Flush Singles Jan-2006 512 124 125 988 1,210 1,388 Singles Dispenser Jul-2006 1,500 1 302 2 Hunting and Fishing Wipe Jan-2007 227 - 250 188 Sensitive Skin Travel Pack Apr-2007 2,421 1,843 2,260 2,130 Sensitive Skin Canister Apr-2007 6,356 3,673 8,900 9,325 Sensitive Skin Singles Apr-07 589 465 750 680 Total Sales of New Products 4,210 1,037 511 1,268 8,113 2,653 5,684 8,831 15,760 15,895

Total Sales - 47,005 55,918 65,917 62,566 74,018 67,968 75,008 52,922 78,200 73,210% of New Products to Total Sales 9% 2% 1% 2% 11% 4% 8% 17% 20% 22%

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# of

SKUs $000's# of

SKUs $000's# of

SKUs $000's# of

SKUs $000's# of

SKUs $000's

Feminine Needs 2 33,328 4 43,878 4 48,780 2 30,560 2 54320

Infant Care 18 36,902 34 47,226 28 78,379 19 49,675 13 68250

Sun Care 9 23,071 10 63,141 6 113,749 11 118230 13 121500

Wet Towelettes 5 1,268 5 2,653 6 5,684 2 8,831 3 11050

Total Sales of New Products 34 94,569 53 156,898 44 246,592 34 207296 31 255120

Product Power 0.27 0.29 0.56 0.61 0.83

% New Product Contribution to Sales 14% 23% 33% 36% 38%

2005 2006 2007 2007 2008Actuals Actual Plan Actual Plan


Consumer Needs

Technology

Benefit

New Product Contribution

Polishing the nugget into gemstones

►The winning metrics:

•Cost of technology entry: Drive below Std. % NOS

• Product Power: As close to 1 as possible

• Product sibling lifetimes- Depending on category keep ahead of neighbors.

Special thanks to:

Jean Vernor

Don Donovan

Gary Cohen

Dave DiGiulio

And many, many others