The basic principle of product development is to identify the needs of the buyers and the users, and design the products towards meeting these needs. This means that the market segments for the products are an important basis for grouping products. There are five main market segments:
1. Consumers: mainly branded products.
2. Retailers: branded products, ingredient mixes.
3. Food service: partially prepared meals, meal ingredients.
4. Industrial processors and manufacturers: differentiated ingredients.
5. Primary processors: commodities, undifferentiated raw materials.
It is important to recognise that there are major differences in the development of products for these different segments. If a company moves from differentiated ingredients for food manufacturers to consumer products to be sold through retailers, there is a need for new knowledge and new resources in the company.
Each of these five main segments can be divided into further segments. There are five common consumer market-segmentation categories:
Regions, social classes, ethnic groups, households, age, sex and income are typical groupings for which statistical census data can be found, but consumer targeting can be more accurate if psychographic segments based on life style, behaviour, personality and attitudes are used. User behaviour segmentation on usage rates, brand loyalty status, purchase occasion and benefits sought are useful for targeting product development. In industrial segmentation, two stages can be used: firstly companies are grouped according to location, size and type of processing, and secondly by company factors such as technical expertise, product needs and service needs. It is important that both the product and service needs are recognised in segmentation for industrial product development. Food service is divided into two broad groups - commercial and institutional; but of course there are important internal segments in these such as large chain fast-food companies, fine food restaurants, family restaurants (Schaffner et al., 1998). The segmentation strategy depends on the company's overall business and marketing strategies. But it is important that the market segments are clearly recognised in developing groups of products for product strategy.
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