Image Credit: Mike Mozart
Product managers for food products are facing a couple of different challenges right now. The first is that the cost of making food is currently rising. This means that their products are becoming more expensive even without them doing anything. The other problem that they are facing is that they are facing tough competition – other companies are making food products that are similar to theirs. Just like product managers everywhere, food product managers are under pressure to look at their product development definition in order to find ways to boost their profits. They think that they may have found a way to make this happen.
How To Charge More For Food
So exactly how can a product manager go about raising the price on their food product without losing market share to their competition? It turns out that one way to do this is to create more expensive sizes and flavors for their food. What product managers need to understand is that they need to keep their food offerings in line with what their customers are going to be willing to afford. Examples of how product managers are going about doing this kind of food positioning include new fudge-dipped Oreo Thins that cost US56 cents per ounce as opposed to standard Oreo thins that cost 30 cents per ounce. Hershey is creating a new stand-up candy pouch that will cost more then their current bags do.
Every meal is open to this kind of food manipulation. Kellogg is planning introducing Eggo waffles that are flavored with imported vanilla that will cost 28 cents more per ounce. Additionally, General Mills new Special K probiotic cereal will be sold for 26 cents per ounce vs the normal 22 cents per ounce for normal Special K cereal. As more and more product managers start to create new versions of their food products, its starting to have an impact on grocery store prices. In the past year, grocery store prices have risen by nearly 2%. Product managers are going to have to be careful to make sure that this doesn’t look bad on their product manager resume.
The reason that this new tactic is proving to be so successful for product managers is because they are able to start to charge a premium for their new products even though their input costs have basically remained the same. Product managers are used to engaging in tough negotiating with grocers regarding what should be charged to customers. Grocery stores are trying to limit prices so that they can continue to attract shoppers. However, when it comes to the new types of foods that product managers are now creating, grocery stories have been more open to higher prices on new styles or flavors of existing products as opposed to raising prices on familiar packaged foods.
How To Make Even More Money On Food Products
Food product managers are getting pressure from all sides these days to find ways to get more money from their products. The arrival of Amazon.com into the food market has changed everything. Amazon has started to press brands to rethink their packaging along with the varieties of products that they are offering in order to find ways to make online sales of food products more profitable. An example of this is what Hostess Brands is doing. They are creating new flavors of what they are calling premium snack cakes. These products are being created in order to attract new customers at higher prices. The new products will cost 47 cents per ounce which is roughly double what Twinkies cost.
Product managers realize that just creating a new product is not going to be enough to attract new customers. Product managers are going to have to find ways to demonstrate that the new flavors and food styles that they have created are distinct enough to cause customers to move away from the standard version of the product. Product managers need to understand that by creating something that their customers did not know that they needed they are innovating. This will work with customers only if they believe that they are getting what they want.
What product managers need to realize is that price is still a key factor that customers use when they are choosing what grocery store they want to shop at. Variety and selection are close behind. Product managers need to understand that things like individually wrapped snacks and single servings along with resealable packaging are important to customers and that they are willing to pay more for it. This is all very important because prices for shelf stable goods are rising. When this happens, stores often start to stock their own lower prices store brands in order to show their customers that prices have not become more expensive overall.
What All Of This Means For You
Food product managers find themselves in between a rock and a hard place. The cost of making their products is increasing at the same time that the competition that their food products are facing is also increasing. What they need to do now is search their product manager job description for ways to make their food products more attractive to potential customers. The good news is that they think that they may have found a way to make this happen.
The secret to creating successful food products is to take existing popular food products and then create new products based on them by varying the size and the flavors. When new foods are created, they generally cost more per ounce than the existing versions of the food. Foods for all meals are open to this kind of modifications. The result of of these higher priced variants is that the cost of food in a grocery store is starting to rise. Grocery stores generally hold the line on existing food products; however, they have been open to allowing new product variants to be priced higher. The arrival of Amazon in the grocery store market means that there is now more pressure to create versions of products that can be sold easier online. In order to convince customers to purchase the new products requires product managers to show them that the new products are worth the extra money. Product managers need to be careful because customers still choose their grocery stores based on price and these stores will substitute lower cost products in order to keep prices low.
Food product managers are facing a number of different challenges. They are expected to find ways to make their products become even more successful even as the price of food creeps up and competition increases. Creatively finding ways to update their food products and present them to customers in new ways is a great way to get more money for the same products. Product managers need to be careful to not go too far and have to make sure that their new product variants will still appeal to their existing customers. If they can get this right, then they may have discovered the winning formula for marketing food products in a competitive price conscious market.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: Do you think that any product variation needs to be closely linked to the original product or can it look different?
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What We’ll Be Talking About Next Time
So when you are hot or thirsty, what do you like to drink? The answer to that question can be any one of a large number of different types of beverages: water, soda, juice, beer, etc. However, somewhat surprisingly the more and more answer is turning out to be seltzer – sparkling water. Consumer’s desire for this beverage is causing seltzer product managers to scramble to meet the needs of their customers.