New consumer product or service concept for Dimmeys and Forges

Dimmeys & Forges

Dimmeys and Forges is a discount store operating across most of Australia. Dimmeys sells housewares and clothing. The company's model involves purchasing stock lots, which are lots that cannot be sold through normal distribution channels for a variety of reasons. They may be discontinued lines, overproduction or goods that have been subject to packaging or labeling changes such that the old stock must be moved at clearance. The value proposition for Dimmeys is to purchase these stock lots at low prices and then offer them for sale. The products are priced below the standard retail for that product or brand, offering a strong value proposition to the customer (Dimmeys.com.au, 2009).

It is proposed that Dimmeys introduce its own house brand items, beginning with cookware. The stores have a captive audience, but the stock lot model does not allow for consistency in the store's product lines. Goods may be out of stock or generally unavailable at some stores during times. This lends a degree of inconsistency to the product offerings at Dimmeys. This creates the risk that the customer may not find what they are seeking, and therefore may go elsewhere. The objective of the house brand strategy is to ensure consistent availability of certain core items. The long-term objective of the strategy is to build a wide range of house brands at Dimmeys. However, the project pilot will be cookware -- pots, pans and cooking utensils. Such products have a higher degree of brand awareness than many of the other items that Dimmeys stocks, so they are a good test for the ability of Dimmeys to extend its brand into the actual products that it sells, rather than just the store itself. The objective of this test project is to determine the ability of Dimmeys to move into house-branded merchandise, a strategy that will strengthen the Dimmeys name and draw customers into the store by guaranteeing consistent availability of high demand goods.

Part II: Traditional research regarding new product adoption and diffusion focuses on the way that new product introductions diffuse into the marketplace. Rogers (1976) outlined the early thought on the matter, in which sociologists and to a lesser extent marketers analyzed consumer behavior with respect to new products. Among the key highlights of this research was information on the role of opinion leaders, the customers who are among the early adopters of a new product innovation. In order for a new product to gain a foothold in the marketplace, those consumers prone to early adoption need to be cultivated, for without them other consumers will be less likely to adopt the new product.

The basic model with respect to new product diffusion, the Bass Model, was first proposed in 1969. Over time, the model has been widely adapted and tested against other variables such as price and advertising. In general, the Bass Model has been found to hold against a wide range of other such influences. New products are adopted first new adopters ("innovators") and then by imitators of those innovators. The Bass Model has therefore become the cornerstone of research on new product introductions (Bass, 1969 & 2004).

Later research broke down the adoption process into two key areas -- awareness and adoption. The role of the opinion leader is critical, as understood by the epidemic analogy. The new product must be adopted early, and then it will spread through the rest of the marketplace. Awareness is critical to both the early adoption and then to the spread. Kalish (1986) analyzes awareness in the context of advertising and adoption in the context of price. His work found that awareness allows early adopters to purchase the product. As those early adopters diffuse information about the product, they thereby reduce the risk to other consumers. This in turn allows the company to charge more for the product, as downside risk to consumers is reduced.

It is worth noting, however, that this process is far from simple. Approximately one in eleven ideas or concepts becomes a viable new product. One of the most significant obstacles to successful introduction of a new product is insufficient resources. A survey of 189 companies found that firms that failed to commit sufficient financial or managerial resources tended to have less success with their new product introductions. New product introduction is typically multidisciplinary in nature, requiring significant marshalling of resources (Page, 1993).

Researchers over the years have established a number of key success factors for new product introduction. Ernst (2002) outlines a number of these success factors. One is knowledge of the target market -- price sensitivity, understanding of buyer behavior and knowledge of customers' needs. A strong market orientation therefore is important to successful new product development. A wide range of studies over the years has found that the stronger the knowledge of the product and the intended target market, the more likely the product introduction is to be a success.

The management science regarding new product development has been turned into a business by a number of firms. One such firm, DRM Associates, outlines its product launch process. Their process begins with a review of the existing process, which is then improved. The deficiencies identified in the review are corrected, including package design, marketing, advertising, distribution planning, logistics and market testing (DRM Associates, 2002).

Less scientific knowledge is also available, from a number of sources. Entrepreneur Magazine writer Kim Gordon (2005) offers a number of tips. These include studying the competition, targeting the ideal customer, creating a unique value proposition, defining your marketing strategy and tactics, testing your concept and marketing approach, rolling out the campaign and understanding the product's lifecycle.

Other sources also reinforce the notion that proper research and planning is key to a new product launch. One author suggests a trial balloon of your intended marketing approach might work, or that a test marketing campaign will allow the company to determine if its strategy is going to be a success (Ngheim, 2009). The branded cookware is essentially that sort of trial balloon for Dimmey Forges, to gauge market response to house-branded items.

The type of launch that is proposed for the branded cookware is essentially a soft launch. Thus, the company is going to launch the cookware quietly and gauge the response without the impact of a high-end advertising campaign. Soft launches minimize risks while testing assumptions (Hart, 2007). By gauging market response, feedback can be gained with respect to the product's value proposition and the ways in which the target market can be expected to respond to a broader launch. Adjustments can then be made in advance of the major launch, or if response is sufficiently poor the launch could be scrapped altogether.

Several pitfalls can scuttle a successful new product launch. The industry firm Phase Forward (Adams, n.d.) outlines these in a newsletter. Among the most relevant to our product launch are not involving the right people in the cross-functional team, not resolving issues, not mapping out the processes in advance, not having the right systems in place to support the launch, not understanding the true priority of the launch and not communicating enough. These are internal issues that reflect on the organization's commitment to the project and the organizational readiness for the launch. If the organization is not ready to launch the product effectively and efficiently, then it does not matter whether or not the product resonates with the marketplace. The right product launched the wrong way will still fail, just as surely as the wrong product launched well will fail to find a market.

Part III: Having discussed the idea of the new branded cookware launch with four people from the target market, the responses were perhaps surprising for Dimmeys executives. The first respondent, a married female in her late 20s, was impressed with the idea but did not feel as though it was enough to compel her to change her shopping habits. She felt that the branded line addressed a problem (lack of product line consistency) that was not something she considered to be a problem. Dimmeys is not expected to have the same products year over year because of its business model. She applauded the idea in principle, however. When it came time to analyzing the potential change to her shopping patterns, she balked. The branded line would not entice her any more than the other offerings at Dimmeys, simply because the store was a convenient means of purchasing name brand goods at discount prices because of overproduction or overstock. Thus, while she felt that the idea was good in principle, it did not meet any of her needs. The issues that this individual had with Dimmeys were not related to the issues that this new product would address.

The second potential customer, a divorced man in his forties, was even less impressed. He did not feel that the idea supported Dimmeys image as a discounter. He would not trust product that bore a house brand because he did not know the origins of the product, whereas with name brands he at least had the opportunity to judge the brand on its known merits. Although a regular Dimmeys shopper, he doubted that his purchasing habits would change, particularly since he did not know the price point at which the new cookware would be offered. He also questioned the value of having house brands, hinting that even if they succeed, they will simply cannibalize sales of existing products rather than drive new business to the store.

The third potential customer, a single female in her early twenties, was the most impressed. She valued the Dimmeys brand and related a history of positive experiences with the stores. She viewed other store brands as being a positive contribution and felt that the positive associations she has with the Dimmeys brand would carry over to the cookware. She felt that cookware alone would not be compelling, but that a full line of Dimmeys good might be a better proposition. She did, however, seem enthusiastic about the prospect of receiving an even better bargain if the house brand was competitively priced and of good, name brand quality. When asked if she would support the brand if quality was merely equivalent to name brands she indicated that she would, but seemed less enthusiastic. When specifically asked if she would purchase the brand before seeing the reaction of her peers to the brand, she said she would likely wait to see their reaction first.

The fourth potential customer, a college-aged single female, was not favorable to the idea. She felt that the prices were fairly good to begin with, such that house-branded items would probably cost the same as the regular stock at Dimmeys and therefore would not be something she would consider good value. When questioned as to what would compel her to adopt Dimmeys branded goods, she postulated that if her friends vouched for them, she might be willing to give them a try. She was not at any point during the interview enthusiastic about the brands and seemed to equate the idea with a poor product.

Overall, the group's disparate responses suggest a generally lukewarm attitude to the idea. Only one respondent genuinely felt that the idea had strong merit and could fill a need. All who favored the idea did so only with qualifications, such as low price and high quality, or positive reviews from peers. There were no obvious candidates for early adoption. In general, it was felt that the product did not fill an existing need for consumers. Dimmeys generally carries a good range of products, even if the particular products are ever-changing and sometimes subject to limited availability. The forth respondent seemed to suggest that perhaps the move could backfire if the typical Dimmeys sales were seen as a loss leader for the house-branded, always-in-stock items.

There are significant implications of these findings for Dimmeys. The prevailing literature indicates that finding early adopters is a critical part of the product launch cycle. None of the interviewees seemed like a good candidate for early adoption. Many were outright skeptical of the idea. The Bass Model shows that because the general target market is imitators, they need somebody to imitate and in this case that looks unlikely.

The lay literature on the subject highlights the importance of proper planning and gaining an acute understanding of the target market. The interviewees indicated that the new product did not fill a need of theirs. If this is the case, then consumer response can be expected to be tepid. Dimmeys does not appear to have a strong enough understanding of what its target market needs from new products. Indeed, the main benefits of the house-branded cookware appear to be to the company in terms of brand-building rather than to the customers. If customer needs are not met, however, the brand-building will not occur either, so it is important that Dimmeys take the time to better understand its target market.

Part IV: Dimmeys should not offer the branded cookware. The product does not appear to meet the needs of the target market. Either Dimmeys has not understood the target market's needs or they need to cultivate a different target market. They have, however, an established customer base. The new product appeals to that customer base but also runs the risk of cannibalizing existing products. In addition, Dimmeys already offers bargain-priced goods, which is often the appeal of house-branded wares. Thus, the new product is essentially meeting a need that it already being met, by and large, with the current product offerings. Dimmeys should instead focus its efforts on the development of a broader product range, rather than new lines of the same products.

However, the branded cookware was merely a trial balloon. If the company is serious about launching a full range of branded goods, then the trial will be used to assess the potential success of the strategy. Management will most likely give the project its full organizational and financial commitment, which increases the likelihood of success. Moreover, branded goods may as yet undercut the prices of the current product lines, which gives them an even greater change of success.

That said, the lack of early adopters among the existing clientele seems to be the most difficult hurdle to overcome. The company can invest significant amounts of money into awareness, but may not see strong sales if some of the target market can be convinced to become early adopters. In this instance, there is no evidence that such a group exists among the existing target market. The product is simply not unique enough, and there is a risk that the branded cookware will not be perceived as offering a substantial enough value proposition to overcome the consumers' natural tendency towards risk aversion.

A better choice for house-branded wares is Myer. That chain markets name brand goods and is not a discounter. Thus, it is reasonable to expect that house-branded goods would be more of a complement to the existing product line than they would be at Dimmeys. The store also has a more high-end image, which would make cookware a more logical starting point than it would be at Dimmeys. The target market at Myer is more likely to have early adopters among its ranks as well, given that they are more fashionable and upwardly mobile.

In order to successfully launch house-branded cookware at Myer, a number of steps must be undertaken. The first is that the launch must be conducted with strong knowledge of the target. It is suspected that the Myer market is better for a slightly discounted house brand line, but that needs to be confirmed with extensive market research. The company has room in its offering for something that is high quality but priced slightly lower (but with higher margins) than the regular brands they currently sell. However, these suspicions should be confirmed with extensive research.

The second step in the launch is to cultivate the early adopter. According to the Bass model, these "innovators" are the key to a successful new product launch. Combine this with the need for extensive target market research and Myer must therefore focus on understanding the specific psychographic of the early adopters within its target market. Then, the company must hit successfully on the other two key success factors -- price and advertising.