sources of new ideas for product development

8.1 Marketing Analysis – Product Development

Objective

To understand the complete product‑development cycle, the main sources of new ideas that feed it, and the criteria (including quantitative tools) used to evaluate and select those ideas.

1. The Full Product‑Development Cycle (Idea → Commercialisation)

Idea Generation → Idea Screening → Concept Development & Testing → 
Business Analysis (costs, profit, break‑even) → Product Development 
(prototype, technical design) → Test‑marketing → Commercialisation
    

Each stage is briefly described below so you can recall key assessment points in the exam.

• Idea Generation: Sources of new product ideas (internal & external).
• Idea Screening: Apply feasibility, profitability, strategic fit, PLC position and sustainability criteria.
• Concept Development & Testing: Turn the idea into a detailed product concept; test with a small group of target customers.
• Business Analysis: Estimate sales, costs, contribution margin, break‑even point and overall profitability.
• Product Development: Build prototypes, refine technical design, ensure manufacturability.
• Test‑marketing: Launch the product in a limited market to gather real‑world performance data.
• Commercialisation: Full‑scale launch, distribution and ongoing marketing‑mix decisions.

2. Why a Systematic Search for New Ideas Matters

• Keeps the business relevant in fast‑changing markets.
• Enables growth by expanding the product portfolio and filling gaps in the product‑life‑cycle (PLC).
• Reduces failure risk by aligning ideas with real market needs and profitability targets.
• Supports sustainable and ethical innovation, enhancing corporate reputation (link to 6.1.3 CSR and 8.2.3 Sustainable product development).

3. Sources of New Product Ideas

3.1 Internal Sources

1. Research & Development (R&D) Departments
   • Systematic scientific research, technology scouting, prototype testing.
   • Creates proprietary knowledge, patents and a competitive edge.
   • Example: R&D develops a biodegradable polymer for cosmetic packaging.
2. Employees (front‑line, production, managers)
   • Daily contact with processes and customers reveals problems and opportunities.
   • Suggestion schemes, idea‑capture portals, internal innovation contests.
   • Example: A sales assistant proposes a “mini‑size” version of a best‑selling snack.
3. Sales & Marketing Teams
   • Feedback from sales calls, market reports, promotional performance.
   • Spot gaps in the current range (e.g., missing colour, size or usage occasion).
4. Customer Service & Support
   • Complaints, queries and recurring issues highlight improvement opportunities.
   • Example: Frequent complaints about short battery life lead to a higher‑capacity model.
5. Company Data & Analytics
   • Purchase patterns, basket analysis, churn rates, product‑usage data.
   • Data‑mining can reveal “hidden” needs (e.g., customers buying printers and ink together suggest a bundled offering).

3.2 External Sources

1. Market Research
   • Primary research: surveys, focus groups, in‑depth interviews, test‑markets – give direct insight into consumer wants.
   • Secondary research: industry reports, government statistics, trade journals – provide broader trend data.
   • Sampling techniques (random, stratified) ensure reliability – a key exam point.
2. Competitors
   • Benchmark product features, pricing, positioning.
   • Identify “white spaces” or gaps in rival portfolios.
3. Suppliers & Distributors
   • Access to new materials, technologies and logistics solutions.
   • Feedback on product performance in the supply chain.
4. Technological Advances
   • Emerging tech such as IoT, AI, biodegradable polymers, 3‑D printing.
   • Patents and academic research that can be commercialised.
5. Social & Cultural Trends (PEST – Social)
   • Changes in lifestyle, demographics, health consciousness, values.
   • Example: Rise of plant‑based diets creates demand for vegan food products.
6. Regulatory Changes (PEST – Legal)
   • New legislation (e.g., EU single‑use‑plastic ban) creates demand for compliant alternatives.
   • Early adopters can become market leaders.
7. Ethical, Sustainability & CSR Trends (link to 6.1.3 & 8.2.3)
   • Consumer concern for environment, fair trade, social impact.
   • Ideas: “green” packaging, carbon‑neutral products, charitable‑linked ranges.
8. International Market Influences
   • Global trends, trade agreements, cultural differences shape idea generation and product adaptation.
   • Example: Adapting a flavour to suit Asian taste preferences when entering that market.

4. Evaluation & Selection (Idea Screening)

Ideas are assessed against the following criteria. Where a quantitative test is required, the relevant formula or method is shown.

Worked Example – Profitability Screening

Idea: “Mini‑size organic granola bar”.

• Estimated selling price: £1.20 per bar
• Variable cost (ingredients, packaging, labour): £0.70 per bar
• Fixed costs (R&D, tooling, marketing launch): £120,000

Contribution margin per unit = £1.20 – £0.70 = £0.50

Break‑even units = £120,000 ÷ £0.50 = 240,000 bars

If market research forecasts 500,000 bars in the first year, projected profit = (500,000 × £0.50) – £120,000 = £130,000 → ROI = (£130,000 ÷ £120,000) × 100 % ≈ 108 % – therefore the idea passes the profitability test.

5. Elasticity of Demand – Relevance to New Products

Understanding elasticity helps decide the optimal price for a new product and predicts how changes in income or promotion will affect sales.

6. Sales Forecasting – Role in the Business‑Analysis Stage

Accurate forecasts feed the profitability calculations and the break‑even analysis.

• Quantitative methods
  • Time‑series analysis (trend, moving average, exponential smoothing).
  • Regression analysis – relates sales to an explanatory variable (e.g., advertising spend).
• Qualitative methods
  • Delphi technique – expert consensus.
  • Executive opinion, market‑share target, scenario planning.

7. Implications for the Marketing‑Mix (4 Ps) of a New Product

8. International Marketing Considerations

• Global trends (e.g., digital health wearables) can be a source of ideas.
• Trade agreements affect cost structures and pricing strategies.
• Cultural adaptation: modify flavour, colour, labelling to suit local preferences.
• Regulatory differences: safety standards, labelling laws, import duties.

9. Comparison of Internal vs. External Sources

10. Practical Steps to Harness All Sources

1. Launch a digital idea‑capture platform (intranet portal) with tags for “internal” and “external”.
2. Run quarterly cross‑functional workshops (R&D, marketing, sales, finance) to review and score captured ideas.
3. Maintain a calendar of primary market‑research projects (surveys, focus groups) and a subscription list for secondary reports.
4. Organise an annual supplier‑innovation forum to learn about new materials, technologies and logistics solutions.
5. Subscribe to regulatory newsletters, industry bodies and CSR watchdogs for early alerts on legislative changes.
6. Use business‑analytics software to mine sales data for hidden patterns (e.g., “bundling” opportunities).
7. Apply the screening matrix (feasibility, profitability, strategic fit, PLC, sustainability) and calculate break‑even and ROI before moving to concept testing.
8. Integrate elasticity analysis to set an initial price and plan the promotional budget.

11. Links to Other 8.x Topics

• 8.3 Elasticity of Demand – used in pricing decisions for new products.
• 8.2 Sales Forecasting – quantitative and qualitative methods feed the Business Analysis stage.
• 8.4 Marketing‑Mix Decisions – the product idea determines the 4 Ps for the launch.
• 6.1.3 CSR and 8.2.3 Sustainable Product Development – are embedded in the evaluation criteria and in the generation of ethical ideas.