the process of product development

8.1 Marketing Analysis – Product Development

Objective

To explain how a company converts market insights and ideas into a market‑ready product, and to show how this process links with market research, the product life‑cycle (PLC) and portfolio planning (Boston Matrix).

1. Sources of New Ideas & the Role of R&D

• Internal sources
  • Research & Development (R&D) – systematic investigation of new technologies, materials or processes. Key points for the exam: R&D must work within a budget, assess technical risk and allocate resources in line with corporate strategy.
  • Employees – suggestion schemes, cross‑functional workshops, “intrapreneur” programmes.
  • Management – strategic reviews, “blue‑sky” sessions, stage‑gate decision points.
• External sources
  • Customers – complaints, “voice of the customer”, co‑creation platforms (e.g., online idea‑sharing communities, crowdsourcing).
  • Competitors – benchmarking, reverse engineering, identification of market gaps.
  • Distributors & retailers – shelf‑performance feedback, order‑pattern data.
  • Market research – primary (surveys, focus groups, depth interviews) and secondary data (industry reports, trend‑watch services, social‑media monitoring).
  • Technological & social trends – sustainability, digitalisation, health & wellness movements.
• Innovation management (pipeline)
  • Provides a structured flow of ideas from generation to commercialisation.
  • Uses a stage‑gate model: each gate has explicit criteria (strategic fit, market potential, technical feasibility, financial viability) that must be satisfied before moving to the next stage.
  • Ensures alignment with corporate strategy, controls risk, and allocates resources efficiently.

2. The Product Development Process (seven stages)

The stages are presented in the exact wording used in the Cambridge 9609 syllabus.

1. Idea Generation

   What happens: Gather a broad pool of raw ideas from all internal and external sources listed above.

   Key criteria: Creativity, relevance to identified market needs, alignment with corporate objectives.

   Typical tools: Brain‑storming, Delphi technique, suggestion schemes, trend‑watch reports, online co‑creation platforms.

2. Idea Screening

   Purpose: Remove ideas that are unlikely to succeed before committing significant resources.

   Screening criteria (gate‑keeping checklist):

   • Strategic fit (brand, corporate goals)
   • Market potential (size, growth rate, segmentation)
   • Technical feasibility (R&D capability, time to market)
   • Legal / ethical considerations
   • Financial viability (rough ROI, break‑even estimate)

   Tools: Screening matrix, SWOT analysis, quick cost‑benefit check.

3. Concept Development & Testing

   Concept: A concise written description of the product, its benefits, target market and positioning.

   Testing methods: Concept statements, focus groups, online surveys, conjoint analysis, concept‑test scoring.

   Measured outcomes: Consumer interest, perceived value, purchase intent, suggested improvements.

4. Business Analysis (Quantitative Feasibility)

   Uses cost‑volume‑profit (CVP) techniques and price‑elasticity estimates to decide whether the concept is financially acceptable.

   Key calculations

   • Estimated selling price (based on perceived value and price‑elasticity).
   • Projected sales volume (derived from market research and concept‑test data).
   • Variable cost per unit and fixed costs (R&D, tooling, marketing, launch).
   • Break‑even volume: $$\text{BEV}= \frac{\text{Fixed Costs}}{\text{Price} - \text{Variable Cost per unit}}$$
   • Projected profit: $(\text{Price} - \text{Variable Cost})\times\text{Expected sales} - \text{Fixed Costs}$
   • Return on Investment (ROI): $\displaystyle \frac{\text{Projected profit}}{\text{Total investment}}\times100\%$
   • Price‑elasticity of demand (PED): $$\text{PED}= \frac{\%\Delta Q_d}{\%\Delta P}$$ Used to test how a change in price will affect expected sales and to choose between a penetration or a skimming price strategy.

   Tools: Spreadsheet models, CVP calculators, sensitivity analysis, elasticity calculators.

5. Product Development (Prototype)

   Activities: Detailed design, engineering, creation of a working model or service blueprint.

   Testing: Functionality, safety, reliability, user‑experience trials, compliance checks.

   Iterative refinement: Feedback loops (gate reviews) to improve the prototype before larger‑scale testing.

   Tools: CAD software, rapid‑prototype equipment, pilot production runs, design‑for‑manufacture checklists.

6. Market Testing (Test‑Marketing)

   Launch the prototype in a limited geographic area or to a defined consumer segment.

   • Validate demand forecasts and price elasticity estimates.
   • Identify required adjustments to product, price, promotion or distribution.
   • Collect real‑world data on sales, market share, consumer reaction and competitor response.

   Tools: Test‑market plan, sales‑tracking systems, post‑purchase surveys, A/B pricing tests.

7. Commercialisation (Full‑Scale Launch)

   Introduce the product to the whole target market.

   • Production scaling: Secure capacity, achieve economies of scale, manage inventory.
   • Pricing strategy: Choose penetration or skimming based on the PED calculated earlier.
   • Promotion mix: Advertising, sales promotion, public relations, personal selling, digital marketing.
   • Distribution: Channel selection, logistics, retailer agreements, e‑commerce platforms.

   Tools: Production scheduling software, launch‑campaign calendar, channel‑partner contracts, KPI dashboards.

3. Linking Product Development to Other Marketing Concepts

• Market Research: Supplies primary and secondary data for idea generation, concept testing, market testing and the quantitative forecasts used in business analysis.
• Product Life‑Cycle (PLC): The development stage feeds directly into the *introductory* phase of the PLC; a successful launch moves the product into growth, then maturity and decline.
• Portfolio Analysis (Boston Matrix): New products are plotted as “Stars” (high growth, high share) or “Question Marks” (high growth, low share). The matrix helps decide whether to invest further, harvest or discontinue.

4. Summary Table – Stages, Activities, Outputs, Tools & Success Criteria

5. Common Pitfalls & How to Avoid Them

• Over‑reliance on internal ideas – complement with systematic external scanning (customer co‑creation, trend‑watch services).
• Excessive testing – set clear time‑and‑cost limits for each test phase; use “go/no‑go” gate decisions.
• Inaccurate sales forecasts – combine market‑research data, concept‑test results and scenario analysis; check assumptions with price‑elasticity estimates.
• Failure to adapt after test‑marketing – treat test‑market findings as a mandatory trigger for product or marketing‑mix revisions.
• Ignoring price elasticity – incorporate PED in the business‑analysis stage to set a price that maximises revenue without sacrificing market share.
• Neglecting budgetary constraints and risk in R&D – include cost‑benefit and risk‑assessment checks at the R&D gate.

6. Exam Tip for Cambridge A‑Level (9609)

When a question asks you to “explain the product‑development process”, follow this three‑part structure for each stage:

1. State the stage name exactly as in the syllabus.
2. Briefly describe the main activities and the gate criteria used to move to the next stage.
3. Mention at least one tool (e.g., screening matrix, focus group) and a link to another part of the syllabus (market research, PLC, Boston Matrix, price elasticity, R&D risk assessment).

Using the summary table as a quick‑reference checklist will help you keep answers concise, fully relevant and well‑structured.