Skip to content

Marketing innovation

Why read this? Marketing innovation is how brands create new products and services. Meeting customer needs in new ways drives growth. Read this guide to learn the opportunities and challenges that come with marketing innovation. Where to look for innovation ideas. Different ways to manage the innovation process. And learn key tools you need to plan ahead for what happens after you launch. 

Marketing innovation

How this guide raises your game

  1. Learn the different types of marketing innovation and what each means for your business.
  2. Understand marketing innovation process options to move from ideas to launches.
  3. Get ideas on how to manage marketing innovation once it has launched to market.

Marketing innovation is the process businesses use to create and launch new products and services. It combines market research and marketing planning with operational management and financial planning.

It usually runs in parallel with managing existing products and customers. It’s a way to grow your business by meeting new needs from customers.

Marketing innovation’s key roles are to  :-

  • Identify growth opportunities.
  • Set up efficient processes to create and launch new products. 
  • Manage the launch and post-launch marketing plan.
Close up of a man's hands holding a light bulb that's illuminated

Ready to test your knowledge?

What’s your starting level of knowledge about marketing innovation?

Take the 2 minute, 5 question Three-brains marketing innovation quiz and see how much you know about marketing innovation already.

Identify growth opportunities

To find new growth opportunities, you first need to know where to look for them. But where do “new” ideas live? What do they look like? And how do you know they’re the right new idea for you? 

It’s tricky because “new” is such a broad concept in marketing innovation. It can have different meanings 

For example, “new” to market could be as simple as a colour change on your packaging. Or it could be complex as inventing a completely new category and changing existing behaviour. (e.g. touchscreen mobile phones). Both of these are “new”. But obviously, they require very different sets of skills

To help narrow down your choices, there’s 3 different approaches you can use :-

Ansoff matrix

The Ansoff matrix is a simple strategic planning model, first proposed by Igor Ansoff in 1957.

It proposes business growth comes either from products – what you sell, or markets – who you sell to. With each of these sources of growth, you can either grow your existing business or grow from new areas.

Combining products and markets with existing and new gives you a 2 x grid with 4 different ways to grow :-

  • market penetration.
  • market development.
  • product development.
  • diversification.
Ansoff matrix - Marketing innovation options - 2 x2 matrix of new/existing products and markets

Our Ansoff matrix article covers each of these in more detail, but we’ll summarise the key points of each here. 

Market penetration

This is a growth strategy where your aim is to sell more of your existing products to existing customers. The might mean minor upgrades to the product. Or you pull on marketing mix levers like price discounts for example, increase your distribution or go hard on your communications

This strategy focusses on growing market share. Of the 4 Ansoff growth options, it’s seen as the lowest risk. It’s what you’re already doing, and it’s in areas you know well. Your existing products and your existing markets. Risk comes in when you go into areas you don’t know. 

Market development

With this strategy, you take your existing products and aim to sell them to new segments of customers.

The most obvious route is geographic expansion, where you sell to new cities, states or countries. 

But it could also include finding new uses or occasions for your products.

For example, look at how Uber expanded from being a lift-sharing business to being a food (and other products) delivery business. 

The product is essentially the same – they transport something conveniently from A to B. But they’ve found a new occasion for people to use those services – takeaway deliveries.

Product development

With product development, you create new products to appeal to your existing customers. This is also sometimes known as range extension. It’s more than a cosmetic or design change. It brings something completely different and meets a different customer need.

You see it in the alcohol market for example, where many brands will add new flavour variants, or more premium versions of their core products. 

It usually requires an investment in Research and Development. There’s always a risk your existing customers won’t buy into the new product concept. They may prefer what they already have. 

Bundaberg rum website page showing their exclusive range of products

Diversification

The final Ansoff matrix option is diversification.

This strategy is where you essentially start with a blank page, as if you were a new business. You develop new products and go after new markets. 

This is often seen as a high-risk, high-reward approach to growth. You don’t have a strong base of experience or knowledge when both products and markets are new.

There’s a higher chance of mistakes happening and you often need to invest heavily to drive the new business. 

Most diversification initiative don’t work. But the ones that do often break new ground.

For the lucky few, they can gain first-mover advantage. It happens in some technology industries for example.

Twitter was originally a podcasting platform for example. Flickr was originally a role playing game. Instagram was originally a check-in app. In each of these cases, the companies diversified and came up with new products that went after new markets.

Market research for innovation

Once you have an idea where that growth might come from, you need to work out what the actual opportunity is.

The simplest way to do that is to ask customers what they need using market research. 

You’d normally do this with qualitative research. One-to-one and focus group interviews with customers to ask them how they currently use products in the relevant category. What do they like about them? And more importantly what don’t they like about them?

There’s usually more opportunity to grow where customers are dissatisfied.

Person holding glasses in front of them against a blurry street background

When existing products don’t do what they want them to. When products underperform, or when customers think “if only (the product) could do this”.

This type of research gives you  ideas about product features and benefits which could inspire your R&D team. It could also help you identify segments whose needs are currently poorly served. You could develop something that better meets their needs than the current options. 

Once you develop and refine your idea, you’d also normally validate the opportunity with some quantitative research. This puts the concept in front of a statistically representative sample of the target so you can validate how many are likely to buy if you launch.

Generate ideas and test them

Your ideas should be customer-focussed, but new ideas don’t always have to come from customers. Customers don’t always know what they need.  

Ideas can also come from the people inside your business. They spend more time than customers thinking about the product, so it’s more likely they can imagine some completely new way of using the product or identifying a new need. 

Post-its for example started as just a lightly sticky adhesive. But they famously took off when a researcher at 3M found they worked brilliantly for marking pages in books. 

Yellow post it with illustration of a lightbulb pinned to a wooden pin board

You can run idea generation sessions with your team and your agencies to explore potential ideas. You can take these from existing market research you have, or brainstorm completely new ideas.

You’d then put these ideas into the qualitative and quantitative market research process we just outlined.

Innovation processes

Once you’ve identified growth opportunities and innovation ideas, you need a marketing innovation process to efficiently manage those ideas. 

There’s 2 main approaches  :-

  • the formal (waterfall) innovation process.
  • the informal (agile) innovation process. 

The innovation process - Formal

The formal marketing innovation process starts with the idea that marketing innovation needs a high level of resources –  money, people and time. You need a formal, structured approach to innovation to manage this high level of investment. 

Control is important. You need safeguards to avoid unnecessary risks. Innovation shouldn’t threaten the business or waste resources. Tried and tested procedures should be in place to ensure marketing innovation projects meets all internal guidelines. This could be quality standards or expected return on investment for example.

This formal process is enforced across the business. This means more time on projects, and less time on process.

Formal innovation projects run with a waterfall approach. The project team follow a series of logical sequential steps to deliver a specific end goal. This is the traditional way to run marketing innovation projects.

While this approach brings a lot of control and consistency to marketing innovation, it’s not without challenges.

Challenges with formal innovation process

There’s 2 particular challenges which stand out.

The first is the length of time for an idea to move through this formal process. The process normally involves a number of approval sessions on the idea. Senior managers review the idea and plan, and approve or reject it. 

Multiple approval stages mean innovations take longer to hit the market. In the formal model, marketing innovation is slow. And it also increases the chances someone will delay or kill a good idea because it doesn’t suit their agenda. 

This can mean you miss out on opportunities if a competitor launches faster. Or something else changes in the market while you wait for approval. 

The other challenge the formal approach faces is that it’s better for sustaining, not disrupting innovation.

In the formal innovation process, businesses want certainty of what innovation will deliver. For example, how much the product will sell in a year, or how customers will react to it.

But this is much easier to do with sustaining innovation – where you know the products and markets. It’s much harder to do for disrupting innovation, where the business has to make marketing decisions with some unknown factors. 

These unknowns in product and market development and in diversification make it hard for disruptive ideas to pass through a formal innovation process. Often, there will be scepticism about the size of the opportunity. That can kill an idea before it even gets started. 

The agile approach to marketing innovation aims to get round these barriers, by breaking innovation down into much smaller chunks. Smaller teams are empowered to drive more disruptive innovation. 

But before we go into that, let’s look at how the formal marketing innovation process works. 

The formal innovation process

The process varies from company to company, but typically we’d expect something like the six stages you can see in our innovation process diagram.

Ideas move through the process sequentially. You need approval to move to the next stage. After each stage, the business commits more resource (budget, time or people).

The level of detail behind the idea grows as it moves towards launch. You have a pipeline of ideas, loose at the start and fully formed by the time they launch. 

At any stage, a marketing innovation idea can be rejected. Only the very highest potential ideas or plans reach the launch stage.

Marketing innovation process - formal approach to screening and approval - 6 steps are idea generation, idea screening, business case, develop product, launch, post launch review - with different goals, costs and numbers of ideas

Idea generation

At the idea generation (often shortened to ideation) stage, you aim to generate as many ideas as possible. At this stage the “idea” is kept relatively simple. It’s often succinct enough to be written on a post-it.

Often businesses run ideation workshops with outside facilitators. They’ll use creative thinking techniques like brainstorming or Six Hats to generate many ideas. 

At the idea generation stage, EVERYTHING is possible. There’s no judgement of ideas this early in the process. One person’s crazy idea can spark someone else’s brilliant idea. 

It’s all about quantity, not quality of ideas here. But quality is what you start to look at next. 

Person holding light bulb with blurred out light effect in the background

Idea screening

From these high level ideas, the next stage is to flesh out the detail of the idea. At this stage, you ask the originator of the idea to apply more thought to their concept.

The idea here is to not go too detailed just yet. You ask the idea originator to complete a one-page template to help flesh out what’s behind the  idea. 

Idea screening template example

In this example, there’s nine criteria to fill in to flesh out the initial idea. These help define the idea in more detail so the business can decide whether it’s worth pursuing.

You move from “idea on a post-it” to “idea on a page”. 

Table the shows how to more from idea generation to Idea screening. Criteria are idea title, idea in a tweet, business fit, consumer insight, competitors, key product / service requirements, key enablers, obstacles or barriers, estimated launch timing

These criteria include a name, a short summary of the idea (no more than a few sentences) and how the idea fits the brand vision, identity or growth objective.

Then, some preliminary external factors such as the consumer insight and competitive environment. You’d also include internal factors such as the product or service requirements and any enablers or obstacles and barriers.

Finally, you sales include estimated launch timing.

Idea screening example

So let’s go back to our product development example of a new pasta range for our fictional pizza company.

You can see from this example how you’d add a few sentences against each of the criteria. Your aim is to make it clear why the business should pursue this idea.

At this stage you don’t need a high level of evidence or proof. But you need to articulate the idea in more detail than you did at idea generation. This lets the business compare different marketing innovation ideas against each other.

You’ll be able to see the projects with the highest potential. At this stage, obvious gaps or issues with ideas become more obvious. Some ideas will get rejected.

Idea screen example - pizza shop

Having a clear definition of what makes a good idea helps the process. It gives idea generators direction on who to communicate their idea. And it stops idea killers delaying or rejecting ideas for non-business related reasons. 

You should keep a record of rejected ideas though. They can be useful stimulus for future marketing innovation sessions.

Sometimes good ideas come up, but the time isn’t right to do them. But in the future, an old rejected idea might become a better fit if conditions have changed.

Business case

For approved ideas that pass through screening, the next stage is to go further by working on a business case.

Most businesses have their own format for business cases. In our example, we’ve kept it relatively simple by focussing on key questions to answer how the idea will develop. 

How will the idea develop?

While the screening template was relatively easy to complete, the process now gets more challenging. 

You have to start to investigate in more detail HOW you’ll develop the idea.

At this stage, you might test the idea with customers with qualitative research for example. This helps to refine the idea and build confidence customers will actually like it. 

The business case defines key decisions like the target audience and the fit to the brand identity.

This business case can  will also define the planned marketing mix. For example, price, channel and customer trade plans and a high level view of marketing communication plans.

marketing innovation business case challenges

The business case aims to test the validity and likely success of the idea. It sets expectations on how the idea will perform against competitors. It can explore the insight and the appeal to the target audience.

The business case also includes details on the finances. It should include the forecast and the profit and loss for the first 2 to 5 years. You should include additional costs like new machinery, extra staff, R&D costs or extra marketing spend. 

Compare innovation ideas with a scoring matrix

The business case can also include some sort of scoring matrix to help compare the attractiveness of different ideas.

This includes decision-making criteria defined by the business leadership team. Typically, these focus on financial returns and strategic fit. 

In this example, you can see we’ve identified 3 financial factors to evaluate – size, profit and spend.

For each factor, the idea would get a score – 1,3 or 9 – based on how it performs.

Because size of opportunity is such an important part of the opportunity, its score is often given extra weight. In this case, it counts double.

Innovation business case - Financial and strategy score

We’ve also identified 3 strategic factors. Fit to the brand vision, level of competition and how fast the marketing innovation can come to market.

The aim of the scoring matrix is to help you compare and plan projects. You prioritise the projects with the highest score. 

Develop product to launch

If the business case is approved, then a project team comes together to take the project to launch.

This launch plan usually works at 2 levels. There’s a high level launch plan which summarises the key points of the business case and what else needs to be done. 

Then, there’s a plan that’s essentially the  marketing plan for the new product. (see also our brand activation guide for more examples).

Usually, there’d also be a final approval by the business leadership team to go launch the product.

The final plan needs to build confidence that everything’s in place and ready to go. 

Business case to launch plan - marketing innovation

Launch and post launch review

Of course, once a new product hits the market, it needs on-going support to continue to  grow.

For this, the launch plan needs to cover who manages the product after it launches. It should show what resources you need (money, time, people), and how you’ll track and measure performance. You need to include how you’ll manage competitor reactions and challenges from retail customers. Include contingency plans for different scenarios in case the launch doesn’t go as planned. 

Final thoughts on the formal innovation process

The main benefits of this formal process is it reduces the chances of bad ideas making it to market. All ideas have to go through a series of hurdles before they can launch.

Anyone who has a stake in the innovation launch has a chance to share their views. The assumption is an idea becomes better when many people contribute to it, than when it’s just one person’s idea. 

However, as we’ve previously outlined, the downside of these hurdles and stakeholder engagement is that the process can be slow and risk-averse.

Running track with hurdles set up for a sprint race

It also requires a lot of discipline to maintain the integrity of the process. It’s easier to NOT do things than do new things. Functional politics in the business can derail the process. (see for example our articles on barriers to marketing and barriers to e-Commerce).

Though it’s designed as an innovation process, the focus is on killing rather than creating ideas. It’s frustrating when ideas get rejected close to launch after a lot of work’s gone into them. 

Agile innovation methodology

To get around the slow and risk-averse downside of formal marketing innovation, in recent years, a faster and lower risk approach called “agile” marketing innovation has become more popular.

In this approach, some process guidelines remain, but it’s much more fluid and flexible. Agile innovation projects are set up with smaller teams, and a faster and leaner process.

In agile, you don’t focus on finding the one big innovation that’ll be a blockbuster launch. Instead you take much smaller “prototype” innovations to market with small segments only.

These multiple small launches gather feedback directly from customers. You only scale up a project after you get feedback on the prototype idea. 

Woman in exercise gear sitting cross legged on a yoga mat and twisting to one side

How agile works - sprints

In agile innovation, big ideas are broken into much smaller chunks. Dedicated small teams work on these smaller ideas in 2 – 4 week ‘sprints’.

These teams are empowered to deliver against the idea. The agile process defines clear roles such as :-

  • Product Owner (the ‘decider’ on the idea)
  • the Scrum Master (the leader of the project team) and
  • the Subject Matter Experts on the team (usually between 6 to 8 technical experts).

The idea for this methodology came from large scale IT projects as we cover in our guide to marketing technology.

Relay sprinter holding a baton in his blocks about to start a sprint relay

In a similar way to the slow progress of formal marketing innovation, large IT projects often got bogged down in internal decision making. They were slow to launch and complex to manage. 

The idea of agile methodology is to go faster with shorter bursts of activity on smaller parts of a big idea. Each sprint has to deliver something at the end. The team are empowered to make faster marketing decisions

The innovation idea progresses in short manageable bursts, where there is always something new to work on. 

Prototype testing

Often the sprint team builds prototypes to test with customers. They build a working version of a core feature or function of a product, and customers tell them what they think.

This feedback goes back in to then refine the idea or product. 

You gain a lot of speed in innovation using an agile approach. But you do need to set up a strong innovation culture to make it work. Some ideas will fail, but because the ideas are small, everybody learns from the marketing mistakes.  

Because the teams are also necessarily smaller and the Product Owner can take decisions without the need for a leadership committee, it does require other parts of the business to buy in to the process. They’ll have less opportunity to input or approve. 

Agile versus Formal marketing innovation

In reality, agile and formal are ends of a spectrum. You choose where each project goes on the spectrum. If you’re running multiple projects, they can be at different parts of the spectrum i.e. you can have a mix of agile and formal projects. 

Which approach you choose depends on business context. For example, factors like how you see risk, the speed of innovation in your category and the size of your business.

Generally, larger business prefer the traditional approach. Smaller businesses (especially if they’re challenger brandsprefer the agile approach.

The Product Life Cycle

As part of the post-launch plan for marketing innovation, businesses often use the Product Life Cycle to shape their plans and priorities.

This model predicts how products evolve over time once they launch in terms of sales and business challenges.

This concept originated back in the 1960s but is still commonly used today.

You use it to identify the most likely scenario of sales, investment, competition and profit a marketing innovation will see over time, if it’s successful.

It describes the ‘life’ of a typical product and how it might go through different life stages. 

Product Life Cycle - graph labelled Introduction, growth, maturity and decline

Challenges to the Product Life Cycle

One of the obvious challenges to this model is that it’s not universal. Not all products follow this S-Curve pattern. Many products never make it beyond the introduction stage.

Marketers who use the model also point out that the maturity and decline stage has become a self-satisfying prophecy. In fact, it’s possible with disruptive innovation to breathe new life into mature products and categories.

Those challenges aside, the Product Lifecycle model remains a useful guide to forecast, plan and manage a new product after launch. Lets’ look at each of the key stages.

Introduction

The Product Life Cycle shows that new products rarely reach their peak quickly. They might make a lot of noise at the Introduction stage, but it takes time to grow sales.

This makes sense.

When a product launches, the market doesn’t know what it is. It takes time for them to become aware and consider it.  You need to invest in advertising and public relations. You need to build presence in all your sales channels.

These take time to have an impact. 

How much time depends on the nature of the new product, and the size and scale of the brand behind it.

Inside a concept hall, lots of confetti flying in air, with audience reaching out their hands towards it

Bigger brands will have bigger launch budgets and expect faster results. But for smaller brands, it may take 6 to 12 months for new product launches to win over new customers.

Commercial mix post launch is key

It’s important to keep a close eye on the commercial mix at the introduction stage. .

Sales  will be low, but you’l need to spend on advertising and media to create awareness, consideration and trial.

So profits will be low, or even negative at this stage. You need to communicate the need for patience and a longer-term view on profitability.

It’s helpful to track non-financial KPIs in this introduction phase. Look at factors such as awareness and trial rates as these can help predict future sales and profit levels.

Person holding 6 hundred dollar bills in front of them which have been set alight

Growth

In this phase, growth accelerates as the popularity of the product grows. More customers become more aware, consider and try the product. Your aim is to maximise the growth and share. You drive growth through more customer adoption.

Marketing spend stays high to support the growth and bring in more customers. Profitability levels start to rise as growing sales help to bring more scale to the business, and spread the impact of fixed costs over more volume.

At this point though, competitors take more notice. Competition becomes tougher as they either launch their own innovation, push hard on communications or do more price discounting

Maturity

At some point growth rates start to slow down as the category / product reaches maturity. This maturity phase accounts for the most people in the market and the product takes on a mainstream status.

This stage can be extremely profitable. The level of investment to maintain sales can be much smaller as a percentage of total sales than needed to drive growth in earlier phases.

The key challenge here though is that because of the size of the market, competition will likely be high.

Bigger players in the market will look to defend their size. This can often lead to more aggressive price positions.

Bigger players will also look to sustaining innovations to keep this profitable maturity position going as long as possible. They can become fixed on the short-term. This maintenance of sustaining innovations can quickly become threatened by new entrants to the market with disruptive innovations.

Decline

At some point, the model argues all products will start to enter a decline phase. A new product or invention might fill the need better. The market might become so saturated that that there are just fewer new consumers. Or it can just be that fashion, culture or lifestyle trends have changed. 

At this stage, investment reduces. The business effectively milks as much as it can get from what is left in the category. 

Overall, the Product Life Cycle give a useful guide to predict what might happen with your marketing innovation. It’s helpful to understand what the business model and commercial mix might look like.

But bear in mind that marketing is not just about the product, it’s also about the customers that buy the product. The Innovation Adoption Curve takes a similar view of how marketing innovations roll out to market, but looks at it from the customer’s point of view. 

Innovation Adoption Curve

In this model, the S-Curve of the Product Life Cycle is mapped towards customers rather than products. The assumption is that certain types of customers are more open and willing to take risks on new products than others. 

Innovators

It argues there’s always a small group of customers who love to be the first in the market to try new products. They’re curious and passionate about the category, and willing to pay for new experiences. 

The number of innovators is usually small, but they can be useful as influencers as others see them as experimenters, experts and pioneers.

Consumer adoption of marketing innovation.

These will be the customers most likely to buy or try a product during its introduction phase. Typically, this group might only make up 2.5% of total sales, but they’re important because they’re the FIRST 2.5% of sales.

Early adopters

Early adopters are a larger group who often make or break products. These customers are closely linked to the growth part of the Product Life Cycle.

They may not always be the first to try new products, but they closely follow the behaviour of innovators. Early adopters are open to try new ideas once they see innovators go first..

They’re an important group because they typically account for around 13.5% of sales.

And when a product has reached >15% of the market (the innovators and early adopters combined), it often has enough visibility and usage to get noticed by the majority.

There’s a theory from the book Crossing the Chasm by Geoffrey Moore that the leap from early adopters to the early majority is the toughest part of innovation. There’ll always be people willing to try new products. But the leap from ‘new’ to ‘mainstream’ can be particularly challenging.

Early and late majority

This group is the biggest and most profitable group.

However, it takes time to reach this group as they’re usually settled into established routines. They don’t buy into new innovations until they have some sort of social proof (see our article on behavioural science for more on this) that it’s accepted in the market.

They’re more cautious about innovation. But once a product has become ‘accepted’ and it becomes part of their routine, that’s when you see the value in the majority. They’ll typically be very loyal customers once they choose a brand. 

Laggards

Laggards are the last group to ‘get’ new innovations. They are typically conservative. This group only enter the market when often there’s no choice not to, or that prices have dropped so it’s a low investment.

Conclusion - marketing innovation

Marketing innovation is hard. There’s a lack of certainty about which products will work. no business gets it right every time, everyone has innovation failures at some point. 

Apple’s iPhone has been phenomenally successful, but remember the Newton? No, because it flopped.

Google’s innovative at search, but for all it invested in Google Glasses, no-one’s wearing them today. 

Amazon is a hugely successful online retailer, but heavily promoted innovations like its Amazon Dash buttons or its Amazon Spark shopping program didn’t work and are no longer around. .

Close up of a man's hands holding a light bulb that's illuminated

Have a pipeline of marketing innovations because some will fail

Those examples show the key thing to remember with marketing innovation.

There’s never a 100% change of success. 

Sure, you can take the lessons of formal innovation or agile innovation and use them to increase your chances. But sometimes, even those won’t work, if something in the market is outside your control. 

Make sure you have contingency plans. Have a pipeline of innovation projects in development. if you need to walk away from a marketing innovation, make sure it doesn’t kill your business.

There’s a lot involved in the process of marketing innovation. If you’re hungry for more innovation content, check out our article on the toughness of innovation delivery.  

Three-brains and marketing innovation

Need expert help to drive your marketing innovation? We have many years of experience as marketers creating and launching successful marketing innovation.  

We offer coaching and consulting services to listen to your marketing challenges, and help you find answers quickly. Contact us to see how we can raise your marketing innovation game. 

Latest blog posts on marketing innovation