What type of analysis is typically used to assess the profitability of new product ideas?

Cost-benefit analysis is the appropriate method for assessing the profitability of new product ideas because it involves comparing the expected costs associated with developing and launching the product against the anticipated financial benefits, such as revenue from sales. This type of analysis helps firms determine whether an investment in the new product is justified by its potential return.

By quantifying both costs (which can include development, marketing, and production expenses) and benefits (like projected sales and market share), decision-makers can make informed choices about whether to move forward with the idea. The focus is on financial metrics, which are crucial for evaluating profitability.

Other analysis types, such as SWOT analysis or market trend analysis, while useful for overall strategic assessments and understanding competitive positioning, do not provide the specific financial metrics needed to determine whether a new product idea will be profitable. Similarly, PEST analysis focuses on external factors impacting the business environment rather than direct profitability assessments. Thus, the clarity and focus of cost-benefit analysis make it the ideal choice for this specific evaluation.