Chapter 08 Developing New Products

Accessibility: Keyboard Navigation Blooms: Remember Difficulty: Easy Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product lin

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Multiple Choice Questions

1 The process by which ideas are transformed into new products and services that help firms grow is known as:

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Accessibility: Keyboard Navigation

Blooms: Remember

Difficulty: Easy

Learning Objective: 08-01 Identify the reasons firms create new products.

Topic: 08-01 Why Do Firms Create New Products?

2 Which of the following is NOT true about new products?

C Companies should always avoid saturated markets for their new products.

Topic: 08-02 Changing Customer Needs

Topic: 08-03 Market Saturation

3 Companies try to create a broader portfolio of products Which one is NOT true about this strategy?

E It works better industries that rely on fashion trends.

Companies can manage risk through diversity, it requires innovation and enhance firm value Companies in fashion industries need to come up with new product more often, but it has nothing to do with diversification

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4 Which of the following is an example of a product in a fashion industry?

D Sea of Thieves video game

Video games are fashionable because consumers demand new versions! Once they beat the game, they want to challenge with a new experience

Blooms: Apply

Difficulty: Moderate

Topic: 08-05 Fashion Cycles

5 Which of the following is an advantage for product pioneers in new product introductions?

B They become readily recognizable to consumers.

Product pioneers have the advantage of being first movers; as the first to create a market or product category, they become readily recognizable to consumers and thus establish a

commanding and early market share lead

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Blooms: Understand

Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-07 Adoption of Innovation

6 The term "diffusion of innovation" refers to the:

buyers or users to obtain their reactions

C process by which the use of a new product or a service spreads throughout a market group

over time and over various categories of adopters

considerations to develop a product

product that does not infringe on the competitor's patents

The process by which the use of an innovation—whether a product or a service—spreads throughout a market group, over time and over various categories of adopters, is referred to asdiffusion of innovation or adoption of innovation The theory surrounding diffusion or

adoption of innovation helps marketers understand the rate at which consumers are likely to adopt a new product or service

Blooms: Remember

Difficulty: Easy

Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-07 Adoption of Innovation

7 A new product might be failed for all the following reasons EXCEPT:

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8 Which of the following terms can be best defined as buyers who want to be the first to have

a new product or service?

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Blooms: Remember

Difficulty: Easy

Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-08 Innovators

10 Firms that invest in the latest technology, either to use in their new products or services or

to make the firm more efficient, are considered:

seminars, and special events

Blooms: Remember

Difficulty: Easy

Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-08 Innovators

11 Innovators are crucial to the success of any new product or service because:

C they help the product or service gain market acceptance.

Innovators are crucial to the success of any new product or service because they help the product gain market acceptance Through talking and spreading positive word-of-mouth aboutthe new product, they prove instrumental in bringing in the next adopter category, known as early adopters

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12 Greg wants to upgrade his personal computer He consults his friend Vernon because Vernon is highly knowledgeable in this field and always uses the latest technology According

to the diffusion of innovation model, to which of the following groups does Vernon belong?

According to the diffusion of innovation model, Vernon belongs to the group called

innovators Innovators are those buyers who want to be the first on the block to have a new product or service These buyers enjoy taking risks, are regarded as highly knowledgeable, and are not price sensitive

as they are launched According to the diffusion of innovation model, to which of the

following groups of buyers does Eric belong?

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16 Jeremy is interested in buying a phone that has a music player and provides access to the Internet After doing a detailed analysis of all the phones in the market that offer these

features, he decides to buy a recently released model Which of the following groups of buyers best represents Jeremy's buying behaviour?

a product after careful review

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Blooms: Remember

Difficulty: Easy

Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-09 Early Adopters

18 Early adopters differ from innovators in that early adopters:

D decide whether a product is worth the cost only after careful review.

different product categories

Early adopters decide whether a product is worth the cost only after reading the innovators' complaints and praises They generally do not like to take as much risk as innovators but instead wait and purchase a product after careful review

C they affect the profitability of new products and services.

The early majority, which represents approximately 34 percent of the population, is crucial because few new products and services can be profitable until this large group buys them If the group never becomes large enough, a product or service typically fails

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20 Scott wants to buy a cell phone that operates with the Android operating system (OS), but

he decides to wait until more cell phone companies release models with the Android OS This way, a lot of user reviews would be available and the details about the drawbacks of the OS would also be available From this scenario, we can say that Scott belongs to the group of buyers called:

At 34 percent of the market, the late majority is the last group of buyers to enter a new

product market; when they do, the product has achieved its full market potential By the time the late majority enters a market, sales tend to level off or may be in decline

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From this scenario, we can say that Natalie belongs to the group of buyers called late

majority At 34 percent of the market, the late majority is the last group of buyers to enter a new product market; when they do, the product has achieved its full market potential By the time the late majority enters a market, sales tend to level off or may be in decline

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23 Personal music players that were initially released in the market were expensive and huge,and provided limited options Anna and her husband did not buy them at that time and waited for more selection When they finally bought the product, the sales had levelled off and the size and prices had reduced significantly To which of the following groups of buyers do Annaand her husband belong?

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27 Ming, the owner of a fast-food restaurant, continues to accept only cash for transactions, although credit and debit cards are common practice in neighbouring business establishments.Ming has not adopted the technology because of her fears concerning the security of these transactions Hence, she belongs to the group of buyers called:

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Blooms: Apply

Difficulty: Difficult

Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-11 Laggards

29 The diffusion of innovation theory is useful for firms because it primarily helps them:

B develop effective promotion, pricing, and other marketing strategies.

The diffusion of innovation theory or adoption cycle helps firms predict the sale of their products in different buyer segments With this knowledge, the firm can develop effective promotion, pricing, and other marketing strategies to push acceptance among each customer group

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31 YumBurgerz, a fast-food outlet, introduced new burgers made with cheese that had low fatcontent without compromising their taste This ingredient brought down the price of the burgers and the burgers were an instant success in the market Which of the following factors was responsible for the quick diffusion of these burgers?

Relative advantage is contributing to the high adoptability of the LCD TVs Relative

advantage signifies that if a product is perceived to be better than substitutes, then the

diffusion will be relatively quick

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Blooms: Apply

Learning Objective: 08-02 Describe the diffusion of innovation theory and how managers can use it to make product line decisions Topic: 08-12 Using the Adoption Cycle

34 Fiery Inc is a manufacturer of hockey accessories that are lightweight as well as

aerodynamic As a first mover, Fiery was able to fulfill the high demand for these accessories

in Arahonia where hockey is a popular sport The high diffusion of Fiery products in Arahoniawas successful because of their:

The high diffusion of Fiery products in Arahonia was successful because of their

compatibility Compatibility exists when business professionals and executives make

decisions in a timely fashion and are able to communicate their decisions in a timely manner This makes the diffusion of a product easier

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35 Vintage Corp, a leather company, manufactures high-quality handbags for women All its bags carry a prominent logo of the company and consumers associate this logo with excellent quality Despite their high price, Vintage handbags are extremely popular Which of the following factors is influencing the quick diffusion of these handbags?

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Blooms: Apply

38 Scorpion Homes Inc is a company that provides security-related products to its

consumers However, the burglar alarm system introduced by Scorpion Homes failed because consumers had to possess a certain level of technical skill to use the product effectively Which of the following factors is affecting the adoption rate of these alarm systems?

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39 Zapper Products Corp., a system integration services company, provides a pay-per-use option for its business customers that allows them to understand its product's capabilities before they order licensed versions on a large scale This option has made Zapper Products Corp extremely popular with smaller firms that plan to invest on information technology infrastructure but have limited funds The factor that is contributing to the success of Techno Products Corp is:

Blooms: Apply

40 The first step in the development of new products is to:

D develop new ideas by either internal research or market survey.

The new product development process begins with the generation of new product ideas Firmsthat want to be pioneers rely more extensively on research and development (R&D) efforts, whereas those that tend to adopt a follower strategy are more likely to scan a market for ideas

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Learning Objective: 08-03 List the stages involved in developing new products and services.

Topic: 08-13 How Firms Develop New Products

41 Which of the following is NOT a step in the product development process?

Topic: 08-13 How Firms Develop New Products

42 Which of the following would a firm that wants to be the pioneer in creating new productsmost likely use to generate ideas for products?

D Internal research and development

Firms that want to be pioneers rely more extensively on research and development (R&D) efforts, whereas those that tend to adopt a follower strategy are more likely to scan a market for ideas Many firms have their own R&D departments, in which scientists work to solve complex problems and develop new ideas

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43 A group of scientists at a biotechnology firm conducted extensive trials in a laboratory for over a decade before creating a formula that could be used to develop a drug to treat cancer The firm invested a lot of money in these trials with the idea of generating revenue through sales The method used by the company to develop the new product is best termed as:

C internal research and development.

Many firms have their own research and development (R&D) departments, in which scientistswork to solve complex problems and develop new ideas The product development costs for firms are quite high, and the resulting new product or service has a good chance of being a technological or market breakthrough Firms expect such products to generate enough

revenue and profits to make the costs of R&D worthwhile; however, R&D investments generally are considered continuous investments, so firms may lose money on a few new products

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Topic: 08-14 Idea Generation

44 Ronen, a chef working for a prestigious restaurant, has come up with an idea for a new dish The owner of the restaurant, Jean, is impressed with the new recipe and asks all the otherchefs of the restaurant to practice making the new dish for three months until they can

reproduce the recipe with the exact taste the owner is looking for The chefs also test the dish

on other restaurant staff before introducing it to customers The source of idea generation used

The source of idea generation being used by Jean is internal research and development

(R&D) Many firms have their own R&D departments, in which scientists work to solve complex problems and develop new ideas In this case, the research and development includespractising the recipe until they get the taste the owner is looking for

Blooms: Apply

45 An advertising agency needs to develop an advertisement for a new product for a client Salima, a manager of the agency, asks her staff to assemble in groups in the presence of a moderator and generate ideas for the advertisement The source of idea generation used by Salima is:

Firms often engage in brainstorming sessions during which a group works together to

generate ideas The moderator of the session may channel participants' attention to specific product features and attributes, performance expectations, or packaging

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46 The manager of a product design company has brought together a group of technical engineers to generate ideas for potential new products These engineers will arrive at a final decision through a vote on the best ideas or combinations of ideas This group is engaging in:

generate ideas One of the key characteristics of a brainstorming session is that no idea can be immediately accepted or rejected At the end of the session the members vote on the best ideas

or combinations of ideas Those ideas that receive the most votes are carried forward to the next stage of the product development process

47 A cosmetics company, which mainly produces soaps, shampoos, and other skin care solutions for adults, wants to introduce a line of baby products in the market Since it has no prior experience with baby products, it decides to buy the rights to use a necessary technologyfrom a small research firm The source of idea generation used by the cosmetics company is:

D licensing.

For many new scientific and technological products, firms buy the rights to use a technology

or ideas from other research-intensive firms through a licensing agreement This approach saves the high costs of in-house research and development

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48 An automobile firm wants to introduce its cars into new international markets to increase its customer base Since it does not know about customer needs in these markets, it associates itself with local firms that have developed prototypes based on the customer needs of these markets The method of idea generation used by the automobile firm is:

or ideas from other research-intensive firms through a licensing agreement This approach saves the high costs of in-house research and development

49 TransInfo Inc., an information technology firm, is trying to develop new software that willfacilitate the transfer of documents in a secure and fast manner The team of engineers at TransInfo has a detailed discussion and come up with several ideas, out of which they accept only the best possible option This type of idea generation is called:

The type of idea generation used by the team of engineers at TransInfo Inc is called

brainstorming Firms often engage in brainstorming sessions during which a group works together to generate ideas One of the key characteristics of a brainstorming session is that no idea can be immediately accepted or rejected At the end of the session the members vote on the best ideas or combinations of ideas

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50 A key characteristic of brainstorming sessions that are used to generate new ideas is that:

experts

D no idea can be immediately accepted or rejected.

generate ideas One of the key characteristics of a brainstorming session is that no idea can be immediately accepted or rejected At the end of the session the members vote on the best ideas

or combinations of ideas

51 Which of the following idea generation methods saves the high costs of in-house research and development for a firm?

or ideas from other research-intensive firms through a licensing agreement This approach saves the high costs of in-house research and development, but it means that the firm is banking on a solution that already exists but has not been marketed

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Blooms: Remember

Difficulty: Easy

52 Taking apart a competitor's product, analyzing it, and creating an improved product that does not infringe on the competitor's patents, if any exist, most accurately defines the term:

Blooms: Remember

Difficulty: Easy

53 Willfred Inc is struggling to improve its sales The sales of Branson Inc., a major

competitor, are soaring because of the company's well-designed and innovative products Willfred decides to study Branson's product designs in an attempt to understand how it is doing so well Finally, Willfred creates an improved product that does not infringe on

Branson's patents This type of idea generation is known as:

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54 Garcia Stephens Co., a clothing company, is unable to improve sales after its designer failed to create designs that satisfied current trends in the market Another clothing company called Rigby Inc., on the other hand, is having a successful season and its designs are the current rage in the market The designers of Garcia Stephens careful studied the designs of Rigby, analyzed them, improved upon them, and then created a whole new range of designs for their own company Which of the following sources of idea generation has been used by Garcia Stephens Co.?

Blooms: Apply

55 Rudo, the owner of an ice cream parlour, is planning to introduce new flavours into the product line He decides to take feedback and suggestions from buyers as part of the process

to develop innovative and interesting new ice cream flavours What is Rudo's source of idea generation?

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Blooms: Apply

56 Innovative product users who modify existing products according to their own ideas to suit their specific needs are called:

so as well

Blooms: Remember

Difficulty: Easy

57 Annie is a designer at a popular clothing brand She observes people on the streets who modify the clothing according to their needs and styles Annie uses this input while designing new collections What is the method of idea generation used by Annie in developing new products?

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58 When the product design team of a firm takes ideas with potential, develops them into visual images, and presents them to potential buyers to get their reactions, they are engaging in:

Blooms: Remember

Difficulty: Easy

Topic: 08-15 Concept Testing

59 A brief written description of a product or service; its technology, working principles, and forms; and what customer needs it satisfies most accurately defines the term:

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Difficulty: Easy

60 The process by which an idea that describes a product or a service is presented to potentialbuyers to obtain their reactions can be best termed as:

Blooms: Remember

Difficulty: Easy

61 The process that entails the balancing of various engineering, manufacturing, marketing, and economic considerations to develop a product most accurately defines the term:

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62 The first physical tentative form of a new product that has the same properties as a new product but is produced through different manufacturing processes is called a(n):

a product prototype that is based on research findings from the concept testing step, as well astheir own knowledge about materials and technology

Blooms: Remember

Difficulty: Easy

Topic: 08-16 Product Development

63 Which of the following processes is used to test the performance of a product prototype and is carried out in the research and development unit of a firm?

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Blooms: Remember

Difficulty: Easy

64 The method of testing that requires potential consumers to examine a product prototype in

a real-use setting is known as:

Beta testing uses potential consumers, who examine a product prototype in a real-use setting

to determine its functionality, performance, potential problems, and other issues specific to its use The firm might develop several prototype products that it gives to users, and then survey those users to determine whether the product worked as intended and to identify any issues that need resolution

Blooms: Remember

Difficulty: Easy

65 A group of scientists in a pharmaceutical firm are conducting trials of a new formula they have developed to be used in a drug in the research and development unit of the firm This method of testing a product prototype is best categorized as:

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66 Alice asks a group of people to test the skateboards she has manufactured She needs to determine whether they are functioning as intended and if they require any changes before they are released What is the type of test being conducted by Alice called?

performance, potential problems, and other issues specific to its use

Blooms: Apply

67 The form of market testing conducted by firms before a newly developed product or service is brought to the market to determine how many customers will try it and then

continue to use it is known as:

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