Marketing Management, 15e (Kotler)

Chapter 15 Introducing New Market Offerings

1) Which of the following is most closely related with the organic growth of an organization?
A) acquiring a product or service brand
B) entering new marketplaces
C) increasing the operational profitability
D) increasing productivity of employees
E) developing new products from within
Answer: E
Diff: 2
LO: 15.1: How can new products be categorized?
AACSB: Reflective thinking

2) New-to-the-world products are ________.

A) low-cost products designed to obtain an edge in highly competitive markets
B) new product enhancements that supplement established products
C) new versions of an existing product that has been less successful
D) new products that create an entirely new market
E) existing products that are targeted to new geographical markets
Answer: D
Diff: 1
LO: 15.1: How can new products be categorized?
AACSB: Reflective thinking

3) Which of the following firms is most likely to seek radical innovation?

A) a traditional publishing company
B) a small scale FMCG company
C) a firm that procures and markets wheat
D) a high-tech firm in telecommunications
E) a firm that sells mineral water
Answer: D
Diff: 2
LO: 15.1: How can new products be categorized?
AACSB: Reflective thinking

4) Most new-product activities are devoted to ________.

A) changing the target markets
B) developing new-to-the-world products
C) introducing backward integration
D) improving existing products
E) changing the existing market dynamics
Answer: D
Diff: 2
LO: 15.1: How can new products be categorized?
AACSB: Reflective thinking

5) Which of the following is the best example of a new-to-the-world product?

1
A) Walmart, the retail giant, opens new stores in an underdeveloped African country.
B) Pestorica, a publishing company, decides to launch a new sports magazine.
C) Tata Motors, an Indian automobile company, acquires Jaguar to extend its business.
D) An Asian company licenses a US apparel brand name though the brand is not familiar in Asia.
E) Kids-Med, a company that produces childcare products, launches a non-contact thermometer.
Answer: E
Diff: 2
LO: 15.1: How can new products be categorized?
AACSB: Analytical thinking; Application of knowledge

6) Most established companies focus on ________ innovation when they aim to enter new
markets by tweaking existing products, or they want to stay one step ahead in the market by
using variations on a core product.
A) incremental
B) continuous
C) spontaneous
D) radical
E) competitive
Answer: A
Diff: 2
LO: 15.1: How can new products be categorized?
AACSB: Reflective thinking

7) Jordan's firm enters new markets by tweaking products for new customers, uses variations on
a core product to stay one step ahead of the market, and creates interim solutions for industry-
wide products. In other words, it uses ________.
A) disruptive technologies
B) incremental innovation
C) complex innovations
D) discontinuous innovations
E) radical innovations
Answer: E
Diff: 2
LO: 15.1: How can new products be categorized?
AACSB: Application of knowledge

8) Fewer than 10 percent of all new products are truly innovative and new to the world.
Answer: TRUE
Diff: 1
LO: 15.1: How can new products be categorized?
AACSB: Reflective thinking

2
9) Jill, a Product Manager for Nike, is responsible for evaluating the viability of a radically new
product. How should she estimate demand?
Answer: Few reliable techniques exist for estimating demand for radical innovations. Focus
groups can provide perspective on customer interest and need, but marketers may need a probe-
and-learn approach based on observation and feedback of early users' experiences and other
means such as online chats or product-focused blogs.
Diff: 3
LO: 15.1: How can new products be categorized?
AACSB: Application of knowledge

10) What are the types of new products that a firm can introduce? What are the problems
associated with introducing a truly innovative product? What are the necessary conditions to
create a radically innovative product?
Answer: New products range from new-to-the-world products that create an entirely new market
to minor improvements or revisions of existing products. Most new-product activity is devoted to
improving existing products. Truly innovative and new-to-the-world products incur the greatest
cost and risk. Although radical innovations can hurt the company's bottom line in the short run, if
they succeed they can create a greater sustainable competitive advantage than ordinary products
and produce significant financial rewards as a result. Companies typically must create a strong
R&D and marketing partnership to pull off a radical innovation. The right corporate culture is
another crucial determinant; the firm must prepare to cannibalize existing products, tolerate risk,
and maintain a future market orientation. Few reliable techniques exist for estimating demand for
radical innovations.
Diff: 2
LO: 15.1: How can new products be categorized?
AACSB: Reflective thinking

11) What does the term organic growth mean?

Answer: Organic growth refers to the development of new products from within.
Diff: 1
LO: 15.1: How can new products be categorized?
AACSB: Reflective thinking

12) I-ball, a cell phone manufacturer introduces a cell phone targeted at customers ages 70 and
above. It has features such as loud volume, large keys, and so forth. How do you classify this
product innovation? What could be a possible disadvantage of this product?
Answer: This can be considered a new-to-the-world product. New-to-the-world products are
products that create an entirely new market. The product has the greatest cost and risk of all
product types.
Diff: 2
LO: 15.1: How can new products be categorized?
AACSB: Analytical thinking

3
13) What is incremental innovation? Give an example of incremental innovation.
Answer: Student answers will vary. Incremental innovation refers to entering new markets by
tweaking products for new customers, using variations on a core product to stay one step ahead
of the market, and creating interim solutions for industry-wide problems.
When Scott Paper couldn't compete with Fort Howard Paper Co. on price for the lucrative
institutional toilet tissue market, it borrowed a solution from European companies: a dispenser
that held bigger rolls. Scott made the larger rolls of paper and provided institutional customers
with free dispensers, later doing the same thing with paper towels. Scott not only won over
customers in a new market; it became less vulnerable to competitors, such as Fort Howard,
which could lower prices but weren't offering the larger rolls or tailor-made dispensers.
Diff: 2
LO: 15.1: How can new products be categorized?
AACSB: Analytical thinking

14) It has been observed that most new products have shorter product life cycles. What is the
reason for this?
A) Most new products do not use technology.
B) Most new products are not backed by a marketable idea.
C) New products do not get adequate management support.
D) Social and governmental constraints lead to this failure.
E) Rivals quickly copy products that are successful.
Answer: E
Diff: 2
LO: 15.2: What challenges does a company face in developing new products and services?
AACSB: Reflective thinking

15) Which of the following strategies for new-product development incorporates buyers'
preferences in the final design of the product?
A) quality function deployment
B) market leadership
C) cost leadership
D) incremental innovation
E) disruptive technology
Answer: A
Diff: 3
LO: 15.2: What challenges does a company face in developing new products and services?
AACSB: Reflective thinking

4
16) Pager, a simple personal device for short messages, became famous in the 1990s. Troveron
Communications launched a pager in the early twenty-first century. Due to the introduction of
mobile phones and text messaging, the pager industry was on a decline. The company's
innovations were not well received by the market and the product was a failure. Which of the
following is the most likely reason for the product's failure in this case?
A) poor launch timing of the product
B) a small and fragmented target market
C) high cost of development
D) social and economic constraints
E) hasty product development
Answer: A
Diff: 2
LO: 15.2: What challenges does a company face in developing new products and services?
AACSB: Analytical thinking; Application of knowledge

17) After creating a product prototype, a company tests it within the firm to see how it performs
in different applications. The company refines the prototype to correct the mistakes found in in-
house testing. What should be the next step?
A) commercializing the product
B) performing concept testing
C) conducting beta testing with customers
D) creating a marketing strategy for the product
E) performing business analysis
Answer: C
Diff: 2
LO: 15.2: What challenges does a company face in developing new products and services?
AACSB: Application of knowledge

18) Organic growth refers to increasing the profitability of the organization by increasing
employee productivity.
Answer: FALSE
Diff: 1
LO: 15.2: What challenges does a company face in developing new products and services?
AACSB: Reflective thinking

19) Companies typically must create a strong R&D and marketing partnership to pull off a
radical innovation.
Answer: TRUE
Diff: 1
LO: 15.2: What challenges does a company face in developing new products and services?
AACSB: Reflective thinking

5
20) High-tech firms that function in a market with high technological uncertainty, high market
uncertainty, and high investment costs are not likely to seek radical innovation.
Answer: FALSE
Diff: 1
LO: 15.2: What challenges does a company face in developing new products and services?
AACSB: Application of knowledge

21) Companies that fail to develop new products leave their existing offerings vulnerable to
increased domestic and foreign competition.
Answer: TRUE
Diff: 1
LO: 15.2: What challenges does a company face in developing new products and services?
AACSB: Reflective thinking

22) Most established companies focus on incremental innovation rather than radical innovation.
Answer: TRUE
Diff: 1
LO: 15.2: What challenges does a company face in developing new products and services?
AACSB: Reflective thinking

23) Shorter product life cycles are common in industries characterized by low level of
competition.
Answer: FALSE
Diff: 2
LO: 15.2: What challenges does a company face in developing new products and services?
AACSB: Reflective thinking

24) Identify the major reasons why new product failures occur.
Answer: The following are some of the possible reasons for the failure of new products:
• shortage of important ideas in certain areas
• fragmented markets
• social, economic, and governmental constraints
• high cost of development
• capital shortages
• shorter required development time
• poor launch timing, shorter product life cycles
• organizational support
Diff: 2
LO: 15.2: What challenges does a company face in developing new products and services?
AACSB: Reflective thinking

6
25) What practices guide innovation at W. L. Gore?
Answer: First, it works with potential customers. Second, Gore has a distinctly egalitarian
culture; it lets employees choose projects and appoints few product leaders and teams. The
company likes to nurture "passionate champions" who convince others a project is worth their
time and commitment, and leaders have positions of authority because they have followers.
Third, all research associates spend 10 percent of their work hours on "dabble time," developing
their own ideas. Promising ideas are judged according to a "Real, Win, Worth" exercise: Is the
opportunity real? Can we win? Can we make money? Fourth, Gore knows when to let go.
Diff: 3
LO: 15.2: What challenges does a company face in developing new products and services?
AACSB: Interpersonal relations and teamwork

26) Tosho Electronics, a leading Japanese, electronic manufacturer believes shorter product life
cycles of new products reduce the scope for R&D and innovation. Offer a possible reason for
shorter life cycles.
Answer: Student answers will vary. Rivals are quick to copy success of an innovation. An
innovative product is copied even before the company recovers the cost of R&D. This leads to
shorter life cycles for products.
Diff: 2
LO: 15.2: What challenges does a company face in developing new products and services?
AACSB: Analytical thinking

27) Identify a shortcoming of giving the responsibility to develop new products to the product
managers of a company.
A) They would not be familiar with the industry standards.
B) Product managers would not have an operational focus.
C) Product managers are often busy managing existing lines.
D) They will find it difficult to gain support from employees.
E) Product managers are less likely to use participative management.
Answer: C
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Reflective thinking

28) ________ teams are cross-functional groups charged with developing a specific product or
business.
A) Virtual
B) Venture
C) Fundamental
D) Elemental
E) Transitory
Answer: B
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Interpersonal relations and teamwork

7
29) Intercom Inc., together with its subsidiaries, primarily engages in the generation,
transmission, and distribution of electric power in the United States. The company observes that
its growth has stagnated over a period of two years. In an attempt to promote growth, it considers
adding new features to the existing products and introducing a few new products. The company
forms a committee consisting of three top executives, one of the production mangers, a few
operational managers, and a representative of the HR department to generate ideas. This team is
called a(n) ________ team.
A) virtual
B) venture
C) fundamental
D) elemental
E) transitory
Answer: B
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Interpersonal relations and teamwork

30) A team formed at Intercom Inc. to generate ideas for new products conducts frequent
meetings and engages in activities such as mind mapping and brainstorming. Most of the
meetings are conducted at informal locations away from office. These workplaces are called
________.
A) skunkworks
B) idea funnels
C) research centers
D) stage-gate systems
E) contextual bases
Answer: A
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Analytical thinking

31) A ________ divides the innovation process into stages with a checkpoint at the end of each
stage.
A) reverse assumption analysis technique
B) skunkworks system
C) stage-gate system
D) spiral development process
E) new-product department technique
Answer: C
Diff: 1
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Reflective thinking

32) ________ are informal workplaces, sometimes garages, where intrapreneurial teams attempt
to develop new products.
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A) Stage-gate systems
B) Skunkworks
C) Funnels
D) Opportunity spaces
E) Research centers
Answer: B
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Reflective thinking

33) Which of the following questions is answered during the business analysis of ideas?
A) Will this product meet our profit goals?
B) Have we got a technically and commercially sound product?
C) Can we find a cost-effective, affordable marketing strategy?
D) Can this product meet sales expectations?
E) Can we find a good concept consumers say they would try?
Answer: D
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Reflective thinking

34) During which of the following stages in new product development decision making do
managers analyze if they can find a good thought consumers say they would try?
A) idea generation
B) idea screening
C) business analysis
D) concept development and testing
E) product development and testing
Answer: D
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Reflective thinking

9
35) A ________ process recognizes the value of returning to an earlier stage to make
improvements before moving forward.
A) spiral development
B) reactive development
C) market testing
D) proactive development
E) concept testing
Answer: A
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Reflective thinking

36) Companies should use normal investment criteria to budget for new-product developments.
Answer: FALSE
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Reflective thinking

37) Almost all companies use the conventional percentage-of-sales figure while budgeting for
new product development.
Answer: FALSE
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Reflective thinking

38) Skunkworks are formal workplaces where intrapreneurial teams attempt to develop new
products.
Answer: FALSE
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Reflective thinking

39) Venture teams are cross-functional groups charged with developing a specific product or
business.
Answer: TRUE
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Reflective thinking

10
40) A business analysis is performed mainly to identify if a company has got a technically and
commercially sound product.
Answer: FALSE
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Reflective thinking

41) A spiral development process recognizes the value of returning to an earlier stage to make
improvements before moving forward.
Answer: TRUE
Diff: 1
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Reflective thinking

42) Angell Healthcare, the world's largest manufacturer of protective gloves and clothing,
adopted a spiral development process, which divided the innovation process into stages with
checkpoints at the end of each stage, to develop products that increased overall sales from 4.6
percent to 13 percent in a little over two years.
Answer: FALSE
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Application of knowledge

43) How do companies organize new product development?

Answer: Companies handle the organizational aspect of new-product development in several
ways. Many assign responsibility to product managers. Some employ new-product managers
who report to category managers. A few companies have growth leaders, a full-time job for its
most creative and successful managers. Some companies have a high-level management
committee charged with reviewing and approving proposals. Large companies often establish a
new-product department headed by a manager with substantial authority and access to top
management whose responsibilities include generating and screening new ideas, working with
the R&D department, and carrying out field testing and commercialization.
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Interpersonal relations and teamwork

11
44) Explain how stage-gate systems are used by companies to manage innovation and new
product launches.
Answer: Many top companies use the stage-gate system to divide the innovation process into
stages, with a gate or checkpoint at the end of each. The project leader, working with a cross-
functional team, must bring a set of known deliverables to each gate before the project can pass
to the next stage. To move from the business plan stage into product development requires a
convincing market research study of consumer needs and interest, a competitive analysis, and a
technical appraisal. Senior managers review the criteria at each gate to make one of four
decisions: go, kill, hold, or recycle. Stage-gate systems make the innovation process visible to all
and clarify the project leaders and team's responsibilities at each stage. The gates or controls
should not be so rigid, however, that they inhibit learning and the development of novel
products. Many firms have parallel sets of projects working through the process, each at a
different stage. Some firms use a spiral development process that recognizes the value of
returning to an earlier stage to make improvements before moving forward.
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Interpersonal relations and teamwork; Reflective thinking

45) Dormentor Inc. produces, converts, and markets packaging products including boxboard,
container board, and numerous other specialty packaging products. In an attempt to increase its
organic growth, the company decides to introduce new products. It asks the managers and
employees to send in ideas for new products. Before launching products based on any of these
ideas, what are the stages that the company has to go through?
Answer: The following are the steps that Dormentor has to go through before launching:
1. It must screen the ideas that are obtained.
2. The ideas that pass the screening should be concept tested.
3. After concept testing a few are screened out and the remaining should be placed for product
development.
4. After developing the product, product has to be test marketed. Ideas that are successfully test
marketed can be launched.
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Analytical thinking

12
46) Interno Computers Inc., together with subsidiaries, designs, manufactures, and markets
personal computers and mobile communication and media devices, as well as sells related
software, services, peripherals, networking solutions, and applications worldwide. The company
is planning to launch a high-end portable digital music player worldwide. What is the best way to
organize this product launch?
Answer: Large companies, like Interno, often establish a new-product department headed by a
manager with substantial authority and access to top management whose responsibilities include
generating and screening new ideas, working with the R&D department, and carrying out field
testing and commercialization. This model is necessary here as the product is going to be
launched worldwide.
Diff: 2
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Analytical thinking

47) What is a spiral development process?

Answer: A spiral development process recognizes the value of returning to an earlier stage to
make improvements before moving forward.
Diff: 1
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Reflective thinking

13
48) What are the benefits of brainstorming? How would one run an effective brainstorming
session?
Answer: If done correctly, group brainstorming sessions can create insights, ideas, and solutions
that would have been impossible without everyone's participation. If done incorrectly, they are a
painful waste of time that can frustrate and antagonize participants. To ensure success, experts
recommend the following:
• A trained facilitator should guide the session, and the right physical environment must be
used.
• The right participants must be chosen. Sometimes it is useful to have a real mixture with
many different points of view.
• Participants must see themselves as collaborators working toward a common goal.
• Rules need to be set up and followed so conversations don't get off track. Some structure is
needed, though flexibility is desired too.
• Participants must be given proper background preparation and materials so they can get into
the task quickly.
• Individual sessions before and after the brainstorming can be useful for thinking and learning
about the topic ahead of time and for reflecting afterward on what happened.
• During the session, each participant must be encouraged to participate and think freely and
constructively. It may be useful to give participants time to think and gather their thoughts based
on what they have heard.
• To help stimulate thinking, participants may be told to identify and challenge existing
assumptions, role-play some aspect of the situation they are analyzing, or consider borrowing
ideas from other firms, even outside the industry.
• Brainstorming sessions must lead to a clear plan of action and implementation so the ideas
that materialize can provide tangible value.
• Brainstorming can do more than just generate ideas — it should help build teams and leave
participants better informed and energized.
Diff: 3
LO: 15.3: What organizational structures and processes do managers use to oversee new-product
development?
AACSB: Interpersonal relations and teamwork

49) ________ means inviting the Internet community to help create content or software, often
with prize money or a moment of glory involved.
A) Stage-gating
B) Cocreation
C) Microstocking
D) Buzzing
E) Crowdsourcing
Answer: E
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

14
50) Companies such as Edison Nation and the Big Idea Group have sprung up to tap into
________ possibilities, often combining its own design, branding, engineering, and sales teams
with online participants, forming a community for devising new products.
A) stage-gating
B) cocreation
C) microstocking
D) buzzing
E) crowdsourcing
Answer: E
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Application of knowledge

51) Surgeons and ER nurses would be considered ________ for surgical equipment.
A) venture agents
B) internal customers
C) buzz agents
D) lead users
E) connectors
Answer: D
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Application of knowledge

52) Many people believe that customer focus does not help to create better, or new, products.
This belief rests on which of the following ideas?
A) Such new product developments decrease the chances of success.
B) Customers do not consider the cost of design when making suggestions.
C) Customers are at times unaware of what they really want.
D) It increases the cost of testing a product or service.
E) Having too much customer focus leads to a negative brand image.
Answer: C
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

53) The ________ technique for stimulating creativity lists all the characteristics of an object and
then modifies each to try to arrive at a new idea.
A) reverse assumption analysis
B) lateral marketing
C) attribute listing
D) forced relationship
E) morphological analysis
Answer: C
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

15
54) The ________ technique used for stimulating creativity identifies a problem and then
considers the dimension, the medium, and the power source.
A) attribute listing
B) reverse assumption analysis
C) mind mapping
D) lateral marketing
E) morphological analysis
Answer: E
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

55) In an attempt to improve the product, a company that manufactures screwdrivers discusses
the modification of each attribute, such as replacing the wooden handle with plastic, providing
torque power, adding different screw heads, and so on. This creativity technique is called
________.
A) attribute listing
B) mind mapping
C) morphological analysis
D) lateral analysis
E) reverse analysis
Answer: C
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Application of knowledge

56) Electro Locomotors (EL) Inc. engages in the manufacture, distribution, and marketing of
custom vehicles in Brazil. Bono, a hybrid car brand that the company produces, is a market
leader in the hybrid vehicles segment. With the increased global focus on nature-friendly
vehicles and governmental subsidies for companies that manufacture hybrid vehicles,
competition has increased for flex-fuel cars like Bono. The heads of the R&D team at EL are in a
creative session to generate ideas for improvements to Bono. They consider each part of the car
and discuss the possibilities of improvements in each of them. Identify the creativity technique
used here.
A) attribute listing
B) forced relationship analysis
C) morphological analysis
D) reverse assumption analysis
E) mind mapping
Answer: A
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Analytical thinking; Application of knowledge

16
57) ________ works by listing all the normal assumptions about an entity and then turning them
around.
A) Lateral marketing
B) Attribute listing
C) Reverse assumption analysis
D) Forced relationships
E) Morphological analysis
Answer: C
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

58) The ________ creativity technique begins with a thought that is written down, then proceeds
to develop other thoughts that are linked to the first thought, and finally a new idea materializes
by associating all of the thoughts.
A) mind mapping
B) contextual analysis
C) attribute listing
D) reverse assumption analysis
E) morphological analysis
Answer: A
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?

59) Increasingly, new-product ideas arise from ________ that combines two product concepts or
ideas to create a new offering.
A) reverse assumption analysis
B) lateral marketing
C) attribute listing
D) forced relationships
E) morphological analysis
Answer: B
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?

17
60) A group of college graduates decides to start a business. Though they are knowledgeable in
various business domains, they are unable to arrive at a valuable business idea. They decide to
search for ideas in a structured manner. They meet and start discussing everyone's ideas. Each
idea is recorded and then the thoughts that come up in relation to the ideas are written down and
discussed. This process helps them to finalize a business plan. What technique is used here?
A) morphological analysis
B) forced relationship analysis
C) reverse assumption analysis
D) attribute listing
E) mind mapping
Answer: E
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Analytical thinking; Application of knowledge

61) Morboro Energy Inc. is a large chain of fuel stations in Europe. The company decided to
expand its business by incorporating restaurants and automobile service stations as a part of its
fuel outlets. This is an example of ________.
A) lateral marketing
B) brand extension
C) market development
D) internal marketing
E) brand personification
Answer: A
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Analytical thinking; Application of knowledge

62) A ________ error occurs when the company dismisses a good idea.
A) probability
B) performance
C) double counting
D) DROP
E) GO
Answer: D
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

18
63) The stage in the new product process that occurs first and has a pass ratio of 1:4 is the
________ stage.
A) idea screening
B) product development
C) test marketing
D) product soft launch
E) concept testing
Answer: A
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Analytical thinking

64) Crowdsourcing means inviting an Internet community to help create content or software,
often with prize money or a moment of glory as an incentive.
Answer: TRUE
Diff: 1
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

65) Cocreation can help a company create favorable word of mouth.

Answer: TRUE
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

66) Employees can be a source of ideas for improving production, products, and services.
Answer: TRUE
Diff: 1
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

67) Attribute listing lists several ideas and considers each in relationship to the others.
Answer: FALSE
Diff: 1
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

68) Reverse assumption analysis lists all the normal assumptions about an entity and then turns
them around.
Answer: TRUE
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

19
69) Morphological analysis starts by forming a new dimension and then thinks about the possible
problems of the dimension.
Answer: FALSE
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

70) A DROP-error occurs when the company accepts a bad idea.

Answer: FALSE
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

71) Explain three techniques for stimulating creativity to generate better ideas.
Answer: The following are some of the techniques. Students may explain any three of these
techniques.
• Attribute listing: List the attributes of an object, such as a screwdriver. Then modify each
attribute, such as replacing the wooden handle with plastic, providing torque power, adding
different screw heads, and so on.
• Forced relationships: List several ideas and consider each in relationship to each of the
others.
• Morphological analysis: Start with a problem, such as "getting something from one place to
another via a powered vehicle." Now think of dimensions, such as the type of platform (cart,
chair, sling, bed), the medium (air, water, oil, rails), and the power source (compressed air,
electric motor, magnetic fields). By listing every possible combination, you can generate many
new solutions.
• Reverse assumption analysis: List all the normal assumptions about an entity and then
reverse them. Instead of assuming that a restaurant has menus, charges for food, and serves food,
reverse each assumption.
• New contexts: Take familiar processes, such as people-helping services, and put them into a
new context.
• Mind mapping: Start with a thought, such as a car, write it on a piece of paper, then think of
the next thought that comes up (say Mercedes), link it to the car, then think of the next
association (Germany), and do this with all associations that come up with each new word.
Perhaps a whole new idea will materialize.
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

72) What is crowdsourcing?

Answer: Crowdsourcing means inviting the Internet community to help create content or
software, often with prize money or a moment of glory as an incentive.
Diff: 1
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Reflective thinking

20
73) Horon Furniture is a manufacturer of office furniture. The company is known for its
innovative multipurpose furniture. When designing a new product, the designers list several
ideas and consider each in relationship to others. For example, the company considers various
options such as an office table, foldable chairs, and filing cabinet, etc. Finally, the company may
come up with a foldable office table with chairs attached and with a filing cabinet. Describe the
creativity technique used at Horon Furniture.
Answer: The company uses forced relationship techniques. This method lists several ideas and
considers each in relationship to each of the others.
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Analytical thinking; Application of knowledge

74) Use reverse assumption analysis to analyze a school.

Answer: Student answers will vary. Instead of assuming that a school is a place where teachers
teach according to a set syllabus and timetable, you could assume that a school is a place where
students choose what they want to learn and how they want to learn it. Students could choose
people to teach them, depending on what they want to study.
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Application of knowledge

75) A group of young students run an Internet center. In an attempt to increase their profitability
they start a cafe alongside the existing business. Explain the type of marketing used here.
Answer: Lateral marketing is used here. It combines two product concepts or ideas to create a
new offering.
Diff: 2
LO: 15.4: What are the main stages in developing new products and services?
AACSB: Analytical thinking

76) A(n) ________ is a possible product the company might offer to the market.
A) test brand
B) alpha product
C) beta version product
D) product idea
E) product concept
Answer: D
Diff: 2
LO: 15.5: What is the best way to manage the generation of new ideas?
AACSB: Analytical thinking

21
77) A(n) ________ is an elaborated version of a product idea expressed in consumer terms.
A) test brand
B) alpha product
C) beta product
D) business schedule
E) product concept
Answer: E
Diff: 2
LO: 15.5: What is the best way to manage the generation of new ideas?
AACSB: Analytical thinking

78) A category concept defines the product's attributes and features.

Answer: FALSE
Diff: 1
LO: 15.5: What is the best way to manage the generation of new ideas?
AACSB: Reflective thinking

79) When a company combines two product concepts or ideas to create a new offering, it is
called reverse assumption analysis.
Answer: FALSE
Diff: 2
LO: 15.5: What is the best way to manage the generation of new ideas?
AACSB: Reflective thinking

80) What is a brand-positioning map?

Answer: A brand-positioning map is a perceptual map showing the current positions of various
existing brands competing with each other.
Diff: 1
LO: 15.5: What is the best way to manage the generation of new ideas?
AACSB: Reflective thinking

81) What are some of the ways a firm can draw new ideas from its customers?
Answer: Forming a brand community; using Web sites for new ideas, including feedback forms
and specialized search engines like Technorati and Daypop to find blogs and postings relevant to
their businesses; using a customer advisory board; observing how customers are using its
products and asking customers about their dream products are all ways to get new ideas from
customers.
Diff: 2
LO: 15.5: What is the best way to manage the generation of new ideas?
AACSB: Interpersonal relations and teamwork

22
82) ________ means presenting the product concept to target consumers, symbolically or
physically, and getting their reactions.
A) Perceptual mapping
B) Brand-positioning mapping
C) Brand attribute mapping
D) Concept development
E) Concept testing
Answer: E
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

83) Modern firms use the ________ tool to design products on a computer and then produce
rough models to show potential consumers for their reactions.
A) morphological analysis
B) rapid prototyping
C) concept testing
D) perceptual mapping
E) conjoint analysis
Answer: B
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking; Application of knowledge

84) Brown & Smith Inc. engages in the design, development, making, and retail selling of
designer jewelry in North America. Before approving a new design, the company draws it on a
computer and then produces models to show potential consumers and get their reactions. This
allows the company to analyze the possible customer reaction. Identify the concept testing
method used here.
A) conjoint analysis
B) perceptual mapping
C) virtual reality testing
D) rapid prototyping
E) digital fabrication
Answer: D
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Analytical thinking; Application of knowledge

23
85) Consumer preferences for alternative product concepts can be measured through ________, a
method for deriving the utility values that consumers attach to varying levels of a product's
attributes.
A) concept testing
B) perceptual mapping
C) gap level analysis
D) conjoint analysis
E) morphological analysis
Answer: D
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

86) With ________, respondents see different hypothetical offers formed by combining varying
levels of the attributes, then rank the various offers.
A) gap level analysis
B) conjoint analysis
C) perceptual mapping
D) concept testing
E) morphological analysis
Answer: B
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

87) Universal Services Inc. provides communication services to residential and business
customers in rural and small urban communities primarily in northern England. The company
offers services such as local and long distance voice, data, and Internet and broadband product
offerings. The company, in an attempt to increase the attractiveness of its offerings, decides to
provide special voice and data packages to its customers. The company designs eight different
packs that offer varying voice and data benefits to customers. The company then asks a few of its
customers to rank the packs in order to choose two best packs. Which of the following testing
methods is being used in this scenario?
A) virtual reality testing
B) conjoint analysis
C) perceptual mapping
D) product fabrication
E) rapid prototyping
Answer: B
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Analytical thinking; Application of knowledge

24
88) The trade-off approach may be easier to use when there ________.
A) are many variables
B) are only a few alternatives
C) are observers that are biased
D) are possible offers that are limited
E) is only one highly desirable solution
Answer: A
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

89) ________ is a "hybrid" data collection technique that combines self-explicated importance
ratings with pair-wise trade-off tasks.
A) Sales wave analysis
B) Simulative data testing
C) Adaptive conjoint analysis
D) Business analysis
E) Exponential data collection
Answer: C
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

90) ________ exhibit replacement cycles dictated by physical wear or obsolescence associated
with changing style, features, and performance.
A) Frequently purchased products
B) High-moving goods
C) Inexpensive products
D) Commodity products
E) Infrequently purchased products
Answer: E
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

91) To estimate replacement sales, management must research the product's ________, the
number of units that fail in year one, two, three, and so on.
A) survival-age distribution
B) life-cycle ratio
C) obsolescence rate
D) business turnover ratio
E) product-performance usage
Answer: A
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

92) ________ contribution lists the changes in income to other company products caused by the
25
introduction of a new product.
A) Supplementary
B) Dragalong
C) Gross
D) Cumulative
E) Net
Answer: A
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

93) The highest loss a project can create is called ________.

A) rapid prototyping income
B) payback income
C) maximum investment exposure
D) incremental yearly exposure
E) cannibalized income
Answer: C
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

94) The job of translating target customer requirements into a working prototype is helped by a
set of methods referred to as ________.
A) quality function deployment
B) quality control processes
C) rapid prototyping
D) marketing control
E) control system formation
Answer: A
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

95) Which of the following methodologies takes the list of desired customer attributes (CAs)
generated by market research and turns them into a list of engineering attributes (EAs) that
engineers can use?
A) quality control processes
B) quality function deployment
C) rapid prototyping
D) marketing control
E) control system formation
Answer: B
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

96) ________ testing is a customer test that involves placing the product within the firm to see
26
how it performs in different applications.
A) Beta
B) Research
C) Sales-wave
D) Alpha
E) Simulated
Answer: D
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

97) In consumer-goods market testing, the company seeks to estimate four variables. These four
variables are: trial, first repeat, adoption, and ________.
A) guaranteed response
B) price sensitivity
C) purchase frequency
D) usage convenience
E) preferential treatment
Answer: C
Diff: 1
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

98) A large FMCG company decides to test market Kora, a new brand of face cleanser, to be
launched soon. The company initially distributes a few free samples to some prospective
consumers. Later it offers the product to the customers at a discounted price and observes that
not only more than seventy percent of the customers are purchasing it but the same number are
also satisfied using it. The company keeps using this process 3-4 times to obtain a correct count
of the number of people purchasing the product repeatedly. Which of the following testing
methods is being used here?
A) simulated testing
B) controlled testing
C) full test marketing
D) parallel testing
E) sales-wave research
Answer: E
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Analytical thinking; Application of knowledge

27
99) Which of the following is an advantage of sales-wave research?
A) It gives surprisingly accurate results on advertising effectiveness.
B) It allows the brand to gain favorable shelf position.
C) It guarantees immediate brand recognition and high sales volume.
D) It can be implemented quickly with a fair amount of security.
E) It easily creates a buzz in the minds of customers.
Answer: D
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

100) Which of the following is usually referred to as a full-blown test market?

A) an internal focus group
B) a discussion group
C) a country
D) a city or a few cities
E) a laboratory
Answer: D
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

101) The least costly way of consumer-goods market testing is ________.

A) simulated test marketing
B) controlled test marketing
C) a few test markets
D) sales-wave research
E) test marketing in 25 percent of the country
Answer: D
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Analytical thinking

102) Which of the following products is most likely to undergo alpha and beta testing?
A) food products
B) industrial goods
C) consumer products
D) commodities
E) FMCG products
Answer: B
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Application of knowledge

28
103) During ________ testing, the company's technical people observe how customers use the
product, a practice that often exposes unanticipated problems of safety and servicing and alerts
the company to customer training and servicing requirements.
A) beta
B) research
C) sales-wave
D) alpha
E) simulated
Answer: A
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Application of knowledge

104) Concept testing means validating the product concept by discussing within the design
group.
Answer: FALSE
Diff: 1
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

105) Rapid prototyping refers to designing products on a computer and then producing rough
models to show potential consumers for their reactions.
Answer: TRUE
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

106) Perceived value refers to the gap between actual needs and satisfied needs of a customer.
Answer: FALSE
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

107) Consumer preferences for alternative product concepts can be measured with conjoint
analysis.
Answer: TRUE
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

108) A major drawback of conjoint analysis is that it cannot be used to measure objective
attributes such as estimated market share and profit.
Answer: FALSE
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

109) The trade-off approach may be easier to use when there are only a few variables and
29
alternatives.
Answer: FALSE
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

110) Beta testing tests the product within the firm to see how it performs in different
applications.
Answer: FALSE
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

111) Sales-wave research can be implemented quickly and carried out without final packaging
and advertising.
Answer: TRUE
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

112) Expensive industrial goods and new technologies will normally undergo alpha and beta
testing.
Answer: TRUE
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

113) In response to a short-term oversupply of wine in the marketplace, the makers of Kendall-
Jackson developed two new brands by using rapid prototyping — designing products on a
computer and producing rough models to show potential consumers for their reactions — to
quickly bring its ideas to life.
Answer: TRUE
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Application of knowledge

114) Cannibalized income is additional income to a company as a result of a new product.

Answer: FALSE
Diff: 3
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

30
115) Customers of a proposed truck may want a certain acceleration rate, which is a desired
customer attribute. Engineers can turn this into the required horsepower and other engineering
attributes through a process known as alpha testing.
Answer: FALSE
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

116) What is concept testing? What is its importance? Explain two modern techniques used for
concept testing.
Answer: Concept testing means presenting the product concept to target consumers, physically
or symbolically, and getting their reactions. The more the tested concepts resemble the final
product or experience, the more dependable concept testing is. Concept testing of prototypes can
help avoid costly mistakes, but it may be especially challenging with radically different, new-to-
the-world products. Rapid prototyping can be used to design products on a computer and then
produce rough models to show potential consumers for their reactions. Companies are also using
virtual reality to test product concepts. Virtual reality programs use computers and sensory
devices (such as gloves or goggles) to simulate reality.
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Reflective thinking

117) Explain the concepts of sales-wave research and simulated test marketing.
Answer: In sales-wave research, consumers who initially try the product at no cost are reoffered
it, or a competitor's product, at slightly reduced prices. The offer may be made as many as five
times (sales waves), while the company notes how many customers select it again and their
reported level of satisfaction. During simulated test marketing, 30-40 qualified shoppers are
asked about brand familiarity and preferences in a specific product category and attend a brief
screening of both well-known and new TV commercials and print ads. One ad advertises the new
product but is not singled out for attention. Consumers receive a small amount of money and are
invited into a store where they may buy items.
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?

118) Caribou Coffee Company Inc. operates coffeehouses primarily in the United States. The
company wants to launch a new brand of specialty coffee and it has created a few hypothetical
combinations. The company wants to select two of the combinations after obtaining a ranking by
customers based on their preference. What concept testing method is suited here?
Answer: The company can use conjoint analysis, a method for deriving the utility values that
consumers attach to varying levels of a product's attributes.
Diff: 2
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Analytical thinking

31
119) GameTech International Inc. engages in the design, development, and marketing of
interactive electronic bingo systems primarily in the United States. Some top managers want to
collect sales-wave research, but others disagree, offering several disadvantages. List these
disadvantages.
Answer: Sales-wave research can be implemented quickly, conducted with a fair amount of
security, and carried out without final packaging and advertising. However, because customers
are preselected, it does not indicate trial rates the product would achieve with different sales
incentives, nor does it indicate the brand's power to gain distribution and favorable shelf
position.
Diff: 1
LO: 15.6: What is the best way to manage concept and strategy development?
AACSB: Application of knowledge

120) For a frequently purchased new product, the seller estimates repeat sales as well as first-
time sales. A high rate of repeat purchasing means customers ________.
A) value price more than differentiation
B) do not support innovation on brands
C) value differentiation more than price
D) prefer personalized products rather than standard ones
E) are satisfied with the product
Answer: E
Diff: 2
LO: 15.7: What is the best way to manage the commercialization of new products?
AACSB: Reflective thinking

121) Poga International, a multinational beverage corporation identifies that one of its
competitors is launching an apple flavored drink. The company decides to launch an apple flavor
brand along with its competitor. What timing strategy is used here?
A) first entry
B) blunt entry
C) parallel entry
D) late entry
E) exchange entry
Answer: C
Diff: 2
LO: 15.7: What is the best way to manage the commercialization of new products?
AACSB: Analytical thinking; Application of knowledge

32
122) Some firms might delay the launch of their products until after the competitor has borne the
cost of educating the market. Such an entry is called ________ entry.
A) strategic payoff
B) parallel
C) balancing
D) late
E) compensating
Answer: D
Diff: 2
LO: 15.7: What is the best way to manage the commercialization of new products?
AACSB: Reflective thinking

123) After a test, the most customer-appealing offer will be the most profitable offer to make.
Answer: FALSE
Diff: 1
LO: 15.7: What is the best way to manage the commercialization of new products?
AACSB: Reflective thinking

124) A business analysis is typically performed after management has developed the product
concept and marketing strategy.
Answer: TRUE
Diff: 1
LO: 15.7: What is the best way to manage the commercialization of new products?
AACSB: Reflective thinking

125) Survival-age distribution refers to the number of customers that the product has in year one,
two, three, and so on.
Answer: FALSE
Diff: 2
LO: 15.7: What is the best way to manage the commercialization of new products?
AACSB: Reflective thinking

126) Dragalong income refers to additional income whereas cannibalized income refers to
reduced income.
Answer: TRUE
Diff: 1
LO: 15.7: What is the best way to manage the commercialization of new products?
AACSB: Reflective thinking

127) Modular function deployment methodology takes the list of desired customer attributes
generated by market research and turns them into a list of engineering attributes that engineers
can use.
Answer: FALSE
Diff: 1
LO: 15.7: What is the best way to manage the commercialization of new products?
AACSB: Reflective thinking

128) Some firms might delay a new product launch until after the competitor has borne the cost
33
of educating the market and its product may reveal flaws the late entrant can avoid. This can be
classified as a parallel entry.
Answer: FALSE
Diff: 2
LO: 15.7: What is the best way to manage the commercialization of new products?
AACSB: Reflective thinking

129) Briefly explain the three choices available to companies when deciding the timing of
market entry.
Answer: Companies face three choices when deciding the timing.
1. First entry: The first firm entering a market usually enjoys the "first mover advantages" of
locking up key distributors and customers and gaining leadership. But if rushed to market before
it has been thoroughly debugged, the first entry can backfire.
2. Parallel entry: The firm might time its entry to coincide with the competitor's entry. The
market may pay more attention when two companies are advertising the new product.
3. Late entry: The firm might delay its launch until after the competitor has borne the cost of
educating the market, and its product may reveal flaws the late entrant can avoid. The late entrant
can also learn the size of the market.
Diff: 2
LO: 15.7: What is the best way to manage the commercialization of new products?
AACSB: Reflective thinking

130) What is the significance of performing business analysis?

Answer: Business analysis is performed to study a proposal's business attractiveness.
Management prepares sales, cost, and profit projections to determine whether they satisfy
company objectives.
Diff: 1
LO: 15.7: What is the best way to manage the commercialization of new products?
AACSB: Reflective thinking

131) Mobile phone company HCF delayed the introduction of a new cell phone model with
innovative features so that the launch could coincide with that of its competitor, LCM, which
was introducing a phone with similar features. What kind of entry did HCF use? How can this
benefit the company?
Answer: HCF used a parallel entry strategy. The market may pay more attention when two
companies are advertising the new product.
Diff: 2
LO: 15.7: What is the best way to manage the commercialization of new products?
AACSB: Analytical thinking; Application of knowledge

34
132) GameTech International Inc. engages in the design, development, and marketing of
interactive electronic bingo systems primarily in the United States. The company has plans to
enter developing markets such as Brazil and India. TechToys, GameTech's major competitor has
already started operations in India. GameTech decides to delay its entry to India and to closely
observe TechToys' operations in India. What is the possible rationale behind this delaying
decision?
Answer: GameTech is using the late entry strategy. The firm will delay its launch until after the
competitor has borne the cost of educating the market. It can also avoid the mistakes that
TechToys make. The company can also learn the size of the market.
Diff: 2
LO: 15.7: What is the best way to manage the commercialization of new products?
AACSB: Analytical thinking; Application of knowledge

133) A(n) ________ is any good, service, or idea that is perceived as new, no matter how long its
history.
A) commodity
B) innovation
C) adoption
D) invention
E) novel product
Answer: B
Diff: 1
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking

134) Adopters of new products move through five stages. These stages begin with ________ and
follow with interest, evaluation, trial, and adoption.
A) awareness
B) investigation
C) trial
D) innovation
E) diffusion
Answer: A
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking

35
135) Identify the stage in the consumer adoption process in which the customer is stimulated to
seek information about the innovation.
A) awareness
B) adoption
C) interest
D) evaluation
E) trial
Answer: C
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking

136) Robert has heard about the latest cell phone from LG Electronics that features Wi-Fi
hotspot technology. Wi-Fi hotspot is a technology that allows users to share mobile internet with
other Wi-Fi enabled devices. Robert visits the company's Web site to read more about the phone.
Robert is in the ________ stage of consumer-adoption process.
A) interest
B) awareness
C) evaluation
D) trial
E) adoption
Answer: A
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Analytical thinking; Application of knowledge

137) Armordo is a famous vacuum cleaner brand in Africa. Clara has heard of Armordo and she
knows that the product is a success. She has started considering whether or not to buy the
vacuum cleaner. What stage of the consumer-adoption process is Clara in?
A) awareness
B) adoption
C) evaluation
D) trial
E) interest
Answer: C
Diff: 3
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Analytical thinking; Application of knowledge

36
138) Which of the following is the mental step in the consumer-adoption process where the
customer starts considering whether to try an innovation?
A) adoption
B) trial
C) awareness
D) evaluation
E) interest
Answer: D
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking

139) People who are technology enthusiasts, venturesome, and who enjoy tinkering with new
products and mastering their intricacies are called ________.
A) innovators
B) early adopters
C) early majority
D) investigators
E) experimenters
Answer: A
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking

140) Troma Inc. is a famous manufacturer of cookware that follows a traditional distributor-
retailer system to distribute its products. The company abstains from the use of automated supply
chain management (SCM) systems mainly due to the fear of unknown. However, rapidly
escalating operational costs and inefficiencies have made it necessary for the company to
implement an SCM system. The company goes for a big-bang installation of SCM system to
become more competitive and cost effective. Identify the adopter group to which Troma belongs.
A) innovator
B) early adopter
C) early majority
D) laggard
E) late majority
Answer: D
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Analytical thinking; Application of knowledge

37
141) Jason is a technology enthusiast who is happy to conduct alpha and beta testing and report
on early weaknesses of consumer electronics products. He is most likely to fall in the ________
adopter category.
A) late majority
B) early
C) early majority
D) innovator
E) laggard
Answer: D
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Application of knowledge

142) Which of the following characteristics is closely associated with late majority adopter
groups?
A) superior technological knowledge
B) low price sensitiveness
C) opinion leadership
D) deliberate pragmatism
E) high risk aversion
Answer: E
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking

143) Joseph, a student of Columbia University, finds many of his classmates have purchased an
iPad tablet from Apple. The iPad, launched a few months before has been identified as a very
useful product and many students in the US have rated it highly. Considering all these, Joseph
also decides to purchase an iPad. Which of the following is the adopter group to which Joseph
belongs?
A) early adopter
B) innovator
C) late majority
D) laggard
E) early majority
Answer: E
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Analytical thinking; Application of knowledge

38
144) Five characteristics influence the rate of adoption of an innovation. One of these is
________.
A) marketing expertise
B) relative advantage
C) packaging attractiveness
D) government regulations
E) place of value exchange
Answer: B
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking

145) ________ is the effect one person has on another's attitude or purchase probability.
A) Sharing power
B) Collaborative power
C) Market influence
D) Brand power
E) Personal influence
Answer: E
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking

146) Relative advantage of an innovation refers to the degree to which ________.

A) it matches the values and experiences of the individuals
B) it is difficult to understand or use
C) it can be tried on a limited basis
D) it appears superior to existing products
E) the benefits of use are observable or describable to others
Answer: D
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Analytical thinking

39
147) The degree to which the beneficial results of an innovation's use are observable or
describable to others is called ________.
A) divisibility
B) communicability
C) compatibility
D) relative advantage
E) plainness
Answer: B
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking

148) Which of the following terms refers to the degree to which the innovation can be tried on a
limited basis?
A) compatibility
B) relative advantage
C) divisibility
D) communicability
E) complexity
Answer: C
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking

149) At the interest stage of the consumer-adoption process, the consumer becomes aware of the
innovation but lacks information about it.
Answer: FALSE
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking

150) The step in the consumer-adoption process where a consumer considers whether to try the
innovation is interest.
Answer: FALSE
Diff: 2
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking

40
151) Compatibility refers to the degree to which the innovation matches the values and
experiences of the individuals.
Answer: FALSE
Diff: 1
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking

152) What is the consumer-adoption process? What are the various steps in the process?
Answer: The consumer-adoption process is the mental steps through which an individual passes
from first hearing about an innovation to final adoption. The steps are the following:
1. Awareness: The consumer becomes aware of the innovation but lacks information about it.
2. Interest: The consumer is stimulated to seek information about the innovation.
3. Evaluation: The consumer considers whether to try the innovation.
4. Trial: The consumer tries the innovation to improve his or her estimate of its value.
5. Adoption: The consumer decides to make full and regular use of the innovation.
Diff: 1
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking

153) A customer survey at a mall revealed that Zoe is considered to be an early adopter. What
does this mean?
Answer: Early adopters are opinion leaders who carefully search for new technologies that
might give them a dramatic competitive advantage. They are less price sensitive and willing to
adopt the product if given personalized solutions and good service support.
Diff: 1
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Reflective thinking; Application of knowledge

41
154) Identify the five main characteristics that affect the diffusion of innovations. Describe each
and provide an example.
Answer: Student answers will vary. Five characteristics influence an innovation's rate of
adoption. We consider them for digital video recorders (DVRs) for home use, as exemplified by
TiVo.
1. Relative advantage — the degree to which the innovation appears superior to existing
products. The greater the perceived relative advantage of using a DVR, say, for easily recording
favorite shows, pausing live TV, or skipping commercials, the more quickly it was adopted.
2. Compatibility — the degree to which the innovation matches consumers' values and
experiences. DVRs are highly compatible with the preferences of avid television watchers.
3. Complexity — the degree to which the innovation is difficult to understand or use. DVRs are
somewhat complex and therefore took slightly longer to penetrate into home use.
4. Divisibility — the degree to which the innovation can be tried on a limited basis. This
provided a sizable challenge for DVRs — sampling could occur only in a retail store or perhaps
a friend's house.
5. Communicability — the degree to which the benefits of use are observable or describable to
others. The fact that DVRs have some clear advantages helped create interest and curiosity.
Other characteristics that influence the rate of adoption are cost, risk and uncertainty, scientific
credibility, and social approval.
Diff: 3
LO: 15.8: What factors affect the rate of diffusion and consumer adoption of newly launched
products and services?
AACSB: Application of knowledge

42