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Chapter 10: Maintaining a Competitive Edge with New Offerings

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Chapter 10: Maintaining a Competitive Edge with New Offerings

25 problems · 0 figures

Knowledge Check 10.1.1 §10.1 source ↗

Many years ago, liquid soap was introduced in place of traditional bar soaps. This innovation changed an intrinsic feature of the product, but it’s used for the same purpose. This is an example of ________.
  1. a.
    discontinuous innovation
  2. b.
    continuous innovation
  3. c.
    dynamically continuous innovation
  4. d.
    noncontinuous innovation

Answer

C. dynamically continuous innovation
With dynamically continuous innovation, some changes in consumer habits are necessary, but the changes aren’t as dramatic as with discontinuous innovation and are not as insignificant as in continuous innovation.

Knowledge Check 10.1.2 §10.1 source ↗

Coca-Cola, a behemoth in the soft drink market, decides that it is going to develop and market Coca-Cola popsicles. What type of new product would this constitute?
  1. a.
    New-to-the-world
  2. b.
    New-to-the-firm
  3. c.
    Improvements and revision to existing products
  4. d.
    Repositioned product

Answer

B. New-to-the-firm
Remember, new-to-the-firm products aren’t new to the world, but they are a new product venture for the firm.

Knowledge Check 10.1.3 §10.1 source ↗

Saundra went to the grocery store and purchased the same laundry detergent she’s been buying for years, but she noticed that the packaging had been changed and the label indicated that the laundry detergent was “new and improved.” What category of new products would the laundry detergent likely fall under?
  1. a.
    New-to-the-world products
  2. b.
    New-to-the-firm products
  3. c.
    Repositioned products
  4. d.
    Improvements and revisions to existing products

Answer

D. Improvements and revisions to existing products
The laundry detergent is supposedly a current product made better.

Knowledge Check 10.1.4 §10.1 source ↗

Hoffman Enterprises has introduced a new product to the market that has undergone only marginal changes and doesn’t alter consumer use habits. What type of product has Hoffman Enterprises introduced?
  1. a.
    Discontinuous innovation
  2. b.
    Continuous innovation
  3. c.
    Intermittent innovation
  4. d.
    Dynamically continuous innovation

Answer

B. Continuous innovation
With continuous innovation, the existing product undergoes only marginal changes and doesn’t alter consumer habits.

Knowledge Check 10.1.5 §10.1 source ↗

Sources through which a business earns income from the sales of goods or services are known as ________.
  1. a.
    capital gains
  2. b.
    incremental income
  3. c.
    profits
  4. d.
    revenue streams

Answer

D. revenue streams
Revenue streams are the different sources from which a business earns money from the sale of its goods or services.

Knowledge Check 10.2.1 §10.2 source ↗

A physical version of the product concept that is developed during the new product development process is called a ________.
  1. a.
    mock-up
  2. b.
    model
  3. c.
    prototype
  4. d.
    precedent

Answer

C. prototype
A prototype is an early model of a new product that R&D develops in order to be able to test the design.

Knowledge Check 10.2.2 §10.2 source ↗

You’ve gathered customers in the target market and presented them with a description of the product concept you have selected. This process is known as ________.
  1. a.
    prototyping
  2. b.
    concept testing
  3. c.
    test-marketing
  4. d.
    crowdsourcing

Answer

B. concept testing
Concept testing is a research method that involves determining how customers feel about the new product before actually launching it.

Knowledge Check 10.2.3 §10.2 source ↗

At what stage in the new product development process would you launch the product, complete with full-scale production, distribution, advertising, and sales promotion?
  1. a.
    Test-marketing
  2. b.
    Product development
  3. c.
    Business analysis
  4. d.
    Commercialization

Answer

D. Commercialization
Commercialization is where the “rubber hits the road” and the company introduces the product to the market on a full-scale basis, involving production, marketing, distribution, and customer support.

Knowledge Check 10.2.4 §10.2 source ↗

The least costly method of test-marketing is known as ________.
  1. a.
    controlled test-marketing
  2. b.
    sales-wave research
  3. c.
    simulated test-marketing
  4. d.
    crowdsourcing

Answer

B. sales-wave research
In sales-wave research, consumers are initially allowed to try the product at no cost. They are then reoffered the product (or a competitor’s product) at a reduced price a number of times (i.e., sales waves). The point of this research is to see how many consumers select the new product and record their reported levels of satisfaction with the product.

Knowledge Check 10.2.5 §10.2 source ↗

What is the first stage in the new product development process?
  1. a.
    Idea screening and evaluation
  2. b.
    Market strategy development
  3. c.
    Commercialization
  4. d.
    Idea generation

Answer

D. Idea generation
The first stage in the new product development process is idea generation.

Knowledge Check 10.3.1 §10.3 source ↗

Data measurements that businesses use to evaluate the success of new products are called ________.
  1. a.
    ROI
  2. b.
    product adoption rates
  3. c.
    R&D
  4. d.
    product metrics

Answer

D. product metrics
Product metrics are data measurements that businesses use to evaluate the success of a product.

Knowledge Check 10.3.2 §10.3 source ↗

Which method calculates cost of goods sold, inventory, cash, and other financial line items as a percentage of sales and then applies that percentage to future sales estimates?
  1. a.
    Product adoption rate
  2. b.
    Current year percentage of sales
  3. c.
    Time to value (TTV)
  4. d.
    Revenue growth rate

Answer

B. Current year percentage of sales
Current year percentage of sales is a “quick and dirty” way to estimate the product’s future value.

Knowledge Check 10.3.3 §10.3 source ↗

To calculate this metric, the return of the investment is divided by its cost.
  1. a.
    Time to value (TTV)
  2. b.
    R&D spending as a percentage of sales
  3. c.
    ROI
  4. d.
    Revenue growth rate

Answer

C. ROI
Return on investment (ROI) is a performance measure used to evaluate the profitability of new product development.

Knowledge Check 10.3.4 §10.3 source ↗

This metric measures how long it takes new users to recognize the value of a new product.
  1. a.
    Product adoption rate
  2. b.
    ROI
  3. c.
    Time to value (TTV)
  4. d.
    Revenue growth rate

Answer

C. Time to value (TTV)
Time to value is a critical metric that measures how long it takes new users to recognize the value of your product.

Knowledge Check 10.3.5 §10.3 source ↗

Which of the following metrics would likely NOT be used to evaluate the effectiveness of new products?
  1. a.
    R&D spending as a percentage of sales
  2. b.
    Time to value (TTV)
  3. c.
    Return on investment (ROI)
  4. d.
    Annual recurring revenue (ARR)

Answer

D. Annual recurring revenue (ARR)
Annual recurring revenue (ARR) is the annual value of revenue generated from subscriptions and contracts.

Knowledge Check 10.4.1 §10.4 source ↗

The degree to which a new product is built on the firm’s existing technological resources is known as ________.
  1. a.
    market attractiveness
  2. b.
    marketing synergy
  3. c.
    technological synergy
  4. d.
    cost-benefit analysis

Answer

C. technological synergy
Technological synergy is how much of a match there is between the existing technological skills of the firm and the technological skills needed to execute the new product initiative.

Knowledge Check 10.4.2 §10.4 source ↗

A study by the Product Development and Management Association found that new product failure rates varied among industries, ranging from 35 percent for ________ to 49 percent for ________.
  1. a.
    health care products; consumer goods
  2. b.
    consumer goods; pharmaceuticals
  3. c.
    consumer goods; technology products
  4. d.
    technology products; health care products

Answer

A. health care products; consumer goods
The study found that new product failure rates varied among industries, ranging from 35 percent for health care products to 49 percent for consumer goods.

Knowledge Check 10.4.3 §10.4 source ↗

Graham, a marketer for ABC Corporation, was concerned about the new product launch because R&D was months behind in development and the economy appeared to be heading toward a recession. Which factor contributing to the failure of new products is Graham’s concern?
  1. a.
    Lack of product differentiation
  2. b.
    Prolonged development/delayed market entry
  3. c.
    Targeting the wrong market
  4. d.
    Failure to understand customer needs/wants

Answer

B. Prolonged development/delayed market entry
The prolonged delay of a new product can have many implications: changing customer needs/wants, an economic downturn, rising unemployment rates, or even the evolution of different market segments.

Knowledge Check 10.4.4 §10.4 source ↗

Your company has added so many features to the new product you’re launching that the price point when it hits the market is going to be significantly higher than originally anticipated. Which factor contributing to the failure of new products is at play here?
  1. a.
    Lack of product differentiation
  2. b.
    Prolonged development/delayed market entry
  3. c.
    Targeting the wrong market
  4. d.
    Poor pricing or cost structure

Answer

D. Poor pricing or cost structure
In an effort to bring “something new” to the market, companies often include features that make the product more costly to produce.

Knowledge Check 10.4.5 §10.4 source ↗

The FurZapper, which removes pet hair from laundry in the washing machine, was introduced on Shark Tank and became an immediate hit. It garnered over 5,000 five-star reviews on Amazon because customers were amazed at how much pet hair it trapped in the washer. Which factor contributing to the success of new products is likely at play here?
  1. a.
    Delivering unique benefits to users
  2. b.
    Technology synergy
  3. c.
    Planning before development
  4. d.
    Market attractiveness

Answer

A. Delivering unique benefits to users
Products that deliver real and unique benefits to customers are typically more successful than products that have few positive points of differentiation compared to existing products on the market.

Knowledge Check 10.5.1 §10.5 source ↗

Garrett is the type of consumer who has to have the absolute “latest and greatest” technology products on the market. He is often the very first of his group of friends to acquire the newest smartphone or other gadget. Garrett would be considered a(n) ________.
  1. a.
    early adopter
  2. b.
    laggard
  3. c.
    late majority
  4. d.
    innovator

Answer

D. innovator
Innovators typically buy new products as soon as they hit the market.

Knowledge Check 10.5.2 §10.5 source ↗

What is the first stage in the consumer adoption process?
  1. a.
    Product awareness
  2. b.
    Product evaluation
  3. c.
    Product trial
  4. d.
    Product interest

Answer

A. Product awareness
Product awareness is the first stage in the consumer adoption process, in which a company creates awareness that the product is available.

Knowledge Check 10.5.3 §10.5 source ↗

The extent to which the beneficial results of using a new product are observable or describable to others is referred to as ________.
  1. a.
    divisibility
  2. b.
    product awareness
  3. c.
    marketing synergy
  4. d.
    communicability

Answer

D. communicability
Communicability is the extent to which the benefits of a new product are likely to be noticed and discussed by consumers.

Knowledge Check 10.5.4 §10.5 source ↗

Bob refuses to get “on board” with smartphones. He insists on having a landline in his apartment. In terms of the new product adopter categories, Bob would be considered a(n) ________.
  1. a.
    early adopter
  2. b.
    innovator
  3. c.
    laggard
  4. d.
    late adopter

Answer

C. laggard
Laggards are more in tune with the past than the future, and they are skeptical of new ideas.

Knowledge Check 10.5.5 §10.5 source ↗

Which group of consumers tends to be unwilling to take a chance on a new product or innovation until the majority of consumers has already adopted the product?
  1. a.
    Innovators
  2. b.
    Early majority
  3. c.
    Laggards
  4. d.
    Late majority

Answer

D. Late majority
Consumers in the late majority category are typically slow to catch on to the popularity of new products or services.

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Problems and answers are adapted from Principles of Marketing by Maria Gomez Albrecht, Mark Green and Linda Hoffman, OpenStax, and are used under the CC BY-NC-SA 4.0 licence. Access for free at https://openstax.org/books/principles-marketing/pages/1-unit-introduction. Illustrations: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license. This adaptation is released under the same licence, is non-commercial, and is neither affiliated with nor endorsed by OpenStax or Rice University.