Marketing Management, 14e (Kotler/Keller)

Chapter 19 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 market places
C) increasing the operational profitability
D) increasing productivity of employees
E) developing new products from within
Answer: E
Objective: 1
Difficulty: Easy
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
Objective: 1
Difficulty: Easy
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
Objective: 1
Difficulty: Easy
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
Objective: 1
Difficulty: Easy
5) Which of the following is the best example of a new-to-the-world product?
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.
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D) An Asian company licenses a U.S. 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
Objective: 1
AACSB: Analytic skills
Difficulty: Moderate
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
Objective: 1
Difficulty: Easy
7) 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
Objective: 1
Difficulty: Easy

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8) Which of the following strategies for new-product development incorporates the buyers'
preferences in the final design of the product?
A) customer-driven engineering
B) market leadership
C) cost leadership
D) incremental innovation
E) disruptive technology
Answer: A
Objective: 1
Difficulty: Easy
9) 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 became 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
Objective: 1
AACSB: Analytic skills
Difficulty: Moderate
10) 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 inhouse 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
Objective: 1
Difficulty: Easy

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11) Identify a shortcoming of giving the responsibility of new product development 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
Objective: 2
Difficulty: Easy
12) ________ 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
Objective: 2
Difficulty: Easy
13) 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) ________.
A) virtual team
B) venture team
C) fundamental team
D) elemental team
E) transitory team
Answer: B
Objective: 2
AACSB: Analytic skills
Difficulty: Moderate

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14) 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
Objective: 2
AACSB: Analytic skills
Difficulty: Moderate
15) The ________ used by companies 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
Objective: 2
Difficulty: Easy
16) ________ are informal workplaces, sometimes garages, where intrapreneurial teams attempt
to develop new products.
A) Stage-gate systems
B) Skunkworks
C) Funnels
D) Opportunity spaces
E) Research centers
Answer: B
Objective: 2
Difficulty: Easy

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17) 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
Objective: 2
Difficulty: Easy
18) 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
Objective: 2
Difficulty: Easy
19) ________ 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
Objective: 2
Difficulty: Easy
20) The ________ uses observational, anthropological, and ethnographic methods or consumer
self-reports to map consumer needs, wants, and even beyond.
A) business analysis
B) demand landscape
C) opportunity space
D) strategic blueprint
E) internal design analysis
Answer: B
Objective: 3
Difficulty: Easy
21) Which of the following uses conceptual lens and structured innovative-thinking tools to
achieve market perspectives from different angles?
A) business analysis
B) strategic blueprint
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C) internal design analysis

D) demand landscape
E) opportunity space
Answer: E
Objective: 3
Difficulty: Easy
22) Gordon Apparel, Inc. engages in the design, manufacture, and retail of fashion apparel for
women, men, children, and pets. The company is known for its timely launch of apparels and
stylish designer clothing. The company believes a new product has to create needs and not just
satisfy the existing needs. To achieve this goal it engages in controlled idea generation
techniques such as brainstorming while creating new designs. Which of the following parts of the
DIG framework is given prominence here?
A) business analysis
B) strategic blueprint
C) opportunity space
D) internal design analysis
E) demand landscape
Answer: C
Objective: 3
AACSB: Analytic skills
Difficulty: Moderate
23) Identify the element in the DIG network that considers how a new product can fit into
customers lives and how it can be distinguished from the competitors' products.
A) business analysis
B) internal design analysis
C) strategic blueprint
D) demand landscape
E) opportunity space
Answer: C
Objective: 3
Difficulty: Easy

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24) ________ 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
Objective: 3
Difficulty: Easy
25) 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
Objective: 3
Difficulty: Easy
26) Many 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 suggesting.
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
Objective: 3
Difficulty: Moderate
27) 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
Objective: 3
Difficulty: Easy
28) 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
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C) mind mapping
D) lateral marketing
E) morphological analysis
Answer: E
Objective: 3
Difficulty: Easy
29) 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
Objective: 3
Difficulty: Easy
30) 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 is 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
Objective: 3
AACSB: Analytic skills
Difficulty: Moderate

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31) ________ 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
Objective: 3
Difficulty: Easy
32) The ________ creativity technique begins in a thought that is written down, then proceeds to
develop other thoughts that are linked to the first thought, and finally materializes a new idea by
associating all the thoughts.
A) mind mapping
B) contextual analysis
C) attribute listing
D) reverse assumption analysis
E) morphological analysis
Answer: A
Objective: 3
Difficulty: Easy
33) 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
Objective: 3
Difficulty: Easy

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34) A group of college graduates decide 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 together 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
Objective: 3
AACSB: Analytic skills
Difficulty: Moderate
35) 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
Objective: 3
AACSB: Analytic skills
Difficulty: Moderate
36) A ________ error occurs when the company dismisses a good idea.
A) probability
B) performance
C) double counting
D) DROP
E) GO
Answer: D
Objective: 3
Difficulty: Easy

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37) 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
Objective: 4
Difficulty: Easy
38) 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
Objective: 4
Difficulty: Easy
39) ________ means presenting the product concept to target consumers, symbolically of
physically, and getting their reactions.
A) Perceptual mapping
B) Brand-positioning mapping
C) Brand attribute mapping
D) Concept development
E) Concept testing
Answer: E
Objective: 4
Difficulty: Easy
40) Modern firms use the ________ concept testing 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
Objective: 4
Difficulty: Easy

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41) Brown & Smith, Inc. engages in the design, development, making, and retail of designer
jewelry in North America. Before approving a new design of jewelry the company draws it on a
computer and then produces models to show potential consumers for 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
Objective: 4
AACSB: Analytic skills
Difficulty: Moderate
42) 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
Objective: 4
Difficulty: Easy
43) 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
Objective: 4
Difficulty: Easy

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44) 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 the above scenario?
A) virtual reality testing
B) conjoint analysis
C) perceptual mapping
D) product fabrication
E) rapid prototyping
Answer: B
Objective: 4
AACSB: Analytic skills
Difficulty: Moderate
45) The trade-off approach may be easier to use when there are/is ________.
A) many variables
B) only a few alternatives
C) observers that are biased
D) possible offers that are limited
E) only one highly desirable solution
Answer: A
Objective: 4
Difficulty: Easy
46) ________ 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
Objective: 4
Difficulty: Easy

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47) ________ 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
Objective: 4
Difficulty: Easy
48) 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) lifecycle ratio
C) obsolescence rate
D) business turnover ratio
E) product-performance usage
Answer: A
Objective: 4
Difficulty: Easy
49) 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
Objective: 4
Difficulty: Easy
50) ________ contribution lists the changes in income to other company products caused by the
introduction of a new product.
A) Supplementary
B) Dragalong
C) Gross
D) Cumulative
E) Net
Answer: A
Objective: 4
Difficulty: Easy
51) The highest loss a project can create is called ________.
A) rapid prototyping income
B) payback income
C) maximum investment exposure
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D) incremental yearly exposure

E) cannibalized income
Answer: C
Objective: 4
Difficulty: Easy
52) 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
Objective: 4
Difficulty: Easy
53) 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
Objective: 4
Difficulty: Easy
54) ________ is a customer test that involves placing the product within the firm to see how it
performs in different applications.
A) Beta testing
B) Research testing
C) Sales-wave testing
D) Alpha testing
E) Simulated testing
Answer: D
Objective: 4
Difficulty: Easy
55) 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
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Objective: 4
Difficulty: Easy
56) 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
Objective: 4
AACSB: Analytic skills
Difficulty: Moderate
57) 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
Objective: 4
Difficulty: Easy

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58) 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
Objective: 4
Difficulty: Easy
59) 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
Objective: 4
Difficulty: Easy
60) During ________, 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 testing
B) research testing
C) sales-wave testing
D) alpha testing
E) simulated testing
Answer: A
Objective: 4
Difficulty: Easy

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61) 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
Objective: 4
AACSB: Analytic skills
Difficulty: Moderate
62) 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 pay off
B) parallel
C) balancing
D) late
E) compensating
Answer: D
Objective: 4
Difficulty: Easy
63) 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
Objective: 5
Difficulty: Easy

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64) 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
Objective: 5
Difficulty: Easy
65) 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
Objective: 5
Difficulty: Easy
66) 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
Objective: 5
AACSB: Analytic skills
Difficulty: Moderate

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67) 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
Objective: 5
AACSB: Analytic skills
Difficulty: Moderate
68) Which of the following is the mental step in consumer-adoption process where the customer
starts considering whether to try the innovation?
A) adoption
B) trial
C) awareness
D) evaluation
E) interest
Answer: D
Objective: 5
Difficulty: Easy
69) 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
Objective: 5
Difficulty: Easy

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70) Troma Inc., is a famous manufacturer of cookware, that follows a traditional distributorretailer system to distribute its products. The company abstains from the use of automated supply
chain management (SCM) system mainly due to the fear of unknown. However, rapidly
escalating operational costs and inefficiencies have made it absolutely 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
Objective: 5
AACSB: Analytic skills
Difficulty: Moderate
71) 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
Objective: 5
Difficulty: Easy
72) Joseph, a student of the Columbia University, finds many of his classmates have purchased
the I-pad tablet PC from Apple Computers. I-pad, launched a few months before has been
identified as a very useful product and many students in the U.S. have rated it highly.
Considering all these, Joseph also decides to purchase an I-pad. 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
Objective: 5
AACSB: Analytic skills
Difficulty: Moderate

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73) 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
Objective: 5
Difficulty: Easy
74) ________ 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
Objective: 5
Difficulty: Easy
75) 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
Objective: 5
AACSB: Analytic skills
Difficulty: Moderate
76) 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
Objective: 5
Difficulty: Easy
77) 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
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C) divisibility
D) communicability
E) complexity
Answer: C
Objective: 5
Difficulty: Easy
78) Organic growth refers to increasing the profitability of the organization by increasing
employee productivity.
Answer: FALSE
Objective: 1
Difficulty: Easy
79) Companies typically must create a strong R&D and marketing partnership to pull off a
radical innovation.
Answer: TRUE
Objective: 1
Difficulty: Easy
80) 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
Objective: 1
Difficulty: Easy
81) Companies that fail to develop new products leave their existing offerings vulnerable to
increased domestic and foreign competition.
Answer: TRUE
Objective: 1
Difficulty: Easy
82) Most established companies focus on incremental innovation rather than radical innovation.
Answer: TRUE
Objective: 1
Difficulty: Easy

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83) Shorter product life cycles are common in industries characterized by low level of
competition.
Answer: FALSE
Objective: 1
Difficulty: Easy
84) Companies should use normal investment criteria to budget for new-product developments.
Answer: FALSE
Objective: 2
Difficulty: Easy
85) Almost all companies use the conventional percentage-of-sales figure while budgeting for
new product development.
Answer: FALSE
Objective: 2
Difficulty: Easy
86) Skunkworks are formal workplaces where intrapreneurial teams attempt to develop new
products.
Answer: FALSE
Objective: 2
Difficulty: Easy
87) Venture teams are cross-functional groups charged with developing a specific product or
business.
Answer: TRUE
Objective: 2
Difficulty: Easy
88) A business analysis is performed mainly to identify if a company has got a technically and
commercially sound product.
Answer: FALSE
Objective: 2
Difficulty: Easy
89) A spiral development process recognizes the value of returning to an earlier stage to make
improvements before moving forward.
Answer: TRUE
Objective: 2
Difficulty: Easy
90) The demand landscape uses conceptual lens and structured innovative-thinking tools to
achieve market perspectives from different angles.
Answer: FALSE
Objective: 3
Difficulty: Easy
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91) The strategic blueprint thinks about how the new product can fit into customers' lives and
how it can be distinguished from competitors.
Answer: TRUE
Objective: 3
Difficulty: Easy
92) Crowdsourcing means inviting the Internet community to help create content or software,
often with prize money or a moment of glory as an incentive.
Answer: FALSE
Objective: 3
Difficulty: Easy
93) Cocreation can help a company create favorable word of mouth.
Answer: TRUE
Objective: 3
Difficulty: Easy
94) Employees can be a source of ideas for improving production, products, and services.
Answer: TRUE
Objective: 3
Difficulty: Easy
95) Attribute listing lists several ideas and considers each in relationship to the others.
Answer: FALSE
Objective: 3
Difficulty: Easy
96) Reverse assumption analysis lists all the normal assumptions about an entity and then turns
them around.
Answer: TRUE
Objective: 3
Difficulty: Easy

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97) Morphological analysis starts by forming a new dimension and then thinks about the possible
problems of the dimension.
Answer: FALSE
Objective: 3
Difficulty: Easy
98) A DROP-error occurs when the company accepts a bad idea.
Answer: FALSE
Objective: 3
Difficulty: Easy
99) A category concept defines the product's attributes and features.
Answer: FALSE
Objective: 4
Difficulty: Easy
100) Concept testing means validating the product concept by discussing within the design
group.
Answer: FALSE
Objective: 4
Difficulty: Easy
101) Rapid prototyping refers to designing products on a computer and then producing rough
models to show potential consumers for their reactions.
Answer: TRUE
Objective: 4
Difficulty: Easy
102) Perceived value refers to the gap between actual needs and satisfied needs of a customer.
Answer: FALSE
Objective: 4
Difficulty: Easy
103) Consumer preferences for alternative product concepts can be measured with conjoint
analysis.
Answer: TRUE
Objective: 4
Difficulty: Easy

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104) 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
Objective: 4
Difficulty: Easy
105) The trade-off approach may be easier to use when there are only a few variables and
alternatives.
Answer: FALSE
Objective: 4
Difficulty: Easy
106) After a test, the most customer-appealing offer will be the most profitable offer to make.
Answer: FALSE
Objective: 4
Difficulty: Easy
107) A business analysis is typically performed after the management has developed the product
concept and marketing strategy.
Answer: TRUE
Objective: 4
Difficulty: Easy
108) Survival-age distribution refers to the number of customers that the product has in year one,
two, three, and so on.
Answer: FALSE
Objective: 4
Difficulty: Easy
109) Dragalong income refers to additional income whereas cannibalized income refers to
reduced income.
Answer: TRUE
Objective: 4
Difficulty: Easy

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110) 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
Objective: 4
Difficulty: Easy
111) Beta testing tests the product within the firm to see how it performs in different
applications.
Answer: FALSE
Objective: 4
Difficulty: Easy
112) Sales-wave research can be implemented quickly and carried out without final packaging
and advertising.
Answer: TRUE
Objective: 4
Difficulty: Easy
113) Expensive industrial goods and new technologies will normally undergo alpha and beta
testing.
Answer: TRUE
Objective: 4
Difficulty: Easy
114) Some firms might delay new product launch until after the competitor has borne the cost 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
Objective: 4
Difficulty: Easy
115) At the interest stage of consumer-adoption process, the consumer becomes aware of the
innovation but lacks information about it.
Answer: FALSE
Objective: 5
Difficulty: Easy

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116) Compatibility refers to the degree to which the innovation matches the values and
experiences of the individuals.
Answer: FALSE
Objective: 5
Difficulty: Easy
117) 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.
Objective: 1
Difficulty: Easy
118) Identify the major reasons why new product failures occur.
Answer: The following are some of the possible reasons for the failure of new products. (1)
Shortage of important ideas in certain areas, (2) fragmented markets, (3) social, economic, and
governmental constraints, (4) high cost of development, (4) capital shortages, (5) shorter
required development time, (6) poor launch timing, shorter product life cycles, and (7)
organizational support.
Objective: 1
Difficulty: Easy
119) 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.
Objective: 2
Difficulty: Easy
120) 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 cross30
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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.
Objective: 2
Difficulty: Easy
121) Briefly explain the three parts of the demand-first innovation and growth (DIG) framework.
Answer: The three parts of the DIG framework are the following.
(1) The demand landscape: Use observational, anthropological, and ethnographic methods or
consumer self-reports to map consumer needs, wants, and even beyond.
(2) The opportunity space: Use conceptual lens and structured innovative-thinking tools to
achieve market perspectives from different angles.
(3) The strategic blueprint: Think about how the new product can fit into customers' lives and
how it can be distinguished from competitors.
Objective: 3
Difficulty: Easy

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122) Explain three techniques for stimulating creativity to generate better ideas.
Answer: The following are some of the techniques.
(1) 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.
(2) Forced relationships: List several ideas and consider each in relationship to each of the
others.
(3) 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.
(4) 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.
(5) New contexts: Take familiar processes, such as people-helping services, and put them into a
new context.
(6) 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 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.
Students may explain any three of these techniques.
Objective: 3
Difficulty: Easy
123) 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-tothe-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.
Objective: 4
Difficulty: Easy

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124) 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, thirty to forty 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 any items.
Objective: 4
Difficulty: Easy
125) 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.
Objective: 4
Difficulty: Easy
126) 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.
Objective: 5
Difficulty: Easy
127) What does the term organic growth mean?
Answer: Organic growth refers to the development of new products from within.
Objective: 1
Difficulty: Easy
128) I-ball, a cell phone manufacturer introduces a cell phone targeted at customers aged above
70. 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
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products that create an entirely new market. The product has the greatest cost and risk of all
product types.
Objective: 1
AACSB: Analytic skills
Difficulty: Moderate
129) What is incremental innovation? Give an example of incremental innovation.
Answer: Student answers may 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.
Objective: 1
AACSB: Analytic skills
Difficulty: Moderate
130) Tosho Electronics, a leading Japanese, electronic manufacturer believes shorter product life
cycles of new products reduces the scope for R&D and innovation. Offer a possible reason for
shorter lifecycles.
Answer: Student answers may 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 product life cycles for products.
Objective: 1
AACSB: Analytic skills
Difficulty: Moderate

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131) 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 it 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.
Objective: 2
AACSB: Analytic skills
Difficulty: Moderate
132) Interno Computers Inc., together with subsidiaries, designs, manufactures, and markets
personal computers and mobile communication and media devices, as well as selling 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.
Objective: 2
AACSB: Analytic skills
Difficulty: Moderate
133) 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.
Objective: 2
Difficulty: Easy

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134) Andersen, the CEO of a home appliance manufacturer, believes in controlled idea
generation techniques such as brainstorming when creating new designs and ideas for product
revisions. He does not engage in observational methods. What part of DIG framework is
eminently used here?
Answer: The opportunity space is used here. It uses conceptual lens and structured innovativethinking tools to achieve market perspectives from different angles.
Objective: 3
AACSB: Analytic skills
Difficulty: Moderate
135) 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.
Objective: 3
Difficulty: Easy
136) What is the purpose of appointing an idea manager?
Answer: A company can motivate its employees to submit new ideas to an idea manager whose
name and contact information are widely circulated.
Objective: 3
Difficulty: Easy
137) Horon Furniture is a manufacturer of office furniture. The company is known for its
innovative multi-purpose 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.
Objective: 3
AACSB: Analytic skills
Difficulty: Moderate
138) Use reverse assumption analysis to analyze a school.
Answer: Student answers may 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.
Objective: 3
Difficulty: Easy
139) 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.
Objective: 3
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AACSB: Analytic skills

Difficulty: Moderate
140) 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.
Objective: 4
Difficulty: Easy
141) 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.
Objective: 4
AACSB: Analytic skills
Difficulty: Moderate
142) 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.
Objective: 4
Difficulty: Easy

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143) 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.
Objective: 4
Difficulty: Easy
144) Mobile phone company HCF delayed the introduction of a new cellphone 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.
Objective: 4
AACSB: Analytic skills
Difficulty: Moderate
145) 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 Techtoy's 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.
Objective: 4
AACSB: Analytic skills
Difficulty: Moderate
146) 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.
Objective: 5
Difficulty: Easy

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