ADM2320 - FINAL EXAM STUDY 1 (CHAPTERS 8-10)
UPDATED ACTUAL QUESTIONS AND CORRECT
ANSWERS
Question:
Define Innovation
Answer:
The process by which ideas are transformed into new products and services
that will help the firm grow
Question:
Name and define the four reasons firms create new products
Answer:
1. Changing customer needs - Companies can create new products to keep
customers from getting bored, to create solutions to problems customers never
knew they had, and to innovate on an already well-known product
2. Market Saturation - The longer a product exists, the more saturated the
market will get. Companies can use saturated markets as an opportunity to
adopt new processes or mentality.
3. Managing Risk through Diversity - Companies with diverse product
portfolios can drop under performing products and address a wider range of
customer preferences.
4. Fashion Cycles - Some product categories are cyclical and follow trends. In
this case, a bulk of sales will come from new products.
Question:
Define Pioneers
Answer:
New breakthrough, and disruptive products that create whole new markets
Question:
Define First movers
Answer:
The pioneers who are first to create a new product category and market. They
are rewarded with a majority share of the initial market.
Question:
Name 5 reasons for product failure
Answer:
1. Overestimation of market size
2. Price too high
3. incorrect positioning
4. ineffective promotion
5. Competition
Question:
Name and define the 5 groups that make up the Con-
sumer adoption cycle
, Answer:
1. Innovators - Buyers that want to be first to use a product. They are risk
takers, often very knowledgeable, and price insensitive.
2. Early Adopters - Don't take as much risk and wait until the innovators have
reviewed the product. They are often the opinion leaders for a certain product
category
3. Early Majority - ~1/3 of the population.This group is crucial for profitability.
They wait until all of the "bugs" are worked out before buying
4. Late Majority - ~1/3 of the population. Sales have typically peaked by the
time this segment purchases the product. The last big group of consumers to
enter the market
5. Laggards - May never buy the product. They will use traditional products
until they are no longer available and avoid change
Question:
Name and define the 4 factors that affect the diffusion of innovation
Answer:
1. Relative advantage - If a product is perceived to be better than substitutes, it
will diffuse faster.
2. Compatibility - Product compatibility with the needs of people in different
cultures will affect its rate of diffusion.
3. Observability - Products that are easily observed and their benefits easily
communicated will diffuse faster.
4. Complexity and Trialability - Products that are relatively less complex and
easy to try out will diffuse faster.
Question:
Name the 6 steps of New Product Development in order
Answer:
1. Idea Generation
2. Concept testing
3. Product Development
4. Market Testing
5. Product Launch
6. Evaluation of Results
Question:
What are the two sources of
ideas and define/expand on them
Answer:
1. Internal Sources - Companies can use internal, formal R&D to come up with
new product ideas.
Brainstorming - Groups of employees work together to generate ideas
2. External Sources
Licensing - Firms can buy the rights to use technology or ideas from other
research firms
Outsourcing - Firms sometimes hire outside firms to perform the research and
come up with new product ideas for them.
Competitors' products - Firms can reverse engineer a competitor's product to
come up with their own version.
UPDATED ACTUAL QUESTIONS AND CORRECT
ANSWERS
Question:
Define Innovation
Answer:
The process by which ideas are transformed into new products and services
that will help the firm grow
Question:
Name and define the four reasons firms create new products
Answer:
1. Changing customer needs - Companies can create new products to keep
customers from getting bored, to create solutions to problems customers never
knew they had, and to innovate on an already well-known product
2. Market Saturation - The longer a product exists, the more saturated the
market will get. Companies can use saturated markets as an opportunity to
adopt new processes or mentality.
3. Managing Risk through Diversity - Companies with diverse product
portfolios can drop under performing products and address a wider range of
customer preferences.
4. Fashion Cycles - Some product categories are cyclical and follow trends. In
this case, a bulk of sales will come from new products.
Question:
Define Pioneers
Answer:
New breakthrough, and disruptive products that create whole new markets
Question:
Define First movers
Answer:
The pioneers who are first to create a new product category and market. They
are rewarded with a majority share of the initial market.
Question:
Name 5 reasons for product failure
Answer:
1. Overestimation of market size
2. Price too high
3. incorrect positioning
4. ineffective promotion
5. Competition
Question:
Name and define the 5 groups that make up the Con-
sumer adoption cycle
, Answer:
1. Innovators - Buyers that want to be first to use a product. They are risk
takers, often very knowledgeable, and price insensitive.
2. Early Adopters - Don't take as much risk and wait until the innovators have
reviewed the product. They are often the opinion leaders for a certain product
category
3. Early Majority - ~1/3 of the population.This group is crucial for profitability.
They wait until all of the "bugs" are worked out before buying
4. Late Majority - ~1/3 of the population. Sales have typically peaked by the
time this segment purchases the product. The last big group of consumers to
enter the market
5. Laggards - May never buy the product. They will use traditional products
until they are no longer available and avoid change
Question:
Name and define the 4 factors that affect the diffusion of innovation
Answer:
1. Relative advantage - If a product is perceived to be better than substitutes, it
will diffuse faster.
2. Compatibility - Product compatibility with the needs of people in different
cultures will affect its rate of diffusion.
3. Observability - Products that are easily observed and their benefits easily
communicated will diffuse faster.
4. Complexity and Trialability - Products that are relatively less complex and
easy to try out will diffuse faster.
Question:
Name the 6 steps of New Product Development in order
Answer:
1. Idea Generation
2. Concept testing
3. Product Development
4. Market Testing
5. Product Launch
6. Evaluation of Results
Question:
What are the two sources of
ideas and define/expand on them
Answer:
1. Internal Sources - Companies can use internal, formal R&D to come up with
new product ideas.
Brainstorming - Groups of employees work together to generate ideas
2. External Sources
Licensing - Firms can buy the rights to use technology or ideas from other
research firms
Outsourcing - Firms sometimes hire outside firms to perform the research and
come up with new product ideas for them.
Competitors' products - Firms can reverse engineer a competitor's product to
come up with their own version.
