MHR 322 FINAL EXAM 2026/2027 – STUDY GUIDE, PRACTICE QUESTIONS, EXAM
REVIEW & TEST PREP
The Psychology of Gains and Losses - ANS ✔✔-Individuals are sensitive to Gains and Loses: better at
judging changes than absolute value(temp.)
-Reference Points Matter: gains and losses are evaluated against current state/current state is different
by individual/current state changes
-decreasing marginal sensitivity: marginal impact is declining for both increases and decreases
-aversion to losses hurt more than the same gain
The Endowment Effect - ANS ✔✔"People value items in their possession (or part of their endowment)
more than they value items not in their possession"
-College students given coffee mugs or large chocolate bar: each student given one item and at ten do
class could trade for other item (e.g. 1/2 started with mug) How many would you predict traded? 50%
50%?
taking away free soda shut down Cisco Systems.
The Nature of Innovations - ANS ✔✔The "Gives" and "Gets" of Innovations.
ex: Electric cars: give up easy refueling and get environmental friendliness.
ex: online grocery: give up ability to select freshness and get home delivery.
Additional Trade Off Complexities: timing, certainty, ability to quantify
The Developer's Curse - ANS ✔✔Problem 1: self selection:
-typical innovator is not typical consumer.
-benefit in being ahead of curve is visionary
-but may be dead before the curve catches up
Problem 2: a clash in perspectives
-typical consumer will overweigh the benefits of the "status quo" by 2-3 times
-typical developer will overweigh the benefits of the new product by 2-3 times-views it as status quo.
-results in huge 4-9 times gap
problem 3: the curse of knowledge
-years of experience with the concept vs. seeing it for the first time
-recognized the need vs. unaware of the need
-convinced that it works vs. skeptical
Capturing Value from Innovations - ANS ✔✔High Behavioral change x low product change involved:
strike out
ex strike out: the DVORAK keyboard
low behavioral change x low product change: tinkering
tinkering ex: Dr. Pepper making cherry flavor
,High behavioral change x high product change: long haul
long haul ex: Tesla
Low behavioral change x high product change: home run
ex: Google from: excite, Lycos, altavista, infoseek
Taking Action - ANS ✔✔Accept Resistance
-Brace for the long haul: make sure you survive to enjoy the rewards, do not overplay the first mover
advantage, be willing to alter your plan and have the resources to do so
-Require 10X improvement not 1%
Minimize resistance
-make it behaviorally compatible (hybrid vehicles)
-seek out the un-endowed: target those customers who are not going to give up an existing competitor,
movie phones developing countries or college students
Find Believers
-find segments that place the highest value on benefits or have lowest switching costs
Eliminate the old
-government mandate: zero emission autos, incandescent bulbs
-dollar coin succes in US vs. Canada
Reduce Complexity
-change the payment schedule to reduce the perceived risk: low/free up front cost, monthly fee,
software, cell phones, satellite radio
-strong customer guarantees
-3rd party qualifications
-risk sharing: consulting projects that base cost on resulting savings
Why Do good Ideas Fail? Key Takeaways - ANS ✔✔-people really don't like change so you need to plan
accordingly: design to minimize change/maximize benefit, plant for slower than expected acceptance,
even homer products had haters so don't get discouraged.
Shai agassi Reading - ANS ✔✔He believes it just might be possible to get the entire world off oil, believed
future was in affordable electric family cars to decrease use of fossil fuels, he had no prototype but did
explain how it would work, good ideas fail because people are hesitant to change
Better place: shai agassi's plan for how electric cars would work in our society, original name of car
before actually deciding on a name
"Better place is a tragicomic case study of the limits of innovation"
Customer Decision-Making Unit - ANS ✔✔end user- the person who will experience the benefits of the
product as seen in the value proposition
champion: advocate of product, not necessarily the end user
, primary economic buyer: primary decision maker because he/she signs off on spending
primary/secondary users: have in depth knowledge of subject matter and somehow influence decision.
Primary has large influence and secondary has some indirect influence.
Person with veto power: have the ability to reject a purchase for any reason. Rare in and individual
purchase, but corporate happens a lot (ex: IT department can veto software that doesn't comply with
company standards, US Govt in healthcare)
Purchasing Department: department handles the logistics of the purchase. They can be another
obstacle, as this department often looks to drive prices down even after the decision to purchase has
been made by the primary economic buyer.
Bell cow/Light house customer - ANS ✔✔Try to sell to these customers because if it is good enough for
them, it is good enough for everyone else. If you put a bell on a cow, you can find the herd. Pick the bell
on the lead cow because all the other customers will follow.
Ex: Bose Model Speaker: entire market strategy geared towards the "godfather" of speaker reviews in
magazines. Once he go ton board, the rest of the market followed.
TAM Review - ANS ✔✔TAM (Total Addressable Market) = Annual revenue your business would earn if it
had 100% market share
ex: Company creates attachment for Xbox that will reduce power consumption. Assuming that all US
Xbox owners can use it, calculate the TAM. 100 million installed, attachment sells for $15/unit, cost is
$10/unit, profit is $5/unit and your market share for an existing product is 50%.
TAM: 100 million units (100% market) x selling price $15/unit = $1500 million
5 Ways to Win Referrals from Influencers - ANS ✔✔1. Build Referral Relationships
2. Gather a group of VIPs
3. Target professional reviewers
4. Get online referrals
5. arm influencers with selling tools: make it easier for reviewer to say good things about your product
Is the following true? "If you build it they will come" and "Build a better mousetrap and the world will
beat a path to your door" - ANS ✔✔NO-FALSE
Product Acquisition Process - ANS ✔✔-A primary goal of a startup is to discover how customers can be
systematically acquired: how it works, what it costs, how long it takes
-The Customer Acquisition process is key to understanding the lifetime value of a customer
Key Questions in Customer Acquisition Process - ANS ✔✔-How customers will determine they have a
need and/or opportunity to move away from their status quo?
-How customer will find out about your product?
-How customers will analyze your product?
-How customers will acquire your product?
REVIEW & TEST PREP
The Psychology of Gains and Losses - ANS ✔✔-Individuals are sensitive to Gains and Loses: better at
judging changes than absolute value(temp.)
-Reference Points Matter: gains and losses are evaluated against current state/current state is different
by individual/current state changes
-decreasing marginal sensitivity: marginal impact is declining for both increases and decreases
-aversion to losses hurt more than the same gain
The Endowment Effect - ANS ✔✔"People value items in their possession (or part of their endowment)
more than they value items not in their possession"
-College students given coffee mugs or large chocolate bar: each student given one item and at ten do
class could trade for other item (e.g. 1/2 started with mug) How many would you predict traded? 50%
50%?
taking away free soda shut down Cisco Systems.
The Nature of Innovations - ANS ✔✔The "Gives" and "Gets" of Innovations.
ex: Electric cars: give up easy refueling and get environmental friendliness.
ex: online grocery: give up ability to select freshness and get home delivery.
Additional Trade Off Complexities: timing, certainty, ability to quantify
The Developer's Curse - ANS ✔✔Problem 1: self selection:
-typical innovator is not typical consumer.
-benefit in being ahead of curve is visionary
-but may be dead before the curve catches up
Problem 2: a clash in perspectives
-typical consumer will overweigh the benefits of the "status quo" by 2-3 times
-typical developer will overweigh the benefits of the new product by 2-3 times-views it as status quo.
-results in huge 4-9 times gap
problem 3: the curse of knowledge
-years of experience with the concept vs. seeing it for the first time
-recognized the need vs. unaware of the need
-convinced that it works vs. skeptical
Capturing Value from Innovations - ANS ✔✔High Behavioral change x low product change involved:
strike out
ex strike out: the DVORAK keyboard
low behavioral change x low product change: tinkering
tinkering ex: Dr. Pepper making cherry flavor
,High behavioral change x high product change: long haul
long haul ex: Tesla
Low behavioral change x high product change: home run
ex: Google from: excite, Lycos, altavista, infoseek
Taking Action - ANS ✔✔Accept Resistance
-Brace for the long haul: make sure you survive to enjoy the rewards, do not overplay the first mover
advantage, be willing to alter your plan and have the resources to do so
-Require 10X improvement not 1%
Minimize resistance
-make it behaviorally compatible (hybrid vehicles)
-seek out the un-endowed: target those customers who are not going to give up an existing competitor,
movie phones developing countries or college students
Find Believers
-find segments that place the highest value on benefits or have lowest switching costs
Eliminate the old
-government mandate: zero emission autos, incandescent bulbs
-dollar coin succes in US vs. Canada
Reduce Complexity
-change the payment schedule to reduce the perceived risk: low/free up front cost, monthly fee,
software, cell phones, satellite radio
-strong customer guarantees
-3rd party qualifications
-risk sharing: consulting projects that base cost on resulting savings
Why Do good Ideas Fail? Key Takeaways - ANS ✔✔-people really don't like change so you need to plan
accordingly: design to minimize change/maximize benefit, plant for slower than expected acceptance,
even homer products had haters so don't get discouraged.
Shai agassi Reading - ANS ✔✔He believes it just might be possible to get the entire world off oil, believed
future was in affordable electric family cars to decrease use of fossil fuels, he had no prototype but did
explain how it would work, good ideas fail because people are hesitant to change
Better place: shai agassi's plan for how electric cars would work in our society, original name of car
before actually deciding on a name
"Better place is a tragicomic case study of the limits of innovation"
Customer Decision-Making Unit - ANS ✔✔end user- the person who will experience the benefits of the
product as seen in the value proposition
champion: advocate of product, not necessarily the end user
, primary economic buyer: primary decision maker because he/she signs off on spending
primary/secondary users: have in depth knowledge of subject matter and somehow influence decision.
Primary has large influence and secondary has some indirect influence.
Person with veto power: have the ability to reject a purchase for any reason. Rare in and individual
purchase, but corporate happens a lot (ex: IT department can veto software that doesn't comply with
company standards, US Govt in healthcare)
Purchasing Department: department handles the logistics of the purchase. They can be another
obstacle, as this department often looks to drive prices down even after the decision to purchase has
been made by the primary economic buyer.
Bell cow/Light house customer - ANS ✔✔Try to sell to these customers because if it is good enough for
them, it is good enough for everyone else. If you put a bell on a cow, you can find the herd. Pick the bell
on the lead cow because all the other customers will follow.
Ex: Bose Model Speaker: entire market strategy geared towards the "godfather" of speaker reviews in
magazines. Once he go ton board, the rest of the market followed.
TAM Review - ANS ✔✔TAM (Total Addressable Market) = Annual revenue your business would earn if it
had 100% market share
ex: Company creates attachment for Xbox that will reduce power consumption. Assuming that all US
Xbox owners can use it, calculate the TAM. 100 million installed, attachment sells for $15/unit, cost is
$10/unit, profit is $5/unit and your market share for an existing product is 50%.
TAM: 100 million units (100% market) x selling price $15/unit = $1500 million
5 Ways to Win Referrals from Influencers - ANS ✔✔1. Build Referral Relationships
2. Gather a group of VIPs
3. Target professional reviewers
4. Get online referrals
5. arm influencers with selling tools: make it easier for reviewer to say good things about your product
Is the following true? "If you build it they will come" and "Build a better mousetrap and the world will
beat a path to your door" - ANS ✔✔NO-FALSE
Product Acquisition Process - ANS ✔✔-A primary goal of a startup is to discover how customers can be
systematically acquired: how it works, what it costs, how long it takes
-The Customer Acquisition process is key to understanding the lifetime value of a customer
Key Questions in Customer Acquisition Process - ANS ✔✔-How customers will determine they have a
need and/or opportunity to move away from their status quo?
-How customer will find out about your product?
-How customers will analyze your product?
-How customers will acquire your product?
