Marketing - Developing New Products and Managing the Product Life Cycle (98-159 Answer Key)

98) Differentiate between controlled test markets and simulated test markets. Answer: In controlled test markets, new products and tactics are tested among controlled panels of shoppers and stores. Using simulated test markets, researchers measure consumer responses to new products and marketing tactics in laboratory stores or virtual online shopping environments. Both controlled test markets and simulated test markets reduce the costs of test marketing and speed up the process. 99) Why might individual departments prefer sequential product development? Answer: This process allows each individual department to work with a new idea, completing its stage of development before passing the product on to the next department and stage; other departments are less likely to interfere. 100) Briefly describe the steps in the new product development process. Answer: New product development starts with idea generation from internal and/or external sources. Next, the ideas must be reduced through idea screening. Once the new ideas are decided upon, the product concept must be developed and tested. A marketing strategy must be developed to introduce the product to the market. Once the product concept and marketing strategy are chosen, a business analysis is conducted to review the sales, costs, and profit projections to see if they will satisfy the company's objectives. Next, a prototype will be created in the product development stage. Test marketing will follow, introducing the new product and its marketing program into more realistic market settings. The last step is to launch or not launch the new product. If the company decides to launch the product, it will go ahead with the commercialization stage and later test its sales and profit results. 101) Identify the major sources of external new product ideas and explain why these sources offer advantages over internal sources. Answer: The major external sources of new product ideas include customers, suppliers and distributors, competitors, and research firms. These sources are close to the market and tend to reflect current tastes and preferences. Firms can better match their product offerings to customer needs and wants. 102) Differentiate between a product idea, a product concept, and a product image. Answer: A product idea is an idea for a product that a company can imagine itself offering to the market. A product concept takes the idea several steps further, with a detailed version of the idea stated in meaningful consumer terms. Finally, a product image is the way consumers perceive an actual or potential product. 103) Explain concept testing. Answer: Concept testing calls for testing new product concepts with groups of target consumers. The concepts may be presented to consumers physically or symbolically. A more concrete and physical presentation, however, will increase the reliability of the concept test. After being exposed to the concept, consumers are asked questions about it; their answers reveal to the marketer whether the concept needs to be altered in any way. 104) Define commercialization. Explain two important decisions the company must make during this stage. Answer: Introducing a new product into the market is called commercialization. The company launching a new product must first decide on introduction timing. Next, the company must decide where to launch the new product—in a single location, a region, the national market, or the international market. Confidence, capital, and capacity are required to launch new products on a large-scale basis. Hence, many firms plan a market rollout over time. 105) What are the two advantages of an innovation management system for developing new products? Provide four strategies for a company to use to establish a successful system. Answer: The first advantage of an innovation management system is that it helps create an innovation-oriented company culture. It shows that top management supports, encourages, and rewards innovation. The second advantage is that it will yield a larger number of new product ideas, among which will be found some especially good ones. As the system matures, ideas will flow more freely. To establish a successful system a company can do the following: 1. Appoint a respected senior person to be the company's innovation manager. 2. Create a cross-functional innovation management committee with people from each department. 3. Set up a Web site for anyone who wants to become involved in finding and developing new products. 4. Encourage all company stakeholders to send their ideas to the idea manager. 5. Set up formal recognition programs to reward those who contribute the best new ideas. 106) Which of the following refers to the course that a product's sales and profits take over its lifetime? A) total product process B) service life C) product mix D) product life cycle E) marketing mix Answer: D 107) Which of the following best characterizes the decline stage of product development? A) rapid market acceptance B) slow sales growth C) sales and profits decline D) high investment costs E) increasing profits Answer: C 108) Which of the following statements characterizes the introduction stage of the PLC? A) There are increased marketing outlays. B) Profits are nonexistent. C) The company incurs minimal expenses. D) The product achieves acceptance by most potential buyers. E) Promotional expenditures are zero. Answer: B 109) Which stage in the product life cycle is characterized by rapid market acceptance and increasing profits? A) introduction B) maturity C) growth D) decline E) product development Answer: C 110) ________ is the product life cycle period when sales fall off and profits drop. A) Introduction B) Growth C) Maturity D) Decline E) Product development Answer: D 111) ________ is the product life cycle period when sales growth slows because the product has achieved acceptance. Profits level off because marketing costs increase in the face of competition. A) Decline B) Maturity C) Product development D) Introduction E) Growth Answer: B 112) Some products that have entered the decline stage have been cycled back to the growth stage through ________. A) repositioning B) harvesting C) maintaining D) pruning E) expanding Answer: A 113) What causes a specific brand's life cycle to change quickly? A) costs of raw materials B) changing demographics C) shift in company strategy D) competitive attacks and responses E) new technology Answer: D 114) A style is best defined as a ________. A) currently popular trend in retail goods B) popular consumer taste at a given time C) temporary period of unusually high sales D) short-term component of the marketing mix E) basic and distinctive mode of expression Answer: E 115) The more formal "business attire" look of corporate dress of the 1980s and 1990s gave way to the "business casual" look of the 2000s and 2010s. This is an example of a ________. A) style B) fashion C) fad D) subculture E) norm Answer: B 116) Apple's iPod has been called "one of the greatest consumer electronics hits of all time." iPods have been sold in huge numbers, and Apple captures a large share of the music player market. This success has attracted many large, resourceful competitors. The iPod is in the ________ stage of the product life cycle. A) introduction B) growth C) maturity D) decline E) adoption Answer: C 117) Flurrbies, a brand of unique winter accessories that quickly fell in and out of favor with customers, is an example of a ________. A) style B) fashion C) fad D) norm E) subculture Answer: C 118) The PLC concept can be applied by marketers as a useful framework for describing how ________. A) competitors' moves are predicted B) marketing strategies are developed C) products and markets work D) concept testing is conducted E) product ideas are developed Answer: C 119) According to the PLC, the ________ stage is reached when sales plunge to zero, or when they drop to a low level where they continue for many years. A) laggard B) decline C) maturity D) growth E) incubation Answer: B 120) Which of the following stages of the PLC is characterized with high promotional expenditures that result from an effort to create consumer awareness? A) growth B) product development C) maturity D) introduction E) decline Answer: D 121) A(n) ________ chooses a strategy consistent with the intended product positioning. To gain market leadership requires correct decisions from the beginning. A) brand evangelist B) market pioneer C) early adopter D) laggard E) harvester Answer: B 122) Which of the following stages of the PLC is characterized with the same level or slightly higher level of promotional expenditures in an attempt to respond to increasing competition? A) growth B) decline C) maturity D) product development E) adoption Answer: A 123) Kellogg's begins to sell its cereals in new markets after conducting extensive marketing research. After the cereal begins to appear in these new markets, the company increases its promotion expenditure to counteract competitive responses. Kellogg's is in the ________ stage of the product life cycle. A) introduction B) growth C) maturity D) decline E) adoption Answer: B 124) Big Moose Toys is a market pioneer introducing a modern version of Bubble the Moose, a character from an animated television series originally broadcast in the '50s and '60s. The company's version of Sandy the Flying Squirrel, a character from the show targeted to baby boomers, was a strong success. Since the firm is a market pioneer, it needs to make the new launch strategy for Bubble the Moose consistent with the intended ________. A) pricing B) product positioning C) brand extension D) prototype E) fad Answer: B 125) Which stage in the PLC normally lasts longest and poses strong challenges to marketing managers? A) growth B) decline C) maturity D) introduction E) adoption Answer: C 126) At which stage in the PLC do profits increase as promotion costs are spread over a large volume, and as the firm enters new market segments? A) maturity B) introduction C) decline D) growth E) harvest Answer: D 127) Which of the following would lead to greater competition in the maturity stage of the PLC? A) overcapacity B) market pioneers C) poor management D) inadequate promotion E) diminishing budgets Answer: A 128) Most products in the marketplace are in the ________ stage of the product life cycle. A) growth B) decline C) maturity D) introduction E) development Answer: C 129) Over the past few years, Binney and Smith's Crayola crayons has expanded to more than 80 countries around the world. Crayola crayons are in the ________ stage of the PLC. A) introduction B) laggard C) maturity D) decline E) incubation Answer: C 130) When a product is in the maturity stage, the company should most likely consider ________. A) harvesting the product or market B) modifying the product, market, or marketing mix C) divesting the product line D) liquidating the firm's assets E) dropping the product from its market offerings Answer: B 131) When Heinz introduced EZ Squirt packaging and new colors such as Blastin' Green and Awesome Orange to revitalize consumer buying, the company was modifying the ________. A) market B) pricing strategy C) distribution D) product E) competition Answer: D 132) P&G has sold off a number of lesser or declining brands such as Folgers coffee and Cover Girl cosmetics. In these examples, management decided to ________ the products. A) modify B) maintain C) drop D) harvest E) franchise Answer: C 133) Due to dropping sales, a company that manufactures soaps begins to sell them to restaurants and hotels to extend their product's life. The soap manufacturer is in the ________ stage of PLC. A) introduction B) growth C) maturity D) decline E) development Answer: D 134) When Kraft focused on cost cutting with its older, established brands, leaving them to wither without much investment or modification, Kraft decided to ________ the older products. A) extend B) modify C) drop D) harvest E) analyze Answer: D Refer to the scenario below to answer the following question(s). Most people laughed when Evelyn Ringler explained her product idea: a solar-powered vacuum cleaner. But the concept was practical and the technology used in the vacuum was the same as that used in many electronic toys. After setting up a demonstration booth in a mall in a Chicago suburb, Evelyn felt more assured than ever that her idea would be a hit. Consumers seemed receptive and offered helpful pieces of advice, such as how much they would pay for the vacuum, what colors they would prefer, and why they would not buy the vacuum. The vacuum itself was shaped like a small saucer, with a filter bag on top and sensory nodes along the edges. After being charged in the sunlight, the vacuum could run for 7 hours, covering a floor area of 600 square feet. As the apparatus lightly bumped into table legs, chairs, and so on, the sensory nodes allowed the vacuum to move around the objects in various directions. This is the same type of technology used in the manufacture of children's racecars and walking dolls. Evelyn knew that the solar-powered vacuum would be especially helpful to both elderly consumers, who may have a more difficult time with vacuuming, and on-the-go consumers who lead busy lives. The price would be above average but would likely be reduced after Evelyn recouped some of her costs. After a 500-unit production run and a substantial financial investment, Evelyn set up a multiple-city test market, in a Chicago mall and in an appliance store in New Jersey and several other retail stores in Florida. "It's such a novel idea," Evelyn added. "People will notice it, even if they don't buy it right away." 135) Evelyn's vacuum is at the ________ stage of the product life cycle. A) product development B) introduction C) growth D) decline E) maturity Answer: A 136) Using the PLC concept to develop marketing strategy can be problematic because strategy is both a cause and a result of the product's life cycle. Answer: TRUE 137) Most successful products are immediately accepted, and quickly move to the growth stage of the PLC. Answer: FALSE 138) Profits drop during the growth stage of the PLC because per customer promotion costs are high. Answer: FALSE 139) Although products that remain in the maturity stage of the PLC seem unchanged, the most successful ones actually evolve to meet changing consumer needs. Answer: TRUE 140) When sales of a product drop during the decline stage of the PLC, a company typically modifies the marketing mix, the product, or the market. Answer: FALSE 141) Sales of products decline because of technological advances, shifts in consumer tastes, and increased competition. Answer: TRUE 142) Harvesting the product involves reducing various costs such as maintenance, R&D, and advertising to increase profits. Answer: TRUE 143) The distribution strategy during the decline stage of PLC involves building more intensive distribution networks. Answer: FALSE 144) Explain how the PLC applies differently to a product class than to a product form. Answer: Product classes have longer life cycles, while product forms tend to have the standard PLC shape. 145) Why are ad expenditures high for products in the introduction stage of the PLC?Answer: Consumers have very little awareness about such products; promotional spending can enhance customer awareness. 146) Why do ad expenditures remain high in the growth stage of the PLC? Answer: Though sales are increasing for such products, competition becomes fierce as competitors attempt to enter the market; therefore, ad expenses remain high in an effort to offset competitive threats. 147) Marketers can prolong the lives of many products in the maturity or decline stages of the PLC, sometimes even moving these products back into the growth stage. How is this undertaken? Answer: Marketers can change any element of the marketing mix, find new users and new market segments for its brands, change characteristics such as quality, features, style, packaging, or technology platforms, and so on. 148) Each product will have a life cycle, although its exact shape and length is not known in advance. Briefly explain each phase of the product life cycle. Answer: -Product development begins when the company finds and develops a new product idea. Sales are zero and the company's investment costs mount. -Introduction is a period of slow sales growth as the product is introduced in the market. Profits are nonexistent in this stage because of the heavy expenses of product introduction. -Growth is a period of rapid market acceptance and increasing profits. -Maturity is a period of slowdown in sales growth because the product has achieved acceptance by most potential buyers. Profits level off or decline because of increased marketing outlays to defend the product against competition. -Decline is the period when sales fall off and profits drop. A company may seek to reinvigorate a product in decline or maintain it hoping competition will diminish or harvest it or drop it. 149) Explain why the PLC can be applied to more than just brands. Answer: The PLC can be applied to new products and services. It can also be applied to product class, a product form, or a brand. The PLC concept lends itself to styles, fashions, and fads. The concept can be used as a useful framework for describing how products and markets work, as well as developing marketing strategy for each stage of the product life cycle. Managers may have difficulties using the PLC concept to forecast product performance or develop general marketing strategies. 150) Manufacturers must comply with specific laws regarding ________. A) profit margins B) product quality and safety C) product harvesting D) distribution channel length E) product life cycles Answer: B 151) Because of ________, a company cannot make its product illegally similar to a competitor's already established product. A) anti-monopoly laws B) patent laws C) the Consumer Product Safety Act D) product warranties E) product liability Answer: B 152) CellTones, a new company selling several types of cellular phones, has closely modeled its products after successful products that are already in the marketplace. As it prepares to enter the market with its new products and services, which of the following should concern CellTones the most? A) legal obligations to suppliers and dealers B) patent laws C) distribution requirements D) product liability suits E) limited warranties Answer: B 153) Which of the following best describes the role of a product steward? A) to protect employees and laborers from harm B) to evaluate new product ideas against a set of general criteria C) to develop a new product concept into a physical product D) to protect consumers from harm and the company from liability E) to decide whether to maintain, harvest, or drop the product in the decline stage of the PLC Answer: D 154) Which of the following is a consequence of standardizing an international product? A) image consistency B) regional design flexibility C) decreased product demand D) increased manufacturing costs E) higher marketing costs Answer: A 155) The federal government may prevent a company from adding products through acquisitions if acquisition threatens to lessen competition. Answer: TRUE 156) As long as a product is not identical to a competitor's product offering, a company can introduce, market and sell it without penalty. Answer: FALSE 157) The international growth of many professional and business services such as accounting, consulting, and advertising led to the globalization of the client companies they served. Answer: FALSE 158) Why has the cost of product liability insurance risen so dramatically? Answer: Consumers who have been injured by a product with a defective design can sue manufacturers or dealers of the product; though manufacturers are only found to be at fault in a small percentage of cases, awards can run into the tens or even hundreds of millions of dollars. This litigation phenomenon has resulted in huge increases in product liability insurance premiums, causing big problems in some industries. 159) Describe three public policy issues or regulations that marketers should carefully consider as they make decisions about adding or dropping products. Answer: The government may prevent companies from adding products through acquisitions if the effect threatens to lessen competition. On the other hand, companies dropping products must be aware that they have legal obligations to their suppliers, dealers, and customers who have a stake in the dropped product. Companies must also obey U.S. patent laws when developing new products, meaning that a company cannot make its product illegally similar to another company's established product. Manufacturers must also comply with specific laws regarding product quality and safety. The Federal Food, Drug, and Cosmetic Act and the Consumer Product Safety Act are just two of many laws that protect consumers from potentially harmful products. If consumers have been injured by a product that has a defective design, they can sue manufacturers or dealers.