GEB1011 MODULE 5 EXAM QUESTIONS AND ANSWERS ALL CORRECT
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Module
GEB1011
Institution
GEB1011
GEB1011 MODULE 5 EXAM QUESTIONS AND ANSWERS ALL CORRECT
The New-Product Development Process - Answer- Stage 1: Idea generation (based on consumer wants and needs)
Stage 2: Product screening
Stage 3: Product analysis
Stage 4: Development (including building prototypes)
Stage 5: T...
GEB1011 MODULE 5 EXAM
QUESTIONS AND
ANSWERS ALL CORRECT
The New-Product Development Process - Answer- Stage 1: Idea generation (based on
consumer wants and needs)
Stage 2: Product screening
Stage 3: Product analysis
Stage 4: Development (including building prototypes)
Stage 5: Testing
Stage 6: Commercialization (bringing the product to market)
The Product Life Cycle - Answer- Product Life Cycle — A theoretical model of what
happens to sales and profits for a product class over time.
Sales and Profits during the Product Life Cycle - Answer- The horizontal axis illustrates
the four stages of the product life cycle: introduction, growth, maturity, and decline. The
vertical axis represents sales. The sales line illustrates that all-electric cars are in the
introduction stage of the product life cycle, hybrid cars are in the growth stage of the
product life cycle, smartphones are in the maturity stage, and videocassette recorders
are in the decline stage of the product life cycle.
During the introduction stage, sales and profit are increasing and closely correlated.
During the growth stage, the profit is still on the rise, but its distance from the sales line
begins to increase. Sales are still increasing during the maturity stage, but profits are
,decreasing. At the beginning of the decline stage, both sales and profits are decreasing,
and the profit line is no longer closely correlated with the sales line.
Sample Strategies Followed during the Product Life Cycle - Answer- Introduction Stage:
• Product characteristics: offer market tested product; keep mix small
• Price characteristics: go after innovators with high introductory price (skimming
strategy) or use penetration pricing
• Place characteristics: use wholesalers, selective distribution
• Promotion characteristics: Dealer promotion and heavy investment in primary demand
advertising and sales promotion to get stores to carry the product and consumers to try
it
Growth Stage:
• Product characteristics: improve product; keep product mix limited
• Price characteristics: adjust price to meet competition
• Place characteristics: increase distribution
• Promotion characteristics: heavy competitive advertising
Maturity Stage:
• Product characteristics: differentiate product to satisfy different market segments
• Price characteristics: further reduce price
• Place characteristics: take over wholesaling function and intensify distribution
• Promotion characteristics: emphasize brand name as well as product benefits and
differences
Decline Stage:
• Product characteristics: cut product mix; develop new product ideas
• Price characteristics: consider price increase
• Place characteristics: consolidate distribution; drop some outlets
• Promotion characteristics: reduce advertising to only loyal customers
How Sales, Profits, and Competition Vary over the Product Life Cycle - Answer-
Introduction Stage:
• Low sales
• Losses may occur
• Few competitors
Growth Stage:
• Rapidly rising sales
• Very high profits
• Growing number of competitors
Maturity Stage:
• Sales reach maturity • Declining profits
• Competitors reach a stable number then begin to decline
, Decline Stage:
• Falling sales
• Profits may fall to become losses
• Declining number of competitors
Competitive Pricing - Answer- Pricing Objectives
1. Achieving a target return on investment or profit
2. Building traffic
3. Achieving greater market share
4. Creating an image 5. Furthering social objectives, both short-run and long-run
Cost-Based Pricing
• Cost-based pricing measures cost of producing a product including materials, labor,
and overhead.
Demand-Based Pricing
• Target costing — Designing a product so that it satisfies customers and meets the
profit margins desired by the firm.
Competition-Based Pricing
• Competition-based pricing — A pricing strategy based on what all the other
competitors are doing. The price can be set at, above, or below competitors' prices.
• Price leadership — The strategy by which one or more dominant firms set the pricing
practices that all competitors in an industry follow.
Break-Even Analysis
• Break-even analysis — The process used to determine profitability at various levels of
sales.
• The break-even point is where revenues equals cost. • Total fixed costs — All the
expenses that remain the same no matter how many products are made or sold.
• Variable costs — Costs that change according to the level of production.
Break−even point (BEP) = Total fixed costs (FC) over the (divided by) Price of one unit
(P) minus Variable costs (VC) of one unit
•If you have a fixed cost of $200,000, a variable cost of $2 per item, and you sell your
product for $4 each, what would be your BEP?
Other Pricing Strategies
• Skimming price strategy — Strategy in which a new product is priced high to make
optimum profit while there's little competition.
• Penetration strategy — Strategy in which a product is priced low to attract many
customers and discourage competition.
• Everyday low pricing (EDLP) — Setting prices lower than competitors and then not
having any special sales.
• High-low pricing strategy
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