CPM CPM Product Development & Pricing Strategy 1 — Questions and Answers
Question 1: Which stage of the new product development process involves filtering out ideas that do not align with company objectives?
- Idea screening (Correct answer)
- Concept testing
- Market testing
- Commercialization
Correct answer: Idea screening
Idea screening evaluates generated ideas against strategic fit, feasibility, and resource requirements to eliminate unviable concepts early.
Question 2: In the BCG Growth-Share Matrix, a product with high market share in a low-growth market is classified as a:
- Star
- Question Mark
- Cash Cow (Correct answer)
- Dog
Correct answer: Cash Cow
Cash Cows generate strong cash flow due to high market share but require little investment because market growth is low.
Question 3: Which pricing strategy sets an initial high price to capture early adopters before gradually lowering it?
- Penetration pricing
- Skimming pricing (Correct answer)
- Cost-plus pricing
- Competitive pricing
Correct answer: Skimming pricing
Price skimming maximizes revenue from early adopters who are willing to pay a premium before targeting more price-sensitive segments.
Question 4: The concept of 'price elasticity of demand' measures:
- How supply responds to a price change
- How quantity demanded changes relative to a price change (Correct answer)
- The total revenue impact of a discount
- The cost to produce one additional unit
Correct answer: How quantity demanded changes relative to a price change
Price elasticity of demand quantifies the percentage change in quantity demanded divided by the percentage change in price.
Question 5: A company launches a new product at a low price to quickly capture market share. This is called:
- Value-based pricing
- Skimming pricing
- Penetration pricing (Correct answer)
- Bundle pricing
Correct answer: Penetration pricing
Penetration pricing uses a low initial price to attract a large customer base rapidly and discourage competitor entry.
Question 6: Which product life cycle stage typically sees the highest level of promotional spending relative to sales?
- Maturity
- Decline
- Growth
- Introduction (Correct answer)
Correct answer: Introduction
During the introduction stage, heavy promotion is needed to build awareness and trial among an audience unfamiliar with the product.
CPM CPM Product Development & Pricing Strategy 1
Which stage of the new product development process involves filtering out ideas that do not align with company objectives?