A Firm That Is First to the Market with a New

question 209

Multiple Choice

A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated. How do these problems affect the innovating firm?

• A) The firm is protected by a first-mover advantage: Initial design flaws tend not to harm a firm significantly because consumers resist changing products for fear of incurring high switching costs.
• B) They reduce profits for the new innovations and open the door to competitors who can enter the new market with a better product.
• C) Because these design flaws were not anticipated, consumers tend to be more forgiving and are likely to remain loyal to the company and its products.
• D) The firm's cost increases as it improves the product, but it will not be able to raise its price for fear of alienating customers. Consequently, its profits will erode although its market share remains secure.

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Definitions:

Prospect's Senses

The engagement and stimulation of a potential customer's senses during marketing or sales efforts to enhance the appeal of a product or service.

Autosuggestion

A psychological technique involving self-induced suggestions intended to influence one’s thoughts, behaviors, or actions.

Television Commercials

Short, televised advertisements designed to inform or persuade viewers about products, services, or ideas.

Testimonials

Statements from satisfied customers or clients that testify to the quality, effectiveness, or value of a product or service.