CMA Product Development & Pricing Strategy 1 — Questions and Answers
Question 1: What does the 'product life cycle' (PLC) describe?
- The manufacturing timeline of a product
- The stages a product goes through from launch to decline in the market (Correct answer)
- The warranty period of a consumer product
- The supply chain timeline from production to sale
Correct answer: The stages a product goes through from launch to decline in the market
The product life cycle describes the stages — introduction, growth, maturity, and decline — that a product passes through in the market.
Question 2: What is a 'minimum viable product' (MVP) in product development?
- The cheapest product a company can produce
- A version of a product with just enough features to satisfy early customers and gather feedback for future development (Correct answer)
- The product with the minimum number of defects
- A product priced at the market minimum
Correct answer: A version of a product with just enough features to satisfy early customers and gather feedback for future development
An MVP is a product version with just enough features to attract early adopters, allowing the company to validate assumptions before full development.
Question 3: Which pricing strategy sets a high initial price for a new product and lowers it over time?
- Penetration pricing
- Economy pricing
- Price skimming (Correct answer)
- Bundle pricing
Correct answer: Price skimming
Price skimming sets a high launch price to capture maximum revenue from early adopters before gradually reducing the price.
Question 4: What is 'penetration pricing'?
- Setting a price above the market average
- Setting a low initial price to quickly gain market share, then raising the price (Correct answer)
- Matching the exact price of competitors
- Setting prices based on product cost only
Correct answer: Setting a low initial price to quickly gain market share, then raising the price
Penetration pricing launches a product at a low price to attract customers quickly and build market share before gradually increasing prices.
Question 5: What is 'value-based pricing'?
- Setting prices based solely on the cost of production
- Setting prices based on the perceived value of the product to the customer (Correct answer)
- Pricing products below competitors to win market share
- Pricing based on industry average benchmarks
Correct answer: Setting prices based on the perceived value of the product to the customer
Value-based pricing sets prices according to the perceived value of the product to the customer, not just the cost to produce it.
Question 6: Which of the following best describes 'product differentiation'?
- Selling the same product in different countries
- Distinguishing a product from competitors' offerings through unique features, quality, or branding (Correct answer)
- Producing multiple product variants at different price points
- Lowering production costs to offer cheaper products
Correct answer: Distinguishing a product from competitors' offerings through unique features, quality, or branding
Product differentiation highlights unique features, quality, or branding that make a product distinctly better or different from competing products.
CMA Product Development & Pricing Strategy 1
What does the 'product life cycle' (PLC) describe?