Chapter 9

Question 1

Also known as Metcalfe’s Law, or network externalities. When the value of a product or service increases as its number of users expands.

Answer 1

Network effects

Question 2

Products and services that allow for the development and integration of software products and other complementary goods, effectively creating an ecosystem of value-added offerings. Windows, iOS, the Kindle, and the standards that allow users to create Facebook apps are all platforms.

Answer 2

Platforms

Question 3

The long-term viability of a product or service.

Answer 3

Staying power

Question 4

The cost a consumer incurs when moving from one product to another. It can involve actual money spent (e.g., buying a new product) as well as investments in time, any data loss, and so forth.

Answer 4

Switching costs

Question 5

An economic measure of the full cost of owning a product (typically computing hardware and/or software). TCO includes direct costs such as purchase price, plus indirect costs such as training, support, and maintenance.

Answer 5

Total cost of ownership

Question 6

Products or services that add additional value to the primary product or service that makes up a network.

Answer 6

Complementary benefits

Question 7

Programming hooks, or guidelines, published by firms that tell other programs how to get a service to perform a task such as send or receive data. For example, Amazon provides application programming interfaces (APIs) to let developers write their own applications and websites that can send the firm orders.

Answer 7

APIs

Question 8

Also known by the acronym DAU, this refers to the number of unique visitors, on average, who use a product or service.

Answer 8

Daily active users

Question 9

A market that derives most of its value from a single class of users (e.g., instant messaging).

Answer 9

One-sided market

Question 10

Benefits derived by interaction among members of a single class of participant (e.g., the exchange value when increasing numbers of IM users gain the ability to message each other).

Answer 10

Same-side exchange benefits

Question 11

Network market that comprises two distinct categories of participant, both of which are needed to deliver value for the network to work (e.g., video game console owners and developers of video games).

Answer 11

Two-sided market

Question 12

When an increase in the number of users on one side of the market (console owners, for example) creates a rise in the other side (software developers).

Answer 12

Cross-side exchange benefit

Question 13

A market where there are many buyers but only one dominant seller.

Answer 13

Monopoly

Question 14

A market dominated by a small number of powerful sellers.

Answer 14

Oligopoly

Question 15

Competing by offering a new technology that is so superior to existing offerings that the value overcomes the total resistance that older technologies might enjoy via exchange, switching cost, and complementary benefits.

Answer 15

Technological leapfrogging

Question 16

The positive influence created when someone finds out that others are doing something.

Answer 16

Social proof

Question 17

An approach where firms seek to create and compete in uncontested “blue ocean” market spaces, rather than competing in spaces and ways that have attracted many similar rivals.

Answer 17

Blue ocean stratgey

Question 18

When two or more markets, once considered distinctly separate, begin to offer features and capabilities. As an example: The markets for mobile phones and media players have converted (and smartphones won).

Answer 18

Convergence

Question 19

When one market attempts to conquer a new market by making it a subset, component, or feature of its primary offering.

Answer 19

Envelopment

Question 20

The ability to take advantage of complementary products developed for a prior generation of technology.

Answer 20

Backward compatability

Question 21

A product that allows a firm to tap into the complementary products, data, or user base of another product or service.

Answer 21

Adaptor

Question 22

When a firm preannounces a forthcoming product or service and experiences a sharp and detrimental drop in sales of current offerings as users wait for the new item.

Answer 22

The Osborne Effect

Question 23

When increasing numbers of users lower the value of a product or service.

Answer 23

Congestion effects

Question 24

A product with a free version—sometimes with limited features or that stops working after a period of time—to allow customers to try a product and hopefully entice them into making a product purchase or subscription decision.

Answer 24

Freemium

Question 25

The amount of money a firm spends to convince a customer to buy (or in the case of free products, try or use) a product or service.

Answer 25

Customer acquisition costs