Download Market Testing

Market Testing
Dr. M. Gunawan Alif
Program Pascasarjana Manajemen FEUI
& MMUI
Market Test Testing
What Is Market Testing?
• Market testing is not test marketing!
• Test marketing is one of many forms of market
testing -- others include simulated test market,
informal sale, minimarket, rollout.
• Test marketing is also a much less common
form now due to cost and time commitments
and other drawbacks.
Where We Are Today in Market Testing
• Scanner systems allow for immediate collection of product
sales data.
• Mathematical sales forecasting models are readily available
that can run on a relatively limited amount of data.
• We are “building quality in,” testing the marketing components
of the product at early stages (ads, selling visuals, service
contracts, package designs, etc.) rather than testing the whole
product at the end.
• Increased competition puts greater pressure on managers to
accelerate product cycle time.
• Market testing is a team issue, not solely in the province of the
market research department.
Test Marketing
• Test marketing is the phrase commonly used to
indicate an experiment, study, or test that is
conducted in a field setting.
• Two broad classes:
• To test the sales potential for a new product or
service
• To test variations in the marketing mix for a
product or service
Types of Test Markets
• Standard test market: one in which the firm tests
the product and/or marketing mix variables
through the companies normal distribution
channels
• Controlled test markets: ones that are conducted
by outside research firms that guarantee
distribution of the product through prespecified
types and numbers of distributors
Types of Test Markets…cont.
• Electronic test markets: those in which a panel of
consumers has agreed to carry identification
cards that each consumer presents when buying
goods and services
• Simulated test markets: those in which a limited
amount of data on consumer response to a new
product is fed into a model containing certain
assumptions regarding planned marketing
programs, which generates likely sales volume
Test Markets
• Test marketing is used in both consumer markets
and industrial or B2B markets as well.
• Lead country test market: test marketing
conducted in specific foreign countries that seem
good predictors for an entire continent
Criteria for Selecting Test Market Cities
• Representativeness: Do demographics match the
total market?
• Degree of isolation: Palangka Raya and Palu are
isolated markets; Surabaya is not isolated.
• Ability to control distribution and promotion: Are
there preexisting arrangements to distribute the
new product in selected channels of distribution?
Are local media designed to test variations in
promotional messages?
Decision Matrix on When to Market Test
Figure 18.1
High
Low
Cost and Time
Savings
Scope of Learning
and Accuracy
High
Low
Stages of the product development cycle
How Market Testing Relates to the
Other Testing Steps
Figure 18.2
Market Test Alternatives
BB Vs iPod Vs Toyota
Two Key Values Obtained from Market
Testing
• Solid forecasts of dollar and unit sales
volume.
• Diagnostic information to allow for revising
and refining any aspect of the launch.
Deciding Whether to Market Test
• Any special twists on the launch? (limited time or budget,
need to make high volume quickly)
• What information is needed? (expected sales volumes,
unknowns in manufacturing process, etc.)
• Costs (direct cost of test, cost of launch, lost revenue that
an immediate national launch would have brought)
• Nature of marketplace (competitive retaliation, customer
demand)
• Capability of testing methodologies (do they fit the
managerial situation at hand)
Types of Information That May Be Lacking
• Manufacturing process: can we ramp-up from
pilot production to full scale easily?
• Vendors and resellers: will they do as they have
promised in supporting the launch?
• Servicing infrastructure: adequate?
• Customers: will they buy and use the product
as expected?
• Cannibalization: what will be the extent?
Methods of Market Testing, and Where
Used
Figure 18.3
Speculative Sale
• Often used in business-to-business and
consumer durables, similar to concept and
product use tests.
• Give full pitch on product, answer questions,
discuss pricing, and ask:
– “If we make this product available as I have
described it, would you buy it?”
• Often conducted by regular salespeople calling
on real target customers.
Conditions for Speculative Sale
• Where industrial firms have very close downstream
relationships with key buyers.
• Where new product work is technical, entrenched
within a firm's expertise, and only little reaction is
needed from the marketplace.
• Where the adventure has very little risk, and thus a
costlier method is not defendable.
• Where the item is new (say, a new material or a
completely new product type) and key diagnostics are
needed. For example, what set of alternatives does
the potential buyer see, or what possible applications
come to mind first.
Simulated Test Market (STM)
• Create a false buying situation and observe
what the customer does.
• Follow-up with customer later to assess likely
repeat sales.
• Often used for consumer nondurables.
Simulated Test Market Procedure
•
•
•
•
•
•
•
Mall intercept.
Self-administered questionnaire.
Advertising stimuli.
Mini-store shopping experience.
Post-exposure questionnaire.
Receive trial package.
Phone followup and offer to buy more.
Possible Drawbacks to STMs
• Mathematical complexity
• False conditions
• Possibly faulty assumptions on data, such as number
of stores that will make the product available
• May not be applicable to totally new-to-the-market
products, since no prior data available.
• Does not test channel member response to the new
product, only the final consumer
Controlled Sale by Informal Selling
• Used for business-to-business products, also
consumer products sold directly to end users.
• Train salespeople, give them the product and
the selling materials, and have them make
calls (in the field, or at trade shows).
• Real presentations, and real sales, take place.
Controlled Sale by Direct Marketing
 More secrecy than by any other controlled sale
method.
 The feedback is almost instant.
 Positioning and image development are easier
because more information can be sent and more
variations can be tested easily.
 It is cheaper than the other techniques.
 The technique matches today's growing technologies
of credit card financing, telephone ordering, and
database compilation.
Controlled Sale by Minimarkets
• Select a limited number of outlets -- each store
is a minicity or “minimarket.”
• Do not use regular local TV or newspaper
advertising, but chosen outlets can advertise it
in its own flyers.
• Can do shelf displays, demonstrations.
• Use rebate, mail-in premium, or some other
method to get names of purchasers for later
follow-up.
Controlled Sale by Scanner Market Testing
• Audit sales from grocery stores with scanner
systems -- over a few markets or national
system.
• Sample uses:
– Can use the data as a mini-market test.
– Can compare cities where differing levels of sales
support are provided.
– Can monitor a rollout from one region to the
next.
Minimarkets and Scanner Testing: IRI’s
BehaviorScan and InfoScan
• Cable TV interrupt privileges
• Full record of what other media (such as magazines) go
into each household
• Family-by-family purchasing
• Full record of 95 percent of all store sales of tested
items from the check-out scanners
• Immediate stocking/distribution in almost every store is
assured by the research firm.
Result: IRI knows almost every stimulus that hits each
individual family, and it knows almost every change that
takes place in each family's purchase habits.
The Test Market
• Several test market cities are selected.
• Product is sold into those cities in the regular
channels and advertised at representative
levels in local media.
• Once used to support the decision whether to
launch a product, now more frequently used to
determine how best to do so.
Advantages of Test Marketing
Advantages:
• Risk Reduction
–
–
–
monetary risk
channel relationships
sales force morale
• Strategic
Improvement
–
–
marketing mix
production facilities
• Allows most accurate
method of forecasting
future sales
• Allows firms the
opportunity to pretest
marketing mix variables
Disadvantages of Test Marketing
Disadvantages:
• Does not yield
infallible results
• Cost ($1 mill+)
• Time (9-12 months+)
–
• Are expensive
• Exposes the new
product or service to
competitors
• Takes time to
conduct
–
–
hurt competitive
advantage
competitor may monitor
test market
competitor may go
national
• Competitor can disrupt
test market
A Risk of Test Marketing: “Showing Your
Hand”





Figure 18.5
Kellogg tracked the sale of General Foods' Toast-Ems while
they were in test market. Noting they were becoming popular,
they went national quickly with Pop-Tarts before the General
Foods' test market was over.
After having invented freeze-dried coffee, General Foods was
test-marketing its own Maxim brand when Nestle bypassed
them with Taster's Choice, which went on to be the leading
brand.
While Procter & Gamble were busy test-marketing their soft
chocolate chip cookies, both Nabisco and Keebler rolled out
similar cookies nationwide.
The same thing happened with P&G’s Brigade toilet-bowl
cleaner. It was in test marketing for three years, during which
time both Vanish and Ty-D-Bol became established in the
market.
General Foods' test market results for a new frozen baby food
were very encouraging, until it was learned that most of the
purchases were being made by competitors Gerber, Libby, and
Heinz.
The Rollout
• Select a limited area of the country (one or several
cities or states, 25% of the market, etc.) and monitor
sales of product there.
• Starting areas are not necessarily representative
– The company may be able to get the ball rolling
more easily there
– The company may deliberately choose a hard area
to sell in, to learn the pitfalls and what really drives
success.
• Decision point: when to switch to the full national
launch.
Types of Rollout
•
•
•
•
By geography (including international)
By application
By influence
By trade channel
Patterns of Information Gained
During Rollout
Figure 18.7
Risks of Rollout
• May need to invest in full-scale production
facility early.
• Competitors may move fast enough to go
national while the rollout is still underway.
• Problems getting into the distribution channel.
• Lacks national publicity that a full-scale launch
may generate.
Probable Future for Market Testing
Methods
• Test marketing
• Pseudo sale
• Minimarket
• Rollout
(“dinosaur”)
(incomplete)
(flexibility & variety)
(small, fast, flexible)
Ref: Crawford & Benedeto (2008)
THANK YOU