CHAPTER NINETEEN

Market Testing I: Pseudo-Sales Methods

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 the responsibility of the market research department.

Decision Matrix on When to Market TestC

ost a

nd T

ime

Sav

ings

High

Low

Stages of the product development cycle

High

Low

Scope of L

earningand A

ccuracy

How Market Testing Relates to the Other Testing Steps

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

Pseudo Sales Tests

Speculative Sale STM (Simulated Test Market)

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.

VIRTUAL REALITYIN MARKETING RESEARCH

VIRTUAL STOREIN MARKETING RESEARCH

VIRTUAL STORESHELF DISPLAY TESTING

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