Exploring Marketing Research William G. Zikmund Chapter 12: Test Marketing

Controlled experimentation Not just trying somethingout But scientific testing Test Marketing

An experimental procedure that provides an opportunity to test a new product or a new marketing plan under realistic market conditions to measure sales or profit potential.

ESTIMATEOUTCOMES IDENTIFY AND CORRECTWEAKNESSES IN PLANS Functons of Test Marketing

A Lengthy and Costly Procedure $$$$$ Loss of Secrecy When not to Test? How Long Should a Test Last?

Popular Test Markets Pittsfield, Massachusetts Charlotte, North Carolina Columbus, Ohio Little Rock, Arkansas Evansville, Indiana Cedar Rapids, Iowa Eau Claire,Wisconsin Wichita, Kansas Tulsa, Oklahoma Omaha, Nebraska Grand Junction. Colorado Wichita Falls, Texas Odessa-Midland, Texas

Selecting a Test Market Population size Demographic composition Lifestyle considerations Competitive situation Media Self-contained trading area Overused markets - secrecy

Control Method of Test Marketing Small city Low chance of being detected Distribution is forced (guaranteed)

The Advantages of Using the Control Method of Test Marketing Reduced costs Shorter time period needed for reading test market results Increased secrecy from competitors No distraction of company salespeople from regular product lines

Some Problems Estimating Sales Volume Over-attention Unrealistic store conditions Reading competitive environment incorrectly Incorrect volume forecasts –Adjusted data –Penetration and repeat purchase rate Time lapse

High Tech Test Markets ElectricTestMarkets SimulatedTestMarkets Virtual-realitySimulated Test Markets

Advanced Experimental Designs are More Complex Completely randomized Randomized block design Latin square Factorial

Completely Randomized Design An experimental design that uses a random process to assign subjects (test units) and treatments to investigate the effects of only one independent variable.

Completely Randomized Designs Average minutes shopper spends in store Control: no music Experimental treatment: slow music Experimental treatment: fast music

Independent Variable A Group AGroup BGroup C Level 1Level 2Level 3

Completely Randomized Design With a pretest posttest Group ARO 1 X 1 O 2 Group ARO 3 X 2 O 4 Group ARO 5 X 3 O 6

With a posttest Group ARX 1 O 1 Group BRX 2 O 2 Group CRX 3 O 3 Completely Randomized Design

Randomized Block Design An extension of the completely randomized design in which a single extraneous variable that might affect test units’ response to the treatment has been identified and the effects of this variable are isolated by blocking out its effects.

Independent Variables Control: no music Experimental treatment slow music Experimental treatment: fast music Mornings and afternoons Evening hours Blocking variable Randomized Block Design

Factorial Design An experiment that investigates the interaction of two or more variables on a single dependent variable.

Independent Variable 1 No Music cart signs Slow MusicFast MusicNo Music Grocery cart signs Independent Variable 2

PriceRedGold $25Cell 1Cell 4 $30Cell 2Cell 5 $35Cell 3Cell 6 Package Design Factorial Design -- Roller Skates

Effects Main effect The influence of a single independent variable on a dependent variable. Interaction effect The influence on a dependent variable by combinations of two or more independent variables.

Men Women Ad A Ad B Main Effects of Gender Main Effects of Ad > > 2 x 2 Factorial Design

Ad AAd B Women Men Believability Interaction Between Gender and Advertising Copy

Level 1 Level 2 Level 1 Level 2 Group A Group D Group C Group B INDEPENDENT VARIABLE 2 Independent Variable 1

Group ARO 1 X 11 O 2 Group BRO 3 X 21 O 4 Group CRO 5 X 12 O 6 Group DRO 7 X 22 O 8 2 x 2 Factorial with a Pretest Posttest

Group ARX 11 O 1 Group BRX 21 O 2 Group CRX 12 O 3 Group DRX 22 O 4 2 x 2 Factorial Design with a Posttest Measure

A Test Market Experiment on Pricing Sales in Units (thousands) Regular Price $ X 1 = X= Reduced Price $ X 2 = Cents-Off Coupon Regular Price X 1 = Test Market A, B, or C Test Market D, E, or F Test Market G, H, or I Test Market J, K, or L Mean Grand Mean

Latin Square Design A balanced, two-way classification scheme that attempts to control or block out the effect of two or more extraneous factors by restricting randomization with respect to the row and column effects.

ABC 2BCA 3CAB Order of Usage SUBJECT