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Why do products in a test market fail?
Because the product does not contain a demonstrable consumer advantage over competitive brands. It can have different causes: recipe, positioning, advertising, price, package, volume.
How long should a test market run?
Depends on the length of time it takes to judge the product’s performance against the company’s objectives for it. Time has to be given to see the correct advertising, package, distribution, and make changes if necessary.
What is the difference between laboratory (or simulated) test markets and real-life (or standard) test markets?
Lab: controlled environment, artificial setting. Real-life: natural environment, with real customers, real conditions and competitors.
Is the test market the most profitable route for a new product? Why?
No. The more profitable route to follow with a new product—provided the risk is acceptable and the research sufficiently reassuring—is to launch nationally and avoid the costs and delays of a test market.
How can we gain more internal and external validity in a test market?
Use random sampling, include a control group if it’s a laboratory test, replicate the study in different environments/time/people.
Can you mention one benefit the article mentions about test markets?
Opportunity to test a product under typical market conditions.
Enabling management to make an accurate prediction of its potential national turnover, forms the basis of the decision whether to extend the product nationally.
Opportunity, while the product is on limited sale, to identify and correct any weaknesses in either the product or its marketing plan before the commitment to a national sales launch, when it’s too late.
Can you mention one drawback the article mentions about test markets?
Costly - laborious.
Can you explain 2 factors that should be considered to conduct and effective test market?
1. It's necessary to weigh the cost and risk of product failure against the profit and probability of success.
2. The difference in the scale of investment involved in the test versus national launch route has an important bearing on deciding whether to test.
3. The likelihood and speed with which the competition will be able to copy your product.
4. Take into account other investments rather than plant and machinery: marketing, attention, effort, reputation.
Can you give an example where test markets are not appropriate? Why?
Test markets will obviously be inappropriate in industries where the technology requires the same sort of investment for the production of one unit as for a thousand, as in the case of airplanes and cars. The scale of risk and investment implied by the marketing decision must be evaluated.
Give an example of a laboratory (or simulated) test market. Does it have high or low external validity? Why? Why is it a problem?
Low external validity because it is a controlled environment. Doesn’t look like a natural setting, in real life. It is a problem because researchers don’t know what is going to happen once the product is launched in the real market with real conditions and competitors. Cannot estimate consumers’ response accurately.
Mention what the article says is indispensable before making the decision to test the market. What should be done before deciding to test?
Properly evaluate the new product: research all aspects of the product in the form in which it will ultimately be presented to the public. Research not only the product itself, but also the name, package design, advertising, price, and competitive environment.
Give an example of a real-life (or standard) test market. Does it have high or low internal validity? Why? Why is it a problem?
Low internal validity because the experiment is run in a natural setting instead of a lab 'perfect' setting. Estimates consumers’ response more accurately but cause and effect cannot be inferred confidently.
When is the model test market useful?
In situations where research results have been inconclusive, where considerable capital investment is required to set up even a test market, or where a speedy evaluation of a product’s potential is necessary. Example: housewives receiving products to test at home.
Why should there not be too much dependence on the results observed during the early days of a test market?
Satisfactory settled-down sale will only be achieved if a large enough core of regular purchasers can be gained for the product, and naturally, this will not be apparent during the early stages of the test market. Aim: the repeat purchase figure: people buying the product again and again. Takes time! Time must be allowed for sales to settle down from their initial honeymoon level.
Can you explain in your own words what the model test market is?
It is a stage of research interposed between pretest research and a full test market. Simulate the appropriate marketplace in an attempt to reduce both the time necessary to properly evaluate a full test market and the expense involved.
Which things new product research can evaluate, and which things cannot, compared to real-life situations?
Research can indicate the acceptability of recipe, package design, name, price, size, and advertising. But research cannot take the place of a test market when trying to assess the frequency of purchase, novelty value, and extent to which the new product will substitute for sales of existing company products. Also, it cannot indicate the role, character, and position that the product will develop in the minds and purchasing patterns of consumers.
What does exploratory and/or descriptive research not reveal about consumer and sales response to new products?
Behavioural intentions compared to actual behaviours, consumers’ response under typical market conditions, sales over time, different strategies effectiveness (related to price, promotion, product, place)