Consumer Goods Market Testing

In testing consumer products, the company seeks to estimate four variables: trial, first repeat, adoption, and purchase frequency. The company hopes to find all these variables at high levels. In some cases, it will find many consumers trying the product but few rebuying it. Or it might find high permanent adoption but low purchase frequency (as with gourmet frozen foods).

Developing New Market Offerings

Here we describe the major methods of consumer-goods market testing, from the least to the most costly.

Sales-Wave Research

In sales-wave research, consumers who initially try the product at no cost are reoffered the product, or a competitor's product, at slightly reduced prices. They might be reoffered the product as many as three to five times (sales waves), with the company noting how many customers selected that company's product again and their reported level of satisfaction. Sales-wave research can also include exposing consumers to one or more advertising concepts to see the impact of that advertising on repeat purchase.

Sales-wave research can be implemented quickly, conducted with a fair amount of security, and carried out without final packaging and advertising. However, sales-wave research does not indicate the trial rates that would be achieved with different sales-promotion incentives, because the consumers are preselected to try the product. Nor does it indicate the brand's power to gain distribution and favorable shelf position.

Simulated Test Marketing. Simulated test marketing calls for finding 30 to 40 qualified shoppers and questioning them about brand familiarity and preferences in a specific product category. These people are then invited to a brief screening of both well-known and new commercials or print ads. One ad advertises the new product, but it is not singled out for attention. Consumers receive a small amount of money and are invited into a store where they may buy any items. The company notes how many consumers buy the new brand and competing brands. This provides a measure of the ad's relative effectiveness against competing ads in stimulating trial. Consumers are asked the reasons for their purchases or nonpurchases. Those who did not buy the new brand are given a free sample. Some weeks later, they are reinterviewed by phone to determine product attitudes, usage, satisfaction, and repurchase intention and are offered an opportunity to repurchase any products.

This method has several advantages. It gives fairly accurate results on advertising effectiveness and trial rates (and repeat rates if extended) in a much shorter time and at a fraction of the cost of using real test markets. Pretests often take only three months and may cost $250,000.30 The results are incorporated into new-product forecasting models to project ultimate sales levels. Marketing research firms report surprisingly accurate predictions of sales levels of products that are subsequently launched in the market.

Controlled Test Marketing. In this method, a research firm manages a panel of stores that will carry new products for a fee. The company with the new product specifies the number of stores and geographic locations it wants to test. The research firm delivers the product to the participating stores and controls shelf position; number of facings, displays, and point-of-purchase promotions; and pricing. Sales results can be measured through electronic scanners at the checkout. The company can also evaluate the impact of local advertising and promotions during the test.

Controlled test marketing allows the company to test the impact of in-store factors and limited advertising on buying behavior. A sample of consumers can be interviewed later to give their impressions of the product. The company does not have to use its own sales force, give trade allowances, or "buy" distribution. However, controlled test marketing provides no information on how to sell the trade on carrying the new product. This technique also exposes the product and its features to competitors' scrutiny.

Test Markets. The ultimate way to test a new consumer product is to put it into full-blown test markets. The company chooses a few representative cities, and the sales force tries to sell the trade on carrying the product and giving it good shelf exposure. The company puts on a full advertising and promotion campaign in these markets similar to the one that it would use in national marketing. A full-scale test can cost over $1 million, depending on the number of test cities, the test duration, and the amount of data the company wants to collect.

Management faces several questions:

Developing Marketing

1. How many test cities? Most tests use between two and six cities. The greater the strategies, the greater the regional differences, and the greater the chance of test-market interference by competitors, the greater the number of cities that should be used.

2. Which cities? Each company must develop test-city selection criteria. One company looks for test cities that have diversified industry, good media coverage, cooperative chain stores, average competitive activity, and no evidence of being overtested.

3. Length of test? Market tests last anywhere from a few months to a year. The longer the product's average repurchase period, the longer the test period necessary to observe repeat-purchase rates. This period should be cut down if competitors are rushing to the market.

4. What information? Warehouse shipment data will show gross inventory buying but will not indicate weekly sales at the retail level. Store audits will show retail sales and competitors' market shares but will not reveal buyer characteristics. Consumer panels will indicate which people are buying which brands and their loyalty and switching rates. Buyer surveys will yield in-depth information about consumer attitudes, usage, and satisfaction.

5. What action to take? If the test markets show high trial and repurchase rates, the product should be launched nationally. If the test markets show a high trial rate and a low repurchase rate, customers are not satisfied and the product should be redesigned or dropped. If the test markets show a low trial rate and a high repurchase rate, the product is satisfying but more people have to try it. This means increasing advertising and sales promotion. If trial and repurchase rates are both low, the product should be abandoned.

Test marketing permits testing the impact of alternative marketing plans. Colgate-Palmolive used a different marketing mix in each of four cities to market a new soap product: (1) an average amount of advertising coupled with free samples distributed door to door, (2) heavy advertising plus samples, (3) an average amount of advertising linked with mailed redeemable coupons, and (4) an average amount of advertising with no special introductory offer. The third alternative generated the best profit level, although not the highest sales level.

In spite of the benefits of test marketing, many companies question its value today. In a fast-changing marketplace, companies are eager to get to market first. Test marketing slows them down and reveals their plans to competitors. Procter & Gamble began testing a ready-to-spread Duncan Hines frosting. General Mills took note and rushed out its own Betty Crocker brand, which now dominates the category. Furthermore, aggressive competitors increasingly take steps to spoil the test markets. When Pepsi tested its Mountain Dew sport drink in Minneapolis, Gatorade counterattacked furiously with coupons and ads.

Many companies today are skipping test marketing and relying on faster and more economical market-testing methods. General Mills now prefers to launch new products in perhaps 25 percent of the country, an area too large for rivals to disrupt. Managers review retail scanner data, which tell them within days how the product is doing and what corrective fine-tuning to do. Colgate-Palmolive often launches a new product in a set of small "lead countries" and keeps rolling it out if it proves successful.

Nonetheless, managers should consider all the angles before deciding to dispense with test marketing. In this case, not testing a formula modification before the product launch had disastrous—and soggy—results:

Nabisco hit a marketing home run with its Teddy Grahams, teddy-bear-shaped graham crackers in several different flavors. So, the company decided to extend Teddy Grahams into a new area. In 1989, it introduced chocolate, cinnamon, and honey versions of Breakfast Bears Graham Cereal. When the product came out, however, consumers didn't like the taste enough, so the product developers went back to the kitchen and modified the formula, but didn't test it. The result was a disaster. Although the cereal may have tasted better, it no longer stayed crunchy in milk, as the advertising on the box promised. Instead, it left a gooey mess of graham mush on the bottom of cereal bowls. Supermarket managers soon refused to restock the cereal, and Nabisco executives decided it was too late to reformulate the product again. So a promising new product was killed through haste to get it to market.

Continue reading here: Business Goods Market Testing

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Readers' Questions

  • Zach
    How does a company use feedback from test marketing?
    4 months ago
  • Felix
    Does consumers like the marketing test?
    1 year ago
  • It depends on the individual consumer. Some may enjoy the marketing test while others may not.
    • Teodros
      What are the major method of consumer Goods market testing?
      1 year ago
      1. Focus Groups: Focus groups involve a small group of consumers who are invited to participate in a discussion of a product or service. These groups are typically moderated by a market researcher and allow marketers to gain a better understanding of consumer opinions and behaviors.
      2. Online Surveys: Another popular method for testing consumer goods is online surveys. These surveys can be administered digitally, via email, text, or other online platforms and allow marketers to quickly and easily collect a large amount of data from consumers.
      3. Concept Testing: Concept testing is used by marketers to gauge consumer interest in new products or services. This involves presenting potential customers with an idea or concept and asking them for feedback.
      4. Pre-Launch Testing: Pre-launch testing is an essential step before launching a product or service, as it allows marketers to identify areas in need of improvement. During pre-launch testing, focus groups or online surveys are often used to collect consumer responses and feedback.
      5. Product Trials: Product trials provide consumers with the opportunity to test out a product or service, usually free of charge, in order to evaluate its features and benefits. This allows marketers to gain valuable insight into consumer preferences and helps provide an accurate gauge of consumer demand.
      • marco
        What are the various methods for the test marketing of consumer goods?
        1 year ago
        1. In-Store Testing: In-store testing involves selling a product in a real-world environment, such as a grocery store, drugstore, or other retail outlet. This allows companies to gather valuable feedback from customers and the sales staff.
        2. Focus Groups: A focus group is a medium-sized group of people that meets to discuss a product or service and provide feedback. Companies often hire a third-party moderator to lead the discussion and help them learn what customers think of their product.
        3. Online Surveys: Online surveys allow companies to quickly and easily gather feedback from a large number of customers, and track responses over time.
        4. Product Sampling: Product sampling involves giving consumers free samples of the product in order to gauge their reactions. Companies can use this technique to test consumer reactions to new or existing products, or to gather feedback on packaging and marketing.
        5. Geographical Testing: Geographical testing involves launching a product in a limited geographic area, such as a city or state, in order to gauge customer reactions and sales performance. This allows companies to determine the most successful strategies for marketing their product and make changes if necessary.
        6. Social Media Testing: Social media testing involves using social media to gather customer feedback and measure customer sentiment about a product or service. This can include posting and measuring feedback on platforms like Facebook and Twitter, or creating surveys and polls on such services as Survey Monkey or Qualtrics.
        • Gabriel
          What are the four variables of consumer goods in market testing?
          1 year ago
          1. Price: The price of the product has a direct impact on consumer interest in purchasing.
          2. Quality: Quality is an important factor for consumers when making purchasing decisions.
          3. Promotion: Advertising, promotions, and other marketing activities can influence consumer purchasing decisions.
          4. Positioning: The way the product is positioned and perceived by consumers can impact their buying decisions.
          • sebastian
            What are the various methods for the marketing of consumer goods?
            1 year ago
            1. Advertising: Advertising is one of the best methods for marketing consumer goods. Through advertising, businesses can convey their message to the target audience with enticing visuals and copy. This helps to create an awareness about the product and drive sales.
            2. Public Relations: Public relations involves creating a positive relationship between the brand and its customers. This can be done through press releases, events, and other promotional activities that help to create a positive perception of the brand.
            3. Social Media Marketing: Social media is a great platform to reach out to consumers and engage with them in real-time. Through social media, brands can interact with their customers, and create a loyal customer base.
            4. Content Marketing: Content is king when it comes to marketing consumer goods. Content marketing involves creating quality and engaging content that is tailored to the target audience. This helps to create an emotional connection with the customers, and drive sales.
            5. Influencer Marketing: Influencers have become a powerful force in influencing the purchasing decisions of consumers. Through influencer marketing, brands can leverage the reach of influencers and create an impact on their target audience.
            6. Promotions: Promotions are a great way to get consumers interested in a product or service. Whether it’s discounts, giveaways, contests, or other incentives, promotions can be an effective way to draw attention to a product and increase sales.
            • Ava
              What are the various method for the test marketing of consumer goods?
              1 year ago
              1. Sample Distribution: Sample distribution is one of the most common methods of test marketing consumer goods. This involves distributing sample products to potential customers to try out before they make a purchase.
              2. Mock Shopping: Mock shopping involves sending out trained observers to observe and record the reactions of customers in mock shopping environments.
              3. Focus Groups: Focus groups are a great way of testing the reactions of people to a new product or service. Companies can hire a professional moderator to guide a discussion between a small group of potential customers, and then observe and record their reactions.
              4. Surveys: Surveys are also an effective test marketing tool. Companies can design surveys to gain insights into customer's buying habits, preferences, and perceptions about their product.
              5. Price Testing: Price testing is a method of test marketing where companies experiment with different pricing structures for their product to see how customers react.
              6. Online Marketing: Online marketing enables companies to market their products to a wide range of potential customers. Companies can use social media, email campaigns, search engine optimization and other strategies to test the appeal of their products.
              • selamawit
                How many companies benefit from test marketing?
                1 year ago
              • It is impossible to give an exact number as it varies depending on the industry, product or service being tested, target market, and other factors. However, it is estimated that approximately 80% of companies benefit from test marketing in some way.
                • Duenna Chubb
                  Which is the least costly method of market testing?
                  1 year ago
                • The least costly method of market testing is conducting online surveys. Online surveys are a cost-effective way to gather feedback from a large number of customers and potential customers. They are an easy way to get feedback and insights into consumer preferences, purchase behaviors, and product usage. Additionally, surveys can be used to test different marketing messages and understand customer segments.
                  • jude
                    How to choose testmarkets for new consumer products?
                    1 year ago
                    1. Research Your Target Audience: You should start your test market process by researching your target market. Understand who your ideal customer is and the specific characteristics that make up that audience, such as age, gender, income, and location.
                    2. Analyze Your Product: Consider what makes your product unique and why it would be appealing to certain markets.
                    3. Identify Potential Test Markets: Once you have identified your target audience, research potential test markets based on your product’s attributes.
                    4. Develop Your Test Plan: Develop a test plan that outlines the scope of your test market and which activities will be tested.
                    5. Execute the Test: Execute the test by launching your product in the market and collecting data on customer feedback and sales.
                    6. Analyze the Results: Analyze the results of your test market to determine if the test was successful. If the results are positive, you can then determine if the test market should be expanded or if the product should be launched into other markets.
                    • gerardino
                      What are the mentod of consumer goods market testy?
                      1 year ago
                      1. Focus Group Interviews
                      2. Online Surveys
                      3. Shopping Malls/Retail Environment Studies
                      4. In-Depth Interviews
                      5. Conjoint Analysis
                      6. Observational Research
                      7. Mystery Shopping
                      8. Prototype Testing
                      9. Price Sensitivity Measurement