Millennium Marketing Research®

Tom Schori DBA Millennium Marketing Research®, 808 Ironwood, Normal IL 61761, 309-532-8466

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Simulated Test Market

Obviously, the very best way to test the efficacy of a proposed new product is to test market it. That is, to test the product, along with its complete marketing mix, in selected markets which are representative of the entire market where a full-scale launch would take place. The test market results, of course, should be predictive of the results that could be expected to occur with an actual introduction of the new product. But even with test marketing, some marketers are dismayed when the launch results don't mimic the test marketing results. Usually, the culprit is the marketer, who didn't launch the new product in exactly the manner prescribed by the test marketing phase.

To be sure, test marketing can be very expensive. And, some marketers will not undertake test marketing for precisely that reason, and they simply launch the product without any test marketing, hoping that it will be a success, that their "instincts" about the product are good. (Talk about a potentially expensive proposition!)

Elsewhere in our site, we mentioned a $100 million new product launch one of us had been involved in years ago. We opted to conduct a simulated test market ourselves, even though that simulated test market cost about $1 million. Let us point out, however, that these many years later, our charge for a test market is far, far less. We must tell you, though, that those who implemented the simulated test market for us advised us not to launch the new product we were evaluating. They concluded that, based upon the simulated market result, the resulting share did not merit launching the product. And, this was in a market where just one share point currently is worth about $600 million.

The error that research vendor made was simply looking at share (as reflected in adoption), without giving the necessary consideration to awareness and trial. When we looked at the data, we saw relatively low awareness and trial, but high adoption. As a result, the launch concentrated on creating awareness and trial, which paid big dividends.

When we conduct a simulated test market (at much, much less than the $1 million we had to pay some years ago), we ordinarily select five cities which are representative of the market where the product would be launched. Then, in each city, we select a mall which has a high incidence of those who constitute the new product's target market. Within each mall, we set up a simulated store (in a vacant facility), which is stocked with products from the product category being tested (including the client's new product, of course). 

An interviewer then qualifies (target market characteristics) passers-by and invites then to participate in a marketing research study which will take about 15 minutes of their time. Those who agree to participate are then asked to view a portfolio of advertisements (which may be print media advertisements or 30-second television advertisements). After viewing the portfolio of advertisements, participants are asked to indicate which advertisements they recalled having viewed. In this way, we get a measure of the extent to which the advertisement generated "unaided" awareness of the new product.

Then participants are given Millennium Marketing Research^® Dollars^©, with which they can "purchase" product from the simulated store, at no cost to them. In this way, they can  "purchase" the new product being tested or any of the competing products. Thus, we get a measure of the extent to which trial is achieved for the new product. At the same time, we have some indication of the relative contribution made by the advertisement and the packaging (and point-of-purchase) materials in achieving that level of trial.

Subsequently, we give those participants who "purchased" the new product the opportunity to purchase additional product on two more occasions, at a price which is lower than they'd ordinarily pay in a real store.

While a Millennium Marketing Research^® simulated test market does not permit one to evaluate one's entire marketing mix, it provides a basis of estimating awareness, trial and adoption before launch, and in a very cost-effective fashion.