Lestrade, marketed under the name Olean, developed and researched by Procter & Gamble over 25 years at a cost of more’than $200 million. is an amazing new cooking oil that adds zero calories and no fat to the snacks people love. Frito-Lay’s Max chips with Olean were test-marketed in three cities in 31 supermarkets. Researchers collected sales data and customer reports of any effects that they associated with eating Frito-Lay’s Max chips. The key findings were encouraging: (I) Sales exceeded expectations; both the initial purchase and repurchase rates were very high; (2) most people responded positively that snacks made with Olean offered a good way to reduce fat in their diets; and (3) the reporting rate of any side effects was lower than the small reporting rate anticipated prior to FDA approval
Because the initial findings were encouraging, it was decided to expand the test marketing to Columbus. Ohio, and Indianapolis, Indiana. The product in these test markets was changed in packaging design, price, and the name. called WOW!, which better described the product with its great taste and no- and low-fat/calorie-reduced attributes versus the Max product name used in the initial test markets. The test market results were again positive. Based on favorable results, the decision was made to launch nationally Frito-Lay’s WOW! line of Ruffles, Lay’s, and Doritos chips, all made with Olestra.
Subsequently, consumer focus on reduced calories has led Frito-Lay to change the name and packaging of the WOW! Products-the company’s line of snacks cooked in Olestra= tc the Light line of Lay’s. Ruffles, Doritos, and Tostitos to more effectively communicate the product’s reduced calories. The new packaging was in stores as of 2005 and sales continued to be strong trough 2009.31
A standard test market constitutes a one-shot case study. In addition to the problems associated with this design. test marketing faces two unique problems. First. competitors often take canons such as increasing their promotional efforts to contaminate the test-marketing program. When Procter & Gamble test-marketed its hand-and-body lotion. Wondra. the market leader, Cheeseburger-Ponds, started a competitive buy-one-get-one-free promotion for its flagship brand. Vaseline Intensive Care lotion. This encouraged consumers to stock up on Vaseline
Sometimes it is not feasible to implement a standard test market using the company’s personnel. Instead, the company must seek help from an outside supplier, in which case a controlled test market
may be an attractive option.
Controlled Test Market
In a controlled test market, the entire test-marketing program is conducted by an outside research company. The research company guarantees distribution of the product in retail out lets that represent a predetermined percentage of the market. It handles warehousing and field sales operations, such as shelf stocking, selling, and inventory control. The controlled test market includes both mini market (or forced distribution) tests and the smaller controlled store panels. This service is provided by a number of research firms, including Nielsen
Simulated Test Market
Also called a laboratory test or test market simulation, a simulated test market yields mathematical estimates of market share based on initial reaction of consumers to a new product. The procedure works as follows. Typically, respondents are intercepted in high-traffic locations, such as shopping malls, and preened for product usage. The selected individuals are exposed to the proposed new product concept and given an opportunity to buy the new product in a real-life or laboratory environment. Those who purchase the new product are interviewed about their evaluation of the product and repeat-purchase intentions. The trial and repeat-purchase estimates so generated are combined with data on proposed promotion and distribution levels to project a share of the market
Simulated test markets can be conducted in 16 weeks or less. The information they generate is confidential and the competition cannot get hold of it. They are also relatively inexpensive. Whereas a standard test market can cost as much as $1 million, simulated test markets cost less than 10 percent as much. One of the major firms supplying this service is Nielsen BASES .Simulated test markets are becoming increasingly popular
Electronic Virtual and Web Enabled Test Markets
An electronic test market combines consumer scanner panel, store distribution, and house hold level media delivery in designated markets. An example would be services offered by Information Resources, Inc., using Behavior Scan, which combines scanner panels with broadcasting system (see Chapter 4). A virtual test market uses a computer simulation of an interactive shopping experience in three dimensions. Web-enabled test markets involve product tests using online distribution, i.e., the product being tested is offered solely through a dedicated Web site. Because of its lower costs, Web-enabled test marketing is gaining in popularity. It is being used by consumer packaged goods companies like Procter & Gamble and General Mills.
Thus. the internal and external validity of field experiments conducted overseas is generally lower than in the United States. By pointing to the difficulties of conducting field experiments in other countries. we do not wish to imply that such causal research cannot or should not be conducted. Some form of test marketing is generally possible. as the following example indicates.
Flawless Quality and Exclusivity at $100,000 Each
Watchmaker Lange Uhren GmbH has succeeded in the struggling eastern German economy of 2008-2009. The reason is their marketing savvy supported by marketing research. Simulated test marketing was done in the United States. Japan. and France to determine an effective positioning and pricing strategy for the watches. In each country. the price and the positioning strategy were varied and consumer response assessed. The results. which were similar across countries. indicated that a prestige positioning with a premium price would be most effective. The eastern Germany area was well known for superior craftsmanship prior to the rise of communism. Lange Uhren used a well-trained workforce and the new marketing platform to rekindle this tradition. The new positioning strategy is based on flawless quality and exclusivity. which are portrayed uniquely in each cultural context. The watches are sold by only a few retailers worldwide for as much as S 100.ooo each. The precious wristwatches that bear the “A. Range & signature have their roots in the grand history of Saxony. German jewelry industry officials were “cautiously optimistic” when discussing the 20 lO to 2015 industry outlook. Officials believed that there would be an increase in demand from European Union-member states for German-made jewelry such as watches. Europe is the primary sales market for German-made goods and. as of2009. accounts for an estimated 70 percent of all jewelry and watch exports. Given these predictions and statistics. Lange Uhren is well positioned to continue its success in this industry.34
Ethics in Marketing Research
It is often necessary to disguise the purpose of the experiment in order to produce valid results. Consider. for example. a project conducted to determine the effectiveness of television commercials for Kellogg’s Rice Krispies cereal. The respondents are recruited and brought to a central facility. They are told that they will be watching a television program on nutrition and then will be asked some questions. Interspersed in the program is the commercial for Rice Krispies (test commercial). as well as commercials for some other products (filler commercials). After viewing the program and the commercials. the respondents are administered a questionnaire. The questionnaire obtains evaluations on the program content. the test commercial. and some of the filler commercials. Note that the evaluations of the program content and the filler commercials are not of interest but are obtained to reinforce the nature of ,he disguise. If the respondents knew the true purpose was to determine the effectiveness of the Rice Krispies commercial. their responses might be biased .
One further ethical concern is the responsibility of the researcher to use an appropriate experimental design for the problem so as to control errors caused by extraneous variables. As the following example illustrates. determining the most appropriate experimental design for the problem requires not only an initial evaluation but also continuous monitoring,
Correting Errors Early:A Stitch in Time Saves Nine
For the fiscal year ending May 31, 2008, Nike reported record revenues of S18.6 billion. a S2.3 billion increase over the previous year’s earnings. Nike’s revenue rose as demand grew across all regions and the weak dollar helped boost the value of overseas sales. A marketing research firm specializing in advertising research is examining the effectiveness of a television commercial for Nike athletic shoes. A one-group pretest-posnest design was used. Attitudes held by the respondents toward Nike athletic shoes were obtained prior to being exposed to a sports program and several commercials, including the one for Nike, Attitudes were again measured after viewing the program and the commercials. Initial evaluation based on a small sample found the one-group pretest-posttest design adopted in this study to be susceptible to demand artifacts: Respondents attempt to guess the purpose of the experiment and respond accordingly. Because time and financial constraints make redesigning the study difficult at best, the research continues without correction. Continuing a research project after knowing errors were made in the early stages is not ethical behavior. Experimental design problems should be disclosed immediately to the client. Decisions on whether to redesign the study or accept the flaw should be made jointly by the researcher and the client
Levi’s: Fading Jeans and Market Share
As of 2009, Levi’s is a leading global apparel company, with sales in more than 110 countries. It has been a long-standing company with more than 150 years of being in the clothing business. Although one may think this long history can only result in good things, Levi’s heritage has been its worst enemy. John Anderson, the president and chief executive officer for Levi Strauss & Co” had to work to revamp Levi’s antique image and make the brand appealing to younger generations in efforts to boost its declining sales. In the last five years, Anderson saw worldwide sales drop 40 percent, losing market share to competitors like the Gap, and trendier ones such as Calvin Klein, Tommy Hilfiger, and Diesel. Another problem for Anderson came from store brand jean such as JC Penney’s Arizona brand jeans or the Gap’s in-house brand, which have changed their image and launched an assault on Gig brand names like Levi’s. These store brand jeans, along with other store label jeans. now target the teenage market with “cutting edge” advertising. American trade publication Brand Strategy estimated that the brand has lost about 50 percent of the younger consumer market share worldwide between 1999 and 2008.
The Marketing Research Decision
1. If you were John Anderson, what type of research would you want to conduct to help arrive at an answer?
2. Please explain how you would implement the type of research you have recommended.
3. Discuss the role of the type of research you recommend in enabling John Anderson to determine the power of a national brand like Levi’s compared to an in-house brand like Gap or a store brand like JC Penney’s Arizona jeans.
The Marketing Management Decision
1. What should Levi’s do to compete with in-house and store brands of jeans?
2. Discuss how the marketing management decision action that you recommend is influenced by the research that you suggested earlier and by the findings of that research