Test Marketing

Test marketing studies are research designs that evaluate complete marketing programs for new or established brands in a "live" retail setting. There are several gradations, and with increasing costs.

• Controlled store tests typically evaluate changes to established brands. Different stores of the same chain, in the same market, are divided into test vs. control groups.
• Matched market tests involve the use of market pairs, which are split into test and control groups.
• Electronic test markets (e.g., BehaviorScan from IRI) provide store distribution services and media delivery (at the household level). Marketers monitor both retail movement and household purchasing via scanner panels to diagnose product performance.
• Live test markets are "mini-launches" in limited geography (e.g., a sales zone). Products are sold-in and advertised in the same manner as a national roll-out.

When Used

Test markets are used as a final confirmatory "go/no go" step before any large scale product introduction occurs, such as a regional or national launch. They necessarily follow extensive concept, product, positioning, and copy testing work, and usually (but not always) follow sales forecasting studies.

Stimuli

Stimuli will vary with the type of test. For controlled store tests, the focus is on changes to an established brand – either formulation, packaging, pricing, or merchandising. In matched market tests, the stimuli can include these variables, as well as variations in finished copy, media weight, or day-part mix. In both electronic test markets and live test markets, all elements of the marketing mix are involved.

Test Market Designs

Controlled store tests use stores from the same chain in the same market (although multiple markets can be used). A matching process creates test/control pairs based on similar store locations, category/brand sales, and prior 12-month sales trends. As an example, a Schick Tracer test could be conducted in Boston area Stop’N Shops, with 10 stores stocking a promotional package, and ten stores stocking the regular package (control group).

Matched market tests are set up as pairs, with pairs matched on criteria such as chain type, category development, competitive share, region, demographics, etc. Markets are also often matched on network and cable penetration, and media spill-in from other markets. In matched market tests (and controlled store tests), the objective is to minimize ingoing variability between test and control groups, and thereby maximize the sensitivity of the test.

Electronic store tests are conducted in specifically designated markets, where retailers and cable TV operators have cooperative arrangements with the research firm. Markets are media-isolated, and do not receive advertising signals from outside the market (i.e., there is little spill-in). Market matching may be used, but the number of available markets is limited to the specifically designated markets. More likely, a household matching procedure will be used to evaluate media delivery (such as a group of households that receive regular media weight, vs. a group that gets twice the weight).

Live test markets generally do not involve specific designs per se. Markets are chosen on the basis of being representative of the ultimate launch geography, those that that meet specific demographic criteria, or those where a key competitor is weak.

Sample Frame

In test marketing, sampling issues deal more with the number of stores or markets than respondents. Sample size decisions are made on different criteria, such as store sales volume or market representativeness. Electronic test marketing firms provide household panel data for their designated test markets. In matched market and live tests, household data may be also be available.

Pros & Cons

Pros: Provides an assessment of complete marketing strategy before regional or national launch decisions are made; time window to adjust strategy, if necessary.

Cons: Expensive; time-consuming; alerts competitors to activity; competitors can actively try to confound the test; the test market environment may not represent national launch conditions.

Timing

Controlled store or matched market tests vary widely in terms of timing. Cycle time from initial product distribution to a preliminary data read is minimally 2-3 months, and can be much longer (6-12 months), depending upon objectives.

Subsequent Steps

Qualitative research (e.g., focus groups), tracking studies, and product/positioning fine tuning, as necessary.

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