The nature and extent of such research depends largely on how much confidence management has in its proposed national marketing plan. For example, if management is insecure regarding the product’s initial retail price then provisions for testing alternative prices should be included in the test market research. Thus, the company must first develop its national marketing plan for the new product and then replicate it in miniature for the test. Sometimes a company will have more than one national marketing plan that it wishes to test so as to determine which is best. Companies frequently make the mistake of planning the test marketing operation first and later expanding it into a national plan, only to find that what was done locally cannot be achieved at the national level. For example, it may be too costly to sustain a high level of media expenditures or personal efforts nationally.
The ultimate objective of any market test is to obtain an estimate of sales for at least the first year of national operation for some level of promotional expenditure. The sales estimates are obtained by measuring the rate at which consumers are induced to try the new product and the number of consumers making repeat purchases. The market test research design should break down such data by type of promotional expenditure as well as by level of expenditure. This makes it possible to test the various methods of sampling or dealing used to induce trial to determine which type of expenditure is most effective. Different levels of advertising intensity can also be tried and their effect on sales measured. The critical point here is that no strategy should be tested unless it is part of one or more national plans. It should also be noted that the more variables to be tested, the more difficult and expensive the test marketing will be.
Determining the length of a Test Market:
In general, the test should last long enough to permit buyers who have purchased the product once to make at least three (and possibly four) repurchases. The heart of any sales estimate lies in the measurement of repeat purchases. It is often assumed that the product in question has a unique quality that can be demonstrated in the first experience with the product: this leads to the major research emphasis being placed on the rate at which initial purchases are made rather than on repeat purchases. But this can be a dangerous assumption to make in view of the fact that management inevitably holds a favorable bias toward the product. There have been many products that enjoyed a high rate of trial but died the second or third repeat purchase. Advertising and promotion are virtually indispensable in persuading people to try a new consumer product, but then the product characteristics themselves become dominant – that is, repeat buying measures the degree to which the product lives up to the expectations aroused by the promotional program.
Deciding What to Measure: In addition sales, research sales, research should attempt to measure a number of other variables as follows:
Repeat Purchasing: A measurement of repeat purchasing is probably the single most important item of information to obtain in a test market, since without it total consumer sales can be misleading. During the introductory period, the advertising and the introductory price offer may influence people to try the product. The important question, however, is whether a substantial portion of the people who try to become loyal customers. A continuous panel is useful for measuring repeat purchases. With such a panel the purchasing activities of the sampling units can be studied over a time period, and the extent of repeat purchasing can be determined.
Advertising Effectiveness: It is important to determine the rate at which target consumers are made aware of a new product, the amount of time they retain the message, and the degree of knowledge they possess about the product’s characteristics, because these factors affect the rate of adoption and the rate of subsequent purchases.
The rate of awareness (as well as message retention) is a function of the message, the media selected, and the frequency with which the message is repeated. While research cannot isolate and measure each of these variables separately it can obtain important clues for determining the number of target households who are aware of the new product, what they know about it, how they evaluate it in comparison with competing products, and whether they have as yet tried it.