Simulated Test Markets

Market Intelligence
Julie Edell Britton
Session 10
October 10, 2009

Todays Agenda
Simulated Test Markets
Contadina Case
Course Wrap-up

Why do an STM?
Get trial rate, repeat rate, & purchase amounts
Fast and Cheap
about $100 K for full STM with projections for 3
alternative marketing plans

Secret from Competitors; no sabotage

Accurate -- when assumptions implemented
Over 1000 validations of BASES forecasting
accuracy; average forecast falls within 9% of actual
sales; 91% fall within 20% of actual sales.

For high risk, follow with true test market

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Two Kinds of Simulated Test Markets

Concept Test Simulated Test Market (BASES). Cheaper.
Trial Rate: Consumers exposed to 2-paragraph concept, not
final ads. Adjusted Top Box.

True Simulated Test Market (e.g., ASSESSOR, LITMUS)

Trial Rate: Consumers come to laboratory store. Exposed to

half hour sitcom with finished ads for new product,
competition. Then led to mini-store where new product,
competitors available for purchase w/ own $.

Concept Tests winning because accuracy not that

different and trends have made it more difficult to recruit
representative samples at mall-based laboratory stores.
BASES now uses Web panels.

Simulated Test Markets

Universe Size (Households)
%Trial Rate (from BASES)
%Adjusted Trial = % Aware * % ACV * % Trial Rate
Trial Units = Trial HHs * Trial Ave. # Units

= (%Adj Trial * Universe) * Trial Av. # Units

% Repeat (from BASES)

Repeat Units/Yr = Trial HH * %Repeat *

Av. Units/Purchase * # Repeat Purchases/Yr

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Contadina Case

Contadina Takeaways
Stages of product development
Moving parts of simulated test market
Simulated test markets good at forecasting
demand if inputs right
Competition must be modeled as in Clancy
& Schulman
When product usage and risk are key, an
actual test market might be necessary
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Market Intelligence: 3 Skills

Backward Market Research
Getting data & judging its quality
Analytic methods for classic marketing
decision problems

Backward Market Research

Determine how research will be
implemented (what will final report look
like)
Figure out what info is needed and what
analysis will support recommendations
Design the study to gather the data -- if info
doesnt already exist
Crunch data & make recommendation
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Getting Data
Process
Identify management decision,
alternatives, information needs
Does secondary data exist? If not, do a
study.
Exploratory research for hypotheses
Conclusive Research
Descriptive. Do a survey.
Causal. Do an experiment.

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Judging Data Quality

All data has error systematic or random

Systematic error is bias
Direction of the bias?
Implication of this direction for decision?
Tools for judging data quality
For secondary: Ad Age & MBA value
For surveys: Measure reliability, validity; sampling
For experiments: Threats to internal validity For
forecasts: Reproduce current market shares

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Statistical Analysis Tools

Crosstabs and Chi Square
Zero order v. partial effects
Experiments & factorial designs using
Analysis of Variance
Conjoint Analysis
Multiple regression
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Marketing Analysis Tools

Competition: Multiattribute attitude model, perceptual
mapping, conjoint, cannibalization analyses
Segmentation: Index numbers, Interaction, a priori v.
clustering
New product concept screening: Conjoint analysis,
BASES
Pricing: Conjoint analysis and Regression
Promotion effects: Sales Promotion analysis, Multiple
regression
New Product Forecasting: perceptual mapping,
conjoint, BASES
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Day 1: Purpose & Approach

Users of market intelligence in consulting,
marketing management, entrepreneurship, finance
Drowning in data
Faced with decisions with imperfect information
Gain practice as evaluator of research before and
after it is undertaken
Act as a provider to become a sophisticated user
soft and hard skills
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Day 10: Technical Skills Learned

Research Process: Exploratory to Conclusive
(Conjoint, Contadina).

Disaggregate forecasting (Conjoint)

Pricing (Conjoint)
Product Design (Conjoint)
Segmentation (index #s, interaction, clustering)
Quantitative tools for marketing decision making:
Perceptual maps for positioning, regression &
promotion (Doritos), BASES (Contadina)
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Thank You and Best Wishes!

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