Simulated test markets

Date of publication: September 1, 1988

Abstract:

Simulated test markets (STM's) have developed extensively over the last 20 years; geographically, across product categories and at different levels of product development, i.e. from concept board to final marketing mix. Essentially all STM's forecasts are based on the same principles: 1. Hypothesis of the marketing plan in terms of the awareness, promotional activities and distribution. 2. Consumer response in terms of trial (if aware and find the product) and repeat purchaser. From the analysis of more than 1000 INNOVACTION DESIGNOR STM's , an experience database modelling system has been developed into DETECTOR, a pioneering expert system to predict sales responses and critical entry factors on the base of strategy profile or light tests. The use of DETECTOR has led us to make better use of STM's by applying a systematic approach to the risk associated with the decision of "Go or No Go" at different levels of product development, especially: 1. Prior to any test, by pre-evaluation based on the analysis of the market structure and the relative sensitivity of advertising quality, product quality and price. 2. When the STM has been carried out with a concept board or in the monadic way, the risk associated with the execution of the final advertising and its impact on trial taking into account the competitive environment. 3. The risk associated with the in-market achievement of a given sales target as a function of the forecast. A case study and validation analysis are presented to illustrate how these rules can be applied to improve decision-making in order to optimise opportunity and minimise risk from opportunity identification to final mix testing and entry optimisation. The accuracy and richness of the system involved clearly indicates that there are faster routes now to work earlier on high payout opportunities.

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