New Product Management
TESTING & LAUNCHING
1. Why Test ???
a.) Reduce risk.
b.) Maximize expected benefit.
ObtainImprove Product Design
Diagnostic Improve Marketing Mix
InfoIncrease Profitability
TESTING & LAUNCHING
Benefit|AcceptanceRegionDecision Frontier =
|Minimum Benefit
|for given risk
|
| Idea / Concept
|Ad Testing
|Pretest Market Test
|Rejection zoneFull Test Market
------>
Risk
* Disadvantages to Testing
- Time: Delay Entry
- Expose Own New Product --> Competition
increase lose pioneer
competition position & reward
TESTING & LAUNCHING
2. Testing Outline
A. Conceptcomponent testing
/ Prototype* physical product * ad copy
GO
B. Productpretest market
is available* eliminate failures
* Prototype/Initial* improve winners
Pilot Run Product* forecast sales
Experiment in Lab
--> Stimulating
Natural Shopping GO
C. * refined pilottest market
run on product* validate forecast
* field testing* identify & select
(launch in best mktg. plan
selected cities) & strategy
GO
D. * masslaunch
production* launch plan
* national mkt* tracking the
introduction launch
Tracking
Product Sales growth
Life
Cycle ------> Time
TESTING & LAUNCHING
<A1> Physical Product Testing
--> to examine whether the product delivers the C.B.P.
1) Laboratory Tests: Use of product in Lab by engineers
- Effective (Variety, Control)
BUT - Can't Represent Actual Use.
- Engineers Don't Think Like Consumers.
2) Expert Evaluation
- Low Cost
- but experts can't represent average consumer
TESTING & LAUNCHING
3) Consumer Tests
- Close to actual use
Because Consumers are Influenced by Psychological Effects as well as
Physical Attributes of All Product.
Therefore: 3 METHODS
<i> Single-Product Evaluation
- To see and evaluate only the new product.
Simple, but no reference
.: Difficult to interpret result.
<ii> Blind Test
To eliminate the bias caused by brand image.
<iii> Experimental Variations
Differ ingredient & ask consumer to evaluate.
TESTING & LAUNCHING
<A2> Advertising Testing -- Copy Evaluation --
The effect of Advertising depends on level of cognitive response hierarchy
awareness -> attitude -> intent -> behavior
SEE ---> LEARN ---> DO
ProcessMeasures
Ad Copy Exposure1. GRP = Reach X Frequency
2. Readership
AttentionAWARENESS: - seen/read/noted
- Brand Name Recognition
- Aided/Free Recall
ComprehensionATTITUDE
- Belief / evaluation
- Perception
AcceptanceINTENTION
(PREFERENCE)
- 1ST CHOICE
- Preference rank
- Intent to buy
-Purchase/Simulation
PurchaseBEHAVIOR
- choice & use
- buying record
TESTING & LAUNCHING
<A2> Advertising Testing -- Selecting a Method
Reliability (R) of test
Validity () of test - results correlate highly with actual market performance (sales, profit)
Expected revenue gain (En)
En = enR
where: =variation between advertisements
en = expected value of largest of N observations from a standard normal distribution
revenue gain increases with increased variability -- therefore, want variability -- choose the best (not average) ad
revenue gain increases with increased reliability and validity
TESTING & LAUNCHING
<A2> Advertising Testing -- Selecting a Method
Premarket testing
On-air + simulated store
On-air + coupon redemption
Test Market
On-air + coupon redemption
Split-cable (requires distribution of product in test market city)
TESTING & LAUNCHING
<A3> Test Personal Selling Presentations
PURPOSETECHNIQUE
• Change Preference• Videotape Sales Presentation
• Influence Purchase• Measure Buyer Response
TESTING & LAUNCHING
CONCEPT TESTING
A. Trial & Repeat Model
i. Trial = f(P, A, D)
where: P = preference for product
A = awareness of product
D = availability of product
ii. Trial Rate
a. Consideration set = F(A)
iii. Repeat Rate - more realistic for non-durables
a. Decay - Repeat Ratio
b. Long Run Retention (LRR)
1
where: SBR = switch back rate
RR = repeat purchase
TESTING & LAUNCHING
CONCEPT TESTING
b. Long Run Retention (LRR)
e.g., Markov Matrix : Brands A & B
//////////// / Next PeriodCurrent Period / A / B
A / RRA / SBRB
B / SBRA / RRB
c. Market Share = CTR x LRR
where CTR = cumulative trial rate
TESTING & LAUNCHING
B. Concept Testing
1. Concept Statements
a. Core Ideas
b. Positioning Statements
2. Test Design
a. Screening Tests
b. Monadic
- competitive concepts assumed
- competition not clearly defined
c. Competitive
- competitive concepts defined
- durables
TESTING & LAUNCHING
B. Concept Testing
3. Respondents
a. Type sample
i. focus group
ii. in-depth
a. customer home
b. shopping site
b. Contact Method
i. Telephone
ii. Mail
4. Questionaire - item design
a. Interest scale - top box score
b. Prob. of Purchase
c. Point allocation
d. Probing diagnostics
e. Uniqueness
f. Relevance - useful/needs
g. Primary idea
h. Concept believability
i. Comprehension of concept
j. Likes/Dislikes
k. Attribute ratings
l. Respondent Classification
TESTING & LAUNCHING
B. Concept Testing
5. Analysis
- Further development of product?
- Appropriate target markets
- Improvement in concept
a. Forms
i. Frequency dist.
ii. Crosstabs
iii. ANOVA, correlation, regression
iv. perceptual maps
TESTING & LAUNCHING
B. Concept Testing
5. Analysis
b. Criteria
i. Norms -- benchmarks -- past concept tests
ii. Primary criterion:
* Trial = intent • awareness • availability
CTR = TBS x A1 x D1
* Weighted Avg. (Prob. of Purchase)
* Overstated intent = f(avail, aware)
Purchase % - intent %
iii. Diagnostic Question
a. Cross tabs
b. Regression: DV = Intent;
IV = vars to be related