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Assignment #2: Test Market Designs
Please recommend a test market design and address the associated questions for 2 of the following 5 scenarios. In your answer, be sure to label the Independent Variables (IV), the Dependent Variables (DV), and any control variables. Include the timeline and associated costs. Also, in answering the questions, you might consider using X and O to help describe your plan. See experimental designs starting on page 158. Be as specific as possible. Your test market design for each scenario should be approximately 2-3 pages in length.
Please organize your response to each scenario using the following headings:
1. Objective of Test-Market:
2. Variables: Identify the main IV(s) and DV(s)
3. Control Variables: Identify these and explain why you need to control for them.
4. Test procedure details and justification: (briefly describe the plans to carry out the test. What will consumers do? What will the company do? How many test markets? How long should it last for? What are the associated costs? What information do you need to obtain to help answer the question of interest?) Be sure to justify your decisions.
5. Overall Recommendation: Given the associated direct and indirect costs of conducting your proposed test market, and keeping in mind the four main factors listed in the text to consider in determining whether or not to conduct the test market, (p. 167-168) do you recommend conducting the test market you outlined above? Please explain your answer.
a. Design a test of a new pricing strategy for orange juice concentrate. The brand is an established brand, and we are only interested in testing the effect of a 5 percent price increase and a 5 percent price decrease. All other elements of the marketing mix will remain the same.
b. A soft drink company has determined in taste tests that consumers prefer the taste of their diet product when sweetened with Splenda in comparison to Equal. Now they are interested in determining how the new sweetener will play in the marketplace. Design a test market that will achieve this goal.
c. A national pizza wants to test the effect on sales of four different discount coupons. Design a test that will do this in a way that gives a clear read. Your focus should be on the effect on sales volume. Financial analysis after the test results are in will address the revenue and profit impact.
d. A national value-priced hotel chain needs to understand the business impact of including a free buffet style breakfast to guests. Design and justify a test that will do this.
e. A credit card company needs to test its strategy for attracting college students to its card. It is going to continue using booths in student unions and other high-traffic campus locations. It has been offering free CDs from a list to those who sign up for its card, but since other card companies are using this approach, the company wants to try some alternatives. It is considering free MP3 downloads from iTunes and t-shirts featuring popular music groups. Design a test that will tell the company which option to choose if its goal is to increase signups by the largest amount.
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