Module 6 : Test market: A test market, in the field of business and marketing, is a geographic region or demographic group used

to gauge the viability of a product or service in the mass market prior to a wide scale roll-out. The criteria used to judge the acceptability of a test market region or group include: 1. a population that is demographically similar to the proposed target market; and 2. relative isolation from densely populated media markets so that advertising to the test audience can be efficient and economical.

Practical use of test markets The test market ideally aims to duplicate "everything" - promotion and distribution as well as "product" - on a smaller scale. The technique replicates, typically in one area, what is planned to occur in a national launch; and the results are very carefully monitored, so that they can be extrapolated to projected national results. The area may be any one of the following:

Television area Internet online test Test town Residential neighborhood Test site

A number of decisions have to be taken about any test market:

Which test market? What is to be tested? How long a test? What are the success criteria?

The simple go or no-go decision, together with the related reduction of risk, is normally the main justification for the expense of test markets. At the same time, however, such test markets can be used to test specific elements of a new product's marketing mix; possibly the version of the product itself, the promotional message and media spend, the distribution channels and the price. In this case, several `matched' test markets (usually small ones) may be used, each testing different marketing mixes. Clearly, all test markets provide additional information in advance of a launch and may ensure that launch is successful: it is reported that, even at such a late stage, half the products entering test markets do not justify a subsequent national launch. However, all test markets do suffer from a number of disadvantages:

1. Replicability - Even the largest test market is not totally representative of the national market, and the smaller ones may introduce gross distortions. Test market results therefore have to be treated with reservations, in exactly the same way as other market research. 2. Effectiveness - In many cases the major part of the investment has already been made (in development and in plant, for example) before the `product' is ready to be test marketed. Therefore, the reduction in risk may be minimal; and not worth the delays involved. 'Competitor warning'. All test markets give competitors advance warning of your intentions, and the time to react. They may even be able to go national with their own product before your own test is complete. They may also interfere with your test, by changing their promotional activities (usually by massively increasing them) to the extent that your results are meaningless. 3. Cost - Although the main objective of test markets is to reduce the amount of investment put at risk, they may still involve significant costs. Test marketing is a technique used during product development to determine how people respond to a product. It can be used at many different phases of development to see whether or not the public will buy the product, how the product may need to be adjusted to make it appealing to the public, and how members of the public interact with the product. Using information from test marketing, product developers can refine products to make them more commercially viable before embarking on a widespread project launch. Advantages: Risk Reduction monetary risk channel relationships sales force morale

Strategic Improvement marketing mix production facilities

Disadvantages: Cost ($1 mill+) Time (9-12 months+) hurt competitive advantage competitor may monitor test market competitor may go national

Competitor can disrupt test market

Simulated test market refers to a marketing research technique where consumers are subjected to engineered advertising and purchase decisions to examine their response to a new product or service. Less Expensive Short time period for results Confidentiality Test multiple marketing plans (advertising , promo etc.), concepts, positionings, alow simulations May be projected nationally Examine cannibalization and source of volume Detailed consumer feedback on purchasing drivers: pack, price, communication, product. Testing Your Competitive Market Strategy A famous figure in the world of strategy was a general named Sun Tzu. He lived in northeastern China about 2,500 years ago and was considered an expert in military strategy due to his many victories on the battlefield. Many successful military leaders (such as General Patton) and business executives (such as former GE CEO) have attributed their victories to their application of Sun Tzu's principles. peed (Velocity) Market timing and speed are critical to many industries, such as technology, pharmaceuticals, and some consumer goods. Today, in fast-moving areas such as wireless, telephony, and hybrid cars, you can see how market windows open and close relatively quickly. The economic rents accrue to those who can thoughtfully scan the market environment and quickly spot profitable opportunities. One of the hottest areas in technology and business process today is around predictive analytics, which is all about helping companies to determine their next move and stay one step ahead of the competition. One way to analyze a competitor's strategic intent and migration path is to assess its expansion plans into new market segments and offering sets (see Figure 1). For example, think of Dell moving into printers or Microsoft moving into the CRM space. Strengths and Weaknesses Most people are familiar with a SWOT analysis, which stands for strengths, weaknesses, opportunities, and threats. In the act of completing a SWOT matrix, many companies glean new insights and better understand what they know and don't know. Sun Tzu's key message in this area is to avoid your competitor's strengths and attack their weaknesses. The following SWOT matrix depicts one way to start asking some hard, strategic questions. As the late Peter Drucker, the well-known management theorist, used to say, the toughest questions to answer are often the simplest ones. For example, where is your company vulnerable to competitors? What business are you really in? Is it worth it to shore up a weak area? What can you capitalize on, improve, or eliminate? What do you need to be monitoring more closely? Alliances In my original article, I mentioned that Sun Tzu wrote about building a strong web of alliances as a way to decrease the number of attractive or effective moves of your competitors. I provided IBM as an example: It has partnerships/alliances with over 30 application vendors; that helps

them to effectively counter almost any direct software vendor attack, considering its broad and comprehensive solution set. Many alliances are initially consummated around a set of narrow objectives, such as developing a new offering, expanding into new markets or geographies, or blocking a competitor. This focus on a few well-defined and achievable objectives enables the partnership to quickly deliver measurable value, often in contrast to the unrealistic expectations and targets with mergers or acquisitions. For example, a 2002 McKinsey & Co. study of 115 acquisitions in the US. and UK showed that only 23% of transactions earned returns greater than the annual cost of capital required for the acquisitions. Today, many companies are trying to create competitive advantage by selling "solutions"to be an end-to-end provider in terms of products and services. In looking at their bundle of capabilities, most companies have to make some important decisions around the three B's: Build, Buy, or Bond. The last "B" is all about alliances and partnerships. Market Capture Again, in my original article, I wrote that Sun Tzu's key message is to capture your market in such a way that it is not destroyed in the process, and that this goal can be accomplished in numerous ways, such as pursuing parts of the market that are underserved or using indirect or veiled approaches that will not elicit a competitor's attention or response. There are many ways to determine the attractiveness of a market, including understanding its size, its growth trends, and its potential. However, regardless of that information, if it's full of strong, deep-pocketed competitors, it may too costly to gain a foothold. The nuance there is that a number of unattractive markets can be profitably exploited through various "disruptions" or innovative business models.

The Best Competitive Strategy The best competitive strategy is not to directly engage in a fight. Just as in legal disputes, there is often a high risk-adjusted cost in waging price or market-share battles, the same as in litigation. Coopetition, a combination of the words cooperation and competition, has become quite popular in recent years. Many companies understand the vicious cycle of "trading" customers at lower and lower margins in order to gain market share or win on price. As trite as it sounds, a win-win, cooperative approach often creates more value for all parties. As Sun Tzu has written, "The best military strategy, then, is to use superior positioning. After that, use diplomacy. After that, use military force as a threat. Only after all else has failed, attack your enemy." In terms of designing a competitive intelligence system, it doesn't have to be overly complex. You first need to define the competitive areas that are importantat an offering, market, and company level. Second, make someone accountable for monitoring each area. Third, determine the best sources to collect infocompetitor Web sites, trade journals, press releases, financial reports, etc. Finally, create a few pro forma competitive intelligence reports that you can use to evaluate and track trends and material changes. "Advertising is any paid form of non-personal presentation and promotion of ideas, goods and services through mass media such as newspapers, magazines, television or radio by an identified sponsor". There are five main stages in a well-managed advertising campaign: Stage 1: Set Advertising Objectives

An advertising objective is a specific communication task to be achieved with a specific target audience during a specified period of time. Advertising objectives fall into three main categories: (a) To inform - e.g. tell customers about a new product (b) To persuade - e.g. encourage customers to switch to a different brand (c) To remind - e.g. remind buyers where to find a product Stage 2: Set the Advertising Budget Marketers should remember that the role of advertising is to create demand for a product. The amount spent on advertising should be relevant to the potential sales impact of the campaign. This, in turn will reflect the characteristics of the product being advertised. For example, new products tend to need a larger advertising budget to help build awareness and to encourage consumers to trial the product. A product that is highly differentiated may also need more advertising to help set it apart from the competition - emphasising the points of difference. Setting the advertising budget is not easy - how can a business predict the right amount to spend. Which parts of the advertising campaign will work best and which will have relatively little effect? Often businesses use "rules-of-thumb" (e.g. advertising/sales ratio) as a guide to set the budget. Stage 3: Determine the key Advertising Messages Spending a lot on advertising does not guarantee success (witness the infamous John Cleese campaign for Sainsbury). Research suggests that the clarity of the advertising message is often more important than the amount spent. The advertising message must be carefully targeted to impact the target customer audience. A successful advertising message should have the following characteristics: (a) Meaningful - customers should find the message relevant (b) Distinctive - capture the customer's attention (c) Believable - a difficult task, since research suggests most consumers doubt the truth of advertising in general Stage 4: Decide which Advertising Media to Use There are a variety of advertising media from which to chose. A campaign may use one or more of the media alternatives. The key factors in choosing the right media include: (a) Reach - what proportion of the target customers will be exposed to the advertising? (b) Frequency - how many times will the target customer be exposed to the advertising message?

(c) Media Impact - where, if the target customer sees the message - will it have most impact? For example does an advert promoting holidays for elderly people have more impact on Television (if so, when and which channels) or in a national newspaper or perhaps a magazine focused on this segment of the population? Another key decision in relation to advertising media relates to the timing of the campaign. Some products are particularly suited to seasonal campaigns on television (e.g. Christmas hampers) whereas for other products, a regular advertising campaign throughout the year in media such as newspapers and specialist magazines (e.g. cottage holidays in the Lake District) is more appropriate. Stage 5: Evaluate the results of the Advertising Campaign The evaluation of an advertising campaign should focus on two key areas: (1) The Communication Effects - is the intended message being communicated effectively and to the intended audience? (2) The Sales Effects - has the campaign generated the intended sales growth. This second area is much more difficult to measure. Marketing plan for your product launch Having established your goals for your product launch, you will know the particular outcomes you intend to achieve. Meeting these goals usually involves building product awareness and demand in the marketplace, which will lead to sales. At the time that your organization sets the goals for the product launch, have your marketing team outline their marketing strategy, which will take your products buyer personas into consideration. Note that this plan should dovetail with the rest of their overall marketing plan, and that the marketing team will also be responsible to help build the sales tools for the new features. Building awareness Awareness is a precursor to demand. By building awareness, you improve the chances that your market will be interested in buying your product. Use the following tools to strengthen your efforts: Press releases: Many companies use press releases to announce new products or upgrades to their existing ones. Press releases are most effective when the content is newsworthy (like a major product release) and they include a customer endorsement. Conduct beta programs to elicit product endorsements that you can use at the time of the launch. When distributing press releases through a newswire agency, news outlets will often republish them, spreading awareness of your new release. Press outreach: Over time, your marketing team will build relationships with different journalists and press outlets. At the time of a product release, your team can reach out to the press to entice journalists to write about the new upgrade.

Website updates: Announce every new product or feature release on your corporate website. If you blog, then write about the new functionality and why it benefits customers. Anyone who regularly views your website will soon learn of the new upgrade. Twitter announcements: If your organization has a Twitter account, then tweet about the upcoming release, including links to the press release, any web content and other marketing efforts. Aim to have your Twitter followers retweet these announcements, which can help to create viral awareness of your new release. Endorsements: Building relationships with third-party industry analysts and receiving endorsementscan boost your marketing efforts. For example, Gartner Group and Forrester are well-known analysts that follow the technology space and evaluate and recommend solutions to their customers. Advertising: Advertising is another option for building awareness. This includes searchengine marketing (e.g., buying Google AdWords) and other forms of advertising (e.g., print, online). Building demand Your marketing team can engage in the following types of activities to help generate demand for your product and create a sense of urgency for your prospects to buy. Email campaigns: Email campaigns designed for existing prospects can help encourage their purchase decision. Follow-up these campaigns with a phone call to maximize effectiveness. Referral campaigns: Use your existing customer base to generate additional leads through a referral campaign. Offer an incentive to your existing customers to refer a friend (e.g., free maintenance for a year, or a gift). Because these new prospects will have had your product endorsed by a friend, the chance for you to close the sale is much higher. Contests: Hold a contest to collect contact information for prospects for a particular release. Set up contests prudently; make sure that you attract legitimate sales prospects, and not just anyone who wants to win the prize. Tradeshows: Tradeshows enable you to connect with a targeted audience that wants to see solutions to their market problems. Use tradeshows with care, however. They can prove a costly and labour-intensive way to generate leads, and might not provide the buyer persona you seek.

Example:Product launch marketing plan Company ABC has a new release of facial recognition functionality for its image manipulation software. The company wants to make a big splash. The goals of the release are to have 1,000 new prospects in the sales funnel. Company ABC has been conducting a beta program with 50 customers over the last three months, and customers love the new functionality. The marketing team decides to do the following:

To build awareness:

Endorsements: Theyll secure five quotes from beta program customers.Press release: Theyll use the best quote to create a press release. o Journalists: Theyll pitch a story to the photo management media, spotlighting how theyve solved the problem of facial recognition for users, and include customer endorsements supporting the product. o Advertising: Theyll buy the termfacial recognition on Google Adwords. To build demand: o Email campaign: Theyll create an email campaign for past trial users of the software to inform them about the upcoming release. They will reach about 10,000 people through the trial database. o Referral campaign: Theyll inform 3,000 existing customers about the new upgrade to prepare them for the release. Theyll also ask those customers to refer a friendif they do so, theyll be entered into a draw for an iPad.
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The marketing team estimates that they can generate 1,000 leads using these different tools to build product awareness and demand. By keeping careful metrics and tracking their activities and results, the team can assess for next time the effectiveness of every launch activity. What is a product strategy? A product strategy identifies, in broad terms, how you plan to sell your products to your marketplace. It documents how the people in your marketplace (your clients) think about your products and business. It documents how your business positions its products and services and it contains your strategies for selling. A product strategy can encompass any number of products, depending on the nature of your business. You could have one strategy for each major product or, perhaps, the same strategy for all of them. For example, an organisation that manufactures and sells high quality vacuum cleaners may sell several product lines but they might all be positioned as high quality premium products. A more diverse organisation selling different products such as finance, travel and music into different markets would need several product strategies. A product strategy is a document containing any of the following:

business objectives descriptions of target market(s), usually based on results of market research results of research about your potential clients and their needs how you want your product to be viewed by your clients product features and benefits

selling strategies how your product features and pricing compare to your competitors' product changes that might enable better market positioning of your product. If you were an electrician, your product is the service you offer. Your product strategy helps you determine exactly what services to offer. Do you focus on industrial electrical work or household? Do you offer simple services, more complex services such as re-wiring or both? Are you going to do business with developers of huge multi-residential complexes? Developing a product strategy helps you analyse why clients should use your service instead of your competitors'. You can do this by analysing your competitors and differentiating your service. It might be your experience or prompt service. You can then use those particular features and benefits to market your service. This is called product positioning. A product strategy gives you an idea of how you should price your service. Will you undercut the competition or charge more because youre worth it? Product positioning: the process of creating an image of a product in the minds of the consumers is called as positioning. Positioning helps to create first impression of brands in the minds of target audience. In simpler words positioning helps in creating a perception of a product or service amongst the consumers. Example The brand Bisleri stands for purity. The brand Ceat Tyre stands for better grip. Steps to product Positioning Marketers with the positioning process try to create a unique identity of a product amongst the customers. 1. Know your target audience well It is essential for the marketers to first identify the target audience and then understand their needs and preferences. Every individual has varied interests, needs and preferences. No two individuals can think on the same lines. Know what your customers expect out of you. The products must fulfill the demands of the individuals. 2. Identify the product features

The marketers themselves must be well aware of the features and benefits of the products. It is rightly said you cant sell something unless and until you yourself are convinced of it. A marketer selling Nokia phones should himself also use a Nokia handset for the customers to believe him. 3. Unique selling Propositions Every product should have USPs; at least some features which are unique. The organizations must create USPs of their brands and effectively communicate the same to the target audience. The marketers must themselves know what best their product can do. Find out how the products can be useful to the end-users ? Why do people use Anti Dandruff Shampoo? Anti Dandruff Shampoos are meant to get rid of dandruff. This is how the product is positioned in the minds of the individuals. Individuals purchase Dabur Chyawanprash to strengthen their bodys internal defense mechanism and fight against germs, infections and stress. Thats the image of Dabur Chyawanprash in the minds of consumers. USP of a Nokia Handset - Better battery backup. USP of Horlicks Foodles - Healthy snack Communicate the USPs to the target audience through effective ways of advertising. Use banners, slogans, inserts and hoardings. Let individuals know what your brand offers for them to decide what is best for them. 4. Know your competitors A marketer must be aware of the competitors offerings. Let the individuals know how your product is better than the competitors? Never underestimate your competitors. Let the target audience know how your product is better than others. The marketers must always strive hard to have an edge over their competitors. 5. Ways to promote brands Choose the right theme for the advertisement. Use catchy taglines. The advertisement must not confuse people. The marketer must highlight the benefits of the products. 6. Maintain the position of the brand For an effective positioning it is essential for the marketers to continue to live up to the expectations of the end - users.

 Never compromise on quality. Dont drastically reduce the price of your products. A Mercedes car would not be the same if its price is reduced below a certain

level. A Rado watch would lose its charm if its price is equal to a Sonata or a Maxima Watch.

Define the target market: With the current state of the economy, having a well-defined target market is more important than ever. No one can afford to target everyone. Small businesses can effectively compete with large companies by targeting a niche market. Many businesses say they target anyone interested in my services. Some may say they target small business owners, homeowners or stay-at-home moms. All of these targets are too general. Targeting a specific market does not mean that you have to exclude people that do not fit your criteria from buying from you. Rather, target marketing allows you to focus your marketing dollars and brand message on a specific market that is more likely to buy from you than other markets. This is a much more affordable, efficient and effective way to reach potential clients and generate business. For example, an interior design company could choose to market to homeowners between the ages of 35-65 with incomes of $150,000+ in the Baton Rouge, Louisiana market. To define the market even further, the company could choose to target only those interested in kitchen and bath remodeling and traditional styles. This market could be broken down into two niches parents on the go and retiring baby boomers. With a clearly defined target audience, it is much easier to determine where and how to market your company. Here are some tips to help you define your target market. 1. Look at your current customer base Who are your current customers, and why do they buy from you? Look for common characteristics and interests. Which ones bring in the most business? It is very likely that other people like them could also benefit from your product/service. 2. Check out your competition Who are your competitors targeting? Who are their current customers? Dont go after the same market. You may find a niche market that they are overlooking. 3. Analyze your product/service

Write out a list of each feature of your product or service. Next to each feature, list the benefits they provide (and the benefits of those benefits). For example, a graphic designer offers high quality design services. The resulting benefit is a professional company image. A professional image will attract more customers because they see the company as professional and trustworthy. So ultimately, the benefit of high quality design is to gain more customers and make more money. Once you have your benefits listed, make a list of people who have a need that your benefit fulfills. For example, a graphic designer could choose to target businesses interested in increasing their client base. While this is still too general, you now have a base to start from. 4. Choose specific demographics to target Figure out not only who has a need for your product or service, but also who is most likely to buy it. Think about the following factors:

Age Location Gender Income level Education level Marital or family status Occupation Ethnic background 5. Consider the psychographics of your target Psychographics are more personal characteristics of a person including: Personality Attitudes Values Interests/hobbies Lifestyles Behavior Determine how your product or service will fit into your targets lifestyle. How and when will they use the product? What features are most appealing to them? What media do they turn to for information? Do they read the newspaper, search online or attend particular events? 6. Evaluate your decision Once youve decided on a target market, be sure to consider these questions:

Are there enough people that fit my criteria? Will my target really benefit from my product/service? Will they see a need for it?

Do I understand what drives my target to make decisions? Can they afford my product/service? Can I reach them with my message? Are they easily accessible? Dont break your target down too far! Remember, you can have more than one niche market. Consider if your marketing message should be different for each niche market. If you can reach both niches effectively with the same message, then maybe you have broken down your market too far. Also, if you find that there are only 50 people that fit all of your criteria, maybe you should reevaluate your target. The trick is to find that perfect balance. You may be asking, How do I find all this information? Try searching online for research others have done on your target. Search for magazine articles and blogs that talk about your target market or that talk to your target market. Search for blogs and forums where people in your target market communicate their opinions. Look for survey results, or consider conducting a survey of your own. Ask your current customers for feedback. Pew Internet publishes reports regarding internet use among various demographics. Scarborough issues press releases with useful data and sometimes publishes free studies. Also look for free studies by Arbitron . You may be surprised what you can find just by doing a search in Google. Conclusion Defining your target market is the hard part. Once you know who you are targeting, it is much easier to figure out which media you can use to reach them and what marketing messages will resonate with them. Instead of sending direct mail to everyone in your zipcode, you can send only to those who fit your criteria. Save money and get a better return on investment by defining your target audience. Pricing Strategies for New Product There are three Pricing Strategies for New Product 1. Prestige Pricing 2. Market Skimming 3. Market Penetration 1. Prestige Pricing - Setting high prices to position a product at the upper or luxury end of market - Producing a high quality and charging the highest price.

- For example, Mercedes Benz and Rolex

Why they are considered as Prestige Pricing strategies? This is because both brands are branded goods which have high quality and standards. That is why you won't find them selling in Putatan. LOL. Mostly you will find it in where? Town area.

2. Market Skimming - Setting high prices at the launch stage and lowering slowly as the product becomes mature. (Same in PLC right?) - Most product are in high demand in the early stage of the life cycle. - That is why using Market Skimming may lead to profit maximization. - For example, Handphones

3. Market Penetration - Setting at lower price to get maximum sales and market share. - Increase price slightly in the future.

Product positioning process

Generally, the product positioning process involves: 1. Defining the market in which the product or brand will compete (who the relevant buyers are) 2. Identifying the attributes (also called dimensions) that define the product 'space' 3. Collecting information from a sample of customers about their perceptions of each product on the relevant attributes 4. Determine each product's share of mind 5. Determine each product's current location in the product space 6. Determine the target market's preferred combination of attributes (referred to as an ideal vector) 7. Examine the fit between: The position of your product The position of the ideal vector