1. OBJECTIVES - TEST MARKET CONSIDERATIONS MODULE • To learn the reasons for conducting a test market • To learn the basic steps in test market studies • To learn the role of Technology in a test market study

2. TEST MARKET DEFINED Test Markets are large-scale commercial marketing experiments in a limited geographic area chosen for very specific marketing-related reasons. They are part of the screening process for new products and provide the means to evaluate a product and its marketing program.

3. SEQUENCE OF PRODUCT TESTING Product Development Employee Testing Guidance Testing Expert Evaluation Test Market Market Research National Roll-out Marketing

4. WHO LEARNS FROM TEST MARKETING? • Product Development • Manufacturing • Marketing • Sales • Distribution • Purchasing • Distribution • General Management

5. WHEN NOT TO TEST MARKET (or, GO STRAIGHT TO NATIONAL DISTRIBUTION) • When the risk is low • When investment is low • When competition can rapidly copy your product

6. TYPES OF TEST MARKETS • Standard • Controlled • Simulated (Laboratory)

7. BASIC STEPS IN CONDUCTING A TEST MARKET 1. Define objectives 2. Plan strategy 3. Determine methodology 4. Select markets 5. Execute plan 6. Evaluate results

8. FACTORS IN SELECTING A MARKET • Number of cities • Size of market • Demographics • Isolation of market • Market factors

9. LEARNINGS FROM TEST MARKETS • Consumer awareness and attitudes • Purchase Measures • Reaction from competitors • Cannibilization • Next steps

10. SIMULATED TEST MARKET DATA Purchase Test Weights Estimate of Intent Scale Results Potential Trial Definitely 25% .52 13.00% Probably 30 .17 5.10 Might or might 35 .08 2.80 not Probably not 7 .02 0.14 Definietly not 3 .01 0.03 100% 21.07%

11. SIMULATED TEST MARKET MODEL Estimated trial rate 21.07% X X Total awareness (Marketing Plan) 50.0% X X % Distribution (Selling Plan) 70,0% = Net cumulative trial 7.37% X X Ongoing repeat rate 30.0% = Ongoing unit sales rate 2.21%

12. REASONS FOR TEST MARKET FAILURES • Product Reasons • Technical problems • Did not fit with concept • Not unique • Did not meet consumer needs • Marketing Reasons • Poor marketing plan • insufficient marketing dollars

13. CONSIDERATIONS FOR TECHNOLOGY • What product should be put into test market? • Where should it be produced? • What samples should be retained? • What evaluations should be performed? • Should Technology make in-store visits? • What should you do with consumer comments?

14. Key Takeaways - Test Market Considerations Module • Use test markets to confirm and learn at reduced cost • Product Development should use test markets to verify technology selected and determine product quality and stability in a real-world situation

15. ROLE-OUT • OBJECTIVES: • To be able to answer the questions as to - • When are you ready? • Where will you roll out? • How are you going to market you product?

16. WHEN ARE YOU READY • Test market results for consumer reactions are positive and sy GO • Launch new products initially in carefully selected geographic regions, taking into account deomgraphic and seasonal factors – versus a national role-out • Advertising and promotional strategies are in place, taking into account competition and based on consumer response in test market • Packaging and graphics have been evaluated and are ready to go • Manufacturing process yields products meeting consumer acceptance, quality, shelf-life, regulatory and cost requirements

17. WHERE ARE YOU GOING TO MARKET? • Retail only • Food Service only (HRI- hotels, restaurants, and institutions – schools, hospitals, government agencies including military • Retail and Food Service • Industrial Users (Igredients)

18. HOW ARE YOU GOING TO MARKET? Retail distributors control access to market • Usually, only only large regional and national manufacturers, with established product lines and reputations can get direct access to supermarket chains. • Small companies need food brokers or manufacturer’s representatives to bring buyer and seller together for new entries into market • Food Service distributors control access to HRI, except for government contracts. • Government contracts may be the best entry point into food service for small manufacturers (Small business set-asides)

19. TIMING FOR ROLL OUT FOR YOUR NEW PRODUCT? • Appropriate timing can be critical! • Seasonal factors need to be considered • Season of the year • Holidays • Competitive activity • Don’t want to roll out just after major competitor has just introduced a new product

20. KEY TAKE-AWAY • The how, when and where of a product roll-out requires consideration of a large number of factors that depend on company size and marketing strategies