The methodology of a Simulated Test Market can typically be broken down into five steps. First, respondents are selected to provide a sample of consumers who satisfy predetermined demographic characteristics. Next, consumers are shown commercials or print ads for the test product as well as ads for competitor’s products. Then, consumers are given the opportunity to purchase, or not purchase, the test product either in a real or simulated store environment. After they’ve had the opportunity to use the product, consumers are re-contacted in effort to determine the likelihood of repurchase, as well as other information relative to the use of the product. Finally, this information is processed through a computer and various other programs that assess the data; in order to, generate outputs such as estimated sales volume and market share.
There are many advantages to Simulated Test Markets. They are relatively fast and typically take only eighteen to twenty-four weeks, as opposed to the twelve to eighteen months standard test markets usually take to set up. Additionally, Simulated Test Markets are exceptionally confidential and competitors are less likely to know about the test and more importantly the data collected. Another advantage is that they tend to be extremely cost efficient by producing helpful information at a very low cost, typically 5-10% that of the cost of standard test markets. However, there are a couple of large scale disadvantages. The first of which is that Simulated Test Markets are not accurate depiction of the full scale market, and therefore cannot be interpreted to the market as a whole. The next, is that it may not be practical or possible to have all the products in a particular category available at one time. This proved to be true in our very own simulated test market.
The Simulated Test Market process we used in class consisted of five college students each age 18-25. Each student was given $10 to spend, and...
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