The case of the test market toss-up
Bill Horton sat alone in the office late Friday afternoon anxiously leafing through computer printouts, even though he could recite their contents from memory. Horton was waiting for his boss; bob Murphy, to report back the decision on a subject the marketing committee had been debating for more than fur hours. The issue whether paradise food should authorize national rollout of a new product, sweet dreams, to complement its established frozen specialty desert, La Treat. Horton was product manager for sweet dreams and Murphy was the group manager responsible for all new products in paradise’s desert line. “I’m glad you are sitting”, bob quipped uncomfortably as he entered bill’s office. “The news isn’t good. The committee decided not to go ahead.” “I don’t believe it,” bill protested. I started to worry when the meeting dragged on, but I never thought they’d say no. damn. Eighteen months down the drain.” “I know how you feel, but you have to understand where the committee was coming from. It was a real close call- as close as I can remember since I’ve had this job. But the more carefully they considered your test results, the more it looked like the returns just weren’t there.” “Not there, all they had to look at was appendix B in my report- the data from mudland and Pittsfield. Sweet dreams got a 3% share after 26 weeks. A trial rate of 15%. A purchase rate of 45%. If national performance were anywhere close to that, we’d have our launch coasts back in 14months. Who can argue with that?” “I’m on your side here, but I only have one vote,” bob said defensively. “We both knew what Barbara’s position would be- and you know how much weights she carries around here these days.” Barbara Mayer was the paradise group manager responsible for established desert products. She became a grouper in 1985, after two enormously successful years as La Treat’s first product manager. “And to be honest, it was tough to take issues with her”, bob continued. “What’s the point of introducing sweet dreams if you end up stealing shares from la treat? In fact Barbara used some of your data against us. She kept waiving around appendix C griping that 75% of the people which tried sweet dreams had bought la treat in the previous four weeks. And purchase rates were higher among la teat heavy users. You know how the fourteenth floor feels about la treat. Barbara claims that adjusting for lost la treat sale means sweet dreams doesn’t recover its up-front costs for three years.” Launched in 1983, la treat was the first “super premium” frozen desert to enter national distribution. It consisted of 3.5 ounces of vanilla ice cream dipped in penuche fudge and covered with almonds. An individual bar sold for under just $2 and package of 4 was $7. Unlike la treat, which came on a stick, sweet dream resembled an ice cream sandwich. It consisted of sweet cream ice cream between two oversized chocolate chip cookies and coated with dark Belgian chocolate. Its price was comparable to la treat’s. Under Barbara Mayer, annual sales of la treat soon reached $40 million and it began making a significant contribution to desert group profit. It accounted for almost 5% of the market despite a price about 50% higher than standard frozen food specialties. Lately, however, competition had stiffened. La treat faced tough challenges from three direct competitors as well as several parallel concepts like sweet dream at various stages of test marketing. The total frozen specialties market had grown fast enough to absorb these new entrants without reducing la treat sales, but revenues had been essentially flat through 1986 and 1987. Bill understood the importance of la treat, but he was not the type to mince words. “You and I both know things are more complicated than Barbara would have people believe”, he told bob. “There wasn’t the same cannibalization effect in Marion and Corvallis. And we never did a test in midland and Pittsfield where...
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