Methodology
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 each item was priced at 50% of the standard market price. The students were then instructed to shop for soup among the various items available, and any items they could think of that may not have been available, while sharing out-loud “why” they were making the decisions they were.
Category Analysis
When evaluating the canned soup category there are some clear and not so clear advantages. The most prevalent advantage is the products low cost. With minimal investment consumers are much more likely and willing to try new items without the fear of cost ever exceeding the amount lost in product value. Furthermore, the initial investment to enter into market production would require relatively low capital reducing overall risk. Additionally, consumers have been traditionally aware of the category, and canned soups are consistently purchased and widely used among all consumers. There are various ways consumers use and consume product’s in the canned soup category including; cooking, drinking on the go, microwave bowls, or traditional heating on the stove. With such a variety of ways of consumption the soup category offers a significant advantage in its ability to provide a market that is exceedingly responsive to product innovation and consumer trends.
Concerning obstacles to consumption or some disadvantages of the canned soup category it is believed consumers typically show strong brand loyalty. While this may serve as an extreme advantage to companies in the existing market, conversely, it poses a definite disadvantage to companies entering in to the market. The soup category has been around for a very long time, and presumably consumers have formed very strong and defined perception of brand leaders such as Campbell’s and Progressive. Which brings us to another disadvantage in the category which is that the market is traditionally been dominated by Campbell’s with somewhere around 50% of the market share. This presents a significant disadvantage considering the fact that given such a thin margin for profit on such a low ticket item, many companies will not have the available capital to sustain initial losses necessary to gain a share of the market from the industry’s leader Campbell’s.
Conclusions
During the Simulated Test Market it was evident that all participants were familiar with brand leaders Campbell’s and Progressive. On the other hand, a majority of the participants showed no distinct brand preference. Many of the participants made their choices based on individual preferences of flavor and/or consistency. The most popular flavors were Chicken n’ Noodles and Tomato with 4/5 participants buying each flavor. The next popular flavor was Clam Chowder and Cream of Mushroom with 3/5 participants buying each flavor. While there was no overwhelming preference in consistency, it was clear that weather it was chunky or not chunky played a factor into why individuals purchased a particular soup. Some participants chose soup because they were less chunky; in particular Gina and the Cream of Broccoli “soup on the go”. In contrast others, like Mara, chose brand’s that were “more chunky” such as Progressive’s Chicken and Noodles.
Additionally participants appeared to be influenced by some emotional attachments; as well as, the capability of the soup being complementary to other foods; specifically Tomato soup going well with Grilled cheese sandwiches. The conclusions formed from the simulated test market we conducted reflected some of the advantages and disadvantages of the category in and of itself; however, some conclusions offer new perspective in to how and why consumers choose the products they do. Again one of the advantages of the canned soup category is that it’s fairly inexpensive so consumers are willing to buy different products, this was evident in the STM we conducted. We saw participants purchase a variety of different types of soups for various reasons. Some of these reasons may be less noticeable to company executives than others.
One of which could be Josh’s decision to purchase Cream of Mushroom soup merely based on an emotional attachment to it as a child. Furthermore, many of the participants have been eating soup for a long time and have very distinct preferences whether its flavor, consistency, portability, product value, or complementary capability. In short, “Consumers know what they want!” The existing product market has been around for a very long time and companies have done a tremendous job in filling it with a variety of options to choose from. At the current state in it’s the product life soup companies can only hope to adopt new concepts that stimulate existing demand for currently successful items and be prepared to respond to market trends as they occur.
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