By using the case study illustrated below, respond to the following questions:
1. Identification of the Issues
2. External Analysis
3. Internal Analysis
4. Alternatives
5. Decisions and Implementation
6. Measuring Results
Case Study: 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 Barbara’s people were free to defend la treat. We might be able to have it both ways.”
Bob interrupted. “Bill, we could stay here all night on this. But what’s the point? The committee’s made its decision. You don’t like it, I don’t like it. But these aren’t stupid people. It’s hard arguing with the desert group’s batting average over the last five years. This may ring hollow right now, but you can’t take this personally.”
“That’s easy for you to say”, bill sighed.
“You know how this company works,” bob reminded him. “We don’t hold withdrawal of a new product against the manager if withdrawal is the right decision. Hell it happened to me ten years ago with that dumb strawberry topping. It made sense to kill that product. And I was better off at the company for it. The fact is, the committee was impressed as hell with the research you did- although to be honest, you may have overwhelmed them. A 40- page report with 30 pages of appendixes. I had trouble wadding through it all. But that doesn’t matter. You did a great job, and the people who count know that”.
“I appreciate the sentiments, but that’s not why I think this is the wrong decision. Sweet dream is a go on the merits”.
“Go home, play some golf this weekend”. Bob counseled. “Things won’t seem so bleak on Monday”.
When bill became project manager for sweet dream, he promised himself he would do a state-of-the-art research job. The plan was to compare the performance of sweet dream in two test markets exposed to different advertising and promotional strategies. The campaign in midland, Texas and Pittsfield, Massachusetts struck an overtly self-indulgent tone- “go ahead, you deserve it” and used limited price promotion to induce trial. The campaign in Marion, Indiana and Corvallis, Oregon emphasized superior quality- “taste the goodness”- and used promotion aggressively. Sunday newspapers in the two cities frequently carried 50-cents-off coupons, and sweet dream boxes included a 75-cent rebate voucher.
Bill used two computer based research services- infoscan and behaviorscan to evaluate sweet dream performance and long term potential. Infoscan tracks product purchase on a national and local basis for the packaged- goods industry. It collects point-of-sale information on all bar-coded products sold in a representative sample of supermarkets and drug stores. It generates weekly data on volume, price, market shares, the relationship between sales and promotional offers and merchandizing conditions. Bill subscribed to infoscan to monitor competitive trends in the frozen specialties segment.
Behaviorscan is used in marketing test to measure the effects of marketing strategies on product purchases. In a typical behaviorscan test, one group of consumer panelist is exposed to certain variables (i.e., print or television advertisement, coupons, free samples, in store displays), while other participating consumers serve as a control group. Company analysis use supermarket scanner data on both groups of consumers (who present identification cards to store checkout clerks), to evaluate purchasing responses to marketing campaigns. A typical behaviorscan test lasts about one year.
On Monday bill arrived at his office a few minutes late. He was surprised to find Barbara Mayer waiting for him.
“Sorry to drop in on you first thing.” She said. “But I wanted to let you know what a fantastic job you did on sweet dream test. I’m sure you were disappointed with the committee’s decision, and in a way I was too. It would have been great to work together on the rollout. But the data were pretty clear. We didn’t have a choice”.
“Well, I thought the data were clear too- but in the opposite direction”
“Come on bill, you can understand the logic of the decision. The midland and Pittsfield numbers were fine, but they were coming at the expense of la treat. There wasn’t so much cannibalization in Marion and Corvallis, but the sweet dream numbers weren’t as great either. Trial was acceptable, but repurchase was low. We might make money, but never meet the hurdle rate.
“Every so often a product just falls between two stools”.
“So well do more tests,” bill countered. “We can play with the positioning in Marion and Corvallis. Or we can start from scratch somewhere else. I can have us wired to go in three weeks.”
“We’ve already taken eighteen months on sweet dreams’. Barbara said. “The committee felt it was time to try new concepts. I don’t think that’s so unreasonable.”
“You are forgetting two things”. Barbara replied. “First, with freezer space as tight as it is, the longer it takes to come up with another product, the harder the stores are going to squeeze us. Second, other people are going to find out how well sweet dream did in midland and Pittsfield. Were the only ones who get the behaviorscan numbers, but you know the competition is monitoring our tests. What do you think Weston and Williams is going to do when it sees the results? It’ll have a sweet dream clone out in a few months if we don’t launch”.
Weston and Williams (W&W) was a leading supplier of household products that was diversifying into foods, including deserts. It had a reputation as a conservative company that insisted on exhaustive prelaunch research. But the trade press recently had reported on W&W’s decision to rush pounce- a combination detergent, colorfast bleach, and fabric softener- to the market on the basis of every preliminary tests and data from a competitor’s test markets.
W&W had thus become the first national entrant in the “maxiwash” category.
“Bob made that argument Friday”. Barbra said. “But you can guess how far he got. The guys upstairs have a tough enough time taking our own computer data seriously. They don’t buy the idea that someone else is going to jump into the market based on our test. Plus that would be a huge risk. Pounce may have given Weston and Williams all the grey hair they can stand for a few years”.
“From what I can tell, Barbara, the only issue that counted was cannibalization”. Bill’s voice betraying a rekindled sense of frustration. “I understand the company wants to protect la treat. But it seems to me were protecting a product that’s getting tired”.
“What are you talking about?” Barbara objected. “Profits aren’t growing as fast as they used to but they are not dropping either. La treat is solid”.
“Come on Barbara, your people have really been promoting it in the last two quarters- shifting money out of pint and TV into coupons and rebates. Total money hasn’t changed, so profits are ok. But la treat has gotten hooked on promotion. You’ve got people accelerating future purchases and price: sensitive types jumping in whenever la treat goes on sale. Who needs that?”
“Where are you getting this stuff?” Barbara demanded. “I didn’t see it in your report”.
“I spent the weekend running some more numbers,” bill replied.
“Take a look at this”. Bill punched a few buttons on his computer keyboard and called up a series of graphs. The first documented the growing percentage of la treat sales connected with promotional offers. The second graph disaggregated la treat’s promotional-related sales by four buyer categories bill had created from behaviorscan data. “Loyalists” were long time customers who increased their purchases in response to a deal.
“Trial users” bought la treat for the first time because of the promotion and who seemed to be turning into loyal customers. “Accelerators” were longtime customers who used coupons or rebate to stock up on products they would have bought anyway. “Switch-on- deal” customers were non users who bought la treat when they were promotions but demonstrated little long-time loyalty. Bill’s graph documented that a majority of la treat’s coupon redeemers fell into the last two categories, with “loyalist” accounting for a shrinking percentage of sales.
Finally, bill called up his ultimate evidence- a graph that adjusted la treat’s sales to eliminate the effects of promotions.
“I’m amazed you spent your weekend doing this.” Barbara said, “but I am glad you did. It’ll help us think through future marketing strategies for la treat. But it doesn’t change what the committee decided. It’s time to move on”.
“I’m not so sure”. Bill replied. “I hope you don’t mind, but I think I should show these data to Bob. Maybe he can convince the committee to reconsider. After all, if la treat is weakening, it’s going to show up in your profit figures sooner or later.”
“Data don’t make decisions, bill people do. And the people on the marketing committee have been in the industry a lot longer than you. Their gut tells them things your computer cant. Besides, you and I both know that when you collect this much data, you can make it show just about anything. Go ahead and talk to bob, but im sure he would see things the same way I do.”