MKTG Role Play 3

Test market results confirm that price is a key influence on purchase. However, there's a fascinating twist. Data analysis reveals that women—the most frequent buyers of hair care products in the test market and overall—are far less price-sensitive than men. Until now, you've always used behavioral segmentation in marketing the conditioner, targeting all consumers who seek the product attribute of frizz-taming properties and the benefit of smooth hair. You could continue this approach, cutting price substantially so as to better satisfy everyone. But the test market data raise another possibility—you might avoid the need for a price cut by adopting demographic (gender-based) segmentation. While targeting women over men would require modifications in promotion and packaging, these changes would have only a short-term impact on profitability. Of course, there are risks associated with any strategic shift; for example, you don't know if increased purchases by women will make up for lost purchases by men.

Demographic segmentation

You've had a good run as manager for a leading brand of leave-in conditioner. The product performs better than competition in taming frizzy hair, and has long commanded a premium price based on an attribute-based positioning. But now you're nervous. There's been a gradual but steady decline in sales over the past three quarters. Denise, a new member on the marketing research team, has presented you with information that suggests two possible causes. - First, beauty magazines and salon publications wrote repeatedly last year about a shift to free-flowing, natural styles. These styles work best with products that don't leave residue on hair. You know that secondary data isn't always ideal, but these stories were consistent and voluminous. - Second, recent focus groups run by Denise complained that your price is too high. Like all focus groups, these included only a small number of people, but the participants were loyal customers. Neither source is perfect, and the information you have is far from conclusive. But there's nothing else to go on for now. Top management is under pressure from investors and anxious to take action, but wants to make sure the company is set up for long-term success. You can't effectively address both issues at once, so you must decide which one is more likely to be causing the sales decrease.

Price

It seems more prudent to take your cue from the only primary data available—comments by recent focus groups—so you've decided to prioritize the issue of price. But slashing price would mean a big hit to your bottom line. Before taking this step, you need more information to confirm whether or not the exploratory research was correct. The relentless pressure to hold down costs and act quickly leads you to consider a relatively inexpensive and fast telephone survey. You could develop a list of simple questions asking respondents about the role of price in their purchase decisions. But no survey will tell you how or if a lower price would affect your product's sales in a real-life environment. It may be worth spending more to do a test market, introducing a discounted product in a specific geographic area and then observing its degree of success. You'd feel more confident moving forward based on real-world results that reflect factors beyond price. However, you recognize that test markets cost much more and take much longer than surveys.

Test market