ABSTRACT
This study examines the effect of test marketing on new product development (a study of 7up bottling company plc). The work further investigate the effect of test marketing on new product acceptance, performance and measurement. Date were collected from both primary sources and secondary sources using personal interview and questionnaire survey these date were analyzed using description statistics, simple regression and correlation analysis. Base on the result of the analysis, regression result of the effect of test marketing on new product quality has the computed f – value as 16.101 while the table value on new product acceptance has computed is 228. Regression result of the effect of test marketing on new product acceptance has computed f – value as 68.762 while table value is 228. Regression result of the effect of test marketing on substitute has the computed f - value as 54.262 while table value is 228. As a recommendation, companies should encourage test marketing acceptance and performance and lunching of new product and marketing campaign
TABLE OF CONTENTS
Title
Page i
Declaration ii
Certification iii
Acknowledgement iv
Table
of Content v
List
of table vi
Abstract
vii
CHAPTER ONE
1.0 Introduction 1
1.1 Background of Study 1
1.2
Statement of Problem 4
1.3
Objective of the Study 5
1.5
Research Questions 6
1.6 Research Hypotheses 6
1.7
Significance of the Study 6
1.8
Scope of the Study 7
1.9
Limitations of the Study 8
CHAPTER TWO
2.0 Literatures Review 9
2.1
Conceptual Framework 9
2.2 Review
of Related Literatures 10
2.2
(1) Meaning of Test Marketing 10
2.2
(2) Measuring of New Product Quality with Test Marketing 11
2.2
(3) Criteria for New Product Acceptance 12
2.2
(4) Performance Criteria for New Product 14
2.2
(5) Test Marketing as a Tool Measuring for New Product Performance 15
2.2(6) Application of Test Marketing in 7up Bottling
Company 16
2.2(7) Different Types of Test Marketing in New
Product Development 17
2.2(8) Problems Associated with test Marketing 22
2.2(9) History of 7up Bottling Company 22
CHAPTER THREE
3.0 Research
Methodology 24
3.1 Research
Design 24
3.2
Area of the study 25
3.3 Sources of Data and method of data collection 25
3.4
Population of the Study 25
3.5 Sampling
Technique and Sample Size 25
3.6
Validity of the study 27
3.7 Reliability of the study 28
3.8
Method of Data Analysis 28
3.9
Model specification 28
CHAPTER FOUR
4.0 Data Presentation, Analysis and
Interpretation 30
4.1 Data
Presentation and Analysis 30
4.2 Hypotheses
Testing 34
4.2.1 Research Hypothesis One 34
4.2.2 Test
of Hypothesis Two 36
4.2.3 Test of Hypothesis Three 38
4.4 Discussion of Findings 40
CHAPTER FIVE
5.0 Summary of findings, conclusion and
recommendations 41
5.1 Summary of Findings 41
5.2 Conclusions 41
5.3 Recommendations 42
REFERENCE
APPENDIX
LIST OF TABLE
Table 4.1: Distribution of questionnaires 30
Table 4.2: Distribution of respondents by sex 31
Table 4.3: Distribution of respondents by status in the
corporation 32
Table 4.4: Distribution of respondents based on year in
service 32
Table 4.5: Distribution of respondents by educational level 33
Table 4.6: Regression
results of the effect of Test marketing on new product quality 35
Table 4.7: Regression
results of the effect of Test marketing on new product
acceptance 37
Table 4.8: Regression results of the effect of Test marketing on new product performance 39
CHAPTER ONE
INTRODUCTION
1.1 Background of Study
Test marketing
is a tool used by companies when they are launching a new product or marketing
campaign to provide the company insight into the probable market success of the
new product or effectiveness of the marketing campaign. Test marketing can be
used by a business to evaluate factors such as the performance of the product,
customer satisfaction or acceptance of the product, the required level of
material support for the full launch and distribution requirements for a full
launch Shawn Grimsley, (2003). Test marketing is distinguished by the fact that
the test cities represent the national market. The consumer must make the
decision herself, must pay his or her own money, and the test product must
compete with the existing products in the actual marketing
environment. For these and other
reasons, a market test is meant to serve as an accurate simulation of the
national market and serves as a method for reducing risk. It should enhance the
new product's probability of
success and allow for final adjustment in the marketing mix
before the product is introduced on a large scale. Boundless Marketing. Boundless, (2014).
Concept
testing involves the process of using quantitative method, qualitative methods
to evaluate consumer to product idea prior to the introduction of the new
product to the market Moore, William L (1982). Once the product has been
developed, it is put to test; test marketing is one of the important stages in
product development process. It lets marketers know about the performance and
the future of the product in the market under this; the product is actually
introduced in the market, the 4ps – product, price, place and promotion of
marketing are put to test the cost incurred in the test marketing which may
vary with the type of the product is analyzed. Test marketing is like someone
trying to test the water before jumping into the river Meeta Pradhan (2013).
Test marketing is a technique used during product development to determine how
people respond to a product Mary Mc Mahon (2003).
Today’s
business environment is rapidly changing, therefore to survive and stay
competitive; a company would definitely benefit by knowing that product
innovation is one of the key concepts for surviving and staying competitive
Gagne and Discenza (1995) Over the past two decades, several studies have shown
that product development has become an increasingly important medium in
developing and sustaining a strong position in an increasingly competitive
business arena. Duysters,van Weele et al,
(2008). Axarloglou (2004) added to this statement by saying in his research
that product innovation and new products also intensify the market competition.
Intense competition in many industries forces firms to develop more products in
less time. Lin, Chai,et al (2006) Cross and Sivaloganathan (2007)
however posited that new product development is a very complex process that
requires industry-specific knowledge to produce commercially feasible
solutions. This specialist knowledge is what enables marketers to develop
competitive advantage in their marketplace. Duysters, et al.(2008) continued by stating that because of the increased
importance of specialist knowledge, the demands on product development
performance, in terms of speed, accuracy, and cost have become higher. De Toni
and Nassimbeni (2003) further suggested that effective new product development
has become the central point of competitiveness in many industries,
particularly those where product life has shortened, competition increased on a
global basis, and customer demand for greater product variety has grown. Chen, et al. (2007) stated another important
issue, the selection of the right set of new product development.
This
is critical to a company’s long-term success, a company must respond quickly to
dynamic customer needs, increased complexity of product design and rapidly changing
technologies. According to Lin, et al.
(2006) product development undergoes new trends such as scattered product
development, cross functional team, and simultaneous product development
because of fragmented and demanding markets, increasing technical intensity,
and short product life cycles. These new trends have increased the complexity
and uncertainty of product development Lin, et al., (2006). New product
introductions are of course common in most markets Hitsch, (2006). However,
because of the complex NPD process many of these new products fail, and the
high failure rate of new product development projects suggested that NPD is a
challenging pursuit Shahrul-Yazid and Nooh, (2007). In business new product development is the complete process of bringing a new
product to market. New product development is described in the literature as
the transformation of a market opportunity into a product available for sale
Krishnan.v.ulrich,et al (2001) and it can be tangible (that is,
something physical you can touch) or intangible (like a service, experience, or
belief). A good understanding of customer needs and wants, the competitive
environment and the nature of the market represent the top required factors for
the success of a new product Kenneth B.kahn (2013).
1.2 Statement of Problem
According
to Fader, Hardie,et al (2004) there
has always been an interest shared by academicians and practitioners in the
matter of forecasting new product sales. However estimations are not
straightforward, according to Shahrul-Yazid and Nooh (2007) the common traits
of business analysis issues (e.g. sales projections) are their high
uncertainty, high ambiguity and their risky characteristics. As earlier stated,
new product introductions are common and an essential part for many businesses.
Many of these new products fail, and soon exit from the market after been
launch. These product failures are costly, as the development costs and
marketing costs during the launch period can no longer be recovered. (Hitsch,
2006) A possible explanation for these problem could be related to what has been
stated earlier by Cross and Sivaloganathan (2007), De Toni and Nassimbeni
(2003) and Lin, et al. (2006) who all argued that (NPD) is a very complex
process and that firms are often uncertain about the demand and profitability
of their new products, and therefore they launch products that could fail. Base
on the above, the problem of this study is to ascertain how test marketing can
be used to measure quality, acceptance and performance within a marketing
environment.
1.3 Objective of the
Study
The
general objective of this study is to examine the effect of test marketing on
new product performance.
The
Specific Objectives are; to:
i.
Examine how test
marketing can be used to measure new product quality
ii.
Examine how test
marketing can be used to measure new product acceptance.
iii.
Examine the effect of test
marketing on new product substitute.
1.5 Research Questions.
i.
How does test marketing
help to measure new product quality?
ii.
How does test marketing
help to measure new product acceptance?
iii.
How does test marketing
help to measure new product substitute?
1.6 Research Hypotheses.
The
following hypotheses are to be tested in the course of this work
Ho1: Test marketing can not be significantly
used to measure new product quality
Ho2: Test marketing cannot be significantly
use to measure new product acceptance
Ho3: There is no
significant relationship between test marketing and new product substitute.
1.7 Significance of the Study
This
study will be of great significance. To organization in order to minimize the
opportunity cost involved in the failure of mass lunch of a new product. The
result of test marketing exercise can provide information regarding “go or
no-go”
Market
decisions. Imagine when a no-go market product is lunched to the mass market
without test and if it falls, its cost to business will be huge. It will
provide marketers in 7up bottling company guide to make decision with regards
to market demand, customer taste, and actual price for the new products. Some
organizations disregard test marketing as an important exercise before lunching
a new product, this study provides useful insight for such organization to
consider test marketing as an effective way of gaining competitive advantage
and increasing sales volume.
Some
organizations operate without thinking of a way to advance their existing
products or modify their offers; this study will help organization improve
their innovative mind.
1.8 Scope of the Study
This
study centre on the effect of test marketing on new product development which
was carried out in Umuahia using 7up bottling company as a case study
1.9 Limitations of the
Study
This
study has some limitation identified in the research. However, the researcher believes that there
are other factors which could still serve as barriers in the study which were
not included in this research. The following limitation pave ways for further
studies;
i.
Time
Constraint: The researcher would have like to research
more on this study but has faced the challenging drawback of time in the course
of the study.
ii.
Material
Constraint: The researcher willingness to make
broader researcher on this study were limited has a result of material
constraint.
iii.
Financial
Constraint:
The researcher financial
capability limited further research on this study.
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