What Is a Simulated Test Market?

A simulated test market is a market-testing technique that exposes customers to a staged advertising and purchase situations to observe their response to a new product. Output produced by the test include early forecast of sales and market share based on input of particular measurements from the simulation, management assumption and mathematical forecasting models.

In a simulated test market, respondents become aware of a new product after being exposed to advertising, typically a concept board. They then indicate their interest in purchasing the product. They are assigned to a certain "awareness track" before viewing the product at the shelf.

Simulated test marketing takes into account the changing influences on consumer purchasing decisions. It allows a consumer to become aware of a new product as he would in the real world. This provides marketers with an accurate purchasing rate for sales forecasting.

Simulated test marketing primarily serves as a forecasting tool. Additionally, it enables marketers to experiment on different inputs, from tactical elements such as budget allocation across different digital media to strategic elements such as target and positioning. It allows them to test a few alternative plans and choose the best one according to projected volume or sales. With the use of this market-testing method, companies are able to improve and revise their marketing plans and select the optimal plan that will most likely attain performance objects in the real world.