Reference no: EM131802963

Texas Red is the oldest soft-drink company in Texas. During the 1980s, the company went through bankruptcy because of its inability to compete with the big national soft-drink brands.

In 2003, a group of investors purchased the brand name from the bankruptcy court and reincarnated it with distribution primarily through specialty grocery stores and selected theme restaurants. The company is currently available in 267 grocery stores and 123 restaurants across Texas. The "new" Texas Red has experienced solid growth and financial performance over its almost 8-year history.

However, the competitive environment remains tough with the big national brands at one end of the spectrum and other specialty soft-drink producers at the other end. It is critical that Texas Red spend its limited marketing budget in the most efficient manner to drive business to its retail and restaurant locations.

In recent months, the management team at Texas Red has been divided in regard to the best marketing strategy for the company. One contingent wants to pursue a strategy based on a low price relative to other specialty soft drinks.

The other group wants to focus on enhancing awareness and image of the brand with a focus on its long history in the state of Texas and the unique aspects and high quality of its products. The difference of opinion between the two factions has become heated and somewhat divisive.

Furthermore, time is running out to get their marketing strategy in place for the coming year. Toby Newbern, director of marketing, knows that it is important to make the right decision and to break the deadlock quickly so that the company can move on with its plans and business development activities. He wants to design a test that will settle the issue once and for all in a scientific manner.

Texas Star has always focused on an upscale demographic target. Toby's research plan calls for testing the price-oriented campaign in one market and the image-oriented campaign in another.

The impact on sales in the respective markets will indicate the effectiveness of the two approaches. He faces a number of decisions. First, he needs to choose the markets for the test. Second, there is the question of how long to run the test. Finally, it is necessary to sort out what happens in the two test markets from the general trend for Texas Red.

Question

1. Is the test market approach the best way to tackle this problem, all things considered? Are there other viable options and, if so, what are the options?

2. Which of the experimental designs discussed in the chapter would be most feasible for this project? Why that design?

3. How many markets should be used for the test? What should be the characteristics of these markets?

4. What sort of evidence, from the test, would definitively break the deadlock between the two groups with different visions as the company?