A Trial-Repurchase Case
Special thanks are extended to Reed Hainsworth, Denise Kemper, and Gary Bell for their help in preparation of this case.

Anthony Luksas, president of Dairy Research, Inc. (DRI), was looking over data he had just received from the first market test of MooSoda. In wondering how well the new product would sell, Luksas commented, "If we could just capture 2 or 3 percent of the carbonated beverage market, we could wipe out the dairy surplus we have each year."

DRI was a research group formed by the Dairy Farmers of America to increase dairy product consumption by developing new uses for dairy products, thus expanding the dairy product market. The idea for MooSoda, a carbonated milk drink, was stimulated by two factors:

1. The dairy industry had been suffering from a surplus in milk production over the past several years, due primarily to a decrease in per capita milk consumption. Recently, the dairy industry reported an excess of 10-20 billion pounds per year.
2. -There was an enormous increase in the consumption of carbonated beverages. Currently, carbonated beverages constituted 53% of the total U.S. beverage consumption, with wholesale sales totaling $15.6 billion.

In October, a test market was conducted as the next step in MooSoda's product development. Luksas' job now was to determine the optimal strategy for the introduction of MooSoda. Specific questions that Luksas needed to answer included:

1. Will MooSoda gain sufficient market share to be profitable and to reduce the milk surplus in America?

2. Will positioning MooSoda as a "nutritious carbonated beverage," be effective? (DRI had adopted the strategy of positioning MooSoda as a carbonated beverage rather than as a milk substitute in order to reduce cannibalization of other dairy products.)

3. Is the advertising copy effective in generating awareness and trial?

4. What will be the reaction of other carbonated beverage producers to MooSoda?

Test Market
DRI conducted market tests in Saint Louis. A television ad campaign was developed, featuring MooSoda as a nutritious, refreshing alternative to soda drinks. The campaign was released simultaneously with the introduction of MooSoda on the shelves of major grocery chains in each city. After three weeks, 300 people were contacted by telephone, using a random digit dialing system that generated phone numbers to call. The same sample of 300 was contacted every month for three months thereafter. Each person was asked the following:

1. Have you heard of MooSoda? (awareness)

2. Have you purchased MooSoda? (trial)

3. If you have, how many times have you purchased it? (repeat and index)

Results of the test are summarized in Table 1.

Analysis
As Luksas reviewed the results of the test market, he realized that he needed to summarize the results of the tests. He had recently attended a conference presented by Parfitt and Collins at the New York Hilton, that introduced him to their market share prediction model. Rummaging through his desk, he found his conference notes, and proceeded to analyze the data with the Parfitt and Collins model.

Using the model, Luksas hoped to predict fourth-period MooSoda share of the $5 billion retail sales carbonated beverage market, and to be able to recommend a positioning strategy for the product. He realized he needed about 3 percent of the market to make much of a dent in the mild surplus. The DRI market test did not reveal data on the cannibalization of milk products.

Periods 1 & 2: Average number of purchases per week for repeat users = 2.5
Periods 3 & 4: Average number of purchases per week for repeat users = 3
Industry average purchases per week for repeat users = 5