StainZapper A: Testing By the end of 2020, Shimano Vacuum Corporation, a Japanese manufacturer of vacuum cleaners, had completed development of an innovative product for cleaning sofa and chair upholstery. For strategic reasons, the company had decided to introduce the product in the US. rst, because of its greater potential and lower competition relative to Japan. The product, currently in the market development stage, was to be branded in the U.S. as the StainZapper. As of March 2021, George Williams, U.S. product development manager of StainZapper, was unsure whether to introduce the product on a small scale with store displays and dealer incentives or aggressively with a national advertising campaign in addition to store displays and dealer incentives. If the latter, the issue was whether to use TV or Facebook. He also wondered what the size, media plan, and schedule for such an ad campaign should be. The Product StainZapper is a small durable appliance designed to clean upholstery. It is like a hand-held version of a heavy-duty carpet steamer. The StainZapper's cleaning head has three components. One component dispenses the cleaning solution on the upholstery, a second component contains a brush that vibrates at high speed and physically scrubs the upholstery, and a third component contains a high-speed fan that sucks up the cleaning solution and loosened debris. The appliance comes with two heads, a wide, at one that is 6\" long by 18\" wide, and a narrow one, with a concave surface that is 6\" long by 3\" wide. The wide head is for cleaning large, relatively at surfaces while the small head is for cleaning small, curved surfaces such as sofa-arms. The suction power of the appliance is not strong enough for it to be used on carpets, though a carpet model is being researched. The hand-held model is also not convenient for cleaning curtains and drapes, because the vibrating brush faces inadequate resistance, while loose edges get caught in the suction. The cleaning solution contains a mixture of an organic solvent, a disinfectant and a stain- resistant chemical. The cleaning solution is very effective at quickly removing all types of stains and dirt commonly deposited on upholstery. It works by breaking down oils and resins and then quickly evaporating, to leave behind a ne dust. It is also nontoxic, non-staining, and does not affect currently used dyes. It leaves the upholstery clean, bright, dry, and with a protective chemical lm that resists future staining. It kills most disease-causing organisms that are common in the US. Patents are pending on the cleaning formula and the appliance in the US. Cleaning has to be done by moving the head in the direction of its length along the major weave of the upholstery, at a rate no faster than 10 seconds a foot. Thus, a 96\" sofa would need about 7 minutes for cleaning its front surfaces, and 15 minutes for a complete cleaning. A second treatment, if administered, provides even higher cleaning without damage to the fabric. Consumer Behavior Research indicates that consumers in the U.S. face three common problems from the use of upholstery. The most common problem is the slow buildup of a very resistant stain from the mixture of sweat, body oils, and dust. The stain occurs on sofa arms, headrests, and seats. Consumers begin to notice the stain only prior to major entertaining events, by which time it is difcult to remove easily. The next most common problem is staining from food. A third problem includes deposits of excreta from children and pets. The latter two stains are generally noticed and treated promptly. Because of increasing two-income families and increasing attention to leisure and entertainment, consumers in the US. have had less time for housekeeping. Their greatest need is for a quick, convenient, effective, and low cost method of cleaning sofa and chair upholstery. Most current methods involve spraying a cleaning solution from a can, waiting for it to dry, and vacuuming the upholstery. The method is slow and inconvenient. It works fairly well with the second and third problems listed above, but it is not very effective with the rst problem. Professional cleaning is expensive and has to be scheduled. Most consumers would be very receptive to an appliance that can do this job effectively, provided it costs less than $200 and uses chemicals that cost less than $8 per can. The major problem with StainZapper, however, is one of credibility. Consumers do not believe a solution can be effective, disinfecting, and protective, while also safe and non-staining. A second problem is that of time. Consumers nd moving the appliance slowly over the upholstery quite boring. They would have to experience or visually see the benets to be persuaded to adopt the procedure. Cost Structure Current plans call for the appliance to retail for $199.99, and a bottle of solution to retail for $7.99. It will sufce for three cleanings of a 96\" sofa. Shimano Vacuum currently offers distributors a 10% margin on sales. However, it plans to offer them a 16% margin for the StainZapper, to encourage product stocking and promotion. It estimates its own costs per unit for the product as follows: Direct material & labor $90 Sales commission $10 Allocation for past R&D $20 Allocation for overhead $10 Allocation for advertising $20 Available for prot $10 Test Marketing Aer intense debate, the marketing research department test marketed the appliance during November 2020-January 2021 in three cities: Cincinnati, Denver, and St. Louis. Sales of such products typically peaked during this time. Indeed, as much as half of annual sales occurred in the ve weeks between Thanksgiving and New Year. Debate raged about the value of test marketing, the comparability of the cities, and especially the timing of the test. Table 1 presents key demographics of the cities. One national appliance chain that had stores in all three cities agreed to carry the product on a test basis for the three months. The marketing conditions, including press releases, in-store displays, and dealer incentives were identical in the three cities. The only change was that Cincinnati and Denver had TV advertising, while St. Louis did not. In each of the former two cities, 30-second ads were scheduled during weekday evening programs for about $6,500 per ad. The ad schedule consisted of three ads per week for the rst two weeks in December 2020 and two ads in the third week. A survey following all four ads indicated that recall of the ad was 14% in Denver versus 2% in St. Louis. Among those who could recall the ad, 75% in Denver said they saw the ad on TV, while 20% of those in St. Louis made the same claim. Table 2 shows the sales pattern in these three cities over three months surrounding the test. Williams tried to analyze the test results to determine if advertising was effective and protable for the launch of the StainZapper. Williams wondered if he should have tested a Facebook video ad campaign instead of a TV ad campaign. For example, about 70% of Cincinnati's population were Facebook users. A saturation campaign targeted to the city would require about 500,000 impressions. For consumer durables, Facebook click through rates were 1% and conversion rates were 2%. Cost per thousand impressions was about $13. Questions (A) Testing 1. What are the pros and cons of the StainZapper? 2. How would you label William's study? Draw out its design. 3. Evaluate the design. How could you improve upon it? 4. Was advertising effective in increasing sales of the StainZapper? Why? Compute gures? 5. Did the advertising have any carryover effects? Why? 6. Was the advertising protable? Why? Compute gures? 7. Would a Facebook ad campaign have been more cost effective that a TV one? Why? What would such a test reveal? 8. Should StainZapper be launched with TV or F aeebook advertising? 'Why? How? Table 1 Comparative Statistics of Test Cities Denver Cincinnati St. Louis U.S. Total Population (million) .7 .3 .3 328 Per capita income ($) 43,770 30,531 30,542 34,103 College educated (%) 49 37 36 32 Source: www.census.gov; wikipedia.com; U.S. Department of Commerce: Bureau of Economic Analysis July 1, 2019 Table 2 Test Market Sales of StainZapper Period City Month Week Denver Cincinnati St. Louis Total Nov. 2020 1 35 25 20 30 2 40 70 50 160 3 70 120 100 290 4 100 140 110 350 Dec. 2020 1 165 120 105 390 2 245 180 130 555 3 240 200 100 540 4 335 310 155 800 Jan. 2021 230 200 90 520 2 140 160 70 370 3 200 140 45 385 4 60 40 30 130\fa) Then compute the effect of advertising. (Hints: Merge data into two periods, one before and one after start of advertising. Use sum, not average per period. Create a new average city from those with advertising. Then do Diff in Diff)