Test Marketing
Test marketing is the final stage before commercialization, and is where all the elements of the marketing plan are tested.
LEARNING OBJECTIVES
Discuss the requirements that must be satisfied to conduct successful test marketing of new products and distinguish test marketing from initial product testing
KEY TAKEAWAYS
Key Points
- Initial product testing and test marketing are very different. The former involves providing consumers with the test product, and giving them an incentive to participate. The latter involves all the elements of the marketing plan, in a real-world setting meant to simulate the broader market.
- There are risks in test marketing, such as high initial marketing costs, the potential to lose customer goodwill before the official launch, and giving competitors the opportunity to quickly copy the product.
- Variables in the test marketing process include the selection and number of test cities, as well as the ideal sample size to use.
Key Terms
- test marketing: The stage where all the variables in the marketing plan, as well as the product characteristics, are tested in a real-world setting.
Test Marketing
This is the final step before commercialization. The objective of the this marketing phase is to test all the variables in the marketing plan, including different elements and characteristics of the product. This stage represents the launching of the total marketing program, albeit on a limited basis.
Three questions can be answered through test marketing:
- Is the overall workability of the marketing plan realized as planned?
- Do alternative allocations of the budget need to be evaluated?
- Can we determine whether users are being inspired to switch from their previous brands to the new one, and whether repeat purchases are taking place?
In the end, the test market should include an estimate of sales, market share, and financial performance over the life of the product.
Initial product testing versus test marketing
Initial product testing and test marketing are not the same. Product testing is totally initiated by the producer: he or she selects the sample of people, provides the consumer with the test product, and offers the consumer some sort of incentive to participate.
Test marketing, on the other hand, 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.
Risks
Test marketing is not without inherent risks. First, there are substantial costs in buying the necessary productive capacity needed to manufacture the product or locating manufacturers willing to make limited runs. There are also promotional costs, particularly advertising and personal selling. Although not always easy to identify, there are indirect costs as well. For example, the money used to test market could be used for other activities. The risk of losing consumer goodwill through the testing of an inferior product is also very real. Finally, engaging in a test-market might allow competitors to become aware of the new product and quickly copy it.
Test Marketing: Aggressive promotion in a limited geographical area is often a key element of the test marketing phase.
Because of the special expertise needed to conduct test markets and the associated expenses, most manufacturers employ independent marketing research agencies with highly-trained project directors, statisticians, psychologists, and field supervisors. Such a firm would assist the product manager in making the remaining test market decisions.
Variables
- Selection of test market cities: these cities should reflect the norms for the new product in such areas as advertising, competition, distribution system, and product usage.
- Number of test cities: should be based on the number of variations considered (i.e. vary price, package, or promotion), representativeness, and cost.
- Sample size determination: the number of stores used should be adequate to represent the total market.
Even after all the test results are in, adjustments in the product are still made. Additional testing may be required, or the product may be deleted if it does not perform well during this stage, or if it becomes apparent that the product is not likely to become a commercial success.