What is Test Marketing?
The best way for testing a new product is to introduce it in a full-blown test market. Test Marketing is a form of marketing the company supplies free samples to the target market. These samples are offered for sale in a limited number of stores. This will estimate the market response to the product. Also, it will serve as a guide for the complete launch.
- It is used to obtain insight into how successful the product is going to be on a large scale, by tracking its performance on a small scale.
- This assists the firm in improving its product design, identifying the target audience and fixing the price.
- Also, it informs the company about what the customers are expecting from them.
- Moreover, it helps the firms to learn about the competition and how the firm can have an edge over them.
Generally, companies use this strategy on a regional level, i.e. they supply the products to a limited geographical area. One must note that the amount of test marketing needed varies with each new product.
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Simply put, test marketing is an experiment which the firms carry out, in a selected target market, to check the response of the consumers to their new product and marketing strategy. This helps the firm refine the product as per the consumer’s demand.
Not just this, but test marketing also facilitates identifying the strengths and limitations of the product on the basis of the consumer’s response to the product. For this, the company picks a few cities and carries out marketing there. Further, the sales force attempts to sell the product, by giving it shelf-exposure.
- Getting the right estimates of sales forecasts and market share of the new product.
- Evaluation of the elements of the marketing mix such as advertisement response, sales promotion efforts, distributor support etc. with the help of test marketing.
- Evaluate the complete marketing strategy.
- It is like a pilot run which helps in streamlining manufacturing, selling and delivering the product to consumers.
Need of Test Marketing
Introducing a new product in the market can be very challenging, the degree of acceptance of the product, customer satisfaction, marketing strategy, etc requires testing. It is the second last step in the development of a new product. Also, it is the final chance to protect against introducing a wrong product.
Though it is an expensive way, as the firm invests a lot of time, money and resources in it.
- Allows pretesting of various marketing strategies.
- Firms obtain valuable clues about different segments of the new product.
- Alongside identifying the sales potential, it outlines the sources of new sales.
- Highlights all the defects, issues and faults in the product in a timely manner to take care of them.
- Converts the ideas of marketing planners into reality.
- Firms use test marketing to understand the response of consumers and dealers on the handling, use and repurchase of the product. Its results help in forecasting sales and profits.
- A time-consuming process, which ultimately postpones the launch.
- Expensive as the company needs to invest money in this process. Also, it may not provide any information.
- Competitors may attempt to disrupt the results.
- Competitors may use it in order to strengthen their product and position in the market. They observe the product being tested and any new surprise advantage will be lost.
- The novelty factor of the new product wears off.
Decisions Regarding Test Marketing
- Where should the test marketing is conducted?: The market chosen for performing test marketing should be representative of the target market.
- In how many markets should the test market is carried out?: The activity must be performed in two to six markets.
- What must be the duration of test marketing?: Depending on the nature of the product, the duration of its performance will be decided. Generally, the test is conducted for a few months to a year.
- What to test?: This activity is performed with the sole purpose of gaining insight, related to the consumer’s response to the promotion, trial rate, usage, satisfaction, frequency of purchase and so forth.
- What are the parameters which must be used for determining the success?: Trial Rate, Repurchase Rate, Purchase Frequency etc. are some of the parameters that determine success.
Test marketing is of great value for the purpose of forecasting. Further, it encompasses a limited launch of the product and gives the marketer experience of marketing the product prior to its actual introduction. Also, it facilitates the company’s test product and its whole marketing programme, i.e. advertising, positioning, distribution, pricing, branding, labelling, etc.