Meaning Test Marketing
Test marketing refers to a tool used by companies for checking the feasibility of new products or marketing campaigns prior to launching them on a wider scale. It is simply a process of testing a product in small part of target market for gauging its viability. Test marketing is also termed as ‘field testing’ where an experiment is performed in a field for capturing the responses of people. The test marketing enables business in understanding the market and market considerations such as needs of consumers, nature of demand, nature of competition etc.
Marketers are able to determine the success ratio of new products as well as marketing campaigns via test marketing. It informs them about probable market success with regard to new product’s performance, the level of product acceptance, customer satisfaction and efficiency of marketing campaign. They are able to design the marketing mix (viz. product, price, promotion, place) in an efficient way before its launch by acquiring all required information related to market. Test marketing is conducted in a field without informing customers of their participation in assessment exercise.
Considerations of Test marketing
The following considerations are essential for carrying out the test marketing: –
- Various utilities of product are identified.
- Market is classified from geographical viewpoint with regard to major uses of product.
- One or two cross-sectional markets are chosen as samples which represent features and conditions of whole market
- Customers need to be classified for the cross-sectional market areas into white collar population vs working class, rural vs urban, age wise analysis etc.
- For distinguishing the market characteristics, customers need to be identified and grouped into consumer market, reseller market, industrial market, government market etc.
- Information is gathered related to product and its features comprising of price from distinct cross sections of customers on whom test are made. It enables in carrying out the depth analysis for developing a good understanding of buyer behaviour and interest.
Procedure of Test marketing
The way of carrying out test marketing of consumer goods and industrial goods vary from one another. They are discussed in detailed as given below:
Test marketing- Consumer goods
Consumer goods marketing test is conducted for determining the consumer behaviour in following terms: –
- Trial: Customer will try the product at least once or not.
- Repeat: Customer will be repurchasing the product after trial or not.
- Adoption: Whether the product will be accepted and purchased again by customer.
- Purchase frequency: How often the customer is going to buy the product.
In order to ascertain all these variables, the following tests are performed.
- Sales-Wave research: It is a test in which product is offered free of cost again and again to customer. This is done for ascertaining his willingness of using the product every time it is offered.
- Simulated Test Marketing: Simulated test marketing is one in which few customers (30-40 peoples) are given invitation for buying anything from a store. Preference of customers is ascertained by placing new products along with competitor’s product and checking which products are they choosing.
If customers do not select the newer products, then in such cases free samples are given to them. Customers are now inquired about product experience after some weeks by making them telephonic call.
- Controlled Test Marketing: It is one in which various stores in distinct geographic areas are chosen by company for displaying their products. Company pays fees to stores for placing the products in their shelf. Positioning of products in shelf, their displays, pricing and point of purchase promotion is all controlled by company itself.
- Test Markets: Here, the representative cities are selected by company for doing a full-fledged launch of their products starting from market campaigns to ultimate sales. The firm ultimately goes for national launch of its products once it is successful in city level product launches.
Test Marketing- Industrial goods
Market testing is of two types under this which are: –
- Alpha Testing (internally within the company)
- Beta Testing (with outside customers)
Alpha Testing- This testing is conducted by employees or test engineers within the firm for evaluating the new product market mix and rectifying the issues involved in any launching step.
Beta Testing- Beta testing involves asking customers to use the product and give their feedback on its usage. Business in other way for testing their product can introduce them in trade shows and consider the customer’s reactions to it. In addition to this, goods can be tested by displaying them on distributors and dealer’s showroom and checking how customers are reacting to them.
Drawbacks of Test Marketing
Various drawbacks of test marketing are as discussed in points below: –
- Expensive: Major limitation of test marketing concept is that it can prove expensive for business organizations. In order to test the product concepts or ideas initially, focus groups are used by companies. Such focus groups can cost thousand of dollars to them. Beta version of products are also created by companies subsequent to this for testing them under the normal market conditions. Shipping of products to distributors, advertising them and handling defective merchandise are included in these conditions. There are even full-time employees working in small companies which may raise their cost. Also, if product get failed then large merchandise is left over.
- Time consuming: It is a time-consuming process. Small manufacturers put much at stake and therefore take their time with test marketing. Test may be run for either 6 months, one year or even 2 years. For ascertaining the possible seasonal trends, sales and profit pattern are analyzed by them. Another major factor contributing to duration of test market is the time taken by customer in knowing about the availability of product.
- Inconclusive results: It is not always possible to predict success by small companies through test marketing. Products getting better response in local markets may not get such response in other geographical areas. People may be local customers of specific brands in other parts of country. In order to build a brand awareness on national level, a lot of time as well as advertising is required. This way results of test marketing are not always projectable.
- Competitive awareness: There is another risk to companies in which competitors may learn about their products. Few competitors may even purchase and analyze the products in their own lab. A detailed information regarding marketing and advertising strategies of company can be acquired by them through test marketing. Competitors may even develop their own products due to the lengthy duration of test finally rolling out the products at regional or national basis more quickly.