TEST MARKETING

DEFINITION

An experimental procedure that provides an opportunity to test a new product or a new marketing plan under realistic market conditions to measure sales or profit potential.

FUNCTIONS OF TEST MARKETING

ESTIMATE OUTCOMES

IDENTIFY & CORRECT

WEAKENESSES IN PLANS

FACTORS AFFECTING DECISIONS REGARDING TEST MARKETING

• Investment & Research Cost: High investment-High risk products, where the chance of failure is high, must be market tested.

• Risk involved: Those products that create new-product categories (first instant breakfast drink) require market testing.

• Time pressure: Seasonal time pressure or because competitors are ready to launch their brand, may reduce test marketing.

STRATEGIES OF TEST MARKETING1. Sales-Wave Research: In this consumers who initially try

the product are reoffered the product (3 to 5 times) or a competitor’s product at a reduced price. The company notes how many customers selected that product again and their level of satisfaction.

Advantages Can be implemented quickly Conducted with fair amount of security Carried out with final packaging & advertisingDisadvantages× Does not indicate the trial rates achieved as consumers

are preselected× It does not indicate brand’s power to gain distribution &

favorable shelf position

2. Simulated Test Marketing: It first identifies 30 to 40 qualified shoppers & they are questioned about brand familiarity & preferences in a specific product category. These people are then invited to a brief screening of both well known and new commercials or print ads. One ad advertises the new product but it is not singled out. Consumers are then invited to a store where they may buy any items. Company measures how many consumers buy the new product; those who don’t buy are given a free sample and later interviewed to determine their level of satisfaction.

Advantages Provides a measure of the ad’s relative effectiveness

against competing ads in a simulating trial. It gives fairly accurate results on advertising effectiveness

and trial rates in much shorter time and at a fraction of cost of real markets.

3. Controlled Test Marketing: in this, a research firm manages a panel of stores that will carry new products for a fee. The company specifies the number of stores and the geographic location. The research firm controls shelf position; number of facings, displays, and point-of-purchase promotions; and pricing. A sample of consumers can be interviewed later.

Advantages Reduced costs Shorter Time period needed for measuring results Increased secrecy from competitors No distraction of company's sales force from regular

product lines.Disadvantages× Does not provide information on how to sell the trade on

carrying the new product.× Can expose the product & its features to competitors’

scrutiny.

4. Test Markets: putting the product in a full blown test markets. The company chooses a few representative cities, and the sales force tries to sell the trade on carrying the product and giving it good shelf exposure. The company puts on a full advertising & promotion campaign. It can vary marketing plans & techniques in several cities.

DECISIONS TO BE TAKEN

• How many test cities?• Which cities?• Length of test?• What information?• What action to take?

DISADVANTAGES OF TEST MARKETING

• A test market may not be a representative of the national market.

• Test marketing gives competitors advance warnings and the time to react.

• Although the main objective is to reduce the amount of investment put at risk, it may still involve significant costs.

EXAMPLES• Google+ is a recent example of test marketing in the technology

space. Google is listening closely to what consumers are saying and incorporating those changes into the platform, touted as an answer to Facebook.

• Marico rolled back Saffola Rice and Hair & Care, modified it post the test market feedback and launched it again.

• When Ford launched its Ford Fiesta sedan in India, it conducted a consumer immersion program before the launch to understand its TG in the Delhi market. The program involving the senior Ford management, agency partners saw teams meeting families across Delhi to understand their lifestyles, family structure, buying behavior etc. All this information was then relayed back into customizing the marketing and communication strategy for the new car.

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