test marketing

Definition:
Basically, test marketing consists of launching the product on a limited scale in a representative market, thus avoiding the costs of a full-scale launch while permitting the collection of market data which may subsequently be used for predictive purposes. In practice the term 'test marketing' tends to be used loosely, and it is important to distinguish the original concept, as outlined above, from two associated techniques commonly confused with it. The first of these is often referred to as PILOT MARKETING, and fulfils the same function for the marketer as the pilot plant does for the production engineer, i.e. it tests the feasibility of the proposed course of action. In many instances companies become so involved with the development of a new product that by the time successful product tests have been completed they feel irrevocably committed. and any course of action other than full-scale marketing is unthinkable. However, companies of this type are usually aware of the critical importance of a well-designed and coordinated MARKETING PLAN, and so test its feasibility in practice prior to full-scale operations. Pilot marketing on a regional basis may also serve to give the firm valuable marketing experience while commissioning new plant to meet the anticipated demands of a national market. The other practice often confused with test marketing is the testing of mix variables, i.e. measuring the effect of changes in the test variable, all other variables being held constant, e.g. COPY TESTING. Such tests are often used to improve the marketing of existing products, and should not be confused with the true test market in which the collective impact of all variables is being tested, simultaneously. It is clear that if test market results are to be used to predict the likely outcome of a full-scale national launch, then the test market must constitute a representative SAMPLE of the national market. Despite the claims of various media owners it is equally clear that no such perfect microcosm exists and that test marketing is of dubious value if undertaken for predictive purposes alone. In addition to the dangers inherent in scaling up atypical test market results to derive national sales forecasts, many marketers feel that test marketing increases the risks of aggressive competitive reaction in an attempt to nip the new product in the bud. Test market validity depends heavily on the assumption that trading conditions in the market are 'normal', and it follows that any departure from such conditions will bias the results. Competitors learn quickly of test marketing operations and typically react in one of two ways. If the new product closely resembles existing BRANDS, the manufacturers of these brands will usually step up their ADVERTISING and SALES PROMOTION in the test market to maintain existing brand loyalties and prevent the new entrant getting a foothold. These tactics also ensure the existence of 'abnormal' trading conditions during the test period. Alternatively, if the new product represents a radical departure from existing products, competitors can easily monitor its test market performance while developing their own substitutes. If the test results seem promising the imitative innovator may well enter the national market at the same time as the originator of the idea - if not before! For these reasons many manufacturers now undertake more exhaustive tests of the mix variables and omit the test market stage altogether. If the new product if launched on a limited scale initially, more often than not it is in the nature of a feasibility study rather than in the hope of obtaining hard data from which to predict the outcome of a national launch.

Cross-References:
[pilot marketing] [samples] [advertising] [copy testing] [marketing plan] [sales promotion]

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