Notes On Test Marketing:

Definition Of Test Marketing:

       Test marketing involves introducing a new product to one or more test marketers which are carefully chosen.

Defined by J. A. Gold:

       In the opinion of J. A. Gold, "Test marketing is a research technique in which the product under study is placed on sale in one or more select localities and its reception by consumers and traders is observed recorded and analyzed."

       Thus test marketing is a method to know in advance whether the product will be accepted by the consumers' at large scale.

Importance Of Test Marketing:

       Test Marketing is a very valuable technique in this age of rising prices and cut throat competitions. Some companies claims that they have faith in the quality of their products and they will be able to sell their goods at their prices, so why should they bother about test marketing. They are of the opinion that test marketing is an unnecessary expense and a time consuming procedure. Test marketing brings out the weaknesses of the products and marketing policies relating to the product and provides them a chance to improve their products or policies.

       The following are some of the advantages of test marketing:

  1. Determining the potential of a new product.
  2. Selecting a new product from a number of possibilities
  3. Determining the optimum price of the product.
  4. Determining the most effective advertising media
  5. Determining the most effective sales promotion technique.
Procedure Or Process Of Test Marketing:

1. To Determine the Number of Cities:

       The first step in test marketing is to determine the number of cities or markets where the tests are to be conducted. Two main factors should be kept in mind for this:

  1. The test market area should be carefully selected to represent a need cross section of the consumers so that the results obtained are fairly reliable.
  2. Cost of testing should also be kept in mind and it should be worthwhile

2. Selection of Cities:

       The next step is to select the particular cities where the test shall be conducted. The number of cities should not be less to avoid unreliable results and it should not also be large to avoid huge expenses. The sample of cities should be based according to the nature of the product, nature of perspective consumers, probable competitions etc.

3. Duration of the Test:

       The period of test marketing my run from one week to years. The duration of the period depends upon the following factors:

a. Re-Purchase period:

       When the re-purchase period is long, test marketing shall also be long and vice versa.

b. Cost:

       It is also an important factor in deciding the test duration. Cost and duration have positive co-relation.

c. Sate of Competition:

       Incase of stiff competition, the duration will be long and vice versa.

4. To Collect Requisite Information:

       The type of informations to be collected form test marketing usually depends on the objectives of test marketing. Usually test marketing is conducted for collecting the following informations:

  1. Sale of products at different points of time. Observation of customers regarding the quality, size or packaging of the products
  2. Recognition of strong points of the products by consumers
  3. Potential of repeat purchases.

5. Drawing Conclusion and Launching the Product:

       The last step is to analyze the informations collected and draw conclusions. Test marketing process can give three types of decisions:

  1. The product is alright and commercial production can be started
  2. The product needs improvements
  3. It is not advisable to produce goods as the response of the market has not been good. So, the product idea should be dropped

       When a new product is launched, it is advisable for the company to enter into small market. If the company becomes successful at the initial of small market, it may gradually enter into the national market. Such policy is followed so as to minimize the risk factors involved in launching a new product.