Introduction of a New Product to Markets by Test Marketing

Test marketing is a procedure by which a company attempts to test on a small basis the commercial viability of the marketing plan for a new or modified product or package. Such a test has a two fold purpose: it is designed (1) to provide a reasonable estimate of the sales and profit potentials in the new product, and (2) to help management identify and correct any problems having to do with the marketing plan and the product before making the final commitment a full scale introduction.

It is important to note that test markets are rarely used to test whether a product is acceptable or not acceptable to the consumer. This can be determined more inexpensively through the use of the kinds of tests discussed earlier. Companies put into test markets only those products for which there is strong evidence that they will be successful. Even so, the number of products withdrawn during or after a test market is substantial probably around 50 percent.

The costs of test marketing are not trivial. A full scale test market program in two cities costs about 10 to 15 crores for the first year. Furthermore, there is the question of how reliable the projected test market results are at the national level. According to one source, there is only about a 50–50 chance that the test results will be within ±10 percent of the national performance. It is difficult to assume for most test markets that the national scene can be replicated with only a few test markets, especially with respect to competitive reaction over time. And finally, test marketing can be audited by competitors, there by eroding the time advantage of the innovator.

Given the problems associated with test marketing, it is understandable why in recent years efforts have focused on the development of low cost alternatives to the traditional full scale test market research design. Pretest market research methods, while no substitute for test marketing, can provide important diagnostic information about a new product and its likelihood of success faster than a full scale test, and at a lower cost. Such tests are sufficiently accurate for a GO / NO GO test market decision. This means that a well run pretest market rejects poor products fairly and consistently. Also, good products have a high probability of being correctly identified. Existing methods provide this level of accuracy.

Pretest market research methods have been used primarily for frequently purchased consumer products but have been adopted with some degree of success  for use with consumer durables and industrial products. The cost of a pretest market study ranges from 15 to 25 lacs for a 10 to 14 week test. To be successful, the methods used must focus on the process by which consumers adopt a new brand namely, awareness, trial, and repeat buying. While the more successful methods are primarily concerned with predicting the test product’s share potential they also provide information that will help improve the product and its advertising.

Laboratory Test markets: One low cost alternative to traditional test marketing is the laboratory test market. For packaged consumer products, the procedure typically consists of a simulated supermarket, where respondents buy products under controlled conditions, and of auditorium like facilities where respondents are exposed to advertisements and other promotional materials. Separate samples of consumers are used if more than one treatment (e.g. different prices or copy themes) are involved. Respondents in each sample are “representative’ of the target audience and participate in the following:

*After completing a self administered questionnaire concerned with their individual demographics and purchase behavior relative to the product class of interest, 300–400 respondents are exposed to a TV program containing a number of communications about brands in the product class, including one for the brand /treatment being tested.

*Respondents visit the simulated store, which is stocked with the brands shown in the commercials and with any others of importance. Respondents are provided with a fixed amount of money and told to purchase the brand they choose.

*After purchase, small groups of respondents are engaged in focused discussions concerning reasons for their purchase. Following this, the respondents return home.

*Sometime later, respondents are re-interviewed by phone to determine reactions to the product purchased including satisfaction or dissatisfaction, usage data, repurchase, and comparisons with other brands used.

*If an extended usage test is involved then respondents are given the opportunity to repurchase the test brand, which if requested, is then delivered to them.