The Hindu Business Line : Test marketing

Just about everyone knows that marketers often run a test market for their new products before going on to a full-fledged launch. And just about everyone will also agree that this a good practice which can save the marketer a lot of grief.

Let us look at this concept in a more formal light.

Test marketing a new product is not quite the same as carrying out a phased launch.

A phased launch refers to the situation where a new product / brand is first launched in one or the geographic zone or area, say only in the southern part of the country or only in the metros, or only in certain kinds of outlets, for instance.

After some months, the launch would be extended to other zones or town-classes or to all kinds of outlets.

This phasing out could be for the purpose of testing the waters (in which case the phased launch works much like a test market does) or it could be imposed on the marketer due to budget constraints which do not permit a wider, simultaneous launch.

A test market, however, is run only for the purpose of testing the waters. Typically, the output required from a test market exercise is feedback on the following broad lines:

Is our marketing mix doing enough to induce a large number of consumers to try out our product?

Is our distribution strategy and implementation good enough to ensure that consumers have access to the product when they want it?

Is our product performance good enough to induce the right kind of consumer to adopt the product in large numbers?

Is our budgeting efficient and well-utilised?

Therefore, a test market is run like a regular launch but in only the selected locations.

A test market will see multi-media advertising, distribution, packaging, pricing, etc, just as if it were a full-fledged launch. The test market could run for anything from three to nine months.

Based on the results from the test market exercise, the marketer could tweak the marketing, distribution, or product mix before the nationwide launch.

For a test market exercise to be successful and effective, it ideally needs the following conditions to be fulfilled:

The test market location (city / town / region) should contain a good mix of all kinds of consumers, so that the feedback from the test market can be extrapolated to the national market at large.

For instance, if the product being launched is a cooking oil, then the test market should have a representation of consumers hailing from different parts of the country, so that the suitability of the oil for different kinds of cuisine and dishes can be assessed.

The test market location should have local media facility i.e. there should be media vehicles which cover the location well but do not spill over into other locations (since – for one reason – that could make consumers in other locations go and ask for the brand only to learn that it is not available).

The test market location should have its own distributor network, and should not see products spilling over into retailers in surrounding areas or nearby towns (since that kind of off-take could confuse the sales figures for the location).

The test market location should have consumer and / or retail research panels that enable tracking of the product performance.

And the test market location should be a relatively small and low-stakes market since it is not a good idea to do testing in a large and important market.

Clearly, carrying out a test market is a useful practice. Nonetheless, it does have its drawbacks, chief among them being a long-drawn and well-run test market invariably alerts the competition to the new product launch and gives them time to formulate their response.

This drawback led to the development of sophisticated simulated test market models, of which we shall see more later.

(Compiled by Kaybase, a business consulting firm. Mail: Info@Kaybase.com)