Before starting commercial production of any product at a large scale, it is imperative to conduct test marketing of it. Test marketing involves the sending of goods in small quantities in selected markets in order to observe the response of the buyers.
Test marketing helps in determining the nature and response of the market towards the newly developed product. It assists the management in finding out what improvements are needed in that product what channel of distribution will be suitable, at what price the product can be reasonably sold and what promotion policy will be required. etc.
Test marketing is a very valuable technique in this age of rising costs and cut-throat competition. Some companies claim that they have faith in the quality of their products, they will be able to sell the goods at their price, so they need not bother about test marketing. According to them, test marketing is an unnecessary, expensive and time-consuming process. Bus it is not a good attitude.
Test marketing brings out the weakness of the product and marketing policies relating to it and provides a change to improve them.
Objectives of Test Marketing
Test marketing activities today are wisely used for the following purposes:
(a) Determining the potential of a new product.
(b) Selecting a new product from a number of possibilities.
(c) Determining the optimum price of a product.
(d) Determining We most effective advertising appeal.
(e) Determining the most effective advertising media.
(f) Determining the most effective sales promotion method.
(g) Evaluating alternatives in the area of sales.
Process of Test Marketing
The following are gradual steps in the process of test marketing :
(1) Determining the Number of Cities— The first step in test marketing is the selection of cities or where test marketing is to be conducted. The number of cities selected should not be so small as to give unreliable and inconsistent results. The number of cities should not exceed too much as it will involve huge cost The sample of cities should be according to the nature of product, nature of prospective customers and probable competition, etc. The selected cities must possess the characteristics of would-be markets for those products.
(2) Duration of Test— The second step is to decide the time duration of test marketing. The period of test marketing may run from weeks to years. The determination of time duration for test marketing depends upon the following factors :
(i) Average repurchase period.
(ii) Competition; and
(iii) Cost of the test marketing.
(3) Necessary Information— Next step is to decide upon the nature of information to be collected through this testing. Generally, this information is useful in this context : sale of the product at different points of time, shipment position, buyer’s response and observation of customers regarding the quality, size of packing of the product, etc.
(4) Drawing Conclusions— When test marketing is complete and necessary information has been collected, the next step is to analyze the information and draw the conclusions. The marketing can provide either of these three types decisions : the product is alright and commercial production can be started, the product needs such and such improvements and, thirdly, it is not advisable to produce the goods as the response of the market has not been good and should be given up.