What is Test Marketing?
As new products are developed or current products are improved, businesses must also determine their performance in the market. When ideas and concepts for products are new to consumers, it can be difficult to determine whether they will be accepted by the market and whether they can be profitable to the business. To gain insight and understand the potential of the product, businesses use test marketing before fully launching the product.
The definition of test marketing refers to the process that takes place when a company essentially tests the effectiveness of its marketing campaign for a new product to determine the product's possible success in the market. This allows the business to get an idea of how well the product may perform in the market. Test marketing for new products works by sampling a portion of consumers to test the market before launching the product on a large scale. It is an important part of new product development since businesses need some insight into the product's potential before taking on the full production aspects of a product that may fail.
Purpose of Test Marketing
The purpose of test marketing is to determine a product's place within a market. Businesses aim to create products that provide a need or want for consumers. With test marketing, the company can determine the effectiveness of the product and determine whether the product has the potential to provide these needs and wants. Test marketing gives the product a test run with a sample portion to see if the product fits in the market. These results can help to provide insight into when the product is ready to be fully scaled at a national level.
Advantages and Disadvantages of Test Marketing
So, how can test marketing be helpful in launching new products? Test marketing can be helpful to a business in many ways. Some of the advantages of test marketing include:
- Ability to gain insight into a product's potential in the market
- Businesses can determine if their marketing campaign is effective
- Flaws can be determined so improvements can be made
On the other hand, there are many disadvantages of test marketing that businesses should consider. Some of the disadvantages of test marketing include things such as:
- Added expenses for tests that may not provide enough data
- Competitors can make similar products since they are now public in the market
- Employees using their time for testing rather than operational tasks that can bring in revenue
Types of Test Marketing
There are several different types of test marketing methods that businesses can use to test their products. Some of these include consumer goods marketing, industrial goods marketing, marketing-effectiveness test, regional launch, alpha and beta testing, and direct marketing. Each of these methods provides a way to test the market before launching a national ad campaign or other larger marketing campaign. These test marketing methods differ in the way they are conducted and can provide insight into different aspects of the marketing campaign.
Consumer Goods Test Marketing
Consumer goods are the products in the market that are sought and purchased by consumers. These types of products are available in the market for any consumer who wants to make a purchase. These include convenience goods, such as groceries, shopping goods like electronics, and specialty goods, such as hybrid cars. Consumer goods test marketing allows the business to understand how consumers will respond to the product by launching the product in a small portion of the market.
Businesses may decide to use a test market and launch only in one store or only in one city. They may also opt for the sales-wave research by giving out free samples of the product to consumers in their target market. They may also use simulated market tests and controlled market tests to garner feedback from consumers. Consumer goods test marketing can provide insight into how the customer will react to the product and whether they have a genuine interest in the product that will prompt them to make another purchase. There are also drawbacks, in that other, larger companies can learn about the new product and gain a competitive advantage in areas where the testing has not taken place.
Industrial goods are the products in a market that are aimed specifically at certain industries and lines of work. Industrial goods are generally the capital products and expenses for business production, such as raw materials, equipment, parts, and supplies. While some of these products may be available to all consumers, industrial goods are typically classified as such due to their use and purpose. Industrial goods test marketing includes two main categories. Alpha testing and beta testing are two ways industrial goods can be tested in a market.
Alpha testing occurs when the company tests the products with their employees or others within the organization before presenting them to the market. Businesses that produce industrial goods want feedback about the products from a business standpoint. This is helpful in that it allows the business to understand how the product might be received by other businesses before putting it out to the public. However, it doesn't obtain data from real customers or business owners that might purchase the products.
Beta testing consists of testing the product with real consumers in the market. These tests typically consist of a small group that can provide feedback about the product. This may take place in small portions of the market, such as exhibitions and trade shows. This type of testing is beneficial as the business can obtain insight into the target market and may even make connections with potential clients. Of course, the drawback is that this takes more time and effort as compared to alpha testing.
A marketing-effectiveness test determines the effectiveness of a marketing campaign and can occur in several ways. The purpose of a marketing-effectiveness test is to determine the performance of a product or ad campaign within a market. Depending on the needs of the business, the marketing effectiveness test may measure engagement, risks, or other customer-related measurements. These types of tests can also help to provide insight to a business about the product's place within a market.
Regional Launch and Direct Marketing
A regional launch allows the company to test the products in a particular region. This may be beneficial for the company as it can generate feedback from more consumers as compared to a focus group. However, it only represents a region, which may take to the product differently compared to consumers in other regions. For example, surfboards will have higher approval from consumers near the coast.
Direct marketing refers to the promotional aspect as it allows the business to connect with consumers directly. In test marketing, companies can use a direct marketing target launch to reach consumers in their specific target market. The company can present current subscribers with emails, texts, coupons, and samples. The business receives real feedback, however, in this type of test marketing, the feedback is not required from the consumers.
Test Marketing Examples
Test marketing takes place in various ways for organizations throughout different industries. Some basic examples of test marketing include:
- An apparel company that wants to test a new product line of hats and launches them in one store
- A restaurant chain that wants to add desserts to the menu but only tests this in a few of its restaurants in one city
- A technology company that creates new software for programming and asks its employees to test the software before launching
Test marketing occurs when a company tests its marketing campaign for a new product to determine its effectiveness, performance, and possible success in a market. There are several different types of test marketing businesses can use. These methods include consumer goods marketing, industrial goods marketing, marketing-effectiveness tests, regional launch, alpha and beta testing, and direct marketing.
Consumer goods test marketing allows the business to determine how consumers will respond to consumer goods by launching the product in a small portion of the market. Industrial goods test marketing, on the other hand, is focused on industrial goods and includes two main categories, alpha testing and beta testing. Alpha testing occurs when the company tests the products with their employees or others within the organization before presenting them to the market, whereas beta testing essentially tests the product with real consumers in the market, such as business owners who will use the products in their own production processes. A marketing-effectiveness test determines the effectiveness of a marketing campaign and can occur in several ways. A regional launch allows a business to test its product in a particular area. Direct marketing allows the business to connect with consumers directly with emails, coupons, and free samples.
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Why is test marketing used?
Test marketing is used to gain insight about a new product's potential in the market. It allows the business to determine whether a product will be successful on a large scale by tracking its performance on a smaller scale.
What is the meaning of test marketing?
Test marketing refers to the methods that are used to determine the effectiveness of a business's marketing campaign for a new product. It is used to determine the product's possible success in the market before fully launching the product.
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