Test marketing is one of the concepts in new product launches. It is a limited launch of a product that helps the marketer understand how well the marketing mix is working, and what needs to be tweaked before going full-scale.
So, it is something like phased launch, right?
Not quite. A phased launch refers to the situation where a new product / brand is first launched in one or the other 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.
So, how exactly does a test market help?
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-utilized?
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 and other such moves. Just as if it were a full-fledged launch. The test market could run for anything from three months 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.
Can a test market be run just anywhere? I mean, are some markets more suitable than others for a test market? Why?
For a test market exercise to be successful and effective, it ideally needs all, or at least most of, the following conditions to be fulfilled
1. 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
2. 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)
3. 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 offtake could confuse the sales figures for the location)
4. The test market location should have consumer and / or retail research panels that enable tracking of the product performance.
5. 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
And is a test market always required when launching a new product?
No, not really. Whether we run a test market or not is a function of how sure the company is about the marketing mix, and how much input it requires from the market before going national
But, if it is really such a good thing, then why doesn’t every company run one? We don’t come across that many, do we? There must be some drawbacks too….
You are quite right, there are some drawbacks. One is that it clearly costs a fair amount of money, though that could be offset I suppose from the potential saving by avoiding errors in the final launch. A second drawback could be the loss in time before the full launch.
But the biggest drawback is that the competition gets to learn too about the product and the marketing mix. So, by the time the company is ready for the full launch, the competition is probably ready with their offering.
Is test marketing more of an international practice, or do Indian companies also run test markets?
Well, it is slightly more of an international practice, though several Indian companies have done test marketing every now and then. I have heard quite a bit about P & G running test markets for many of their products in India, and I seem to remember reading that they used Vishakapatnam a lot. Having said, that I think test marketing is less common than phased launches in India, and this is probably for two main reasons
- Given the sheer diversity of the Indian market and the way the media is structured, it is difficult to find a good test market location
- And many companies have regional strengths and weaknesses in terms of brand strength and distribution reach, so they probably prefer to launch a new product region by region.
Ashok Sankethi, an alumnus of IIM Bangalore, runs Kaybase, a market research agency
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