Test Marketing

One way to gather information about the revenue potential for a new or improved product is to trial it in a test market.

Test marketing involves launching the product in small part (usually geographic) part of the target market in order to gauge the viability of a product or service in the target market prior to a main roll-out or launch.

The aim of the test marketing is to gather as much information as possible about the elements of the marketing mix, including:

• The product itself
• The promotional message and media spend
• The distribution channels
• The price

Sometimes several test markets (usually small ones) are used, with each testing different marketing mixes.

The main benefits and disadvantages of test marketing can be summarised as follows:

Advantages of Test Marketing

Data provided is from actual customer spending

Reduces the risk of a full-scale launch – if the product fails a test then significant costs may be saved

Provides a way to tweak the marketing mix before full launch

Can create a promotional "buzz" which supports the main launch

Disadvantages of Test Marketing

Danger of the competition learning about the product and coming up with a response before the full launch

Test market may not be representative of the full target market, leading to inappropriate decisions

Delays in full launch may limit the revenue opportunity in markets subject to rapid change

Costly and time-consuming to administer