Test Marketing

Test Marketing

test marketing The stage of new­

If the product passes functional and consumer tests, the next step is test product development

marketing, the stage at which the product and marketing programme are intro­ where the product and

duced into more realistic market settings.

marketing programme are tested in more

Test marketing gives the marketer experience with marketing the product realistic market settings.

before going to the great expense of full introduction. It lets the company test the product and its entire marketing programme ­ positioning strategy, advertising,

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distribution, pricing, branding and packaging, and budget levels ­ in real market situations. The company uses test marketing to learn how consumers and dealers will react to handling, using and repurchasing the product. The results can be used to make better sales and profit forecasts. Thus a good test market can provide a wealth of information about the potential success of the product and

marketing programme. The amount of test marketing needed varies with each new product. Test marketing costs can be enormous and test marketing takes time that may allow competitors to gain advantages. When the costs of developing and introducing the product arc low or when management is already confident that the new product will succeed, the company may do little or no test marketing. Companies often do

not test market simple line extensions, minor modifications of current products or copies of successful competitors' products. However, when the new­product introduction requires a large investment, or when management is not sure of the product or marketing programme, the company may do a lot of test marketing. For example, Lever USA spent two years testing its highly successful Lever 2000

bar soap in Atlanta before introducing it internationally. In principle, the idea of test marketing also applies to new service products. For example, an airline company preparing to introduce a secure, cost­saving system of electronic ticketing may try out the new service first on domestic routes before rolling out the service to international flights. Or, it might offer the ticket­

less system on its busiest routes and restrict the test to its most frequent trav­ ellers. The system's effectiveness and customers' acceptance and reactions can

618 • Chapter 14 Product Develojxnent and Life­Cycle Strategies

then be gauged prior to making the decision to extend the service to cover all of its domestic or global networks.

Consider another example. In July 1995, Mondex International, a consortium of 17 international banks and telecommunication companies from the United Kingdom, Asia, Australasia and North America, pilot tested Mondex ­ a 'smart card' that acts as a replica of cash ­ in Swindon, some 100 km west of London, with some 10,000 people, mainly participating NatWest Bank and Midland Rank customers. A second test site ­ Exeter University, in the west of England ­

was later added to assess students' and staffs use of the card as a university identi­ fication card, library and building security card as well as a payment card for everything from meals to laundry. Mondex officials say the card will be launched nationwide in the UK in 1998. Meanwhile, tests are under way in other consortia members' home countries to assess the international acceptance of the card. ls

Whether or not a company decides to test­market, and the amount of testing it does, depends on the cost and risk of introducing the product on the one hand, and on the testing costs and time pressures on the other. Although the costs of test marketing can be high, they are often small when compared to the costs of making a major mistake. For example, as illustrated in the 'chapter preview' in Chapter 4, Unilever learned a costly lesson when it decided to skip formal test marketing for its new European laundry detergent, Power, and forged ahead with its £200 million, Europe­wide launch. The company spent another £70 million on

the withdrawal of the defective, clothing­annihilating Power detergent a year after its introduction.

When using test marketing, consumer­products companies usually choose one of three approaches ­ standard test markets, controlled test markets or simulated test markets.