Market Research
TEST MARKETING
WHAT IS TEST-MARKETING

Test Marketing combines
scientific testing with
controlled field
experimentation. Testmarket is a market
experiment conducted in
an actual product
market, meaning under
real-world conditions.
USING TEST-MARKETING

Test-Marketing has three broad primary uses in marketing
research.
Forecasting the success of a newly developed product
Testing hypotheses about different options for marketing mix
elements
Identifying weaknesses in product designs or
marketing strategies.
Forecasting New Products Success

Test-Markets have long been used as a pilot test for
a new product introduction. While test-markets can
be complicated to implement, the basic idea is
simple. A product can be marketed on a small
scale under actual market conditions and the results
used to forecast the success or failure once the
product is introduced on a large scale. Companies
using test-markets should realize that a new product
concept also involves issues like advertising, pricing,
retail prices etc. These issues may be manipulated
within a test-market and a decision can be made.
Testing the Marketing-Mix
 Test-Markets
are not confined to studying
new products or product modifications.
They also are equally useful as a field
experiment manipulating different
marketing plans for existing products. Any
element of the marketing mix can be
examined with a test-market. (example
with flyers page. 297)
Identifying Product Weaknesses

Test-Market experimentation also allows identification of
previously undetected product or marketing plan
weaknesses. The weaknesses can then be dealt with
before the company commits to the actual sale launch,
Often, this use of test-marketing occurs when a product
underperforms in at least one location. Researchers can
then follow up with other research approaches to try
and reveal the reason for the lack of performance.
Once identified, product modifications can be made
that address these reasons specifically.
Advantages of Test-Marketing

The key advantage of test-marketing is the real-world
setting in which the experiments are performed.
Although focus groups and surveys also can be useful in
describing what people may like in a new product, the
actual behavior of consumers in a real test-market
location is far more likely to lead to accurate projections.

A second advantage is that the results are usually easily
communicated to management. Although the
experiment itself can be difficult to implement, the data
analysis is usually very simple.
Disadvantages of Test-Marketing
Cost
Time
Loss of
Secrecy
Disadvantages of Test-Marketing

Cost: Test-Marketing is very expensive. Consider
that far most new products, companies have to
actually create production facilities on a small
scale, develop distribution within selected testmarket cities, arrange media coverage specific
to those locations, and then have systems and
people in place to carefully monitor market
results.

Time: Test-Markets cost more than just money. TestMarkets cannot be put together overnight. Simply
planning a test-market usually takes months. Actually
implementing one takes much longer. On top of the
time for planning and implementation, researchers also
must decide how long is long enough. When is the
amount of data collected sufficient to have confidence
in drawing valid conclusions? Test-Markets should be
long enough for consumers to become aware of the
product, have a chance to purchase it, consume it, and
repurchase it at least one more time.

Thus, it must be longer than the average
purchase cycle for that particular product. So
the time required for test-marketing depends on
the product. The purchase cycle for chewing
gum is much shorter than a bottle of shampoo.
The average test-market requires about twelve
months.

Loss of Secrecy: Secrets no longer exist. In the case of a
new product, not only does the competition know about
the new product, but a competitor can sometimes
benefit from the test-market by monitoring the same
dependent variables. This may cause them to launch a
competing product. In some cases, the competitor can
even beat the originating company to the national
marketplace.
Selecting a Test-Market site

Selecting test-market is, for the most part, a
sampling problem. The researcher seeks a sample of
test-market cities that is representative of the
population comprised of all consumers in the
relevant marketing area. If a new product is being
launched throughout Australia, for example, the
researcher must choose cities that are typical of all
Australians. Thus, test-market cities should represent
the entire competitive marketplace.
Factors to consider in Test-Market
Selection
Population
Size
Demographic
Composition
and lifestyle
considerations
Competitive
situation
Media
Coverage
and
efficiency
Media
Isolation
Self Contained
Trading Area
Overused
Test-Markets
Factors to consider in Test-Market
Selection

Population Size: No one size represents the best
population for a test-market city. The population
simply should be large enough to provide
meaningful results with respect to the large
population, yet small enough to ensure that costs
are not prohibitive. U.S cities such as New York, Los
Angeles and other cities like Tokyo, Mexico City etc
are far too large to be a popular test-market.
(Popular test-markets table page 305).

Demographic composition and lifestyle
considerations: Ethnic backgrounds, incomes,
age distributions, lifestyle, and so on within the
market should be representative of the market
segment to which an offering is targeted. If a
product is intended to be equally targeted
toward the entire U.S market, the product should
then be test-marketed in cities that most closely
match the entire U.S population.
Competitive Situation
 Competitive
market shares, competitive
advertising, and distribution patterns should
be typical so that test-markets will represent
other geographic regions. If they are not
representative, it will be difficult to project the
test-market results to other markets. If a
company has a good market share in a
specific geographical area, it will be much
easier than in another area that the market
share is low.
Media Coverage and Efficiency

Local media (television spots, newspapers) will
never exactly replicate national media.
However, duplicating the national media plan or
using similar to it is important. Sunday newspaper
supplements are sometimes used as a substitute
for national magazine advertising. Ideally, a
market should be represented by the major
television networks, typical cable television
programming and newspaper coverage.
Media Isolation

Advertising in communities outside of the testmarket may contaminate the test-market.
Furthermore, advertising money is wasted when
it reaches consumers who cannot buy the
advertised product because they live outside
the test area.
Self-Contained Trading Area

Distributors should sell primarily or exclusively in the testmarket area.
Overused Test-Markets

If consumers or retailers become aware of the
tests, they will react in a manner different from
their normal. Thus, it is not a good idea to
establish one great test-market and use it time
and time again.