Basic Steps of Test Market Studies

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When a new product or line extension is tested, a number of steps are followed in order to achieve the desired results. Here are the basic steps needed to streamline the process. Note: all these steps should be followed in sequence.

1. Definition of the Objective:

This step involves closely analyzing and examining the product to be tested. It should be noted that the tested product could be similar to the ones already in the market; the product could be an improved product; the product could be an upgraded version of a product already in the market; the product could be a newly introduced product.

It should be noted that the type of product to be tested is related to the market performance of the product.

Test market objectives are used to project: dollar and unit sales volume, and dollar and unit shares. This type of testing is used to predict the market performance at the retail level.

2. Plan Strategy:

The plan strategy consists of manufacturing and distribution, and media selection. Different products require different types of manufacturing and distribution techniques. For example, a "me too" product will require heavy advertizing together with precise positioning, execution, and strategy or marketing. On the other hand, a "never before" product will require a different approach - which involves the use of free samples and discount coupons.

Selecting the type of advertizing media is also a very important factor. If advertising is done in magazines, print advertisements of the product must be readily available. Weekend magazines, TV guides, and newspapers may precede advertisements in national magazines. Newspapers may be more explanatory and comprehensive in their advertising approach. Last but not the least, television advertising is crucial for product marketing.

3. Determination of Methodology

The next step in marketing function is to determine the type of test market and identify the agency being used to do the testing and the auditing. There are a number of methods used for this experimental process:

a. A stimulated test market:

This method involves interviewing, monitoring, and introducing the new product to a group of especially selected respondents. The purpose of this technique is to predict the performance of the product once it is launched in the real world.

b. A standard market test:

This method involves the company's personnel who distribute the product in certain selected experimental markets. The company's personnel may also be involved in restocking the product and studying its sales at the distribution center.

c. A control test market:

This method involves handing over the test market project to an external entity. This entity handles all the research parameters such as mini-markets and controlled store panels. The controlling company also guarantees distribution, storage in warehouses, immediate advertising and promotion, an auditing.

4. Select Markets

This phase of testing involves determining the location to test the proposed product. Usually, mid-sized cities that reflect national demographics are selected. Test marketing professionals also need to ensure that respondents are unaware that they are being tested. Here are four overriding factors to be considered while selecting a test market.

a. Total number of markets used:

Generally, the more the markets used, the better the results. With a large number of markets, the results tend to be more accurate and reliable. Furthermore, diverse markets must be used. The "matched market" strategy must be employed, ie., two markets with similar factors such as climate, population, geography.

b. Size of the markets to be used:

Markets must be large enough, but not too large otherwise the testing would become too expensive. Large markets tend to give results that are more accurate and reliable. It is advisable to use multi markets comparable to two or three percent of the population.

c. Markets with more representative demographics:

It is important to use markets that are demographically accurate in terms of age, income, etc., The type of population being tested must be representative of the type of population that is targeted by the product.

d. Isolated markets:

It is desirable that the market in which the product is being tested is separated from the mainstream markets. This leads to minimal wastage and maximal security. Efforts must be made to minimize spill-in and spill-out. Here, spill-in refers to external media entering the market, and spill-out refers to local media published outside the city. Furthermore, isolated markets tend to be hidden from view of competitors who would disturbed the testing by lowering the prices of their products - a process knowing as jamming.

Additionally, electronic test markets are the worst because they tend confine the markets. First, electronic markets are only used in places where electronic scanners are used. Second, the company may be "locked-out" of a city if competition is testing in the same region.

5. Execution of the Plan

It is vital to make test marketing as legitimate as possible. There are two important points:

a. The marketing team must not pay over-attention to the product because the product may tend to over-perform in the test market than in the actual market.

b. Repeat-purchase incidence must not be over-emphasized. Repeat-purchase must be studied unto many repeat-purchase-cycles. Repeat-purchase-cycles must be studied carefully and the cause of over-sales must be examined. It is better to continue to study the repeat-purchase-cycles until the test is stabilized.

6. Evaluation of Results

Four points must be noted for better evaluation of results:

a. Consumer awareness:

This idea is used ensure that consumers are aware of the product and its price, usage, and location of the distribution agency. Consumer awareness reflects the effectiveness of the marketing tactics used; consumer attitude reflects the consumer opinion of the product after its usage.

b. Purchase measures:

It is important to evaluate the product trial and repeat-purchase incidences. This provides feed back whether the advertising campaign as worked effectively or not.

c. Effect on competition:

The actions of the competition must be closely followed during the product testing period.

d. Effect on other products:

It should be ensured that the new product is not taking sales away from the company's other established products. Thus, cannibalization must be kept at a minimum.

e. Further steps:

Depending upon the market performance of the product, the next level testing may involve further research and development of the product, abortion of the entire project, or launch the product as-is.

Additional Readings:

1. Functions and Elements of Growth in Marketing Management
2. Marketing Organization and Functions of a Marketing Manager
3. Functions and Essentials of New Project Planning
4. Types and Various Stages of Market Studies
5. Naming Products and Name Testing Research
6. Planning of Advertizing Budgets
7. Basic Steps of Test Market Studies
8. Trade through Selected Agencies
9. Price and Motivation of Marketing
10. Marketing Functions at different levels of Development
11. Elements of a Marketing Mix
12. Advantages and Disadvantages of Branding
13. Packaging and Sales Promotion
14. New Product Development Strategy
15. Screening a New Product

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