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Modern economic conditions demand creative decisions and new approaches in terms of marketing. Moreover, competitive surrounding changes all the time, which makes managerial process more thoughtful and critical. Test marketing is the best strategy to eliminate risks in the future as well as to diminish possible losses. On the other hand, this procedure can be time-consuming and expensive. Besides, it does not promise the required outcome under all considered circumstances. However, the companies that have big output and rich marketing mix must invest in test marketing, because it is affordable and productive for them. Another huge advantage that can be achieved through this decision is that the enterprise can compare new products with the other existing goods that are already for sale. This paper considers both advantages and disadvantages of test marketing and its necessity for a company.
Advantages and Disadvantages of Test-Marketing
Every new product has a risk of failure. The major question is, whether people need this particular offer and whether they are interested in what the company tries to sell. The number of workers who prefer to go to work by bicycle rather than drive is increasing progressively. People take care of their health and want to remain fit. In such a manner, the company has spotted a good opportunity for entry. On the other hand, the synergy of a road bike and a mountain bike is not necessarily winning in practice. For this reason, the biggest advantage that will be attained through test marketing is that the business will be able to see how beneficial the product is for customers. The second advantage is to know the potential quantity of buyers. Nevertheless, these plusses must dominate over minuses to make the strategy productive.
The development of test marketing can last approximately a year, which is time-consuming (Zikmund & Babin, 2007, p. 305). Additionally, the company’s competitors have time to copy the new product. Usually, all businesses copy each other, and, for this reason, organizations keep their business secret. In such a manner, the company will invest many funds in testing, and the results can be used by the other rivals. One more disadvantage is a mistake of choosing a wrong location (Zikmund & Babin, 2013, p. 236). The enterprise needs place that has all conditions that repeat the future potential market. For this reason, in case of failure, the results may be not accurate.
The initial policy that must be adopted by companies is the orientation on customers’ needs and wishes. Test marketing will reveal consumers’ preferences and their buying activity. This information can be used to understand the amount of production that may be placed in the future. Besides, customers’ complains may help in the product development and adding new features before the product appears on the market.
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Another piece of information is cannibalizing the other products. Diversity is important for the sale strategy, but the choice must be limited. If the choice is too big, people may go without a purchase at all. However, if the choice is too small, customers may not find what they are searching for in a particular product. Consequently, all of the company’s products must remain competitive. Sales of the old production may not decrease due to the new bicycle. Otherwise, the enterprise may suffer a loss. One more risk includes market liquidity. The market is not constant, it changes all the time. It means that tests conducted during the year may not be representative later.
Although the company uses a particular location to test the new bicycle, it still sales the product to different people. For example, the local test may show how useful the product is for women and men or it may demonstrate that men buy the bicycle more than women. Correspondently, the enterprise may concentrate on features that are more appropriate for males and use this knowledge for the national market.
Another situation, which may occur, is that customers will prefer a certain color of the bicycle, and the organization will increase the production of this color for masses as well. Concerning advertising and supply campaign, it may be crucial during the test-marketing procedure. The company may regard distribution channels and marketing points or measures to see if the overall marketing strategy works. If it is not effective, the enterprise will win time to restructure its ideas and thoughts. In general, the national launch presupposes huge investments. These investments may not be made mindlessly. For this reason, all pieces of information acquired with the help of test marketing are useful for right decisions in the future. Small expenses compared to the national launch will reveal various deviations, uncertainties, and problems.
Test marketing is important for big companies. Mass production associated with significant investments implies many risks. They cannot be avoided completely, but they can be tested. Pre-examination may help to adopt the right way of thinking in the prospect. It may direct managerial thoughts in the correct way. However, the first step of test marketing must consider a few disadvantages that may influence results.
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The idea to combine a road bike with a mountain bike is relatively new. Customers are suspicious of novelties. Consequently, test marketing may also give time to consumers to get used to the “fresh” idea. In any case, they will have a bunch of products, and a few propositions are sold better than one. The company may implement offers on the broader range of its products. It can afford discounts. Anyway, the enterprise makes the right decision to test the market reaction, and this move shows that the managers have consistency and logics in their organizational effort.
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