test marketing

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A product test prior to launch with a small representative group. Frequently, new products are released to a test market in order to determine market potential. Feedback is gathered and the product can be improved before it is rolled out to a larger market or audience. Samples of a proposed new product are tried out in areas that are supposed to be representative of the market as a whole. The key advantage of test marketing is that it is possible to evaluate a new product or service without launching nationally and incurring a large amount of expenditure on both promotional elements and sales training. Generally, test marketing is practised in consumer markets rather than industrial markets. Objectives of the test marketing should be clear. Representative areas should be chosen so that when the findings are extrapolated to the whole sales area, the results are indicative of likely activity and market share. There are some limitations on test marketing; in particular, it can alert competitors to the new product or service and allow them to respond. Even if the test is successful and the test area is thought to be representative, there is no way of knowing for certain that the test area is representative of the full target market. If special plant and equipment needs to be commissioned to produce the new product, the fixed costs may make it uneconomic to launch on a limited scale and having carried out exploratory research, it may be better to launch to the full market.

Subjects: Marketing.

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