Product test marketing is an activity a company uses to determine the success or failure of a new good or service. Companies may use one or more activities in which to test a product depending on the product type and expected demand. A few different types of product test marketing are consumer surveys, trade shows, or focus groups. The main goal for this activity is to determine the consumer demand for a good or service at a specific price point. If a company develops a wonderful new product, for example, but the price places it out of reach for most consumers, the product may be a dud.
Developing new products is typically the most important way a company stays relevant in a changing marketplace. Companies — that often desire high profits from product sales — usually make every attempt to determine the success of a good or service. Therefore, creating a few prototypes of a new product and conducting initial research on its success is quite common. This process ensures a company keeps its initial costs low for manufacturing new goods or services in its product pipeline. Out-of-control costs in product development can be extremely detrimental to a business.
A consumer survey is often the cheapest method of product test marketing. Companies can either conduct telephone surveys or send out mailers to gather the information desired for new products. Answering standard, predetermined questions is most common for product test marketing surveys. More expensive options — such as trade shows and focus groups — allow for real-time interaction when testing a new good or service. The issue with these methods, however, is the cost associated with the activity.
The goals under each marketing process are the same: Find out how many products a company can sell in the shortest amount of time. The two biggest factors here include consumer demand and product price. For brand-new products introduced into a market, there may be no initial demand. Therefore, product test marketing can help generate buzz and create demand as consumers become excited about a new product. Offering information on the different price points can also help generate demand for these items.
Product test marketing is not without flaws. For example, companies are unable to discuss and test new products in an entire marketplace. The buzz and excitement from a few individuals may not capture the true thoughts of an entire economy. Additionally, a new product may fall flat at a trade show or focus group. This means the company must go back to the drawing board and approach the product from a different angle.