The PDMA Handbook of New Product Development

32.4. Test Marketing vs. National Launches

The marketer must decide whether to introduce the product in a limited area, rather than immediately launching it nationally. The benefits of test marketing are ones of lower cost; reducing risk exposure (e.g., of possibly sullying the company's name or image among consumers or trade customers, etc.); obtaining a "success story" to use to obtain favorable trade acceptance in expansion areas; gaining early operational and logistical experience in manufacturing, distributing, and commercializing the new product or service; and permitting assessment of specific marketing elements to modify prior to full national launch. The drawbacks of test marketing are ones of opportunity cost, competitive exposure, and possible unreliability of reading performance (e.g., if competitors try to make the test unreadable by heavy defensive promotions, etc.). In addition, test marketing may simply not be possible for some products (e.g., automobiles). Industrial and business-to-business products typically call for a very different approach, using pilot or prototype testing, followed by beta testing (Stern, 1991).

At one time, test marketing was standard operating procedure for major manufacturers (in those situations where it was feasible). In recent years, indications are that the popularity of test marketing has been declining (Profit-Building Strategies, 1993). One factor is the high costs of test marketing these days due to factors such as the imposition ...