Definition: The Market Test is an experiment conducted before the commercialization (launch) of a new product to find out the facts about the product such as Is the product the right one? Is the product reasonably priced? etc. On the basis of such findings, the firm may either accept or drop the product idea.
The Test Marketing is one of the methods used under the Market Test. What is Test Marketing? The Test Marketing is yet another method of sales forecasting, wherein the new product is launched in the selected geographical areas, the representative of the final market, to check the viability of the product and its demand among the selected group of people.
The test marketing is the most reliable method of sales forecasting wherein the product is launched in a few selected cities/town to check the response of customers towards the product. On the basis of such response, the firm decides whether to commercialize the product on a large scale or not. The test marketing must be performed with utmost care; the marketers must select those areas for testing that depicts the true image of the overall market.
The test marketing is the common method of sales forecasting and is often employed by the firms due it several benefits. Firstly, it helps the firms to test and try the product beforehand. Secondly, test marketing enables the firms to look at the pros and cons of the product at the early stage and make decisions on whether to continue with the product or drop the product idea very much before the commercialization.
Though the test marketing proves to be a very helpful sales forecasting tool, it is not free from the limitations. Firstly, it is a time-consuming process as it is required to be carried out for a long period of time in order to obtain the reasonable results. Secondly, due to such a long time gap, the competitors may manipulate the test marketing process and make the results unreliable. Thirdly, there are chances of the wrong selection of the geographical areas that might not represent the true picture of the whole market.